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Proposed changes in the Companies Act, 2013 – Decriminalization of various offences

Since the inception of the Companies Act, 2013 (“Act”), the Government of India (“Government”) has undertaken and continues to undertake various amendments to the Act including the recent amendment dated July 31st, 2019, in which approximately 21 (twenty-one) criminal offences were decriminalized and re-categorized as civil offences.

Since then there have been constant deliberations to decriminalize more and more criminal offences under the Act, with the intent to avoid unwarranted prosecutions against the executives of the companies and provide a fair chance to compound the civil offences by paying penalties only.

As per recent updates, the Government now seeks to present a bill in this regard for approval, at the Parliament during the upcoming winter session.

The key highlights of the proposed bill are listed below:

  • Penalties to be lowered for companies having a turnover of Rupees Two Crore and a paid- up capital of Rupees Fifty Lakh or less.
  • Upon the proposal of the Company Law Committee, the Government further proposes to increase the penalties upon the violators in case of non-compoundable offences, without imposing imprisonment on them.
  • Further it is proposed that the prosecution for the civil offences given under the Act shall be dealt by an in-house mechanism led by the Registrar of Companies (“ROC”) which will in turn reduce the burden of cases pending before courts/tribunals.

The Government’s move to decriminalize certain offences is basically to protect the wealth creators of the Indian economy and also to benefit small companies and start-ups.