Wednesday, April 1, 2020

Decriminalising offences, relaxing CSR norms, setting up NCLAT in cos law

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The companies management Bill, 2020 has been introduced in the Lok Sabha today.

Among the proposals in the latest bill to amend the companies law included all the following –

  • Decriminalising offenses
  • Allowing direct overseas listing of companies
  • Relaxing CSR norms, and 
  • Setting up National Company Law Appellate Tribunal (NCLAT) benches

Besides from allowing the direct listing of Indian companies in permissible Foreign jurisdictions, the bill seeks to empower the central government of India to exclude certain classes of companies from the definition of a “listed company”, mainly for the listing of debt securities.

The said exclusion would be done only after consultations with markets regulator SEBI.

As per the statement of objects and reasons of the bill, various provisions of the companies act, 2013 would be amended for decriminalizing defaults that lack any element of fraud or do not involve larger public interest.

Other proposals include setting up of NCLAT benches and allowing payment of adequate remuneration to non-executive directors in case of inadequate profits.

The bill also proposed to impose lesser penalties for small and one-person companies as well as the reduction in timelines for applying for rights issued.

Setting up a committee for companies that have CSR applications up to Rs.50 Lakhs would not be required and entities that have spent beyond their CSR obligation in a particular fiscal would be permitted to set off that excess amount in the coming financial years.

Providing greater ease of living corporates through certain amendments has also been proposed by the government.

On March 4, 72 changes were approved by the Union Cabinet to the companies law. On the very same day, corporate affairs Minister Nirmala Sitharaman said the priority was to decriminalize provisions in the act.

The company law now has 72 changes resulting in amendments to 65 sections of the act with the aim to ensure greater ease of doing business as well as a living.

Nirmala Sitharaman, who is also the finance minister of India, had said 23 offenses would be re-categorize out of 66 compoundable offenses under the act. Besides, seven compoundable offences would be omitted, she said.

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