Have you tried google to find FAQs on the recently introduced corporate law of India, the Companies Act 2013? When I tried the same, I just found one state-sponsored link for the Ministry of Corporate Affairs; however the same displayed error upon clicking. The U.K. has also come up with a new piece of legislation, Companies Act 2006, and the businesses around the world having any interest in the country can easily overcome uncertainties in this law by going through an exhaustive list of FAQs available at the government’s web portal. Same is the case with the Delaware General Corporation Law, the most adopted law in the U.S., which hosts a list of FAQs on its official webpage to assist businesses and professionals steering clear of any blunders. It is very evident that unless the laid down laws of the land are unambiguous and transparent, slipups and litigations will always be at their high. Is the new Companies Act one among these?
The list of clarifications, rules and notifications post the coming of the new legislation on corporate actions is dense. Hence, when drawing any conclusion from the Act, one must search extensively for any amendments made ‘thereafter’; else you may end up in a state of contravention of law. Yes, you can also find some FAQs while hovering over the webpage of the MCA, but in case you are looking for information on which form to be filed with the ROC for a specific corporate action, or are looking for any clarification on what the Act says, you are at the wrong place. The Ministry has a special cell to deal with queries and complaints; however for reaching the apt person you need a re-birth. I am hopeful that this milieu will change with the coming in of the new minister and his squad; however challenges are still many. The prime of all is the law itself, which lacks generality and is vague at numerous matters.
Foremost slip by the previous government was making most of the Sections of the new Act effective from the 1st of April even when they were made public in the last week of March. Furthermore, the final rules were not in line with the draft ones, and at many places are even strict than the draft, hence creating an anarchy in the entire corporate and professional domain. While we have always been aiming towards bringing in global funds to India, was the globally accepted practice of according a year time to familiarize with the new law adhered to? Now, you have two pieces of legislation to adhere to for the time being, both the Acts of 1956 and 2013. Let me also include the hefty fines that are levied on LLPs in case they delay the filing of annual accounts with the ROC in this. Ranging from related party transactions and CSR to fraud reporting and whistleblowing, there are distinct areas of slip-ups in the Companies Act 2013, which I have endeavored to enumerate hereunder.
The definition of ‘Related Party Transactions’ has been widened, which now reads as ‘a private company in which a director or manager or his relative is a director or manager’. This now means that any company which seeks to enter into a transaction with private limited company may fall into the category of related party even owing to relatives. So, formalities ranging from approval of Audit Committee, Board, and /or the shareholders, wherever applicable, have to be adhered to. In this context, The Companies (Removal of Difficulties) Sixth Order, 2014, has even deepened the concerns. The notion of IDs was vague from the very beginning. Appointed by the promoters, would they really be independent, also when they can take directorship of 20 companies without any apt criterion necessities. The duty of unbiasedly monitoring directors’ actions, to make them in line with the interests of the shareholders, will be hardly served.
It becomes so perplexing in the case of closely-held companies wherein all shareholders can be a related party that the obligatory consent of shareholders, wherever required, will be unmanageable to attain. Another area of pain is restrictions placed on setting up multiple layers of subsidiaries, wherein the law now permits only two layers, hence the corporate players will need to re-think their restructuring strategies. Restrictions placed on inter-personal loans, loans to directors, subsidiaries and associates, along with the uncertainties over the applicability of relevant sections have multiplied the chaos. Then are the CSR norms and the strings attached to it. Though parking of certain percentage of profits for CSR activities has been mandated, there are no clear instructions on how the money should be expended. Herein, aren’t the corporates given autonomy to spend the fund on any of the specified activities that may even be aimed at profiting business?
Countless is the list when I add compulsion of appointment of a woman director on the Board, enhanced role of bureaucracy, alike rules for preferential and private placement, and issue of NCDs for a term of 5 years to the tailbacks of the new piece of legislation. A lot has been delivered by the new government in the initial 100 days of governance, of which, calling foreign funds for the betterment of Indian industrial sector is the most phenomenon. However, the most crucial legislation that shall aim at easing, and rather, paving the way for businesses, is proving to be the principal limitation. Vodafone India has recently spoken about the delayed clearances in India which make doing business a challenging task. Leave apart the taxation and labor laws, even our basic corporate law, the Companies Act is highly unfavorable for the functioning of corporates. The former rulers have done their part by bringing an ambiguous corporate legislation; it is now for the new squad to clear all clouds and pave a smooth way for business houses.
Intellectuals are not just within the government departments or ministries. The new PM has accepted this notion and the outcome is the mygov.in web portal. On similar lines, the MCA needs to invite concerns from valid stakeholders, viz. ICAI, ICSI, ASSOCHAM, FICCI, CII, and the business houses with respect to all uncertainties in the Companies Act 2013. Thereafter, a committee with members representing all the stakeholders should be delegated the task to formulate a master circular, which must be capable to answer all the subsequent doubts. The basic aim should be to swap all the rules, clarifications, and notifications with a comprehensive and unambiguous literature that is capable to complement the new Companies Act. Along with, corporate houses must be consulted with a view to eliminating obstacles that hamper the day-to-day corporate actions and make businesses vulnerable to penalties and litigations. To lift the corporate sector, it has become imperative to undertake reinstating actions sooner than later.
