Companies Law Committee submits report to Government

Suggestions include omitting provisions relating to forward dealing, insider trading

The Companies Law Committee — constituted in June 2015 to make recommendations on the issues related to implementation of the Companies Act, 2013 — submitted its report to the Government on Monday.

After extensive consultations with stakeholders and exhaustive deliberations, the Committee has proposed changes in 78 sections of the Companies Act, 2013 which, along with consequential changes, would result in about 100 amendments to the Act, according to an official statement.Approximately 50 amendments to the Rules have also been proposed. The recommendations cover significant areas of the Act, including definitions, raising of capital, accounts and audit, corporate governance, managerial remuneration, companies incorporated outside India and offences/ penalties.

The Committee has endeavoured to reconcile the competing interests of the various stakeholders keeping in mind the difficulties and challenges expressed by them and also being mindful of the government’s objective of furthering ease of doing business, encouraging start-ups and the need for harmonising various laws, according to the statement. Some of the key changes proposed are regarding managerial remuneration to be approved by shareholders and modification of definition of associate company and subsidiary company.Private placement process should be substantially simplified and incorporation process made easier.

The suggestions also include omitting provisions relating to forward dealing and insider trading from Companies Act. Companies may give loans to entities in which directors are interested after passing special resolution and adhering to disclosure requirement. Restriction on layers of subsidiaries and investment companies could be removed.

Auditor will report on internal financial controls with regard to financial statements. Frauds less than Rs. 10 lakh could be compoundable offences, according to the statement.

Other frauds can be continued to be non-compoundable. Requirement for a managerial person to be resident in India for 12 months prior to appointment may be done away with, it said. ESOPs may be allowed to promoters working as employees/directors. The report is available on the website of the Ministry of Corporate Affairs and public comments on the report are invited online till 15 February, 2016 on the facility made available specifically for the purpose at the portal. The Committee was chaired by Secretary, Ministry of Corporate Affairs. 

Source : The Hindu