Photo: Mint
Photo: Mint

Less harsh penalties for Companies Act violations on the card

  • The government wants to overhaul the regulatory architecture to make it easier to do business in India and reduce litigation
  • A simpler regulatory regime will enable businesses to dedicate more time on their core business activities and spend less time and resources on litigation

A panel of experts led by Injeti Srinivas, secretary in the corporate affairs ministry, is set to give its recommendations to the government on making the Companies Act less harsh and easy to comply for businesses. The panel is expected to recommend decriminalising over 40 violations under the Act and rationalise penalty provisions to make the regulatory regime more investment friendly and less adversarial.

A person privy to the discussions in the panel said that the idea is to rationalise penalty provisions so that they remain proportionate to the gravity of the offence while there is enough deterrence against breaking the law. That will also ensure that getting conviction in a court of law is not hard.

Times of India reported on Friday quoting unnamed sources that penalties for startups, smaller entities, single person companies, and farmer producer organisations would be lowered to half of that is levied on large companies.

Mint had reported on 14 October that the panel will recommend several offences to be classified as civil wrongs not warranting jail term and propose a liberal penalty regime for small businesses.

The government’s intention is to move amendments to the Companies Act in the winter session of Parliament, however, it remains to be seen if the government will be able to have a Bill ready before the session ends on 13 December.

The government wants to overhaul the regulatory architecture to make it easier to do business in India and reduce litigation. The expert panel is of the nature of a standing committee which can continue to give recommendations till the government wants.

A simpler regulatory regime will enable businesses to dedicate more time on their core business activities and spend less time and resources on litigation. The Narendra Modi administration’s goal is to make India rank among the top 50 nations in ease of doing business, up from 63 now. In October, the World Bank, which brings out its ranking of 190 nations in terms of ease of doing business, said India moved up 14 places from its earlier ranking of 77. Two key areas where India needs further reforms are enforcement of contracts and customs procedures.

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