Govt mulls amendments to related party norms for companies

Seeking to address concerns of various stakeholders, the government is looking to amend certain provisions of the new companies law, including those pertaining to related party transactions.
Most provisions of the Companies Act, 2013, came into effect from April 1 this year and has elicited mixed responses. To sort out the issues, many rounds of discussions were held by government with the industry and other stakeholders.
The Corporate Affairs Ministry, which is implementing the Act, is now looking to make changes to certain provisions of the new law, sources said.
In this regard, the Ministry has floated a draft Cabinet note listing about various proposed amendments. After getting nod from the Cabinet, the same would be presented to the Parliament for final approval.

According to sources, amendments are proposed for norms governing related party transactions and those pertaining to auditors being required to report suspected frauds at the companies that are audited by them.
Among others, changes are mulled to protect confidentiality of board resolutions of companies, they added.

There have been concerns that stringent regulations for related party transactions could even hurt routine business activities.
Under the new Act, auditors are required to inform the government about instances of frauds that they come across at companies.
In case the statutory auditor has sufficient reason to believe that an offence involving fraud is being or has been committed against the company by its officers or employees, it has to be reported to the government within 60 days of coming to know about it.

After years of deliberations, the new Companies Act -- that replaces the nearly six-decade old law governing corporates -- was passed by the Parliament in August last year.
To address the concerns about the law, the new government has held meetings with stakeholders and have also many notifications and circulars related to various topics.
In July, the government had told the Parliament that amendments to the Companies Act would be considered only if statutory orders and changes to rules do not address the practical difficulties in implementing the legislation.