Indian Companies Act, 2013 – Implications to Sri Lankan businesses in India
View(s):KPMG in Sri Lanka recently conducted a round table discussion on the recently enacted Companies Act, 2013, which is a landmark piece of legislation and likely to have far reaching consequences on all companies incorporated in India. The fundamental aim f this legislation is said to achieve the objective of ‘Raising the Bar on Governance’.
In a statement, KPMG said the discussion was aimed at assisting companies in Sri Lanka with operations and interest in investing in India to obtain a better understanding of the implications of the newly introduced legislation.
Madhu Sudan Kankani, a Partner at KPMG India who heads the Accounting Advisory Services practice for South India, led the discussion by addressing the important changes and developments to help decode the critical nuances and implications of the 2013 Act. He analysed the key changes and categorised them into 6 critical themes each aimed at a different stakeholder community.
The six critical themes discussed were: the increase in reporting framework, higher auditor accountability, easier restructuring of companies, wider director and management responsibility, the inclusive CSR agenda and emphasis on investor protection. As explained the impacts to multinational corporations include:
• Lower thresholds for financial consolidation
• Mandatory contribution to local CSR
• Wider definition of related party transactions
• Ease in cross-border restructuring
• Facility of minority buy-out
• Liabilities for class action suits.
• Additional reporting responsibilities.
Joining the discussion, Santhosh Jayaram – Technical Director at KPMG India, explained that as per Section 135 of the Act, companies with a specified net worth or turnover or net profit are required to spend 2 per cent of their average net profit towards specified CSR activities.