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About Bhumesh Verma

Bhumesh Verma is Managing Partner of Corp Comm Legal, a Delhi-headquartered Law firm. He is a senior corporate lawyer and author. A law graduate from Campus Law Centre, Delhi University (1994), he started his career at Ajay Bahl & Co. (now part of AZB & Partners) and went on to become partner at some of the leading Indian law firms.

He was selected as a Chevening Scholar in 2000 by the UK government. During this scholarship, he studied at the College of Law at York and worked with a big London law firm.


Currently, he is ranked among Top 100 Indian Lawyers by Indian Business Law Journal (“IBLJ”).


He has advised clients from more than 50 countries on M&A, inbound and outbound FDI, incorporation of companies, regulatory approvals and compliances, joint ventures, financial and technical collaborations, private equity, venture capital, corporate and securities laws, commercial agreements, exchange control laws, structuring cross-border transactions and strategy on legal and business issues.


He is a keen reader, prolific speaker and writer. He has contributed to in-house journals of many international law firms on India law


He is guest faculty with law colleges and online legal education portals too and conduct workshops on corporate laws and drafting skills. 

ROAR

Whistleblowing in India:…

Introduction

Non-transparency and irregular reporting to Government and market regulators has been the primary cause of corporate corruption around the world. In any corporate set-up, invariably some of the employees are well versed with the workplace activities and are also aware of any kind of misconduct taking place. Despite being the first people to become aware of the wrongful deeds of the corporates, most of the times they choose to exercise a studied silence due to the apprehended retaliation that may follow by the powerful people in charge.

For any country to build on corporate governance, whistleblower protection must be given the highest priority. Corporate governance refers to ensuring the interests of all the stakeholders and taking efficient strategic decisions. Whistle-blowing mechanism is essential for proper administration and working of companies. Presently, there is no separate piece of legislation that addresses the issue of corporate whistleblowing in India. The Whistle Blowers Protection Act, 2011 came into being in the year 2014, which protects all those who give information regarding any corrupt practices related to the Government. Though this Act was the need of the hour, it has many discrepancies, one of them being, non-inclusion of corporate whistleblowing.

Whistleblowing is directly correlated to enhancing corporate governance in an economy. Whistleblowing mechanism ensures that the corporates do not take personally beneficial (to a selected few) decisions at the expense of other stakeholders. Despite being a non-mandatory provision, whistleblowing mechanism as per erstwhile Clause 49 of the Securities and Exchange Board of India (SEBI) Listing Agreement plays an extremely instrumental role in enhancing the corporate governance standards of the company.

Post the discontinuance of Clause 49, Regulation 18 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 [SEBI (LODR) Regulations] inter alia provides for a mandatory requirement for all listed companies to establish a vigil mechanism called “whistleblower policy” for directors and employees to report concerns about unethical behaviour, actual or suspected fraud or violation of the company’s code of conduct or ethics policy. In simplest terms, whistleblowing must be recognised as the practice of highlighting or alarming that some kind of unlawful, felonious, or wrongful act is taking place inside a company.

Whistleblowing Policy Framework in India

A SEBI Circular dated 26-8-2003 amended the principles of corporate governance as incorporated in the standard listing agreement. The amended principle made it mandatory for companies to have their own whistleblowing policy. This mechanism allows any irregularity prevailing in the company to be exposed by the employees wherein the same can be brought to the attention of the management. SEBI included these guidelines for companies in an amendment to Clause 49 of the Listing Agreement in August 2003.

The substance of Clause 49 can now be found in Regulation 18 of SEBI (LODR) Regulations. Regulation 18 is an agreement between stock exchanges and listed companies. The Listing Agreement makes it mandatory for all listed companies to establish a mechanism called whistleblower policy. It provides a platform for its employees to report any kind of misappropriation, fraud or actual and any unethical behaviour to the Board.

As per these clauses, an employee wanting to report any kind of fraudulent activity or malpractice in the company must be given access to the company’s Audit Committee. The company must thereafter transfer this information to all the employees working in it. The guidelines under Regulation 18 aim to create a sense of responsibility amongst the employees of a company and enlighten them about the fact that it is their right and privilege to be vigilant. As an extension to the right of the employees to blow whistle against the illegal acts, the company also affirms to protect such an employee from any kind of aggravation or termination.

Moreover, Section 177 of the Companies Act, 2013 provides that every listed company needs to establish a vigil mechanism for the directors and employees to report any frauds or misappropriations in the prescribed format. Accordingly, a code of conduct has been laid down by the company for its senior management executive and other top management members, which states the guidelines for their code of conduct.