Lastly, though this may need a lot more labors and time, would it not be favorable for the stakeholders if the Companies Act 2013, which stands out of the line on numerous subject matters and somewhere even contradicts with the SEBI and RBI guidelines, be substituted by an altogether new corporate law that must be capable to balance all the current norms of Acts and Rules governing the corporate world? For instance, how can it be tolerable that the concept of IDs is dissimilar in the new Companies Act and the SEBI Listing standards? Also, it has been a long tradition now to exempt PSUs from many of the clauses of the corporate law on yearly basis. In this context, the ministry of finance is even considering exempting PSU banks from CSR spend. A new law would need extended brain storming; the result, a new and apt corporate law will be a reward for hard labors. The new squad must take the charge devotedly and expeditiously.
It was an exercise initiated with good intentions but messed up completely . There was no need to put it on implementation unless all rules are properly
framed & things are completely vetted by stakeholders.
Dr. Gupta,
I am in agreement with your views. I am a practicing Company Secretary. The law which should be revolution and evolution should at first place be ‘made properly’ instead of hush-up manner with lots of confusions and far away from business practicalities. Law is a compliance tool for country and business, it can not be rule maker for business suddenly – for example refund of deposits / loans in one year. I am not sure what will happen to business into capital goods, real estate, hospital, hotel etc. which has taken loans for long term period as per business plans. I think henceforth all business plan makers will have to first see Companies act first.
thought provoking and educative
It was exercise started with good intention. The announcements given in March and asked companies to follow from March. With a lot of clarifications i( in peace meal basis) made it very difficult to update and even professionals find it difficult follow leave alone stake holders.
I definitely enjoyed every bit of it.
ICAI, FICCI will be very happy to help the government frame good corporate law for the country.
Government should consult them.
PM Modi is continuously branding India but with such restrictive company law I don’t think much can be achieved.
Just wanted to say how much we appreciate the tremendous amount of hard work and effort you all put in to producing this website.
It is a great credit to everyone and I am sure will be a great success.
I like the way you put thoughts forward
Congratulations on a job done extremely well.
We look forward to reading many more thoughts of yours
, and wish you the success that you deserve.
I must compliment you on the level of research and knowledge involved in this article
I really like what you’ve acquired here, really like what you
‘re saying and the way in which you say it.
You make it enjoyable and you still care for to keep it smart.
I really love your website.. Excellent colors & theme.
These are in fact enormous ideas in concerning blogging.
You have touched some nice things here.
Any way keep up writing.
It was so awesome of you to take out time and express your thoughts on a topic so different.
Way cool! Some very valid points!
I appreciate you penning this write
-up and the rest of the site is also very good.
A refreshing one with a totally new kind of thought process.
I appreciate your insights.
If some one wishes to be updated with most recent technologies
therefore he must be pay a quick visit this site and be up to date all the time.
Your website is very useful.
Many thanks for sharing!
It’s an amazing piece of writing designed for all the online visitors;
they will get benefit from it I am sure.
I’m often to blogging and i really appreciate your content.
The article has actually peaks my interest.
I am going to bookmark your web site and keep checking for brand new information.
My family always say that I am killing my time here at net,
however I know I am getting know-how all the time by reading such good articles.
Hi,That nice post Thanks
An article of great help and value.
Hi there! This article could not be written any better!
Absolutely wonderful, well done everyone, what a great achievement.
Here’s to the future and success for everyone. Thank you all for your hard work,
we know it will be ongoing and trust that you will get the appreciation
and credit of putting such brilliant articles on the worldwide web.
Looking forward to seeing it grow.
I should be leaving this one liner for your hard work
“Great knowledge and good command over writing.
Long way to go!”
An outstanding share!
I’m very happy to find this web site.
I wanted to thank you for your time due to this fantastic read!!
I definitely liked every little bit of it and i also have you saved to fav to see new information in your site.
Just a quick note to appreciate you for your outstanding work on post.
Very good information.
Lucky me I ran across your blog by accident
You actually created some respectable aspects right now there. Nice post
Great blog you have got here..
Congratulations for all the effort putten in to reach to such explanatory and efficient article.
Hello, its my first time to commenting any post.
But I couldn’t stop myself from commenting on reading through such a sensible piece of writing.
I visit daily a few web sites and sites to read articles or reviews,
however this blog provides feature based articles.
Thanks for sharing such a pleasant thought, post is nice, thats why i have read it entirely
Having read this I thought it was really enlightening.
What a beautifully drafted article which has all the important points still its not boring!
After looking into a handful of the blog articles on your website,
I seriously like your technique of writing a blog.
I added it to my bookmark site list and will be checking back in the near future.
Your style is unique in comparison to other people I have read stuff from.
