The Companies Bill 2012 was introduced in the Rajya Sabha on 6 August 2013. The Bill aims at protecting the interest of employees and small investors. Earlier, the Bill was passed by the Lok Sabha on 18 December 2012.
Highlights of the Bill
• The new legislation, which would replace the nearly 50-year-old Companies Act of 1956 and would encourage the companies to undertake social welfare voluntarily instead of imposing the social responsibility.
• The proposed legislation would ensure setting up of special courts for speedy trial and stronger steps for transparent corporate governance practices and curb corporate misdoings.
• The new law would require companies that meet certain set of criteria, to spend at least two percent of their average profits in the last three years towards Corporate Social Responsibility (CSR) activities.
• In case, entities are unable to comply with the CSR rules, they would be needed to give explanations. Otherwise, they would face action, including penalty.
• The amended legislation also limits the number of companies an auditor can serve to 20 besides bringing more clarity on criminal liability of auditors.
India’s first Companies Act was made way back in 1919 in colonial times. After independence, a new Companies Act came into force in 1956. Since then the act has been amended 25 times. The new Companies Bill 2012 was passed by the Lok Sabha in 2012.