New Delhi: The government is contemplating to strengthen penal provisions and provide for tough disclosure norms in the new Companies Act, which will be introduced in Parliament in the forthcoming Budget session.
The proposed law will try to remove inequalities in penalties for violations of norms by companies, officials said, adding it will ensure that all wrongdoings by the companies are dealt with professionally.
It will also be the endeavour of the government to streamline disclosure norms to tighten corporate governance and introduce shareholders’ democracy, they said. In addition, the new law would also provide for time-bound liquidation of companies in case of debt default or winding up.
To enhance shareholders’ democracy, officials said, the government is also thinking of removing the provisions that allow directors to take important decisions on investments and share issuance.
In the proposed company law, the ministry of corporate affairs would introduce some disclosure schemes, they said.
On matters such as investment and issue of share, companies may be required to take prior approval from their shareholders. This is to curtail powers of the board of directors of a company.
It would be a major shift from the present Companies Act, 1956, as this ‘approval regime’ would bring greater transparency in the functioning of the corporates and make them more accountable to their shareholders.