Home >Politics >Policy >Government Panel recommends review of disciplinary rules on directors, auditors
Government had earlier this year amended the Companies Act to decriminalize 16 procedural offences into civil wrongs that does not warrant a jail term. (Bloomberg )
Government had earlier this year amended the Companies Act to decriminalize 16 procedural offences into civil wrongs that does not warrant a jail term. (Bloomberg )

Government Panel recommends review of disciplinary rules on directors, auditors

  • The World Bank’s Ease of Doing Business 2020 survey released this year showed that India had climbed 14 places from last year’s survey to stand at 63
  • Government had earlier this year amended the Companies Act to decriminalize 16 procedural offences into civil wrongs that does not warrant a jail term

NEW DELHI : A government panel that examined ways of improving the ease of doing business in the country has recommended that there is a case for reviewing the rules on disqualifying directors and debarring auditors.

The panel led by Injeti Srinivas, secretary in the corporate affairs ministry, which presented its report to corporate affairs and finance minister Nirmala Sitharaman on Monday also suggested that penalty for 46 company law breaches should be toned down. It also recommended that penalties could be reduced for startups, small, one person and producer companies, said an official statement from the ministry. Parity on remuneration of executive and non-executive directors is also recommended.

The panel suggested that before taking a final call, there should be wider consultation on issues like allowing appeals against orders of ministry officials before company law tribunals, giving relief on certain requirements for private placement and relaxing the norms for disqualification of directors and debarment of audit firms. However, in the case of toning down penalty for offences that do not affect public interest or do not involve element of fraud, the panel’s proposals may be taken up immediately for implementation. A government official who did not wish to be named, said that the intention is to bring a Bill on these measures in the winter session of Parliament itself. But considering that the winter session ends by mid-December, it remains to be seen whether the government is able to meet that target.

This is the second round of toning down penalty provisions in the Companies Act this year as the Narendra Modi government is keen that India gets a place among the top 50 nations in World Bank’s ease of doing business ranking. The World Bank’s Ease of Doing Business 2020 survey released this year showed that India had climbed 14 places from last year’s survey to stand at 63, among 190 countries.

The government had earlier this year amended the Companies Act to decriminalize 16 procedural offences into civil wrongs that does not warrant a jail term. In the latest round of changes, the panel proposed that 23 compoundable offences should be reclassified and should be handled by an in house adjudicatory mechanism rather than by tribunals and courts. The quantum of penalties should also be lowered in these cases, the panel said. The panel said that in all, 46 penal provisions should be amended to either remove criminality, or to restrict the punishment to only fine, or to allow rectification of defaults through alternative methods, which would lead to further de-clogging of the criminal justice system in the country, the statement said.

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