New companies bill introduced in Lok Sabha


New Delhi : A new Companies Bill was introduced in the Lok Sabha Monday with stringent clauses to deal with corporate frauds against the backdrop of the Satyam Computer Services scam, besides calling for special courts to prosecute offenders and addressing the needs of India Inc in today’s globalised environment.

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The bill, introduced by Corporate Affairs Minister Salman Khurshid, is centred on stakeholder protection with the provision for class action suits that allow a group of people with similar grievance to file a joint petition.

The system is prevalent in the US, with one of the most famous cases involving Pacific Gas and Electric that was made into a Hollywood blockbuster titled “Erin Brokovich”.

The bill also proposes to allow formation of one-person company and help India Inc compete more effectively globally. At the moment, two people are required to form a private limited company and seven for constituting a public limited company.

The upper limit on the number of persons as promoters in professional firms like partnerships, banking companies and audit firms has also been raised to 100.

The other major proposals of the bill include:

* Insider trading becomes a criminal offence

* Consolidated financial statements of subsidiaries made mandatory

* Clause that disallows claims over unclaimed dividend after seven years removed

* Role of independent directors clearly defined

* Process for formation of companies simplified

“The Companies Bill, 2009, on its enactment, would allow the country to have a modern legislation for growth and regulation of corporate sector in India,” said a government statement.

The bill, according to Khurshid, was being re-introduced as the earlier version framed last year had lapsed because of dissolution of the previous Lok Sabha.