The Union Cabinet of the Government of India has approved a draft of the Companies Bill, 2011.
The bill seeks to replace the Companies At, 1956, a voluminous piece of legislation which has turned arcane because of the numerous amendments made over the decades.
Parliament of India
The bill is likely to be placed before the Parliament in the current winter session. Mr.Veerappa Moily, Minister for Corporate Affairs, said that the government hoped to get the bill passed during the current Winter Session of Parliament.
The proposed legislation is claimed to be in keeping with the best global practices in corporate law and practice. The bill proposes stringent provisions in the matter of raising money from public. Insider trading is also going to be dealt with sternly. The bill also addresses issues like class action suits, fixed terms for independent directors, etc.
A remarkable feature of the proposed bill is that it makes it compulsory for every company to set aside 2% of the average profit of the three years preceding every year (in which the amount is to be so set aside) to fulfill its corporate social responsibility; each company is required to disclose to its shareholders the policy adopted in the matter.
General Chandrajit Banerjee, Director, CII, said: “The Bill has been through various iterations and industry anxiously awaits a new corporate law that would lay stress on responsible self-regulation. The new company law is expected to be more streamlined and facilitative than the existing 55-year old Companies Act it seeks to replace.”
With due apologies to General Banerjee, we hope the bill doesn’t rely much on corporate self-regulation. We do not think it works. Nor do we pin much hope on the notion of corporate social responsibility that the law now seeks to enforce.
We also hope that the proposed legislation is not as voluminous as the Companies Act 1956, it seeks to replace; that it is couched in language which can be understood easily by lawyers and laymen alike; that it doesn’t use ambiguous phrasing; and that it incorporates – or expressly negates – the case law which has evolved over the years so that one does not have to look beyond the statute book to know what the current position on any corporate legal issue is.
Tags: Companies Act 1956 Companies Bill 2011
