The new Companies Act, 2013, will come into force from April 1,2014. However, many sections are yet to be notified.
Experts say the new law will bring more transparency in corporate governance, while allowing flexibility to companies in exceptional situations. Initially, the government faced a lot of criticism on the implementation and lack of clarity in the law. The draft rules and, eventually, notification of final rules by ministry of corporate affairs (MCA) in recent months have helped ease the scenario to a large extent, they say.
Replacing the 58-year-old legislation, the new law would have stricter norms for independent directors, auditors, key appointments and standards of conduct. While there is a mandatory provision on spending for CSR, companies can explain if they want to digress from the norm. From Tuesday, companies with a net worth of more than Rs 500 crore or revenue of more than Rs 1,000 crore or net profit of more than Rs 5 crore will have to mandatorily spend two per cent of their average net profit over the three preceding years on CSR activities.
Also, companies must file returns on public deposits within three months and reconstitute their boards, with at least one woman and two independent directors (IDs) within a year.
Experts say the new law will bring more transparency in corporate governance, while allowing flexibility to companies in exceptional situations. Initially, the government faced a lot of criticism on the implementation and lack of clarity in the law. The draft rules and, eventually, notification of final rules by ministry of corporate affairs (MCA) in recent months have helped ease the scenario to a large extent, they say.
Replacing the 58-year-old legislation, the new law would have stricter norms for independent directors, auditors, key appointments and standards of conduct. While there is a mandatory provision on spending for CSR, companies can explain if they want to digress from the norm. From Tuesday, companies with a net worth of more than Rs 500 crore or revenue of more than Rs 1,000 crore or net profit of more than Rs 5 crore will have to mandatorily spend two per cent of their average net profit over the three preceding years on CSR activities.
Also, companies must file returns on public deposits within three months and reconstitute their boards, with at least one woman and two independent directors (IDs) within a year.
