NEW DELHI: Violations of two provisions of the Companies Act relating to unpaid or unclaimed dividend, and valuation of assets will no longer attract prosecution. Instead, defaulting companies and officials will be subject to a more predictable monetary penalty regime with the corporate affairs ministry giving effect to decriminalisation of these offences from Wednesday.
Accordingly, a more rational penalty regime for violations of section 124 of the Companies Act, that specify how to treat unpaid or unclaimed dividend, has come into force.
The second section that has come into effect from the same date is the penalty for wrongful conduct of valuers hired by the company for assessing the worth of assets including goodwill or of any liabilities.
“These offences have been decriminalised and penalty rationalised with effect from 24 March," explained a government official, who spoke on condition of anonymity.
As per Companies Act, businesses have a month to transfer dividends announced to shareholders. Unpaid or unclaimed dividends have to be transferred to a specified account after the expiry of this period, within seven days. Companies defaulting on this will have to pay 12% interest on the amount. Companies also have to publish the names of all the persons eligible for dividend who have not claimed or received it along with their last known address within three months.
Breaches of these provisions were earlier criminal offices, which have now been reclassified as civil offences. Also, earlier the penalty for defaulting companies ranged from ₹5-25 lakh and ₹1-5 lakh in the case of defaulting officials depending on the duration of the default. These have now been rationalised to ₹1-10 lakh in the case of companies and to ₹25,000 to ₹2 lakh in the case of defaulting officials.
Valuers of the company are expected to make impartial, true and fair valuation of assets and have to follow the conditions barring them from having any interest in the assets being valued. The penalty for any breach on this count has been rationalised to a flat ₹50,000 from a broad range specified earlier of ₹25,000 to ₹1 lakh. The idea is to simplify the Companies Act and to improve ease of doing business.
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