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Journalism of Courage
It could be third time lucky for the Companies Bill,after cabinet clearances in 2008 and 2011. The principal opposition party,the BJP,has declared its support for the bill,unlike the last time when it had raised objections over some of the clauses being changed from the draft cleared by the standing committee. The partys support means the bill will not have to pass the committee stage again and could become an act,13 years after it was first proposed. In its provisions and fine print,the bill will be of deep significance to the corporate sector. In the absence of an updated law,a significant part of the working of Indian companies,public and private,is based on conventions and approvals from other mechanisms like the Listing Agreement. The ramifications for the sector of such ad hoc guidelines,and the absence of rule-based operations,was apparent in several cases,of which Satyam was only the first one.
There is no clarity,for instance,in the current Companies Act 1956 on the extent to which the board members of a company can be hauled up for corporate malfeasance. The provisions for private placement,too,are few. Yet 1,500 Indian companies raised a massive Rs 2.39 lakh crore through this route in just eight months this year,as per Sebi data. Money raised from the equity markets was only Rs 1,217 crore in the same period. Similarly,allowing companies with multiple lines of business to separate the posts of the chairman and managing directors will provide them with more flexibility to take decisions than is possible under the current law.
