The government is planning to bring in radical changes in the new Companies Act like permission to start one-person companies and time-bound bankruptcy proceedings.
Through the new Act the government also hopes to remove the smoke-screens used to hide the real promoters of companies.
The new registration process would require detailed declarations and disclosure about promoters and directors at the time of a company's incorporation, official sources told Business Standard.
The changes are being brought in to offer better flexibility to companies as well as to bring about better transparency in their functioning.
"The broad thrust of the new Companies Act will be to remove superfluous regulations and replace them with laws in sync with current realities," the official said.
The proposed amendments are currently being discussed at various official forums. "Once finalised, the note will be put up for the Cabinet's approval. Subsequently, the Act will be tabled in Parliament," the official said. It is likely that the legislature may refer the Bill to a standing committee to deliberate its various aspects.
Currently, a private company can only be incorporated if there are two promoters. To register a public company, at least seven shareholders are required. Several start-ups see this as an irritant, which will be ironed out once one-person companies are allowed.
A provision aimed at enhancing corporate governance is also likely to be incorporated in the Act. This will seek to encourage, through a comprehensive legal framework, "responsible self-regulation" by companies.
"The amendment will enable the law to respond to regulatory requirements of an ever-growing and changing business environment," the official added.
As such, a dynamic model that focuses on procedural and quantitative aspects being clearly addressed through rules is being pursued.
The current effort to amend the Companies Act has been preceded by a number of such attempts. There have been 24 amendments in the past, with major amendments being made in 1988 and 2002.
The current round of proposals to amend the Act included the constitution of the JJ Irani committee to make recommendations.
The sources also said more provisions were likely to be added, including several mooted by the Planning Commission. The Plan Panel had earlier raised the issue of India not having a modern bankruptcy law.
It had suggested the introduction of a separate section on bankruptcy or a new bankruptcy law that facilitates the exit of failed management at the the earliest.
