Govt eyes ordinance route for Companies Act amendments

The government is considering a fresh ordinance to amend the Companies Act to decriminalise several offences, apart from allowing Indian companies to directly list overseas. The ministry of corporate affairs has begun discussions on fast-tracking the amendments and may approach the Union Cabinet shortly, sources told TOI. The government had introduced a Bill to amend the law during the last session of Parliament, but it could not be cleared. The move comes days after the Cabinet recommended promulgation of an ordinance to amend the Insolvency and Bankruptcy Code to disallow fresh filings for up to 12 months.

“Companies need more flexibility on compliance due to Covid-19. The government is keen to ensure that there are fewer complications in case of non-compliance,” a government source told TOI. The Bill to decriminalise the Companies Act followed recommendations by a committee headed by corporate affairs secretary Injeti Srinivas and several industry representatives. Of the 66 remaining offences where criminal prosecution is allowed, the government is looking to make 23 compoundable, which will allow to cure the violations on payment of fine.

In case of 11 compoundable offences, the provision for a jail term is being done away with. Further, for six defaults, which were decriminalised earlier, the penalties are proposed to be lowered. And, at least five offences will be dealt with under an alternate framework, which is an innovation that is being tried out. For instance, section 16 of the law allows the government to order a name change in cases where a recently-incorporated company’s name is similar to an existing one. The amendments propose to introduce a mechanism under which a new computer-generated name will be assigned.