Companies bill 2008 gets the nod of Union Cabinet (pib.nic.in)

Companies bill 2008 gets the nod of Union Cabinet

USHERS IN AN ERA OF COMPACT CORPORATE LEGISLATION AND SHAREHOLDER DEMOCRACY

19:36 IST

The Union cabinet today gave its nod for the introduction of the Companies Bill 2008 in the next session of Parliament to replace the existing Companies Act, 1956 by incorporating far-reaching changes. The proposed Bill seeks to enable the corporate sector in India to operate in a regulatory environment of best international practices so that entrepreneurship, investment and growth are encouraged. It calls for shareholder democracy with protection of the rights of minority stakeholders. The Bill provides right to Shareholder Associations/Group of Shareholders to take legal action in case of any fraudulent deed on the part of a company and also to take part in investor protection activities and 'Class Action Suits'. It provides for Special Courts to deal with corporate offences. Company matters such as mergers and amalgamations, reduction of capital, insolvency including rehabilitation, liquidations and winding up are proposed to be addressed by a National Company Law Tribunal/ National Company Law Appellate Tribunal. The Bill recognizes insider trading by company Directors/KMPs as an offence with criminal liability.

The Companies Bill 2008 is an effort to usher in self-regulation in corporate affairs with disclosures and accountability, and to substitute government control over internal corporate processes and decisions by shareholder control. It also provides for an easy transition of companies operating under the existing Companies Act of 1956, to the new framework as also from one type of company to another. A new entity in the form of One-Person Company is also being introduced by the new Bill. It also provides for appointment of Independent Directors in certain types of Listed Companies and in such cases the minimum number of Independent Directors shall not be less than 33 % of the total number of Directors. It also recognizes both accounting and auditing standards.

The Bill is the result of a comprehensive revision of the existing Companies Act, 1956 that started way back in 2004. In this context the Govt. had constituted an Expert Committee under the chairmanship of Dr. J.J. Irani in Dec. 2004.The Committee had submitted its report to the Govt. on 31st May 2005. After this a detailed consultation was done with various Ministries, Departments and Govt. regulators. The new Bill provides for the basic principles for all aspects of internal governance of corporate entities and framework for their regulation.

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KKP


Source: http://pib.nic.in/release/release.asp?relid=42085