All companies are currently governed by the Companies Act, 1956. The Act has been amended 24 times since then. Three committees were formed in the last ten years, chaired by Justice V B Eradi (2001), Naresh Chandra (2002) and J J Irani (2005) to look into various aspects of corporate governance and company law. The Companies Bill, 2009 incorporates some of these recommendations. Main features The major themes of the Bill are as follows: It moves a number of issues that are currently specified in the Act (and its schedules) to the Rules; this change will make the law more flexible, as changes can be made through government notification, and would not require an amendment bill in Parliament. On a number of issues, the Bill moves the onus of oversight towards shareholders and away from the government. It also requires a super-majority of 75 percent shareholder votes for certain decisions. The powers of creditors have been enhanced in cases where a company is in financial distress. It has new provisions regarding independent directors and auditors in order to strengthen corporate governance. Finally, the bill increases penalties, and provides for special courts. Types of companies The Bill provides for six types of companies. Public companies need to have at least seven shareholders, and private companies between two and 50 shareholders. Charitable companies should have at least one shareholder, may have only certain specified objectives, and may not distribute dividend. Three new types of companies have been defined, which have less stringent provisions. These are one-person companies, small companies (private companies with capital less than Rs 50 million and turnover below Rs 200 million), and dormant companies (formed for future projects, or no operations for two years). Corporate Governance The Bill defines the duties of directors and norms for composition of boards. The number of directors is capped at 12. At least one director should be resident in India for at least 183 days in a calendar year and at least a third of the board should consist of independent directors. The Bill also sets guidelines for auditors. Certain related persons such as creditors, debtors, shareholders and guarantors cannot be appointed as auditors. Certain services such as book-keeping, internal audit and management services may not be undertaken by the auditors. Removal of an auditor before completion of term requires approval of 75 percent of the shareholders. Adjudication The Bill provides for a National Company Law Tribunal (NCLT) to adjudicate disputes between companies and their stakeholders. It also establishes an Appellate Tribunal. The NCLT may ask the government to investigate the working of a company on an application made by 100 shareholders or those who hold 10 percent of the voting power. Arrangements All arrangements such as mergers, takeovers, debt split, share splits and reduction in share capital must be approved by 75 percent of creditors or shareholders, and sanctioned by the NCLT. Standing Committee’s Recommendations The Parliamentary Standing Committee on Finance has submitted its report, and suggested several significant amendments. Corporate governance Substantive matters covered in various corporate governance guidelines should be contained in the Bill. These include: separation of offices of Chairman and Chief Executive Officer; limiting the number of companies in which an individual may become director; attributes for independent directors; appointment of auditors. Delegated legislation The Committee noted that the Bill provided excessive scope for delegated legislation. Several substantive provisions were left for rule-making and the Ministry was asked to reconsider provisions made for excessive delegated legislation. The Ministry has agreed to make some changes to include the following provisions in the Act: the definition of small companies; the manner of subscribing names to the Memorandum of Association; the format of Memorandum of Association to be prescribed in the Schedule; the manner of conducting Extraordinary General Meetings; documents to be filed with the Registrar of Companies. The Committee recommended that provisions relating to independent directors in the Bill should be distinguished from other directors. There should be a clear expression of their mode of appointment, qualifications, extent of independence from management, roles, responsibilities, and liabilities. The Committee also recommended that the appointment process of independent Directors should be made independent of the company’s management. This should be done by constituting a panel to be maintained by the Ministry of Corporate Affairs, out of which companies can choose their requirement of independent directors. Investor protection The Ministry, in response to the Committee’s concerns for ensuring protection of small investors and minority shareholders, indicated new proposals. These include: enhanced disclosure requirements at the time of incorporation; shareholder’s associations/groups enabled to take legal action in case of any fraudulent action by the company; directors of a company which has defaulted in payment of interest to depositors to be disqualified for future appointment as directors. The Ministry also made some suggestions on protection of minority shareholders/small investors, which the Committee accepted, including the source of promoter’s contribution to be disclosed in the Prospectus; stricter rules for bigger and solvent companies on acceptance of deposits from the public; return to be filed with Registrar in case of promoters/top ten shareholders stake changing beyond a limit. Corporate Delinquency Recommendations include: subsidiary companies not to have further subsidiaries; main objects for raising public offer should be mentioned on the first page of the prospectus; tenure of independent director should be provided in law; the office of the Chairman and the Managing Director/CEO should be separated. The Committee emphasised that the procedural defaults should be viewed in a different perspective from fraudulent practices. Shareholder democracy The Committee recommended that the system of proxy voting should be discontinued. It also stated that the quorum for company meetings should be higher than the proposed five members, and should be increased to a reasonable percentage. Foreign companies The Bill requires foreign companies having a place of business in India and with Indian shareholding to comply with certain provisions in the proposed Bill. The Committee observed that the Bill does not clearly explain the applicability of the Bill to foreign companies incorporated outside India with a place of business in India. It recommended that all such foreign companies should be brought within the ambit of the chapter dealing with foreign companies. Next steps The report of the Standing Committee indicates that the Ministry has accepted many of its recommendations. It is likely that the government will take up the Bill for consideration and passing during the winter session, which starts on 9th November. This article was published in PRAGATI on November 1, 2010
The National Anti-Doping Bill, 2021 is listed for passage in Rajya Sabha today. It was passed by Lok Sabha last week. The Bill creates a regulatory framework for anti-doping rule violations in sports. It was examined by the Parliamentary Standing Committee on Sports, and some of their recommendations have been incorporated in the Bill passed by Lok Sabha.
