The Ministry of Corporate Affairs has notified 183 sections of the new Companies Act, 2013, which comes into effect from April 1, 2014. With this, 283 of 470 sections of the Act have got notified in a phased manner. However, the related rules that fall under the 183 sections are expected to get notified in course of this week.
"The Companies Act 2013 is finally a reality and has been substantially operationalised with the notification of 183 sections earlier today, in addition to the 100 sections notified earlier," said Sai Venkateshwaran, head - accounting advisory services, KPMG in India. Analysts said that with this notification the key requirements of the new company law relating to incorporation, management, board functioning accounts and audit, will now be operational with effect from 1 April 2014. Sections which are yet to be notified include those that relate to National Financial Reporting Authority (NFRA), National Company Law Tribunal (NCLT), and registered valuers as their framework is still being worked out.
There is a pending case in Supreme Court filed by Madras Bar Association against formation of NCLT, which as per the Act is slated to take over the functions of Company Law Board.
Corporate law experts point out that coming practically in the last week of the financial year, there is very little time for corporates to understand the ramifications of the detail in the final rules. "One does hope the rules contain some additional transitional provisions that would provide companies some reasonable time to comply with the new requirements," said Venkateshwaran.
The new Act enhances the responsibilities of board of directors, audit committees, and those of independent directors. Rotation of auditors and independent directors will become mandatory under the new Act. Companies - public and private- have to present consolidated financial information for all companies, significantly enhancing financial information reporting requirements. Legal experts point out with NCLT and NFRA still not in-force, one is not sure who will fulfil their roles with the Act comes into effect. "The Ministry needs to come out with a guidance on this aspect," notes Dolphy Dsouza, senior partner, assurance, SR Batliboi & Co LLP. Most experts expect some teething troubles initially as corporates re-align their business practices in line with the new regime that kicks-in from April 1st.