The much-awaited makeover…Indian Companies Act in its proposed New ‘Avatar’

As the Government of India reportedly plans introducing the Companies Bill, 2008 in Parliament, hopes for a long overdue modernisation of company law seem close to fulfilment.

The review/redrafting of the Companies Bill was carried out by an Expert Committee through a consultative process, by eliciting views of various Ministries, Departments and Government Regulators.

Primarily intended to revitalise the Corporate reality of emergent India the Bill aims to bring it at par with the international best practices geared towards fostering/facilitating entrepreneurship, investment and growth.

The Bill, with its thrust on Good Corporate Governance, is expected to emphasise:

·   Stronger protection of the rights of minority stake-holders; responsible self-regulation with disclosures and accountability; substitution of government control over internal corporate processes and decisions by shareholder control.

·   A new entity in the form of One-Person Company.

·   Retains the concept of Producer Companies, while providing a more stringent regime for ‘not-for–profit’ companies to check misuse.

·   Expansion of e-Governance initiative of the Ministry of Corporate Affairs (MCA-21) to all processes of compliances and also provide access to corporate data through internet to all stakeholders, round the clock.

·   Relaxation of extant restrictions which limit the number of partners in entities (e.g. partnership firms, banking companies)to a maximum 100 - with no ceiling as to professions regulated by Special Acts.

·   Mandatory consolidation of financial statements of subsidiaries with those of holding companies.

·   Single forum for approval of M&As along with concept of ‘deemed approval’ in certain situations.

·   Revised framework for insolvency, including rehabilitation, winding-up and liquidation of companies, based on models suggested by the United Nations Commission on International Trade Law (UNCITRAL).

·   Consolidation of fora for dealing with rehabilitation of companies, their liquidation and winding up in the single forum of National Company Law Tribunal with appeal to National Company Law Appellate Tribunal. Special Courts to deal with offences under the Bill.