Paid up share capital of 20 Crores

And

Turnover of 200 Crores(as per immediately preceding financial year)

Provided that nothing in this clause shall apply to—

(a) a holding company or a subsidiary company;

(b) a company registered under section 8; or

(c) a company or body corporate governed by any special Act

•  Reduced Compliance Burden
• Alignment with Startup Ecosystem
• Reduced Compliance cost

Certain class or classes of companies to maintain modes of communication and provide particulars

Share capital of company under International Financial Services Centre

b)Company maintaining its share capital in a permitted foreign currency shall prepare and maintain its books of account, and other relevant books and papers, financial statements and all other records in the permitted foreign currency

c)Company  shall pay fees, fines and penalties under this Act and the rules made thereunder in Indian rupees

d) The Central Government may require that company shall use permitted foreign currency for the purpose of filing, submitting or delivering any documents under section 398.

Section 132B: Fund of Authority.

Section 132C: Power of Authority to issue directions

Section 132D: Power of Authority to impose penalty.

Section 132E: Civil courts not to have jurisdiction.

Section 132F: Protection of action taken in good faith.

Section 132G: Power of Central Government to give directions to Authority.

Section 132H: Power of Central Government to supersede Authority.

Section 132I: Levy of fees or other charges by Authority.

Section 132J: Power of Authority to make regulations.

Section 132K: Transparency in making regulations.

• Enhances financial Independence of NFRA and enforcement powers
• Bar on civil courts to entertain case thereby faster resolution of the case

Resignation of a whole-time key managerial personnel, who is not a director.

Treatment of certain shares held in a name of a company or trust

(2)    Notwithstanding anything contained in this Act, if a company fails to deal with or dispose of the shares referred to in sub-section (1), such shares shall be cancelled and extinguished by the company in such manner, as may be prescribed, and such cancellation and extinguishment shall be deemed to be a reduction of the share capital of the company

(3)    If the company fails to comply with the provisions of sub-section (2), the company and every officer of the company who is in default, shall be liable to a penalty of ten thousand rupees for every day during which the default continues.”.

Appeal rights

Grievance mechanism against decision of Registrar under section 7.

Recovery of the amount

(a) attachment and sale of movable property

(b) attachment of bank account

(c) attachment and sale of immovable properties

(d) arrest of that person and his detention in prison

(e) appointing a receiver for the management of such movable or immovable properties,

Settlement

•  Certain contraventions under the Act may be settled, subject to prescribed conditions.
•  Central Government may constitute a Specified Authority (officer(s)) to handle settlements.
• Application must be made before the penalty order is passed.
•  Authority may accept settlement based on nature, gravity, and impact, with payment or other prescribed terms.
• If terms are unsuitable or no agreement is reached, the application is rejected and proceedings continue.
• Orders of the Specified Authority are final and non-appealable.
• Settlement amounts are credited to the Consolidated Fund of India.

Deposit of certain amount before appeal is entertained

(a) NFRA under section 132; or

(b) the Valuation Authority under section 247

unless the appellant has deposited ten per cent. of that amount in the manner as directed by the Appellate Tribunal or Regional Director or the Appellate Authority

Memorandum

Power of Securities and Exchange Board to Regulate Issue and Transfer of Securities, etc.

(b) a declaration in the prescribed form by a person named in the articles as a director, manager or secretary of the company, that all the requirements of this Act and the rules made thereunder in respect of registration and matters precedent or incidental thereto have been complied with

(ba) a declaration in the prescribed form by an advocate, a chartered accountant, cost accountant or company secretary in practice, where a company engaged such professionals in its formation or incorporation;”.

• Enhanced Compliance at Incorporation Stage
• Increased Professional Accountability

Service of Documents

• Certain classes of companies (as may be prescribed) must serve documents to members only through electronic mode and such will be treated valid.
•  Members can request documents in a specific mode and   Company may charge fees for such requested mode and Fee charged to be approved in general meeting

• Moves companies towards paperless governance
• Removes ambiguity by recognizing electronic service as sufficient compliance
• Cost benefits

Power of Securities and Exchange Board to Regulate Issue and Transfer of Securities, etc.

Matters to be Stated in Prospectus

If a prospectus is issued in contravention of the provisions of this section, the company and every person who is knowingly a party to the issue of such prospectus shall be liable to a penalty of two lakh rupees

Offer or Invitation for Subscription of Securities on Private Placement

(5A) If a default is made in complying with the provisions of this section, other than sub-section (3), the company shall be liable to a penalty of twenty-five lakh rupees and every officer of the company who is in default shall be liable to a penalty of two lakh rupees.”

