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Compliance is the Buzzword

The success of every amnesty scheme depends on the benefits it provides to the delinquents. Under Company Law Settlement Scheme 2014, the defaulting companies[1] and its directors can also expect major benefits and advantages. With the advent of the Companies Act, 2013, there is bound to be substantial change in the way the companies are governed and managed. The new provisions of the Companies Act, 2013 are aimed at ushering in the era of good corporate governance. Gaining from experience of corporate scams and frauds in the recent past, the Legislature has introduced provisions with the sole purpose of bringing in transparency in the functioning of companies irrespective of their category. Even the private limited companies have been mandated under the Companies Act, 2013 to follow stricter regime though they are likely to get respite in the form of exemption. The penalties under the Companies Act, 2013 are not only steep but also affect the persons in charge of the governance i.e. the directors.

Though Companies Act, 2013 is at the nascent stage and its full effect is yet to emerge, it has brought in an era of anxiety amongst the directors and the companies. The fact remains that the companies and directors have been used to a certain compliance atmosphere and they now stand exposed to stricter measures and control. It is not possible to bring the change in a day. First off, the more important change is required in the form of education and awareness of the provisions of the Act. The Central Government has definitely acted in haste, at the brink of tearing hurry to notify Companies Act, 2013. The Ministry of Corporate Affairs, having notified over 50% of the provisions of Companies Act, 2013, sprang into action to control the damage unleashed by hurried notification of the majority of the provisions of the Companies Act, 2013. This has not helped the matters and at times it has compounded the confusion that existed. The action of the Central Government does not seem to be cohesive and is not driven by unified direction. Host of clarificatory circulars, Removal of Difficulties Orders and Notifications have been issued to remove confusion. At times, the Ministry of Corporate Affairs has over stepped its powers and in its zeal to issue clarifications has amended Act through circulars and Removal of Difficulties Order. Non-notification of Section 465 has also not helped matters. Nonetheless, the Companies Act, 2013 has brought in new era and the corporates and professionals need to match its steps.

A detailed reading of the provisions of the Companies Act, 2013 clearly brings out that it craves for compliance and the directors need to act with diligence. Non-filing of mandated documents attract severe penalties under the Companies Act, 2013 besides inviting disqualification and prosecution. Continuing non-compliances and defaults under the Companies Act 1956 are bound to boomerang and the directors may face difficulties. This makes the present Company Law Settlement Scheme 2014 immensely appealing and the defaulting companies and their directors may benefit greatly by filing the pending and overdue documents and by availing immunity thereafter.

The benefits under the Company Law Settlement Scheme 2014 can be enumerated as under: -

Benefits to Companies

1. Lower Additional Filing Fee by remission of 75% of additional fee otherwise payable

2. Immunity from Prosecution upon filing of e-Form CLSS 2014

3. Withdrawal of cases already filed and pending in courts

4. Escape from Enhanced Penalty

5. Dormant Status option available at ¼ of fee payable

6. Strike Off option available at ¼ of fee payable

Benefits to Directors/Officers in default

a. Immunity from Prosecution upon filing of e-Form CLSS 2014

b. Non-applicability of disqualification provisions for past defaults

[1] For list of defaulting companies, directors and Secretaries as on 10th August, 2014, http://www.mca.gov.in/MinistryV2/default_comp_list.html. Last visited 24th August, 2014. 


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Category Corporate Law, Other Articles by - Ashish makhija 



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