Government re-introduces Companies Bill

Last Updated: Monday, August 3, 2009 - 16:00

New Delhi: The government on Monday re-introduced
Companies Bill in the Lok Sabha to replace a 52-year-old law
and simplify regulations dealing with formation, mergers and
acquisitions and winding up of companies.

The Companies Bill, 2008, which lapsed with the
dissolution of the 14th Lok Sabha, was reintroduced by the
Corporate Affairs Minister Salman Khurshid in the Lower House
amid din.

Besides other things, the new Bill will be shorter and
will try to harmonise the company law framework with sectoral
regulations.

The proposed Bill will have 480 sections compared to over
600 sections in the Companies Act, 1956 in addition to
providing for greater shareholder democracy and less
government intervention.

The new legislation will try to promote shareholders
democracy with protection of rights of minority shareholders,
responsible self-regulation with adequate disclosure and
accountability and lesser government control over internal
corporate processes, said the statement of objects and reasons
of the new Bill.

It will also make it mandatory for listed companies to
have 33 percent independent directors and provides for
formation of One Person Company (OPC), while empowering the
government to provide a simpler compliance regime for small
companies.

The Bill also proposes to make stringent provisions for
companies seeking to raise money from the public. They would
not be allowed to raise deposits from the public without
obtaining permission from the relevant regulator.

There will be a single forum for approval of mergers and
acquisitions, whether domestic or with foreign entities. Also
the procedure for merger of holding and wholly-owned
subsidiaries would be shortened.

The Bill also seeks to prohibit insider trading by
company directors or key managerial personnel. Such activities
will be treated as a criminal offence.

Under the proposed norms, every company director would
be required to acquire a unique Director Identification
Number, a provision which would check the menace of vanishing
companies.

The Bill also provides for a framework for enabling fair
valuations of companies for various purposes and strengthening
Investor Education and Protection Fund.

Bureau Report



First Published: Monday, August 3, 2009 - 16:00

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