Likely to replace ordinance on ease of doing business, corporate governance
The government has begun work to bring in legislation to replace an ordinance that it had promulgated to improve corporate governance, ease of doing business and reduce the caseload on company law tribunals. It will reintroduce the Companies (Amendment) Bill, 2019 in the upcoming budget session of Parliament starting June 17, said a senior official at the Ministry of Corporate Affairs. The Bill will replace the ordinance re-promulgated in February. The Bill seeks to help improve ease of doing business and reduce the caseload on the National Company Law Tribunal (NCLT). The ordinance, which first came into force in November last year, was re-promulgated in February after the replacement Bill was not ratified by the upper house of Parliament in the winter session because of time constraints.
Bills replacing ordinances need to be placed before Parliament within six weeks of the reassembly of Parliament to ensure continuity of the provisions of ordinances. The ordinance re-categorised 16 ‘criminal’ offences under the Companies Act, including failure to file annual returns and the issuance of shares at a discount, to civil offences, allowing government officers to levy penalties instead of initiating criminal proceedings against the offenders. It also granted power to the regional directors of the ministry to settle offences with a penalty of Rs.25 lakh, up from the previous ceiling of Rs.5 lakh.
As per the ordinance, the Centre has the authority to allow companies to take themselves private from public, and change their financial year. Previously, NCLT benches had cleared such proposals. It also sought to also strengthen corporate governance. Under this, companies must file a declaration that all subscribers to their memorandum have paid the value of the shares they have agreed to purchase within 180 days of incorporation and file verification of their registered office with the Registrar of Companies within 30 days of incorporation.
Besides, individuals holding at least 25% shares in a company or exercising significant control over it are required to declare themselves as significant beneficial owners. Failing to do so is punishable with imprisonment up to one year or a fine of up to Rs.10 lakh, or both. The ordinance also required that companies register charges such as mortgages on their property with the Registrar of Companies within 30 days.
The Economic Times, 05th June 2019
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