This means that the standards prescribed by the ICAI have no mandatory application. This piggyback approach will downgrade the ICAI, another arm of the same regulator.

In what way the Central Government is competent to decide in which companies substantial shareholding interest, public borrowings and institution funding which constitute public interest are involved.

This is a matter to be decided on a case-by-case basis and the wisdom of the shareholders should prevail.

i) any expenditure incurred by the company in providing rent-free accommodation free of charge, any expenditure incurred by the company in providing any other benefit, amenity or annuity free of charge or at a concessional rate.

ii) expenses incurred by the company to effect any insurance on the life of, or to provide to, any person annuity or gratuity for his spouse or child.

This definition will have a wide-reaching effect. Many companies that are on the borderline of maximum remuneration and those employing relatives of employees (Section 314 of the Act) may have to revisit this area for a review.

Other features

Companies can commence business without obtaining any certificate of commencement of business; merely passing a special resolution and filing it with the Registrar of Companies (RoC) is all that is required.

For the formation of a company, the minimum amount to be subscribed for the memorandum is Rs 1 lakh and the subscription money has to be paid within a month.

Cost auditor: Can be appointed only at general meetings, not by the board as hitherto, and must hold a certificate of practice.

Independent director: Companies should have little less than 50 per cent of the total number of directors, which will mean that companies having seven and nine directors can have three or four respectively.

Their attributes, duties and functions will be governed by subordinate legislation.

Secretarial compliance (clause 87 of the Bill): Appointment of secretary mandatorily and the appointment of company secretaries in whole-time practice for compliance certificate are all grouped.

Company secretaries appointed under the mandatory provisions should be in whole-time employment of the company.

Nobody can be company secretary of two companies.

Auditor disqualification (Clause 58): Among the grounds of disqualification, the most pernicious one relates to the powers delegated to the Central Government to prescribe other disqualification grounds. An unacceptable suggestion.

Articles of association and memorandum of association (AoA and MoA): Companies were at a liberty to amend, alter or substitute the set of AoA by merely passing a special resolution and filing it with the RoC.

Curiously, clause 87 of the Bill proposes, inter alia, that such alterations will have to be registered with the RoC and they will take effect only upon such registration.

This infringes on the fundamental rights of the company to run its business the way the owners want. And where substantial public interest in involved, the proposal appears particularly ridiculous.

Inter-corporate loans: Clause 76 embraces even private companies. Privileges enjoyed by them (through exemption from the purview of Section 372A) are withdrawn. On one side, there is talk of simplification and deregulation and, on the other, fresh areas of government control are sought to be brought in.

Penal provisions: Penalties for offences under various provisions are brought under one section.

This is a good attempt at streamlining, but at the same time there is a provision for payment of minimum penalty, which will encourage corruption and nepotism.

This may even amount to encroachment on the fundamental rights of the judiciary to decide cases purely on merits.

(The author is a Pune-based company secretary.)

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