A few days before the concept paper on the Companies Act was released, the Department of Company Affairs drummed out some interesting statistics: Many firms spend up to Rs 300 crore annually in compliance, four of every seven registered companies are defunct, the RoC deals with 30 million documents every year, which it must preserve for five years. Each factoid is intrinsically linked with three powerful lobbies — investors, companies, and the government. After three previous attempts to redraft the Companies Act, here’s another. This draft,like its predecessors, aims at “discipline, accountability and transparency”.

But India Inc still seeks a single, consolidated law. While the chambers of commerce said they were fine with cutting the number of provisions from 685 to 249, they may sulk if independent directors are cut down to size, ‘special audits’ are enforced willy-nilly, or punitive measures become too harsh. And what about the shareholders? Take a look at some key issues:

Independent directors

It’s back. The requirement to appoint 50 per cent independent directors — or three independent among the seven minimum directors — has obviously not gone out of favour. ‘‘The idea is good for widely-held public companies but private, closely-held firms wouldn’t like it. Independent directors should theoretically check mischief, but without shares in a company they treat the job like a perk or pass-time,’’ says Anil Chopra of Bajaj Capital.

There are also concerns that independent directors are not held responsible when defaults occur and rarely step in to ensure public cash is safeguarded by promoters.

Pruning the law

The Concept Paper says 685 provisions are too many – 289 will do. But India Inc fears sweeping changes, and early reversals. The director of a big, Delhi-based firm says most rules and regulations in the Companies Act have never been used. But though the process is expected to be long drawn out, this is the only element of the concept paper that industry chambers have welcomed.

In default cases

The concept paper has more than doubled fines but reduced or done away with imprisonment in many cases. Maximum imprisonment is two years and fines are up from Rs 2 lakh to Rs 10 lakh, following opposition to harsh imprisonment terms in cases of financial irregularities. ‘‘Most chambers had spoken out against imprisonment, which may be necessary to make shareholders feel defaulters will pay. Without this, they may not want to trust India Inc.,’’ says an industry source.

Dropped provisions

Many controversial issues have been raked up again, but equally, a range of provisions — such as the reservation for women directors and need to route investments through a single subsidiary — have been thrown out when borrowing from the 2003 draft. For industry, the biggest step towards procedural ease is the consolidated balance sheet a fresh provision that will help diversified business houses, specially in complex sectors like FMCG and retail.