Government decriminalises 65 provisions of company law


Prime Minister’s independence day speech reiterated the government’s stance to promote the ease of doing business and reducing government interference. With this in mind, the government decided to decriminalise 65 new sections of the companies act where the offences are not severe.

The government is eager to engage the business community as the Indian economy battles muted investment, falling consumption and the global economy reeling towards a recession. The review of the Companies Act was long overdue, and the idea to decriminalise corporate law to improve governance was also recommended by the Injeti Srinivas committee.

As per Business Standard, the corporate affairs’ ministry’s committee on decriminalisation will work in two stages. In the next stage will study the Sections that involve frauds and will look into reducing punishment for offences that are non-serious and do not affect public interest. The government is also looking at alternative dispute settlement methods for closing cases that do not affect public interest.

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The decriminalisation will also help declutter the National Company Law  Tribunal (NCLT) since trivial court cases impose a severe cost to the economy. Reclassifying small procedural or technical defaults will give more room to the court to discuss urgent cases speedily. The move will improve the existing legal setting for firms but will also reduce litigation.

In the midst of the reforms, the Injeti Srinivas committee made crucial recommendations on the newly amended CSR norms. It stated that imposing such strenuous reforms will result in complications and that notions of mandatory CSR are fundamentally flawed. The committee recommendations suggested that CSR spending should be voluntary and not mandated by law. Such mandates will weigh heavily on the corporates as there still exists severe confusions about the inner workings of the new norm.

While the clouds of confusion persist around the newly imposed CSR laws, it is reassuring to see that the government is open to the review of the outdated provisions of the Companies Act.

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