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Keep those handcuffs away

  • The government move to decriminalise innocuous violations under the law governing companies should help avoid unnecessary run-ins with law enforcement agencies and ease business.

Finance minister Nirmala Sitharaman on Sunday announced that harsh legal penalties under the Companies Act would be done away with. Several violations of this law’s provisions unfairly attract criminal charges, making it difficult for corporate executives to operate without the fear of an inadvertent run-in with law enforcement agencies. These also made space for harassment at the hands of officials.

The government’s move to decriminalise innocuous violations is in line with recommendations of the Company Law Committee, which submitted a report late last year asking for penalty rationalization. The panel had asked for 43 provisions of the Company Law to be amended so that firms could breathe freely on a host of matters. Relatively minor slip-ups, like certain inadequacies in a board report, or a delay in holding an annual general meeting, should not make executives vulnerable to criminal prosecution.

Criminal penal provisions for lapses that can be deterred by the imposition of fines had never made any sense. When the government introduced jail terms for flouting corporate social responsibility norms, it triggered outrage in India Inc. That the corporate sector’s voice had got across was clear from many of the earlier statements issued by the government. Sunday’s declaration should mean that the changes will be made without ado. With the country under a lockdown, most business routines have been thrown out of gear. Compliance with procedural must-dos is no longer merely about being mindful of them. Entrepreneurs and executives need immediate relief from business worries that they should never have had in the first place.

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