The government will reach out to rival political parties to iron out differences on the companies bill in an attempt to ensure smooth passage of the key legislation aimed at overhauling corporate governance norms and grant shareholders with greater powers to defend their rights.
The bill, which was introduced in Parliament in August 2009, is expected to be sent to the Cabinet this week for approval to the amendments suggested by the Parliamentary Standing Committee on Finance.
"We will talk to leaders of the Opposition parties on the issue and seek their advice and support," corporate affairs minister Veerappa Moily told HT.
The bill would be taken up in Parliament in the forthcoming monsoon session that will commence on August 1, Moily said. "My immediate focus would be to see the pending bill is approved in Parliament in the forthcoming session."
The bill, which seeks to fix more responsibility on independent directors, comes in the backdrop of the multi-crore accounting fraud at Satyam Computer Services that exposed gaping holes in India's existing corporate governance norms.
The government also proposes to impose a six-year limit on the tenure of an independent director on the Board of company, although the suggestion has not gone down well with the industry, which believes such decisions should be best left to individual boards.
"Tenure of independent directors should be left to the Board and shareholders to decide. Inclusion of this provision in the Companies Bill must be reconsidered," the Confederation of Indian Industry (CII) said in a note to the ministry.
The Central government has also proposed a cooling off period — elapsing of a period of three years — before the same individual is inducted in the same company in any capacity.
Two tenures is the maximum that an independent director can serve in any company in the manner provided in this clause.
The number of company boards on which an independent director can serve, will also be brought down from the current 15.
The bill will also empower shareholders associations or group of shareholders to be enable to take legal action in case of any fraud by a company through "class action suits."
A class action is a form of lawsuit where a large group of people collectively bring a claim to court. This acts as a deterrent for carrying out a fraud.