Revised Companies Act to simplify penalties for minor violations

NEW DELHI: An expert panel set up by the government has suggested simplifying imposition of penalties for minor violations of Companies Act, including some related to technical defaults and corporate governance. At the same time, it has decided to treat contraventions, such as non-disclosure of by a director regarding an interest in a contract or an agreement, as a serious offence — where the current mechanism of penalty and prosecution by courts will continue.

While the panel had recommended that 16 technical and corporate governance offences be moved out of the ambit of courts, where over 40,000 were pending at the end of June, it has proposed that only fine should be levied in 12 offences. In another four, the panel has suggested that it could be a fine or imprisonment, or both.

The committee headed by corporate affairs secretary I Srinivas submitted its report to finance minister Arun Jaitley last week, with the government keen on amending the law to incorporate some of the proposed changes. Sources indicated that a Bill may be introduced during the winter session of Parliament.

A delay or failure to file annual returns with the registrar of companies can come under the second category, while a violation related to certain resolutions or a report by a public-listed company on an annual general meeting should only attract a fine, the panel — that also had banker Uday Kotak and lawyer Shardul Shroff as members — has recommended.

Similarly, a delay or a failure in filing a notice for alteration of share capital or attachment of statement of special business in a notice calling for an AGM will only face a fine. At the same time, the committee has decided against tinkering with penalties for serious offences.