Cos bill tabled in LS,goes to House panel

Cos bill tabled in LS,goes to House panel
The Economic Times, August 4, 2009, Page 9

GOVT GETS IN THE ACT TO MAKE LIFE EASIER FOR COS & GIVE MORE FREEDOM TO TRUSTS

Our Bureau NEW DELHI

THE government on Monday re-introduced the new Companies Bill in the Lok Sabha, which will eventually replace a five-decadeold corporate law with one that reflects the complexities of the current economic scenario and the post-Satyam learning experiences.

The proposed new law also promises simplified regulations relating to the founding, mergers and winding-up of companies, while empowering investors to take prompt and collective action against errant moves by companies.

The Companies Bill, 2009, will now be forwarded to a parliamentary standing committee, but since the panel is burdened with no deadlines, it may take a year to get enacted, said a government official who didn’t want to be named.

The bill is similar in content to the one introduced in October 2008, which lapsed early this year with the change in government. While the Companies Bill, 2008, had promised firms greater breathing space on their operational freedom, many provisions in the bill came under intense debate after the Satyam Computer scandal and the global economic downturn highlighted a need for greater state oversight.

The provisions of Companies Bill, 2008, are broadly considered to be suitable for addressing various contemporary issues relating to corporate governance, including those recently noticed during the investigation into the affairs of erstwhile Satyam Computer Services, the government said.

The bill was introduced in the lower House by minister for corporate affairs Salman Khurshid. It proposes to make it mandatory for all companies above a particular size to reserve 33% representation in their boards to independent directors. With the Satyam scandal highlighting the need to make independent directors accountable for their work, the final form of the law is expected to have substantial changes than what is proposed in the bill.

The new legislation will try to promote shareholder democracy with protection of rights of minority shareholders, responsible self-regulation with adequate disclosure and accountability and lesser government control over internal corporate process, said statement of objects and reasons of the new Bill.