Context

With over 30% of India's GDP being driven by small, medium and large businesses, entrepreneurship is the backbone of the Indian economy. Yet, it is encumbered by time consuming processes, outdated legal considerations, and copious paperwork, which leads to slower growth.

To modernise the business ecosystem and to promote ease of doing business, including incorporating international best practices, The Ministry of Corporate Affairs ('MCA') decided to reform the Companies Act, 2013 ('CA-13') and the Limited Liability Partnership Act, 2008 ('LLP Act'). Accordingly, the Company Law Committee (CLC) released a report in 2022 mooting 25 amendments to the CA-13. Vidhi engaged with the MCA to provide research and drafting assistance for this report.

Promoting ease of doing business

To enable swifter delivery of public services, the CLC report explicitly recommends replacing paper with electronic and hybrid modes of functioning, including for holding meetings, serving documents to members, and maintaining statutory registers. It also suggests doing away with cumbersome affidavits when dealing with the government.

Facilitating the entry of new players

To facilitate the entry of new entrepreneurs in the market, the Report has suggested that Special Purpose Acquisition Companies ('SPACs') be explicitly recognised under the Companies Act. SPACs are a unique opportunity for Indian businesses to get listed on Indian and foreign stock exchanges without having to go through the formalities and rigours of an Initial Public Offering ('IPO').

The recent listing of Renew Power Private Limited, an Indian renewable energy company, on NASDAQ through an internationally incorporated SPAC in August 2021 speaks to its benefits.

Further, the recommendation on allowing companies to issue, hold, and trade fractional shares will enable retail investors to invest precise and predetermined budgeted amounts in companies whose shares were otherwise inaccessible due to high prices. This will consequently allow these companies to have a greater presence in the market.

Improving checks and balances

The CLC Report 2022 has suggested strengthening the audit framework and the regulation of auditors, which will play a crucial role in companies' corporate governance and accountability to shareholders. In the same spirit, the CLC has also recommended the constitution of a dedicated Risk Management Committee in certain companies to strengthen the Board's power to overview and supervise risk management systems.

Reducing transactions costs

Agro-based producer institutions play a pivotal role in reducing transaction costs for producers by providing a forum to share mutually beneficial information such as details on market linkages, crop prices, fertilisers, machinery, training, and technical advice. By allowing them to be registered as LLPs (Limited Liability Partnerships) instead of companies, through the introduction of a new chapter in the LLP Act, the proposed amendment will ensure that agro-based producer organisations benefit from the range of relaxations available.

Impact

The recommendations of the CLC Report 2022, after public consultation, are expected to take the form of the Companies (Amendment) Bill and the Limited Liability Partnership (Amendment) Bill. If enacted, it will further boost investment and participation in the Indian economy, and encourage the spirit of enterprise.

'The (Company Law) Committee's recommendations will further give a fillip to honest, law-abiding corporates and other stakeholders in the country whilst consolidating and strengthening the provisions of the Companies Act, 2013 and the Limited Liability Partnership Act, 2008.' _{— SHRI RAJESH VERMA} 
SECRETARY, MINISTRY OF CORPORATE AFFAIRS (AS QUOTED IN THE CLC 2022)