The Companies Act should be the overarching law for regulating companies in India. The finance ministry should work with the ministry of corporate affairs (MCA) and facilitate a comprehensive and an early amendment of the Act of 1956.
SEBI must work within the overall framework of the Companies Act, while it may prescribe additional sets of rules and guidelines for listed companies. The finance ministry’s objections to inclusion of provisions on corporate governance such as one-third of the board seats of listed companies going to independent directors and definition of “well known seasoned issuers” is unwarranted.
Dropping the provision for independent directors from the Bill would be regressive since the intent of policy should be to raise corporate governance standards. Worse, the move would fuel demand for the dilution of Clause 49 of the listing agreement of stock exchanges, which requires companies to give at least half the seats to independent directors.
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