Whistleblowing mechanism aims to create a balance between law and morality by compelling the employees to realise their responsibility towards the society. An effective policy could bridge the gap created by the fear of retaliation by powerful people upon unsavory disclosures. Employees often are at the risk of losing their job and are threatened and exploited if they decide to speak up against wrongful acts of companies. This fear of retaliation is further extended due to the confidentiality clauses in their employment contracts.

More often than not, employees are also afraid of speaking up due to the fear of defamation in the event of the information disclosed is not eventually true. The problems of whistleblowers are evident from the cases wherein several individuals have lost their life in India due to them standing up against unlawful acts of their companies.

Strengthening the Mechanism in India 

The increasing number of corporate scams make a strong whistleblowing mechanism the need of the hour. There are several stakeholders in the efficient functioning of a company and its proper administration is instrumental for the economy. The primary shortcoming of the Whistle Blower Protection Act, 2011 is its limited framework. The present Act only covers those whistleblowers that have exposed irregularity or corruption related to Government. While it ensures a healthy framework for government officials to blow the whistle, it is not applicable to corporate employees. It is essential for the law to have a broad coverage wherein it is applicable to public and private sector employees. The rationale behind the law is to protect any individual who upon disclosing any kind of misconduct of the organisation may be subjected to retribution outside the employer-employee relationship.

Another issue that needs a conclusive declaration is the defining scope of the Whistle Blower Protection Act, with respect to its applicability to public sector undertakings (PSUs). The Act provides a mechanism to investigate alleged corruption and misuse of power by public servants and also protect anyone who exposes alleged wrongdoing in government bodies, projects and offices. Presently, the Act allows disclosures that are prohibited by the Official Secrets Act, 1923 and extends only to public servants.

Therefore, ordinarily it is not applicable to PSUs however, it may be argued that they fit the definition of public servants and hence fall under its ambit. While dealing with this question, the Supreme Court held that the protection by way of sanction under Section 197 CrPC is not applicable to the officers of government companies or the public undertakings even when such public undertakings are “State” within the meaning of Article 12 of the Constitution on account of deep and pervasive control of the Government. Applicability of whistleblowing mechanism to PSUs shall further the interests of corporate governance in India.

When an individual decides to keep the societal interests above the interests of the company, he has to bear a substantial risk of retaliation. Therefore, the Government should provide incentives to these employees to encourage them to reveal the corrupt practices that they know about. These employees often put their job at risk and there should be compensation for coming out with the revelations. The compensation must include all losses and must replace the individual back in an identical position as before the disclosure. These individuals must also be provided protection against misguided disclosures made in good faith. Section 17 of the Whistle-Blowers Protection Act, 2014 provides punishment for mala fide or knowingly wrong/false reporting. However, in order to encourage employees to take risk, they must not be punished for wrong disclosures that are bona fide in nature.

Moreover, a systematic procedure must be present for ensuring an early disclosure of misconduct. The procedure for disclosure must be easily comprehensible and straightforward. The law should provide for reasonable procedures to invigorate and facilitate intramural procedures to disclose wrongdoing. The procedure should allow for easy access to legal advice to facilitate disclosures and reduce misunderstandings. The aim of the law should be to facilitate disclosures at the earliest stage to minimise the damage caused for big corporate scams. Further, in order to enhance transparency and promote corporate democracy, the disclosure should be published in reports for greater awareness. A special committee must be created for the disclosures to be made, giving the whistleblowing mechanism a separate institutional framework.

Conclusion

Over the years, several big corporate scams have shocked the global economy. Whenever we look back as to how we could have deterred these scams from taking place, the questions of corporate governance is always discussed. Looking at the various scams that have occurred over the last few years, it can be stated that if there was a proper whistleblowing mechanism in place for the employees to disclose the crookedness and misconduct, there was a strong probability that few of these scams could have been prevented. The lack of proper protection could have acted as a hindrance for the limited few who would have the courage to blow the whistle against their companies.

Scams such as Punjab National Bank, ICICI Bank, Satyam, Kingfisher, Enron among others have had drastic effects on millions of people. These corporates impact the life of these people on a daily basis and their interests must also be taken care of in the administration of big corporates. While it is a personal choice of the employees on their decision to blow the whistle against illegal activities taking place in companies, it is the duty of the Government to ensure a healthy and protective environment to encourage and allow them to do so. It would be interesting to see if we see a separate Whistle Blower Protection Act for the private sector in addition to the SEBI Regulations and Section 177 of the Companies Act, 2013.

