The Institute of Chartered Accountants has already issued auditing standards and the fraud reporting methodology is incorporated in those auditing standards. Sir, detecting the fraud has been left with the auditors which responsibility must also be entrusted to the management or its various officers like the Managing Director, the Chief Financial Adviser, the Administrator, etc. Sir, the next amendment, which is important, is diluting the provision relating to loan to Directors, that is, wholly owned subsidiaries and the Directors have been exempted. I do not know why that has to be done. It is related to loans to directors, that is, an amendment to Section 185. Then, there is proposed amendment to Section 188. Provision for special resolution under Section 188 should also be seen in similar context. Sir, SEBI continues to provide for the requirement of special resolution for material related party transactions. The requirement of special resolution in the situations envisaged under Section 188 would have made companies more transparent and encourage shareholders democracy in the governance of the Corporates. It may still be appropriate to modify the clause to require the special resolution in case where related party transactions involve an amount above a certain threshold limit. In order to encourage transparency, explanatory statement as required to be given under Rules to the shareholders should also state the criteria or the basis for the management for considering a particular related party transaction in the ordinary course of business and at arm’s length. The SEBI requirements and provisions under Companies’ Law also differs on definition of ‘related party transaction’. While SEBI has aligned recently the criteria for material related party transaction, there are a number of differences on the corporate governance requirements as well. The government should evolve a mechanism so that SEBI and the Companies’ Law requirements converge in regard to listed companies and companies with significant public interest. This would greatly help in easing business in India as well. Sir, the other amendments are consequential, I welcome some of the amendments and I request the Government to look into the provisions of section 143 and the special resolution. With these few words, I support the Bill and hope that the hon. Minister will look into the suggestions and consider them seriously in the interest and benefit of the people of this country. Mr. Deputy Chairman, I am extremely grateful to the hon. Members who have spoken. In fact, it is a very rare, as I said, that law made in 2013 has to be reviewed, because it is an Act with 470 sections. Therefore, a lot of representations had started coming in the moment this Act was notified. There were some drafting oversights, because it is a long Act. Plus, some inconveniences were felt when the Act was being implemented. We, therefore, held consultations with all stakeholders and we were able to identify several points which required to be revisited. Some of those points were revisited by virtue of notifications or even under rules. For example, one of the issues that my friend from the Opposition, has raised is with regard to a large number of private limited companies and the provision of very onerous nature being made applicable to them. Now, by virtue of a notification, it was possible to give private limited companies exemptions from some of those provisions. And, therefore, those exemption notifications have been given and the pain of some of those provisions has been diluted by that particular process. Now, I was, initially, able to shortlist fourteen amendments and then two more have been added after the Bill was passed in the Lok Sabha. Provisions have to be brought in line with the international standards. Now, the question asked is: Why are we in a hurry? As rightly mentioned by some hon. Members, people are finding it extremely inconvenient after this legislation to comply with all the provisions. And, therefore, they are finding out devises of not forming a company and going in for other devices, including a limited liability partnership. People are thinking whether it will be a better option to do business rather than a company registered under this Act itself. For example, you look at sub-section (6) of section 212. For some reason we have to be careful of this whole process. About four years ago, even in the Customs Act this provision was brought in. So, a provision for bail which was considered very onerous even for anti-terrorism law is brought in for violation of the Companies Act. So, it was earlier brought in under the Customs Act. When I had pointed it out to the then hon. Finance Minister, he withdrew it being an onerous provision. (800)
