The Company Law Committee ("Committee") which was constituted in September 2019 to examine provisions of the Companies Act and make recommendations to inter alia improve ease of doing business submitted its report ("Report") to the Central Government on November 14, 2019 (Report accessible here).
The key recommendations of the Committee are set out below:
(a) Recategorization of 23 non-compliances which are currently treated initially as criminal in nature such that the non-compliances would be considered civil in nature. Once recategorized, these non-compliances would be subject to a penalty levied by an adjudication officer. Non-compliances in respect of the following key matters are suggested to be recategorized as aforesaid:
(i) the procedural requirements for transfer/transmission of securities;
(ii) maintenance of register of members, debenture holders, significant beneficial owners;
(iii) declaration of registered ownership, beneficial ownership in shares and significant beneficial ownership;
(iv) disclosure of interest by directors;
(v) maintenance of register of charges;
(vi) matters relating to unpaid dividend account;
(vii) matters to be provided in the board's report and directors' responsibility report;
(viii) requirements relating to related party transactions; and
(ix) appointment and qualification of directors.
(b) Recategorization of 11 offences which are currently punishable with fine and/or imprisonment as offences with fine only . Offences in respect of the following key matters are suggested to be recategorized as aforesaid:
(i) maintenance of books of accounts at the registered office and inspection by any director;
(ii) compliance with respect to buy-back;
(iii) the chapter dealing with audit and auditors;
(iv) vacation of office of a director; and
(v) the chapter dealing with foreign companies.
(c) Amendment of Section 62(1) of the Companies Act (dealing with rights issue) to enable the Central Government to prescribe a shorter minimum time period than the extant 15 days for which the rights issue offer is to be kept open.
(d) Amendment of Section 135 of the Companies Act (dealing with corporate social responsibility) to enable the Central Government to enhance thresholds triggering the applicability of the section.
(e) Amendment of Section 167 of the Companies Act ( dealing with vacation of office of director ) to remove disqualification under Section 164(2) (dealing with inter alia disqualification for non - filing of annual returns and financials) as a ground for vacation of office of the director.
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