The Ministry of Corporate Affairs has issued notice dated 12th April, 2022 to invite comments/suggestions on the Company Law Committee(CLC) Report from all the stakeholders through e-Consultation Platform on the MCA website. It is requested that comments/suggestions on the Report may be provided through such facility by 6th May, 2022.
The recommendations of the Committee regarding the Companies Act, 2013, are summarized hereunder:
For promotion of ease of doing business, following suggestions are made:
- Allowing companies to hold general meetings in virtual, physical or hybrid modes;
- Companies, which cease to be associated with a foreign entity, should be allowed to file a fresh application with the Central Government in a prescribed form to allow them to revert back to the FY followed under the Companies Act, 2013.
- Regional Directors to be empowered to pass order for restoration if applied within 3 yrs
- Power of restoration to continue with NCLT if application is filed after 3 yrs but before 20 yrs
- The committee has proposed to include the money that remains unclaimed for seven years or more in respect of shares/securities that have either bought back or cancelled requires to be credited to IEPF under section 125(2) of the Companies Act, 2013.
For relaxation of securities laws, following suggestions are made:
- Recognizing issuance and holding of fractional shares, Restricted Stock Units and Stock Appreciation Rights;
- Easing the requirement of raising capital in distressed companies;
- The compensation of a company’s employees may be linked to its shares, aimed at granting such employees ownership rights in the company. Such schemes include Restricted Stock Units (RSUs) and Stock Appreciation Rights (SARs) that allow employees to subscribe to the company’s equity capital.
- Recognizing Special Purpose Acquisition Companies and allowing such companies, which are incorporated in India, to list on permitted exchanges;
- Fast track mergers to be allowed between a holding company and its subsidiary company or companies other than WOS.
For revision for audit process, following suggestions are made:
- The auditor who has resigned from the company will be required to file a statement in prescribed form within a period of 30 days to Company and Registrar from the date of resignation. The statement must indicate the ‘reasons for resignation’ and any ‘other facts relevant with regard to resignation’.
- Mandatory joint audit for certain companies
- Auditor of holding company to comment on true and fair view of each subsidiary company
- The committee recommends to include the concept of Forensic Audit under the Companies Act, 2013 for use in enforcement actions in case of severe non-compliances. Further, the committee has recommended that forensic audit may be ordered during investigations of such nature as prescribed under Chapter XIV of Companies Act, 2013. Chapter XIV contains sections 206 to 229 of the Companies Act, 2013, that deals with the provisions relating to inspection, inquiry and investigation of the affairs of company.
- The committee has proposed to insert an enabling provision under the Companies Act, 2013 so as to allow the CG to introduce a format for auditors to enable them to state the impact of every qualification or adverse remarks made on the financial statements of the company for circulation to the Board before circulating to the shareholders of company.
