The Parliament has passed the historic Companies Bill 2012, moved by Shri Sachin Pilot, Minister of Corporate Affairs. The Bill was passed by the Rajya Sabha here today which had already been passed by the Lok Sabha many months ago (in December 2012). Shri Pilot has termed it as a historic day for the country as it will usher in a new era in the Corporate Governance.
The new Companies Bill, on its enactment, will allow the country to have a modern legislation for growth and regulation of corporate sector in India. The existing statute for regulation of companies in the country, viz. the Companies Act, 1956 had been under consideration for quite long for comprehensive revision in view of the changing economic and commercial environment nationally as well as internationally. The new law will facilitate business-friendly corporate regulation, improve corporate governance norms, enhance accountability on the part of corporates/ auditors, raise levels of transparency and protect interests of investors, particularly small investors.
The salient features of the new Companies law are:
-- Companies are required to spend at least two percent of their net profit on Corporate Social Responsibility.
-- To help in curbing a major source of corporate delinquency, introduces punishment for falsely inducing a person to enter into any agreement with bank or financial institution, with a view to obtaining credit facilities.
-- The limit in respect of maximum number of companies in which a person may be appointed as auditor has been proposed as 20.
-- Independent directors' shall be excluded for the purpose of computing 'one third of retiring directors'.
-- Appointment of auditors for 5 years shall be subject to ratification by members at every Annual General Meeting.
-- 'Whole-time director' has been included in the definition of the term 'key managerial personnel'.
-- The term 'private placement' has been defined to bring clarity.
-- Maximum number of directors in a private company increased from 12 to 15 which can be increased further by special resolution.
-- Financial Year of any company can end only on March 31 and only exception is for companies, which are holding / subsidiary of a foreign entity requiring consolidation outside India, can have a different financial year with the approval of Tribunal.
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Tarun Kumar Gupta
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