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The corporate law framework could see a significant change if a government-appointed panel’s recommendations are implemented this year.
Sweeping changes with as many as 100 proposed amendments to the existing company law enacted by the UPA Government in 2013 have been suggested by the 10-member Companies Law Committee, which was set up in June 2015. Some of the significant suggestions include doing away with the need for government approval for managerial remuneration, specifying a pecuniary relationship threshold for directors (violation of independence) and removing the cap of layering of subsidiaries.
The recommendations, submitted on Monday, 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.
Broadly, the committee’s recommendations seek to tackle three types of issues — addressing the transitional-cum-implementation problems; removal of inconsistencies between the new company law, SEBI framework and the accounting standards; and difficulties faced by corporates in doing business.
The proposed amendments would affect as many as 78 existing sections of the company law. Also, fifty new changes are being proposed to existing rules.
Out of the 470-odd sections of the new Companies Act 2013, the government has already notified 283 for implementation.
Sai Venkateshwaran, Partner – Advisory and India Head – Accounting Advisory Services, KPMG in India said the recommendations will go a long way in establishing a law that is both contemporary and business friendly.
Penalties for fraud
Vidya Rajarao, Partner, Grant Thornton India LLP, said the report attempts to harmonise the existing framework for penalties for fraudulent conduct with international standards.
In several jurisdictions such as the UK and the US, the penalties for fraud are proportionate to the nature, impact and, more importantly, the remedial measures taken by the company post-discovery of the fraud, she added. The US Sentencing Guidelines, for instance, offer detailed guidance on credits or reductions in penalties that a company can obtain due to its conduct post-discovery of the fraud as well as the effectiveness of its internal controls.
Feedback on the recommendations can be given to the Corporate Affairs Ministry online till February 15, a release said.
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