Companies Bill 2012 - Read between the lines

The groundwork on the bill started way back in 2005 with the JJ Irani Committee report in May 2005.However the bill passed on the 18^th January, 2013 does not replicate all the recommendations.

Some of them are as given below:

· This means that all that was intended has not been accepted and the bill should be read afresh with no previous notions that it corresponds in totality to some earlier working paper.

· Typically the 1956 had provisions scattered all over the act for example managerial remuneration was covered by section 198,269,309,387 etc .However the bill consolidates the managerial remuneration in clause 197. Hence not many cases of “one section read with some other section” scenario.

· A shift from Central government approval to more of shareholders’ approval. Section 295,297,313 of the 1956 required CG approval. Loans to Directors can now be given with approval by shareholders by special resolution.CL186 (3) includes the word “person” in (2)(a) applying it to Directors also.

· Major part of the act to become operational by mode of rules to be notified. Approximately 300 rules are to be notified.

· The Bill once it becomes an act will apply to all of India including Jammu & Kashmir and Sikkim. The Registration of Companies (Sikkim) Act, 1961 shall stand repealed. Which means Companies in J&K; Sikkim will have same restrictions in operation like a Company in Delhi or Ahmadabad.

· CL 470 of the bill provides power to Central government to remove difficulties in a period of 5 years from the date of application of the act. This means all the streamlining ,notifications will have to come in next 5 years and the new law will see a lot of activity for the next 1825 days from the day it becomes effective .

· The new law will be truly global in its operation .CL 207(1) (c) states “inspection of any books, registers and other documents of the company at any place. Now at “any place signifies” offices of foreign subsidiaries where such evidence may be found, hence while inspecting the officials can raid the office of even foreign subsidiary to gather evidence .This was never envisaged in the 1956 Act.

· The new law will be implemented in stages. CL 3 states “This section shall come into force at once and the remaining provisions of this Act shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this”…….This means the act will not be standalone company legislation and both the 1956 act and 2012 bill on becoming an act will run parallel for the initial years.

· National Company Law Tribunal will be the most powerful quasi judicial body. Its scope will be much more than existing Company law Board .CL 434 of the bill states “transfer of certain proceedings, they include:

1. All pending CLB matters.

2. Arbitration proceedings, compromise, arrangements and reconstruction and winding up, pending  before any District Court or High Court.

3. Any appeal preferred to the Appellate Authority for Industrial and Financial Reconstruction(AAIFR) or any reference made or inquiry pending to or before the Board of Industrial and Financial Reconstruction (BIFR).

There by making it a single entity with the power of three entities existing on date ,i.e CLB+DISTRICT/HIGH COURT( for relevant matters)+BIFR/AAIFR= NCLT

MORE INSTANCES TO FOLLOW.

DISCLIAMER:

The synopsis has been compiled with a view to highlight certain important changes brought about by the Companies Bill 2012.The compilation must not be taken as an exhaustive coverage nor should it be used in place of professional advice. Although it has been endeavored to provide accurate information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

CS Amitava Banerjee