Committee to Review the Companies Act

Although the Companies Act, 2013 is
brand new and yet to be brought into force in its entirety, there is already a
lot of discussion about the need to reevaluate the legislation. The Government
has taken initial steps to address some of the issues by way of the Companies
(Amendment) Act, 2015. However, as we have previously
noted
, the amendments are not very significant and are mostly procedural in
nature.
In this background, the Government
has now appointed
a Companies Law Committee
under the leadership of the Secretary, Ministry
of Corporate Affairs. The Committee consists of members from the industry as
well as professional bodies. Although it comprises in-house counsel and a
retired High Court judge, the membership does not include external lawyers. In
any event, the Committee does possess the power to co-opt others, and we might
likely see some additional expertise being inducted into the Committee.
The terms of reference of the
Committee are two-fold. First, it is to “make recommendations to the Government
on issues arising from the implementation of the Companies Act, 2013”. The
scope of the Committee on this account is wide as well as narrow. It is wide in
that there are no specific areas identified and the Committee could very well
look at all aspects that need consideration. At the same time, the mandate
seems to be only to look at “issues arising from the implementation” of the
legislation. Hence, it is not clear whether the Committee can suggest reforms
(especially those that are substantial in nature) for the future. The tenor of
the terms of the reference imply the need to preserve stability and continuity
now that the Companies Act, 2013 is already in place after several years in the
making.
The second aspect is for the
Committee “to examine the recommendations received from the Bankruptcy Law
Reforms Committee, the High Level Committee on CSR, the Law Commission and the
other agencies, while undertaking” the role indicated in the preceding
paragraph. Hence, this Committee is intended to be consolidating body not just
to examine the Companies Act on a standalone basis but also to incorporate the
work that has been carried out other Committees, including the Bankruptcy Law
Reforms Committee, which has made recommendations
for amendments to the Companies Act
. I add to this list the changes
identified by the Supreme Court
on matters relating to the National Company
Law Tribunal. That might explain the rather unusual usage of “Companies Law” in
plural in the title of the Committee.



The Committee is to submit its
recommendations within six months from the date of its first meeting. Hence, we
are likely to witness changes to the implementation of the Companies Act, 2013
in due course, or even substantive reforms. This indicates that the company law
reforms process is likely to be an ongoing one. Despite the wholesale reform
that resulted in the 2013 Act, either the needs have altered or several
interest groups remain dissatisfied with its dispensation. As I note in a
recent paper,
the Companies Act, 1956 was amended nearly 30 times in its lifetime of 57
years, averaging one set of amendments nearly every two years. At the present
rate, the new Companies Act is all set to surpass the frequency of legislative
change. And, that is not including all the rulemaking powers exercised by the
Government, which occur ever so often.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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