Decriminalise 46 more offences under cos law, says panel report
The committee has suggested amendments to 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", an official release said. The propo...
If accepted, the recommendations will reduce the number of compoundable offences under the Companies Act that attract criminal penalties by around 70%.
These suggestions could become part of the amendments set for the Companies Act that the government proposes to table in the current session of Parliament as part of its bid to reassure investors and industry.
The panel, which submitted its report to finance minister Nirmala Sitharaman on Monday, has also suggested reducing timelines for speeding up rights issues and empowering the government to exclude certain class of companies from the definition of ‘listed company’ for listing of debt securities.
“The committee has made far reaching recommendations to decriminalise 46 sections of the Companies Act 2013... The focus is on raising compliance levels without criminalising minor offences which promotes ease of living,” said corporate affairs secretary Injeti Srinivas.
“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,” said a statement from the government.
The panel has also suggested that only auditors and partners involved in cases of fraud be debarred and not entire audit firms except in exceptional cases but favoured the issue being taken up in the next phase of reforms. "It should only take place in cases where the firm refuses to co-operate in the proceedings in question or if the higher management of thefirm is involved in the fraud," said the report adding that necessary changes to the companies act and the chartered accountants act may be identified after a thorough examination of all relevant issues.
The committee, chaired by corporate affairs secretary Injeti Srinivas, has recommended that 23 out of the 66 compoundable offences under the Companies Act be dealt with an in-house adjudication framework with penalties to be levied by an adjudicating officer.
The 11-member panel has batted for omission of seven compoundable offences, limiting punishments under 11 compoundable offences to only fines and suggested that five other offences be dealt with alternative frameworks. It has, however, not recommended any change in non-compoundable offences that mandatorily require imprisonment upon conviction.
This is part of a larger move by the government to decriminalise offences under the Companies Act. Earlier this year, it passed an amendment re-categorising 16 offences as civil offences. A criminal offence can lead to imprisonment in the event of conviction, while a civil offence attracts a penalty.
The panel said that a provision be added to the Companies Act to allow the government to increase the thresholds beyond which companies must spend on CSR activities. It has sought a provision to waive off penalties for late filing of annual returns or financial returns if the pending documents are filed within 30 days of the government issuing a show-cause notice.
Experts say the move is much needed to boost the sentiment in an environment of economic slowdown.