In order to remove practical difficulties, ambiguities and anomalies arising out of the partial and "hurried" implementation of the new Companies Act of 2013, India Inc represented by its largest industry lobby – Confederation of Indian Industries (CII) – has called for a comprehensive review of the new law and its corresponding rules.
CII has already made a presentation in this regard to the officials of the ministry of corporate affairs (MCA) and now wants to present the same to the finance minister Arun Jaitley who is looking after MCA, sources said.
In its presentation, CII has highlighted dozens of anomalies and practical difficulties of implementing the provisions of the new Companies Act including transitional provisions, rotation of auditors, difficulties in the functioning of board of directors, related-party transactions and its adverse impact on subsidiaries, mandate of the audit committee and the leg-room for India Inc in implementing the CSR clauses among others. .
“While the country is looking to improve its image after a series of setbacks like retrospective changes to tax laws, poor economic conditions, etc, an unclear and cumbersome Companies Act would make things worse. India already ranks very low in terms of ease of doing business and the new act will further add to the cost and complications of doing business,” said CII president Ajay Shriram.
According to Shriram, in absence of any unambiguous clarifications from MCA, companies are resorting to different interpretations of the provisions. “There is no uniform interpretation of even items of ordinary business such as appointment of Independent Directors,” he said.
CII has highlighted a number of areas within the new Companies Act, 2013 and its corresponding rules as the "problem area" for India Inc. According to CII, clarity is required vis-à-vis transitional provisions.
CII said the provisions pertaining to related party transactions indirectly seeks to vest power in minority in most of cases which is against the fundamental principle of shareholders’ democracy and majority rule. “Legislation should balance interests of multiple stakeholders and equity must apply to both big and small shareholders to avoid misuse.”