COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Companies amendment bill introduced in Lok Sabha

Law, Justice and Company Affairs Minister M Thambidurai introduced in the Lok Sabha today the Companies (Amendment) Bill, 1998, incorporating buyback of equity shares by a company from the stock exchange, issuance of sweat equity shares, and establishment of an Investors' Education and Protection Fund.

According to the memorandum explaining the modification of the Act, the buyback of equity shares in any financial year should be less than 25 per cent of its paid-up capital so that a company may not reduce its capital by 25 per cent in a financial year.

Companies, defaulting in payment of interest on deposits or payment of dividend or repayment of interest on any term loan, will be declared as defaulters companies for the purpose of buyback of shares.

The Securities and Exchange Board of India has been authorised to make regulations in respect of buyback of shares of other specified securities listed on any recognised stock exchange.

The bill bars companies to deal in their own shares directly or indirectly, if the companies have not complied with the provisions of Sections 159, 207 and 211 of the Companies Act.

The bill also provides for the issuance of guidelines for sweat equity shares of non-listed companies by the Central government. It also proposes to confer powers on the Central government to prescribe the accounting standards in consultation with the National Advisory Committee on Accounting Standards, and prescribe guidelines for this purpose.

The bill also provides for declaring Infrastructure Development Finance Company Limited as a public financial institution, and nominating facility to the holders of shares, debentures and fixed deposit.

According to statement of objects and reasons of the bill, the corporate sector is going through difficult times. The capital market is also at low ebb, which requires immediate morale-boosting efforts on the part of the government to promote investors' confidence.

In order to overcome adverse conditions faced by the corporate sector, it was decided that the company should be permitted to buyback their own shares to make investments or loans freely without prior approval of the Central government.

The bill also seeks restriction of 24 months, after the buyback, for further issue of fresh securities.

The condition of prior approval of financial institutions in case of investment/loan/guarantee upto 60 per cent of net worth has been relaxed, if there is no default in repayment of loan or interest.

The powers of the board of directors to decline or suspend registration of shares in case of nominee have been withdrawn in the interest of small investors.

UNI

Business news