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The year 2014 has ushered in a new era in corporate governance in India, with the Ministry of Corporate Affairs (MCA) having notified a vast majority of the sections to operationalise the Companies Act 2013 (2013 Act) - an Act that aims to raise the bar on governance in Indian companies. The MCA has also published several chapters of Rules and the remaining ones in respect of notified sections are expected to be released shortly.
The 2013 Act has far and wide ranging impacts on all companies - listed and private in varying degrees. The final Rules notified by the MCA have seen some significant changes keeping in mind the recommendations made by corporate India and the difficulties that would have been faced in its implementation.
The key areas impacted by the notification of final rules include related party transactions, depreciation accounting, inter-company loans and guarantees, appointment of directors, constitution of Audit Committee and other committees of the Board. The final Rules also clarify the definition of total share capital and the directors’ reporting requirements related to internal financial control with reference to financial statements.
This note provides an overview of these Rules, and a preliminary analysis of the potential impacts of these changes.