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.