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The Companies Act, 2013, has introduced important audit reforms. One of the important reforms is rotation of the auditor. All listed companies; unlisted public limited companies having paid-up share capital of Rs.10 crore or more; all private limited companies having paid-up share capital of ~20 crore or more, and all companies having public borrowings from financial institutions, banks or public deposit of Rs.50 crore or more are required to rotate their auditor. An individual cannot continue as an auditor for more than one term of five years and an audit firm cannot continue as an auditor for more than two terms of five years, that is a consecutive period of 10 years. The cooling off period is five years. The Companies Act allows three years for complying with the provision. Therefore, the provision must be complied by April 1, 2017. The objective is to enhance audit independence. This is expected to improve audit quality, resulting in improved financial reporting. Traditionally,...

Many stories appear in the media about those whose employee stock ownership plans (ESOPs) made them millionaires when their companies got listed. A recent one is that of RBL Bank. The bank had issued ESOPs at exercise prices ranging between Rs 52 and Rs 120. A large number of ESOPs were exercised at an average price of Rs 59.40 a share. When the stock listed at Rs 274 apiece, the employees enjoyed a windfall. In India, Infosys popularised ESOPs in the 1990s. The company’s various schemes have created hundreds of dollar millionaires and thousands of rupee millionaires. While these stories paint a rosy picture, and are even inspirational, all of them don’t end equally well. How ESOPs work ESOPs are a motivational tool, given to employees to impart a sense of ownership. There are four stages in an ESOP scheme. The first is its grant. At this point, the company communicates to its employees that they are being given options that can be converted into shares at a predetermined price...

The Centre has warned employees of disciplinary action if they indulge in criticism of the government or its policies. The move comes after officers of Indian Revenue Service (Customs and Central Excise) and All India Association of Central Excise Gazetted Executive Officers, among others, suggested changes in Goods and Services Tax Network (GSTN), a private company tasked with creating information technology infrastructure for the goods and services tax (GST), and composition of Revenue Secretary-led GST council secretariat. “Of late, it has been noticed that some associations or federations have commented adversely on the government and its policies. It may be brought to the notice of all associations or federations that if anyone indulges in criticism of the government and its policies, appropriate action (including disciplinary action) shall be taken,” an order issued recently by finance ministry said. It cited service rules that bar any government servant from making any a...

The Insolvency and Bankruptcy Code (IBC), 2016 proposes to set up new institutional pillars to support the insolvency resolution and liquidation processes. One such pillar is the industry of insolvency professionals. Insolvency professionals (IP) are expected to play a critical role in the timely and efficient insolvency resolution of firms and individuals. Two specific provisions pertaining to IPs in the new law have gone largely unnoticed: (i) not just individuals but firms can also get licensed as IPs (ii) those residing outside India can practise as IPs on Indian corporate and individual insolvencyrelated matters. Both these provisions can have important implications for the regulatory structure of the IP industry once the law is implemented. The regulation of professions in India has been a failure. Self-regulatory organisations in professions such as medicine (Medical Council of India), law (Bar Council of India) and accountancy (The Institute of Chartered Accountants of Indi...

The Commerce Ministry has suggested to its finance counterpart that the exemptions given to exporters should continue under the new indirect tax regime, GST. The proposed procedure of paying taxes and then claiming the refunds by exporters under the Goods and Services Tax (GST) would cause hardships for them, said an official. Hindustan Times New Delhi,10th October 2016