The Government of India introduced various economic measures and reforms on May 17, 2020 as a consequence of the COVID-19 pandemic. Pursuant to such economic reforms, several amendments to the Indian Companies Act, 2013 (the “Act”) have been proposed by the Government for ease of doing business for corporates and other stakeholders. Consequently, the Companies (Amendment) Bill, 2020 (the “Bill”) has been put to the Lok Sabha, (the lower house of the Parliament). The Bill is yet to be passed as an Act.
The key amendments proposed in the Bill are set forth below:
1. Decriminalization and Re-categorization of certain offenses
The Bill proposes changes to certain offenses in relation to technical and procedural defaults such as shortcomings in the company's social responsibilities reporting, inadequacies in the board report, filing defaults, delay in holding of annual general meetings which lack any element of fraud or do not involve larger public interest:
(i) Removal of imprisonment: Imprisonment for certain offenses has been removed. For instance, to omit the punishment of imprisonment prescribed in Section 68(11) of the Act for non-compliance with procedure for buyback prescribed under Section 68 of the Act, the rules framed thereunder and the SEBI (Buy-Back of Securities) Regulations, 2018.
(ii) Reduction in fine amount: Fine payable in certain offenses has been reduced. For instance, the penalty amount of the Significant Beneficial owner (SBo) prescribed in Section 90 (1) of the Act, the penalty for each day when the default continues is proposed to be reduced from ₹10,000 to ₹1,000, subject to a maximum of ₹200,000.
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