Relevance: Mains: G.S paper II: Governance
The report of the Company Law Committee-2019 was presented to the Union Minister of Finance and Corporate Affairs by Injeti Srinivas, Secretary, Ministry of Corporate Affairs, who chaired the Committee.
About:
- The Committee was constituted by the Ministry of Corporate Affairs in September, 2019 to further decriminalise the provisions of the Companies Act, 2013 based on their gravity and to take other concomitant measures to provide further Ease of Living for corporates in the country.
- The Committee has proposed amendments in 46 penal provisions, so as to either remove criminality, or to restrict the punishment to only fine, or to allow rectification of defaults through alternative methods, which would lead to de-clogging of the criminal justice system.
Key recommendations of the Committee:
- Re-categorising 23 offences out of the 66 remaining compoundable offences under the Act, to be dealt with in the in-house adjudication framework wherein these defaults would be subject to a penalty levied by an adjudicating officer.
- In addition, the quantum of penalties recommended are lower than the quantum of fines presently provided in the Act.
- Retention of status-quo in case of the non-compoundable offences.
- Proposing benches of the National Company Law Appellate Tribunal;
- Extending applicability of Section 446B (lower penalties for small companies and one person companies) to all provisions which attract monetary penalties and extending the benefit to producer companies and start-ups also;
- Providing power to enhance the thresholds which trigger applicability of Corporate Social Responsibility provisions;
- Providing for appeal against the orders of the Regional Directors before the NCLT after due examination;
- Exempting certain private placement requirements for Qualified Institutional Placements (QIPs) after due consultation with SEBI;
WIDER CONSULTATION
- The CLC has also highlighted certain areas that require wider consultation and need to be taken up in due course at a later stage.
- These include providing for appeal against the orders of the Regional Directors before the NCLT after due examination;
- Exempting certain private placement requirements for Qualified Institutional Placements (QIPs) after due consultation with SEBI;
- Reviewing provisions on disqualification of directors after due consultation and examination; and reviewing provisions in respect of debarment of audit firms after due consultation and examination.