Cabinet approves ordinance to amend Companies Act

The Union Cabinet on Thursday approved an ordinance to amend the Companies Act that seeks to strengthen corporate governance standards in India.

The Ordinance, which has been sent to President Ramnath Kovind for his assent, includes tightening rules around independent directors and simplifying penalties for minor offences. It seeks to decriminalise over 80 minor offences in the existing Act.

Earlier, the Corporate Affairs Ministry had sought changes to the Companies Act to strengthen the regulatory framework in the act based on the recommendations of the high-level committee that reviewed offences in the legislation.

The committee had recommended among other things de-clogging of business environment by shell companies and tightening rules around their commencement of business, protection of depositors’ interest and declaration of significant beneficial ownership.

Other recommendations included the imposition of a cap on independent directors’ remuneration and de-clogging the National Company Law Tribunal through a significant reduction in compounding cases before it.