The Bill was introduced in the Lok Sabha late in the evening and was passed through a voice vote later. The new Companies Bill aims to make it mandatory for private companies to earmark 2% of net profit in preceding three years for corporate social responsibility (CSR) activities. It will also make corporate governance more transparent and make independent directors more accountable.
The Bill will also ensure more powers to the Serious Fraud Investigation Office, corporate affairs minister Sachin Pilot said.
The Companies Bill has been under works for over a decade. It will replace the Companies Act of 1956, which was amended several times in the past two decades.
Introducing the Bill, corporate affairs minister Sachin Pilot said: When the current Companies Act of 1956 was made, there were only 30,000 registered companies in India. In 2012, there are over 850,000 companies.
This is a very important Bill... In order to avoid corporate frauds before they happen, SFIO will be given more statutory powers in the new Bill. Moreover, there will be better tie ups between investigative agencies at the state and Centre, I-T department and information technology ministry with SFIO, Pilot said.
Seeking more co-operation from state investigative agencies in this regard, Pilot said: There has been cases of financial frauds in states like West Bengal where some companies, chit funds and Ponzi schemes have taken away hard earned money of small investors. Our primary objective is to protect small investors.
The present Bill was introduced in the Lok Sabha last year by former corporate affairs minister Veerappa Moily. Later in January this year, the Bill was referred to the Parliamentary Standing Committee on finance headed by the former finance minister and BJP leader Yashwant Sinha.
The Parliamentary panel asked the government to make corporate social responsibility (CSR) spending mandatory for companies above a certain threshold. This has been accepted by the government. In its report on the Companies Bill the House panel also suggested that appointment of auditors should be approved by shareholders at the annual general meeting. This too was accepted.