Doping is the consumption of certain prohibited substances by athletes to enhance performance. Across the world, doping is regulated and monitored by the World Anti-Doping Agency (WADA) which is an independent international agency established in 1999. WADA’s primary role is to develop, harmonise, and coordinate anti-doping regulations across all sports and countries. It does so by ensuring proper implementation of the World Anti-Doping Code (WADA Code) and its standards. In this blog post, we discuss the need of the framework proposed by the Bill, and give insights from the discussion on the Bill in Lok Sabha.
Doping in India
Recently, two Indian athletes failed the doping test and are facing provisional suspension. In the past also, Indian athletes have been found in violation of anti-doping rules. In 2019, according to WADA, most of the doping rule violations were committed by athletes from Russia (19%), followed by Italy (18%), and India (17%). Most of the doping rule violations were committed in bodybuilding (22%), followed by athletics (18%), cycling (14%), and weightlifting (13%). In order to curb doping in sports, WADA requires all countries to have a framework regulating anti-doping activities managed by their respective National Anti-Doping Organisations.
Currently, doping in India is regulated by the National Anti-Doping Agency (NADA), which was established in 2009 as an autonomous body under the Societies Registration Act, 1860. One issue with the existing framework is that the anti-doping rules are not backed by a legislation and are getting challenged in courts. Further, NADA is imposing sanctions on athletes without a statutory backing. Taking into account such instances, the Parliamentary Standing Committee on Sports (2021) had recommended that the Department of Sports bring in an anti-doping legislation. Other countries such as the USA, UK, Germany, and Japan have enacted legislations to regulate anti-doping activities.
Framework proposed by the National Anti-Doping Bill, 2021
The Bill seeks to constitute NADA as a statutory body headed by a Director General appointed by the central government. Functions of the Agency include planning, implementing and monitoring anti-doping activities, and investigating anti-doping rule violations. A National Anti-Doping Disciplinary Panel will be set up for determining consequences of anti-doping rule violations. This panel will consist of legal experts, medical practitioners, and retired athletes. Further, the Board will constitute an Appeal Panel to hear appeals against decisions of the Disciplinary Panel. Athletes found in violation of anti-doping rules may be subject to: (i) disqualification of results including forfeiture of medals, points, and prizes, (ii) ineligibility to participate in a competition or event for a prescribed period, (iii) financial sanctions, and (iv) other consequences as may be prescribed. Consequences for team sports will be specified by regulations.
Initially, the Bill did not have provisions for protected athletes but after the Standing Committee’s recommendation, provisions for such athletes have been included in the Bill. Protected persons will be specified by the central government. As per the WADA Code, a protected person is someone: (i) below the age of 16, or (ii) below the age of 18 and has not participated in any international competition in an open category, or (iii) lacks legal capacity as per their country’s legal framework
Issues and discussion on the Bill in Lok Sabha
During the discussion on the Bill, members highlighted several issues. We discuss these below-
Independence of NADA
One of the issues highlighted was the independence of the Director General of NADA. WADA requires National Doping Organisations to be independent in their functioning as they may experience external pressure from their governments and national sports bodies which could compromise their decisions. First, under the Bill, the qualifications of the Director General are not specified and are left to be notified through Rules. Second, the central government may remove the Director General from the office on grounds of misbehaviour or incapacity or “such other ground”. Leaving these provisions to the discretion of the central government may affect the independence of NADA.
Privacy of athletes
NADA will have the power to collect certain personal data of athletes such as: (a) sex or gender, (ii) medical history, and (iii) whereabout information of athletes (for out of competition testing and collection of samples). MPs expressed concerns about maintaining the privacy of athletes. The Union Sports Minister in his response, assured the House that all international privacy standards will be followed during collection and sharing of data. Data will be shared with only relevant authorities.
Under the Bill, NADA will collect and use personal data of athletes in accordance with the International Standard for the Protection of Privacy and Personal Information. It is one of the eight ‘mandatory’ standards of the World Anti-Doping Code. One of the amendments moved by the Union Sports Minister removed the provision relating to compliance with the International Standard for the Protection of Privacy and Personal Information.
Establishing more testing laboratories across states
Currently India has one National Dope Testing Laboratory (NDTL). MPs raised the demand to establish testing laboratories across states to increase testing capacity. The Minister responded by saying that if required in the future, the government will establish more testing laboratories across states. Further, in order to increase testing capacity, private labs may also be set up. The Parliamentary Standing Committee on Sports (2022) also emphasised the need to open more dope testing laboratories, preferably one in each state, to cater to the need of the country and become a leader in the South East Asia region in the areas of anti-doping science and education.
In August, 2019 a six-month suspension was imposed on NDTL for not complying with International Standard for Laboratories (ISL) by WADA. The suspension was extended for another six months in July, 2020 due to non-conformity with ISL. The second suspension was to remain in effect until the Laboratory complies with ISL. However, the suspension was extended for another six months in January, 2021 as COVID-19 impacted WADA’s ability to conduct an on-site assessment of the Laboratory. In December, 2021 WADA reinstated the accreditation of NDTL.
Several athletes in India are not aware about the anti-doping rules and the prohibited substances. Due to lack of awareness, they end up consuming prohibited substances through supplements. MPs highlighted the need to conduct more awareness campaigns around anti-doping. The Minister informed the House that in the past one year, NADA has conducted about 100 hybrid workshops relating to awareness on anti-doping. The Bill will enable NADA to conduct more awareness campaigns and research in anti-doping. Further, the central government is working with the Food Safety and Standards Authority of India (FSSAI) to test dietary supplements consumed by athletes.
While examining the Bill, the Parliamentary Standing Committee on Sports (2022) recommended several measures to improve and strengthen the antidoping ecosystem in the country. These measures include: (i) enforcing regulatory action towards labelling and use of ‘dope-free’ certified supplements, and (ii) mandating ‘dope-free’ certification by independent bodies for supplements consumed by athletes.