To incentivize compliance with law and to extend greater Ease of Doing Business (EoDB), the Union Cabinet on Tuesday approved the promulgation of the Companies (Second Amendment) Ordinance 2019.
The ordinance, which will be replaced by a Bill in Parliament, is based on the suggestions of a committee to review offences under the Companies Act, 2013. It will fill critical gaps in the corporate governance and compliance framework as enshrined in the Act.
"The changes are expected to lead to greater compliance by corporates, de-clogging of the special courts, de-clogging of the NCLT and effective enforcement," the Ministry of Corporate Affairs said in a statement after the Cabinet decision.
At present around 60 percent of the 40,000 odd cases pending in courts pertain to sections dealing with procedural lapses that are proposed to be shifted to in-house adjudication mechanism, thereby incentivizing compliance by corporates.
As a result, the compounding cases load on the National Company Law Tribunal (NCLT) will come down significantly. The existing cases will be withdrawn from special courts via an amnesty scheme and by prescribing civil liabilities for procedural lapses instead of undertaking a criminal trial.
A total of 29 sections were amended and two new sections were inserted through the earlier ordinances, which were promulgated on November 2, 2018 (Ordinance 9 of 2018) and on January 12, 2019 (Ordinance 3 of 2019).
The Ministry said analysis of data available demonstrates that most of the cases initiated or pending relate to procedural lapses such as non-filing of financial statements and non-filing of annual returns, among others.
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"It was felt that if such violations are re-categorized and allowed to be adjudicated in an in-house mechanism through payment of monetary penalties, the burden on special courts would be drastically reduced and more effective and speedy progress of the more serious cases would be possible," it said.
Further, this would also allow Registrars of Companies to more effectively pursue action against serious offences, it added.
--IANS
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