The cabinet approved the companies bill 2011

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RG - A Helping Hand

Company Secretary

13877 Points Posted on 25 November 2011

The Cabinet on Thursday approved the Companies Bill 2011 which, once approved by Parliament, will replace half-a-century-old Act, in a step that is expected to improve transparency and regulation of business houses in Asia's third-largest economy.

"The Cabinet has cleared Companies Bill, 2011. It is likely to be tabled (for consideration and passage) in the ongoing Winter Session," a Corporate Affairs Ministry official said after the Cabinet meeting.

The Bill, which has already been vetted by the Parliamentary Standing Committee of Finance and also by different ministries, seeks to update the company law in line with the best global practices.

The suggestion for earmarking a part of a company's profit for CSR was floated by the Parliamentary Standing Committee on Finance, which scrutinised the Companies Bill, 2009.

The Companies Bill (2008), which lapsed with the dissolution of the 14th Lok Sabha, was reintroduced in the Lok Sabha in August, 2009. Subsequently, in August 2010, the Parliamentary Standing Committee on Finance gave its report after examining the provisions of the law.

The Bill, which was originally introduced in Lok Sabha in 2008, lapsed because of change of government. It was reintroduced in August 2009.

Cabinet approval on the Companies Bill, 2009, was pending as the Finance Ministry and MCA failed to reach a common ground on powers to be delegated to the Securities and Exchanges Board of India (Sebi) in case of regulatory overlaps.

Finance Minister Pranab Mukherjee, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Corporate Affairs Minister Veerappa Moily were asked to discuss and iron out issues. The ministers have come to a consensus on the issue, sources in the know said.

According to them, the Finance Ministry and Sebi have sought review of the provisions which conflicted with the Sebi Act. Apparently, it has been decided that Sebi's view will be upheld in cases where jurisdictions conflict.

Source : https://businessworld.in/businessworld/businessworld/content/Cabinet-Oks-Cos-Bill-2011-Be-Taken-Session.html

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RG - A Helping Hand

Company Secretary

13877 Points Posted on 25 November 2011

Salient features of Company Bill 2011

The Bill has introduced ideas like Corporate Social Responsibility (CSR), class action suits and a fixed term for independent directors.

Among other things, it also proposes to tighten laws for raising money from the public. The Bill also seeks to prohibit any insider trading by company directors or key managerial personnel by treating such activities as a criminal offence.

Further, it has proposed that companies should earmark 2 per cent of the average profit of the preceding three years for CSR activities and make a disclosure to shareholders about the policy adopted in the process.

Subsequently, the MCA proposed that "every company with net worth of Rs. 500 crore or more, or turnover of Rs 1,000 crore or more or a net profit of Rs 5 crore or more during a year shall be required to formulate a CSR Policy, as may be approved and specified by the company".

The Bill also proposes rotation of audit firms. The audit firms might have two fixed terms of four years each with four year cooling off period.

Moreover, the Bill also proposes to rotate audit partner every year. It might also say that audits should be conducted by more than one auditor. There is also a proposal to make at least one 'women director' mandatory for certain classes of companies.