Companies ordinance: More transparency, more speed

The Ministry of Corporate Affairs set up a committee in July 2018 to review the regulatory framework on offences and penalties under the Companies Act, 2013 (act), and to make recommendations on relaxing the framework. The primary intention of the act was to promote a better environment for corporate compliance.

The committee submitted its report in August 2018 and some of the key recommendations were: 1) redirecting 16 out of 81 compoundable offences to an in-house adjudication framework, where the penalty would be levied by an adjudicating officer; 2) instituting a transparent and technology-driven in-house adjudication mechanism, and 3) unclogging the National Company Law Tribunal (NCLT) by expanding the jurisdiction of the Regional Director and shifting certain powers to the central government.

In light of the recommendations made by the committee, the Companies (Amendment) Second Ordinance, 2019 (new ordinance), was promulgated on 21 February 2019 replacing a 12 January 2019 ordinance (which had replaced a 2 November 2018 ordinance). The new ordinance has been issued because the Companies (Amendment) Bill, 2019, could not be passed by the parliament in its budget session.

Rudra Kumar Pandey is a partner and Vishal Nijhawan is a senior associate at Shardul Amarchand Mangaldas & Co.