Wonderful to see such brilliant post on an individual’s website.
Ahaa, its pleasant dialogue about this piece of writing at this place at this weblog,
I have read all that, so at this time me also commenting here.
I started to read your article and it caught me to the extent that I couldn’t put it down. Amazing piece.
I recently had a good fortune of reading your article it is really well written with updated information.
I will be returning here often now.
What a simplest and purest form of reflecting your views on such a difficult topic. Great going.
Hello my friend! I wish to say that this article is awesome,
nice written and include almost all important infos.
I would like to peer extra posts like this .
Congratulations Dr Gupta in the setting up of your attractive,
informative and very professional website. Well done!
You are so cool! I don’t believe I’ve read something like that before.
I could not refrain from commenting.
Perfectly written!
Just spent a few very enjoyable minutes looking at the site.
Excellent! Well done.
Overall very good: clean, easy to navigate, informative and, importantly, interesting.
I really appreciate your efforts and I will be waiting for your further write ups thanks once again.
It’s hard to find experienced people for this subject,
but you seem like you know what you’re talking about!
It is an honour to have a view of this website which has so much information for everyone.
An intriguing discussion is definitely worth comment.
I do believe that you ought to publish more on this issue,
it may not be a taboo matter but typically people don’t speak about such topics.
To the next! Cheers!!
I look forward to reading your next informative work soon. Thank You.
Can I just say what a relief to discover someone that actually understands what they are talking about over the internet.
You definitely understand how to bring a problem to light and make it important.
More and more people really need to read this and understand this side of the story.
I was surprised that you aren’t more popular since you most certainly possess the gift.
A masterpiece!
Your article is an impression of your high thinking and great perspective
I honestly appreciate people like you! Take care!!
This was an incredibly wonderful post.
Thanks for providing these details.
I do accept as true with all of the ideas you have introduced for your post.
They’re very convincing and will certainly work.Thank you for the post.
This a wonderful blog submit!
It is so nice when persons appreciate all that you do.
There is certainly a lot to know about this issue.
I love all of the points you’ve made
What I have seen so far is brilliant and everyone involved should be congratulated.
I can see me spending the rest of the evening perusing the site.
Just when I thought I would like an early night!
Spot on with this write-up, I absolutely believe that this amazing site needs much more attention.
I’ll probably be returning to read through more, thanks for the advice!
I quite like reading an article that can make men and women think.
Also, thank you for permitting me to comment!
I applaud the publications of yours.
Hi there to every one, it’s in fact a fastidious for me to go to see this website,
it includes important Information.
The website is fantastic and something your group should be really proud of.
I just had to drop you a line to let you know that John and I think that the website is BRILLIANT Well done.
Very good post.
I absolutely love this site.
Stick with it!
Excellent weblog right here! Also your site loads up very fast!
I want my website loaded up as quickly as yours lol
Thanks for helping out, wonderful info .
Keep the good articles coming!
Targeting easy law, they even messed the Companies Act 1956.
This is blunder. So many confusions.
And you are right there is no office where we can go for clarifications.
PM is promising red carpet, I wish he also removes the red marks on the Companies Act 2013.
Brand India will shine when we will have easy laws.
Litigations will also fall. Why doesn’t the government understands this.
We all know who made the Act.
That immature minister had never experienced the pain of businessmen and professionals.
Only BJP can do something.
Make a new committee with Jaitley as head.
He is wise and he will correct all the issues.
I respect your thoughts sir but do not compare Indian laws with foreign.
They have different corporate culture and we have different.
You are amazing with words.
A simple yet advantageous writing.
Thank you for informing about this particular subject.
Very informative and helpful
Wanted to inform you that how impressed I have been
, since I read your article.
Great going
Looking forward to read more of your stuff.
Complete and relevant.
Very accurate.
I read this article completely about the comparison of most up
-to-date and preceding technologies, it’s remarkable article.
Thank you for the auspicious writeup.
Article looks great and really inspires me to come back to your website regularly.
An impressive one! Best wishes for the future work.
Rarely do I come across a blog that’s both educative and amusing,
and without a doubt, you’ve hit the nail on the head.
Carry on the great work!
Great blog, keep it up!
Everything is very open with a precise clarification of the challenges.
Keep up the good work!
Hello there, You’ve done an incredible job.
I will certainly digg it and personally suggest to my friends.
Thank you for some other magnificent post.
Where else could anybody get that kind of information in such a perfect manner of writing?
I have a presentation subsequent week, and I’m on the look for such information.
The site looks absolutely fantastic! Well done to all involved!
Very professional & the navigation is great too. Cheers!
It is a nice piece of writing which is rare to find these days.
It is a nice piece of writing which is rare to find these days.
Very descriptive article. I enjoyed it a lot.
Waiting to see next article soon.
An enlightening work.
Thanks for the marvelous posting! I genuinely enjoyed reading it, you are a great author.
I will always bookmark your blog and will come back very soon.
I want to encourage that you continue your great work,have a nice day!
Amazing blogsite, greetings.