private companies. In case of a public company, there will be a minimum of three directors. For private companies, at least two members are mandatory. In certain classes of companies – which will be specified in the rules – at least one woman director will be mandatory as per the new Companies Bill, 2012. The new Bill also caps the number of directorships a person can hold in companies to 20 of which not more than 10 will be public companies.
The new Bill also allows companies to change the object of fund-raising after shareholder approval through a special resolution and the dissenting shareholders will get an exit opportunity. The new Bill also requires greater participation and approval from shareholders. For instance, inter-corporate loans and investments above certain limits will need approval through a special resolution. Shareholder approvals will be required if loan/investments is greater than 60% of company’s paid-up capital, free reserves and securities premium account or 100% of its free reserves and securities premium account.
India Inc welcomed Parliament clearing the Bill. “This legislation is indeed a milestone in the history of company law and will revolutionise the administration and management of businesses in the times to come,” said Naina Lal Kidwai, president, Ficci.
“It is a historic moment for our country as it took 60 years to reach this stage. The new Companies Bill will enhance regulatory compliance,” corporate affairs minister Sachin Pilot said in his closing remarks as the Bill was put to vote. “Now, the focus will be on drafting the rules. It will be done in a transparent manner and we will put up the draft on our website for comments by August-end,” Pilot said. Officials in the ministry said the draft rules were almost ready and will be sent for the approval of the minister soon.
Dolphy D'Souza, partner in a member firm of Ernst & Young Global said the impact of this new legislation will be strongly felt on around 1 million registered companies in the country. “The requirement to rotate auditors or regulate related party transactions and to create a framework