Offer or Invitation for Subscription of Securities on Private Placement

• The marginal heading of the word shares to be substituted to securities
• In 42(b)(2)scheme linked to the value of the share capital of a company to be inserted with ESOP
• 42(10)(c) word ‘which may extend to’ substituted to equivalent to”

• Covers wider range of instruments under private placement
• Penalties now directly linked to transaction value

Further issue of the capital

Buyback of securities

•  Government can prescribe higher buy-back limits for certain classes of companies.
• The 25% limit (or revised %) for equity shares will be calculated based on total paid-up equity capital in that financial year
• Prescribed companies can undertake up to 2 buybacks in a year Conditions:

1. Minimum 6 months gap
2. Counted from closure of previous buy-back

• References to “sweat equity” expanded to include Schemes linked to share capital value (as per Section 62(1)(b))
• Declaration of solvency No longer required to be verified by affidavit
• Revised penalty:

For Companies

1.       ₹25 lakh → Listed companies
2.       ₹2 lakh → Other companies

For Officers in Default:

1.   ₹5 lakh → Listed companies
2.  ₹2 lakh → Other companies

·        Improved Capital Management by allowing two buybacks in a year

·        Ease of Compliance

Duty to Register Charges, etc.

Register of Members, etc.

(2A) No notice of any trust, whether express, implied or constructive, shall be entered in the register of members or debenture holders

AGM

• AGM can be held  physically, or through video conferencing or other audio-visual means
• EGMs can also be held in hybrid mode

Every company shall hold its annual general meeting in physical mode at least once in every three years

Punishment for Default in Complying with Provisions of Sections 96 to 98

Revised penalty:

liable to a penalty of one lakh rupees and in case of continuing default, with a further penalty of five thousand rupees for each day during which such default continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default”

Calling of the EGM

Company may hold its EGM physically, or through video conferencing or other audio-visual means, either wholly or partly, in such manner and subject to such terms and conditions, as may be prescribed:

Provided that if the number of members referred to in sub-section (2) requisition the meeting can be held by the company in hybrid mode

Notice of the meeting

• Boost to Virtual Governance
•   Enables quicker decision-making through shorter notice period

Investor Education and Protection Fund

Investor Education and Protection Fund

• Unpaid/unclaimed amounts from buy-back of shares (after 7 years) to be transferred to IEPF
•   IEPF Authority can Delegate powers/functions to members, officers, or other person

• Enhanced Investor Protection
•    Improved Administrative Efficiency

Books of Account, etc., to be kept by Company

•  Listed Company: ₹5 lakh
•  Other Companies: ₹50,000

For contravention of sub-section (1) or (5):

• Listed Company: ₹20 lakh
• Other Companies: ₹5 lakh

•  Higher penalties for key violations ensure strict compliance
• Fixed penalties reduce ambiguity in enforcement

Voluntary Revision of Financial Statements or Board’s Report

Constitution of National Financial Reporting Authority

• NFRA to be constituted as a body corporate
• Chairperson  is empowered with General superintendence and direction powers
• NFRA can frame regulations for its functioning and specify procedures independently
•  NFRA can

1. issue  an advisory, censure or warning to the member or the firm
2. Require requiring additional professional training of the member or individual partners or employees of the firm
3.  Refer the matter to the Central Government for taking action under the provisions of this Act or rules

•  The definition of the misconduct also include Misconduct under Chartered Accountants Act, 1949
• Failure to comply with the order of will attract penalty

1. Imprisonment (up to 6 months) or fine (₹1–5 lakh) for individuals
2. Fine ₹5–25 lakh for firms
3.   Liable for debarment

• Actions of NFRA remain valid despite:

1.   Vacancy
2. Defect in constitution
3. Procedural irregularities

• NFRA can appoint experts in accounting standards, auditing standards, economics, law, business or such other disciplines to discharge its functions

·        Higher Accountability for Auditors

·        Enhances credibility of financial reporting

Financial Statement, Board’s Report, etc

• Auditor observations affecting company functioning
•  Qualifications, reservations, or adverse remarks on accounts

Board’s Report must include:

• Composition of Audit Committee
• Cases where Board did not accept recommendations

• Ensures transparency
• Strengthened Corporate Governance

Appointment of Auditors

•  Net Profit limit increased from ₹5 crore → ₹10 crore
• Transfer of unspent CSR amount extended from 30 days → 90 days

