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
On March 22, Bihar registered its first two cases of the new coronavirus disease (COVID-19), one of whom died the same day. Since then, the number of cases has increased steadily. As of April 19, Bihar has 86 confirmed cases of COVID-19, of which 47 are active cases and 37 have recovered. 33 new cases have been registered since last week. One more death has been registered since March 22.
Given the highly contagious nature of the disease, on March 22, the Government of Bihar announced a state-wide lockdown till March 31. This was followed by a nation-wide lockdown enforced by the central government between March 25 and April 14, now extended up to May 3. During the lockdown, severe restrictions have been placed on the movement of individuals. Establishments have remained closed, except those providing essential goods and services. Restrictions are likely to be relaxed in less-affected districts post-April 20.
In this blog, we look at key measures taken by the state government in response to COVID-19 so far.
Early-stage: screening of travellers, awareness on precautionary measures
The initial responses from the state government were aimed towards: (i) raising awareness about precautionary measures to be taken against the disease, and (ii) screening of international travellers. In this context, on February 25, the Bihar State Health Society issued advisories for: (i) measures to be taken in schools and colleges, and (ii) reporting of airline passengers and tourists with symptomatic cases to the district health administration. On March 11, 104 Call Centre was designated as the COVID-19 control room, to address public queries related to the disease.
Prior to lockdown: limiting mass gatherings, mobilisation of the public health system
Limiting mass gatherings
Between March 13 and March 18, the state government issued orders to shut down various premises until March 31. These include Anganwadi centres, educational institutions, and commercial establishments such as cinema halls, parks, and shopping malls. The government staff was directed to come to office on alternate days. Gathering of more than 50 persons at one place was prohibited including any mass family gathering (except marriages). The transport department was asked to restrict both public and private transport.
Healthcare measures
On March 13, the government issued directions to: (i) ensure availability of 100 extra ventilators in the government hospitals, (ii) arrange for testing of COVID-19 in AIIMS, Patna and PMCH, Patna hospitals, and (iii) cancel leaves of all employees of the Health Department, and (iv) strengthen screening of travellers entering through the Bihar-Nepal border.
On March 17, the Health Department issued The Bihar Epidemic Diseases, COVID-19 Regulation 2020 under The Epidemic Diseases Act, 1897. The Act provides for better prevention of the spread of dangerous epidemic diseases. These regulations specify the protocol to be followed in both private and government hospitals for screening and treatment of COVID-19 patients. It also empowers the district administration to take containment measures including sealing of specific areas and conducting surveillance for COVID-19 cases. It makes spreading of rumour or unauthenticated information with mala fide intent a punishable offence.
Welfare measures
On March 16, the Chief Minister announced that treatment costs for COVID-19 for residents of Bihar will be sponsored from the Chief Minister Medical Assistance Fund. Moreover, the state government will provide assistance of four lakh rupees to the family of a person dying due to COVID-19.
The government issued directions to provide direct cash transfer in place of the food provided under the Mid-Day Meal scheme in schools, and at Anganwadi centres.
Essential goods and services
On March 21, the Food and Consumer Protection Department directed the district administration to ensure implementation of the Bihar Essential Article (Display of Prices and Stocks) Order, 1977. The Order requires sellers of specified items to display stock and price for the public’s reference. The specified items include food items, edible oilseeds, and petroleum products. The Department also directed the district administration to send proposals for adding any new items to the list of specified items.
During lockdown: strengthening medical response, welfare measures
Upon announcement of the lockdown on March 22, state-level and district-level coordination committees were set up. During the lockdown, the state government’s measures have been aimed towards: (i) strengthening the medical response in the state, (ii) providing relief to various sections of society from issues being faced during the lockdown, and (iii) addressing difficulties with the supply of essential goods and services.
Healthcare measures
On March 25, the Health Department constituted the Bihar COVID-19 Emergency Response Team which is responsible for the control and coordination of all health-related response.
