Business

New Companies Bill provides for self-regulation

NEW DELHI: The Central Government on Thursday introduced the Companies Bill, 2008, in the Lok Sabha, seeking to replace the existing 52 year-old legislation with new provisions to lessen state control and catalyse speedy mergers and acquisitions.

The Bill, introduced in the House by Corporate Affairs Minister Prem Chand Gupta, proposes to do away with the 658 provisions and 15 schedules in the existing Act and replace them with a far lower number of 426 clauses to provide for greater shareholder democracy and fair company valuations.

The Bill, once enacted on approval by Parliament, would replace the existing Companies Act, 1956.

Speaking to newspersons after introducing the Bill, Mr. Gupta pointed out that it would be easy for companies to comply with the provisions of the new legislation as it would be shorter and simpler than the existing Act.

For the first time, the proposed legislation, Mr. Gupta said, has mooted the concept of ‘One-Person Company’ and while recognises auditing standards, it prohibits companies from raising deposits from the public, except on the basis of permission obtained through other legislations.

The Minister said that the new Bill seeks to makes it mandatory for companies to have one-third independent directors on board. For other public companies, the numbers would be prescribed through the rule, he said. To deter fraudulent practices, Mr. Gupta said the new Bill sought to lay down a more effective regime for inspections and investigations of companies while prescribing the minimum and maximum quantum of penalty.

This, he said, has been done keeping in view the need for greater shareholder democracy and responsible self-regulation with adequate disclosure and accountability.

Among other provisions, the Bill proposes the setting up of a single forum for approval of mergers and acquisitions and a shorter merger process for holding and wholly-owned subsidiaries and cross-border mergers, he said. The Bill also seeks to prohibit insider trading by company directors or key managerial personnel and declare such activities as “offence with criminal liability.” Earlier, CPI (M) member Varkala Radhakrishnan objected to the Bill’s introduction in the House on the ground that the over 250-page document read like an encyclopaedia and, therefore, members should have been given at least two days to go through it.

“It was given to us only this morning... Is this the way legislative business should be conducted by the Government?” he asked.

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