HYDERABAD: In a significant move, the Cabinet on Wednesday amended the Companies Act, 2013 to decriminalising offences making as many as 72 changes.
Prior to 2018 when the government first started its decriminalisation action, there were 134 penal provisions, of which 81 were compoundable offences, which can be settled by paying fines.
Last year’s amendments to the act meant total penal provisions increased to 136, while compoundable offences fell to 66. With Wednesday’s changes, total provisions will be down to 124 and compoundable offences to 31.
According to Nirmala Sitharaman, Minister for corporate affairs, the priority was to decriminalise provisions in the act.
“Out of 66 compoundable offences under the act, 23 will get re-categorised so that they can be dealt with through in-house adjudication framework, seven have been omitted altogether, 11 will have limited punishment in the form of fines alone by removing imprisonment provision, five will be dealt with under different alternative frameworks, six which had earlier been decriminalised will now have reduced quantum of penalties,” Sitharaman said.
Importantly, Wednesday’s provisions eliminated imprisonment in various sections and even imposed lower penalties in case.
Plus, companies having CSR obligation of less than Rs 50 lakh won’t have to constitute a CSR committee, which Sitharaman said was aimed at ease of doing business.
Similarly, companies which spend over the obligated two per cent on CSR in a particular year can carry it forward as credit for fulfilment of CSR obligations in subsequent years.
Some other measures include enabling companies with inadequate profits to honour remunerations to non-executive directors in line with executive directors.
The move is expected to retain quality talent. Besides, the changes include excluding certain companies from the definition of listed company mainly for listing debt securities, extending benefit of lower penalties for small companies, one-person companies, start-ups and producers.
The maximum penalty has been capped at Rs 2 lakh for companies and Rs1 lakh for officials. This is the second amendment being made to the act in the last one year.