September 25, 2020

Key proposals of Companies Amendment Bill 2020 include decriminalising offences, direct overseas listing and more

  • The monsoon session of the Indian Parliament is all set to begin on September 14, with over 20 bills on the agenda for discussion.
  • Amongst the key ones is the Companies (Amendment) Bill, 2020.
  • Some of the major highlights of the Bill include the decriminalization of minor offences and direct overseas listing for certain prescribed classes of companies.
  • The government has also proposed an evolved CSR policy, allowing companies to carry forward excess CSR spendings to future financial years.
  • Check out the latest news and updates on Business Insider.

In March 2020, the Indian government introduced the Companies (Amendment) Bill, 2020, recommending further measures aimed at improving the ease of doing business. Key amongst its recommendations include aspects like decriminalizing minor offences, allowing companies to list overseas directly, and more.

With the monsoon session of the Indian Parliament all set to begin on Monday, September 14, we took a look at some of the crucial highlights of the Bill that will be tabled for legislation.

“This Bill is a net positive, these are good steps and will enhance the ease of doing business,” Tarun Gulati, senior advocate and partner at PDS Legal told Business Insider.

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Also read: Monsoon session 2020 of the Indian Parliament will debate these important bills and ordinances


Highlights of the Companies (Amendment) Bill, 2020


Decriminalizing minor and technical offences


The Bill includes 72 proposed amendments which decriminalize minor and technical offences. For example, it suggests doing away with jail time for offences which involve shareholder rights or reduction in shares, among others. It also suggests converting 23 compoundable offences which involve imprisonment, into a civil wrong with civil penalties.

According to Gulati, this will improve ease of doing business and benefits startups and small companies which don’t have large teams to check compliance.

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It is worth noting that only those offences which are minor, technical, and do not involve fraud or affect public interest are proposed to be decriminalized.

In addition to this, the government has also proposed removing penalties for certain offences and reducing penalties for others.

Direct overseas listing and exclusion from listed companies


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The government has proposed to allow a certain class of companies to list directly in foreign jurisdictions, allowing them to raise capital easily.

In addition to this, it has also proposed allowing companies to list debt securities on stock exchanges without having to list the company itself. This will allow companies to raise debt funds without attracting the compliance burden of listed companies.

Set-off of excess corporate social responsibility (CSR) spending


Companies that have a net worth, turnover, or profits above a specified amount are required to spend 2% of their average net profits of the last three years towards CSR in a financial year.

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If companies spend more than 2%, the excess amount does not count towards their past or future obligations.

However, the government has now proposed that any excess amount over 2% of the current CSR obligation will be allowed to be carried forward and set off against future CSR obligations.

This is likely to encourage companies to better spend on their CSR obligations instead of restricting themselves to the 2% target.

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Setting up of benches of National Company Law Appellate Tribunal (NCLAT)


The government has proposed setting up benches of NCLAT to ease the burden and speed up the resolution of pending cases. Further, the maximum limit on the number of members in NCLAT, which is currently 11, is proposed to be dropped.

Overall, Gulati believes that these proposed amendments will help in reducing the compliance burden on companies and allow them to focus on their business. It remains to be seen how effective the government’s execution is, though.

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