The Companies (Amendment) Bill, 2003, introduced in the Rajya Sabha, is only the first step in a three-stage process planned this year by the department of company affairs to tighten the regulatory regime for corporates.

Two other legislation will be introduced in 2003-04 for overhauling the disciplinary mechanism for chartered accountants, company secretaries and cost and work accountants, and for setting a framework on related-party transactions, valuation of companies and a simpler dispensation for private limited companies and partnership firms.

Government officials said a Bill to revamp the disciplinary mechanism in the three professional institutes had been sent to the law ministry for approval and was proposed to be introduced in the monsoon session of Parliament. The Bill is based on the recommendations of the Naresh Chandra committee on corporate-auditor relationships.

The committee had recommended doing away with the present two-tier disciplinary mechanism to enable the Institute of Chartered Accountants of India to penalise without going to the high courts for review.

The establishment of a prosecution directorate in the ICAI was also proposed. Further, it suggested the establishment of quality review boards for the three professions.

The department planned to introduce the second Companies (Amendment) Bill later in the year to issue norms for company valuation and to enhance penalties, officials said.

It proposes to implement norms like pricing and valuation of related-party transactions and also provide for a disciplinary mechanism for errant companies. Accounting standards for related-party transactions have already been put in place by the ICAI.

A committee under the chairmanship of corporate lawyer Shardul Shroff has submitted its report on valuation of companies, recommending licensing valuers.

It suggested that all unlisted and private companies with a minimum networth of Rs 100 crore (Rs 1 billion) or a turnover of over Rs 500 crore (Rs 5 billion) should be subjected to valuation norms. For unlisted companies accepting deposits, the threshold limit for networth has been pegged at Rs 25 crore (Rs 250 million) and the minimum turnover has been prescribed at Rs 150 crore (Rs 1.5 billion).

The committee has also recommended the introduction of a separate chapter on valuers and valuation in the Companies Act. Officials said while some of the recommendations of the committee could be implemented without amendments to the Companies Act, issues like appointment and licensing of valuers, prescribing of disciplinary rules and regulations would need legislative change.

They also said the second Naresh Chandra committee on private limited companies and partnership firms was looking at some 40-odd issues of the Companies Act, including aspects like the need for DCA clearance for setting managerial remuneration, compliance with norms related to holding statutory meetings and preparing statutory reports like the annual report in the prescribed format, fresh issue of shares and restrictions on giving loans for purchase of own or holding company's shares.