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The government is making amendments to Companies Act. Discuss why it i...

  May 24, 2020

The government is making amendments to Companies Act. Discuss why it is being changed and the expected benefits?

  1. The government is moving to decriminalise provisions of the Companies Act to enhance ease of doing business in the country as part of the government Covid-19 relief package. 
  2. The move aims to remove criminal penalties from all provisions of the Companies Act, except provisions dealing with fraudulent conduct.
  3. A number of offences previously classified as compoundable offences, i.e. those offences that had either imprisonment or fines as punishments have had the imprisonment penalty removed. 
  4. Some of these offences have been omitted altogether while others have been shifted from the purview of the National Company Law Tribunals (NCLT) to an in-house adjudication mechanism. 
  5. The move has been part of larger government efforts to boost ease of doing business since 2018. 
  6. The recently decriminalised offences include administrative offences such as delays in filing CSR reports, or failure to rectify the register of members in compliance with orders from the NCLT. 
  7. The number of compoundable offences under the Companies Act have come down to 31 from 81 prior to the 2018 amendment to the Companies Act. 
  8. The total number offences to be dealt with the in-house adjudication mechanism has risen from 18 in 2018 to 58 proposed in the latest amendment.