New Delhi: The Narendra Modi government Wednesday moved to decriminalise the Companies Act and relax provisions governing corporate social responsibility norms in a major step towards ease of doing business.
The Union Cabinet cleared the amendments to the Companies Act as recommended by a group of ministers.
Addressing a press conference to announce the decisions, Finance Minister Nirmala Sitharaman said the amendments will help in improving the ease of doing business for companies and decriminalise the Companies Act. She said that 72 changes have been made to 65 sections of the Act.
These are likely to be the last of the changes that will be introduced to the Act for the moment, Sitharaman indicated.
The decision is in complete contrast to the government’s earlier stance of penalising companies with fines and imprisonment for failure to meet CSR norms.
The cabinet move comes at a time when the economy is faced with a sharp slowdown and there are fears of a further negative impact on account of the disruption in supply chains in automobiles, textiles and pharmaceuticals due to the onset of the coronavirus outbreak.
The global spread of the virus has seen stock markets around the world tanking with many currencies weakening against the dollar. The Indian rupee has also fallen to a low of 73 against the dollar and is expected to weaken further.
The Indian economy grew at 4.7 per cent in the October-December quarter, lower than the 5.1 per cent reported in the July to September quarter and 5.6 per cent in the April to June quarter. It is forecast to grow at 5 per cent in 2019-20 as against 6.1 per cent in 2018-19.
Also read: Govt sets target to increase nuclear power generation capacity by over 3 times in 10 years
Fineprint of changes
The amendments propose to limit the punishment of 11 compoundable offences to penalties and removing the clauses that allow for imprisonment as punishment. Compoundable offences are those that are typically less serious in nature when compared to non-compoundable offences.
At the press meet, Sitharaman said 23 of the 66 offences have been reclassified to be dealt with an in-house adjudicating framework. In addition, seven compoundable offences have been omitted.
The cabinet has also relaxed CSR norms for companies. Now, they will be allowed to carry forward credit of their CSR spends to the future years if they spend more than the mandated 2 per cent of net profits towards CSR spending in a particular year.
In addition, the amendments propose to exempt companies which have an obligation to spend Rs 50 lakh or less under CSR from requirement of having a CSR committee.
Also read: Why well-to-do Indians are fleeing the country and economists aren’t returning