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What the Companies Bill Means for You ?

It has been eight long years since the process of ushering in a new Companies Act began. A new concept paper was first made public on August 4, 2004. However, Murphys Law always prevailed. For instance, the Companies Bill,2008,could not be passed because the Lok Sabha itself was dissolved. Then the Companies Bill, 2009 was drawn up, on which the parliamentary standing committee gave its recommendations. Once these were incorporated, we had the Companies Bill, 2011,which was introduced in the Lok Sabha on December 14, 2011.However,as it contained some new provisions not earlier referred to the committee, the Bill had to be hastily withdrawn. In June,2012,the committee gave its final comments on the Bill including the new additions. India Inc and its shareholders are now waiting for the tabling of yet another Companies Bill during the forthcoming monsoon session of the Parliament.

Provisions relating to e-governance, enhanced accountability on the part of companies, their directors and even auditors, introduction of a diversified board which includes a woman director, introduction of CSR norms, statutory recognition of a statutory fraud investigation office and so on should improve the investment eco-sphere and help investors. This apart, there are several provisions that directly benefit the shareholder, including small shareholders.

The Companies Bill,2011 has incorporated a majority of suggestions made by the committee. While the recommendations are not mandatory but recommendatory, unless there is a dissent note by the ministry these are included in the Bill tabled before Parliament. An analysis of the replies of the Ministry of Corporate Affairs to the standing committees suggestions shows that some dissent points may actually strengthen shareholder protection. Improving the lot of the small shareholders seems to be the buzz-word these days. Even the Senate Committee in Pakistan has taken what can be termed as a dramatic step to benefit the small shareholders. On June 7,it approved a provision that listed companies with free reserves of more than 50% of their paid-up capital must distribute at least 40% of taxed profits as cash dividends. This will apply from July next year.

While India's proposed law does not contain such a measure, shareholders do have much to cheer about when it comes to protection of their interests and facilitating ease of operations.

Here is a quick primer analysing what is likely to be in store for the shareholders in the forthcoming Companies Bill. While some provisions will need a lot more to be done, such as setting up of the National Company Law Tribunal, others once enacted will be of immediate help to shareholders.

The analysis has taken into consideration the recommendations released by the Committee in June-end and the Companies Bill,2011

It has been eight long years since the process of ushering in a new Companies Act began. A new concept paper was first made public on August 4, 2004. However, Murphys Law always prevailed. For instance, the Companies Bill,2008,could not be passed because the Lok Sabha itself was dissolved. Then the Companies Bill, 2009 was drawn up, on which the parliamentary standing committee gave its recommendations. Once these were incorporated, we had the Companies Bill,2011, which was introduced in the Lok Sabha on December 14, 2011.However,as it contained some new provisions not earlier referred to the committee, the Bill had to be hastily withdrawn. In June,2012,the committee gave its final comments on the Bill including the new additions. India Inc and its shareholders are now waiting for the tabling of yet another Companies Bill during the forthcoming monsoon session of the Parliament.

Provisions relating to e-governance, enhanced accountability on the part of companies, their directors and even auditors, introduction of a diversified board which includes a woman director, introduction of CSR norms, statutory recognition of a statutory fraud investigation office and so on should improve the investment eco-sphere and help investors. This apart, there are several provisions that directly benefit the shareholder, including small shareholders.

The Companies Bill,2011 has incorporated a majority of suggestions made by the committee. While the recommendations are not mandatory but recommendatory, unless there is a dissent note by the ministry these are included in the Bill tabled before Parliament.
An analysis of the replies of the Ministry of Corporate Affairs to the standing committees suggestions shows that some dissent points may actually strengthen shareholder protection. Improving the lot of the small shareholders seems to be the buzz-word these days. Even the Senate Committee in Pakistan has taken what can be termed as a dramatic step to benefit the small shareholders. On June 7,it approved a provision that listed companies with free reserves of more than 50% of their paid-up capital must distribute at least 40% of taxed profits as cash dividends. This will apply from July next year.

While India’s proposed law does not contain such a measure, shareholders do have much to cheer about when it comes to protection of their interests and facilitating ease of operations.

Here is a quick primer analysing what is likely to be in store for the shareholders in the forthcoming Companies Bill. While some provisions will need a lot more to be done, such as setting up of the National Company Law Tribunal, others once enacted will be of immediate help to shareholders.

The analysis has taken into consideration the recommendations released by the Committee in June-end and the Companies Bill,2011

Key Changes at a Glance