In the fifth set of reforms from the Narendra Modi government, FM Nirmala Sitharaman announced many changes to the Companies Act, 2013 to bring about ease of business in India. Some minor violations have now been decriminalised and Indian firms can directly list in foreign markets.
Companies can now directly list their securities in foreign jurisdictions
FM Sitharaman has made fundraising easier for Indian public companies by allowing them to directly list their securities in permissible foreign markets. Private companies that list their non-convertible debentures on the stock exchange will not be treated as listed companies and hence will not have to deal with the compliances required for listed companies. This move has been made to push fundraising in the time of a cash crunch.
Penalties have been lowered for startups, small companies, one-person companies, and producer companies in a bid to provide some relief.
Minor violations will not be punished
The government has decriminalised minor violations such as technical and procedural faults of the Companies Act, 2013, related to shortcomings in CSR reporting, inadequacy in Board report, fixing defaults, delay in holding Annual General Meetings.
7 Compoundable offences have been dropped
The Finance Minister, furthermore, announced that the government has dropped 7 compoundable offences and another 5 offences will be dealt with by the Internal Adjudicating Mechanism (IAM), an alternative framework. The sections under the Companies Act that are to be dealt with under IAM by Regional Directors have now been increased fro 18 to 54.
The government is trying to decrease the load on the criminal courts in India and the National Company Law Tribunal (NCLT) so that they can concentrate on more pressing matters in front of them.
The exact details on the dropping of compoundable offences will be given when the government passes an ordinance when Parliament resumes.
