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Highlights of the New Company Bill tabled in Lok Sabha

on 16 December 2011


Highlights of the New Company Bill tabled in Lok Sabha:

Corporate Social Responsibility

o 2% of average profit of last three years.

o Only disclosure mandatory.

o Mandatory CSR committee.


o Rotation in four years.

Independent Directors

o Five-year fixed term.

o No stock options.

o Board to have one woman director.

Serious Fraud Investigations Office

o To get power to arrest.

o No suo moto powers.

Investor protection

o Mandatory “Unpaid Dividend” account to be opened by companies in scheduled banks.


o 30 days dividends to get transferred under Investor Education Protector Fund.

Benefit to Minority Shareholders

o Majority Shareholders shall deposit equal value of shares obtained from minority in a separate bank account.

Others Observations of the new Bill:

1. The Bill enhances the accountability for those incorporating a company, and directors on the board, by framing additional disclosure norms.

2. At the time of incorporation, it is now mandatory to file the consent of directors associating with the company. The director will also have to give particulars of other firms which they are associated with. This will make promoters and directors more accountable. It will also address the problem of bogus directors on company boards.

3. In case of fraud, the defaulter can get an imprisonment of anywhere between six months to 10 years along with a fine.

4. The new Bill also proposes that persons signing the memorandum of association—document that regulates a company’s activities—will have to state upfront that they have not been associated with any fraud or mismanagement or breach of duty under the companies law.

5. With scams such as companies vanishing after raising public monies as also opting for liquidation, the new Bill was designed with the aim of sensing frauds early and, therefore, these provisions have been incorporated. These will ensure that maximum responsibility is put on the companies when they register.

6. The Bill also proposes to strengthen the Serious Fraud Investigation Office, a multi disciplinary body constituted by chartered accountants, company secretaries, revenue and corporate law officials.

7. It will also introduce concepts that are new to India, including the one-person company and class-action suits. The proposed regulation will also make it easier to start and shut companies.

8. The new regulations, if cleared by both houses of parliament, will apply to more than 800,000 companies registered in India.

9. The structure of the Bill is contemporary, sound and visionary rather than just an attempt to address shortcomings.

CA Dhiraj Satnalika
CA, CS, B. Com(H)
For Complete Bill, please check the link:

Companies Bill 2011

Category Corporate Law
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