The Ministry of Corporate Affairs notified 98 sections of the Companies Act, 2013 on 12th September. Although notification of 98 sections of New Act is welcome but MCA has notified these sections when only a part of the draft rules made live for public comments.
Now in the present situation and until the remaining sections are notified, one will need to follow both old and new Act for planning the transactions and day to day compliance purposes. More surprisingly, in some notified section, certain sub-sections have not been notified now and that section is brought into force with exception for the un-notified sub-section.
Some of the key issues/highlights are follows:
1. Section 465 of the Act which deals with repeal and saving has not been notified. As a result, the entire Companies Act 1956 will continue to remain in full force and effect.
2. Now even component of preference capital will be counted to determine this relationship of holding and subsidiary between various Companies. These resulting in creation of numerous unplanned subsidiaries suddenly and necessitating various compliances like consolidation of financial statements etc. by the new ‘holding companies’.
3. The new Act under Section 185, expressly prohibited that loans/guarantees etc., cannot be provided by a company to its directors (including directors of holding company) or entities in which such directors are interested. In view of these, this may hamper companies’ plans to persify the business and structuring to fund their projects and business requirements. Although with the prior approval of the Central Government, but it was allowed under the Companies Act, 1956.
4. The new Act removed the most of the privileges which Private Companies enjoyed under the old Act. Most of the exemptions given to Private companies under the old Act have been removed. Now Private Companies are brought on par with Public Companies. For example, section 180 of the Companies Act 2013 (restriction on the Powers of the Board) is applicable to every company, whereas the corresponding Section 293 of the Companies Act 1956 was not applicable to the Private Companies.
5. New definitions of CEO, CFO, company, company secretary, control, cost accountant, debentures, derivatives, director, pidend, ESOPs, experts, financial statements, financial institutions, global depository receipts, government company and holding company, have also been notified.
No doubt, The Companies Act, 2013 comes as a welcome change for the stakeholders as it emphasizes to bring reforms in enforcement measures and mandates increased transparency and accountability. But it is always advisable to give adequate time to create a proper infrastructure for implementation before the new law is notified as Companies Act is a basic charter for the corporate sector.
By: Aalok Chhaperwal
CAclubindia
