[Paras Ahuja is a third year law under-graduate at National law University, Jodhpur] Section 167(1) of the Companies Act, 2013 provides for several grounds that mandate directors of companies to vacate their office. Section 167(1)(a) provides for one such ground, wherein the office of the director shall become vacant if he is disqualified to be a director under section 164 of the Act. Under...
Disqualification of Directors: Construing Retrospectivity
[Aditya Singh Chauhan is a B.A. LL.B (Hons.) student at the National Law University, Jodhpur] The Companies Act, 2013 (“Act”), under section 164(2)(a), provides for the disqualification of directors of a company in case they fail to file financial statements and annual returns for a period of at least three (3) consecutive financial years. The provision reads as follows: “No person who is or has...
MCA Clarifies on Legal Actions against Outside Directors
Recognizing the specific roles that different directors of a company play, section 149(12) of the Companies Act, 2013 contains a safe harbour provision that protects certain types of directors against liability. It relates to three types of directors, who are, for the sake of convenience, referred to as “outside” directors: (i) an independent director; (ii) a non-executive director who is not a...
MCA’s Proposals for Overhauling the Audit Industry
In corporate governance parlance, auditors are considered to be key “gatekeepers”. However, governance failures both in India and around the world have pointed fingers towards the role of auditors. This has led to a series of reforms that impose greater stringency on auditors and the audit process. For example, the audit provisions in the Companies Act, 2013 (the “Act”) have been designed...
The Sun Pharma Orders: NCLT Confounds the Law on Cross-Border Demergers?
[Shinoj Koshy is a partner and Mayank Labh an associate at L&L Partners. The views expressed are personal and do not constitute legal advice. An earlier post on the topic is available here.] On 19 December 2019, the Ahmedabad bench of National Company Law Tribunal (“NCLT”) passed the order in which it rejected an application made by Sun Pharmaceutical Industries Limited (“Sun Pharma”) for a...
NCLT Finds Cross-Border Demergers Impermissible under the Companies Act
An important question arose before the National Company Law Tribunal (NLCT), Ahmedabad bench. Are only cross-border mergers and amalgamations permitted under section 234 of the Companies Act, 2013 (the “Act”), or does the provision also encompass cross-border demergers and other similar transactions? The NCLT answered that the scope of section 234 is narrow, and covers only cross-border mergers...
Setting Up To Fail: The Amended Significant Beneficial Ownership Rules
[Ayush Kashyap is a IV year law student at Hidayatullah National Law University, Raipur] The Companies (Significant Beneficial Owners) Amendment Rules, 2019 suffer from a problem relating to the computation of significant beneficial ownership and disclosure requirements thereon. With the compliance deadline for these rules already lapsed, a look at the problem is in order. However, before that, a...
Decriminalisation of Company Law: A Welcome Change
[Arun Kumar is a 4th-year student of NLIU Bhopal] The Company Law Committee (CLC) in its November 2019 report (CLC Report) to the Ministry of Corporate Affairs (MCA) has recommended amendments to 46 penal provisions in the Companies Act, 2013 (CA, 2013). This is in addition to the 16 offences already decriminalised by the Companies (Amendment) Act, 2019 (CAA, 2019). India is making rapid strides...
Some Comments on NCLAT’s Ruling in the Tata-Mistry Case
Last week, the National Company Law Appellate Tribunal (NCLAT) pronounced its ruling in the Tata-Mistry case. It held that the removal of Mr. Cyrus Mistry as executive chairman by the board of Tata Sons was illegal, and called for his reinstatement to that position. It also decided that consequential actions taken in the interim, including the appointment of a new executive chairman were illegal...
Schemes of Arrangement: Setting a Date
[Rudra Shankar is a fifth-year BA LLB (Hons.) student at Symbiosis Law School, Pune] The procedure for mergers and demergers of companies in India is governed by sections 230 to 232 of the Companies Act, 2013. Companies are required to approach the National Company Law Tribunal (NCLT) to obtain its sanction to such schemes of arrangement before they can take effect. Section 232(6) of the Act...
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