The Company Law Committee recommended the decriminalization of compoundable offenses under Companies Act 2013

The Company Law Committee recommended the decriminalization of compoundable offenses under Companies Act 2013

The Company Law Committee, which has been constituted by the Ministry of Corporate Affairs (MCA) by means of an order which was made on 18th September 2019 had submitted the first phase report towards the Union Finance and Corporate Affairs Minister Nirmala Sitharaman on 18th November 2019, suggesting some amendments in the Companies Act, 2013 relating to the further decriminalizing of the offences under the stated Act and in order to enable ease of doing business as well as ease of living.

The Minister of State for Finance and Corporate Affairs, Anurag Singh Thakur, in a written response towards a question in Rajya Sabha had submitted his reply recently.

The Company Law Committee has been established for examining as well as making recommendations towards the Government on numerous provisions and concerns relating to the implementation of the Companies Act, 2013 as well as the Limited Liability Partnership Act, 2008 and other related matters.

The Ministry of Corporate Affairs (MCA) had commenced many reforms in the direction of the easing the business environment in the nation through furnishing Ease of Doing Business to law-abiding corporates, fostering better corporate compliance for stakeholders in general and also towards addressing emerging concerns which has an impact on the working of corporates in the nation.

The key recommendations of the Committee pertaining to the decriminalization of compoundable offenses comprise of:

  • Out of the 66 remaining compoundable offenses under the Act, Re-categorizing 23 offenses, in order to deal with the house adjudication framework in which these defaults shall be subjected towards a penalty imposed by an adjudicating officer.

  • Omitting the overall 7 compoundable offenses; limiting penalty for 11 compoundable offenses towards only fine by means of eliminating the provision for imprisonment as well as suggesting that 5 offenses being dealt under alternative frameworks;

  • Reducing the quantum of punishments with respect to certain provisions, this has been shifted to the in-house adjudication framework by means of the lately passed Companies (Amendment) Act, 2019.

  • The retention of the status-quo relating to the matters of the non-compoundable offenses.

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