Tranche V of special economic package: Company/ insolvency law amendments
August 21, 2020
Tranche V of the Special Economic Package announced by the FM provides, among others, for amendments to Company Law and Insolvency Law to boost the ease of doing business and also for the privatisation of public sector enterprises, as outlined below :
Reforms in the next phase of ease of doing business to include –
Direct listing of securities by Indian public companies in permissible foreign jurisdictions.
Private companies which list NCDs on stock exchanges not to be regarded as listed companies.
Inclusion of provisions of Part IXA of Companies Act 1956 related to Producer Companies in Companies Act, 2013.
Power to create additional/ specialized benches for NCLAT.
Lower penalties for all defaults for Small Companies, One person Companies, Producer Companies & Start Ups.
Minimum threshold to initiate insolvency proceedings raised to Rs. 1 crore (from Rs. 1 lakh, which largely insulates MSMEs).
Special insolvency resolution framework for MSMEs under Section 240A of the Code to be notified soon.
Suspension of fresh initiation of insolvency proceedings up to one year.
Empowering Central Government to exclude COVID 19 related debt from the definition of “default” under the Code for the purpose of triggering insolvency proceedings.
Amendments to Companies Act 2013:
Decriminalization of Companies Act violations involving minor technical and procedural defaults (shortcomings in CSR reporting, inadequacies in board report, filing defaults, delay in holding AGM).
Majority of the compoundable offences sections to be shifted to internal adjudication mechanism (IAM) and powers of RD for compounding enhanced (58 sections to be dealt with under IAM as compared to 18 earlier).The amendments will de-clog the criminal courts and NCLT.
7 compoundable offences altogether dropped and 5 to be dealt with under alternative framework.
Public sector enterprise policy: The government will announce a new policy whereby:
List of strategic sectors requiring presence of PSEs in public interest will be notified.
In strategic sectors, at least one enterprise will remain in the public sector but private sector will also be allowed.
In other sectors, PSEs will be privatized (timing to be based on feasibility etc.).
To minimize wasteful administrative costs, number of enterprises in strategic sectors will ordinarily be only one to four; others will be privatized/ merged/ brought under holding companies.
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