We will amend Companies Act if necessary, says Govt
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, the government said on Tuesday.
Stakeholders, including industry chambers, have raised concerns over various provisions of the new legislation and the Corporate Affairs Ministry has also held discussions with them to address the concerns.
In a written reply to the Rajya Sabha, Minister of State for Corporate Affairs Nirmala Sitharaman said the Companies Act 2013 has been enacted only last year and so far, a little more than half of its provisions have come into force.
‘Matters arising from the operation of provisions already brought in force are getting attention of the government in the form of issue of circulars, suitable statutory orders and amendments in rules to remove doubts or practical difficulties; amendments in the Act would be considered in case the above measures prove insufficient,’ she said.
The minister was responding to a query on whether the government was considering amendments to the Companies Act. Many provisions of the Companies Act, 2013 — that replaces the nearly six-decades old legislation —came into force from 1 April.
In reply to another question, Sitharaman said that Section 462 of the Act envisages relaxations in the form of not applying some provisions or applying them with exceptions or modifications to specific class/classes of companies. ‘Before grant of such relaxation, draft notifications have to be laid before each House of Parliament. Preparation of such notification is under active consideration,’ she said.
According to the minister, the ministry is concerned with the administration of Companies Act and rules which contain essential elements of corporate governance.
She also said that improvement of governing system is a continuous process.
‘Since the provisions of the Act are gradually coming into force, these reflect the latest best practices in corporate governance.
‘Wherever difficulties or hardships are experienced, corrective steps through circulars, statutory orders and rules are being taken to provide ease and facilities to companies,’ Sitharaman said in reply to another query.
Responding to a separate query, she said the Act seeks to bring the system of policy relating to regulation of companies at par with the best practices in the developed countries. On the corporate social responsibility (CSR), government said it would start monitoring CSR activities of corporates under the new Companies Act from next year. Certain class of profitable companies are required to shell out at least 2 per cent of their three-year annual average net profit towards CSR works. These norms have come into effect from 1 April. ‘This being the first year of implementation of the provisions, it will be possible to initiate monitoring of the CSR activities under the above provision from next year only,’ Minister of State for Corporate Affairs Nirmala Sitharaman informed the Rajya Sabha in a written reply.
Companies with a turnover of Rs 1,000 crore or more, at least Rs 500 crore net worth or minimum Rs 5 crore net profit are required to spend on CSR, according to Section 135 of the Companies Act, 2013.