The Hindu Business Line : `Co law changes must address compliance cost'

INDIA Inc is in favour of a slim-and-trim company law. But it also wants any simplification of the existing law to address the issue of rising cost of regulatory compliance.

The Department of Company Affairs (DCA) has already started work on coming up with a concept paper that may form the basis for enacting a trimmer and slender version of the Companies Act.

"There is a general feeling that excessive regulations under the law are forcing the company boards to spend more time on compliance and implementation rather than on the company's growth," a senior FICCI official said.

"What is important is that the law should be enabling rather than detrimental to competition and effective growth of the corporate sector. Further, regulations should be made applicable only for listed public limited companies, which have public exposure."

The FICCI President, Mr Y.K. Modi, has been calling for a simple and crisp law for private companies where public money is not involved.

The chamber agrees with the Government view that the company law must provide adequate protection to investors, shareholders, creditors, employees and other persons concerned to ensure that corporate wrongs are quickly and effectively addressed and those responsible are punished.

"The law should provide only the framework. The details should be left to be evolved by corporates themselves with the consent of the shareholders."

In a background paper for a recent conference on legal reforms, the chamber sought the views of the participants on issues such as holding subsidiary company structure, inter-corporate loans, and officers in default, as well as age restriction on appointment and removal of managerial personnel.

The paper said: "If we want capital formation to take place and are looking for entrepreneurship in a major way, it is important that restrictions are not imposed on holding subsidiary company structure."

Besides, there is no logic for imposing restrictions on inter-corporate loans and investments, as it would unnecessarily hamper the growth of the corporate sector. "Any restriction of this sort would limit the ability of companies to grow `laterally and horizontally'."

The paper also stressed that ordinary or non-working directors, including nominee directors, should not be involved in legal proceedings at par with the managing director or whole-time director or manager looking after day-to-day affairs of the company.

On the issue of majority independent directors on a company's board, the paper said, "It is not always necessary that (the presence of) majority independent directors on the board would lead to better corporate governance practices."

More Stories on : Regulatory Bodies & Rulings | Company Law

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Veronica Labs engages SRL Ranbaxy to monitor AIDS drug

HLL reduces Clinic Plus prices

Prostrate drug from Dr Reddy's

Grasim's VSF plant resumes operations

Hyundai hikes Accent GVS price

Merck net up

Tata Motors' FCCB issue

`Co law changes must address compliance cost'

MAS Enterprises diversifyng

Maruti invests Rs 10 cr in centre for excellence

Kalindee keen on joint venture with DMRC for metro projects

Wipro Consumer Care to focus on topline growth

Salem Steel posts operating profit

Indian CEOs thinking global, says study