Since the Bill to make amendments to the Companies Act, 2013, is pending in the Rajya Sabha, the ordinance has been re-promulgated.
The central government has re-promulgated the Companies (Amendment) Ordinance, 2019. The Ordinance is to amend the companies law to further improve the ease of doing business as well as ensure better compliance levels.
The government has taken the step as the Bill to make amendments to the Companies Act, 2013, is pending in the Rajya Sabha.
Notably, the Bill was passed by the Lok Sabha on January 4. The Cabinet cleared the proposal to re-issue the ordinance last week.
The Companies (Amendment) Ordinance, 2019, was issued on Saturday, according to the official gazette.
On Thursday, the Cabinet cleared the proposal to re-issue the ordinance.
To amend the Companies Act, the government had first issued the ordinance in November and the same would have ceased to be operational from January 21.
The amendment are aimed at reducing the burden on special courts and bringing down applicable penalties for small companies, among others. The ordinance has amended 16 sections of the Act so as to modify the punishments from fine to monetary penalties to lessen the burden on the Special Courts.
The amended provisions enhance the jurisdiction of Regional Director for compounding offences, and empower the central government to allow certain companies to have a different financial year instead of being determined by the National Company Law Tribunal.
In November 2018, the government said the ordinance amending the Companies Act, 2013, was promulgated with twin objectives of “promotion of ease of doing business along with better corporate compliance”.
The amendments through the ordinance were effected on the basis of recommendations made by a government-appointed panel that reviewed the offences under the Act.
The latest amendments shift the jurisdiction of 16 types of corporate offences from the special courts to in-house adjudication.
This is “expected to reduce the case load of special courts by over 60 per cent, thereby enabling them to concentrate on serious corporate offences. With this amendment, the scope of in-house adjudication has gone up from 18 sections at present to 34 Sections of the Act,” the Corporate Affairs Ministry had said in November.
The main amendments are as under:
- Shifting of the jurisdiction of 16 types of corporate offences from the special courts to in-house adjudication, which is expected to reduce the caseload of Special Courts by over 60%, thereby enabling them to concentrate on serious corporate offences. With this amendment, the scope of in-house adjudication has gone up from 18 Sections at present to 34 Sections of the Act.
- The penalty for small companies and one person companies has been reduced to half of that applicable to normal companies.
- Instituting a transparent and technology-driven in-house adjudication mechanism on an online platform and publication of the orders on the website.
- Strengthening in-house adjudication mechanism by necessitating a concomitant order for making good the default at the time of levying the penalty, to achieve the ultimate aim of achieving better compliance.
Declogging the NCLT by:
- Enlarging the pecuniary jurisdiction of Regional Director by enhancing the limit up to Rs. 25 Lakh as against the earlier limit of Rs. 5 Lakh under Section 441 of the Act;
- Vesting in the Central Government the power to approve the alteration in the financial year of a company under section 2(41), and
- Vesting the Central Government the power to approve cases of conversion of public companies into private companies.
Recommendations related to corporate compliance and corporate governance include re-introduction of declaration of commencement of business provision to better tackle the menace of ‘shell companies’; greater disclosures with respect to public deposits; greater accountability with respect to filing documents related to creation, modification and satisfaction of charges; non-maintenance of registered office to trigger de-registration process; and holding of directorships beyond permissible limits to trigger disqualification of such directors
(Source: LiveMint; Tax Scan)