New Delhi, Mar 24 (KNN) Union Finance and Corporate Affairs Minister Nirmala Sitharaman on Monday introduced amendments to the Companies Act aimed at decriminalising procedural defaults, improving ease of doing business, and strengthening regulatory oversight.
The proposed legislation, which has been referred to a Joint Parliamentary Committee for further examination, seeks to reduce compliance burden by decriminalising several minor offences.
Decriminalisation And Ease Of Doing Business
These include procedural lapses related to prospectus issuance, buybacks, annual general meetings (AGMs), maintenance of accounts, and certain defaults by directors. Similar provisions have also been proposed under the Limited Liability Partnership (LLP) framework.
The amendments introduce greater flexibility in corporate operations by allowing new executive compensation instruments such as restricted stock units (RSUs) and stock appreciation rights (SARs), in addition to existing Employee Stock Option Plans (ESOPs), subject to shareholder approval. SARs would enable employees to receive cash benefits linked to stock price appreciation.
Governance Reforms And Regulatory Strengthening
To strengthen dispute resolution, the government has proposed setting up special benches of the National Company Law Tribunal (NCLT) to handle cases under the Companies Act and the Insolvency and Bankruptcy Code (IBC). The bill also seeks to simplify merger and amalgamation processes by rationalising approval thresholds for fast-track mergers.
In terms of capital management, the amendments propose changes to buyback rules, allowing certain companies, particularly those that are debt-free, to undertake up to two buybacks within a year, with a mandatory six-month gap between offers.
The government has also proposed relaxations for small companies under corporate social responsibility (CSR) norms.
The net profit threshold for CSR applicability is proposed to be increased to Rs 10 crore, while the timeline for transferring unspent CSR funds to a designated account has been extended from 30 days to 90 days. Revised thresholds for the constitution of CSR committees have also been suggested.
The bill further clarifies that compromise or arrangement provisions under the Companies Act will not apply once liquidation proceedings have commenced under the IBC.
Experts noted that the amendments indicate a shift towards a more facilitative regulatory framework, while strengthening oversight mechanisms, particularly through enhanced powers for audit regulators.
(KNN Bureau)
