Sibal: Initiate change

New Delhi, Aug. 29: The cabinet today approved the draft of a new companies bill that provides for the appointment of a minimum 33 per cent independent directors on boards and proposes to do away with the minimum paid-up capital clause.

The new bill will replace the Companies Act 1956 and will be tabled in the next session of Parliament beginning October, science and technology minister Kapil Sibal said after the cabinet meeting.

“The new bill will change the nature of corporate governance and make firms globally competitive,” Sibal said.

On whether the provision for 33 per cent independent directors would supersede Clause 49 of Sebi’s listing agreement, the minister said, “The provisions of the special law will remain. It will not supersede them.”

According to the Clause 49, it is mandatory for a company with an executive chairman to have independent directors making up half of its board.

Sibal said the bill also allowed individuals to set up a company, while lawyers and chartered accountants could float entities with unlimited partners.

The new bill will also remove restrictions on the number of subsidiaries a company can have, apart from pushing e-governance and electronic voting by shareholders.

According to Sibal, the issuing of shares on discount will not be allowed. At present, some promoters issue shares at a discount for themselves, he said. The proposed law recognises the chief executive officer, chief financial officer and company secretary of a company as “key managerial personnel” and provides for a single forum for mergers and acquisitions.

Companies will not be allowed to raise deposits from the public, except in special cases allowed by law. There will also be provisions for shareholder democracy and a special court will be set up to deal with offences.