Irani sub panel to pore over company law provisions

The JJ Irani committee on company law has decided to form sub committees to examine various issues relating to the new company law.

At their first meeting here today, major issues including those relating to independent directors, disclosures, penalties and prosecution were discussed.

"The committee should see that substantive provisions are retained in the main law and only procedural and operational aspects should be left to the rules," PC Gupta, minister of state for company affairs, told the committee members before the meeting.

He was referring to the concerns expressed by many regarding excessive delegation of power to the government in the proposed law.

"The expert committee should not feel fettered by the provisions proposed in the concept paper. The committee should feel free to consider and make recommendations on all issues," Gupta said.

The issues discussed included the suggestion in the concept paper to extend the scope of independent directors beyond listed companies. Further, the committee is also examining separating provisions relating to companies in which public interest is not involved.

Gupta told the committee before the meeting that the framework applicable to purely private companies compared with those where substantial public interest is involved should be separate.

Meanwhile, another issue before the expert committee is whether there should be a separate insolvency law. The suggestion stems from the reasoning that the new act can be made even more compact by placing the provisions relating to insolvency in a separate act.

The expert committee is likely to meet again within the next two weeks. At around the same time the government is likely to release the first draft rules for public comments.

The expert committee has been given a wide scope to cover all aspects of the law and focus on protecting the interests of stakeholder.

The committee has also been asked to suggest ways to make the law compact with flexibility in rule making. It will also consider the feedback received by the ministry of company affairs on the concept paper.

The government has invited UK Sinha, joint secretary, Department of Company Affairs, and MR Umarji, advisor (legal), Indian Banks' Association, Mumbai, to take the committee strength to nineteen.

Experts have cited instances of excessive delegation in the concept paper such as the provisions related to conducting of general meeting which have been relegated to rules.

As per the concept paper, "the central government may prescribe the rules regarding notice, conduct of the meeting, quorum, voting, entitlement of members to appoint proxies and other matters for conducting any general meeting."

Similarly, the requirement to include the director's responsibility statement has been left to the rules. The concept paper says that the matters to be included in the director's report will be prescribed.