Govt plans simplification of Companies Act

NEW DELHI: The government will soon finalise a concept paper proposing comprehensive overhaul of the Companies Act, 1956 to update the legislation as well as make it easier to interpret.
This was stated today by department of company affairs secretary MMK Sardana at conference on legal compliance for sustainable business growth organised by the Federation of Indian Chambers of Commerce and Industry. ET had reported on December 30, 2003 the department had begun the exercise to make the Companies Act slimmer and more industry friendly.
The government is also likely to constitute at least 2-3 benches of National Company Law Tribunal by June this year, another official at the department said.
The number of sections could be drastically reduced to about 400 or even less from the current from 650 section and several sub-sections. The new Act would lay down a broad framework for regulating the management of the corporate entities registered in the country. The redrafting would also arm the government with more flexibility to modify the regulations without necessarily moving Parliament.
A substantial portion of the existing Act could be enforced through rules notified under the Act rather than through main sections of the legislation.

Modification to the rules can be made by the DCA in consultation with law ministry under its delegated powers whenever the situation warrants a change. Parliament is informed of the developments on a post-facto basis by the government when the notifications were tabled in the House.
On the constitution of the National Company Law Tribunal, an authority to replace the Company Law Board and Board for Financial and Industrial Reconstruction, the DCA official said that efforts are being made to ensure that at least 2-3 benches can be constituted as early as possible. The government had received about 600 applications for the post of 62 members.
The search committee chaired by chief justice of India VN Khare would soon finalise the selection process and the shortlisting of candidates would begin immediately thereafter, the official said.
The bill to repeal the Sick Industrial Companies Act was enacted by Parliament in the winter session but it is yet to be notified. The notification would mean immediate scrapping of the BIFR.
The first few benches would be set up in the metros. In the first stage, it would discharge all the functions of the CLB and BIFR. Subsequently, the certain powers currently vested with the high courts would be moved to it as envisaged in the Companies (First Amendment) Act, 2002.