New Delhi, Nov 20 (KNN) The Company Law Committee, a government-instituted high level panel, has proposed reviewing the provisions of Companies Act on disqualification of directors and debarment of audit firms. It has also proposed decriminalizing more than half of the existing compoundable offences under the Companies Law as well as lower monetary penalties for violations by startups.

The Company Law Committee was constituted by the Ministry of Corporate Affairs in September this year. The committee is headed by Ministry of Corporate Affairs Secretary Injeti Srinivas.

The panel has prepared a report and submitted it to the Minister of Finance and Corporate Affairs Nirmala Sitharaman this week.

Major recommendations include dealing with 23 out of 66 compoundable offences under the Companies Act through an in-house adjudication framework, wherein such defaults would be subject to a penalty by an adjudicating officer.

Under the in-house adjudication framework, the representative of the defaulting company does not have to be physically present in front of the adjudicating officer. The quantum of the penalties has also been lowered.

It also recommends omitting seven compoundable offences and limiting punishment for 11 compoundable offences to only fine by removing provision for imprisonment. A compoundable offence is one for which the law does not prescribe imprisonment as a punishment.

Earlier this year, the corporate affairs ministry de-criminalised 16 minor procedural/ technical lapses under the Act into civil wrongs'.

Another proposal is for "extending applicability of Section 446B (lower penalties for small companies and one person companies) to all provisions which attract monetary penalties and extending the benefit to producer companies and startups," the release said.

The report also recommends measures to reduce compliances and make compliance easier. It has asked for reviewing provisions on disqualification of directors and debarment of audit firms after due consultation and examination.

It has suggested changing the definition of listed company in consultation with Sebi for certain class of companies for listing of debt securities, enhancing the thresholds for applicability of Corporate Social Responsibility provision and non-levy of penalties for delay in filing annual returns.

The committee has also called for taking up various other issues, including a mechanism for appeal against orders of Regional Directors before the National Company Law Tribunal (NCLT).

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