[Note: Author and Contributor of this blog post is Risabh A. Gupta, 3rd Year Student, B.B.A. LL.B. (Hons.), National Law University, Odisha. He can be contacted at rishabh.a.09@gmail.com]
The much awaited Companies Bill, 2012 has been
finally approved by Rajya Sabha on 8th August, 2013. The bill was
passed in Lok Sabha in December 2012 after detailed deliberations and
discussions. It is now on the verge of becoming an act post presidential assent
and notification in the Gazette of India.
The new Companies Bill, 2012, once effective, would
replace the fifty-six year old legislation, the Companies Act, 1956, the
primary legislation for incorporation, governance and operation of the
corporate bodies in India. Further, the Bill envisages to create a simplified
and effective framework for regulation and functioning of corporate bodies in
India.
The new companies Bill, 2012 is a very welcome step
as it has brought in numerous positive steps in streamlining the overall
framework pertaining to corporate law. While the existing Companies Act, 1956
has 658 sections, the new Companies Bill, 2012 would have 470 clauses which are
divided into twenty-three (23) chapters and has seven (7) schedules. Thus, in
this post, an overview of the important and substantial changes as well as
introduction of new provisions would be discussed like One-Person Company, new
compliance regime for private companies, Corporate Social Responsibility,
Mergers & Acquisitions (M&A), Corporate Governance and Class Action
Suits.
1.
MERGERS &ACQUISITIONS (M&A)
Numerous changes have been proposed in the new
Companies Bill, 2012 to make the procedure for mergers and amalgamations
(M&A) simpler and efficient. The approval of the National Company Law
Tribunal (NCLT) for the fast-track mergers has been done away with in the new
bill if it is a merger between two small companies, between a holding and
subsidiary company, or between any other companies as may be prescribed.
Further, the new Companies Bill, 2012 says any
contract or arrangement between two or more persons on transfer of securities
shall be enforceable as a contract. Private equity (PE) investors, who until
now have been unable to enforce strict conditions in their agreements with
promoters, will be able to use clauses such as 'tag along' and 'drag along'
mentioned in the shareholder agreement. A 'tag along' clause helps protect a
minority shareholder as he can sell his stake along with the majority
shareholder, while a 'drag along' clause gives right to a majority shareholder
to force a minority shareholder to sell stake[1].
The new law also allows an Indian company to merge
with a foreign company, making cross-border mergers and acquisitions easier.
Earlier, only foreign companies were allowed to merge with Indian companies.
Also, the bill will make it easier for promoters to restructure, merge or
acquire companies because only those shareholders who own more than 10% stake
or have more than 5% of the total debt will have the power to oppose any scheme
of arrangement[2].
