The new company law has come after the longest and the widest ever consultation in the legislative history of India. This is evident from the debate in Rajya Sabha on the subject where members across party lines welcomed and supported the Companies Bill. A concern that a few members expressed related to the use of the word ‘prescribed’ 416 times in the legislation with 470 clauses where ‘prescribed’ means prescribed by rules made by the central government under the Act. This means that the government would make rules over 400 matters which, the Bill claims, are of procedure and detail and it is not practicable to provide for them in the law.
Let us take an example. It defines ‘key managerial personnel (KMP)’ to mean chief executive officer, company secretary, whole-time director, chief financial officer and other such officers as may be prescribed. This would allow the authorities to deal also with the KMPs who are not listed in the Act, should the need arise in future and also the new KMPs that may emerge in future, without an amendment to the law. At the time of enactment, the legislature could not possibly visualise all KMPs who all would need to be regulated in future. The import of this provisions is that KMPs are important and the law needs to deal with them in a particular manner and an officer irrespective of designation can be a KMP depending on the environment and such designation or environment can’t be specified today which would hold good for all times to come. The government needs to be empowered to deal with a KMP that emerges any time by resorting to ‘prescribed’ without legislative intervention, particularly when this particular legislation has taken almost a decade for enactment.
Of late, the business environment has become very dynamic. Change that used to take centuries earlier is coming about in months, or at the very slowest, in a few years. Former chairman of Sebi, C B Bhave reportedly likened governance challenges in this environment to a flight that has developed snag at 30,000 feet and it is too late to land and too dangerous to continue flying. The options are limited—“Fly, we must. Repair, we must.” The governance response to this has been empowerment of the executive with the ‘almost incomplete’ regime of law. This regime believes that it is not possible to visualise all the possible