Dave Committee Underlines Changes In Companies Act

The Dave panel set up by the Association of Merchant Bankers of India (Ambi) has pointed out amendments required in the Companies Act.

The amendments are significant in the light of the new Companies Bill to be presented in Parliament.

According to the draft report, presently circulated among the Ambi members, clarifications have been sought in the definition of a prospectus in the light of introduction of concepts like book-building. There are as many as 25 amendments sought by the panel to streamline the legal infrastructure in the countrys capital markets.

The report says that there is a need for clarification in the context of private placement. The scope and extent of disclosure provision for private placement needs specific definitions.

 

The report observes: certain large private placements have been attempted by issuers including public sector entities which are obviously in clear violation of the prospectus requirements and consequently do not carry requisite accountability. This needs to be urgently corrected and stringent enforcement action should be taken where public offering has been made in the guise of private placement.

Besides this, the panel has suggested streamlining of responsibility and liability for misstatements in offer documents. Separate chapter needs to be carved out in the Companies Act for book-building related procedures and permitting book-building on a retail basis.

The panel also seeks a regulatory frame work regarding payment of commission and brokerage currently enshrined in Section 76 of the Companies Act and the May 7, 1995 guidelines of the Stock Exchange Division of ministry of finance should be appropriately clarified.

Deletion of the limits of commission and brokerage called as costs since pricing of instruments have been freed already.

A clarification has also been sought regarding the treatment of debentures in the form of negotiable instrument and particularly bonds in the nature of promissory notes and modalities to their transfer or overlapping of Negotiable Instrument Act, Companies Act should be clarified to avoid inconsistency.

Clarification of Companies (Acceptance of Deposit Rules) 1975 and Non-banking Financial Companies (Reserve Bank) Directions 1977 in relation to treatment of amounts received by way of secured debentures which are secured on a composite group of assets partially movable and immovable.

They have also called for a deletion or relaxation of restrictions on inter-corporate investment under section 370 and 372 of the Companies Act which impedes investment activity.

CSE meet to okay Cstar-BOLT deal on March 26

Anuradha Himatsingka

CALCUTTA

The Calcutta Stock Exchange (CSE) has decided to convene an extra-ordinary general meeting (EGM) on March 26 to seek the approval of member-brokers for entering into a reciprocal expansion with the Bombay Stock Exchange (BSE) enabling the extension of C-star and BOLT to Mumbai and Calcutta respectively and for setting up of a clearing corporation at the exchange.

According to a committee source, the EGM will also seek members approval for amendments in the rules and regulations of the local bourse which will be needed to give effect to the memorandum of understanding (MoU) with BSE and various other issues.

This follows CSEs decision at the seventy-third annual general meeting to convene EGMs to endorse changes on bourses rules, regulations and operations instead of merely issuing circulars. On the modalities of the reciprocal extension of BOLT to Calcutta and C-star to Mumbai, a CSE official said: we have decided to put the terms of the agreement before the board to be ratified by the committee members to obtain the members opinion on the matter.

Though Sebi has cleared the exchanges proposal to link up CSE and BSE through BOLT, it has said that it will be implemented only after the setting up of a clearing corporation with trade guarantee at the local bourse as per the directives of the securities watchdog.

We intend to draft and sign the MoU with BSE now, but will be implemented only after the setting up of a clearing corporation with trade guarantee at the local bourse, the source said.

BSE streamlines investor redressal programme

Salil J Panchal

MUMBAI

The Bombay Stock Exchange (BSE) has resolved nearly 70 per cent of member-to-non-member arbitration cases as a part of redressal programme.

The exchange has also cleared nearly 90 per cent of the broker-to-broker arbitration proceedings in 1996-97. The exchange has increased the presence of non-members as independent arbitrators.

At present, it has 60 arbitrators comprising nine outsiders and 51 brokers.

BSE statistics show that the number of member-to-non-member arbitration cases has come down to 199 from 507 during the previous year, registering a 60.74 per cent reduction.

As on February 18, the Bombay Stock Exchange was able to reduce the pending cases to 180. As regards complaints by investors against members, while total number of cases stood at 154 on January 1 1996. The exchange has managed to resolve 1,214 cases of the total 1,518 cases registered during the year.

At the beginning of the new year, only 458 cases were pending with the exchange while 84 fresh cases registered in January-February 1997.

The exchange has, however, settled 113 cases have been resolved and as on February 18, 1997, the number of pending cases has come down to 429, of which 161 cases are more than six months old.

As regards member-to-member cases, the rate of success has, however, been slower with 814 cases pending as on January 1, 1996. Despite addition of another 4,065 cases in 1996, the exchange has disposed off 4,522 cases ensuring a clearance rate of 92.6 per cent.

As on December 31, 1996, only 357 cases were outstanding, of which 89 cases the brokers involved were defaulters at the Bombay Stock Exchange.

In the case of the 357 outstanding member-to-member cases, only 24 have remained unresolved for more than six months.

The exchange will focus on settling those cases which are more than six months old, said BSE executive director R C Mathur. The exchange has decided to take stern action against non-implementation of its awards, Mathur said. Recently, the exchange did not even allow a broker, who failed to appear in person during the hearing, to appeal against its show-cause notice. There message is clear. If the broker shows scant regard to the decision of the arbitrator, and is absent during hearings, the right to appeal will not be granted, Mathur said.

He said the exchange is likely to increase the fees for arbitrators in the coming months.

At present, there are four chartered accountants, four professionals and one retired high court judge functioning as BSE arbitrators.