The Govt of India has taken many initiatives to facilitate the ‘ease of doing business’ in the country and one of such initiative is the Companies (Amendment) Ordinance, 2018. The said ordinance has amended 31 provisions of the Companies Act, 2013 with the basic objectives to promote ease of doing business by facilitating better corporate governance & compliance.

The Ordinance provides much needed relief to the corporates and professionals alike by decriminalizing a host of offences. Considering re-categorization of certain ‘acts punishable as compoundable offences’ to ‘acts carrying civil liabilities’, the Ordinance further promotes the Indian Government’s intent to promote ease of doing business.

The main reforms undertaken through the Ordinance include the following:

  1. Re-categorizing of certain offences : The ordinance wants to re-categorise certain offences which are in the category of compoundable offences to an in-house adjudication framework from special courts.
  2. Measures to ensure compliances: Ensuring compliance of the default and prescribing stiffer penalties in case of repeated defaults.
  3. Reduced penalty for Small companies and OPC: The penalty for small companies and one person companies has been reduced to half of that applicable to normal companies.
  4. In-house adjudication mechanism: Instituting a transparent and technology driven in-house adjudication mechanism on an online platform and publication of the orders on the website.
  5. De-clogging the NCLT- Certain measures: To reduce the burden of NCLT following measures are being taken:
    1. Enlarging the jurisdiction of Regional Director (“RD”) by enhancing the pecuniary limits up to Rs.25 Lacs as against the earlier limit of Rs.5 Lacs under section 441 of the Act;
    2. Vesting with the Central Government the power to approve the alteration in the financial year of a company under section 2(41); and
    3. Vesting with the Central Government the power to approve cases of conversion of public companies into private companies.
  6. Other corporate governance related reforms: Some of the other reforms include re-introduction of declaration of commencement of business provision; greater accountability with respect to filing documents related to creation, modification and satisfaction of charges; non-maintenance of registered office to trigger de-registration process; holding of directorships beyond permissible limits to trigger disqualification of such directors.

The ordinance has received the assent of the Hon’ble President with effect from 02nd November 2018. Only the time will tell the impact of the ordinance in determining the index of ‘Ease of doing Business’ in India.