Banning of Unregulated…

Deposit schemes are one of the easiest modes to generate money for the fraudsters. Usually, middle / poor strata of Indian society is an easy target for the fraudsters organizing deposit schemes.

As a common phenomenon, fraudsters initiate a deposit scheme with ridiculous incentives to grab the attention of people. Uninformed people seeking quick and more than decent returns get inclined towards such deposit schemes.

Following the accumulation of the targeted money from the people, these fraudsters abscond with the hard earned money of middle/poor people. These kinds of schemes are being reported in the media on constant basis, with little improvement in greed of people getting cheated.

The Central Government, with the intent to curb the practice of using deposit schemes as a money spinner for fraudsters, has passed Banning of Unregulated Deposit Schemes Bill, 2019.

The underlying intent is to establish a system in place to ensure people (who have deposited their hard earned money in certain unregulated deposit schemes) will recuperate their deposit monies from the organizers of such unregulated deposit schemes.

The system shall firmly deal with the illegal deposit taking activities as certain fraudsters are conning poor/innocent people to generate money by using regulatory gaps to their advantage.

The Bill is the reflection of the central government efforts to recuperate money looted by the fraudsters from common men under the pretext of deposit schemes and based on the certain recommendations made by the inter-ministerial group. 

Under the new law, depositors will have first claim on the recovery money and central/state governments shall be empowered to frame rules to firm handle with the misuse of unregulated deposit schemes.

As per the available data, 978 cases are identified out of which 326 cases are based in West Bengal. 

Apt measures are integrated to develop a regulatory system to abolition the unregulated deposit schemes excluding the deposits procured in regular course of business.

Utmost priority is given to recover the deposits made under unregulated deposit schemes which are pioneered with the intent to generate easy money via unofficial modes.


The offences under the Bill are broadly classified into three categories:

a)     Unregulated deposit schemes operation;

b)     Fraudulent default in regulated deposit schemes; and

c)     Wrongful solicitation/inducement to subscribe the deposits under the unregulated deposit schemes.


Severe punishment will be imposed on the deposit scheme organizers who illegal raised money from common man with the target to loot such common man.

Defaulters will be exposed to severe punishment in the form of imprisonment (1 to 10 years) and pecuniary penalty ranging from Rs 2 lakh to Rs 50 crores.

With this new enactment, depositors will be armored with right weapon to recuperate the deposit money without delay via attachment of defaulters’ assets. There are statutory timelines for assets attachment of defaulters and restitution to depositors.

Accordingly, entities will be entitled to accept deposits from the depositors in their regular course of business for any legitimate purpose. However, there would be prohibitions for the promotion/advertisement of or acceptance of deposits pursuant to unregulated deposit scheme.

Subject to the aforesaid proposition, severe punishment will be imposed on the deposit takers for promotion/advertisement of unregulated deposit scheme or acceptance of deposits under any unregulated deposit scheme.

People who have the intent to lure money from the common man under the pretext of unregulated deposit schemes should be aware of the new regulations and restrain themselves from indulging in any fraudulent acts of soliciting deposits as commission of any such fraudulent acts would land them in jail.

To conclude, the strict enforcement of the new enactment will reduce the occurrence of unregulated deposit schemes and preserve the economic interest of the depositors from the clutches of the deposit takers without diluting the prospect of accepting deposits by entities in regular course of business.

Big Bang Banking Reforms:…

Contributed by Harshita Verma

With an aim to strive towards a USD 5 trillion economy and cleaning up the banking sector notoriously saddled with NPAs, the Government of India has prescribed the consolidation pill yet again.

Yesterday, the Finance Minister announced another significant round of consolidation of Indian Public Sector Banks (PSBs) with 10 of them being merged into 4. With a total of 12 PSBs remaining now, compared to 27 in 2017, there could be a sense of increasing global competitiveness, economies of size and scale for Indian PSBs.

Canara Bank and Syndicate Bank to be merged (anchor bank Canara Bank). Consolidated Canara Bank and Syndicate Bank will be 4th largest public sector bank with  ₹15.2 lakh crore business.

Andhra Bank and Corporation Bank will be merged into Union Bank of India. Consolidated Union Bank of India, Andhra Bank and Corporation Bank will become the 5th largest public sector bank with Rs. 14.6 lakh crore business.

