PRESS
NOTE
The
Department of Company Affairs (DCA), constituted the Joshi Committee, to
identify the left over items of provisions of the Companies Bill, 1997. The
Committee has submitted its report. The major recommendations of the Committee
include prohibiting promoters to withdraw once having subscribed to a Public
Issue, restriction on number of directors, retiring age of directors, service of
notice etc. by Courier and electronic means, restriction on loans to directors.
The recommendations of the Committee are being examined.
Section 605A, was inserted in the Companies Act w.e.f.
13.12.2000. The said Section
permits companies (incorporated or to be incorporated outside India) to issue
Indian Depository Receipts (IDR) as per Rules to be prescribed by Central
Government (DCA). Pursuant to the said Section, DCA originally prepared draft
IDR Rules. Consultations were held
regarding the draft Rules with SEBI and others. The draft rules were modified, wherever
considered necessary, in the light of suggestions made by SEBI. The Department
is also consulting the intermediaries in the capital market like merchant
bankers to bring out rules. A final decision will be taken after completing the
consultative process.
Regarding the applicability of Section 43A(2A) to those
public companies, which are subsidiaries of foreign body corporate, a
clarification, was sought and the matter was examined in the DCA. Section 4(7)
of the Act was an exemption available to Indian private companies when foreign
body corporates were holding 100% share in them to retain their "private" status
when Section 43(A) was in operation.
After amendment of Section 43A, such exemption is not required. The legal position in the above
circumstance would be that a private company would be the subsidiary of another
private limited company even if the holding company happens to be a foreign body
corporate, if it would be a private company, if incorporated in India and these
companies do not need the exemption provided in Section 4(7) of the Act. The Department has already clarified and
given instructions to the Registrar of Companies, Delhi in particular to dispose
off all pending applications seeking reversion back to private limited companies
on the above lines.
Valuation of shares and computation of exchange ratio are the key issues
in any scheme of amalgamation or merger of companies. There are various methods
of valuation and each method of valuation proceeds on certain assumptions and
projections about the company. Any change in these basic assumptions may widely
change such valuation of the company. Therefore, many countries have issued
guidelines in this regard. As there are no provisions to regulate such valuation
in India, DCA has constituted an expert group for evolving comprehensive
guidelines as may be followed uniformly in the matter of valuation of shares.
This will not only ensure uniformity of methods and procedures but will also
introduce greater objectivity in such exercises.
The Central Government has established the Investors'
Education and Protection Fund with effect from 01.10.2001.
All amounts which had remained unclaimed or unpaid as on 30th
October, 1991 (irrespective of the number of years they had remained unclaimed
or unpaid as on that date) and which remained unclaimed or unpaid as on
31st October, 1998 should be transferred to the Fund unless such
amounts have been paid to the parties before the enactment of the Companies
(Amendment) Act, 1999. In respect of such amounts, which have become due for
payment after 30th October, 1991, the amounts should be transferred
to the Fund if they remain unclaimed and unpaid for a period of seven years from
the dates they first became due for payment.
During the last one year (October, 2001 to September, 2002), an amount
of Rs.48,54,40,370/- has been
deposited by the various companies into the Fund.
DCA ordered inspection of 98 companies including Broking
companies such as Ketan Parekh, Shankar Sharma etc. The Department has received 87
inspection reports and so far 539 prosecutions have been ordered/launched for
violation of various provisions of the Companies Act, 1956 including
non-compoundable offences. DCA has
also decided to make applications before CLB for appointment of Government
directors on the board of seven companies.
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