Introducing the bill replacing the ordinance promulgated earlier with some changes, companies affairs minister M Thambidurai said the amendments were necessitated as the corporate sector was passing through difficult times and the capital market was at a low ebb requiring immediate morale boosting on the part of the government to promote investors' confidence.

Besides, he said the economy needed an impetus for promoting inter-corporate investments considering the slowdown in investments in new companies.

The amendment inserts new sections 77 A, 77AA and 77B in the Act. It provides that a company may purchase its own shares or other specified securities out of its free reserves or the securities premium account orthe proceeds of any shares or other securities provided that no buyback of any kind of shares or other specified securities shall be made out of the earlier proceeds of an earlier issue of the same kind of shares or other specified securities.

Under the amended law, no company can purchase its own shares unless the buyback is authorised by its articles, a special resolution has been passed in the general meeting of the company authorising the buyback and the buyback in that financial year is at or less than 25 per cent of the total paid-up capital and free reserves of the company in that financial year.

The ratio of debt, which includes all amounts of unsecured and secured debts owed by the company, should not be more than twice the capital and its free reserves after such buyback, provided the central government might prescribe a higher ratio of debt than that specified under this clausefor a class or class of companies.

The amendment imposes a restriction of 24 months after the buyback for furtherissue of the same security. However, the company will have no restriction to issue other securities during this period.

If there is no default in repayment of loan or interest to public financial institutions, prior approval of financial institutions in case of investment, loan or guarantee up to 60 per cent of the net worth will not be required.

Other changes include the following: A company will not be allowed to make any inter-corporate investment if there is a default in repayment of deposits or interest thereon. Restrictions on inter-corporate investment will also not apply in the case of wholly owned subsidiaries or companies established with the object of financing industrial enterprises and for subscribing to rights shares.

In the case of corporate guarantee, the companies would be permitted to obtain ex-post facto approval of the shareholders within a specified period. The powers to the board of directors to decline or suspend registration of shares in case of nominees have beenwithdrawn.

The period for transfer of unclaimed funds from the company to investor protection fund has been increased from five years to seven years. Thereafter, no claim is to be entertained. For issue of sweat equity, a special resolution has been provided instead of an ordinary resolution.

The bill also provides for transfer of certain sums to the capital redemption reserve account when a company repurchases its own shares out of free reserves, establishment of investors' education and protection fund and constitution of a national advisory committee on accounting standards.

It also provides for compliance of accounting standards by a company in preparation of profit and loss account and balance sheet and permission to make inter-corporate investments.