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Panel bats for decriminalising more provisions of Companies Act
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SME Times News Bureau
The Company Law Committee on Monday submitted its recommendations to
Finance Minister Nirmala Sitharaman on providing easier functioning for
corporates in the country by further decriminalising the provisions of
the Companies Act 2013.
The committee was set up in September by
the Corporate Affairs Ministry as part a larger programme to provide
ease of functioning for the corporate sector where sentiments have been
dampened on account of multifarious provisions in existing corporate
laws that criminalise several business activities even if these are
petty and harmless in nature.
The committee took note of the
progress made consequent to the Companies (Amendment) Act, 2019, which
had resulted in decriminalisation of 16 minor procedural and technical
lapses under the Companies Act, 2013, into "civil wrongs", the Company
Law Committee said in its report.
It has adopted a
principle-based approach to further remove criminality in case of
default which can be determined objectively and which, otherwise, lack
the element of fraud or do not involve larger public interest, the
committee said.
The Committee has proposed amendments in 46 penal
provisions, so as to either remove criminality, or to restrict the
punishment to only fine, or to allow rectification of defaults through
alternative methods, which would lead to further de-clogging of the
criminal justice system in the country.
It has proposed
re-categorising 23 offences out of the 66 remaining compoundable
offences under the Act, to be dealt with within the in-house
adjudication framework wherein these defaults would be subject to a
penalty levied by the adjudicating officer.
In addition, the quantum of penalties recommended are lower than the quantum of fines presently provided in the Act.
The
report has altogether omiited 7 compoundable offences, limited
punishment for 11 compoundable offences to only fines by removing the
provision for imprisonment, recommended 5 offences be dealt under
alternative frameworks, and reduced the quantum of penalties in respect
of 6 provisions which were shifted to the in-house adjudication
framework through the recently passed Companies (Amendment) Act, 2019.
It has also recommended maintaining status-quo in case of the non-compoundable offences.
In
addition, the committee while deliberating on certain other issues,
felt that wider consultation would be necessary and recommended that
these be taken up in due course at a later stage.
Exempting
certain private placement requirements for Qualified Institutional
Placements (QIPs) after due consultation with market regulator Sebi,
reviewing provisions on disqualification of directors after due
consultation and examination, reviewing provisions in respect of
debarment of audit firms after due consultation and examination are some
of the decisions where wider consultations have been felt to be
necessary by the panel.
The Committee has made recommendations
targeted towards providing further ease of living for law abiding
corporates which include providing power to enhance the thresholds which
trigger applicability of Corporate Social Responsibility provisions and
non-levy of penalties for delay in filing the annual returns and
financial statements in certain cases.
It has called for
provisions for allowing payment of adequate remuneration to
non-executive directors in case of inadequacy of profits, by aligning
the same with the provisions for remuneration to executive directors in
such cases.
The committee was chaired by Corporate Affairs Secretary Injeti Srinivas.
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