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Richa Mishra

NEW DELHI, May 27

ANY liberalised regulatory framework does not come for free. If corporate India wants a liberal regulatory set-up, it must gear to shoulder more responsibility by ensuring greater transparency in its functioning. This is the thinking behind the recently introduced Companies (Amendment) Bill, 2003.

"The intention is to create greater confidence in the foreign as well as domestic investors," the Secretary, Department of Company Affairs (DCA), Mr Vinod Dhall, said in an exclusive chat with Business Line.

Explaining the philosophy behind the proposed Bill, the Secretary said the intention is to make the law as liberal as possible by doing away with excessive procedural requirements, however, with higher responsibility to abide by the law on the shoulders of the corporate sector.

The Bill is the outcome of the recommendations of three high-level committees - the Joint Parliament Committee that examined the stock market scam, the Naresh Chandra Committee on Corporate Audit and Governance, and the remaining provisions of the well-debated 1997 Companies Bill.

"A lot of thinking has gone in before the Bill was finally given a shape. There is a lot of emphasis on investor protection and corporate governance," the Secretary said.

The Bill, besides proposing greater transparency in accounting practices, and consolidation of balance sheets, also places limits, that would be prescribed, up to which companies will receive inter-corporate loans or deposits and the extent to which any company may make loan or inter-corporate deposits or inter-corporate investments.

It has also been specified that every company can make investments only through one investment company.

Commenting on the view expressed by a section of India Inc, especially on the issue of the role of an independent director and mandatory training for becoming an independent director, Mr Dhall said, "The issue was debated by the Naresh Chandra Committee, which had representatives from the corporate world. It should not spring an element of surprise."

Another issue raised by corporate sector has been a proviso proposed in the Bill to provide that sale, lease or otherwise disposal of the undertaking of a company in a financial year shall not exceed 20 per cent of the total assets of the undertaking or 10 per cent of total assets of the company, whichever is higher, in that financial year.

"This has been done in the interest of the small shareholder and it restricts the power of the boards. It was found that many a time, the assets were disposed of without the small shareholder knowing about it."

Talking about the theme of the Bill, the Secretary said, "based on the past experiences, a need was felt to protect the small shareholders who suffer due to the nexus between the big players and promoters in the market. Besides, there was a need to keep pace with the changing trends in international corporate laws."

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