A day after releasing a concept paper on the Companies Act, Company Affairs Minister Premchand Gupta, discussed how the new proposals would make compliance easier for India Inc in an interview with Vishaka Zadoo and Priti Patnaik.
Excerpts:
How does the concept paper propose to help Corporate India?
The aim is to make compliance easier, remove redundant provisions and add greater flexibility in rule-making. We want to improve compliance through simplification of laws, rather than just over-burdening corporates with regulations.
The present Act has 781 sections and several schedules, which are not easy to interpret or implement. Moreover, changes in the earlier Act were made in a piecemeal manner, but, with this paper, we propose to undertake a comprehensive overhaul.
How have you balanced the interests of small investors, while proposing greater flexibility for companies?
The corporate world needs to be shorn of unnecessary formalities, which just add to the costs. It should have greater autonomy but the government simultaneously has to balance the interests of stakeholders.
The protection of shareholders and small investors is paramount, which is why companies must fulfill some obligations for more transparency.
What suggestions have been made to prevent companies from vanishing?
To prevent promoters from disappearing, we have decided to get into the root of the problem.
We have proposed that promoters and directors need to mandatorily submit a copy of their passport, photograph and Permanent Account Number at the time the company is registered.
This is to ensure that incidence of vanishing companies are reduced to a minimum.
Has any other step been taken to prevent companies from duping investors?
Yes, we have also made it clear that companies can change their name once only in five years.
At present, companies are free to change their name any time, which can confuse investors. We, however, may relax this provision for genuine cases.
How is the concept paper different from the Companies (Amendment) Bill, 2003?
The Bill was not easy to interpret and stakeholders were not involved during its preparation, which is why it had to be sent back.
Hence, this time we decided to take into consideration the opinions of all affected parties, including banks, financial institutions, companies and chambers, before drafting the Bill.
We have already put the paper on the official website and will be expecting responses during the next three months.
What is the present stand on the various controversial issues contained in the Companies (Amendment) Bill, 2003, like the composition of board and reservation for women directors?
We are open to suggestions, and let me assure you that that the decisions taken regarding the number of independent directors on the board, multi-layered subsidiaries and quota for women directors, will reflect popular opinion. We do not want to enforce anything on the corporate world.
What steps have you taken for penalising a defaulting party?
A separate schedule for penalties has been constructed. At present, penalties are a token amount and we have raised them substantially. We also propose to link the magnitude of the penalty with the gravity of the offence.
How do you propose to demarcate the functions of company affairs ministry and the Securities and Exchange Board of India?
There is no conflict so far as this aspect is concerned. While Sebi deals with matters related to stock exchanges and public issues of listed companies, my ministry looks into all prospective issues of listed and unlisted companies.
Sebi and the company affairs ministry do not have overlapping functions. In fact, they have the same goal.
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