Crime no longer soon! Big relief for businessmen on these 16 corporate offences

The Union Cabinet on Thursday approved an ordinance to decriminalise 16 corporate offences under the Companies Act, 2013. The ordinance to amend the Act will be promulgated after receiving President’s assent. These offences have been a source of harassment to entrepreneurs and businesses.

The decision comes a day after India improved its position to 77th in the Ease of Doing Business rankings. The offences which will be brought out of the purview of criminal offences include non-filing of annual returns and financial statements within specified time, accepting directorships beyond specified limits, failure to file statement after resigning as auditor of a firm, managerial remunerations in case of inadequate profits, failure to inform about the change in share capital and issuance of shares on discount, sources said.

The maximum number of defaults (around 6,000) under the Companies Act have been on account of non-filing of financial statement and annual report. The law provides for a fine of Rs 50,000 with a maximum of Rs 5 lakh or an imprisonment of up to six months or both.

In a big relief to the corporate sector, the offences will now be brought under the category of ‘civil defaults’ with the provision of a penalty, thus reducing the number of prosecutions filed in the courts.

The cases of default will be decided by the Registrar of Companies through an in-house adjudication mechanism.

This will lead to de-clogging National Company Law Tribunals.

The government-appointed committee headed by Ministry of Corporate Affairs (MCA) secretary Injeti Srinivas had submitted its report last month to the finance minister Arun Jaitley after a review of offences and the existing mechanism of penalty under Companies Act.

The report recommended bringing 16 offences of a total of 81 out of the category of compoundable offences. The panel had suggested re-categorisation of these offences and instead placing them under the in-adjudication framework. Such defaults would be liable for a penalty.

The other recommendations included declaration of significant beneficial ownership and re-introduction of declaration of commencement of business provision to better tackle the menace of shell companies.

Source: DNA Money