New Delhi: The Government is contemplating strengthening penal provisions and providing for tough disclosure norms in the new Companies Act, which will be introduced in Parliament in the budget session.
The proposed law will try to remove inequalities in penalties for violations of norms by companies, sources said, adding it will ensure all wrongdoings by companies are dealt with professionally.
It will also be the endeavour of the government to remove all streamline disclosure norms to tighten corporate governance and introduce shareholders’ democracy, they said.
In addition, the new law would also provide for timebound liquidation of companies in case of debt default or winding up.
To achieve the objective of enhancing shareholders’ democracy, sources 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, sources said. This is to curtail powers of Board of Directors of a company.
It would 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 towards their shareholders.
As per present rules, corporates have to inform only regulators such as Registrar of Companies and Sebi on such issues.