Indian Bank will be merged with Allahabad Bank (anchor bank - Indian Bank) - Consolidated Indian Bank and Allahabad Bank will be 7th largest public sector bank with Rs 8.08 lakh crore business.

Similarly, Punjab National Bank will subsume Oriental Bank of Commerce and United Bank.

Some of the other measures envisaged are the following:

1. Non official directors will perform a role analogous to individual directors.

2. PSBs are enabled to do succession planning.

3. Making the management accountable to the board, the board committee of nationalized banks will appraise performance of the General Manager and above including Managing Director.

4. The Chief Risk Officer will be given market linked compensation to attract the best talent.

5. Boards will be given the flexibility to fix sitting fee of individual directors.

6. Boards will have the flexibility to introduce the chief General Manager as per business needs.

Many positive changes are likely to come about, including the following:

1. Reduction in the gross Non Performing Assets (NPAs)

2. Increase in the provision coverage ratio; it being the highest in the 7 years.

3. Increased capital size and enhanced liquidity leading to increased operational strength and improved profitability.

4. Larger reach of the banks resulting in greater financial inclusion and provision of better/greater variety of services for customers.

5. Enhanced risk appetite and a strong national and global presence of Indian PSBs.

The government is reassuring that while the banks will grow and some rationalisation of operations will take place, no employees will be retrenched. Else, the entire exercise could prove to be counterproductive in the present atmosphere of gloom surrounding job losses across sectors.

This major reform has the potential to generate new vigour in the Indian economy and enable it to become a USD 5 trillion economy.

Indian government in…

Amidst signs of Indian economy losing pace, job losses and other worrisome indicators, Indian government has announced multiple measures to boost the foreign direct investment flow (FDI) in the country yesterday.

One of the most significant sector impacted by these announcements is the retail trading sector. The government has indicated easing of local sourcing norms for single-brand retail companies.

The extant FDI policy mandated a single-brand retail company with more than 51% FDI to source 30% of its goods from within India. The new decision allows this 30% to be calculated over the first five years of operations of the Indian entity.

Further, in calculation of the local sourcing, exports will also be counted. Therefore, any local sourcing by an Indian company (engaged in single brand retail trade) having more than 51% FDI, be it for sales in India or for exports   will be counted towards the local sourcing requirement. This was a big bone of contention between foreign retailers and Indian government. This should result in enhanced ‘ease of doing business’ sentiment and provide greater flexibility to big players in the sector.

Further, any incremental sourcing for global operations by non-resident single brand retail trading, either directly or through group companies, will also be counted towards the local sourcing requirement for the first five years.

The government observed that “… prevalent business models involve not only sourcing from India for global operations by the entity or its group companies, but also through an unrelated third party, done at the behest of the entity undertaking single brand retail trading or its group companies.”

Therefore, the Press release indicates that “In order to cover such business practices, it has been decided that ‘sourcing of goods from India for global operations’ can be done directly by the entity undertaking SBRT or its group companies (resident or non-resident), or indirectly by them through a third party under a legally tenable agreement,”

The government also allowed single-brand retail companies to start selling online before setting up a brick and mortar store as long as it sets one up within two years of starting online sales. Earlier, such companies were supposed to set up a brick and mortar store before selling online.

Apart from single brand retail, the Cabinet also approved some changes to the FDI rules for digital media, coal mining and contract manufacturing.

Henceforth, 26% FDI will be allowed (with government approval), for uploading and streaming news and current affairs using digital media, on lines similar to those of print media.

The government has also allowed 100% FDI under automatic route for sale of coal, for coal mining activities including associated processing infrastructure subject to provisions of Coal Mines (special provisions) Act, 2015 and the Mines and Minerals (development and regulation) Act, 1957 as amended from time to time, and other relevant acts on the subject.

The earlier FDI norms provided for 100% FDI under the automatic route in the manufacturing sector. However, there was no specific provision for contract manufacturing in the policy. Henceforth, 100% FDI will be allowed under the automatic route in contract manufacturing in India as well.

Better late than never. Some of these reforms were long overdue and should result in enticing more FDI, reversing the recent worrisome trends, give a boost to Make in India initiative and generate employment opportunities, to name a few benefits. 

Companies (Amendment)…

The much awaited the Companies (Amendment) Bill, 2019 was passed by the Parliament recently with the objective to augment more transparency/accountability in compliance/business management of the Indian corporate sector and to reinforce the corporate governance regime.


