On August 3, 2009 , a new Companies Bill was introduced in the Lok Sabha. The name of the bill is Companies Bill, 2009. Actually It is the Companies Bill, 2008, which lapsed with the dissolution of the 14th Lok Sabha, and was reintroduced by the corporate affairs minister Salman Khurshid in Lok Sabha.
Why this bill is needed?
The older Companies Act, 1956, needs to be amended in keeping with the changes in the corporate world. Mainly the governance and capital structuring requirements of the Companies Act 1956 need an urgent amendment and there is a demand to allow easier incorporation and quick winding up. The existing Act suffers from several infirmities that prevent healthy development of our corporate sector. In particular, the provisions for winding up sick companies have been a sticking point with the industry.
Features of the New Bill:
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The new Bill will be shorter and will try to harmonise the company law framework with sectoral regulations.
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It will have 480 sections compared to over 600 sections in the Companies Act, 1956 in addition to providing for greater shareholder democracy and less government intervention.
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It will try to promote shareholders democracy with protection of rights of minority shareholders, responsible self-regulation with adequate disclosure and accountability and lesser government control over internal corporate processes.
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It will also make it mandatory for listed companies to have 33 per cent independent directors
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It provides for formation of One Person Company
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It empowers the government to provide a simpler compliance regime for small companies.
The Bill also proposes to make stringent provisions for companies seeking to raise money from the public. They would not be allowed to raise deposits from the public without obtaining permission from the relevant regulator. -
The bill proposes a single forum for approval of mergers and acquisitions, whether domestic or with foreign entities.
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Procedure for merger of holding and wholly-owned subsidiaries would be shortened.
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Bill seeks to prohibit insider trading by company directors or key managerial personnel. Such activities will be treated as a criminal offence.
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Every company director would be required to acquire a unique Director Identification Number, a provision which would check the menace of vanishing companies.
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It provides for a framework for enabling fair valuations of companies for various purposes and strengthening Investor Education and Protection Fund.
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It makes Consolidated financial statements of subsidiaries mandatory
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It removes the Clause that disallows claims over unclaimed dividend after seven years.
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It clearly defines role of independent directors.
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It simplifies the Process for formation of companies simplified
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