The much awaited Companies Bill, 2012 (Bill), passed by the Lok Sabha (lower house of Indian Parliament), is an attempt by the Indian government to update the existing legislation to meet the requirements of an economy which has evolved significantly in the last two decades.

The Bill promises operational flexibility to companies and at the same time also addresses concerns on corporate governance by prescribing higher standards of accountability and transparency. It will not only significantly impact the management structure and operational facets of companies, certain classes of holding companies and their subsidiaries may have to relook at their group structure for complying with the proposed restrictions on the level of holding companies and investment vehicles. Even though the Bill itself is fairly extensive, it relies heavily on underlying rules which are yet to be published for public comments and the picture will become clearer only when these rules are formalized.

Once notified as an Act, the Bill will be a game changer in many ways and companies would have to gear up to adapt to the new legislative environment which will be ushered by it. The Bill has to be passed by the Rajya Sabha (upper house of the Indian Parliament) and receive the President’s assent before it can be notified as an Act replacing the existing Companies Act, 1956. Given the government’s attempt to inject confidence in a slowing economy, the likelihood of this process being completed in the near future is fairly high.

The Danish Parliament has recently adopted a bill with the aim to create a more equal distribution of men and women on the companies’ boards of directors.

 The bill introduces new provisions in the Danish Companies Act (Section 139a) and the Danish Financial Statements Act (Section 99b) pursuant to which certain types of companies are required to set target figures and to implement a policy for gender equality. Also, the companies must report on the status of fulfilment of these requirements.

However, the new rules do not impose any mandatory quotas to increase the share of women on the boards of directors. The rules are, inter alia, applicable to state-owned public companies, listed companies, large commercial enterprises, large commercial foundations and a number of financial enterprises.

Large commercial enterprises are enterprises in accounting class C, which exceed two of the Danish Financial Statements Act’s following three thresholds in two consecutive financial years: (i) a balance sheet total of DKK 143 million, (ii) a net turnover of DKK 286 million, and (iii) an average number of 250 full-time employees.

Enterprises with other securities than shares (for instance bonds) admitted to trading on a regulated market in an EU/EEA country will also be subject to the new rules. This applies regardless of the size of the enterprise. To the extent that an enterprise already has an equal gender composition in its management – pursuant to the explanatory notes to the bill, this means at least 40/60 per cent of each gender – the enterprise is not obligated to set target figures or implement a policy. Information in this respect must, however, be included in the annual report of the enterprise.

Furthermore, there is a lower threshold regarding the requirement to implement a policy of gender equality. Thus, companies with less than 50 employees are not subject to the requirement of implementing a policy of gender equality.

The new rules enter into force on 1 April 2013 and the reporting obligation is applicable for financial years starting on 1 January 2013 or later. Therefore, the management must, before 1 April 2013, determine whether there is any need for setting target figures or implementing a policy, or whether the enterprise already fulfils the legal requirements for gender equality. The reporting obligation regarding these issues will, however, not enter into force until 2014 in connection with the presentation of the annual report for 2013.

Target figures, policy for gender equality and reporting

Pursuant to the new rules, the board of directors in the enterprises concerned must set target figures for the share of the underrepresented gender, typically women, on the board of directors.

In companies with at least 50 employees, the management must implement a policy for gender equality in order to increase the share of the underrepresented gender in the company’s management levels in general.

Pursuant to the explanatory notes to the bill, the wording “management levels in general” must be understood to mean all management positions in the enterprise below the board of directors. Thus, the wording comprises all managers in the enterprise, including those managers who are not registered with the Danish Business Authority (e.g. IT managers, financial managers and HR managers). It also includes other types of management positions in an enterprise, e.g. heads of department, team managers, etc.

When setting target figures, the enterprise must partly (i) set target figures for an increased share of the underrepresented gender, and partly (ii) set a time frame for achieving such increased share. The target figures only have to include the members of the board of directors who are elected by the general meeting and not members elected by the employees, if any. The time frame must not exceed four years, corresponding to the maximum term of office for the members of the board.

The policy to be prepared must contain a description of the company’s endeavours to increase the share of the underrepresented gender in the company’s management levels in general. This may for instance take place by entering into cooperation with other enterprises, by targeted measures for the career development of the persons concerned through networking and mentoring schemes and implementation of employee policies promoting equal career opportunities for men and women.

In connection with the presentation of the annual report, the enterprises must also report on the status of fulfilment of the targets set out and the policy of gender equality. The reporting of the enterprise must follow the same procedure as set forth in Section 99a in the Danish Financial Statements Act regarding social responsibility.

Failure by the enterprises to observe the obligation to set target figures, prepare a policy for gender equality or reporting in the annual report may result in a fine. However, the fact that an enterprise does not achieve the target figures set out will not give rise to a fine.

The Danish Business Authority will, together with relevant trade organisations, prepare guidelines enabling the companies to fulfil the new requirements.

An evaluation of the new handbook, “Governance International”, shows that in this respect there are regional parallels, but also significant differences. With regard to international mandates, directors and officers should therefore concern themselves proactively with their legal duties to reduce personal liability risks. DOWNLOAD

- A CEO was not in breach of his obligations by granting salary increases and paying out bonuses. This shows that a CEO has very broad authority in terms of authorizing bonus payments and salary in-creases for employees as long as it is commercially well-founded and not exceptional in the relevant company.

- A CFO was not part of the company’s executive board if he/she had been assigned to handle administrative tasks and finances but was not authorized to buy real property or cars or to enter into major contracts and if he/she had to leave the board meetings in case the board of directors had to make important decisions related to personnel.

Plesner attorneys (Copenhagen) kindly contributed an analysis of these decisions — now available in the data base.