Changes to Companies Act draw MPs' ire

Opposition says amendments should have been referred to the Standing Committee

As the debate on amendments to the Companies Act drew to a close, a Parliamentarian on Wednesday recalled an occasion when he was working on a Bill on migrant workmen. He had wanted to include one change, tweaking the title from migrant workmen to migrant workers, to make it gender-neutral. Even that required a standing committee reference.

A standing committee has members from different parties and examines Bills and amendments before those are taken up in the House. Such a reference is not mandatory but it is a generally accepted practice for Bills to be reviewed by the committee before being voted on.

A number of MPs (Members of Parliament) protested the fact that changes to the Companies Act were passed without a reference to the standing committee. The amendments include need to lower the proportion of minority shareholder votes for related-party transactions.

The Companies Act earlier required 75% of minority shareholders to approve transactions in which promoters or board members had an interest. An example of such a transaction would be a manufacturing company buying parts from another company owned by the promoter’s brother.

This provision in the Companies Act was seen as a way to empower minority shareholders. It was to help them defeat abusive transactions where promoters used their hefty voting power to pass transactions favouring and enriching themselves at the cost of other shareholders.

Earlier, a company would require the approval of 75% of minority shareholders, to pass such resolutions. This will be reduced to 50% after the latest amendment.

Finance Minister Arun Jaitley told the House the moves were to ease the business environment. He said a number of representations had been received, saying ‘with some of these provisions, doing business in India is very difficult’.