The government analyzes new tools to decriminalize the Business Law
NEW DELHI: As part of the campaign to decriminalize the Law, the government is ready to test the waters with an alternative framework for at least five provisions designed to simplify the lives of companies and facilitate their implementation.
For example, section 16 of the law allows the government to order a name change in cases where the name of a newly incorporated company is similar to an existing one. Otherwise, a daily fine of Rs 1,000 is applied to the company, and designated executives also face a fine of Rs 50,000 to Rs 1 lakh. The amendments will eliminate the penalty. Instead, they introduce a system under which the government will issue a new computer-generated name if the company refuses to change the name for three months, which is considered a push.
Similarly, according to current provisions, penalties are imposed for the lack of cooperation of the promoters or directors of a company that is being liquidated. The bill has proposed that the problem be addressed under the insolvency and bankruptcy bill, rather than imposing criminal liability for such crime. A similar approach has also been proposed for official liquidators, as the ministry of corporate affairs and a committee appointed by it considered that this can be addressed through administrative action.
The bill also proposes to allow Indian companies to trade abroad through an enabling amendment, while seeking to provide companies with flexibility in expenses related to (CSR). For example, companies that have to spend less than Rs 50 lakh for mandatory spending do not need to establish a committee now. Similarly, companies that spend more than 2% mandatory can now transfer additional expenses to subsequent years and compensate for their liability.
The alternative is part of the 72 amendments to the Companies Law approved by Wednesday, and the government plans to present a bill during the current session of Parliament. The Corporate Law Committee had also been responsible for exploring other mechanisms, such as the plea agreement, to reduce the burden on businesses for misdemeanors, but so far it has endeavored to decriminalize various provisions.
FM told reporters that a group of ministers, who analyzed the law in detail, had decided not to reduce penalties for serious crimes such as fraud and the proposed changes are aimed at simplifying the lives of companies.