PART II - PERTAINING TO WORKING DRAFT OF COMPANIES BILL, 1997 Executive Summary

• Definition of the expression "security" be restructured. The expressions "derivative" and "option in securities" can be more appropriately defined in SC(R) Act.

• As per the Working Draft Report, only Part III is proposed to be administered by SEBI. It is recommended that all the provisions relating to listed companies in so far as they relate to subject matter of capital market and issuance or dealing in securities wherever found in Companies Act be administered by SEBI. SEBI should be the sole authority for framing regulations in relation to the subjects entrusted to it under the new legislation.

• Provisions relating to prospectus, shelf-prospectus and red herring prospectus require several modifications.
• Private Placement should be regulated. Broad parameters should be laid down in the Act. Details to be determined by SEBI.
• Provisions made in the Working Draft for buy back of securities require several modifications. (i) The provision for buy-back should be restricted to "shares" only. (ii) The company should not be allowed to utilise proceeds of "prior issue" for purpose of "buy-back".(iii) The company should be allowed to re-issue the shares which are bought back, subject to safeguards and stipulations which may be laid down. (iv) Implications relating to insider trading to be considered.
• Penal provisions of the Act be made deterrent.
• Listing period be reduced from 10 weeks to 30 days. It should not be mandatory to have the securities listed on the regional stock exchange.
• Clauses 94-98 of the Working Draft require several amendments. SEBI may be authorised by the Act to frame regulations relating to transfer of securities of listed companies, etc.
• Obtaining of duplicate share certificate and issue thereof as a result of fraud or collusion be made a serious criminal offence.
• If a person is found guilty of contravening the provisions of SEBI Act, SC(R) Act or depository Act, or is penalised by the adjudicating officer under the SEBI Act, he should be disqualified from becoming the director of the company. The Committee has formulated amendments.
• Securities audit be made compulsory.
• Monetary penalty concept be introduced so that investors can seek remedy of claiming compensation, damages, etc.
• In order to enhance corporate democracy, the concept of Postal Ballot to be introduced to enable shareholders to vote through postal ballot.
• The blank transfer deeds should not be permitted.
• SEBI should have power of inspection of books of accounts, records of the listed companies.
• Rights issue with right of renounciation be treated as public issue.
• Printing of share certificates be regulated and technical standards to be prescribed.
• Verification of transfer deeds by companies on payment of nominal fees before lodgment of certificate of transfer.
• Company’s right to refuse transfer limited to be limited to violation of SEBI Act and regulations, or any other law and not on "sufficient cause" as presently prescribed under section 111A.
• The concept of deemed public company be reintroduced. Section 43A of existing Act is a useful provision in the Act and it should not be deleted.
• The Reserve Bank of India should have power to freeze voting rights in respect of "shares under transfer" concerning Banking Companies pending consideration of Application for Acknowledgment If the shares of a Banking Company are transferred in violation of Banking Regulation Act, 1949 or the circulars / guidelines issued by Reserve Bank having the force of law, the Reserve Bank should have locus standii to apply to Company Law Board for rectification of Register on par with SEBI and other authorities.
• Companies making initial public offer of securities for a sum of Rs.10 crores or more to be issued only in dematerialised form through a depository.

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