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Corporate - Company Law


Concept paper for new Cos Act to be ready by month-end

Our Bureau

Kolkata , July 4

THE proposed Concept Paper for drafting a new Companies Act, essentially to shrink the 658 provisions in the existing Act to less than 300, would be ready by end July. The Paper is being prepared internally by the Department of Company Affairs.

Participating in an interactive session on "Corporate Governance," organised by the Merchants Chamber of Commerce, here, Mr Prem Chand Gupta, Union Minister of State (Independent Charge) for Company Affairs, said the Paper, once finalised, would be sent to all chambers of commerce, chartered accountants and other experts throughout the country to seek their opinion and also record useful suggestions.

The Minister said two months' time would be given to all concerned to make suggestions, after which the process would be set in motion. He said the Concept Paper would also be sent to various ministries like finance, law, commerce etc to elicit their viewpoints as well.

Pointing out that some of the provisions in the existing Act were irrelevant and "not in line with today's requirements, in the changing scenario of zero barriers dictated by a new world economic order under the WTO regime, he said the opportunities before the Indian corporate sector now were huge. Describing shareholder protection as the need of the day, the Minister said the present Companies Act, enacted in 1956, and arguably the largest in the world, was unsuitable to today's environment despite the various amendments carried out so far.

The Minister lamented that none of the big chambers like FICCI or CII or Assocham or any of the professional institutes have sent in any suggestions with regard to the changes required to be made in the Companies Act. He said some Rs 300 crore is spent annually by way of compliance by companies to the various Act provisions, and in the process, the Registrar of Companies had to deal with 30 million documents every year, and keep these in custody for 5 years.

Why so much documentation when some 4 lakh companies out of the 7 lakh companies registered are defunct, he asked. He said the ROC was now being equipped to download documents and various returns through Internet or website to minimise paper work within the next 12 months. Reiterating the UDA government's firm resolve to root out the menace of bogus companies which siphon off small investors' hard earned money, he advised the ROCs to tighten the scrutiny procedure at the very first stage, but short of harassing the promoters. Suggesting that the proposed new companies Act should be comprehensive, modern, realistic and growth-oriented, Mr K.B. Agarwala, president of the chamber, said the defaulting and vanishing companies should be put on notice. He said a simplified Exit Scheme should be incorporated in the new Act for striking off the names of defunct companies on application under section 560 of the Companies Act.

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