In a resolute effort to actualize the promises outlined in the 2021-2022 budget, the Ministry of Corporate Affairs has spearheaded comprehensive initiatives. From the groundbreaking Limited Liability Partnership (LLP) Act, 2008 amendments, aiming at Ease of Doing Business, to the establishment of an integrated IT portal for unclaimed shares and dividends reclamation. The strengthened National Company Law Tribunal (NCLT) framework, with 20 new appointments, and the introduction of pre-packs in insolvency resolution showcase a commitment to fortifying the legal and operational landscapes. This article delves into the meticulous progress, impactful changes, and the far-reaching implications of these strategic measures.
DELIVERY ON BUDGET PROMISES [2021-221]
Ministry of Corporate Affairs
1. The LLP (Amendment) Act, 2021 facilitates Ease of Doing Business and encourage startups across the country with De-Criminalisation of Offences, In-House Adjudication Mechanism and introduction of Small LLPs.
ANNOUNCEMENT
> The decriminalising of the procedural and technical compoundable offences under the Companies Act, 2013, is now complete. I now propose to next take up decriminalisation of the Limited Liability Partnership (LLP) Act, 2008.
PROGRESS SO FAR
A. Limited Liability Partnership (Amendment) Act, 2021
> The Limited Liability Partnership (Amendment) Act, 2021, has been passed by both the Houses of Parliament and notified after the assent of the President of India on 13.08.2021
> The LLP (Amendment) Act, 2021, amended 20 sections, omitted 3 sections, and inserted 7 new sections in the LLP Act, 2008.
>Re-categorised 12 compoundable offences under the Act as civil defaults, which will be dealt within the in-house adjudication framework wherein these defaults would be subject to a civil penalty levied by an adjudicating officer.
> Decriminalisation of procedural & technical violations has incentivized compliance and reduced burden on NCLT & special courts.
> In tune with the Ease of Doing Business agenda of the Government.
- > 16 offences into In-House Adjudication Mechanism (IAM) through Companies Act, 2019 (CA-2019)
- 35 offences into IAM through CA-2020
- 51 offences decriminalised and taken into IAM; 11 compoundable offences -imprisonment part removed and only fine part retained.
- 12 compoundable offences decriminalised under LLP Act, 2008.
Decriminalisation under Companies Act-2013
| Prior to 2018 | Post CAA-2020 | |
| Total Penal provisions | 134 | 124 |
| Compoundable offences | 81 | 31 |
| Non-compoundable offences | 35 | 35 |
| Defaults handled through IAM | 18 | 58 |
2. A single-window integrated IT portal will help investors in reclaiming unclaimed shares and dividends in a hassle-free and streamlined way.
Reclaiming of Shares and Dividends
ANNOUNCEMENT
> For investors to reclaim unclaimed shares and unpaid dividends from the Investor Education and Protection Fund Authority with case, an integrated IT portal will be established.
TheInvestor Education and Protection Fund Authority (IEPFA) was established for administration of investor education and protection of their funds by Government of India on 7th September. 2016.
THE IEPF IS ENTRUSTED WITH
> The refund in respect of unclaimed dividends, matured deposits, matured debentures, the application money due for refund and interest thereon.
> Promotion of investors’ education, awareness and protection.
> Distribution of any disgorged amount among eligible and Identifiable applicants for shares or debentures. shareholders. debenture-holders or depositors who have suffered losses due to wrong actions by any person, in accordance with the orders made by the Court which had ordered disgorgement.
> Reimbursement of legal expenses incurred in pursuing class action suits u/s 37 and 245 by members, debenture-holders or depositors as may be sanctioned by the Tribunal.
> Any other purpose incidental thereto. in accordance with such rules as may be prescribed.
PROGRESS SO FAR
> Development of portal taken up and is under trial
> Search module to enable investors to search shares and amount transferred by companies to IEPF developed and is under testing.
> The rules, processes and procedure for claiming refund from IEPF is under review and the portal is under development.
3. With appointment of 20 new Members, National Company Law Tribunal is on a fast track with a stronger framework to deliver faster resolution of insolvency cases.
ANNOUNCEMENT
> To ensure faster resolution of cases, NCLT framework will be strengthened, e-Courts system shall be implemented and alternate methods of debt resolution and special framework for MSMEs shall be introduced.
Strengthening of National Company Law Tribunal (NCLT) Framework
PROGRESS SO FAR
> Government has Strengthened NCLT framework with the appointment of 20 new members (09 and 11 Technical) in NCLT in 2023.
> At present, 54 members (26 Judicial and 28 Technical) are in position in NCLT against the sanctioned strength of 62 members (31 Judicial and 31 Technical).
> The e-court project is implemented in all the benches of NCLT.
> Insolvency and Bankruptcy Code (Amendment) Act, 2021, has been approved on 11.08.2021 thereby providing a speedier, cost-effective, semi-formal, and less disruptive framework for insolvency resolution of corporate debtors in distress.
> The Insolvency and Bankruptcy (PPIRP) Rules, 2021 and Insolvency and Bankruptcy (PPIRP) Regulations, 2021, are in force from 09.04.2021.
> Minimum amount of default for initiation of PPIRP kept at Rs. 10 lakh.
4. Pre-packs in Insolvency Resolution ensures quick #resolution, value maximisation of assets, least disruption to the business, and group resolution.
PROGRESS SO FAR
> Enacted vide the IBC (Amendment) Act, 2021 w.e.f. 04.04.2021 which inserts Chapter III-A on pre-pack under the Insolvency and Bankruptcy Code, 2016.
> As per the IBBI, six applications were admitted out of which one stands withdrawn and three are resolved till September, 2023.
Special Framework for Insolvency Resolution of MSME Corporate Debtors (Pre-pack)
PRE-PACK FRAMEWORK PROVIDE
- Alternative insolvency resolution framework for honest micro, small and medium enterprises (MSMEs) corporate debtors
- Quicker, cost-effective and value maximising outcomes for all the stakeholders
- Least disruptive to the continuity of MSMEs businesses.
> Pre-pack framework can be invoked by the MSME corporate debtor with approval of 66% of unrelated financial creditors on a minimum default of Rs. 10 lakhs.
> Pre-pack commences from the date of admission of application by the Adjudicating Authority.
> Upon admission there may be resolution, termination of the process, or liquidation of the MSME corporate debtor.
In conclusion, the Ministry of Corporate Affairs has made substantial progress in delivering on the budget promises of 2021-2022. The amendments and initiatives undertaken are geared towards promoting ease of doing business, enhancing investor protection, and providing efficient resolution frameworks for insolvency cases. These measures signify a commitment to fostering a conducive environment for businesses and investors alike.