Some outstanding features of the new / amended provisions are de-criminalization of certain offences, rationalization of corporate governance provisions and reduction of the burden on the shoulders of the National Company Law Tribunal (NCLT).


The central government had constituted a high level committee and assigned with the job of reviewing the Companies Act, 2013 (Act) and recommending apt amendments to the Act.


Based on the committee recommendations the central government had passed multiple ordinances related to company amendments in November 04, 2018, January 04, 2019, January 12, 2019 and February 21, 2019 respectively prior to giving effect to the existing Amendment (Bill), 2019.


The following are the major reforms:

a) Empowerment of the central government to sanction the conversion of public companies into private companies and alteration of financial year of a Indian company having Holding/ subsidiary/ Associate Company situated outside India;

b) Hefty penalties are pioneered with the intent to avert the commission of repeated defaults; 

c) Reintroduction of requirement of submitting commencement of business declaration;

d) Establishment of in-house adjudication framework to resolve the compoundable offences;

e) Disqualification of directors for accepting the director position beyond the permissible limits as specified in the Act;

f) Expansion of pecuniary jurisdiction limit of the Regional Director to adjudicate the compound offences; and

g) De-registration of a company on the ground of non-maintenance of a registered office.


The company reforms can be majorly categorized into four heads:

  • De-criminalization of offences
  • Imposition of stringent penalties for repeated defaults
  • Reduction of default cases burden on NCLT.
  • Corporate governance reforms


De-criminalization of offences:

The following is the list of criminal defaults which are re-classified into civil defaults: Penalty will be imposed on:

  • The company and any officer in default who has unlawfully issued shares at a discount (S. 53). 
  • The company and any officer in default for failure/delay in filing notice for alteration of share capital (S. 64). 
  • The company and any officer in default for failure/delay in filing annual return (S. 92). 
  • Every promoter, director, manager or other key managerial personnel who is in default for attachment of a statement of special business in a notice calling for general meeting (S. 102). 
  • Every officer in default for failure to provide a declaration regarding appointment of proxy in a notice calling for general meeting (S. 105).
  • The company and every officer in default including company liquidator for failure/delay in filing certain resolutions (S. 117).
  • The company and every officer in default for failure/delay in filing report on Annual General Meeting conducted by public listed company (S. 121).
  • The company, the managing director and the chief financial officer of the company, directors for failure/delay in filing financial statement (S. 137).
  • Auditor for failure/delay in filing statement by auditor after resignation (S.140)
  • The company and every officer in default for failure/delay by company in informing Director Identification Number (DIN) of director (S. 157).
  • Individual or director of a company in default for contraventions (Non-compliance with Section 152 (Directors Appointment), Section 155 (Duplication of DIN) and Section 156 (Intimation of DIN)) related to DIN (S. 159).
  • Individual for accepting director position in violation of the Act (S. 165).
  • Person in default for allocating managerial remuneration in excess of permissible limits under the Act (S. 197).
  • The company, every director and key managerial personnel of the company who is in default for violating provisions related to appointment of Key Managerial Persons in certain class of companies (S. 203).
  • Director for noncompliance of provisions related to Registration of the offer of scheme involving transfer of shares (S. 238).


Imposition of stringent penalties for repeated defaults:

  • In general the adjudicating officer will provide the defaulter with the opportunity to rectify the default by issuing certain directions.
  • If the defaulter fails to comply with the directions of adjudicating officer and rectify the default then such failure would amount to non-compliance default.
  • With the inception of a new provision a defaulter (who has committed a second or subsequent default in relation to same cause of action within a period of 3 years from the occurrence of last default) will be penalized with an amount equivalent to twice the amount provided for such default under the relevant provision of Act.


Reduction of default cases burden on NCLT:

