National Company law Tribunal

 Decriminalising Companies Act Offences

Via the Companies (Amendment) Act, 2019, recommendations of the Committee to Review Offences under the Companies Act, 2013 (Committee) to re-categorise 16 out of 81 compoundable offences under the Companies Act, 2013 (Act) as civil liabilities were accepted. In a move to further relax the provisions, the Government has constituted a Company Law Committee to review aspects of criminalization in the remaining compoundable and non-compoundable offences under the Act.[1]
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Home Buyers are equivalent toFinancial Creditors Supreme Court Reigns

The Supreme Court in Pioneer Urban Land and Infrastructure Limited vs. Union of India (Pioneer Judgment)[1], has upheld the constitutionality of the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 (Amendment Act)[2]. Through the Amendment Act[3], the ‘real estate allottees’ (home buyers), as defined under Section 2(d) of the Real Estate (Regulation and Development) Act, 2016 (RERA), were brought within the ambit of ‘financial creditor’ under the Insolvency and Bankruptcy Code, 2016 (IBC).

A three judges’ bench headed by Hon’ble Mr. Justice Rohinton Nariman disposed off a batch of over 150 petitions filed by the real estate developers challenging the constitutional validity of the Amendment Act. The Supreme Court also held that the RERA has to be read harmoniously with the IBC and, in the event of a conflict, the IBC will prevail over the RERA.


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Is Liquidation Irreversible - Schemes of Compromise in Liquidation

The 2005 Report of the Expert Committee on Company Law (JJ Irani Committee Report) had noted that an effective insolvency law:

should strike a balance between rehabilitation and liquidation. It should provide an opportunity for genuine effort to explore restructuring/ rehabilitation of potentially viable businesses with consensus of stakeholders reasonably arrived at. Where revival / rehabilitation is demonstrated as not being feasible, winding up should be resorted to.

Where circumstances justify, the process should allow for easy conversion of proceedings from one procedure to another. This will provide opportunity to businesses in liquidation to turnaround wherever possible. Similarly, conversion to liquidation might be appropriate even after a rehabilitation plan has been approved if such a plan was procured by fraud or the plan can no longer be implemented”.
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Schemes and the Amendment to the Takeover Regulations

Schemes of arrangement have been a favoured route for corporates to acquire shares of listed companies, given the many obvious pros of acquisitions undertaken through a court/ National Company Law Tribunal (NCLT) based scheme of arrangement. Schemes have also been used to undertake group level restructurings, a consequence of which could be the indirect transfer of shares of a listed company from one group company to another.

One of the biggest advantages of acquiring shares in, and/or control over, a listed company pursuant to a scheme of arrangement is that such an acquisition is exempt from the requirements of making a mandatory open offer under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations), subject to certain conditions being met.
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Changes in the Indian Companies Act

Recently, based on the recommendations of the Committee to Review Offences under the Companies Act, 2013 (Committee), the Companies (Amendment) Ordinance, 2018 (Ordinance) was passed on November 2, 2018, to effect certain changes in the Companies Act, 2018 (CA 2013). Around the same time the Ministry of Corporate Affairs (MCA) also issued a notice, seeking comments/suggestions from stakeholders on additional amendments of an “urgent nature” that are required to strengthen the corporate governance and enforcement framework (Notice). This article discusses some of the key amendments proposed in the Notice, which would have far reaching impact if approved in their current form.
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Share transfer restrictions come in various shapes and sizes and in so far as they relate to shares of public companies, their validity has been a topic of hot debate. In several cases, Indian courts have considered and opined on the legality of contractual restrictions on the transfer of shares of public companies. The position in this regard now appears to be much clearer than before with changes also being introduced in the Companies Act, 2013 (CA 2013). However, one aspect of this debate that has hitherto gained lesser traction is the ability of a public company to refuse registration of share transfers pursuant to section 58(4) of the CA 2013.

Section 58(2) of CA 2013 states that the securities of any member in a public company are freely transferable, while under section 58(4) of CA 2013, it is open to the public company to refuse registration of the transfer of securities for a ‘sufficient cause’. To that extent, section 58(4) of CA 2013 can be read as a limited restriction on the free transfer permitted under section 58(2) of CA 2013. However, the statute does not provide any guidance on what would constitute ‘sufficient cause’ and leaves it open to the company itself to ascertain the same.
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On June 6, 2018, the Government once again amended certain provisions of the Insolvency and Bankruptcy Code, 2016 (IBC), by promulgating an ordinance[1] (the 2018 Ordinance) which introduces sweeping changes to the both substantive as well as procedural aspects relating to the insolvency process. Some of the key changes are analysed below.

Homebuyers – A New Class of ‘Financial Creditors’

The 2018 Ordinance has amended the definition of ‘financial debt’ to include amounts raised from ‘allottees’ in respect of a real estate project (as defined under the Real Estate (Regulations and Development) Act, 2016 (RERA)). Accordingly, homebuyers will now be entitled to a seat on the ‘committee of creditors’ (CoC) of the corporate debtor. However, given the large number of homebuyers for a project, they will be treated as a class of creditors and be represented in the CoC by an ‘authorised representative’ to be appointed by the National Company Law Tribunal (NCLT).


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