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Review of Companies Act, 2013

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July 17, 2018

Why in news?

The Ministry of Corporate Affairs (MCA) has constituted a committee to review the Companies Act, 2013.

What is the Companies Act?

  • The Companies Act, 2013 entailed the first massive overhaul of India’s legal regime to govern businesses.
  • The Act consolidates and amends the law relating to companies.
  • The 2013 Act imposes stiff penalties and, in some cases, prison terms as well, for directors and key management personnel.

What are the mandates of the committee?

  • The committee is mandated to review the overly harsh provisions of the Companies Act.
  • It has been tasked with checking if certain offences under the Act can be ‘de-criminalised’.
  • It will review if any of the violations that can attract imprisonment may instead be punished with monetary fines.
  • It will review the provisions relating to non-compoundable offences which are grave and criminal in nature.
  • Also, it will recommend if any such provisions need to be re-categorised as compoundable offence.
  • It is also mandated to lay down the framework of an in-house adjudicatory mechanism.
  • This will allow penalties to be levied for minor violations, in an automated manner, with minimal discretion available to officials.

What is the rationale?

  • The high-pitched anti-corruption discourse of the time led to harsh penalties and prison terms in the 2013 law.
  • Several cases of crony capitalism, massive corporate frauds have tainted the credibility of corporate India’s standards.
  • But the harsh provisions have had an impact on investor sentiment and the ease of doing business.
  • Hence a review of the Companies Act is seen as a means to address the above concerns and revive the economy.
  • The changes in the regulatory regime are expected to allow trial courts to rationalise their time.
  • Courts could pay more attention to serious offences rather than get overloaded with cases of minor violations.

 

Source: Live Law, The Hindu

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