New Delhi – Parliament on July 26, approved the Companies (Amendment) Bill which seeks to tighten Corporate Social Responsibility (CSR) norms and ensure stricter action for non-compliance of the company law regulations including the increased punishments of imprisonment and penalties on the violation of CSR rules.
The new amendments of the act says that all the directors of the company, shall be punishable with imprisonment for a term which may extend to 6 months or with fine which shall not be less than Rs 1 lakh and may extend to Rs 5 lakh, or with both if a company contravenes the provisions of sub-section 5 or sub-section 6 of the Company Act, which says that the articles may contain the provision for the entrenchment whether made on formation of a company or by amendment, agreed by all the members of the company in case of private company and special resolution in case of public company.
Any amount remaining unspent under sub-section 5, pursuant to any ongoing project fulfilling such conditions, undertaken by a company in persuance of its CSR Policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company under the new amendments.
The Central Government may give such general or special directions to a company or class of companies as it considers necessary to ensure compliance of provisions of this section and such company or class of companies shall comply with such directions.
Section 137 of the principal Act, which says that the copy of financial statement to be filed with registrar by the company.
Sub-section (3) of the Act, is amended with the substitution of the terms ‘punishable with fine’, and ‘liable to a penalty’.
The penalty of Rs 1 lakh and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of Rs 5 lakh” shall be substituted.
It shall be the duty of every company in creating a charge within or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise, and situated in or outside India, to register the particulars of the charge signed by the company and the charge-holder together with the instruments under chapter VI of the Principle Act.
Creation of such charge in such form, on payment of the fees and in such manner as may be prescribed, with the registrar within thirty days of its creation.
Further, the new amendments says that any company who contravenes any provision of Chapter VI of the Act, shall be punishable with fine which shall not be less than Rs 1 lakh but which may extend to Rs 10 lakh and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than Rs 25 thousand but which may extend to Rs 1 lakh, or with both.
If a company fails to file its annual return under sub-section (4) of chapter VI, before the expiry of the period specified under section 403 with additional fee, the company shall be punishable with fine which shall not be less than Rs 50 thousand but which may extend to Rs 5 lakh and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to 6 months.
Any person who knowingly acts as a managing director or other director or manager of a company in contravention of clause (b) of sub-section 1 of chapter VI and every other director of the company who is knowingly a party to such contravention, shall be punishable with imprisonment for a term which may extend to 6 months or with fine which may extend to Rs 5 lakh, or with both.
Provided further, any person guilty of fraud which involves an amount less than Rs 10 lakh or 1% of the turnover of the company and does not involve public interest shall be punishable with imprisonment for a term which may extend to 5 years or with fine which may extend to Rs 20 lakh or with both.