KEY TAKE AWAY-
REPORT OF
 COMPANY LAW COMMITTEE – 2019
14TH NOVEMBER, 2019
Criminal Compoundable Offence to Civil Wrongs/ Facilitation of Ease of Doing Business/ decriminalize non-compliances of minor, technical or procedural nature.
Ministry of Corporate Affairs has issues report on “Corporate Law Committee” on 14th November, 2019. The basic purpose of this report is followings:

v Facilitate and Promote ease of doing business
v Ease of living of law Abiding Corporate in the Country
v Decriminalize non-compliances of minor, technical or procedural nature

Ministry has already re categorized 16 “Compoundable Offence” into “Civil defaults” through Companies Amendment Act, 2019. In this report they have examined the scope of re-categorizing of further remaining compoundable offence into either penalty which can be handling through in house adjudication mechanism providing u/s 454 of the Act or in any other appropriate within the broad framework of relevant laws.

The Report proposes amendments in 46 penal provisions which will further declog the Special Court and National Company Law Tribunal and further reducing the burden of  Special court and NCLT.

Rational Behind Amendments:
·    Providing for an appellate mechanism against orders of Regional Directors (“RDs”),
·        Modifying the definition of listed companies,
·        Enacting a framework for Producer Companies,
·        Decreasing Duplication in Disclosures,
·   Decreasing Onerous Compliances for Small Companies, One Person Companies, Producer Companies, etc.

It is essential to strike a balance between Civil and Criminal liabilities of Corporates.
Criminal Liability
Civil Liability
It was noted that serious violations of the law, especially wrongful conduct involving fraudulent elements, should be dealt with under criminal law. Due to the nature of such wrongs and the degree of public interest involved, it may be prudent to adopt a strict approach to fraudulent conduct.
However, procedural, technical and minor non compliances, especially the ones not involving subjective determinations, may be dealt with through civil jurisdiction instead of criminal.

   A.    The main recommendations of the committee as included in chapter I of the Report are as follows 
            i. Re- categorizing of 23 offences of the 66 which are in the category of compoundable offences to an in- house adjudication framework where in defaults would be subject to a penalty levied by an adjudicating officer;
ii.            Omitting 7 compoundable offence ,limiting 11 compoundable offences to be fine only (i.e. removing the imprisonment part ) and recommending 5 offences to be dealt with in an alternate  framework ( including through exercise of contempt powers by the national company Law Tribunal );

iii.            No change has been suggested in respect of any of the non- compoundable offences;

B.    In addition to the above , chapter 2 contains recommendations related to further ease of living and the Main recommendations relate to;

              I.            Allowing appeal against the orders of the Regional Director before National   Company Law Tribunal after due examination ;
        II.            Allowing payment of remuneration to non -executive directors in case of inadequacy of profits by
                III.            Aligning the same with the provisions for remuneration to executive directors in such case;
                IV.            Relaxing provisions related to payment of additional fees under third proviso to section 403(1);                       
               V.            Excluding certain companies / bodies corporate from section 89 and chapter XXII;    
                   VI.            Reducing timelines for speeding up rights issues under section 62;
      VII.            Enabling powers to modify the threshold which trigger applicability of corporate social provisions;
         VIII.            Revising provisions on disqualifications of directors after due consultation and examination;
         IX.            Reviewing penalty for delay in filling the annual returns and financial statements.

CONCLUSION:

Further, it is suggested to read Annexure A to Annexure E of Company Law Committee Report to understand it in more better way.

                     I.            Annexure I: Constitution of the Committee
                  II.            Annexure II: Categorization of Compoundable Offences under the 2013 Act
               III.            Annexure III: Offences Proposed to be Shifted to IAM Along With Suggested Quantum of Penalty
               IV.            Annexure IV: Changes to Existing Penalty Provisions
          V.            Annexure V: Summary of Recommendations

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