Wednesday, January 9, 2013

Basic Introduction to Companies Bill, 2012

The Companies Bill, 2012 was passed by Lok Sabha on the 18th of December 2012. The following are a few highlights from the same.

The objectives kept in mind while drafting the Companies Bill were:
·         Protecting the interests of Employees and Small Investors
·         Voluntary adoption of Social Welfare Schemes
·         Clearing cumbersome procedures and making India an attractive and safe destination for Investment

Differences between the Companies Bill, 2012 and the Companies Act, 1956:
·         Introduction of “One Person Company” concept
·         More powers conferred upon the Serious Fraud Investigation Office (SFIO) to tackle issues of corporate frauds.
·         Setting up of special courts for speedy trials, thereby assuring quick relief to investors.
·         Corporate Social Responsibility mandated through a statutory provision. The Companies Bill is said to make CSR spending compulsory for companies that meet certain criteria.
·         Annual ratification of appointment of Auditors for 5 years, i.e. every company will be required to mandatorily obtain the consent of its shareholders every year in order to continue with its auditors.
·         Limits the number of companies an auditor can serve to 20, while also increasing the criminal liability of auditors.
·         New Clause has been inserted related to offence of falsely inducing banks for obtaining credit.
·         Companies are allowed to have only two layers of subsidiaries for investment.
·         Companies are encouraged to create Employees’ Welfare Fund
·         Whistle Blower policies and Class Action Suites are other areas brought into light.