Parliament passes Companies Bill; Sachin Pilot terms it 'historic'
NEW DELHI:
Parliament today approved the new
Companies Bill that will make sweeping changes in the way firms operate and are regulated and replace a nearly six-decade-old legislation.
The new bill, which now needs the President's nod to become law, makes
it mandatory for companies to spend on social welfare, empowers
investors against frauds committed by promoters, encourages companies to
have women directors, and seeks to bring in greater transparency in
corporate governance matters such as executive salaries and the role of auditors.
Corporate Affairs Minister Sachin Pilot
termed the passage of the legislation a "historic feat" and said it
will give impetus to the country's growth momentum by ushering in a
regime of "less regulations and more compliance."
The bill
replaces the existing Companies Act, 1956, which has been amended at
least 25 times in the past 57 years, with many of its provisions found
to be outdated and inadequate.
The passage of the bill, which
is spread across nearly 30 sections and over 300 pages, was widely
welcomed by stakeholders, including industry bodies, political leaders
and consultants.
"The focus of the bill is to enhance
transparency and ensure fewer regulations, self-reporting and
disclosure...It will outline the positivity in the
economy,"
said Pilot, who has aggressively sought the support of lawmakers and
other stakeholders for the bill since becoming Corporate Affairs
Minister in October 2012.
The Bill was passed by the
Lok Sabha more than seven months ago. Since then, its passage in the upper house has been delayed by disruptions in Parliament.
It has been almost three years since the submission of first report on
the Companies Bill by the Parliamentary Standing Committee on Finance.
Pilot said that 96 per cent of the recommendations made by the
Parliamentary Committee have been accepted and the Ministry would try to
incorporate further suggestions by various stakeholders while
formulating the final rules.
Among others, the new Bill
provides about three dozen new definitions, including terms such as
frauds, promoters, turnover, related parties (to promoters), small
companies, associate companies and employee stock options.
It
provides for a uniform financial year (April-March) for all companies,
while the concept of one-person company has been introduced for the
benefit of small entrepreneurs. Besides, the new Bill proposes strong
checks against fraudulent money-collection activities through issuance
of various securities.
The Bill requires auditors to be changed
every five years to avoid collusion with the management, while rules
would be tightened for appointment of independent directors.
To
safeguard the interests of small investors, the Bill proposes approval
by two-thirds of the public shareholders for deals that involve
promoters and related entities.
It has a provision for setting
up special courts for speedy trials and stronger steps for transparent
corporate governance practices and curbing corporate misdoings.
The law also provides for "faster winding up" of firms as also for speedier clearances to businesses.
Participating in the Rajya Sabha debate, Congress leader Mani Shankar
Aiyar asked Pilot to guard against bogus business entities.
Supporting the Bill, the BJP said a proper check needs to be there to
ensure that unscrupulous people do not take advantage of the one-person
company provision.
Industry bodies expressed their full support
to the government for implementation of the Bill, with the CII saying
its passage shows the "government's commitment to usher in a new era of
corporate regulation."
http://economictimes.indiatimes.com/news/economy/policy/parliament-passes-companies-bill-sachin-pilot-terms-it-historic/articleshow/21709867.cms