• Reduced Compliance Burden
• Better planning and utilisation of CSR funds

Appointment of Auditors

Eligibility, Qualifications and Disqualifications of Auditors

Provided further that every partner of the firm shall be a person who has been registered with a statutory institute or body established under a law in India having powers of such registration

Auditor not to Render Certain Services

• Certain classes  auditors/audit firms prohibited from providing non-audit services to the company ,its holding company and its subsidiary
•   Restriction continues for 3 years after completion of auditor’s term

• Strengthening Auditor Independence
•  Improved Financial Integrity

Punishment for Contravention

•    Penalty for contravention of section 139, 140, 141, 142, 146, 143 (excluding sub-section 12), 144,145

For company

1. ₹1 lakh penalty
2.  Additional ₹500 per day (max ₹5 lakh) for continuing default and

For Officers in default

1.  ₹1 lakh penalty
2.  Additional ₹500 per day (max ₹5 lakh) for continuing default

·        Stronger Enforcement

Cost Audit

• Central Government empowered to issue cost accounting standards
•  Cost auditor can be Firm with majority partners qualified in India
•  Penalty for non-compliance section 148(9)

For key managerial personnel (MD/WTD/CFO/other responsible person) ₹5 lakh(Listed Company)and₹50,000(Other companies)

• Penalty for non-complying 139(3) for Company and officers in default ₹10,000 and  ₹100/day (max ₹2 lakh for company and ₹50 Thousand for Officers in default

• Standardisation of Cost Accounting
• Clarity in Auditor Eligibility

Company to have Board of Directors

•  Transactions/relationships will now be checked during the preceding financial year AND the current financial year. Applies to Direct transactions and Professional relationships
• Company Secretaries in Practice” replaced with Secretarial Auditors
•   Materiality Threshold limit revised to 10% OR lower percentage as may be prescribed
• Independent Directors must continuously ensure compliance with independence criteria throughout their tenure (not just at appointment)
• Independent Director can still be associated with Legal or consulting firm but transactions of such firm with company group must be less than 10% (or prescribed lower limit) of firm’s turnover
•   Period as Additional Director will now be included in total tenure as Independent Director

• Tightens independence norms
• Adds continuous compliance obligation
• Provides practical relaxation for professionals

Appointment of Directors

Allotment of Director Identification Number

Every DIN holder must:

1.  Periodically verify/update details
2. As prescribed by Central Government

(b) Grounds for Deactivation / Cancellation

DIN may be deactivated or cancelled if:

1.  Non-compliance with verification
2. DIN obtained fraudulently / wrongly
3. Director becomes disqualified (Sec 164) or by court/tribunal order

(c) Effect of Deactivation

1. Director cannot function until reactivated

(d) Effect of Cancellation

1. Office of director becomes vacant automatically

(e) Surrender of DIN

1.    Voluntary surrender allowed as prescribed

(f) Reactivation / Restoration

• Allowed:

1.  On fulfilment of conditions
2. Payment of prescribed fees

Penalty for Default of Certain Provisions.

Appointment of Additional Director, Director in casual vacany

1. Till next general meeting OR
2. 3 months from appointment

Whichever is earlier

If a person was not approved / considered in general meeting then  cannot be appointed by Board as:

Additional Director ,Alternate Director  and Casual Vacancy Director without prior approval of members

Disqualifications for Appointment of Director

•   Persons or Partners of firm Auditor / Secretarial Auditor / Cost Auditor Registered Valuer / Insolvency Professional  who has provided services in last 3 FYs or current FY (for company/group)
•   shall not be eligible for appointment as a director
•     Director to be fit and proper as per prescribed
• Non-compliance period reduced from 3 years to 2 years

Number of Directorships

Duties of Directors

Revised penalty:

Default (other than sub-sec 5):

• ₹5 lakh → Listed company
•   ₹2 lakh → Other companies

Vacation of Office of Director

•   After 6 months or end of tenure, whichever earlier
• Applies to all companies including defaulting company

Penalty for acting as director despite:

• Disqualification OR
• DINdeactivation/cancellation
• ₹5 lakh (listed) / ₹2 lakh (others)

Meetings of Board

Disclosure of Interest by Director

Loan to Directors, etc.

