The Minister for Corporate Affairs Veerappa Moily is set to meet representatives of India Inc to sort out differences over the finer points of the new Companies Bill, 2011 as certain provisions of the legislation have not gone down well with the corporates.
"We have got certain recommendations from the corporate representatives and they have serious objections over certain provisions. They have sought clarity and further discussions over these provisions with the minister," a senior official at the ministry of corporate affairs told Mail Today.
According to the sources the corporates wants more clarity on the role of independent directors and the strict role of auditors.
"The minister will meet them next week and hold separate meetings with PSU representatives to brief them about better corporate structure in the light of the new Bill," the official said.
The minister had already said that the government intends to table the Bill in the ongoing winter session of Parliament.
The Bill has many new provisions like a one-man company, compulsory contribution of 2 per cent of profit to corporate social responsibility (CSR) activities and stricter roles for auditors.
The Bill envisages special rights and autonomy to the Serious Frauds Investigation Office (SFIO) and will make it equivalent to CBI. Thus, it will not have to wait for an executive order to probe corporate in case of suspicion of fraud. However, corporates fear misuse of these powers and are seeking clarity on their role.
The government is also retaining various contentious provisions in ted to the audit committee. A copy of that report will be put online. This provision has not going down well with India Inc.
"Even for rotation of audit firms and partners, we have retained the original stipulation which disallows any company to appoint or re-appoint an individual or a firm as auditor for more than five consecutive the new Companies Bill. These include fixed term for four years for independent directors and rotation of auditors every five years. This is despite concerns raised by industry.
Also, auditors will be directly accountable for any financial lapses. If they locate any problem areas, they have to underline the fault lines in their report submit- years," an official source said.
Industry chambers Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry ( Ficci) have already raised their concerns over the role of auditors saying it may not be the best practice.
The Bill has allowed manufacturing companies to have more than one subsidiary while its investment arm will be permitted to create only one subsidiary.
This too, has not gone down well with the corporates.
The provision relating to class action suits, where stakeholders can directly sue a company in case of mismanagement and claim damages too, has also raise India Inc's hackles.
The Bill also proposes to tighten the laws for raising money from the public and prohibit insider trading by company directors or key managerial personnel by treating such activities as a criminal offence and proposing serious penalties.
"There are strict provisions in the Bill to protect the rights of the minority stake holders," Moily told reporters last week.
Courtesy: Mail Today