KPMG Roundtable: Indian Companies Act, 2013- Implications to Sri Lankan businesses in India

Wednesday, 18 December 2013 00:00 - - {{hitsCtrl.values.hits}}

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 of this legislation is said to achieve the objective of ‘Raising the Bar on Governance’. 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 and has nearly 15 years of experience in auditing and accounting advisory, 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 six 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, who has over a decade-long, varied and in-depth involvement in the areas of sustainability and climate change, 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% of their average net profit towards specified CSR activities. Speaking on the purpose of having such a roundtable, Suren Rajakarier – Head of Audit at KPMG in Sri Lanka stated: “We are happy to facilitate this discussion as it is very important that our local clientele understand the financial reporting implications and the cost of non-compliance, to avoid any unexpected penalties being imposed on the subsidiaries or the directors being penalised for non-compliance. Further the discussions also focused on how the companies can plan their transition to comply with the numerous requirements, which the participants appreciated and found to be useful.”