The government Wednesday approved 43 amendments to the companies law as it seeks to further strengthen the regulatory framework and ensure stricter action for violations.
From de-clogging of the National Company Law Tribunal (NCLT) to bolstering corporate governance standards and tweaking provisions for unspent CSR funds, a slew of changes were cleared by the Union Cabinet on Wednesday.
Sources said a bill would be introduced in Parliament to carry out the 43 amendments to the Companies Act, 2013 and the bill would replace an ordinance issued this year.
A total of 12 additional amendments in 11 sections of the Act are proposed to be made, in addition to amendments in 29 sections and insertion of 2 new sections carried out through the ordinance, they added.
Procedural and technical defaults would be decriminalised while compliance would be incentivised.
A key change pertains to Corporate Social Responsibility (CSR) norms, wherein companies would be allowed to keep unspent money in another account.
For companies that are not able to spend their full amount for CSR activities in ongoing projects within a particular financial year, the money can be transferred to a CSR account. The latter amount has to be spent within the next three financial years, sources said.
Any amount remaining unutilised in such CSR account would be transferred to any fund specified in Schedule VII of the Act.
Besides, Section 135 would be amended to provide for a specific penal provision in case of non-compliance and authorise the corporate affairs ministry to give directions to companies for ensuring compliance with CSR provisions.
Section 135 pertains to CSR. Under the Act, certain class of profitable companies are required to shell out at least two per cent of their three-year annual average net profit towards CSR activities.
Re-categorisation of 16 minor offences as purely civil defaults, transferring of functions with regard to dealing with applications for change of financial year and shifting of powers for conversion from public to private companies from NCLT to the central government, as well as more clarity with respect to certain powers of the National Financial Reporting Authority (NFRA) are also among the changes.
"The amendments will benefit law abiding corporates while simultaneously plugging gaps in the corporate governance and compliance framework enshrined in the Companies Act, 2013," an official release said.