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Professional liquidators to have more say
December, 12th 2006

The company affairs ministry will be presiding over a host of momentous legislative changes in the coming months. The proposed laws will decisively impact the way business is conducted and governed in India. In the pipeline are a new Companies Act, the Competition Act and the Limited Liability Partnership Act. Company affairs minister Prem Chand Gupta took time off to speak about these things Excerpts:

How will the competition commission be structured? How useful would it be as regulator to avoid anti-competitive practices?

The Competition Commission of India (CCI) will be structured as per the provisions of the Competition Act, 2002. As you know, following the amendment Bill introduced by our ministry, the Act is in the process of amendment. Presently, it is under consideration of the Standing Committee on Finance.

The government will take further action as soon as the report of the committee is received.CCI will act as a regulator and will consist of members, who will be experts in the field of competition and other relevant and related fields as envisaged in the law. Primary responsibility of CCI is to prevent practices having adverse effect on competition, to promote and sustain competition in the markets, to protect the interests of consumers and to ensure freedom of trade carried on by the participants in market.

Insolvency determination and delays in liquidation are a problem. How will the new company law address these issues?

It is a fact that the existing liquidation process of companies in the country suffers from long delay and resultant problems. The Irani Committee on the new Company Law has recommended changes in the existing system for liquidation of companies.

The government is considering the internationally accepted best practices in this regard. Major changes are being considered for inclusion in in the proposed Companies Bill. We will set specific timelines for completion of various phases of liquidation process. The unqualified say of professional liquidators in this regard will be ended. Professional liquidators are going to be given a greater role.

Recognising the problems of liquidation, the government had made many changes in the Companies Act through the Companies (Second Amendment) Act, 2002. The new law introduced the concept of National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT). The NCLT was to takeover the role of High Courts in the matter of liquidation of companies. It also was to takeover the work of BIFR to offer a single platform in the matters of revival of sick industries and their liquidation.
However, some of the provisions of the amendment got challenged before the Madras High Court. Following the order of Madras High Court, the matter is pending before the Supreme Court. The government is awaiting eagerly the judgment of the apex court in the matter. As soon as the judgement is received further action will be taken.

Overseeing cross-boarder transactions and fixing cross-boarder insolvency are in regulatory gaze. How will the legal framework for these evolve?

As I said, several changes are under process on the basis of internationally accepted best practices. It is expected that with operationalisation of the NCLT and other changes as envisaged, the insolvency regime for companies in the country will be addressed effectively.

The LLP Bill, cleared by Cabinet, is looking at a new hybrid structure that will have the benefits of the partnerships and companies. Comment on this models usefulness in the Indian contextWe are in the process of introducing the LLP Bill in the current session of the Parliament. This is a path-breaking legislation.

The model would be useful for professionals, small and medium enterprises, venture capital and the like. Even though the Naresh Chandra panel had proposed to initially limit the LLP option to professionals, we have decided to go the whole hog and allow it for all businesses, including manufacturing.

We will allow maximum flexibility to LLP partners. The internal governance flexibility of partnership firms will be harmonised with the limited liability of companies. Existing unlisted companies can either convert themselves to LLPs or become partners in LLPs. Inventors and people of good ideas who are capital-scarce will be able to form LLPs by tying up with companies or venture capitalists. The intellectual contribution of partners will be quantified at the stage of signing of the LLP agreement. LLPs are intended to function on the basis of the agreement among the partners. If there is no agreement, the partners will be guided by a standard format which we will prescribe in the Acts first Schedule.

Comment on the recent initiatives on corporate governance.Improving corporate governance has been very high on our agenda. The National Foundation on Corporate Governance has been providing a platform for coordinating the activities in this regard. The MCA21 e-governance programme, which has already become functional, would go a long way in enhancing the transparency and good corporate governance.

Q: Isnt there a need to complement the legislative changes with compatible administrative revamp?

Of course. The ministry and its field offices are under the process of transformation. Beginning with the success of the e-governance initiatives we are determined to give a new look to the Registrars of Companies. New look in every aspect the physical infrastructure, the way of working and the mindset- with the ultimate objective of providing maximum user satisfaction.

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