New Delhi, Jan 4
IT may take a while before the new simplified Company Law comes into existence. The Ministry of Company Affairs, which is targeting the Budget Session of the Parliament to introduce the new Companies Bill, does not rule out the possibility of it being referred to a standing committee.
"We are targeting the forthcoming session of the Parliament. Currently, the Ministry is working with the Law Ministry to give the proposals the shape of a Bill. But remember, it is a massive exercise which requires a close coordination with other Ministries," the Minister of State (Independent Charge) for Company Affairs, Mr Prem Chand Gupta, told
The Government had decided to revise the existing Companies Act, 1956 and replace it with a compact law that would be able to address the changes taking place in the national economy as well as in the international scenario, Mr Gupta said. Asked about the contentious issue of Board composition and the strength of independent directors on a company's Board, the Minister said, "Under the new Company Law we may prescribe a number after consultation with various departments, subject to mandatory approvals. But the sector-specific regulators can always go ahead and prescribe a number."
Independent directors: As regards the SEBI provision under Clause 49 of the Listing Agreement, which came into effect from January 1 that at least 50 per cent of the Board should comprise independent directors, he said "the perception was that a strength of one-third independent directors could have been appropriate to begin with, as the structure of corporate India is, to a great extent, different from what is overseas. However, SEBI norms for corporate governance have come into effect. Now let us see the results."
Giving an example, the Minister said that in the US, less that five per cent companies were family owned, and more than 90 per cent were professionally managed. In India, on the other hand, the scenario was different with the number of family owned and controlled companies being visibly higher.
Boards for PSUs: On whether the Government should consider different set of norms for the composition of Boards of public sector undertakings, Mr Gupta said, "In the PSUs, there are in any case directors who have no direct interest in the company. The only thing is that they are nominated by the Government."
He pointed out that PSUs had nominees from financial institutions, banks, State or Central Government nominees and independent directors. The FI or bank nominees take care of the interest of the institution they represent but their larger role would be to protect the interest of the company, because if the company fails, their investment would be impacted.