New companies law: Most provisions to be effective tomorrow
Mar 31 2014 , New Delhi
Norms for social welfare spending, stringent regulations for related party transactions, independent directors and deposit-taking companies, among others, would come into force.
Nearly 60 per cent of the Companies Act, 2013, including rules, have been completed by the Corporate Affairs Ministry and they would be effective from April 1, according to an official.
The rules for the new Companies Act have been finalised after extensive deliberations, a process that also saw the Ministry receiving more than 50,000 comments from various stakeholders, including the general public.
The voluminous legislation is spread across 29 chapters, 7 schedules and 470 sections.
Apart from notifying all the schedules, the Ministry has so far notified about 19 chapters and more than 280 sections.
The Ministry is implementing the Companies Act, that replaces the nearly six-decade old law governing corporates in the country.
In the past few days, the Ministry has come out with rules for more than 10 chapters, including those pertaining to auditors, management and administration, meetings of board and its powers, appointment and qualification of directors, and accounts.
Besides, rules are in place for vigil mechanism -- which would provide a windown for directors as well as employees of certain class companies to report their grievances.
Among others, public deposit taking entities are required to insure the deposits taken and also have to bear costs related to the insurance.
In a first of its kind, certain class of corporates now require to shell out at least two per cent of their three-year annual average net profit towards CSR (Corporate Social Responsibility) activities.
However, certain provisions of the new Companies Act would not be coming into force immediately. These are related to National Company Law Tribunal (NCLT), National Financial Reporting Authority (NFRA), Investor and Education Protection Fund, winding up of companies, mergers and amalgamations, among others.
"This is a landmark legislation with far reaching consequences on all companies incorporated in India," consultancy firm KPMG in India said in a note.