In a bid to strengthen company regulation, FM Nirmala Sitharaman has by way of an amendment to Company Law passed specific reforms to ensure more transparency and accountability.
One such portion of these reforms focus primarily on CRS. In an interaction with the media, Nirmala Sitharaman made it clear that profit-earning cannot be devoid of social responsibility. She further added that corporates must meet all social responsibility requirements.
It is in this spirit Section 135 of the companies act is being amended. Now the Ministry of corporate affairs will be able to give directives to companies to ensure compliance with CSR norms.
Violating CSR norms may attract fines for the company as well as defaulting officers. These fines may range from Rs.50,000 to Rs 25 lakh. Officer may also be liable to imprisonment of up to three years. Additionally, the bill also included amendments that require companies to transfer the unspent CSR money for a financial year to an escrow account for created especially for CSR. Post this; the money is to be transferred to a fund specified in the schedule VII, such as PM’s National Relief Fund.
Another critical amendment includes declogging of the National Company Law Tribunals (NCLTs) by shifting routine matters to the Central government. A necessary intervention to help fast track disputes.
Other key changes include:
- Strengthening the enforcement provisions that enable the SFIO (serious Fraud Investigation Office) to ensure speedy and more effective enforcement.
- Disqualification of directors if he/she breaches the limit of maximum directorship allowed by the act.
- Debarring erring auditor for a period of 6 months to a maximum of10 years in case of proven misconduct.
- The amendment also allows subsidiaries of international companies to follow different accounting standards.
- The Regional Director can now compound offences under section 441 and also impose a fine up to 25 lakh
You can read the full text of the bill here.