Companies Bill to go into joint sitting

Of the 41, the NA did not endorse 12 recommendations from the NC

Parliament: Once the Companies Bill 2015 gets enacted, a firm will be allowed to be registered as a limited company with just one shareholder.

The National Council had introduced the concept of “one person company” (OPC) under section 4 of the bill. The National Assembly accepted the proposal yesterday during the re-deliberation.

This addition, the bill will give OPCs all benefits of a private limited company such as credit, market access, legal protection and tax advantage. Also, the owner of a company will be only responsible for company debts up-to the amount that they have invested and no more without risk to his personal wealth.

Members said that although the concept is new in the country, it was becoming popular in economies around the world. Until now, at least two shareholders were required to start a company.

The House will vote on the bill today for moving it into a joint sitting next session.

Bartsham-Shongphu MP Wangdi Norbu said countries were introducing OPC as a new concept. He said even India has incorporated the concept in its Companies Act in 2013 recognizing its benefit to the economy.

Although he supports the concept, MP Dorji Wangdi said ambiguities should not be left to avoid problems in implementation. “If specifications were not provided, we might encounter problems later,” he said.

Citing an example of the Indian Companies Act, Dorji Wangdi said the Indian OPCs needed to fulfill certain requirements to be qualified as OPCs. For instance, he said the Indian law prescribed a minimum capital of Rs 100,000 for a business to be incorporated as an OPC.

With the endorsement of OPC, the house deliberated on section 11 on whether OPC should have more than one director. The Council had proposed that a company should have at least two directors even in case of an OPC.

MP Lekey Dorji said having two directors in a private company was required to avoid evasion of tax and other corrupt practices. He also said two directors were required to promote good corporate governance in the country.

“The committee felt it was must to provide for two directors,” he said.

Economic affairs minister Norbu Wangchuk said, “Having two directors will avoid the occurrence of conflict of interest.” He said the requirement was proposed after realizing the risks of leaving a company in a single person’s hands.

However, health minister Tandin Wangchuk said having two directors in OPCs might not be practical. Dramedtse-Ngatshang MP Ugyen Wangdi said appointment of the second director should be left to the owner of the business.

The house resolved that it would allow a company to have at least two directors.

Lyonpo Norbu Wangchuk explained that a company was also required to conduct annual meeting of directors and that having two directors was necessary. “One of the directors can be either the nominee of the business or the independent director.”

The house however, did not agree on the Council’s recommendation on section 170, where an unsatisfied shareholder can appeal against the decision of the regulatory authority to a court.

While the Assembly proposed that it could be appealed in any court, the Council had proposed the appeal be made to the High Court.

Lyonpo Norbu Wangchuk said that over the last 15 years since the enactment of the Companies Act 2000, there have been tremendous amount of changes in the socio-economic and legislative landscape of the country.

The new bill, which seeks to repeal the existing Act, was drafted incorporating necessary changes to establish good corporate governance system in the country.

The House did not endorse 12 of the 41 recommendations from the Council. The bill will be submitted to His Majesty the Druk Gyalpo for his command to deliberate the bill in a joint sitting.

MB Subba

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