Sources in the Department of Company Affairs (DCA), which is in the final stages of preparing a cabinet note for changes in the act, said that the bill will permit buyback of shares by corporates, introduction of sweat equity for software companies, and transmission of shares in the event of death of a shareholder. It is further learnt that the government may add eight more restrictions to the existing seven in the buyback clause in order to prevent any misuse of the provision.

It may also include a provision on setting up a national advisory committee on accounting standards as proposed in Clause 415 of the Companies Bill 1997 to bring in more transparency.

The buyback would be allowed only for restructuring of capital by companies and the amendment would require these shares to be extinguished within a specified periodafter completion of the buyback.

According to sources, the government is expected to restrict the time limit for completion of buyback to maximum of 15 months from the date of a resolution in this regard at an annual general meeting. The corporates, on the other hand, want a five-year validity to the special resolution for buyback.

A section of the government is keen that this period be restricted to 12 months. They felt that the companies should go back to their shareholders in case they want any amendment to the resolution passed by them empowering management to buyback shares.

The introduction of the amendment bill would be preceded by withdrawal of the Companies Bill, 1997 from the Rajya Sabha.

The finance ministry has been mulling over the option of moving amendments to the Companies Act, 1956 and then go for a complete overhaul of the Companies Bill, 1997. There is an increasing feeling in the government that the amendments should be moved first while the Bill itself can be further debated.

Acomplete overhaul of the Companies Bill would be a long-drawn process as it would have to be referred to a consultative committee of the cabinet for clearance.

"It is quite likely that we may come up with a short-bill to amend the Companies Act as a precursor to a detailed exercise which will follow once the committee for revamping the Companies Law gives its recommendations,'' sources told The Financial Express.

Sources added that the DCA, on a Prime Minister Office's directive, was working overtime to prepare an appropriate package of measures for revamping the Companies Bill 1997.

The move to withdraw the Bill seems to have stemmed from a feeling among a section of the government that the country is not ready for a number of provisions proposed to be introduced in it. They cite the opposition to the introduction of non-voting shares as an example. They feel that only those provisions which are absolutely necessary should be introduced at this stage.