The Companies Act of 2000 will be repealed and the 2013 version of it will have simpler, clearer provisions, and faster procedures.
Various company secretaries and representatives in the western region attended the first consultative meeting, hosted by the Department of Industries to deliberate on the new draft bill, yesterday here in the capital.
Director of the department of industry Tandin Tshering in his opening address at the meet said “we are repealing this Companies Act 2000 as it is easier to repeal than amend.” This, he said was considering the fact that the existing law has turned old and in keeping with recent international norms.
However, ultimate decision whether to introduce a new Act or amend the existing one shall be taken by parliament.
“Even if we look at the international practices, it is sometimes very complex to look at the amendments and creates confusion. So it is best to have a completely new version of the companies act,” he concluded.
The draft Companies Bill of Bhutan 2013 was introduced to the participants by the director of Registry Advisers Limited, David Walke from the United Kingdom and Ugyen Dorji from UD & Partners. The field work is being undertaken by the two consultants under the main contractor Warrington Consulting Group (WCG) from Canada.
Earlier this year, the WCG submitted an inception report to the economic affairs ministry (MoEA).
In his opening remarks, company registrar Karma Yeshey said the existing law which is more than a decade old has become unclear, vague and outdated and needed major reforms.
He said the ministry has assigned the revision works on the draft to the working group which comprised members from the royal security exchange of Bhutan, finance ministry, tax department and MoEA among others.
“We discussed the bill for the last two months but it is more important to incorporate Inputs and comments from the companies or stakeholders as well,” he said.
Some of the main objectives behind reforming the Act are to protect investors, encourage good corporate governance, maximize participation from the shareholders in company affairs, provide transparent incorporation or closing of business procedure and make appropriate provision for foreign direct investments (FDI).
Talking to The Bhutanese, David Walke said the draft bill is also aimed to encourage more FDIs through simple and user friendly provisions. “If you have an arrangement for companies that are good for local companies which actually send out a good message to overseas investors as well,” he said.
David pointed out the importance of facilitating small companies’ growth in the kingdom by making it “easier and simpler” to set up a business through the law. “In comparison with other countries, Bhutan has very small number of companies and a lot of it tends to be public companies which are a concern,” he explained.
Major changes in the Act covers simplified procedures to start and close a company , roles of company officials including the board members and shareholders, code of conduct, possible filing exemptions for small companies, procedure for amalgamations, protection of shareholders against unfair prejudice and role of courts among others.
Chapter seven, section 148 of the draft bill mandates the government to establish a code of conduct for the governance of a company that shall promote those conditions that will enable the pursuit of Gross National Happiness.
The bill also calls for adequate human resource with the company registrar division and empowers assistant registrars to be able to perform all functions which are currently carried out by the registrar alone. It also aims to streamline document-submission to different agencies under the present procedures and also online services such as e-filing and e-mail communication with companies.
Unlike in the past, new companies will be aware of specific rules with regard to company names as the bill also has a separate chapter for the same. “It is better for people to decide according to the rules rather than putting up a name to the registrar to get it rejected,” David said.
Another major change in the Act would be, to remove Schedule XIII and XIV which talks about the minimum auditing requirement. The auditing standards will be adopted from the Accounting and Auditing Standard Board of Bhutan.
The draft bill also strengthens section 91 of the existing Act which entails responsibility of a director to act in the ‘best interest of the company’.
David Walke said the best interest of the company in the past was always considered to be the interest of the shareholders. He said it was “narrow and indicated a short term view”. “It will now include the interest of employees, impact of the company’s operation on environment and consequences of any decision among others,” he said.
The new Bill will have nine rules and regulations excluding the Corporate Bond Regulation which was put in place this year.
The rules and regulations include appointment of Directors; appointment and qualification of the Company Secretaries; company’s payment of fees; Appointment of Auditors Regulation; company official remuneration; company’s agent appointment; Alteration of articles regulation; merger and acquisition regulation and winding up regulation.
This is done to lay down clear procedures to implement the provisions of the Companies Act and the ministry will pass the rules once the Act is passed by Parliament.
The reforming of the companies Act project, funded by Asian Development Bank (ADB) was commissioned to Barrington Consulting Group by the Company Registry Division, Department of Industry under MoEA.
David said the consultancies has “looked at legislation in various other countries just to see what developments are there around the world and what works best for Bhutan.”
The company registrar said the draft bill will be forwarded to the MoEA for endorsement following extensive deliberations within stakeholders.
Tandin Tshering said the draft Bill which should be ready by the end of the year, would probably be tabled during the 11th session of Parliament. “The next government may probably take it up,” he said.
The Companies Act of 2000 came into existence when the same Act of 1989 was revised.