Ministry Of Corporate Affairs Panel Of Experts Set To Urge Decriminalization Of 40 Violations Of The Companies Act

A Union Ministry of Corporate Affairs (MCA) committee of experts is expected to recommend decriminalization of more than 40 violations under the Companies Act as well as rationalize penalty provisions to make the regulatory regime more investment friendly and less adversarial.

These proposed amendments to the Companies Act are likely to be moved in the winter session of Parliament, but it remains to be seen if the government will be able to have a draft bill ready before the winter session ends on December 13.

The idea behind the proposed move is to rationalize penalty provisions so that they remain proportionate to the gravity of the offense leaving enough room to maintain enough deterrence against breaking the law.

Accordingly, penalties for startups, smaller entities, single person companies, and farmer producer organizations will be lowered to half of what is levied on large companies.

The panel will recommend several offenses to be classified as civil wrongs which do not warrant jail terms as well as propose a liberal penalty regime for small businesses.

The government’s intention is to design a simpler regulatory regime which will enable businesses to dedicate more time to their core business activities and spend less time as well as resources on litigation.