Summary: The Companies Act, 2013, imposes absolute structural restrictions on most classes of companies (barring a few) from having more than two layers of subsidiaries. This blog analyses whether such absolute restrictions will meet the test of proportionality laid down by the SC, considering that prima facie such restrictions violate the fundamental right to carry on any occupation, trade or business.Continue Reading Are Layering Restrictions under the Companies Act Constitutionally Valid?
“Compliances” are inevitable certainties for companies. The provisions of the Companies Act, 2013 (“Act”) and various rules formulated under it prescribe the various compliances and the way companies[1] must fulfil them. The Act provides for 4 (four) meetings of the board of directors to be held in a year[2]and
India is in its “vocal for local” and “ease of doing business” (“EoDB”) era. Yet the slew of show cause notices and penalty orders the jurisdictional registrar of companies (“RoC”) has issued against Indian companies and its directors in the recent past[1] for alleged non-compliance of significant beneficial ownership (“SBO”) disclosures,[2] corporate social responsibility (“CSR”) contributions,[3] etc. under the Companies Act, 2013 (“Companies Act”), reflect the need for a well-balanced system.Continue Reading A Fine Balance: A Perspective on recent RoC Orders
In a recent case, the National Company Law Tribunal (“NCLT”) rejected a scheme of merger of three related entities on the ground that it was against public interest. Unlike the other cases of arrangements and schemes where the NCLT focused on the technical compliance of the provisions of the Companies Act, 2013 (“the Act”), in the instant case, the NCLT, in addition to analysing the scheme and verifying its satisfaction of the technical requirements, also went through the facts presented and the reports submitted by the Ministry of Corporate Affairs (“MCA”) and the Income Tax Department (“ITD”), who had carried out their separate investigations. The trend of recent decisions appears to show that the NCLT is not just mechanically sanctioning schemes of merger but is also going beyond the facts provided and reviewing them holistically.Continue Reading NCLT rejects a scheme of merger citing public interest concerns
From claiming phantom carbon credits to the mid-air opening of a plane door: recent instances highlight the need and role of robust corporate governance practices in preventing and identifying misconducts. Resultantly, thwarting potential regulatory actions.Continue Reading ESG Disclosures: A New Frontier in Combating Corporate Misconduct
The Central Government recognised the importance of setting up tribunals outside the judicial system that would help alleviate the overburdened judicial machinery. In 1976, the Constitution of India (“Constitution”) was amended through the 42nd Amendment to add two new provisions to the Constitution, viz., Articles 323A and 323B. This change laid the foundation for tribunal system and for the evolution of the system of administrative adjudication in India.Continue Reading Administrative Adjudication under the Companies Act – Need for a relook at appeal provisions
In a previous blog post, we had stated that there exists no statutory regime for recognition of foreign insolvency judgments or proceedings in India. Hence, it remained unclear whether Indian courts would recognise and give effect to foreign insolvency interim orders or judgments.Continue Reading Using Comity in Insolvency – Indian Courts pivot
The ‘Draft Policy for Pre-Legislative consultation and comprehensive review of existing Rules and Regulations’, released by the Ministry of Corporate Affairs (“MCA”), became effective from January 1, 2024 (“MCA-PLCP”). This move complements the increased focus on improving the ‘ease of doing business’ across regulators in India[1] and will also help address the inherent non-uniformity in the consultative mechanisms and processes employed by various MCA-formed/governed regulatory bodies. Continue Reading Institutionalising public consultations: A step towards building a stakeholder-friendly regulatory threshold
The aim of any business organisation is to earn profit and distribute it among the owners. In case of a company, such distribution of profits is connoted as Dividend. The Companies Act, 2013 (“the Act”), inter alia provides for declaration of dividend out of profits. Profit here is the net profit of a company, as determined for preparing financial statements, as per the provisions of Section 129 of the Act and after complying with all the applicable accounting standards notified under Section 133 of the Act.Continue Reading Declaration of Dividend: Interplay of law and business dynamics
Pursuant to the issuance of the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023, with effect from September 30, 2024, both public and private limited companies are required to convert the existing shares and issue new shares exclusively in dematerialised form, bringing an end to physical share certificates. While this seems like a small change, this post seeks to trace the transformation of ‘dematerialisation’ from a progressive and secure option for security holders to a compliance requirement, signifying an increased and progressive threshold of regulation. The post also highlights the key challenges that companies and investors may face with this change.Continue Reading Enforcing progressive compliance: Push for digitalisation by dematerialising shares of all Companies