PHDCCI seeks re-look on directors

New Delhi, Jan 25 | Updated: Jan 26 2005, 05:30am hrs
The chambers have urged the government to look at a proposal to reduce the number of independent directors to one-third of the total strength in the new Companies Act. A memorandum, prepared by PHD Chamber of Commerce and Industry (PHDCCI), has pointed out that the requirement for having half of such directors on board who do not have a stake in the company would be dangerous precedent to set in the Indian law and requires a re-look.

The minimum number of directors should be retained at three and not increased to seven. As per PHDCCI, non executive and independent directors should be exempt from criminal and civil liabilities under certain circumstances.

The concept paper points out that the issue of having 50% independent directors can have many dimensions, for instance, in case of disinvestment of a company or a joint venture agreement. By providing that half of the board shall comprise independent directors, the entire documentation of share purchase and shareholder agreements will need to be reworked, it said. Meanwhile, the ministry of company affairs will come up with a comprehensive policy providing easier exit routes for companies next week. The policy will underline a simple and easy exit route for companies, wherein the directors of a company, wishing to exit, would only be required to submit three years of balance sheets.

The concept paper for the companies act amendment proposes to levy a cess of at least 0.005% and up to 0.1% of turnover or gross receipts of companies, to be credited to the Consolidated fund of India. A high-level committee headed by JJ Irani is now having a relook at the concept paper proposals. The government had earlier received a large number of suggestions from various stakeholders on the concept paper.