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Business finds adhering to the new Companies Act a challenge in the absence of transitional provisions in certain cases, reveals a survey.
A little more than half the respondents also said it was challenging for listed companies to comply with the provisions of both the Companies Act and that of the Securities and Exchange Board of India (Sebi).
The survey was conducted by Grant Thornton India LLP, covering 127 participants. These included chief executive, finance heads, business owners and promoters across sectors
“While a gap between the 2013 Act and the Sebi requirements has been narrowed in several areas, both have become much stricter than their previous avatars. Since a listed company will have to comply with the stricter provisions of the two, they will face an increased challenge in achieving compliance,” said Nabeel Ahmed, partner, Grant Thornton India LLP. (Click here for graphics)
The survey also show 68 per cent of the respondents do not believe or are unsure that the mandate of a woman on a company's board of directors will be effective in the true sense.
Rules regarding related party transactions in the new Act - one of the most contentious since its inception – have been changed a number of times to address business concerns. Still, 68 per cent of the respondents felt the new approval requirements for RPTs were too onerous to comply with.
Asked about user-friendliness of this Act as compared to the older one, only 38 per cent gave a definite approval. Similarly, only 31 per cent of the respondents believe private companies (those unlisted and not having raised even debt from the markets) and their auditors will be able to comply with the requirements on internal financial reporting. The latter are designed to provide reasonable assurance that a company's financial statements are reliable and prepared in accordance with the law. The new Companies Act gives wide scope to these internal controls.
It has almost been a year since the new Act came into effect, replacing the 1956 law. it is being notified for implementation in phases and some sections are yet to become effective. To increase the ease of doing business, the government had recently introduced a Bill to amend even the new Act. With 14 amendments, it has cleared the Lok Sabha but not the Rajya Sabha.