Protocols for containment and treatment: Directions have been issued to implement several guidelines related to containment and treatment measures. These include: (i) set up and operationalization of isolation centres and quarantine centres, (ii) containment plan to address local transmission and community transmission through cluster containment strategy, (iii) surveillance program for Influenza-like Illness (ILI) and Severe Acute Respiratory Illness (SARI), (iv) handling of waste generated during treatment/diagnosis/quarantine, and (v) sanitation of residence and nearby areas of a COVID-19 positive person.
Door-to-door screening campaign: On April 14, the Chief Minister issued directions to start door-to-door screening campaign for suspected cases in affected districts including Siwan, Begusarai, and Nalanda. Such screening campaign will also be run in districts in border-areas, and an area within 3 km radius of the residence of COVID-19 positive patients.
Increasing manpower: The government invited medical professionals including doctors, nurses, and paramedics to volunteer. It also directed the district administration to engage retired doctors, nurses, and paramedics from defence services for volunteer work. Leaves of all employees of the Health Department were cancelled until April 30. The Health Department deputed AYUSH practitioners to assist at isolation and quarantine centres.
Dedicated infrastructure for COVID-19: On April 5, certain government hospitals were designated as exclusive hospitals for treatment of COVID-19 patients. The Health Department also directed certain big private hospitals in Patna to stop OPD services.
Other health-related measures: On March 23, the state government announced payment of one-month basic salary as an incentive to all doctors and health workers. On April 13, the Health Department issued an order prohibiting spitting in public places by tobacco, cigarette, and Pan users. Further, the state government announced that it will procure test kits from the private sector.
Welfare measures
Relief package: On March 23, the state government announced a relief package for people affected due to lockdown. Key features of the relief package are:
ration of one-month to all ration cardholders for free,
one-time cash transfer of Rs 1,000 per family to ration cardholders,
payment of pensions for three months in advance to all pensioners including pension for old age persons, widows, and physically challenged, and
release of pending scholarships to all students.
Help for migrants: On March 26, Rs 100 crore was allocated from the Chief Minister Relief Fund to provide aid to the migrants from Bihar stuck in other parts of the country due to the lockdown. On April 2, the state government announced that a one-time cash transfer of Rs 1,000 will be provided to the migrants. On April 13, an additional Rs 50 crore was allocated from the Relief Fund for this purpose. State-wise nodal officers have been appointed for coordination of relief efforts for migrants. The state government is running 10 food centres in Delhi to help migrants from Bihar.
Relief camps: On March 28, the state government decided to start relief camps along the border (including Nepal border) offering food, shelter, and medical help to persons coming in the state. Community kitchens and relief camps have been started in government school campuses to provide food and shelter.
Electricity tariff: On April 8, the State Cabinet approved the proposals for: (i) reducing electricity tariff for domestic and agricultural consumers by 10 paise per unit and (ii) waiving the monthly meter fee.
Measures for businesses and agricultural activities
The state government provided certain relaxations to businesses in matters related to taxation. These include:
extension in the deadline for payment of GST from March 31 to June 30, no interest or penalty charges to be levied for late payment in certain cases,
three-month extension in the deadline for one-time settlement scheme for pre-GST tax disputes, and
cancellation of orders regarding attachment of bank accounts of certain tax defaulters.
On April 16, the Chief Minister issued directions to start procurement of wheat through the Primary Agriculture Credit Society (PACS).
Essential goods and services
Various departments issued guidelines to the district administration to facilitate operational continuity of essential goods and services including (i) food items, (ii) seeds, fertilisers, and other agriculture-related items, (iii) livestock fodder, and (iv) petroleum products.
On March 27, the Food and Consumer Protection Department brought certain new items under the purview of The Bihar Essential Article (Display of Prices and Stocks) Order, 1977. These include: (i) wheat and wheat products, (ii) masks and hand sanitisers, and (iii) potato and onion.
Other Measures
Education: On April 8, the cabinet approved the proposal to promote students of Class I to XI (except class X) without annual examination.
Legislature: Salaries of MLAs and MLCs have been reduced by 15% for one year. The amount will be donated to the state’s Corona relief fund.
Labour and employment: On April 16, the Chief Minister issued directions to resume public works under the Saat Nischay Programme, Jal Jeevan Hariyali Yojana, and MNREGA.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
