Lok Sabha on 18 December 2012 passed the Companies Bill 2011. The Bill is aimed at improving corporate governance. It contains provisions to strengthen regulations for corporate as well as auditing firms. Once enacted as law, it will replace the Companies Act 1956.
The Companies Bill makes it mandatory for profit-making companies to spend two percent of their profit for community welfare as part of their Corporate Social Responsibility. In case, a company fails to meet its social obligations, it will have to explain the reasons for the shortfall. The Bill will protect small investors from corporate frauds. Under the proposed legislation, more powers will be conferred upon Serious Fraud Investigation Office (SFIO) to deal with corporate frauds. There will be better co-ordination now bwetween the investigation agencies at the centre and the states.
In the year 1956, there were only 30000 registered companies in India. In 2012 there are more than 850000 companies. Therefore a modern company bill was needed to check the corporate fraud.
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