Companies Amendment Act 2020: Sections 135, 137, 140, 143, 147, 149 and 165
Updated: 18 September 2026
The Companies (Amendment) Act, 2020 made important changes to the Companies Act, 2013 in relation to Corporate Social Responsibility, filing of financial statements, auditor resignation, reporting of fraud by auditors and professionals, penalties for audit-related defaults, remuneration of independent directors, and the maximum number of directorships. This article explains the amendments affecting Sections 135, 137, 140, 143, 147, 149 and 165 and their practical effect.
Quick summary of the amendments
| Companies Act section | Subject | Key effect of 2020 amendment |
|---|---|---|
| 135 | Corporate Social Responsibility | Permits prescribed set-off of excess CSR spending, revises penalty for transfer defaults, and removes the CSR Committee requirement where the amount required to be spent does not exceed Rs. 50 lakh. |
| 137 | Financial statements | Reduces and rationalises penalties for failure to file financial statements with the Registrar. |
| 140 | Auditor resignation | Reduces the maximum continuing-default penalty under Section 140(3) from Rs. 5 lakh to Rs. 2 lakh. |
| 143 | Auditor duties and fraud reporting | Introduces fixed penalties for failure by an auditor, cost accountant or company secretary in practice to comply with Section 143(12). |
| 147 | Audit contraventions | Removes imprisonment from the company's default provision in Section 147(1) and omits the reference to Section 143 from Section 147(2). |
| 149 | Independent directors | Allows remuneration to an independent director in case of no or inadequate profits, subject to Section 197 and Schedule V. |
| 165 | Number of directorships | Substitutes a civil penalty of Rs. 2,000 for each day of continuing violation, subject to a maximum of Rs. 2 lakh. |
Section 135 - Corporate Social Responsibility
What Section 135 covers: Section 135 of the Companies Act, 2013 governs Corporate Social Responsibility (CSR). It applies to companies crossing the statutory net worth, turnover or net profit thresholds and requires eligible companies to comply with the CSR framework, including the prescribed spending obligation.
Set-off of excess CSR expenditure
The 2020 amendment inserted a proviso in Section 135(5) permitting a company that spends more than its required CSR amount to set off the excess against its CSR spending requirement for succeeding financial years, in the manner prescribed. The detailed conditions are contained in the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended.
Penalty for failure to transfer unspent CSR amount
Section 135(7), as substituted, provides that a company in default of Section 135(5) or Section 135(6) is liable to a penalty equal to twice the amount required to be transferred to the relevant Schedule VII Fund or the Unspent Corporate Social Responsibility Account, or Rs. 1 crore, whichever is less. Every officer in default is liable to one-tenth of the amount required to be transferred, or Rs. 2 lakh, whichever is less.
CSR Committee exemption for smaller CSR obligations
Under Section 135(9), where the amount required to be spent under Section 135(5) does not exceed Rs. 50 lakh, constitution of a CSR Committee under Section 135(1) is not required. In such a case, the Board of Directors performs the functions assigned to the CSR Committee.
For current CSR compliance, the statutory section should be read with Schedule VII and the Companies (Corporate Social Responsibility Policy) Rules, 2014, including subsequent amendments.
Section 137 - Copy of Financial Statement to be Filed with Registrar
What Section 137 covers: Section 137 requires companies to file financial statements and the prescribed accompanying documents with the Registrar of Companies within the statutory period.
The Companies (Amendment) Act, 2020 revised Section 137(3). If the company fails to file the financial statements within the prescribed period, the company is liable to a penalty of Rs. 10,000 and, for a continuing failure, a further penalty of Rs. 100 for each day of default, subject to a maximum of Rs. 2 lakh.
The managing director and Chief Financial Officer, where applicable, or the director or directors responsible under Section 137(3), are liable to a penalty of Rs. 10,000 and, for continuing failure, a further penalty of Rs. 100 for each day after the first, subject to a maximum of Rs. 50,000.
Section 140 - Removal, Resignation of Auditor and Special Notice
What Section 140 covers: Section 140 deals with removal of an auditor before expiry of the auditor's term, resignation by an auditor, and special notice in specified cases concerning appointment or reappointment.
Under Section 140(2), a resigning auditor must file the prescribed statement within thirty days, giving the reasons and other relevant facts. Section 140(3) provides the consequence of non-compliance. The 2020 amendment reduced the maximum penalty for continuing failure from Rs. 5 lakh to Rs. 2 lakh. The provision otherwise retains the penalty structure linked to Rs. 50,000 or the auditor's remuneration, whichever is less, together with the prescribed continuing-default penalty.
Section 143 - Powers and Duties of Auditors and Auditing Standards
What Section 143 covers: Section 143 sets out the statutory powers and duties of company auditors. Section 143(12) specifically concerns reporting of fraud in the manner prescribed. By virtue of Section 143(14), relevant provisions also apply to a cost accountant conducting cost audit and a company secretary in practice conducting secretarial audit.
Section 143(15), as substituted by the Companies (Amendment) Act, 2020, provides a penalty for failure to comply with Section 143(12): Rs. 5 lakh in the case of a listed company and Rs. 1 lakh in the case of any other company.
Section 147 - Punishment for Contravention of Audit Provisions
What Section 147 covers: Section 147 prescribes consequences for contravention of specified provisions relating to audit and auditors.
The Companies (Amendment) Act, 2020 removed the words providing for imprisonment of up to one year from Section 147(1). It also amended the concluding wording so that the provision operates through the stated fine rather than imprisonment or fine. In Section 147(2), the reference to Section 143 was omitted.
This amendment should be read with the current text of Sections 139 to 146 because Section 147 operates by reference to contraventions of those audit provisions.
Section 149 - Independent Directors and Remuneration
What Section 149 covers: Section 149 contains requirements relating to the composition of the Board and independent directors. Section 149(9) regulates the remuneration that may be received by an independent director.
The 2020 amendment inserted a proviso permitting an independent director to receive remuneration where a company has no profits or inadequate profits. Such remuneration is subject to the applicable provisions of Section 197 and Schedule V, apart from fees payable under Section 197(5).
Section 165 - Number of Directorships
What Section 165 covers: Section 165 restricts the number of companies in which a person may simultaneously hold office as director, subject to the statutory limits and exclusions.
Section 165(6), as substituted by the Companies (Amendment) Act, 2020, provides that a person accepting appointment as a director in violation of Section 165 is liable to a penalty of Rs. 2,000 for each day after the first during which the violation continues, subject to a maximum of Rs. 2 lakh.
Practical compliance points
Companies and professionals should check the current consolidated text of the Companies Act, 2013 rather than relying only on the amending Act. An amendment provision explains what was changed, while the operative compliance obligation is found in the principal Act read with the relevant rules and commencement notifications.
For CSR matters, particular attention should be given to Section 135, Schedule VII and the Companies (Corporate Social Responsibility Policy) Rules, 2014. For auditor matters, Sections 139 to 147 and the applicable audit rules should be read together. Filing obligations under Section 137 should also be checked against the current MCA forms, filing system and applicable rules.
Official legal resources
For authoritative and updated material, refer to the Ministry of Corporate Affairs and the Companies Act, 2013 on India Code. The MCA portal should also be checked for current rules, notifications, circulars, forms and filing requirements.