COMPANY LAW
| India Inc asks govt to take a relook at liability clause Tue, 05 Oct 2010 19:39:18 GMT |
| The Economic Times India Inc asks govt to take a relook at liability Fearing that the government may soon make a company promoter liable for mistakes even though they are not actively a part of the board’s decision-making process, India Inc has asked the ministry of corporate affairs to reconsider the relevant proposal. In its representation before the ministry on draft Companies Bill, the Confederation of Indian Industry (CII) has called for a re-look into the definition of ‘officer in default’ so as to exclude promoters from the list of officials the industry’s stand on the issue. It may also be stressed that there is a need to place trust on promoters, the CII maintains. who will be held accountable for any violation under the law. “It has to be understood that the term Promoter is very wide in meaning and to include ‘promoter’ as an ‘Officer in Default’ would be impractical and also unfair, especially for those promoters who are not even members of the board or not involved in the day-to-day affairs of the company,” said CII spokesperson, explaining As proposed by the ministry, the ‘promoter’ will be included as ‘officer in default’. The definition of ‘officer in default’ under the Bill includes key managerial personnel, apart from persons like share transfer agents, bankers, registrars, merchant bankers, who advise the board on various aspects of a company’s functioning. “Entities such as share transfer agents, bankers, registrars, merchant bankers should be kept out of this definition as they have only specific professional and arms length role,” said CII. As per the proposed structure under the new law, assets including property and cash of key managerial personnel or any officer taking undue advantage or benefit could be disgorged to compensate the investors. A detailed process for determination of the fault and the amount of benefit derived must be prescribed to avoid the possibility of subjective interpretation of ‘undue advantage or benefit’, the chamber has said. On the definition of the term ‘fraud’ under the Bill, CII has said that the government should bring clarity to an official’s intent to cause damage to a company. ‘Intent to injure’ is a very subjective matter and can also lead to interpretational issues, it said. While endorsing the ministry’s proposal to define an independent directors’ liability, only for activities that is within his knowledge, the CII has called for extending a similar liability measure for non-executive directors sitting on a company’s board. |
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