Lok Sabha Question No. 4141 (UNSTARRED), answered on 2017-08-11
Subject: JJ Irani Committee
Ministry: CORPORATE AFFAIRS
Asked by: S. RAJENDRAN

## GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA

UNSTARRED QUESTION NO. 4141 ANSWERED ON FRIDAY, THE 11th AUGUST, 2017/ SHRAVANA 20, 1939 (SAKA)

## JJ IRANI COMMITTEE

## QUESTION

4141.  SHRI S. RAJENDRAN:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

कारपोरेट कार्य मंत्री

- (a)  whether  the  Securities  Exchange  Board  of  India  (SEBI)  has  requested  the Government for  amendments in the Companies Act, 2013 and if  so,  the  details thereof;
- (b) whether the JJ Irani Committee constituted by the Government has submitted its report; and
- (c)  if  so,  the  details  thereof  and  the  major  recommendations  made  by  the
- Committee along with the action taken by the Government thereon?

## ANSWER

THE MINISTER OF STATE

(SHRI ARJUN RAM MEGHWAL)

IN THE MINISTRY OF CORPORATE AFFAIRS

(श्री अर्जुन राम मेघवाल)

कारपोरेट कार्ु मंत्रालर् में राज्र् मंत्री

(a):- SEBI has suggested for reviewing/amending section 169 of the Companies Act, 2013 in such manner that a resolution to remove an Independent Director should be by way of a special resolution, on which the promoter should not be permitted to vote.

- (b) to (c):-The Expert Committee on Company Law under the Chairmanship of Dr. J.J. Irani had submitted its report to the Government on 31st  May, 2005.  The major recommendations of the Committee are at Annexure-I. The full report is available on www.mca.gov.in.

After considering the Report of the Irani Committee and other inputs received from time to time, the Government took up the exercise of comprehensive review of the Companies Act, 1956 and introduced the Companies Bill, 2009 in the Lok Sabha. After introduction, the Companies Bill, 2009 was referred to Parliamentary Standing Committee on Finance for examination and report.

Keeping  in  view  the  recommendations  made  by  the  Standing  Committee  in  its report, a revised Companies Bill, 2011 was prepared and was introduced in the Lok

Sabha on 14th December, 2011, which was also referred to Standing Committee subsequently and it got enacted as the Companies Act, 2013, which was notified on 29th August, 2013.

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## ANNEXURE-I

## ANNEXURE REFERRED TO IN REPLY TO PART (b) to (c) OF THE UNSTARRED QUESTION NO. 4141 FOR ANSWER IN LOK SABHA ON 11.08.2017

## Irani Committee - Main recommendations

-  Introduction of concept of Small Companies and One Person Companies.
-  There may not be any restriction to a company having any number of subsidiaries.
-  Limited  liability  partnerships  should  be  facilitated  through  a  separate enactment.
-  Government  should  not  intervene  in  the  process  of  appointment  and removal of directors in non-Govt companies.
-  Law should recognize the principle of independent directors and spell out their attributes, role, qualifications, liability and manner of appointment. However, prescription of the number and proportion of such directors in the Board may vary depending on size and type of company and may be prescribed through Rules.
-  Decision  on  remuneration  of  directors  should  not  be  based  on  a 'Government approval based system' but should be left to the company.
-  Board Meetings by electronic means to be allowed.
-  Rights  of  investors  in  respect  of  unclaimed  dividends  etc.  to  be recognized even after 7 years period.  IEPF should not be based solely on expropriated unclaimed returns but should be in the form of a corpus in which  funds  may  be  parked  to  be  managed  and  utilize  for  investors education.
-  The provisions in the Companies Act allowing multiple jurisdiction may be  done  away  with.    There  is  however,  need  for  different  regulatory agencies to interact with each other more comprehensively in operational matters.
-  Concept  of  Shelf  Prospectus  may  be  extended  to  other  class(es)  of companies who access capital market more frequently as Well Known Seasoned Issuers (WKSI).
-  The regime of acceptance and invitation of Public Deposits should be made stricter. The insurance option should be explored for deposits with the companies.
-  Registration of charges to be enabled by the lender if the borrower does not register the charge within a fixed time.
-  Non-cash consideration for allotment of shares should be valued through independent valuers.
-  Provisions relating to inter-corporate loans and investments should be strengthened to ensure that there is no mis-use of these provisions for price rigging or by diversion of funds.
-  Penalties for fraudulently inducing any person to invest money should be made more stringent
-  Consolidation of financial statements should be made mandatory.
-  Small Companies should be given exemptions/relaxations in respect of disclosures relating to financial statements.
-  The Act should provide flexibility in respect of rates of depreciation for infrastructure or similar projects.
-  Rotation of auditors not be mandated in Law. Auditor to be prohibited from performing certain non-audit functions/services to be specified in Law/rules.
-  Valuation of shares of companies involved in schemes of mergers and acquisition by independent registered valuers (rather than court appointed valuers) should be made mandatory.
-  There is need to clarify issue regarding payment of stamp duty on Court Orders sanctioning schemes of merger/acquisition.
-  The  concept  of  Electronic  registry  should  be  evolved.  Jurisdictional issues vis-à-vis stamp duty should be resolved to enable single registry.
-  'Contractual mergers' and  'Cross Border mergers and acquisition' may be suitably addressed in the new Act.
-  Mergers among associated companies, private companies or companies where no public interest is involved, should be allowed through a less stringent framework.
-  The fees paid by transferor company on the authorised capital should be available as a set off to the transferee company upon the sanction of the scheme.
-  A Non obstante provision to be introduced to ensure that the assets and liabilities  of  transferor  company  absolutely  vest  in  the  transferee company notwithstanding anything to the contrary in any other law.
-  The Govt may appoint an officer of the Govt or any private professional as inspector to carry out investigation.
-  The Serious Frauds Investigation Office (SFIO) should be strengthened. A separate statute may be framed for SFIO.
-  A clear regime for identification of Officers-in-default to be necessary.
-  The Company Law to provide for an in-house structure for levying non discretionary  monetary  penalties  only  (i.e.  in  respect  of  offences  not involving imprisonment).
-  The  penalties  may  be  classified  in  the  form  of  two  self-contained schedules -one for monetary penalties and the other for those involving imprisonment, with or without fine.  The Law to lay down the maximum as well as minimum quantum of penalty for each offence.
-  In  case  of  fraudulent  activities/actions,  provisions  for  recovery  and disgorgement to be suitably provided for.
-  The law should strike a balance between rehabilitation and liquidation process.  It  should provide  an  opportunity  for  genuine  efforts  towards revival.    Only  where  revival/rehabilitation  is  not  feasible,  winding  up should be resorted to.
-  A  Panel  of  Administrators  and  liquidators  should  be  prepared  and maintained by an independent body out of experienced and knowledgeable Insolvency Practitioners.
-  Private  professionals  should  play  a  meaningful  role  in  all  aspects  of insolvency process.  The law should encourage and recognize concept of Insolvency Practitioners.
-  Public  interests,  Government  claims  should  not  get  precedence  over private rights.
-  Provisions  relating  to  rehabilitation  cess  should  be  replaced  by  the concept  of  'Insolvency  Fund'  [Fund]  with  optional  contributions  by companies.
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