Companies Bill

On November 24, 2011, the Union Cabinet approved the Companies Bill, 2011, which aims to update corporate laws in the country and introduce modern concepts like mandatory CSR and class action suits.

Intended to replace the existing half-a-century-old Companies Act, the Bill has undergone several modifications in view of the Rs 14,000-crore Satyam accounting fraud.

Besides strengthening the provisions to check fraud, the Bill has introduced ideas like mandatory corporate social responsibility (CSR), class action suits and a fixed term for independent directors.

Among other things, it also proposes to tighten laws for raising money from the public. The Bill also seeks to prohibit any insider trading by company directors or key managerial personnel by treating such activities as a criminal offence.

Further, it has proposed that companies should earmark two per cent of their average profits of the preceding three years for CSR activities and make a disclosure to shareholders about the policy adopted in the process.