New Delhi, Aug 4 (KNN) As the industry is preparing itself to shift to the New Companies Act 2013 from the decades old Act, the small and medium enterprises have raised concerns over certain issues such as deposits from the members only; restriction on funds from the relatives; mandatory CSR of 2 per cent for all the companies with Rs 5 crore profit; and no difference in the Act between the private company, public company and MNC etc.

Federation of Indian Micro and Small & Medium Enterprises has organised a Consultation Workshop on Companies Act in collaboration with Corporate Professionals- a financial and legal consulting firm, here today.

The New Companies Act 2013 has both – negative as well as positive impacts on the SMEs, said Managing Director of Corporate Professional, Pawan Kumar Vijay adding that the new Act has major contours such as – more self-regulation; E-governance; making corporate sector more accountable; protection of interest of minority shareholders; CSR; SFIO  etc.

Addressing the gathering, FISME President, D Gandhikumar said there are some major changes in the Companies Act concerning the SMEs like deposits through sister concerns, responsibilities of directors, holding of the shareholders etc. FISME is organizing this workshop to make SMEs aware of the new Act, he added.

The New Companies Act 2013 has created turmoil in the industry, but it is good. With regard to the SME sector, there are some good changes in the Act, Vijay said. “Certain things like deposits, loans are not so favourable for the SMEs. SME sector is working with the money of their own people, they take money from friends, relatives, wife, shareholders, but now these things are restricted. “

Under the new Act replacing the old Act of 1956, “SMEs can take money from the directors, in which there is no limit but that should be his own fund.  The SMEs can take money from the shareholders but is restricted to 25 per cent and then they cannot take money from other people including relatives. In that way the SME sector is more worried as they already face the problem of funding,” he pointed out.

Vijay also said that the new law has used the word company and does not differentiate between the private, public, MNC or government firm.

“Some of the frequent queries coming from the small sector regarding the new Act are about the appointment and removal of the Directors and their disqualification. The other issue which has drawn many queries is that in case, they have not filed three years balance sheet report, they would be disqualified from day one,” Vijay said.

The other major issue is in the context of deposits, he said. “The SMEs which have taken money from various sources, as per the Deposit, you have to return back the money. So the SMEs are worried about this.

Also, previously when the SMEs were taking money, it had to be either deposit or share application money. As per the new Act, they have to allot this within 60 days or refund the money, he added.

“The new Act has a provision that every company with net worth over Rs 500 crore, or net profit of Rs 5 crore, will spend at least 2 per cent of its average net profit on corporate social responsibility activities.”

Meanwhile, there is some good news for the SMEs in the new Act. Under the new Act, there is a provision of one-person company for which only one member is required for the formation of the company. This is very beneficial for the start-ups, he highlighted.

“There is a big opportunity for the one person company, which is introduced for the first time in India. The company can have only one director and limited risk which would attract investment,” Vijay said.

The new Act has made mergers easier, as it need not be routed through the Court. It has streamlined the process of mergers and acquisitions of Indian companies with foreign entities.

One of the major changes which has small entrepreneurs worried is that there should be a limit set for exemption of small and medium enterprises from certain claws, said Secretary General of Manesar Industries Welfare Association, Manmohan Gaind adding that the SMEs should be segregated from the large companies.  (KNN/SD)