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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
Amidst news reports of violence against healthcare workers during the spread of the COVID-19 pandemic, the Epidemic Diseases (Amendment) Ordinance, 2020 was promulgated on April 22, 2020. The Ordinance amends the Epidemic Diseases Act, 1897. The Act provides for the prevention of the spread of dangerous epidemic diseases. The Ordinance amends the Act to include protections for healthcare personnel combatting epidemic diseases and expands the powers of the central government to prevent the spread of such diseases.
Who is considered a healthcare service personnel under the Ordinance?
The Ordinance defines healthcare service personnel as a person who is at risk of contracting the epidemic disease while carrying out duties related to the epidemic such as caring for patients. They include: (i) public and clinical healthcare providers such as doctors and nurses, (ii) any person empowered under the Act to take measures to prevent the outbreak of the disease, and (iii) other persons designated as such by the respective state government.
What is considered an ‘act of violence’ under the Ordinance?
An ‘act of violence’ includes any of the following acts committed against a healthcare service personnel: (i) harassment impacting living or working conditions, (ii) harm, injury, hurt, or danger to life, (iii) obstruction in discharge of his duties, and (iv) loss or damage to the property or documents of the healthcare service personnel. Property is defined to include a: (i) clinical establishment, (ii) quarantine facility, (iii) mobile medical unit, and (iv) other property in which a healthcare service personnel has direct interest, in relation to the epidemic.
What are the offences and penalties outlined under the Ordinance?
The Ordinance specifies that no person can: (i) participate in or commit an act of violence against a healthcare service personnel, or (ii) participate in or cause damage or loss to any property during an epidemic. A person committing these two offences is punishable with imprisonment between three months and five years, and a fine between Rs 50,000 and two lakh rupees. However, for such offences, charges may by dropped by the victim with the permission of the Court. If an act of violence against a healthcare service personnel causes grievous harm, the person committing the offence will be punishable with imprisonment between six months and seven years, and a fine between one lakh rupees and five lakh rupees. All offences under the Ordinance are cognizable (i.e., a police officer can arrest without a warrant) and non-bailable.
Do healthcare service personnel that face violence get compensation?
Persons convicted of offences under the Ordinance will be liable to pay a compensation to the healthcare service personnel whom they have hurt. Such compensation will be determined by the Court. In the case of damage or loss of property, the compensation payable to the victim will be twice the amount of the fair market value of the damaged or lost property, as determined by the Court.
What protections did healthcare service personnel have prior to the promulgation of this Ordinance?
Currently, the Indian Penal Code, 1860 provides for penalties for any harm caused to an individual or any damage caused to property. The Code also prescribes penalties for causing grievous hurt i.e., permanent damage to another individual.
The Ministry of Health and Family Welfare had released a draft Bill to address incidences of violence against healthcare professionals and damage to the property of clinical establishments in September 2019. The draft Bill prohibits any acts of violence committed against healthcare service personnel including doctors, nurses, para medical workers, medical students, and ambulance drivers, among others. It also prohibits any damage caused to hospitals, clinics, and ambulances.
Table 1 compares the offences and penalties under the Ordinance, the draft Bill, and Indian Penal Code, 1860.
Table 1: Offences and penalties with regard to violence against healthcare service personnel
Offences and Penalties |
Epidemic Diseases (Amendment) Ordinance, 2020 |
Healthcare Service Personnel and Clinical Establishments (Prohibition of violence and damage to property) Bill, 2019 |
Indian Penal Code, 1860 |
Violence
|
|
|
|
Violence causing grievous harm |
|
|
|
Damage to property |
|
|
|
Sources: Epidemic Diseases (Amendment) Ordinance, 2020, Healthcare Service Personnel and Clinical Establishments (Prohibition of violence and damage to property) Bill, 2019, and Indian Penal Code, 1860; PRS.
Are there provisions for the safety of healthcare service personnel at the state level?
Several states have passed legislation to protect healthcare service personnel. These states include: Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Delhi, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Manipur, Odisha, Punjab, Rajasthan, Tamil Nadu, Tripura, Uttarakhand and West Bengal.
Most state Acts define healthcare service personnel to include registered doctors, nurses, medical and nursing students, and paramedical staff. Further, they define violence as activities causing harm, injury, endangering life, intimidation, obstruction to the ability of a healthcare service person to discharge their duty, and loss or damage to property in a healthcare service institution.
All state Acts prohibit: (i) any act of violence against healthcare service persons, or (ii) damage to property in healthcare service institutions. In most of these states, sf a person partakes in these prohibited activities, he/she is punishable with imprisonment up to three years and a fine of up to fifty thousand rupees. However, in certain states such as Tamil Nadu the maximum prison sentence may be up to ten years.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.