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Commencement of Section-5 Companies (Amendment) Act, 2020

Introduction:

The Central Government vide its notification has notified 30th October, 2023 to be the effective date for commencement of Section-5 of the Companies (Amendment) Act, 2020

Date of Notification– 30th October 2023

Date of Enforcement – 30th October 2023

Key Amendments:

Addition of below clauses in Section 23 of the Companies Act, 2013

“(3) Such class of public companies may issue such class of securities for the purposes of listing on permitted stock exchanges in permissible foreign jurisdictions or such other jurisdictions, as may be prescribed.

(4) The Central Government may, by notification, exempt any class or classes of public companies referred to in sub-section (3) from any of the provisions of this Chapter, Chapter IV, section 89, section 90 or section 127 and a copy of every such notification shall, as soon as may be after it is issued, be laid before both Houses of Parliament.”

Purpose of Amendment:

  • This amendment seeks to grant public companies greater flexibility in listing their securities on foreign stock exchanges as they are permitted to issue specific classes of securities for the purpose of listing on authorized stock exchanges in permissible foreign jurisdictions or other prescribed jurisdictions.
  • Further, The Central Government holds the authority, through notification, to exempt any class or classes of public companies from certain provisions of Prospectus and Allotment of Securities, Share Capital and Debentures, Beneficial ownership and penal provisions with respect to dividend.

Conclusion:

In conclusion, the Companies (Amendment) Act, 2020, through the enforcement of Section-5 on October 30, 2023, marks a significant development in enhancing the operational flexibility for public companies. This forward-looking initiative aims to facilitate global market participation for public companies while maintaining regulatory oversight through strategic exemptions.

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