The Lok Sabha on 19th September, 2020 passed the Companies (Amendment) Bill, 2020 to decriminalize minor procedural or technical lapses under the Companies Act, 2013, into civil wrong, with an aim to enhance the ease of doing business in India. The Bill was introduced in the Lower House by Ministry of Corporate Affairs, Nirmala Sitharaman during the Budget Session this year. However, that session was wound up early amid the pandemic and the Bill was finally taken up yesterday.
The Bill proposes to amend 64 provision of the Act to make 75 changes in all. The Statement of Objectives of the Bill seeks to:
- Decriminalise offences in case of defaults which can be determined objectively and which otherwise lack any element of fraud or do not involve larger public interest;
- Empower the Central Government to de-list certain class of companies, in consultation with the SEBI, primarily for listing of debt securities;
- Incorporate a new Chapter XXIA in the 2013 Act to govern Producer Companies (earlier governed by the 1956 Act);
- Set up new NCLAT Benches.
Shiv Sena MP Arvind Sawant also supported the Bill while pointing out certain anomalies like:
- What will be the criteria employed to de-list certain class of companies?
- How many times will the Government forgive a defaulter and relax the charges of higher additional fees for default on two or more occasions in submitting, filing, registering or recording any document, fact or information as provided in Section 403, Companies Act, 2013?
MP Manish Tewari informed the House that it was after great deliberations that a ‘fine balance’ was struck between cohesive action and civil action under the Company Law. Speaking on the new chapter regarding Producer Companies, he said that when the same is read with the recently passed Farmers Bills for contract farming and trade relaxations, it becomes clear that a channel is being made for companies and business to enter into farmers’ business. Lastly, he spoke about the relaxations granted to NBFCs and finance companies and refuted the same in the backdrop of IL&FS scandal and DHFL’s payment defaults.
The Bill removes imprisonment in certain offences such as:
- Buy-back of shares without complying with the Act;
- Default in complying with procedure for formation of Charitable company;
- Knowingly participating in issue of prospectus in contravention of the law;
- Default in complying with procedure for dealing with Securities in stock exchange;
- Default in complying with procedure for variation of shareholders’ rights;
- Default in keeping Books of Accounts at registered office, etc.;
- Continuing in office of director despite knowledge of disqualification;
- Failure of Director to disclose interest in the company;
- Execution of contract in violation of provisions for Related party transactions, etc.
Many more changes are proposed in the Bill.