A government-instituted committee has proposed reviewing the provisions of Companies Act on disqualification of directors and debarment of audit firms. The Company Law committee constituted by the ministry of corporate affairs in September this year has also recommended amending 46 penal provisions under the Companies Act to either remove criminality or to restrict the punishment to only fine in case of certain defaults committed by companies.
The committee, headed by Ministry of Corporate Affairs secretary Injeti Srinivas, has prepared a report and submitted it to the Minister of Finance and Corporate Affairs Nirmala Sitharaman today. The report contains a variety of measures recommended by the committee to provide Ease of Living for corporates in the country.
Major recommendations include dealing with 23 out of 66 compoundable offences under the Companies Act through an in-house adjudication framework, wherein such defaults would be subject to a penalty by an adjudicating officer. Under the in-house adjudication framework, the representative of the defaulting company does not have to be physically present in front of the adjudicating officer. The quantum of the penalties has also been lowered.
It also recommends omitting seven compoundable offences and limiting punishment for 11 compoundable offences to only fine by removing provision for imprisonment. A compoundable offence is one for which the law does not prescribe imprisonment as a punishment.
The report also recommends an array of measures to reduce compliances and make compliances easier. It has asked for reviewing provisions on disqualification of directors and debarment of audit firms after due consultation and examination. It has suggested changing the definition of listed company in consultation with Sebi for certain class of companies for listing of debt securities, enhancing the thresholds for applicability of Corporate Social Responsibility provision and non-levy of penalties for delay in filing annual returns.
It also recommends keeping out certain companies/bodies corporate from declaring beneficial interest in shares as well as reducing timelines so as to speed up rights issues.