The government Wednesday notified 183 new sections of the new Companies Act, in addition to 100 sections notified earlier, making most part of the new legislation operational.
With this notification, the key requirements of the new legislation relating to incorporation, management, board functioning, accounts and audit will now be operational with effect from April 1, 2014.
It is expected that the remaining sections relating to National Financial Reporting Authority (NFRA), Investor and Education Protection Fund, Compromise and arrangement, oppression and mismanagement, winding up, sick companies, special courts, National Company Law Tribunal (NCLT) will be operationalised in due course once the NCLT and NFRA are set up.
"This is a landmark legislation, which has the potential to significantly alter the manner of functioning of Indian corporate sector, ushering in an era of greater transparency and better governance," said Sai Venkateshwaran, head, accounting advisory services, KPMG, in India.
He said the new provisions would require a significant change in mindset of all stakeholders in the Indian corporate ecosystem, from independent directors, board members, to management in companies and auditors.
"The stakes are high, and this will bring in greater rigor and discipline in governance, management and other independent oversight functions," Venkateshwaran said.
Under the new law, the responsibilities of boards, committees and those of directors, including independent directors have been significantly enhanced.
Auditor's reporting responsibilities have also been significantly enhanced together with more stringent penalties and independence requirements.
Mandatory rotation of independent director and auditors is also now a reality, as is the presentation of consolidated financial information for all companies, which will significantly enhance the relevance of financial information.
The legislation focuses on making the law contemporary and incorporating best practices accepted internationally in several areas of governance as well as setting the trend in certain other areas such as corporate social responsibility.
