The government is set to decriminalise two-thirds of the Companies Act as it looks to do away with jail term is over 40 sections out of the 66 where compounding is permitted.
Besides, the ministry of corporate affairs, which is pushing the change, is also seeking to lower the penalty for small companies, sources told TOI. The move is expected to benefit around eight lakh of the 11 lakh registered Indian companies which have a turnover of up to Rs 2 crore and a paid-up capital of Rs 50 lakh or less.
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Through the process of compounding, a company or its executives can avoid prosecution by paying penalty.
The steps are being discussed by the Company Law Committee, headed by corporate affairs secretary Injeti Srinivas, which is also looking at stringent deterrents for violators, without putting them in jail, sources said. For instance, some restrictions may be imposed on accessing funds or transfer of registered office in case a company violates a provision.
Source: Economic Times
