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The Lok Sabha on Wednesday cleared the Companies (Amendment) Bill, which seeks to ease related-party transaction norms and ensure severe punishment for those raising illegal deposits from the public. The amendments also propose restricting hearings by special courts to serious offences.
The Bill, containing 14 amendments, was passed by voice vote. This followed the Congress raising objections to the Bill, demanding it be referred to a standing committee. The demand was, however, turned down.
Replying to a debate on the Bill, Corporate Affairs Minister Arun Jaitley said the amendments spanned four types of changes - increasing the ease of doing business, correcting drafting errors, fixing oversight and changing clauses that were "harmful to doing business".
The current Act provides for special courts taking up offences under the Companies Act. "Are we trying to induce or scare investors," Jaitley asked, adding henceforth, only severe offences would be tried in special courts.
He said "oppressive provisions" had been removed from the Companies Act 2013, as it was felt "nobody will come here to set up business if such an environment persists". He added the United Progressive Alliance government had repealed the Prevention of Terrorism Act, brought about by the Atal Bihari Vajpayee-led National Democratic Alliance, alleging its bail provisions were draconian. But these stringent provisions, Jaitley said, were included in the Companies Act, 2013.
"A terrorist can get bail, but a company official cannot," he said.
The Bill also amends provisions pertaining to related-party transactions.
The amendments include replacing 'special resolution' with 'ordinary resolution' for approval of related-party transactions by minority shareholders. This means companies will require the consent of 50 per cent of the minority shareholders present, instead of 75 per cent (under the current Act).
The amendments include a new provision that prohibits the public inspection of the board resolutions filed with the Registrar of Companies, according to an official statement. Company professionals have approached the Ministry of Corporate Affairs, saying board resolutions, if made public, will reveal a company's strategy, inadvertently helping its rivals.
Jaitley said the provision that board resolutions of a company be thrown open to public scrutiny wasn't followed in any other country. He added it would be unwise to expect a company to alert its rivals by making public its board decision to, for instance, launch a new car model or a new trademark. He said resolutions adopted at annual general meetings alone would be open to public scrutiny.
The Companies Act, 2013, also had drafting errors, the minister said. For instance, dividend not claimed for seven years goes to an investor-protection fund but shares not claimed for a year returns to the company. The Bill seeks to address such issues.
The Companies Act, 2013, was notified in August last year by the United Progressive Alliance government. Of the 470 sections in the Act, 283 sections and 22 sets of rules corresponding to these sections have been implemented so far.
