India Inc is not on board with the government on several key issues pertaining to independent directors, managerial remuneration and rotation of auditors, as proposed in the Companies Bill, a senior official said on Thursday.
“There are about ten areas where there are issues,” Corporate Affairs (MCA) Secretary Mr D K Mittal said, after the ministry held consultations with representatives of leading business chambers and professionals on the Companies Bill 2009.
The Bill, which will replace the Companies Act 1956, is about to be placed before Parliament in the Budget session, starting next week.
Parliament Standing Committee, chaired by BJP leader Mr Yashwant Sinha, has already given its report suggesting various changes in the original bill which was introduced in August 2009.
Mr Mittal said differences exist on issues relating to term of independent directors, managerial remuneration, Corporate Social Responsibility (CSR), subsidiaries, rotation of auditors and voting rights.
The Bill proposes that no independent director can be on board of a company for more that six consecutive years, and a director cannot be on the board of more than seven companies.
Besides, it provides that statutory auditors and audit firms should be rotated every five years by the companies.
The Standing Committee has recommended changes in the subsidiary structure and said that a firm should have only one investment company, saying that the pyramid-like structure is often misused for “siphoning off funds or routing terror money”. The Bill promises greater shareholder democracy and tighter corporate governance norms.
Introduced in Parliament in the aftermath of the Rs 14,000 crore Satyam accounting scam, the Bill also provisions for class action suit.
There is a provision under which the companies have to earmark two per cent of their average three-year net profit for the CSR.
“What we do not want is a fixed minimum limit on such spending and government insight,” FICCI Corporate Laws Committee chairman Mr Siddharth Birla said.
Wipro’s Chief Financial Officer Mr Suresh Senapati said the companies have no problem in changing individual auditors but is opposed to compulsory changing of auditor firms. “Besides, the provision on subsidiaries will affect the companies financial performance,” he said.