Article 123 Current Affairs - 2019

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Government promulgates Companies (Amendment) Ordinance, 2019

The government has re-promulgated the Companies (Amendment) Ordinance, 2019 to amend the Companies Act 2013. Even though the Companies (Amendment) Bill, 2018 for this effect was passed in Lok Sabha, it was pending before Rajya Sabha. The ordinance was first issued in November and would have ceased to be operational from January 21. Hence the government has decided to re-promulgate the ordinance.

Features of the Companies (Amendment) Bill, 2018

The Loksabha had passed the Companies (Amendment) Bill, 2018. The bill had important features like re-categorisation of offences, reducing the burden on special courts and bringing down the applicable penalties for small companies, enhancing the jurisdiction of Regional Director for compounding offences, empowers the central government to allow certain companies to have a different financial year instead of being determined by the National Company Law Tribunal among others.

The main objective of the amendment bill was the promotion of ease of doing business along with better corporate compliance.

Promulgation of Ordinance

Article 123 of the Constitution empowers the President to promulgate Ordinances to amend certain laws when either of the two Houses of Parliament is not in session and hence it is not possible to enact laws in the Parliament.

Ordinances must be must be approved by Parliament within six weeks of reassembling or they shall cease to operate.

Similar power to promulgate the ordinance has been provided to the Governor of the state under Article 213.

Ordinances were provided as a stop-gap arrangement and not as an alternative legislation process. The promulgation of the ordinance is subject to judicial review

Government Promulgates Ordinance to amend Companies Act, 2013

Union Cabinet has approved proposal for promulgation ordinance to amend the Companies Act, 2013. The ordinance had received assent from President Ram Nath Kovind under Article 123 and has been promulgated. The amendments to the Act are aimed to promote ease of doing business as well as ensure better compliance levels.

Key Facts

The ordinance to change Companies Act seeks to declog National Company Law Tribunals (NCLTs) and decriminalise minor offences by companies. The ordinance will transfer 90% of the cases to regional directors under Ministry of Corporate Affairs from NCLTs. Moreover, it will retain status of all non-compoundable offences since they are serious in nature.

Background

Union Government-appointed Committee (headed by Corporate Affairs Secretary Injeti Srinivas) had suggested various changes to Act, including restructuring of corporate offences under companies law and in-house adjudication mechanism to ensure that courts get more time to deal with serious violations.

Apart from restructuring of corporate offences to relieve special courts from adjudicating routine offences, the committee had mooted re-categorisation of 16 out of 81 compoundable offences under the Act. This move was recommended to bring down NCLT’s load as it looks at insolvency and bankruptcy cases as well.

It also recommended disqualification of directors in case they have directorships beyond permissible limits and capping an independent director’s remuneration. It also had suggested that remuneration any independent director gets from company should be capped at 20% of his gross income in year to prevent any material pecuniary relationship, which could impair their independence on the board.