New Delhi

The Companies Act needs to be amended to improve the business climate in the country, Corporate Affairs Minister Arun Jaitley said today in the Lok Sabha as he pushed a bill in this regard for consideration of the House.

Congress, on the other hand, wanted the bill to be referred to the Standing Committee for closer scrutiny.

The 14 proposed amendments include provision to ensure that frauds beyond a certain threshold would need to be mandatorily reported by the auditors to the government.

To address concerns raised by the corporates, the government has also agreed to relax a number of norms including those pertaining to related party transactions, while resolutions passed by the companies? boards would not be subjected to public inspection.

The amendments are being carried out after consultation with industry chambers and business organisations, Jaitley said while moving the The Companies (Amendment) Bill, 2014, for consideration and passage.

“Most of them are intended for one purpose, that is, for the ease of doing business,” said Jaitley, who also is the Finance Minister.

The new Companies Act, which came into force with effect from April 1 with some provisions yet to become operational, has faced stiff criticism for many provisions.

The original Companies Act 1956 had 600 plus provisions and it was re-worked and a law with 470 sections and most of the provisions have been implemented.

Arguing for the need for amendments, Jaitley said, “Now, after the provisions were implemented, while enforcing the provision, we found that there were certain difficulties with regard to the enforcement of certain provisions or certain errors, while drafting had taken place.”

Participating in the debate, Veerappa Moily (Cong) said that Bill should be referred to the Standing Committee to re-examine it before the amendments are brought out.

Jaitley said there was a need to change the attitude of policy makers to ensure ease of doing business.

Saugata Roy (TMC) sought to know if the amendments would protect investors from frauds.

The amendments to the law seek to ensure severe punishment for those raising illegal deposits from the public.

This would be among the first major initiatives by the government to make changes in the country?s regulatory framework to improve its global ranking for ease of doing business, where India has been ranked very low at 142nd position in the latest World Bank report.

The new law, put in place by the previous government, has replaced a nearly six-decade old Companies Act, 1956, but the new government has been indicating for quite some time that it would bring in necessary changes to address concerns raised by various stakeholders including corporates.

The Companies Act, 2013 was notified on August 29, 2013.

Out of 470 sections in the Act, 283 sections and 22 sets of Rules corresponding to such sections have so far been brought into force.

To improve ease of doing business, the proposed amendments include omitting requirement for minimum paid up share capital, and consequential changes and making common seal optional, and consequential changes for authorization for execution of documents.

Besides, specific punishment will be prescribed for non-compliance to norms governing deposits taking activities.

Such a provision was “left out in the (existing) Act inadvertently”.

Enabling provisions are being put in to prescribe thresholds beyond which fraud shall be reported to the central government, while cases below this threshold will be reported to the audit committee of the company’s board.

Disclosures for both the categories would need to be made in the board’s report, the government said, while adding that this provision has been made at the demand of auditors.

Besides loans given by a company to wholly owned subsidiaries and guarantees/securities on loans taken from banks by subsidiaries, would be exempted from the purview of related party transactions.

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