♦ The Bill shifts the onus of regulation and oversight over management
away from the government and towards shareholders. It provides for
stricter standards of approval by shareholders over some types of
♦ The Bill allows for certain types of companies to be subject to a less
stringent regulatory framework.
♦ It seeks to strengthen corporate governance by including new provisions
related to independent directors and auditors.
♦ It gives greater powers to creditors to supervise a rescue plan and restrict
the powers of management in the rehabilitation of a sick company.
♦ The Bill establishes a National Company Law Tribunal to administer
provisions with respect to company law. It increases penalties and
provides for special courts to try offences under the Act.
♦ Shareholders and creditors can file class action suits against the company
for breaching provisions of any Act.
Key Issues and Analysis
♦ The composition and powers of the National Company Law Tribunal are
similar to those introduced by a 2002 amendment to the Companies Act.
The constitutional validity of that amendment is being examined by the
♦ The Bill permits certain financial relationships between independent
directors and the company, which can lead to conflicts of interest.
♦ Some provisions in the Bill, such as those covering independent directors
and the delisting of companies, conflict with provisions under the SEBI
Act and its regulations.
♦ The Bill provides for a number of issues currently specified in the Act, to
be specified by the government in the rules. The government has not
issued draft rules to the Bill so the impact of any possible change cannot
♦ Fines have been increased and the range of offences which are punishable
by imprisonment has been widened. The Bill does not require proof of
intent to commit an offence as a condition for criminal prosecution. This
differs from the recommendation of the Irani Committee.
The Companies Bill, 2009 PRS Legislative Research
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