Delhi: The JJ Irani committee, appointed by the ministry of company affairs
to advice on the amendment to the Companies Act, 1956, has recommended that
listed public companies and companies accepting public deposits need not reserve
half the seats on their boards for independent directors. The committee has
said that a third of the total number of directors as independent directors
should be "adequate" for a company having significant public interest,
irrespective of whether the chairman is executive or non-executive, independent
said, "We have provided more powers in the hands of the shareholders
and in many cases where the existing Companies Act requires the company to
approach the government, we have suggested that shareholders should be allowed
to take a decision."
Irani committee report, which studied the concept paper on the Companies Act
floated by the ministry, will now be examined by the government, and its recommendations
considered when the Act is redrafted and introduced in parliament.
concept paper floated by the government had suggested that at least half the
seats on company boards should be reserved for independents leading to much
consternation in the corporate world.
Irani committee report also gives a fillip to entrepreneurship with the concept
of a single-person company. There are provisions to help companies raise long-term
capital without affecting voting rights of existing shareholders. On the M&A
front, the new law will require an independent valuation of companies getting
merged or restructured. It will also make mergers and acquisitions as well
as corporate rescue and liquidation easier.
Irani committee further says that the Company Act should not prescribe the
maximum number of directors that any company, private or public, should appoint.
"Law should provide for only the minimum number of directors necessary
for various classes of companies." The report also adds that the government
should not intervene in the appointment and removal of directors in non-government
recommendations in the report says that there should be no age limit prescribed
in the Act other than procedures for appointment of directors above a certain
age. Earlier amendments to the Companies Act, introduced and withdrawn in
the previous Lok Sabha had prescribed a retirement age of 75 for directors.
report has also recommended setting up a single-window clearance mechanism
for mergers, removal of the ceilings on director remuneration and suggested
a system of deemed regulatory approvals in case proposals were not cleared
within a stipulated period.
for company affairs Prem Chand Gupta told the media that the government would
harmonise this proposed company law provision with the listing agreement norms
of the Securities and Exchange Board of India (Sebi) which require listed
companies to reserve half the board for independent directors if the chairman
is an executive director.
He said, "We are planning to introduce the new Companies Act by the end
of this year and this report will be duly considered in framing the law,"
in the company affairs ministry said the report would be only one of the inputs
for preparing the new law.
JJ Irani report has made a number of recommendations on the working of companies
The report has noted that the merger process in India was court-driven and
suggested that contractual mergers be allowed without judicial intervention.
Such mergers should only require subsequent approval of the shareholders by
majority, the committee proposed.
committee has come down heavily on directors who join the companies at the
time of public issue or when investments are to be raised and resign soon
afterwards. The report said that such directors should continue to be liable
for two years for decisions taken when they were on the board. To ensure the
responsibility of management, the report has suggested that the financial
statement should be signed by the managing director, chief executive officer
and the company secretary even if they were not present in the meeting to
finalise the accounts.
ensure uniformity in financial reporting, the committee has suggested that
all companies should have their financial year ending on March 31.
protect the minority interest during mergers and takeovers, the
report has suggested that the audit committee should appoint an independent
valuer in case of companies that have delisted and have 1,000 or more shareholders.