NEW DELHI: The government is likely to table the Companies (Amendment) Bill 2024 in Parliament in the current session, as it aims to streamline corporate operations and enhance governance norms, official sources told FE.
The amendments are likely to touch upon easing the borrowing process of listed companies, incorporate a mechanism to enable courts to enforce a compromise/arrangement for dissenting creditors, streamline auditing process of companies, and relax the procedure of shifting registered offices among states, the sources said.
FE had reported earlier that the corporate affairs ministry may allow companies to hold AGMs/EGMs through electronic mode on a permanent basis, and ease the requirement of raising capital in distressed companies, through amendment in the Companies Act, citing an official. These proposals will also be part of the current set of amendments.
There is also a plan to finalise a stricter governance framework for large unlisted firms, especially in the backdrop of alleged irregularities at firms like Byju’s, the sources mentioned.
The corporate affairs ministry had for the first time allowed companies to hold AGMs and EGMs virtually in 2020, in the backdrop of Covid-19 pandemic. This facility is valid till September 30, 2024; but with an amendment to the Companies Act, the facility of virtual AGMs/EGMs would continue indefinitely.
Further, to relax the borrowing process, experts say, an amendment should be proposed to Section 42 of the Companies Act, to clarify that where a resolution with respect to higher borrowing limits has been passed by shareholders of a listed company, such company should not be required to pass a separate resolution in case of breach of the applicable limits.
“In the event the limit is raised to a ceiling decided by shareholders of the company… listed companies will be able to borrow and access funds swiftly, and enhance ease of doing business in India,” said Moin Ladha, partner, Khaitan & Co.
Nilesh Tribhuvann, managing partner, White and Brief Advocates and Solicitors said the bill should refine the “judicial management process” to clarify the roles and responsibilities of judicial managers, to improve the efficiency of rescuing financially distressed companies.
It should also incorporate a provision to prioritise essential funding for distressed companies above other debts, supporting their survival and recovery efforts, he said.
The corporate affairs ministry, meanwhile, is also ready with an amendment to the Insolvency and Bankruptcy Code (IBC), 2016. “However, the IBC amendment may not be tabled in the current Parliament session,” a source said.
The IBC amendments on the cards include introduction of cross-border and group insolvency mechanisms. The amendment also include removal of the interim moratorium provision for personal guarantors assets, introduction of project-wise insolvency under real-estate, and introduction of creditor-led resolution plan (CLRP) mechanism, a method to settle cases out-of-court.
Source: The Financial Express
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