| New company law tribunal: SC gives qualified approval |
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New Delhi, 14 May The Supreme Court on Thursday upheld, with riders, the constitutional validity of the proposed National Company Law Tribunal (NCLT). This allows setting up of the body, meant to replace the Company Law Board ( CLB), the Board for Industrial and Financial Reconstruction ( BIFR) and the Appellate Authority for Industrial and Financial Reconstruction ( AAIFR). A five- judge constitution bench asked the government to set up NCLT and its appellate forum without further delay. However, the bench struck down several provisions of the Companies Act, 2013, which provided for establishment of NCLT and its appellate forum. The court has asked the government to modify the rules according to the recommendations made in the judgment. In the Companies Act, the tribunal was to not only replace CLB but also handle various cases on companies currently with the high courts, BIFR and AAIFR. It was to have 63 members and 21 benches. A constitution bench had already examined the Companies Act provisions in 2010 and found several legal hitches. The government then amended those provisions and argued the faults had been repaired. However, the Madras Bar Association for the second time had challenged the provisions and the SC agreed certain provisions must go. The present judgment, delivered by a bench headed by Chief Justice H L Dattu, emphasised on the principles of independence of the judiciary and separation of powers, underlined in the 2010 judgment. According to the court, many of the amended provisions- did not meet the conditions set by the earlier judgment. The main illegalities were related to the selection and appointment of members and heads of the tribunals. One of the provisions found invalid was Section 409, which allowed a joint secretary in the government to be a technical member of the tribunal. The court wanted only a secretary or additional secretary to be appointed to the post. More, the provision for a cost accountant with at least 15 years experience was also held invalid. The court held these provisions went against the "clear and categorical dicta in the 2010 judgment… Tinkering with them would evidently have the potential of compromising with standards which the 2010 judgment sought to achieve, nay, so zealously sought to secure," went the verdict, written by judge A K Sikri. Another serious illegality was on the composition of the selection committee. According to the SC, the mandate of the 2010 judgment was not followed in the amended rules. There should have been a four- member committee and the chief justice was to have the casting vote in case of differences. Instead, the new Companies Act proposed a five member committee. Another deviation from the 2010 judgment has been that one member each from the ministry of corporate affairs and the ministry of finance were proposed for the selection committee. This, said the court, would again make it a five- member body, with bureaucrats having an upper hand. For full report, visit www. business- standard. c0m |
| New insider trading norms kick in today |
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The traditional definition only applied to companies whose shares can be traded on the stock exchanges. The new regulations also apply for ' proposed to be listed' companies. This will largely cover those which plan to hit the market with an initial public offer. It seeks to regulate insiders who might have access to pricesensitive information not listed in the offer document, and prevent them from trading on its basis. ESOPs Ambiguities remain over how employee stock option schemes ( ESOPs) will be regulated under the new insider trading rules. This includes questions over when they would be allowed to put through transactions and how the trading plan would apply to ESOPs. Due- diligence The earlier regulations did not expressly deal with the issue of due- diligence. Companies looking to acquire a stake in listed entities conduct an indepth check of operations. This could include picking up on unpublished information which could move the share price significantly if made public. The new regulations recognise the need for communication of such unpublished price- sensitive information ( UPSI) in connection with transactions. Safeguards have been introduced and attempts made to remove ambiguity around the issue. Trading plan A trading plan provides an outlook on insiders' buying and selling decisions in advance. This plan is to be made public and is designed to give greater clarity in terms of transactions by insiders.Connected persons People outside the company can also be privy to insider information. The new regulations empower companies to ask connected persons Experts have wondered about the Others say in such cases, the onus of References: Khaitan & Co, J Sagar Associates, Nishith Desai Associates BS REPORTER Mumbai, 14 May The new insider trading regulations, effective Friday, revamp those issued in 1992. The current set looks at a number of additional issues. This includes expanding the scope of the entities and individuals coming under it, as well as norms on transactions by insiders and sharing of price- sensitive information. Here, some key changes and issues. |
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