Dca Not To Get Quasi-Judicial Powers
The move by the Department of Company Affairs to arm itself with quasi-judicial powers along with its suggestions to include prior government approval under buy-back are likely to be spiked in the face of intense pressure from finance ministry and the prime minister's office.
The DCA had proposed in a cabinet note that independently of the Company Law Board, the department should be allowed to summon and even engage in search of premises to investigate corporate misdemeanor.
Similarly, the department's proposal to allow issue of sweat equity on a sector-specific basis is not likely to be endorsed by the cabinet, slated to meet in the next fortnight. The proposal, if accepted, will be extended to all sectors.
A revised note incorporating the relevant changes will be put upto the cabinet for approval. "The notings of other ministries have been taken note off and appropriate decisions will be taken," a senior government official in the cabinet secretariat said.
In addition, the cabinet will also take a decision on the fate of the Companies Bill, 1997 (which is lying open in the Rajya Sabha at present). According to highly placed officials in government, the cabinet will decide as to whether to refer the Bill to a select committee or be withdrawn completely (an option, which is not likely to be considered).
"The select committee would be favoured as it would consist of experts. But this is a government decision and we will have to await the cabinet meeting," an official said.
The finance ministry had opposed the proposal that companies be mandatorily required to seek the government's prior approval for buying back their shares on the grounds that this would contrary to the liberalisation policy being pursued by the government.
It had also opposed the proposal to restrict the issue of sweat equity by computer software companies to promoter-directors, whole time directors or employees for providing any know-how intellectual property or value addition to the company.
In the ministry's view, shareholder approval was a sufficient check on a companies intentions on buyback. Several safeguards to prevent companies from misusing the share buyback clause have been included in the cabinet note.
This includes disclosure of the class of shares to be purchased and the fund requirements for such buybacks.
In addition, companies have been required to furnish a clear time-table on the buyback of shares.
The cabinet note was circulated by DCA in prepartion for the government move to initiate an ordinance to effect changes in the Companies Act, 1956 to incorporate buyback and sweat equity for the information technology segment.
The ministry had argued that sector-specific concessions was not tenable in any court of law. In fact, government officials said, that they concurred with this view and if the cabinet was willing suitable amendments will be made to allow other sectors the right to issue sweat equity.