The Union Cabinet on Wednesday approved 72 changes to the Companies Act 2013, with a thrust on decriminalising compoundable offences and allowing direct foreign listing for domestic companies to boost “Brand India”.
The nod for the Companies amendment Bill, likely to be tabled in the ongoing Parliament session, has been given to ease compliance burden related to corporate social responsibility (CSR) by exempting companies with obligation to spend Rs 50 lakh or less. Such companies will not be required to have a CSR committee.
Also, if a company spends more than the required 2 per cent of its average profit in any given year, it can carry forward the excess amount to the subsequent financial years.
“We want to bring ease of doing business for stakeholders. Our priority is to decriminalise by removing sections that result in criminality when it is not intended,” Nirmala Sitharaman, finance and corporate affairs minister, told reporters.
A new section, 129A, is proposed to be added for prescribed classes of unlisted companies, which will file results on a periodic basis in addition to annual filing, to make “the periodic economic data more scientific”.
The government plans to re-categorise 23 of the 66 compoundable offences, which will be dealt with by an in-house adjudicating framework. For 11 offences, the Bill proposes to limit the penalty and remove the imprisonment clause. The quantum of penalty will also be reduced for six defaults that had already been decriminalised.
With respect to allowing domestic firms to list on foreign exchanges, Corporate Affairs Secretary Injeti Srinivas said the enabling provision would be introduced in the Act and a detailed framework of rules would be brought in the next few months.
Currently, Indian companies only have the option of American Depository Receipt (ADR) or Global Depository Receipt (GDR) route to tap foreign investors.
A press statement said the move would increase the attractiveness of the technology sector, provide an alternative source of capital, and broaden the investor base.
The Bill extends exemptions from filing certain resolutions to a particular class of non-banking financial companies and housing finance companies to reduce compliance burden for routine lending activities.
It also proposes to allow payment of adequate remuneration to non-executive directors in the case of inadequate profits, by aligning it with the provisions for remuneration for executive directors.
The government will also exclude certain class of companies from the definition of “listed company” mainly for listing of debt securities in consultation with Sebi, to reduce their compliance burden.