Corporate law is often misunderstood to be only concern of the Legal department of MNCs and big corporations. The word “corporation” is generally synonymous with large publicly owned companies.
Earlier, corporate law was understood to be existing within the confines of aspects related to legal personality, aspects related to limited liability, transferable shares, delegated management, board structure and investor ownership but as the industrial age progressed various stake holders merged in this complex web of corporate law including shareholders, directors, employees, creditors, and other stakeholders such as consumers and the community.
Now with the constitution of National Company Law Tribunal (‘NCLT’) and National Company Law Appellate Tribunal (‘NCLAT’) in exercise of powers conferred under §408 and §410 of the Companies Act 2013 (‘Companies Act’) by the Ministry of Corporate Affairs (‘MCA’), the ambit of corporate governance has further enlarged. In recent times the Government of India has been emphasizing on easing the process of carrying out business in India. Thus, in recent times, various legal reforms have been carried out and the constitution of the NCLT and the NCALT is one more step in this direction. The government also introduced The Commercial courts, commercial division and commercial appellate division of high courts Act.
Corporate laws affect people at individual level and hence are very crucial. Paradoxically, it is also dispassionate in the sense that it affects a wide spectrum of people. There are various challenges faced by the business legal fraternity like:
The creation of NCLT has undoubtedly streamlined the process for the business community. This has inadvertently led to a paradigm shift in the way Corporate laws and related litigation was dealt in India. According to recent reports, money to the tune of Rs.9 trillion was stuck in litigation before various forums. The NCLT and lawyers are facing the uphill task of channelizing this huge load in such a way so as to not disrupt business functioning. The role of legal community has increased in the sense that the advent of NCLT requires a very broad understanding of the specific laws.
Corporate Litigation has become a very important aspect of how a business is run in the current environment. It is no more a post-issue mechanism but also one to avoid possible issues. That is why it is safe to conclude that the companies nowadays cannot depend on a legal team to pro-actively handle all the aspects of corporate laws. That is why law firms with experience in corporate governance litigation are required to ensure that business can be handled swiftly without getting into legal turmoil. Nowadays, law firms are required to know how corporate statutes are written and the pressures that produce them. Ever since India’s biggest-ever corporate fraud and governance failure unearthed at Satyam Computer Services Limited, the concerns about good Corporate Governance have increased phenomenally. This has led to NCLT and other related provisions. Earlier, Indian companies were required to approach multiple forums for resolving their disputes. For instance, to contest insolvency proceedings a Company had to approach the Board of Industrial and Financial Reconstruction (BIFR), should a company seek approval of a scheme of merger with another company, the relevant High Court or the District Court had to be approached. While, to contest claims of mismanagement of company affairs by a shareholder, the Company had to approach the Company Law Board. We are hopeful and confident that the new amendments in corporate laws will be able to provide the much needed bridge between corporate governance and legal system of India without disrupting the current business environment.