Seeking changes in the new Companies Act, industry body Assocham has told the government that certain provisions in the legislation have the potential to "dissuade foreign investors" from looking at India as a "viable destination".
In a detailed letter to Corporate Affairs Minister Arun Jaitley, who also holds the portfolios of Finance and Defence, Assocham has raised concerns about the Companies Act, 2013.
The legislation is being implemented by the Corporate Affairs Ministry. Many provisions of the new law came into effect from April 1.
The Companies Act, 2013, has certain provisions which have the potential to dissuade foreign investors from looking at India as a viable destination," Assocham said in the letter dated June 12.
It has suggested removal of such provisions.
"A combined reading of sections 2(71) and 2(87) of the new Act deems any private company which is a subsidiary of a foreign corporate body to be a public company, and this makes such a company abide by stringent regulations regarding managerial remuneration.
"Foreign parent companies are unlikely to operate under such restrictions. In a time when there is a declining interest in India among international investors, such a measure can prove counter-productive," it said.
Under the Act, an entity is considered as a public company if it has a minimum paid-up share capital of Rs 5 lakh or higher, among other criteria.
A private company is one having a minimum paid-up share capital of Rs 1 lakh or higher, among other requirements.
Besides, the industry body has said the definition of 'Fraud' in the new law is "very wide and at the same time vague and subjective".
"Corporate laws should facilitate growth of business. There is an urgent requirement to issue a guidance note on 'Fraud' so that even genuine transactions done with genuine intent do not get classified as 'Fraud' by the regulators," the letter said.
Assocham has also sought changes in norms pertaining to related party transactions, NBFCs (Non Banking Financial Companies) and limit on number of audits that can be done by an auditor