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The Union Cabinet on Thursday gave its approval for promulgation of an ordinance to bring amendments to the Companies Act 2013. The amendments are largely in line with recommendations of a panel headed by Corporate Affairs Secretary Injeti Srinivas, official sources said.
The ordinance will now be sent for Presidential assent, they added.
Indications are that the ordinance will cover provisions to decriminalise several offences (about 80) under the Companies Act, cap independent directors’ remuneration, steps to improve independence of independent directors and bring measures to curb shell companies besides help de-clog the National Company Law Tribunal. An informal Group of Ministers headed by Finance Minister Arun Jaitley had earlier this month looked into the recommendations of this panel.
The group included Law Minister Ravi Shankar Prasad, Railway Minister Piyush Goyal, Commerce & Industry Minister Suresh Prabhu and Minister of State for Corporate Affairs PP Chaudhry.
Shell companies
There is no specific definition of a shell company under the Companies Act 2013. To tackle the aspect of money laundering via shell companies, the committee has recommended re-introduction of declaration of commencement of business provision.
The report also recommended de-clogging the National Company Law Tribunal through a significant reduction in compounding cases before the Tribunal.
Other recommendations related to corporate compliance and governance include a cap on independent directors’ remuneration in terms of percentage of income to prevent any material pecuniary relationship, which could impair his/her independence on the board, and holding of directorships beyond permissible limits to trigger disqualification of such directors.
It suggested a reduction in the time-limit for filing documents related to creation, modification and satisfaction of charges and stringent penal provisions for non-reporting. Once a company obtains restrictions under Section 90 (7) relating to significant beneficial ownership, in respect of shares whose ownership remains undetermined, such shares should be transferred to the Investor Education and Protection Fund if the rightful owner does not claim ownership within a year, it said.
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