The Companies Bill, 2011
The Bill was passed by the Lok Sabha on December 18, 2012 during its winter session. On its enactment, the Bill will permit our country to have a modern legislation for growth and regulation of corporate sector. This will replace existing Companies Act, 1956. 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. In view of various reformatory and contemporary provisions proposed in the Companies Bill, 2011, together with omission of existing unwanted and obsolete compliance requirements, the companies in the country will be able to comply with the requirements of the proposed Companies Act in a better and more effective manner.
The Salient features of the Companies Bill 2011 are as follows:
- Amendment in Clause 135: In the Section on Corporate Social Responsibility (Section135), which is being introduced as a statutory provision for the first time, the words ‘make every endeavour to’ have been omitted from its Sub-clause (5). So that the first para of Sub-clause (5) of Clause 135 now reads as follows: “The Board of every company referred to in sub-section (1), shall ensure that the company spends in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.” Such clause is also amended to provide that the company shall give preference to local areas where it operates, for spending amount earmarked for Corporate Social Responsibility (CSR) activities. The approach to ‘implement or cite reasons for non implementation’ retained.
- Amendment in Clause 36: To help in curbing a major source of corporate delinquency, Clause 36 (c) amended, to also include punishment for falsely inducing a person to enter into any agreement with bank or financial institution, with a view to obtaining credit facilities.
- Amendment in Clause 143: Provisions relating to audit of Government Companies by Comptroller and Auditor General of India (C&AG) modified to enable C&AG to perform such audit more effectively.
- Amendment in Clause 186: Clause 186 amended to provide that the rate of interest on inter corporate loans will be the prevailing rate of interest on dated Government Securities.
- Amendment in Clause 144: Provisions relating to restrictions on non audit services modified to provide that such restrictions shall not apply to associate companies and further to provide for transitional period for complying with such provisions.
- Amendment in Clause 203: Provisions relating to separation of office of Chairman and Managing Director (MD) modified to allow, in certain cases, a class of companies having multiple business and separate divisional MDs to appoint same person as chairman as well as MD.
- Amendments in Clause 147 and 245: Provisions relating to extent of criminal liability of auditors – particularly in case of partners of an audit firm – reviewed to bring clarity. Further, to ensure that the liability in respect of damages paid by auditor, as per the order of the Court, (in case of conviction under Clause 147) is promptly used for payment to affected parties including tax authorities, Central Government has been empowered to specify any statutory body/authority for such purpose.