India is a growing economy where
development is attributable to number of factors such as availability of land,
labour, raw materials, cost effective incentivizing schemes promoting
commercial development in the country. With a view to carry out business operations,
the entrepreneurs may opt for any of the available corporate vehicles such as
proprietorship, partnership, limited liability partnership, etc. One of such
medium to transact business is via setting up of a company.
Legal
Light
The Government enforced the
Companies Act, 2013 (hereinafter referred to as the “Act”) in order to monitor
the affairs of the companies in India. The Act states the provisions regarding
incorporation, obligations, liabilities, management of a company thereby
ascertaining proper regulation thereof.
Ordinance
enforced
The Government promulgated the
Companies Amendment (Ordinance), 2018 (hereinafter referred to as the
“Ordinance”) on November 2, 2018 after receiving the assent from the President
of India. The
said ordinance has been brought into effect with the twin objectives of
promotion of ease of doing business within the country along with better
corporate compliance. Some of the aspects aimed at being covered under the said
ordinance are;
·
Reduction
of burden: Shifting of jurisdiction of 16 types of corporate offences from the
special courts to in-house adjudication, which is expected to reduce the case
load of Special Courts by over 60%, thereby enabling them to concentrate on
serious corporate offences.
·
Easing
penal provisions: The penalty for small companies and one-person companies has
been reduced to half of that applicable to normal companies.
·
E-adjudication:
Instituting a transparent and technology driven in-house adjudication mechanism
on an online platform and publication of the orders on the website.
·
Strong
regulation: Strengthening in-house adjudication mechanism by necessitating a
concomitant order for making good the default at the time of levying penalty,
to achieve the ultimate aim of achieving better compliance.
·
Unclogging
of NCLT: To administer the legal affairs in respect to a company, the
Government has provided the National Company Law Tribunal (also referred to as
the “NCLT”) established for resolution of civil as well as criminal disputes
thereto. Minimizing the burden on NCLT shall aid its focus on serious corporate
offenses. Some of the measures taken to de-clog NCLT are:
i.
enlarging
the pecuniary jurisdiction of Regional Director by enhancing the limit up to
INR 25,00,000 as against earlier limit of INR 5,00,000 under Section 441 of the
Act;
ii.
vesting
in the Central Government the power to approve the alteration in the financial
year of a company under section 2(41); and
iii.
vesting
the Central Government, the power to approve cases of conversion of public
companies into private companies.
·
Curbing
Shell companies: Shell companies are the non-trading entities incorporated
under the multiple layers of subsidiary companies which be used as device to
effectuate illegal transactions such as tax evasion, money laundering etc.
Declaration of commencement of business provision has been re-introduced to
better tackle the menace of shell companies.
