New Delhi, Oct. 21: The cabinet today refused to clear the Companies (Amendment) Bill, 2003, drafted by the Department of Company Affairs (DCA) and asked it to redraft the bill.
Parliamentary affairs minister Sushma Swaraj told reporters that the Bill was taken up by the cabinet for discussion but the DCA was “asked to withdraw the Bill and come up with a fresh draft bill”.
Companies have been eagerly waiting for the Companies (Amendment) Bill which, when passed, will help them restructure their operations. However, they have been peeved with some provisions that were originally proposed, including the clause that made it mandatory for company boards to have one women director.
However, the proposal had sparked a controversy with industry associations lobbying against a provision that smacked of gender bias in awarding directorships, arguing that merit should determine whether or not a woman breaks the so-called glass ceiling that limits their career progression.
The DCA had eventually dropped the proposal — apparently accepting the argument that Parliament ought not to legislate on reservation for women on company boards when it failed to reach consensus on the proposal for 33 per cent seat reservation for women in legislature. It is not known what the cabinet found objectionable in the Bill placed by the DCA which had also watered down certain other provisions that were designed to usher in good corporate governance.
For instance, it had initially been proposed that two-thirds of the board positions should go to independent directors. The DCA had relaxed this requirement to just 50 per cent.
The DCA is also reported to have introduced a clause that set a limit on the number of subsidiaries that a company should be allowed to float and had made it mandatory for a group not to form more than one investment company. The draft also proposed to drop the clause related to the 75-year retirement age for the board of directors of any company.
Companies have been keen to see that the Bill goes through Parliament in the winter session so that they can take some vital decisions within this financial year. It now remains to be seen whether DCA will be able to get its act together and present the Bill in time.
On the cabinet’s decision to refer the bill back to the DCA, Omkar Goswami, chief economist of the CII, said, “Corporate governance in India is undoubtedly the best. It is more important to have a proper, manageable and implementable law than to rush in for the legislative process.”