Companies (Amendment) Bill Resurrected in an Altered Shape

Readers will recall that early last
year the Government introduced
the Companies (Amendment) Bill, 2016 (the “Amendment Bill”) in Parliament. This
was in response to the report
of the Companies Law Committee (CLC) that sought to address some issues that
arose in the implementation of the Companies Act, 2013 (the “Act”). The theme
of the legislative effort and the recommendations of the CLC were oriented
towards the “ease of doing business”, particularly because several provisions
of the Act were found to be too onerous or unworkable. The Amendment Bill was
referred to the Standing Committee on Finance, which issued its report in
December 2016.
Since then, the Government had been
considering further amendments to the Amendment Bill, and there was no real anticipation
as to when the legislative amendments proposed in the Bill would see the light
of day. However, news reports indicated (here
and here)
that the Lok Sabha yesterday debated and passed the Amendment Bill in its
further amended form. Now, the Bill will have to be taken up by the Rajya
Sabha.
Although the current version of the
Amendment Bill does not seem to be available in a consolidated form, the list
of amendment proposed can be gathered from transcripts of yesterday’s debates
in the Lok Sabha (here, here and here).
Moreover, PRS Legislative Research has a summary
of the key provisions of the Amendment Bill, and how they were considered by
the Standing Committee and proposed by the Government for amendment.
The developments so far represent a
pendulum swing. The Act itself (which was passed during the UPA regime) was criticized
to be too onerous and in many ways complex to businesses. The CLC Report and
the Amendment Bill sought to mitigate some of the rigour by making the provisions
more business friendly. It is perhaps this tension between the somewhat
opposing considerations that resulted in the Amendment Bill being held up for
longer than expected. The Standing Committee report, the newer amendments
proposed as well as the debates in the Lok Sabha indicate grave concern on the
part of the various constituencies in whether the Amendment Bill will fail to
act as a check and balance against corporate malfeasance which will have an
adverse impact on investor protection. The complexities caused by further
amendments to the Amendment Bill itself is suggestive of this tendency. In the
end, it might be that the passage of the amendments will be the result of some form
of compromises among stakeholders, much like the Act itself represents.

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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