Friday, September 13, 2013

Some Sections of the Companies Act, 2013 Come Into Force

The Ministry of Corporate Affairs (MCA) has notified a list of provisions of the Companies Act, 2013 that came into force with effect from 12 September 2013.

A cursory review of the list of sections does not indicate any coherent pattern regarding which aspects of the new legislation are being brought into force, and the sections are peppered across various chapters. The only seeming common thread is that most of them do not require rules to be promulgated by the Central Government in order to make them operational. This approach of piecemeal effectiveness is bound to cause significant practical problems given there is no clarity regarding the legislative/regulatory rationale for why these sections have been brought into force first.

The social media is abuzz with another curious question posed by some lawyers. Section 465 of the new legislation, which repeals the Companies Act, 1956, has not been notified. Hence, there could be a question as to whether the new provisions notified will operate in addition to the provisions of the 1956 Act. It is not clear as to what would happen in case of a conflict.

Hopefully, such a hairsplitting exercise will not be required, and that these issues are confined to a fairy short transitional phase. They may get addressed once the other provisions of the Act become effect. Practical difficulties would get exacerbated, however, if there were to be an inordinate delay in giving effect to the other provisions.


vswami said...

"....and the sections are peppered across various chapters. The only seeming common thread is that most of them do not require rules.."

The 'official' reasons for MCA notifying only a few of the new provisions, on a selective basis, without bothering to go into the rationale or genuineness, or want of it,behind,are found to have been indicated in the write-up HERE > MCA notifies 98 Sections of the Companies Act.

vswami said...

Particularly, refer the version on the website of Taxguru
@ MCA notifies 98 Sections of the Companies Act - TaxGuru

Mangesh Patwardhan said...

Section 194 seems to be an absolute bar on directors and KMP `buying' call or put options on the company's shares or debentures. Is this too drastic? How does it affect ESOPs?

rajeev reddy said...

Some of my colleagues and myself are of the view that this notification has not come into force as on the first page of notification it specifies as "To be published in official gazette". As per section 1(3) the provisions will come into effect only on publication in official gazette. I have tried to verify in the public gazette, but did not find any such notification. If you come across the same, please do share it.