The government will draft a concept paper in the next two to three months to simplify the Companies Act, 1956, incorporating provisions of the present law, suggestions by various bodies and other relevant laws so that it is implemented in totality.
"We will draft a concept paper to make the act more legible to senior company executives and common people in the first reading itself. At present, the law is cumbersome and often incomprehensible," Department of Company Affairs secretary MMK Sardana told reporters at the national conference on Legal Compliance for Sustainable Business Growth organised by the Federation of Indian Chambers of Commerce and Industry.
The initiative of drafting a concept paper comes after the Companies (Amendment) Bill, 2003 was introduced in Rajya Sabha last year and sent back by the Cabinet for redrafting in October last year.
The Bill was mired in controversy with many of its provisions being strongly opposed by corporates and industry chambers.
The contentious recommendations included the prohibition of multi-layered routing of investment through subsidiaries, fixing the age of retirement of the company's chief executive officer at 75, reserving seats for women in the company's board and requirement of approval of all shareholders for transfer of shares.
The Bill had suggested these changes drawing from the reports of the Naresh Chandra committee and the joint parliamentary committee on 2001 stock scam.
Sardana said the drafting process would take two-three months after which the concept paper would be put on the Internet for public comments and suggestions.
"At this stage, we are not saying that the present Companies Act will be scrapped completely. We are only putting together a concept paper to simplify it," he cautioned.
Sardana said the paper would include suggestions of the second Naresh Chandra Committee report on regulation of private companies and partnership as well as other contemporary legislations.
Some of the significant recommendations of the Naresh Chandra Committee report were regarding defining small private companies that would enjoy exemptions from many compliance norms and opening the route of limited liability partnerships for the professionals like lawyers and doctors.
The committee, to minimise the harassment faced by the independent directors had suggested that they should not be prosecuted. It also suggested simplification of exit procedures for the companies as well as subjecting both the secured deposits and public deposits to same kind of regulatory regime.
Sardana also confirmed that the government investigation has been ordered against Ispat Industries under section 235 of the Companies Act to check its balance sheet.