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CompaniesAct.in: Graduated Corporate Governance-a modest start CompaniesAct.in
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Updated On: 23/09/2015

Now updated based on Final Rules

Though late, India has also now realized that good Corporate Governance is one of the keys to explore the real worth of an organization. The essence of its key ingredients such as Company's Philosophy, Transparency & Disclosure, Board Framework, Stakeholder Interest Protection and Risk Management are being felt now. Unlike the six decades old Act, the new law includes various initiatives to inculcate the features of good governance in the organization.

Salient features of new law

  • Initiatives towards Transparency & Disclosure
    • Financial Statement - A wider perspective has been given with respect to consolidation of accounts. Where a company has one or more subsidiaries, it shall, in addition to its financial statement prepare a consolidated financial statement of the company and of all the subsidiaries in the same form and manner as that of its own and it shall also be laid before the annual general meeting of the company. Further the company shall also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiary or subsidiaries in Form AOC-1. The Central Government will prescribe the manner in which the consolidation of accounts of companies would be done. Herein it is pertinent to note that the word "subsidiary" shall include associate company and joint venture.
    • Financial Statement, Board's report, etc. - The disclosure requirement with reference to Financial Statement and, Board's report has been enhanced.
    • Disclosure of interest by directors - Disclosure of interest by every director has been made mandatory and not discretionary, as was earlier. The disclosure shall be made at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the disclosures already made. Notice of interest under this section by directors shall have to be given at the Board Meeting, as opposed to earlier case, where it can also be brought up and read at the Board meeting.
    • Annual Return - Besides increasing the disclosure requirement in the Annual Return, extract of it is also required to be made part of Board Report.
    • Return to be filed with Registrar in case promoters' stake changes - Every listed company shall be required to file a return in Form MGT.10 with the Registrar with respect to change in the number of shares held by promoters and top 10 shareholders of such company, within 15 days of such change.
    • Statement to be annexed with notice - Disclosures on special business to be undertaken has been increased. Besides other disclosures, nature of concern or interest, financial or otherwise is required to be disclosed with respect to every director and manager, every other key managerial personnel, and relatives of such persons
    • Report on annual general meeting - Every listed public company is required to prepare and file a report on each annual general meeting which would include a confirmation to the effect that the meeting was convened, held and conducted as per the provisions of the Act and the Rules and this report shall be filed within 30 days of the conclusion of the annual general meeting.

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Decoding The New Act