Centre promulgates ordinance to amend Companies Act

The Centre on Friday promulgated an ordinance to amend the Companies Act of 2013.

The Ordinance, assented by President of India Ram Nath Kovind, is based on the recommendations of the Committee appointed by the Government to review corporate offences under the Companies Act.

The Ministry of Corporate Affairs, in a press release, said that the twin objectives of the Ordinance are the promotion of ease of doing business as well as ensuring better corporate compliance.

"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 Ministry of Corporate Affairs said.

A decision has also been taken to reduce penalties in cases of small and one-person companies, which will be half to normal ones.

"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 a penalty, to achieve the ultimate aim of achieving better compliance," the statement from the Ministry stated.

Among the recommendations related to corporate compliance and governance, it has been decided to tackle the menace of shell companies, and greater disclosure with respect to public deposits to counter any potential scam.

"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," the statement added.

A decision was also passed to declog the National Company Law Tribunal (NCLT) by "enlarging the pecuniary jurisdiction of Regional Director by enhancing the limit up to Rs. 25 Lakh as against 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 conversion of public companies into private companies.