To make our Companies Act more contemporary and relevant to corporates, regulators and other stakeholders in India and to effectively handle some of the present day challenges of a growing industry, Companies Act, 2013 (“2013 Act”) was enacted in August 2013- to significantly change the regulations as applicable to the Companies in India.
The new Companies Act has given this country a legislation which is aligned to the current set of regulatory environment across the globe. However it has specified several provisions which are very unique to India. The Companies Act 2013 aims to empower the Companies Board towards self-governance and certification. The Act, amongst other aspects provides for good corporate governance; enhanced disclosures, increase in roles and responsibilities and liabilities of the board, its committees and independent directors; Corporate Social Responsibility (CSR); auditor accountability; protection for minority shareholders and other stakeholders and improved framework for winding-up regulation and institutional structure.
While it is indeed a positive step forward by the Ministry of Corporate Affairs (MCA) in implementing the reformative new company law, it also creates some significant challenges for the corporates and the auditing professionals to adopt the new requirements in such a short time. Over last several months we have now worked with several companies and have helped them towards understanding and implementation of several aspects of Companies Act 2013.
To further help and decode the implications of the 2013 Act, we conducted a four day master class training across Delhi and Mumbai locations in the month of Nov-Dec. The training approach included interactive discussions, knowledge sharing sessions including real life examples along with case studies and partners’ representation to share implementation experience.
The idea of launching this training was to help various professionals from different industries understand the ground level challenges in implementing the new law. Many CFO’s, tax directors, company secretaries, finance controllers, internal audit heads participated and made the master class a grand success.
Speakers who are subject matter experts deliberated upon key areas covered under these recent legislations, including related party transactions, internal financial controls, corporate social responsibility, enterprise risk management, Consolidation of financial statements, componentisation and other accounting concepts, board governance, vigil mechanism, mergers and acquisitions etc. Additionally, major changes as compared to the 1956 Act and the potential implications of these changes were encapsulated.
There was tremendous interaction and thorough discussion upon challenges arising from lack of clarity in interpreting the new Act at various places where it is not worded with sufficient clarity. For example, the new Companies Act provides that no member of a company shall be eligible to vote in a special resolution to approve a related party transaction if such member is a related party. However, it is not clear if the members of a company shall be ineligible if they are a related party concerned with the transaction being approved or by virtue of being a related party to the company simply by definition.
Additionally, the 2013 Act is more a rule-based legislation containing only 470 sections, which means that the substantial part of the legislation is in the form of rules. To interpret the rules along with the Act, and notifications and clarifications thereon, is a taxing task for the corporates.
Given the phenomenal success of the 1st edition of the Master class and the need in the market, we are launching its second edition starting 31 January, 2015. In the second edition, we extend the outreach to Chennai and Bangalore in addition to New Delhi and Mumbai.
This exciting and reformative new company law is indeed a reality. However considering the immediate effective date timelines, we encourage you to benefit from the insightful knowledge and technical sessions and ensure lawful compliance!
Register here to be a part of Companies Act Master Class.
Sandip Khetan, Partner, Member firm of Ernst & Young Global has contributed to this article