NO CLASH OF INTEREST WITH SEBI ON CLAUSE 49 OF LISTING AGREEMENT: PREM
CHAND GUPTA

NEW DELHI, July 8, 2005. The Ministry of Company Affairs (MCA) has no clash of interest with the Security and Exchange Board of India (SEBI) over Clause 49 of the Listing Agreement relating to independent directors, Mr. Prem Chand Gupta, Minister for Company Affairs said here today.

Inaugurating the FICCI-ICAI ‘National Conclave on Corporate Laws, Disclosure Requirements and the Changing Face of Schedule VI’, Mr. Gupta said an impression has been created, of late, that the MCA and SEBI do not see eye to eye on the issue of independent directors. On the contrary, “we have decided to work closely” with SEBI and I have told the SEBI chief, Mr. Damodaran to do what he thinks is in the best interests of the stakeholders.” He hoped the issue would be resolved amicably soon. Mr. Gupta said it was the considered view of his Ministry that the appointment of celebrity directors on company boards was not in tune with the interest of small investors. The interest of celebrity directors in the affiars of the company was token and did not add value to the decision-making process. The Minister declared that the framework of the proposed Company Bill would be ready by August. This would be followed with consultations with other Ministries concerned and the Bill would then be sent to the Cabinet for approval. “I expect the Bill to be presented in the winter session of Parliament and hope that it would become law by the end of the year”.

Dr. J. J. Irani, Chairman, Expert Committee on Company Law & Director, Tata Sons Ltd., said the Committee had recommended the right to independent directors to appoint their own auditors if they detected any wrong doing in the affairs of the company which were not pointed out by official company auditors. The cost of such auditors would have to be borne by the company itself. He stressed the imperative need to accent on the quality, not number of independent directors, to expose any possible collusion between the CEO and the CFO of a company.

Mr. Saroj Kumar Poddar, Senior Vice President, FICCI laid stress on acceptance, in toto, of the Irani Committee’s recommendation for doing away with the restriction on a subsidiary for having further subsidiaries, restoration of the limit of directorships for a person to 20, inclusion of a separate chapter in the Companies Act for smaller companies with minimal regulatory requirements and introduction of the concept of plea bargaining, as is in vogue in the US.