Highlights of new Companies Bill 2012

The New Companies Bill was finally passed in Rajya Sabha on 8th August 2013, making it mandatory for profit making companies to spend on activities related to Corporate Social Responsibility (CSR).

With the new legislation, India would possibly become the first country to have Corporate Social Responsibility (CSR) spending through a statutory provision.

The bill will now go for presidential assent. The lower house of parliament Lok Sabha cleared the bill Dec 18 last year.

Below are the Highlights of New Companies Bill 2012:

Maximum number of directors in a private company increased from 12 to 15 which can be increased further by special resolution.

The limit in respect of maximum number of companies in which a person may be appointed as auditor has been proposed as 20.

Companies are required to spend at least two per cent of their net profit on Corporate Social Responsibility.

To help in curbing a major source of corporate delinquency, introduces punishment for falsely inducing a person to enter into any agreement with bank or financial institution, with a view to obtaining credit facilities.

Independent directors' shall be excluded for the purpose of computing 'one third of retiring directors'.

Appointment of auditors for 5 years shall be subject to ratification by members at every Annual General Meeting.

'Whole-time director' has been included in the definition of the term 'key managerial personnel'.

The term 'private placement' has been defined to bring clarity.

Financial Year of any company can end only on March 31 and only exception is for companies, which are holding/subsidiary of a foreign entity requiring consolidation outside India, can have a different financial year with the approval of Tribunal.

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Ten things you wanted to know about the new Companies Bill

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Ten things you wanted to know about the new Companies Bill

Its time to know the Basic thing about companies Bill 2012
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.

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