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 Medical Commission (NMC) Bill, 2017 was introduced in Lok Sabha in December, 2017. It was examined by the Standing Committee on Health, which submitted its report during Budget Session 2018. The Bill seeks to regulate medical education and practice in India. In this post, we analyse the Bill in its current form.
How is medical education and practice regulated currently?
The Medical Council of India (MCI) is responsible for regulating medical education and practice. Over the years, there have been several issues with the functioning of the MCI with respect to its regulatory role, composition, allegations of corruption, and lack of accountability. For example, MCI is an elected body where its members are elected by medical practitioners themselves, i.e. the regulator is elected by the regulated. In light of such issues, experts recommended nomination based constitution of the MCI instead of election, and separating the regulation of medical education and medical practice. They suggested that legislative changes should be brought in to overhaul the functioning of the MCI.
To meet this objective, the Bill repeals the Indian Medical Council Act, 1956 and dissolves the current Medical Council of India (MCI) which regulates medical education and practice.
Who will be a part of the NMC?
The NMC will consist of 25 members, of which at least 17 (68%) will be medical practitioners. The Standing Committee has noted that the current MCI is non-diverse and consists mostly of doctors who look out for their own self-interest over larger public interest. In order to reduce the monopoly of doctors, it recommended that the MCI should include diverse stakeholders such as public health experts, social scientists, and health economists. In other countries, such as the United Kingdom, the General Medical Council (GMC) responsible for regulating medical education and practice consists of 12 medical practitioners and 12 lay members (such as community health members, and administrators from the local government).
How will the issues of medical misconduct be addressed?
The State Medical Council will receive complaints relating to professional or ethical misconduct against a registered doctor. If the doctor is aggrieved by the decision of the State Medical Council, he may appeal to the Ethics and Medical Registration Board, and further before the NMC. Appeals against the decision of the NMC will lie before the central government. It is unclear why the central government is an appellate authority with regard to such matters.
It may be argued that disputes related to ethics and misconduct in medical practice may require judicial expertise. For example, in the UK, the GMC receives complaints with regard to ethical misconduct and is required to do an initial documentary investigation. It then forwards the complaint to a Tribunal, which is a judicial body independent of the GMC. The adjudication and final disciplinary action is decided by the Tribunal.
What will the NMC’s role be in fee regulation of private medical colleges?
In India, the Supreme Court has held that private providers of education have to operate as charitable and not for profit institutions. Despite this, many private education institutions continue to charge exorbitant fees which makes medical education unaffordable and inaccessible to meritorious students. Currently, for private unaided medical colleges, the fee structure is decided by a committee set up by state governments under the chairmanship of a retired High Court judge. The Bill allows the NMC to frame guidelines for determination of fees for up to 40% of seats in private medical colleges and deemed universities. The question is whether the NMC as a regulator should regulate fees charged by private medical colleges.
A NITI Aayog Committee (2016) was of the opinion that a fee cap would discourage the entry of private colleges, therefore, limiting the expansion of medical education. It also observed that it is difficult to enforce such a fee cap and could lead medical colleges to continue charging high fees under other pretexts.
Note that the Parliamentary Standing Committee (2018) which examined the Bill has recommended continuing the current system of fee structures being decided by the Committee under the chairmanship of a retired High Court judge. However, for those private medical colleges and deemed universities, unregulated under the existing mechanism, fee must be regulated for at least 50% of the seats. The Union Cabinet has approved an Amendment to increase the regulation of fees to 50% of seats.
How will doctors become eligible to practice?
The Bill introduces a National Licentiate Examination for students graduating from medical institutions in order to obtain a licence to practice as a medical professional.
However, the NMC may permit a medical practitioner to perform surgery or practice medicine without qualifying the National Licentiate Examination, in such circumstances and for such period as may be specified by regulations. The Ministry of Health and Family Welfare has clarified that this exemption is not meant to allow doctors failing the National Licentiate Examination to practice but is intended to allow medical professionals like nurse practitioners and dentists to practice. It is unclear from the Bill that the term ‘medical practitioner’ includes medical professionals (like nurses) other than MBBS doctors.
Further, the Bill does not specify the validity period of this licence to practice. In other countries such as the United Kingdom and Australia, a licence to practice needs to be periodically renewed. For example, in the UK the licence has to be renewed every five years, and in Australia it has to renewed annually.
What are the issues around the bridge course for AYUSH practitioners to prescribe modern medicine?
The debate around AYUSH practitioners prescribing modern medicine
There is a provision in the Bill which states that there may be a bridge course which AYUSH practitioners (practicing Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy) can undertake in order to prescribe certain kinds of modern medicine. There are differing views on whether AYUSH practitioners should prescribe modern medicines.
Over the years, various committees have recommended a functional integration among various systems of medicine i.e. Ayurveda, modern medicine, and others. On the other hand, experts state that the bridge course may promote the positioning of AYUSH practitioners as stand-ins for allopathic doctors owing to the shortage of doctors across the country. This in turn may affect the development of AYUSH systems of medicine as independent systems of medicine.
Moreover, AYUSH doctors do not have to go through any licentiate examination to be registered by the NMC, unlike the other doctors. Recently, the Union Cabinet has approved an Amendment to remove the provision of the bridge course.
Status of other kinds of medical personnel
As of January 2018, the doctor to population ratio in India was 1:1655 compared to the World Health Organisation standard of 1:1000. The Ministry of Health and Family Welfare stated that the introduction of the bridge course for AYUSH practitioners under the Bill will help fill in the gaps of availability of medical professionals.
If the purpose of the bridge course is to address shortage of medical professionals, it is unclear why the option to take the bridge course does not apply to other cadres of allopathic medical professionals such as nurses, and dentists. There are other countries where medical professionals other than doctors are allowed to prescribe allopathic medicine. For example, Nurse Practitioners in the USA provide a full range of primary, acute, and specialty health care services, including ordering and performing diagnostic tests, and prescribing medications. For this purpose, Nurse Practitioners must complete a master’s or doctoral degree program, advanced clinical training, and obtain a national certification.
