Special Clause To Enable Firms Top Limit On Inter-Corp
Corporates will be allowed to exceed the limit on inter-corporate loans and investments currently pegged at 60 per cent of their networth provided they are able to get their shareholders to approve a special resolution to this effect.
A new amendment will be introduced in this regard in the working draft of the Companies Bill 1997, which is expected to be passed in the forthcoming monsoon session of Parliament.
This was left out in the working draft. Were incorporating it in the final draft, said T S Krishnamurthy, secretary in the Department of Company Affairs, who is currently engaged in giving final touches to the proposed draft companies bill.
Addressing a meet organised by the Greater Mysore Chamber of Industry (GMCI), Associated Chambers of Commerce and Industry of India (Assocham) and Institute of Company Secretaries of India (ICSI) here, he said the committee would receive suggestions till June 30.
On the proposed amendment which pegs retirement age for non-executive directors at 70 and for managing directors and whole-time directors at 65, he said there would be no provision in the Bill which would bar companies from appointing these directors as advisors after they reach the age for compulsory retirement.
The bill proposes to bring down the time taken for approvals to set up new companies from 45 days to 20 days. Companies experiencing a delay of over 30 days can approach him directly for remedy, he suggested.
He assured industry that the DCA administration would be streamlined in six months. You will be able to see the changes, he said.
He denied that there were rigid provisions in the billl pertaining to buyback of shares by company managements with the intention of extinguishing them. The only stipulation, he said, was the debt-equity ratio should not exceed 2:1.
He said industry should desist from drawing comparisons with the buyback provisions in Europe because the situation was different. The debt-equity clause would remain, he said, though the government could consider consider relaxing it over time.
Indicating that re-introduction of the earlier clause could be done in future, he assured industry that he would put forward their suggestions before the committee.
On buy-back of shares for treasury operations,he said the voting rights of European companies were different from Indian. But added that this was left again to the discretion of companies.
However, H L Somany, Assocham president, cautioned that this bill would open the gate for hostile takeovers. In case of a hostile takeover, the `predator will be buying the shares with voting rights and the company will be buying the shares without the voting rights. This way, the company will not able to take full advantage of buy-back of shares to combat the hostile takeover, he said. The government plans to investigate seriously complaints of malpractices by companies by appointing a D-G, the secretary said.
On making company secretaries and auditors punishable for overlooking omissions, he said the government preferred this to be tackled at the level of professional bodies than involing itself.
But suspending of those who were found guilt should would improve the image of the professional chartered accountants institutions, he said.
The committee is also in favour of segregating public limited companies from private ones and a separate body is being set up for this.
Ends. SV. 20.06.1997