A massive overhaul of company law with special thrust on de-criminalisation is on the cards with the Union Cabinet on Wednesday approving a Bill that will be carrying out 72 changes in as many as 65 sections of the Companies Act 2013.
The proposed amendments — which are likely to be moved in the ongoing Budget session — will make the company law a “bit more humane”, Finance Minister Nirmala Sitharaman said after the Cabinet meeting.
The latest move is part of the government efforts in recent years to reduce the criminality in provisions of company law and is aimed at further ease of doing business while de-clogging the criminal justice system.
From a level of 81 compoundable offences (prior to 2018 when government started its decriminalisation action), the number of compoundable offences will come down to 31 post the enactment of the latest Bill, said Injeti Srinivas, Secretary, Corporate Affairs Ministry.
Out of the current 66 compoundable offences, as many as 23 will be recategorised to be dealt with an in-house adjudication framework, Sitharaman said. The government also proposes to omit altogether seven compoundable offences; limit punishment for 11 compoundable offences to only fines by removing the provision for imprisonment.
Also, the quantum of penalties will be reduced in respect of six defaults decriminalised earlier. After the proposed changes to company law, criminality provisions will be triggered only in cases of frauds and where huge public interest is involved, said Srinivas.
The proposed law will remove criminality totally in respect of 35 procedural and technical defaults (which otherwise, lack the element of fraud or do not involve larger public interest). Imprisonment is being removed from 11 penal provisions.
Direct listing abroad
To boost start-ups, fintech and other small innovative firms, the Centre plans to bring enabling provisions in the company law to allow direct listing of securities by Indian public companies in foreign jurisdictions.
Allowing Indian public companies to directly list abroad without getting their securities listed in domestic bourses first will help boost “brand India”; provide alternative source of capital and broaden investor base for Indian companies, paving the way for Indian economy to reach the $ 5 trillion economy mark by 2024, a Government official said.
“All the concerned regulators and government departments — SEBI, RBI, MCA, DEA — are in sync for allowing this,” sources said.
Once the enabling provision is enacted into law, the government will frame a separate scheme that will detail the categories of companies, the class of equity shares that could be issued, sources added.
CSR tweaks
Sitharaman said that companies with obligation to spend ₹50 lakh or less towards CSR will be exempted from the requirement to constitute a CSR committee. The functions of the committee will be discharged by the Board of those companies.
Also, eligible companies will be permitted to claim credit for CSR spend in excess of the 2 per cent obligation in a particular year, against its obligation for the subsequent financial year.