New Delhi : 10-member committee to propose changes to companies law has suggested simplifying the process for private placement of securities by doing away with the offer latter and making disclosures in the application form itself.
The government-appointed committee also recommended that instead of having a special resolution passed by the shareholders, an ordinary resolution may be passed for managerial remuneration in some cases. These include cases where the managerial person was not a promoter, does not hold more than 2% of the paid-up equity share capital of the company or its holding companies, among other factors.
“The committee further recommended that the limits of yearly remuneration prescribed in the schedule be enhanced,” the panel’s report said, adding that the requirement for government approval may be omitted altogether. Further, the panel said, the Companies Act contained a provision that did not allow a company to have subsidiaries beyond a prescribed number. It said that this provision was included to address practices of creating subsidiaries aimed at making it difficult to trace the source of funds. However, it said the provision could have a substantial bearing on the functioning, structuring and the ability of companies to raise funds, and recommended omitting it.
START UPS
The companies law committee has also made several recommendations to encourage the start-ups ecosystem in the country. The report said that the committee deliberated on the issue of sweat equity shares in excess of the 25% ceiling and recommended that start-ups, which may require such instruments, may be permitted to issue sweat equity shares up to 50% of the paid-up equity share capital. Sweat equity is the ownership interest, or increase in value of shares, which is created as a direct result of contribution to a project or enterprises in form of effort and toil. It is the preferred mode of building equity for cash-strapped entrepreneurs in their start-up ventures.
The panel also sought relaxation of rules to enable issuance of employee stock options to promoters who may be working as employees or employee directors or whole time directors. -Cogencis
