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Finance Minister announces decriminalisation of defaults under Companies Act

Under this, seven compoundable offences have been altogether dropped, while another five will be dealt with under an alternative framework.

May 17, 2020 / 03:27 PM IST

Finance Minister Nirmala Sitharaman on May 17 announced the decriminalisation of defaults under the Companies Act. Under this, seven compoundable offences have been altogether dropped, while another five will be dealt with under an alternative framework.

“Violations involving minor technical and procedural defaults – such as shortcomings in corporate social responsibility (CSR) reporting, inadequacies in board report, filing defaults, and delay in holding of annual general meetings (AGMs) will be decriminalised,” Sitharaman said.

Further, majority of the compoundable offences sections will be shifted to internal adjudication mechanism (IAM) and powers of regional directors for compounding has been enhanced, the finance minister added. As per this, 58 sections will be dealt with under IAM as compared to 18 earlier.

“This makes it simpler rather than going to courts and the amendments will de-clog the criminal courts and National Company Law Tribunal (NCLT). An ordinance will be brought in for this. And we will take it to Parliament once the session starts,” she added.