Loan and Investment by Company

Company

₹1 lakh + ₹500/day (max ₹5 lakh)

Officer:

₹25,000 + ₹200/day (max ₹1 lakh)

Register of Contracts or Arrangements in Which Directors are Interested

Power to Call for Information, Inspect Books and Conduct Inquiries

•   Term Company secretary in practice to be substituted by Secretarial Auditor
• Only practicing CS to be appointed as secretarial auditor

Provided that a firm, whereof majority of partners practising in India who are qualified for appointment, may be appointed by its firm name to be the secretarial auditor of a company

Power to Call for Information, Inspect Books and Conduct Inquiries

•   Company: ₹1 lakh + ₹500/day (max ₹5 lakh)
• Officer: ₹25,000 + ₹200/day (max ₹1 lakh)

Imposition of Restrictions Upon Securities

Power to Compromise or Make Arrangements with Creditors and Members

• IBC references removed
• Application to be filed with Tribunal of transferee/resultant company
•  Pending cases continue under old provisions

Merger or Amalgamation of Companies

“on the merger or amalgamation” shall be inserted.

Merger or Amalgamation of Certain Companies

•  Approval threshold revised to Members forming 75% (present & voting)
• No need to file scheme with Official Liquidator in case of division/transfer of undertaking

Powers of Tribunal

Class Action

Valuation by Registered Valuers.

•  Prescibes conditions to qualify for the appointment as valuer
•     Prescribes power and authority of the Valuation Authority
•  Provides for penalty for contravention by the registered valuer
• Allows Valuation authority to make recommendation ,issue notifications  regarding regulations

Power of Registrar to Remove Name of Company From Register of Companies

• Non-filing + no transactions + inactivity
• Includes current year default

Restrictions on Making Application Under Section 248 in Certain Situations

Appeal to Tribunal

Circumstances in Which Company may be Wound Up by Tribunal

(b) in clause (c), the words “by notification under this Act” shall be omitted.

he Official Liquidator as the liquidator of the company or Insolvency Professional as Liquidator

Companies Capable of Being Registered

Obligations of Companies

Appointment of directors

Vacation of office by Directors

Quorum

AGM

Under subsection 3(c)

The Members shall adopt the articles of the Producer Company referred to in clause (b) of sub-section (1) of section 378G and appoint directors of its Board in the first annual general meeting

Internal Audit

Penalty for contravention

• subsection(a)(1) Rs. 1 lakh in case of continuing Rs.500/-day  subject to maximum. Rs, 5lakhs
•  subsection (b)(2)Rs. 25,000 in case of continuing default Rs. 200/-day  subject to maximum 5 lakhs
•   If a director or officer of a Producer Company—

(a) fails to hand over the custody of books of account and other documents or property in his custody to the Producer Company of which he is a director or officer; or

(b) fails to convene annual general meeting or other general meetings,

he shall be liable to a penalty of Rs. 25,000 in case of continuing default Rs. 200/-day  subject to maximum1 lakhs

Re-conversion of Producer Company to inter-State co-operative society

Punishment for Contravention

shall be liable to a penalty of one lakh rupees and in case of continuing contravention, with a further penalty of Rs. 500 for each day, after the first during which such contravention continues, subject to a maximum of Rs. 5 Lakhs and every officer of the company who is in default shall be liable to a penalty of Rs. 25000 and in case of continuing contravention, with a further penalty of Rs.200 for each day, after the first during which such failure continues, subject to a maximum of Rs. 2 Lakhs ”

Registration offices

Fees for filing, etc

Filing for fees…etc

Benches for Apellate Tribunal

If the Members of a Bench of the Appellate Tribunal differ in opinion on any point or points, it shall be decided according to the majority, if there is a majority, but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the Chairperson for hearing on such point or points by one or more of the other Members of the Appellate Tribunal and such point or points shall be decided according to the opinion of the majority of Members who have heard the case, including those who first heard it.”.

Benches  of Tribunal

Compounding for certain offences

Lesser Penalties for OPC/Small companies

liable to a penalty of one-half, or such per cent. not exceeding one-half, as may be prescribed

Punishment for Fraud

Minimum punishment increased:

₹10 lakh → ₹25 lakh

₹50 lakh →  ₹1Crore

Punishment for Improper Use of “Limited” or “Private Limited”

₹1 lakh and in case of continuing failure ₹50 per day subject to maximum ₹5 lakh

Adjudication of Penalties

•      Introduction to adjudication and Apellate Authority
• Enabled provision for recovery of penalty via Court

Nondisclosure of Information in Certain Cases

Power of Central Government to Make Rules

and reduced court involvement