Law Ministry starts vetting new Companies Act provisions

Draft rules related to cost audit and winding up process open for public comments till Dec 12 and 19, respectively

The Law Ministry has started vetting provisions of the new Companies Act, which is expected to be in force by April next year.

The Companies Act, 2013, that replaces nearly six-decade old law governing corporates, has many new provisions including those related to social welfare spending and insurance cover on public deposits.

Most of the provisions and rules related to Companies Act, 2013, have been sent to the Law Ministry by the Corporate Affairs Ministry.

A government official said the Law Ministry has started the vetting process and the new legislation is anticipated to be fully implemented by April next year.

Rules related to four topics -- National Financial Reporting Authority (NFRA), Investor Education and Protection Fund (IEPF), winding up of companies and cost audit -- are in the process of being finalised.

Draft rules related to cost audit and winding up process are open for public comments till December 12 and 19, respectively.

The Corporate Affairs Ministry, which is implementing the companies law, has issued the draft rules in six tranches. The draft norms have elicited about 26,000 comments.

The long pending legislation was approved by the Parliament in August.

It aims to strengthen measures to protect investor interests as well as ensure stringent steps to deal with corporate misdoings.

Among others, the new law requires certain class of companies to shell out at least two% of their three-year annual average net profit towards Corporate Social Responsibility (CSR) activities. In case, they are unable to spend that amount, the same should be explained.