Promotion of Privatisation in a Socialist way: Corporate Financial Structuring and Dividend

Payout The Legal Perspective.

Author: Ms. Keerti Rikhari
e-mail: rikhari_keerti@yahoo.com
Abstract
The post liberalisation era has seen many constant changes in the corporate restructuring from the
closed economic framework, to the implementation of LPG policy and finally to the present stage of
corporate development. The law making body of India has maintained the responsibility of public
welfare, as India being a mixed economy, in the Companys Bill 2012.
This paper is an examination of the impact of the Companies Bill 2012, with the amendments and
changes made in the new bill and added points, on the corporate business houses in the crucial
decisions related to finance outcomes, choice making amongst the options of estimation of a
suitable capital structure and the treatment of the most sensitive decision of retained earnings and
distribution of the dividends to the shareholders.
The paper also tries to focus on key matters associated with the corporate finance decisions
Capital Structure, Capital Budgeting and Working Capital needs after the bill becomes an act.
Basically dealing with questions like-
Finding the availability of the men, money, material and methods as inputs readily available
with the corporate house and deciding which project to undertake for creation of wealth?
How to match the revenue and other fund sources with the desired target of planned output
to meet the profit maximisation need of the organisation?
How to make policies related to managing of the day to day financial requirement, in order
to cater the macroeconomic deviations?
What would be the most suitable optimised ratio of debt and equity, so as to ensure the
growth and prosperity of the organisation?
The database based analysis have been made on the basis secondary source of data
collection with aim to provide a study of new and altered dimensions of the Financial Business
aspects by the Company Bill 2012, focusing on the following main points:-
1. Preliminary (relaxations to small companies, increasing the maximum no. of member from
50 to 200 in case of private company etc.)
2. Provisions on Compromise, Arrangement and Amalgamation of companies.
3. New norms regarding audit of financial reports and appointment of auditors.
4. Company Accounts in electronic form.
5. Appointment of Directors and their qualifications.
6. Dividend: Declarations, payment norms and penalties. (Investor protection)
7. Additional Information in Annual Returns. (Matters like Penalties imposed by company,
Directors remuneration, certification of compliance, details of foreign investments etc.)
8. Participation in Board meetings, Board powers and voting by electronic means.
9. Constitution of National Company Law Tribunal and Appellate Tribunals.
10. Mandate on compulsory fulfilment of Corporate Social Responsibility.
11. Enhanced Corporate Governance.
With the study it has been derived that there is no consistent pattern and there are significant
differences in the countries all over the world, with regards to corporate legal system. The capital
structure and dividend payouts are a choice which is the result of a complex interaction of many
institutional policies, business practices, micro & macro economic factors as well as the legal
systems of the country.