The Hindu Business Line : Regulators get leeway on number of independent directors

The much-awaited new Companies Bill, 2008, which proposes to replace the existing Companies Act, 1956, envisages that those listed companies that are required to appoint independent directors should have a minimum number of 33 per cent of such directors of their total Board strength, while the regulator can give its own cap.

This puts to rest all speculations that the Ministry for Corporate Affairs may propose a contradictory view on the issue vis-À-vis SEBI’s requirement of a minimum 50 per cent of independent directors for listed companies.

“The concept of independent directors is proposed to be introduced gradually, beginning with listed companies above a particular size, with enabling powers with the Central Government for the concept to be extended to other class or classes of public companies,” said the Minister for Corporate Affairs, Mr Prem Chand Gupta.

On deposits

Addressing depositors’ concern, the Bill, which has got Cabinet nod on Friday and now will be placed before Parliament, has proposed that except those companies that have permission under special Acts such as the Reserve Bank of India Act, the others cannot raise deposits from public. In other words except non-banking financial companies, other corporates will not be allowed to raise money from public.

As regards restrictions on a holding company to set up any number of subsidiary companies, the Minister said, “The current global scenario requires our corporates to be competitive. And any kind of restrictions which will hamper their growth is not advisable. In the new Bill there is no restriction on number of subsidiary companies that a company may float.”

To curb instances where the promoters have issued shares at discount to themselves and increased their stake, the Bill prohibits issue of shares on discounts. It proposes a higher tenor for issue of preference share. A company may issue preference share for a period exceeding 20 years for such infrastructural projects as may be prescribed, subject to redemption of such percentage of shares as stipulated on an annual basis at the option of preference shareholders.