In what may be termed as a move towards alleviating the complexities in running businesses, the cabinet will apparently consider an amendment in the Companies Act. As per reports, the proposed changes have been pulled from the CLC (Company Law Committee) report headed by Injeti Srinivas, secretary of corporate affairs.
According to reliable sources, the amendment in the Act will reportedly decriminalise approximately 44 out of 66 offences. The list of infringements includes CSR (corporate social responsibility) violations and non-filing of returns.
The proposed changes in the Act are also said to consider easing norms related to remuneration for loss-making companies to enable higher salary structure for key managerial personnel, including non-executive directors in these firms.
This change is being taken into consideration after representations in this regard from various industries including infrastructure, power and telecom. The Company Law Committee in its report emphasized on allowing appropriate compensation structure for non-executive directors which should be invariable against the profit or loss that company makes.
As per official reports, the increase in compensation of key managerial personnel would require approval from the company’s creditor as well as passage of a special resolution.
Sources familiar with the matter report that the cabinet is also considering a proposal with regards to return filing procedure for “systemically important non-listed companies”. Under the proposed changes, it will be mandatory for these firms to file returns on a quarterly basis instead of an annual cycle. The move could lead to an increase in the compliance cost of large unlisted firms.
For the record, the Company Law Committee was established in September 2019 to review provisions of the LLP Act as well as the Companies Act. The CLC is also responsible to look at the recategorization of offences under the Companies Act. In a similar move towards facilitating convenience for businesses, the ministry of corporate affairs has proposed reducing penalties for small companies, including one-person firms, under the Companies Act. The cabinet is also considering a proposal by the corporate affairs ministry to set up dedicated benches of NCLT (National Company Law Tribunals) for handling cases under the Competition Act. The MCA has already transferred certain powers to the Centre and added new benches for de-clogging the NCLT.