The Act incorporated the recommendations of high powered committees such as the Dr. Irani Committee, Vepa Kamesan Committee, etc. This large piece of legislation comprising 29 chapters, 470 sections and seven schedules is being rolled out in a phased manner. Of the total 470 sections, 282 have already been notified. It is expected that the remaining provisions will also be notified soon. Most of the remaining provisions are sections related to proceedings before NCLT and NCLAT. NCLT and NCLAT are soon going to be a reality and so will be the sections dealing with them.
The new Act mostly treats a private limited company on par with a public limited company, the differences between the two being almost negligible. However, considering the technical and practical difficulties faced by the companies, the Ministry of Corporate Affairs ("Ministry") by virtue of provisions of section 470 of the Act - 'Power to Remove Difficulties' - has issued numerous circulars and has clarified various grey areas of the Act.
In spite of many circulars, there are many grey areas that require immediate attention by the Ministry - especially why small and mid-sized private limited companies are required to comply with the provisions of the Act as if they are large corporations. Questions like these have been discussed threadbare by various stakeholders in various professional fora. However, even then there was lack of clarity, which led to numerous representations being made to the Ministry by the corporations, stakeholders and professional bodies.
Considering the need for an amendment to the Act, the Ministry vide its notification dated June 05, 2015 exempted private limited companies from complying with certain provisions of the Act. The exemption notification has resolved many technical and practical issues that were faced by private limited companies, and has catalysed various business models and strategies. However, the said notification was in the form of a temporary relief and is limited to only the private limited companies. So, the question is: what about the other troubling issues?
The Ministry encountered further challenges, including difficulties in implementation faced by companies, which adversely affected their businesses. To overcome such issues, the Ministry had set up a Companies Law Committee (the "Committee") on June 04, 2015. The role and responsibility of the Committee was to make recommendations to the government on the issues arising from the implementation of the Act, as well as on the recommendations received from the Bankruptcy Law Reforms Committee, the High Level Committee on Corporate Social Responsibility (CSR), the Law Commission and other agencies.
For the purposes of the Committee, various institutes such as industry chambers, professional fora and experts immensely participated and made contributions. The Committee also approached Comptroller and Auditor General, Competition Commission of India, National Housing Bank, Telecom Regulatory Authority of India, Central Electricity Regulatory Commission, Reserve Bank of India and Insurance Regulatory Development Authority for their suggestions. Considering the difficulties and challenges expressed by various corporations and their stakeholders and by the regulators, the Committee has taken a holistic and comprehensive view making requisite suggestions for the amendments to the Act and to the Rules made thereunder.
On February 01, 2016 the Committee had submitted a detailed report to Jaitley, suggesting amendments in certain definitions, sections, sub-section and the rules made thereunder.
Following are some key amendments as suggested by the Committee:
a. Section 2(49) the definition on 'interested director' to be omitted.
b. Bringing in more clarity in the definition of 'holding company', by including 'body corporate' in its definition.
c. Time period for a Company to have its registered office-after incorporation, and notice of every change of the situation of registered office-to the Registrar, be increased to 30 days.
d. An employee, duly authorised by the Board of Directors can authenticate documents, proceedings and contracts.
e. Separate Annual Return format for small companies and OPC's, with lesser detail and omission of requirement of attaching extract of the Annual Return to the Board's Report.
f. Allowing unlisted companies to convene Annual General Meeting at any place in India, subject to approval of 100% shareholders.
g. Provision with regard to ratification of appointment of statutory auditors by the members at every annual general meeting to be omitted.
h. Condition of minimum net worth/turnover/net profit for compliance of CSR provision should be considered for the 'immediate financial year'.
i. For resident director, the period of 182 days shall apply during the financial year.
j. Directorship in a dormant company to be excluded for reckoning the limit of directorships.
k. Resigning director to be given an option for filing his resignation to the Registrar, instead of making it mandatory.
Considering the recommendations and the concept of 'ease of doing business in India', the Bill has been introduced in Lok Sabha. There are high expectations on the consideration and approval of the Bill. In case the Bill is passed and then enacted as law, there will be a sea change in the provisions of the Act, which in turn will bring about change in the way the corporate world works. Hopefully, the amended avatar of the Act would raise the bar on governance, and not only bring Indian Company Law in tune with global standards but also ensure ease of doing business in India without many hurdles.
The author is a Consultant with JSA, Advocates and Solicitors. The views expressed here are his own