I. Business Friendly Corporate Regulations/ Pro-Business Initiatives
- Provision of self-regulation with disclosures/transparency instead of 'Government approval based regime'.
- Automation of corporate records/meetings statutory recognition to (i) maintenance of documents by companies in electronic form, (ii) 'video-conferencing' as a mode of conducting Board meetings etc.
- Faster mergers and acquisitions including short form of mergers and cross border mergers.
- Summary liquidation: For companies having net assets of Rs. 1 crore or less, Official Liquidators (OLs) are empowered with adjudicatory powers.
- Time bound approvals through National Company Law Tribunal (NCLT).
- Concept of 'dormant companies' introduced (Companies not engaged in business for two consecutive years are declared as dormant).
- Concept of One Person Company (OPC) introduced.
II. Good Corporate Governance and Corporate Social Responsibility
- Concept of Independent Directors (IDs) included as a statutory requirement u/s 149(4).
- Provision for constitution of several Committees of the Board (Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and CSR Committee).
- Woman Director for prescribed class of companies.
- Mandatory provision for constitution of CSR Committee and formulation of CSR Policy, with mandatory disclosure, for prescribed class of companies.
III. Enhancing Accountability of Management
- The term 'Officer in Default' has been reviewed to make it more relevant.
- Terms 'Key Managerial Personnel' (KMP) and 'Promoter' defined to affix responsibility on key functionaries of the company.
- Duties of Directors defined, including to shareholders, employees, the community and environment.
- Cap on number of Directorships: 20 companies, of which 10 can be public companies.
IV. Strengthened Enforcement
- The Central Government to have powers to order investigation, suo-motu, in public interest.
- Statutory recognition of Serious Fraud Investigation Office (SFIO).
- Provision for creation of Special Courts.
- Search and seizure of documents, during investigation, without an order from a Magistrate.
- Freezing of assets or disgorgement of illegal gains of company under investigation.
V. Audit Accountability
- Recognition of accounting and auditing standards.
- Stricter disqualification norms for auditors.
- Auditor not to perform specified non-audit services.
- Tenure or rotation of auditors prescribed.
- Internal audit for bigger companies.
- Substantial civil and criminal liability for an auditor in case of non-compliance.
- Tribunal empowered to direct a change of auditor in case of a fraud detected.
- Cost records and cost audit for prescribed class of companies.
- Secretarial audit for prescribed class of companies.
- National Financial Reporting Authority (NFRA) to be constituted.
- Protection of Minority Shareholders
- Exit option provided, if there is dissent to change in Object clause, or during compromises etc.
- Valuation mandated during compromise, arrangements etc.
- Effect of merger on minority shareholding to be disclosed.
- Listed companies to have one Director representing small shareholders.
VI. Investor Protection
- Stringent norms for acceptance of deposits from the public.
- Strengthened role of Investor Education and Protection Fund (IEPF)
- No time bar on claims of dividends from IEPF.
- Class Action Suits recognized.
- Enhanced powers to Tribunal for protection of minority rights.
Ref: MCA Annual Report 2015-16