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Tags Current Affairs

Changes in companies Act to decriminalise certain offences

Date: 05 March 2020 Tags: Bills & Laws

Issue

The Centre proposes to amend the Companies Act, in a bid to decriminalise a number of offences and ease corporate social responsibility (CSR) requirements, especially for smaller companies.

 

Background

The amendments are based on the recommendations of a high-level panel set up in September 2019. If passed by Parliament, these would be the second set of amendments to the Act over the last year, as the law was already amended last July.

 

Details

  • The changes are expected to “significantly enhance the confidence of Indian corporates in the government’s resolve to provide greater ease of doing business and accord highest respect to honest wealth creators in the country and reduce the burden on the justice system”.

  • The amendment bill will also enable the listing of Indian companies on stock exchanges in foreign jurisdictions. This is expected to give Indian firms greater access to capital, a broader investor base and better valuations.

  • The priority is to remove sections which criminalise offences which may not have been intended to be malafide.

  • The government proposed changes to 52 out of 66 compoundable offences under the Act, either removing them entirely, downgrading penalties from jail sentences to fines or suggesting alternative adjudication mechanisms.

  • The Centre proposes to recategorise 23 offences so that they can be dealt with through an in-house adjudication framework, while five types of offences will be dealt with under different alternative frameworks.

  • Most of these are procedural or technical defaults that lack the element of fraud or do not affect larger public interest.

  • For 11 kinds of offences, the provision of imprisonment will be removed, limiting punishment to fines only. Six offences that had already been decriminalised earlier will see a further reduction in the quantum of penalties.

  • The proposed amendments will also ensure that companies which have an obligation to spend ?50 lakh per annum or less on Corporate Social Responsibility (CSR) are no longer required to have a CSR committee.

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