A 21st century corporate regime
Finally it appears that the new Companies Bill will see the light of the day with the Lok Sabha having recently passed the new Bill. Some very significant provisions have immediately hit the news, such as provisions relating to CSR, additional powers to SFIO in dealing with corporate frauds, appointment and obligations of auditors, payment of 2 years’ salary to employees prior to secured creditors on company’s winding, auditor’s liability for fraudulent conduct, the mandatory inclusion of a woman director, one person-company, class action, concept of independent directors, setting of NCLT and many more. Although these are the changes that deserve most of the attention, the story of the new Bill does not really end here. There are certain very important provisions that will come into force once the Companies Bill is fully operational.
There is always uncertainty around the status of a private company that is a subsidiary of a public company. Should they be treated as private companies or public companies (since they are controlled or owned by public companies)? The problem of uncertainty is multiplied thanks to conflicting judicial decisions. But, the Companies Bill completely removes this ambiguity. Now private companies that are subsidiaries of public companies can retain the basic features of a private company in their articles of association. The most important feature being restrictions placed on the transferability of shares. In effect, such a private
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