The Rajya Sabha approves the New Companies Bill: --------------------------------------------- -------------- The Bill was already passed by Lok Sabha in December last year and now only President’s nod is required to make it a law. The Bill, aimed at improving corporate governance, also contains provisions to strengthen regulations for corporates as well as auditing firms. Ten things you wanted to know about the new Companies Bill: --------------------------------------------- -------------------------- 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: Associate Company Small Company Employee Stock Option Promoter Related Party Turnover 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. Key Highlights of Companies Bill,2012: ------------------------------------------ 1. Incorporation of a One Person Company has been permitted. 2. Numbers of permissible members in private company has been raised to 200 as against existing limit of 50 members. 3. Listed companies shall have at least 1/3rd of the total number of directors as Independent Directors and the Central Government may prescribe the minimum number of Independent Directors for any class of public companies. 4. Nominee director cannot be regarded as Independent Director. 5. Maximum term of ID has been restricted to five years at once subject to a maximum of two such terms. 6. Appointment of at least one woman director on the board of prescribed classes of companies has been made mandatory. 7. Appointment of at least one director resident in India, i.e. a director who has stayed in India for at least 182 days in the previous calendar year, is made mandatory for all companies. 8. Maximum number of directors has been increased from twelve (12) to fifteen (15) directors .Further no Central Government approval is required to increase the maximum no. of directors beyond fifteen(15). Shareholders of companies may do so by passing a special resolution. 9. A person can hold directorship of up to 20 companies, of which not more than 10 can be public companies. 10. No listed companies shall appoint- i. an individual as auditor for more than one term of five consecutive years, and ii. an audit firm as auditor for more than two terms of five consecutive years 11. Shareholders are at liberty to decide by passing resolution that audit partner and the audit team, be rotated every year 12. CSR has been made mandatory for a company having net worth of Rs. 500 crore or more, or turnover of Rs.1,000 crore or more or net profit of Rs. 5 crore or more during any financial year. 13. Such company is required to constitute a Corporate Social Responsibility Committee of the board(CSRC) which shall consist of three or more directors , out of which at least one director shall be an independent director. 14. Such company shall spend, in every financial year, at least 2 % of the average net profits of the company made during three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy (CSRP). 15. The provision for establishment of Serious Fraud Investigation Office (SFIO) by the Central Government is another significant feature of the bill. 16. SFIO is empowered to arrest in respect of certain offence involving fraud. 17. Changes have also been made to the grounds for winding up a company. 18. Some other features of the bill include- i. Financial year will be uniform for all companies i.e. April-March. ii. Restriction on buyback of shares within one year from the last buy back. iii. Voting through electronic means. iv. Capping director’s remuneration at 5% of the net profits of the company. v. The concept of Dormant Company has been introduced. vi. Special courts for speedy trials.
Posted on: Fri, 09 Aug 2013 19:28:15 +0000
Trending Topics
Recently Viewed Topics
© 2015