Introduction: Discover how the Indian Government is fostering ease of doing business by decriminalizing compoundable offences under the Companies Act, 2013. This article examines the phased approach to decriminalization, the implementation of an in-house adjudication mechanism, and an international collaboration between the Institute of Chartered Accountants of India (ICAI) and the Chartered Accountants of Maldives.
Analysis: The Ministry of Corporate Affairs in India has undertaken a systematic approach to reduce the burden on law-abiding corporates while incentivizing compliance with the Companies Act, 2013. In the first phase, 16 compoundable offences were transferred to an In-house Adjudication Mechanism (IAM) through the Companies (Amendment) Act, 2019. This approach targeted technical and procedural violations without elements of fraud, deceit, or injury to public interest.
The second phase, facilitated by the Companies (Amendment) Act, 2020, further advanced decriminalization efforts. It encompassed the de-criminalization of 35 more compoundable offences. Moreover, for 11 offences, provisions of imprisonment were replaced with fines, aligning with the goal of reducing the burden on the criminal justice system and boosting confidence among Indian companies.
The international aspect of this initiative is highlighted by the Memorandum of Understanding (MoU) between the Institute of Chartered Accountants of India (ICAI) and the Institute of Chartered Accountants of Maldives (CA Maldives). The MoU aims to enhance collaboration, advance accounting knowledge, and promote professional development, thereby contributing to the growth of the accounting profession in both countries.
Conclusion: The Government’s efforts to decriminalize compoundable offences under the Companies Act, 2013, showcase a commitment to ease of doing business and fostering a conducive environment for honest wealth creators. By embracing a phased approach, introducing an in-house adjudication mechanism, and fostering international collaboration, India is actively promoting corporate compliance, reducing legal complexities, and reinforcing the significance of ethical business practices.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
LOK SABHA
STARRED QUESTION NO. 243
ANSWERED ON MONDAY, AUGUST 07, 2023
SARAVAN 16, 1945 (SAKA)
DECRIMINALISATION OF COMPOUNDABLE OFFENCES UNDER
COMPANIES ACT, 2013
QUESTION
*243. SHRI ANIL FIROJIYA:
Will the Minister of CORPORATE AFFAIRS be pleased to state:
(a) the details of the manner in which the Government is working to clear its pending cases by taking steps towards decriminalizing compoundable offences under the Companies Act, 2013 and showing strong commitment to ease of doing business;
(b) whether any agreement has been signed between the Institute of Chartered Accountants of India and the Chartered Accountants of the Maldives; and
(c) if so, the details thereof?
ANSWER
THE MINISTER OF FINANCE & CORPORATE AFFAIRS
[SMT. NIRMALA SITHARAMAN]
(a) to (c):- A statement is laid on the Table of the House.
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STATEMENT REFERRED TO IN REPLY TO LOK SABHA STARRED QUESTION NO. *243 FOR ANSWER ON 07.08.2023.
(a) :- In keeping with the Government’s objective of incentivizing compliance with law and providing greater ease of doing business to law abiding corporates, process of de-criminalization of technical & procedural violations under Companies Act, 2013 was carried out in phased manner. In the first phase, through the Companies (Amendment) Act, 2019, 16 compoundable offences under the Companies Act, 2013 were shifted to an In-house Adjudication Mechanism (IAM). A principle-based approach was adopted and only those violations which involved technical & procedural violations which could be objectively determined and did not involve any element of fraud, deceit, injury to public interest were decriminalized.
In the second phase, through the Companies (Amendment) Act, 2020, 35 more compoundable offences under the Companies Act, 2013 were de-criminalized. In addition, through this amendment, in case of 11 compoundable offences, provisions of imprisonment were removed and only fines were retained.
These amendments were based on the recommendations of the Companies Law Committee and are expected to significantly enhance the confidence of Indian companies on the Government’s resolve to provide greater Ease of living & accord due respect to honest wealth creators in the country and reduce the burden on the criminal Justice system.
and (c):- The Memorandum of Understanding (MoU) between the Institute of Chartered Accountants of India (ICAI) and the Institute of Chartered Accountants of Maldives (CA Maldives) has been approved by the Union Cabinet at its meeting held on 17th May 2023. The MoU signing ceremony is scheduled to be held on 20th August 2023 in Maldives during the sidelines of South Asian Federation of Accountants (SAFA) events being hosted by CA Maldives. The objective of MoU is to establish mutual co-operation for the advancement of Accounting Knowledge, Professional and Intellectual Development, advancing the Interests of their respective members and positively contributing to the development of the Accounting Profession in Maldives and India.
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