India Inc gets new law

New Delhi: Ushering in a stronger framework under the new law to govern companies, the government on Friday notified more rules covering areas such as independent directors and transactions among related parties.

The regulations aim to strengthen the overall functioning of companies as well as protect the interest of investors.

Notification of rules for another 10 chapters under the Companies Act 2013 paves the way for most of the provisions to come into effect from April 1, a time frame which some quarters feel could pose challenges for India Inc.

Most companies will now be required to have at least one woman and two independent directors, keep a register of beneficial investments and entities  including those taking money from the public, and establish a vigil mechanism to address grievances of directors and employees.

Besides, the definition of related party now covers directors and key managerial personnel with respect to the company and its holding entity.

As per the rules for the 10 chapters notified by the corporate affairs ministry on Thursday, companies are barred from issuing any shares with differential voting rights, if they have defaulted on repayment of loans from banks and public financial institutions, among others.

Also, e-voting has been made compulsory for listed firms and other entities with at least 1,000 shareholders.

Consultancy firm KPMG’s India partner and head of accounting advisory services Sai Venkateshwaran said the ministry has made several changes to final rules especially in rationalising the limits for compliance with various sections.

For instance, the definition of related parties, senior management and functional heads has been removed while that of relatives has been relaxed from 15 to less than 10.

Dolphy D'souza, partner in a member firm of Ernst and Young  Global said the final rules have removed considerable burden.

Industry body Federation of Indian Chambers of Commerce and Industry‘s (FICCI)president Sidharth Birla said that one of the biggest challenges for India Inc at this stage would be compliance with the new law.

Rules related to registration of charges, management and administration, declaration and payment of dividend, meetings of board and its powers, appointment and qualification of directors, and accounts have been notified.