New Companies Bill to simplify business regulations

The Indian Companies Act, 1956, provides the legal framework for corporate entities in India. Essentially based on UK company law, the Indian Companies Act, 1956, has seldom seen any far reaching changes since its adoption. With over 730,000 companies by the end of last year, the corporate sector has grown in pace, demanding a comprehensive revision of the act. The Indian government thus drew up a “Concept Paper on New Company Law” in 2004, inviting comments and suggestions from the public, which were evaluated by the JJ Irani Committee.

The committee submitted its report in May 2005. It was widely discussed by various governmental ministries, departments and regulators, resulting in the shape of the Companies Bill, 2008, which was approved by the Union Cabinet on 29 August and is expected to be introduced in parliament in October.

General provisions

While reducing the number of clauses in the extant act to half, thereby making it less cumbersome and easier to understand, the proposed bill provides India’s corporate sector with the freedom it needs to grow in a globalized world. The bill proposes to incorporate simpler, faster and more efficient processes in relation to company matters: however, it retains the necessary checks and balances, ensuring the controlled liberalization of the Indian corporate sector.

Shardul Shroff is the managing partner of Amarchand Mangaldas & Suresh A Shroff & Co. He specializes in mergers and acquisitions.