A meeting on Thursday sought to clear a last-minute hurdle on passage of the new Companies Bill. Government officials met a Securities and Exchange Board of India (Sebi) representative on Thursday and sought suggestions. Necessary changes are expected to be incorporated.
Clearance was deferred by the Cabinet earlier this week because the finance minister raised some queries, based on certain concerns expressed by the market regulator.
“We worked on the Bill and sent suggestions about six months ago. Recent judgements on cases involving private placements might also have changed the position,” a senior Sebi official who dealt with the Bill said and directed further queries to the legal department handling the issue.
J Ranganayakulu, executive director (legal), Sebi, in New Delhi for the meeting with government officials, could not be reached for comments.
Some of Sebi’s key concerns included provisions regarding insider trading and private placements by unlisted companies, said a government official familiar with the matter.
Under Sebi rules, violations of insider trading regulations attract a penalty of Rs 25 crore or three times the gains made from such trades. However, the new Bill provides for a fine of up to Rs 1 crore. Another issue is that of private placements by unlisted companies. Of late, a number of companies have been found using this route to raise money from the public.
The lack of a clear demarcation of jurisdiction between the central government and the market regulator on such areas where the company law and Sebi rules overlap has created scope for regulatory arbitrage. Specific clauses of the new law are likely to be tweaked to limit the scope for multiple interpretations in these areas, according to the official.
The Bill, once approved by Parliament, will lead to a comprehensive revision of the Companies Act, 1956. It aims at providing a clearer framework for good governance by strengthening the powers of all stakeholders, including minority shareholders. The Bill also provides greater flexibility in procedural aspects to bring Indian company laws on a par with the internationally accepted standards.
Most of the changes in the Bill happened after the Satyam accounting fraud, where the promoters admitted to having manipulated financial accounts.
Amendments have been in the offing for nearly 10 years, with successive governments working on improved versions of the Bill.
The Bill was referred to a parliamentary standing Committee in 2009 and the ministry had incorporated most of its suggestions while finalising the current version.
