New Delhi: The government introduced the Companies Bill 2008 in Parliament that will replace a 52- year-old legislation, with new provisions that foster speedy mergers and acquisitions with lesser state control.
The Bill seeks to sweep away over 600 provisions in the existing law and bring in a smaller list of 480 that provides for greater shareholder democracy and fair valuations in companies.
The Companies Bill, 2008, introduced by Minister of Corporate Affairs Prem Chand Gupta in Lok Sabha, would replace the existing Companies Act, 1956, once it is passed by Parliament.
The bill, according to the statement of objects and reasons, provides for formation of One-Person company, while empowering government to provide a simpler compliance regime for small companies.
It said that companies would not be allowed to raise deposits from the public except on the basis of permission obtained by them through other legislations.
The bill also prohibits insider trading by company directors or key managerial personnel and declares such activities as ‘offence with criminal liability’.
It retains the concept of producer companies, while providing a more stringent regime for companies with charitable object to check misuse.
The proposed legislation also articulates ‘shareholders democracy with protection of rights of minority shareholders, responsible self-regulation with adequate disclosure and accountability. Reduction of government control over internal corporate processes’.
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.
All the listed companies would be required to appoint a minimum of one-third independent directors in a listed company. For other public companies, the statement said, the numbers will be prescribed through the rule.
There will be a single forum for approval of mergers and acquisitions, with a shorter merger process for holding and wholly-owned subsidiaries and for cross-border mergers.
The bill also provides for a framework for enabling fair valuations in companies for various purposes and strengthening of Investor Education and Protection Fund.
Earlier, CPI (M) member Varkala Radhakrishnan objected to the introduction of the bill by the minister on the ground that the 250-odd page document read like an encyclopedia and that MPs should have been given at least two days to go through it.
“It (bill) was given to us only this morning. Is this the way legislative business should be conducted by the government?,” he questioned.