FICCI reservations over Companies Amendment Bill

By Our Legal Correspondent

NEW DELHI, JUNE 9. The Federation of Indian Chambers of Commerce and Industry (FICCI) has expressed reservations over some of the provisions of the Companies (Second Amendment) Bill, 1999 stating that they will create practical problems for the corporate sector.

In a statement, the FICCI said though the Bill was aimed at introducing certain measures for good corporate governance and for protection of investors, a close look would reveal that some of the provisions would lead to anomalous situations and create problems for the corporate sector.

Referring to the Postal Ballot System in the Bill, the FICCI said this was ``uncalled for'' as the entire process of sending the postal ballot paper and collecting the assent/dissent of the shareholders was unnecessarily cumbersome, expensive and time consuming.

The proposal that the postal ballot be sent by Registered post would involve exorbitant expenditure, namely, Reliance with three million shareholders will need to spend about Rs. 10 crores. Similar would be the case with other big companies. The FICCI strongly feels that the infrastructure at post offices and at Registrar's offices are not adequate to handle postal ballots. It noted that the working group set up by the Government for drafting the Companies Act has unanimously rejected the idea of providing for a postal ballot.

However, if it is the desire to somehow extend the rights of absentee shareholders the role of proxies could be further strengthened by permitting additional rights too, that is, to vote by show of hands and also to speak at general meetings. In addition, ``pre-paid post'' proxy forms could be sent to the shareholders where they could vote ``yes'' or ``no'' and the proxy forms could be suitably amended so as to meet the requisite requirements on the key prescribed resolutions.

On the issue of public deposits, the FICCI submits that offences under the Company Law are of civil/technical nature and seldom involve moral turpitude. It is, therefore, imperative that penalties are commensurate with the nature and degree of the offence and not totally out of proportion.

It is important to give effect to the doctrine of mens rea or guilty intention to commit an offence. Only such offences as are committed knowingly and willfully or with fraudulent intention should be severely punishable and defaults made by an oversight or unintentional negligence be not subjected to such onerous provisions.

It suggested to the government to set up a Deposit Insurance Structure for deposits up to Rs. 20,000 on the lines of the Deposit Insurance Corporation where smaller depositors in banks up to a prescribed limit are protected.

The FICCI calls for dropping the provisions pertaining to the appointment of director by small shareholders. Also in the context of ongoing liberalisation process, the restriction on number of directors is a retrograde step and goes against the philosophy of corporate democracy. It urged the Government that the law should not seek to put artificial restrictions in this regard.

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Section  : Business
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