CLC recommends major reforms in corporate laws for ease of doing business
– MCA’s move to standardise, streamline and digitize
– Payal Agarwal, Senior Executive | Vinod Kothari & Company (payal@vinodkothari.com)
The Report of the Company Law Committee – 2022 (“CLC Report”) has proposed various important amendments to the existing Companies Act, 2013 (“the Act”) and some in the Limited Liability Partnership Act, 2008 (“LLP Act”). The recommendations touch a wide array of elements under the Act – be it the association/ cooling period of directors, auditors, KMPs, etc. or corporate actions such as mergers, transfer of unclaimed monies to IEPF on account of buyback etc., de-clogging of NCLTs for restoration of company’s name after having been dissolved as defunct, setting up of specialized company law Benches of NCLT for dealing with matters of economic importance such as corporate restructuring, and specialized IBC cases or cases involving public interest. The recommendations also seek restoration of some meaningful provisions of the erstwhile CA 1956.While some suggestions pertain to ease of compliances and moving towards digitization with respect to certain compliances of a company, others pertain to building a robust corporate governance framework including alignment of the law with various provisions with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”).
This is the 3rd CLC Report in the series of recommending changes to the 2013 Act, several reforms in the Act had been suggested in past by the CLC Report 2016, Committee to Review Offences Under Act of 2018 and CLC Report 2019. A brief summary of the issues under hand and the recommendations along with proposed amendments have been provided for as an Annexure to the CLC Report itself, and therefore, we find it useful to discuss only some of the recommendations which require analysis.
Applicability
The Committee report, if accepted by the Government, will potentially lead to an Amendment Bill, and therefore, there will be an enactment by a law of the Parliament. Once passed, it is expected that several of the amendments will require extensive rule-making, as there are references in several provisions to “class or classes of companies”. Thus, while we get a broader view of the direction into which the law will move, but as they say, the devil lies in the detail. We will get to know the details, hopefully divine and not devilish, only when the Bill is available for review.