Rajya Sabha today approved a bill to amend the Companies Act with an aim of promoting ease of doing business. Finance Minister Arun Jaitley said that the law will be reviewed further by an expert committee to be set up shortly to see where the shoe still pinches.
According to PTI, as many as 16 amendments have been made to the Companies Act of 2013 which mainly deal with winding up of companies, board resolutions, bail provisions and utilisation of unclaimed dividends to bring the law in tune with the global standards.
Replying to a brief discussion on the Companies (Amendment) Bill 2014 which was passed by voice vote, Jaitley said the amendments were necessitated as there have been complaints from the corporates about the problems ever since the law was enacted in 2013.
Observing that the existing law had some stringent and difficult provisions, he said the amendments were aimed at simplifying bail provisions.
"Now, except in various issues of serious frauds, normal CrPC provisions" would apply", Jaitley said.
Contending that 16 amendments were not enough to cover everything, the Minister said that "a broad-based committee will continue to go into this question for the next few months as to where the shoe pinches, and this may not be the last amendments which we are bringing in."
The expert committee comprising representatives of bodies of company secretaries, chartered accountants, industry chambers and officials will look into the discrepancies and suggest changes, he said.
Talking about the problems faced by the corporates, he said the onerous provisions were dissuading entrepreneurs to incorporate companies and prompting them to set up Limited Liability Partnership (LLP) firms for carrying out business.
Referring to the amendments with regard to bail provisions for violations under the Companies Act, Jaitley said minor offences would be tried in a routine manner by the courts.
With regard to trying fraud cases, he said, all cases under the Companies Act cannot be tried by a Special Court and that only "serious offences" will go to such courts while the others would be tried by normal magisterial court.
As regards the provisions for winding up of companies, the existing Act provided that the case be heard by a bench of three judges. The Finance Minister said he was altering this as the procedure prescribed for winding up of companies was very complicated. He added that the concept of company seal, which is a "relic" as far as global laws are concerned, was being done away with.
Referring to the amendment relating to prohibition of acceptance of deposits by the companies, Jaitley said, the Act did not provide for violation of that provision and added "that gap is to be filled up by virtue of amendment."
As regards the provision for inspection of company records, he said, it would not be incumbent on the companies to reveal board resolutions as they contain financial strategy and other important information.
"Annual General Meeting (AGM) resolutions are meant for public display but board resolution are not. A board resolution can contain its entire corporate strategy.
financial strategy, intellectual property strategy. Those are not available for public display. This Act obliterated the disctinction between Board and AGM resolutions. The correction has been made," he added. .
Talking about another amendment, Jaitley said, there is a provision for setting off past losses and depreciation before declaring dividend. "This provision was put in rules, without being put in the Act. So the gap, as far as the drafting is concerned, that has to be rectified," he added.
Similarly the drafting error with regard to transferring unclaimed dividend into the investor education fund was being rectified. The amendment, he said, will also provide a threshold for reporting fraud cases to the government.
"Now people make various kinds of allegations of fraud. fraud can be very widely defined. So, threshold has to be provided so the cases above the threshold that may be reported to the central government," he added.
The Minister further said he was addressing the issues concerning related party transactions which is resulting in "rule by minority" in companies where the relatives and spouses are directors.
In order to address the problem of voting in such cases, the Finance Minister said, "for present I am diluting it (the voting provision) to an ordinary resolution."
He further said that issues concerning related party transactions with regard to a company and wholly owned companies too were being addressed through the amendments.
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