Changes in Companies Act
A little more than a half of the provisions of Companies Act, 2013 (Act) came into force from 1st April 2014. Following this, several communications were received in the Ministry of Corporate Affairs from bodies such as industry associations, chambers of commerce and professional institutes drawing attention to certain practical difficulties concerning these provisions or seeking clarifications about the same.
There was also an interactive session on these issues with the stakeholders on 21st June 2014. Pursuant to this Government have issued suitable circulars, statutory orders and amendments in the Rules to provide transitional time, remove doubts or practical difficulties. Amendments in the Act will be considered if measures out-lined above prove inadequate.
Specifically for the difficulties expressed regarding communication of irregularities, embezzlements etc. to the Government through auditors’ reports, the Institute of Chartered Accountants of India has been asked to give its comments on the feasibility of having some criteria to determine the thresholds of the quantum of a fraud/suspected fraud for mandatory reporting to the Government by the Auditors. Section 149(12) of the Act already grants protection to Independent directors (IDs) from prosecution in matters which had not occurred with their knowledge, consent, connivance or where they had acted diligently.
This was stated by Smt. Nirmala Sitharaman, MoS in the Ministry of Corporate Affairs in written reply to a question in the Rajya Sabha today.