The Companies Bill 2012 was passed in Rajya Sabha on 8 August 2013 (during the monsoon session of the parliament). Earlier, the bill was passed by the Lok Sabha on 18 December 2012. The legislation will replace the 57-year old Companies Act, 1956 after getting the final consent from Pranab Mukherjee, the President of India.
Highlights of the Companies Bill that was presented in the Parliament
• The new legislation, which would replace the nearly 57-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.
The Companies Act of 1956 replaced the first Companies Act that was created in 1919 (the pre-independent India). The Act of 1956 has been amended 25 times in all these years since its formation.