New Delhi August 30, 2008 Business Standard
The government today approved the introduction of a new single, comprehensive law to govern the Indian corporate sector. The Bill is expected to be tabled in Parliament during the upcoming October session.
Among other things, the Companies Bill 2008 proposes to tighten the rules governing share sales by firms to their owners, to bar issuance of shares at a discount to owners, does away with shares that have differential voting rights and scraps the requirement of minimum paid-up capital.
The Bill proposes the requirement to appoint independent directors, where applicable, at a minimum of 33 per cent of the total number of directors. “However, any ruling by regulators like the Securities and Exchange Board of India will override the provisions of the Companies Bill,” Corporate Affairs Minister Prem Chand Gupta told reporters.
Clause 49 of Sebi’s listing agreement states that 50 per cent of the Board has to comprise independent directors if it is headed by an executive chairman and 33 per cent for a non-executive chairman. The Bill also mandates that every company needs to have at least one director resident in India.
The Bill recognises insider trading by company directors or key managerial personnel as an offence with criminal liability, while also identifying the company as a separate entity in cases where monetary penalties are imposed on executives. It does away with restrictions on the number of subsidiaries that a company can have, envisages a single forum for mergers and approvals, a separate framework for enabling fair valuations and recognition of both accounting and auditing standards.
Among other things, the Companies Bill 2008 proposes to tighten the rules governing share sales by firms to their owners, to bar issuance of shares at a discount to owners, does away with shares that have differential voting rights and scraps the requirement of minimum paid-up capital.
The Bill proposes the requirement to appoint independent directors, where applicable, at a minimum of 33 per cent of the total number of directors. “However, any ruling by regulators like the Securities and Exchange Board of India will override the provisions of the Companies Bill,” Corporate Affairs Minister Prem Chand Gupta told reporters.
Clause 49 of Sebi’s listing agreement states that 50 per cent of the Board has to comprise independent directors if it is headed by an executive chairman and 33 per cent for a non-executive chairman. The Bill also mandates that every company needs to have at least one director resident in India.
The Bill recognises insider trading by company directors or key managerial personnel as an offence with criminal liability, while also identifying the company as a separate entity in cases where monetary penalties are imposed on executives. It does away with restrictions on the number of subsidiaries that a company can have, envisages a single forum for mergers and approvals, a separate framework for enabling fair valuations and recognition of both accounting and auditing standards.
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