  • With the objective to condense the burden on the NCLT, the pecuniary jurisdiction limit of the Regional Director (RD) is enhanced in relation to compound offences. Accordingly, the RD pecuniary limit to compound offences is enhanced to a maximum of INR 25 lakhs which was 5 lakhs earlier (S. 441).
  • Prior in order to compound certain offences consent of the special court is mandatory However, such requirement is detached via latest company amendments (S. 441).
  • Corporate Governance Related Reforms
  • Company with share capital is obligated to submit a certificate of business commencement prior to starting its business operations or procurement of a loan in relation to the business commencement (Sec. 10A).
  • The Registrar is empowered to initiate the action to strike off the name of a company provided during the physical verification of such company registered office by Registrar it is identified by Registrar that the company is not carrying any business operations (S. 12).
  • Failure of any company/officer in charge to register the details of the significant beneficial owner (SBO) will expose such company/officer to fine/imprisonment or both (S. 90). It is the responsibility of the company to recognize the SBO – Any failure to recognize SBO would expose such company to punishment.
  • The central government is conferred with the authority to issue requisite regulations in this regard. If any company or person aggrieved by a tribunal order in this regard is provided with the opportunity to submit an application to relax/lift restrictions placed on the company within duration of one year from order date (S. 90).
  • Any person who has accepted the designation of director in excess of limits permissible under the Act will be disqualified to accept/act as a director (S. 164).
  • Corporate Social Responsibility
  • Within a period of six months from the financial year expiry every company is under the obligation to transfer any unspent amounts which is not related to any ongoing project to a Fund specified in the Act.
  • Pursuant to accomplishment of certain prescribed conditions every company is mandated to transfer the unspent amount which is related to any ongoing project into special account (Unspent Corporate Social Responsibility Account) opened with any scheduled bank within 3o days by the financial year end.
  • Funds transferred to the aforesaid special account will have to be spent by the company within a period of 3 years from the date of such transfer – Failure to spend such funds within the 3 year period will obligate the company to transfer such unspent funds to the account designated by the central government.
  • Non-compliance with the CSR provisions will expose the company to a minimum penalty of INR 50,000 to a maximum penalty of INR 25 lakhs and expose officer in default to imprisonment of 3 years/penalty (Minimum INR 50,000 to Maximum INR 5 lakh).
  • In order to make certain that companies will be complying with CSR provisions – The Ministry of Corporate Affairs is empowered with the authority to issue directions to certain class of companies in this regard.


Serious Fraud Investigation Office (SFIO):

  • Any person who is in default may be arrested by officer at rank of Assistant Director or above of SFIO pursuant to S.212 of the Act.
  • Within 24 hours of arrest such officer may have to take the arrested person to any designated Magistrate/Officer.
  • If any SFIO investigation report reflects any commission of fraud by a director, key managerial personnel or other officer in any company by taking undue advantage of such position then the central government has the authority to file disgorgement application against such director, key managerial personnel or other officer in the designated tribunal – Such fraudster may be charged with personal liability with no limitations on liability.


List of some other Amendments:

  • Rules are relaxed to reduce compliance burden and to facilitate the companies to file the prospectus copy with the Registrar rather than the registration of the prospectus with the Registrar of Companies (ROC) (Sec. 26). Accordingly in S.35 of the Act, the phrase (Filing of copy of Prospectus with the Registrar) is included as a replacement to the phrase (Registration of Prospectus with the Registrar).
  • The word ‘Public’ is detached from S.29(1)(b) of the Act to empower the central government to direct certain class of companies to mandatorily issue the securities in de-materialized form.
  • A governing body under the name (National Financial Reporting Authority – NFRA) will be assigned with certain functions and duties as directed by the central government from time to time – NFRA will contain Chairperson and certain number of full time members to perform the NFRA functions/duties (S. 132).
  • No person will be inducted into the NFRA body in the role of auditor or to perform any valuation under the S.247 of Act by NFRA if such person has the track record of professional misconduct (S. 132).
  • If the central government has the reason to believe any officer in charge of a company is indulged in unlawful acts – Then the central government has the authority to submit an application to designated tribunal seeking its decision on eligibility of such officer in charge to continue or not to continue in the office (S. 241).
  • Accordingly the designated tribunal has the authority to decide eligibility of such officer in charge to hold or not to hold such position in relation to conduct/management of company affairs (S. 242).
  • If the designated tribunal decides to expel such officer in charge from holding such position then such officer in charge will be prohibited from holding such position for a period of 5 years from the date of tribunal order (S. 243).
  • Such expelled officer in charge is not eligible to receive any compensation for the loss/termination from the job. The central government has the authority to permit such expelled officer in charge to assume the same position prior to completion of the banned period subject to the written permission of the designated tribunal.


The Companies Act Amendments will certainly:

  • Encourage the companies to put CSR funds to good use for the welfare of the society;
  • Streamline certain procedural aspects to get rid of the roadblocks which are hindering the enforcement of certain vital company provisions;
  • Empower the authorities with right tools to hunt down the fraudsters;
  • Diminish the compliance burden on the NCLT; and
  • Ultimately uplift the corporate governance standards of the corporate sector

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New Delhi, Delhi, India

Call us : 9811336533

E-mail : bhumesh.verma@corpcommlegal.com

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