Icici, Ifci May Withdraw Nominees From Some Firms

Financial institutions ICICI and IFCI may withdraw their nominees from the boards of several companies. The move is intended to protect them from future disqualification from board level posts in other companies if they are directors of a defaulting company now.

Institutional sources said that consequent to the recent amendment of Section 274 of the Companies Act, 1956, all directors are liable to be disqualified for five years if they are on the boards of defaulting companies. This would apply to the institutional directors also which are governed only by the Companies Act.

While the Industrial Develop- ment Bank of India (IDBI), the Life Insurance Corporation (LIC), State Bank of India (SBI) and other PSU banks are governed by separate legislations, the Industrial Finance Corporation of India (IFCI) and ICICI are governed by the Companies Act, making their nominees liable for disqualification. Even government nominees in joint sector companies are subject to the same clause.

The amended section of the Companies Act has included companies which failed to file their annual accounts and returns for three consecutive years beginning April 1, 1999. It also includes companies that have not repaid deposits or paid interest, failed to redeem debentures on the due date or have not paid dividends for a year or more.

Finance ministry officials said that the institutions, particularly ICICI and IFCI, have taken up the matter with finance minister Yashwant Sinha. The ministry is taking up the matter with the department of company affairs (DCA) to get a blanket waiver for bank and institution nominees.