Explained: Lok Sabha has passed amendments to The Companies Act. Here’s what they are

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  1. Lok Sabha has passed The Companies (Amendment) Bill, 2019.The Bill seeks to amend The Companies Act,2013.
  2. Under the 2013 Act,there were 81 compoundable offences that carry punishments of a fine and/or prison terms.These offences were heard by courts. 
  3. The Bill makes 16 of these offences civil defaults where government appointed adjudicating officers may levy penalties.Some of these offences are the issuance of shares at a discount and the failure to file annual returns.
  4. Currently,companies that are required to budget for Corporate Social responsibility(CSR) must disclose in their annual reports the reasons why they were unable to fully spend these funds. 
  5. However,the bill now says that any unspent annual CSR funds must be transferred to one of the funds under Schedule 7 of the Act (for example, the Prime Minister’s Relief Fund) within six months of the financial year.
  6. Under the Act, the National Financial Reporting Authority can debar a member or firm from practising as a Chartered Accountant for six months to 10 years in case of proven misconduct. 
  7. The Bill amends this punishment to provide for debarment from appointment as an auditor or internal auditor of a company or performing a company’s valuation for the same period.
  8. Under the Act,change in period of financial year for a company associated with a foreign company has to be approved by the National Company Law Tribunal (NCLT).Under the Bill,these powers have been transferred to the central government.