The new companies law enacted last year comes into force from 1 April but still lacks clarity on certain aspects, especially on rules that will govern its implementation, some experts and analysts said.

The new law was passed by Parliament in August and replaces 58-year-old legislation. Last week, the corporate affairs ministry notified rules for 11 of the 24 chapters of the new law. By Monday, it is expected to notify rules for 167 of the 470 sections.

“The notified rules contain subtle changes over the draft rules, which have a significant impact in terms of applicability to class or classes of companies and role of the audit committee with regard to the vigil mechanism,” Jagdeep Singh, director, fraud services and dispute services, at consultancy EY India, said in an emailed statement.

“The audit committee or the nominated director have been given the task of overseeing the vigil mechanism rather than operating it, which makes it more practical. (But) one area which still needs clarity is exceptional situations for giving direct access to audit committee chairman or nominated director, as the same has not been defined still,” he said.

The rules notified thus far are on specifications and definitions, incorporation of companies, prospectus and allotment of securities, shares and debentures, registration of charges, management and administration, declaration and payment of dividend, accounts, appointment and qualifications of directors, board meetings and powers, and corporate social responsibility.

The new law makes it mandatory for listed companies, and unlisted ones that have either taken deposits from the public or money from financial institutions or public sector banks in excess of Rs.50 crore, to set up a vigil mechanism for reporting concerns.

There is confusion regarding provisions dealing with disqualifications for the appointment of directors, according to Pavan Kumar Vijay, managing director at New Delhi-based financial and legal consultancy Corporate Professionals India Pvt. Ltd.

Section 164 of the new law says that a person shall not be eligible to be a director on the board of a company if he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call.

“Will such a person have to vacate from (the boards of) other companies as well?” asked Vijay. “Moreover, what happens on the very first day of the law coming into force?”

The rules to be notified on Monday may limit the requirement of appointment of key management personnel (KMPs) to listed companies or those unlisted public companies having a paid-up share capital of more than Rs.10 crore, he said.

Such a provision would keep only 14,000-15,000 such companies within the purview of section 203 of the Act, which lists that managing directors, chief executive officers, whole time directors, company secretaries and chief financial officers would be KMPs. “Effectively, most of the other 14 lakh (1.4 million) or so registered companies which are either not listed or do not have paid-up capital of Rs.10 crore would not be required to have a whole-time company secretary,” Vijay said.

Another person, who was closely associated with drafting the rules and so did not want to be identified, differred with this view. “Most companies are very small and cannot afford to pay for a full-time company secretary, so this would be good for them,” he said.

Beginning April, companies may have to immediately start devising and implementing policies on corporate social responsibility and the vigil mechanism, a new code for independent directors, and identify and notify related parties.

The new companies law mandates companies with a net worth of more than Rs.500 crore or revenue of more than Rs.1,000 crore or net profit of more than Rs.5 crore to spend 2% of their average net profit over the three preceding years on corporate social responsibility activities.

Within three months of 1 April, companies will be required to file returns on public deposits and reconstitute their boards with at least one woman director and two independent directors within a year.

Last week, the corporate affairs ministry also notified 183 new sections of the new law on top of the 100 that had been notified last year. Sections related to the proposed national financial reporting authority and the national company law tribunal, investor and education protection fund, winding up, sick companies, special courts, oppression and mismanagement and compromise and arrangement are yet to be notified. Since a majority of these are being contested in courts, they are unlikely to be notified soon.