The Ministry of Corporate Affairs (MCA) has recently announced a policy framework for “pre-legislative consultation” relating to the framing of rules and regulations under laws administered by it. The framework aims to enhance public participation and transparency in the rule-making process and to ensure that the proposed changes are well-informed and justified.
The policy framework applies to the Companies Act, 2013, the Limited Liability Partnership (LLP) Act, 2008, and other laws under the MCA’s purview, such as the competition and insolvency laws. It requires that any proposal for amending or introducing rules or regulations under these laws should be accompanied by an explanatory note that states the reasons, objectives, benefits, costs, and implementation plan of the proposed changes. The explanatory note and the draft rules or regulations should be placed on the MCA’s website for soliciting public comments for at least 30 days.
As part of the first phase of implementing the policy framework, the MCA has invited public comments on the proposed amendments to the Companies Act, 2013 and the LLP Act, 2008 by January 25, 2024. The proposed amendments cover various aspects of corporate governance, compliance, disclosure, audit, and enforcement. Some of the key proposals are:
- To introduce a new concept of “small company” under the LLP Act, 2008, with simplified compliance requirements and lower fees.
- To allow LLPs to issue non-convertible debentures (NCDs) to raise funds from the market.
- To revise the thresholds for classifying a company as a small company, a one-person company (OPC), or a start-up company under the Companies Act, 2013.
- To enable OPCs and start-up companies to issue sweat equity shares and employee stock options (ESOPs) to incentivize their employees.
- To empower the National Company Law Tribunal (NCLT) to order disgorgement of profits or assets from persons who have misappropriated or misused company funds or property.
- To streamline the process of mergers and acquisitions (M&A) between Indian companies and foreign companies or bodies corporate.
The MCA has also sought suggestions from stakeholders on any other issues or areas that need to be addressed in the Companies Act, 2013 or the LLP Act, 2008. The MCA has stated that it will consider all the comments and suggestions received from the public before finalizing the amendments.
The policy framework for pre-legislative consultation is expected to improve the quality and effectiveness of the rules and regulations governing corporate affairs in India. It will also provide an opportunity for stakeholders to voice their opinions and concerns on matters affecting their interests. The MCA has urged all stakeholders to participate in this exercise and contribute to the development of a robust and responsive corporate legal framework.