New Delhi, Oct 23 (UNI) The government today set the country on the much-awaited reforms path in the corporate sector when it introduced a legislation in the Lok Sabha to replace the Companies Act of 1956.
It seeks to knock out much of the obsolete provisions of the present law and brings in a new liberal regime from incorporation to liquidation and winding up, in a single, comprehensive, legal framework administered by the Central Government.
The Bill was piloted by Corporate Affairs Minister Prem Chand Gupta in place of one which was introduced by him in Rajya Sabha two days ago. The Companies (Amendment) Bill has been introduced to usher in reforms in place of the old one which was considered not in tune with the present day requirements of the corporates sector in the liberalising regime in the country.
The new consolidated Bill running into over 250 pages seeks to enable the corporate sector in India to operate in a regulatory environment of best international practices that foster entrepreneurship, investment and growth.
Officials said the new law would reinforces shareholders democracy as their association or group can take legal action against any fraudulent act by the company. It makes a special provision for ''class action suits'' that were hitherto not available in the Indian jurisprudence.
The new law will also ensure that claim of an investor over a dividend or a benefit from a security not claimed for more than seven years will not to be extinguished as provided under the present law.
It seeks to facilitate e-Governance in company processes, recognise the liability of Boards, directors and senior management personnel of companies, provide for a new scheme for penalties and punishment for non compliance or violation of the law. It also incorporates a new framework for mergers and amalgamations of companies that is now an order of the day.
The statement of objects and reasons of the Bill says it will provide for ''basic principles for all aspects of internal governance of corporate entities and a framework for their regulations.'' Officials said the Bill was intended to modernise the structure for corporate regulation in India and represents a major reform statement by the Government to promote development of the Indian corporate sector through enlightened regulation.
The exercise for comprehensive revision of the Companies Act has been going on since 2004 to cope with the number of companies in India expanding from about 30,000 in 1956 when the original Act was enacted to more than seven lakhs today.
Officials said the urgency for a new consolidated law was felt from the fact that the Indian corporate sector had transformed itself in a manner that was unimaginable even a decade ago and today the Indian companies have expanded and grown into global entities, continuously entering into and bringing new activities into the fold of the Indian economy.
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