The new Companies Act promising more shareholder democracy and tighter governance norms for corporates is likely to be enacted this year, Corporate Affairs Secretary R Bandyopadhyay said today. We are hopeful that the committee (parliamentary standing committee) will be giving its reports very quickly… Maybe in the monsoon session… and the ministry will take another two to three months. By the end of this year hopefully we will have a new Act, Bandyopadhyay told reporters on the sidelines of a CII event here.
The Companies Bill, 2009, which lapsed with the dissolution of the 14th Lok Sabha, was reintroduced in the Lok Sabha in August last year.
The Bill comes in the backdrop of the multi-crore accounting fraud in Satyam Computer Services last year, which exposed gaping holes in the existing corporate governance norms in the country, highlighting the need for stricter norms.
Corporate Affairs Minister Salman Khurshid had earlier said the new Companies Bill seeks to fix more responsibility on independent directors and the government is currently framing norms for their appointment and conduct.
The new legislation, he had said, will also protect the rights of the minority shareholders, bring about responsible self-regulation with adequate disclosure and accountability and lesser government control over internal corporate processes.
Besides other things, the Bill also proposes to tighten the laws for raising money from the public.
There will be a single forum for approval of mergers and acquisitions, whether domestic or with foreign entities. Also, the procedure for merger of holdings and wholly-owned subsidiaries will be shortened.
The Bill also seeks to prohibit insider trading by company directors or key managerial personnel by treating such activities as a criminal offence.
To check the menace of vanishing companies, under the proposed law, every director would be given a unique Director Identification Number that would make their identification and tracking easier.
The Bill also provides for a framework for enabling fair valuations of companies for various purposes and strengthening the Investor Education and Protection Fund.
It will also make it mandatory for listed companies to have 33 per cent independent directors and provides for formation of an One Person Company (OPC), while empowering the government to have a simpler compliance regime for small companies.