The Companies bill 2012 has been tabled in the Rajya Sabha and is expected to be passed in the monsoon session. Business Standard brings you some key facts you need to know about the bill.
Why do we need a new company law?
When the existing company law - The Companies Act, 1956 was passed, Bill Gates was a few months old. Many of our own corporate leaders were toddlers. Sachin Pilot, the corporate Affairs minister, was not even born. It is a relic of an era bygone. The law, though amended 25 times, is perceived to be not in sync with the new corporate world. Hence, the new bill.
How long has it taken to change the law?
An entire term of the government. It was first introduced as Companies bill 2009 in Loksabha on August 3, 2009. It was referred to standing committee on finance a month later. It came back to the house as Companies Bill 2011. But was referred to the standing committee again.
What is the course the latest version of the bill took?
More than 7 months have passed since Lok Sabha passed the Bill. More than 12 months have passed since the submission of second report on Companies Bill by Parliamentary Standing Committee on Finance.
What happens if the Rajya Sabha does not pass it in this session?
With the elections looming large, the bill may not get another chance. If it is not passed in the upper house, being a finance bill it will lapse with this Lok Sabha and has to reintroduced in the lower house all over again.
What are the key changes?
The law has been rewritten extensively with several new provisions for investor protection, better corporate governance and corporate social responsibility etc. It defines a number of new terms that have come into vogue in recent times.
What are the new corporate terms defined in the bill?
The Bill prescribes 33 new definitions. Some of these are:
Employee Stock Option
Chief Executive Officer
Chief Financial Officer
Global Depository Receipt
What are the investor protection measures?
The bill provides for class action suit, which is key weapon for individual shareholders to take collective action against errant companies. Better disclosure requirements in financial statements and disclosure of interests of directors etc. It has also streamlined procedures relating to disclosure of transactions with parties related to directors, promoters etc.
What are the anti-fraud measures?
It provides for prohibition on forward dealings in securities of company by key managerial personnel, insider trading rules and restriction on non-cash transactions involving directors.
How does it help ease of doing business?
It provides for new concepts such as a single person company. Cap on number of persons in a private company raised to 200. E-voting has been recognized.
What happens after Rajya Sabha passes the bill?
The bill goes for presidential assent. The draft rules on the companies act will then be made public and the act comes into effect with notification by Ministry of Corporate Affairs.