Industry Welcomes Amendments in the New Companies Act
The union cabinet’s approval to amend the recently legislated Companies Act affirms industry’s confidence in the government’s efforts to ease doing business in the country, the Fedreation of Indian Chambers of Commerce and Industry (Ficci) said.
“These amendments not only pave the way for a facilitative regulatory environment but also testify to the government’s commitments to remove all barriers to growth,” Sidharth Birla, president, Ficci, said in a statement New Delhi.
“Enabling provisions to prescribe thresholds beyond which fraud shall be reported to the Central Government (below the threshold, it will be reported to the Audit Committee),” the cabinet approval said.
“The proposal to introduce thresholds for reporting of fraud to the government, aligning the requirements prescribed under the Companies Act and SEBI and rationalising the copious approval process for certain related party transactions would address some of the issues that have been raised by FICCI with the Ministry of Corporate Affairs for some time,” Birla added.
Stakeholders were concerned that stringent regulations for related party transactions, or those transactions between the company and another in which a board member or members are interested, could hurt routine business activity.
The new Companies Act proposes to exempt corporates from the need to get shareholders’ nod in the case of related party transactions valued lower than Rs.100 crore or 10 percent of net worth.
The cabinet on Tuesday approved amendments to the Companies Act to improve the ease of doing business and to specify punishments for illegal deposits.
India has been ranked 142nd among the 189 countries in the latest World Bank report on ease of doing business, falling two places from last year’s rankings. This would be among the first major initiatives by the government to improve its global ranking.
The 14 proposed amendments also include provision to ensure that frauds beyond a certain threshold would need to be mandatorily reported by the auditors to the government.
The amendments to the Companies Act, 2013, which came into effect from April 1 this year, have been proposed “in order to address some issues raised by stakeholders such as chartered accountants and professionals,” the cabinet approval read.
Under the new norms proposed, the paid-up capital criteria has been scrapped while threshold limits for various transactions for getting shareholders’ nod has now been stipulated.
Another amendment approves “prescribing specific punishment for deposits accepted under the new Act”.
Towards meeting a “corporate demand,” an amendement proposes “prohibiting public inspection of Board resolutions filed in the Registry”, the release said.
Under the old system, shareholders’ permission through a special resolution was required in case of related party transactions for all firms with a paid up capital of Rs.10 crore or more.
Another amendment approved by the cabinet for tabling in parliament exempts related party transactions between holding companies and wholly owned subsidiaries from the requirement of approval of non-related shareholders.
The Confederation of Indian Industry (CII) said Wednesday it has given the government an action plan on ease of doing business in India and recommendations to improve investment attractiveness.
“The CII-KPMG Report on ‘Vibrant India: Best Place for Doing Business – An Action Plan’ outlines a roadmap for the government and recommends rationalization of the taxation regime, facilitative land acquisition process, streamlining investment approval and provisions of utilities, creating appropriate labour development and skill development ecosystems, effective enforcement of laws, facilitation of greater cross border transactions, creation of clear exit guidelines and technology enablement across all government departments,” CII said.
During the last three years, India has received an average of $30 billion worth of annual foreign direct investment.