Company law is the set of provisions for doing business with ease. The law emphasizes corporate governance. In 2019, MCA created the CLC committee for monitoring the ease of doing business. The objective of CLC {Company law committee} is to improve the operational efficiency and support for the ease of doing business. A blog is written here to highlight the crucial points of the CLC recommendation. The report listing was released on March 21, 2022. Companies act, 2013 recommends different types of committees for companies. The committees to be set are the audit committee, stakeholder’s relationship committee, nomination and remuneration committee, and corporate social responsibility committee.
Recommendation for fractional share:
• The amendment is the issuance, transfer and holding of the fractional shares.
• The recommendation states that the rule is only for the fresh issue and not for the share at the time of merger or amalgamation.
• After discussing with SEBI, the listed securities need to decide the number of fractional shares.
• In the USA, the investors hold and are permitted to trade with fractional shares.
• The stock split and bonus issue are the tools for reducing the share price. Trading fractional shares in the domestic and international market are also one such tool that reduces the share price and retail participation.
• The employee stock options with fractional shares lead to high share prices. So, a bonus issue or stock split help for reducing the share price.
• New issues, ESOP issues, trading fractional shares, created during the merger, and amalgamation increase the share price.
Recommendation for special purpose acquisition companies:
• SPACs are listed in the equity market privately without IPO. These special purpose acquisition companies are formed to acquire the target company.
• The SPAC-Indian companies are listed in the international market like NASDAQ. As there is a global impact, the SPAC transactions are given importance.
• SEBI is examining the SPAC transactions. This examination is to regulate the framework. CLC will provide the provisions in the domestic listing. SEBI regulate SPAC transactions through provisions.
• The regulatory framework from CLC and SEBI helps IPO companies to raise the funds through SPAC transactions.
Other recommendations:
• Consolidation of accounts of a foreign company requires changes with the financial year. The financial year in a foreign country is from January to December. With the approval of the central government, the CLC recommend that companies incorporated outside India can follow the Indian format.
• The independent director is appointed, and the calculation for the five years tenure starts from the date of appointment. The calculation is not from the date of regularization.
• CLC restrict the conversion of cooperative societies into companies. The objective of a cooperative society is principle-based and not profit based. So, the motive should support the concept of ease of doing business. Section 366 allows for the conversion of a limited liability partnership, cooperative society and partnership into the company. The application of this provision is on the acceptance of the business owners and Indian market conditions.
The rules of MCA emphasize the ease of doing business:
The following points from the past acts of companies act show that the regulatory body strives high for implementing ease of doing in the Indian business environment.
• The companies’ act of 2015 relaxed the minimum paid-up capital for private companies.
• Incorporation is a process that takes more time. CRC published in 2016 is the initiative for speeding the incorporation process.
• The name availability and incorporation of companies are processed within one day after the date of payment confirmation.
• MCA introduced SPICe to help the companies to register through e-form. MCA21 System helps for solving the issues related to TAN and PAN.
• The web-based service RUN helps the companies to reserve their name. This website also simplified the need for a digital signature certificate.
• The registration of LLP with ROC is centralised in one place in the year 2018. RUN-LLP website is for reserving the name, and the FiLLip form is for reservation of LLP.
• At the time of incorporation, the SPICe e-form asks for the details about GST, ESIC and EPFO. Before the introduction of the SPICe e-form, this was not integrated with the incorporation.
• Section 8 companies are integrated with the SPICe forms. These companies were handled by the ROCs and RDs in early processes.
• SPICe also takes care of the establishment registration number. MCA collaborate with the labour department in Delhi regarding the process.
Conclusion:
Companies act has 470 sections to explain the different processes in the companies. There are 29 chapters in the companies act. The chapters names are as follows: Preliminary, incorporation of company and matters incidental thereto, prospectus and allotment of securities, share capital and debentures, acceptance of deposits by companies, registration of charges, management and administration, declaration and payment of dividend, accounts of companies, audit and auditors, appointment and qualification of directors, meetings of the board and its powers, Inspection, appointment and remuneration of managerial personnel, investigation, inquiry, compromises, amalgamations, arrangements, registered valuers, prevention of oppression and mismanagement, removal of names from the register, rehabilitation and revival of sick companies, , winding up, companies incorporated outside India, government companies, registered registration offices and fees, companies to furnish information or statistics, nidhis, national company law tribunal and appellate tribunal, special courts, and miscellaneous. The recommendations of CLC are framed as a regulatory framework. The objective of the recommendation, reporting and compliance should go hand in hand. With the periodical issues and changes in the market, the different sections and amendments become operational. The Indian markets need to implement these amendments to enhance the ease of doing quality standards.
