Lower house LS passes Companies Bill
Replying to a debate before the bill was passed by a voice vote on
Tuesday; Corporate Affairs Minister Sachin Pilot said through this new
legislation, the government intends to make India an attractive and safe
investment destination.
He said special courts would be set up for speedy trials, as an assurance to investors that cases will not linger on.
Underlining the need for such a law, Pilot said India will become
the first country to mandate corporate social responsibility (CSR)
through a statutary provision.
He also said that while framing rules for the legislation, the
government will take in confidence MPs and other stakeholders, like
NGOs.
“It’s an evolving idea…We will make compliance easy,” he said.
Pilot said that companies should voluntarily engage in CSR and not fear
that the legislation amounts to return of “inspector raj”.
Pilot said that under the new legislation, companies will be encouraged to create employees welfare fund.
“Severity of law is not deterrent, it is surety which is
deterrent,” the Minister said, adding the companies may engage in
promoting education, reducing child mortality and any other matter they
feel can contribute for social welfare.
Disapproving of “vulgar display of wealth”, Pilot said the law
provides that remuneration of a director of a company should not be more
than 5 percent of the net profit.
Under the new law, the CSR spending would be the responsibility of companies like their tax liabilities.
The bill, with 470 clauses, seeks to make CSR spending compulsory
for companies that meet certain criteria. Firms having Rs 5 crore or
more profits in the last three years have to spend on CSR activities.
One of the major proposals is that companies have to mandatorily
spend two percent of their average net profit for CSR activities. The
changes, once in place, would amend the Companies Law that has been in
force since 1956.
If companies are unable to meet CSR norms, they will have to give
explanations. In case, the companies are not able to do the same, they
have to disclose reasons in their books. Otherwise, they would face
action, including penalty.
The amended legislation also limits the number of companies an
auditor can serve to 20 besides bringing more clarity on criminal
liability of auditors.
There are proposals for annual ratification of appointment of
auditors for five years and introduction of a new clause related to
offence of falsely inducing banks for obtaining credit.
The legislation mandates payment of two years’ salary to employees
in companies which wind up. This liability would be overriding.
First introduced in August 2008, the bill was withdrawn as Lok
Sabha was dissolved. It was again introduced in Parliament in 2009 and
sent to the Standing Committee, which presented its report in August
2010.
The debate on the bill saw Abhijit Mukherjee (Cong), son of
President Pranab Mukherjee, making his maiden speech in which he wanted
clarification on the definition of ‘net profit’ along with the formula
for calculating for the purpose of CSR.
M Thambidurai (AIADMK) suggested that the share of Corporate Social
Responsibility (CSR) for a company should be increased from 2 percent
as mentioned in the bill to 5 percent of the profits.
B Mahtab (BJD) suggested that the post of chairman of a company and
the CEO should be separated and strengthening of Serious Frauds
Investigation Office (SFIO).
Nishikant Dubey (BJP) expressed happiness that the Companies Bill
has come up for consideration and passage after a delay of several
years. He lauded the inclusion of e-governance and enhanced
accountability in the bill.
Ajay Kumar (JVM-P) said there is a need to audit CSR to check that
it is implemented properly. NBFCs and diffused ownership of companies
should be monitored, he said.
Lok Sabha passes Banking Laws Amendment Bill
The Government on Tuesday withdrew a controversial clause allowing
futures trading for banks from a bill which seeks to amend banking laws,
the House also considered and passed the Banking Laws Amendment Bill,
2011.
Finance Minister P Chidambaram said government was withdrawing the clause in deference to the views expressed by members.
“Since the bill is too important for me to pass, therefore I am
bringing the Bill dropping the controversial clauses,” Finance Minister P
Chidambaram said, winding up the discussion on the Banking Laws
(Amendment) Bill, 2011.
The House considered and passed the Banking Laws Amendment Bill, 2011.
On the proposal to allow banks to participate in the commodity
futures trading, he said, it was based on the recommendations of the
Standing Committee on Food and Consumer Affairs and report of the
Reserve Bank’s working group.
As regards other issues, he said, while RBI would regulate the
banking sector, the Competition Commission of India (CCI) would look
into competition practices in the banking sector.
Land Acquisition Bill also introduced in the House however discussion was deferred till Budget session.
Parliamentary Affairs Minister Kamal Nath said the Bill will be
taken up for consideration as the first measure in the budget session.
His statement came following pleas by BJP member Rajnath Singh,
Mulayam Singh Yadav (SP), Basudeb Acharia (CPI-M) and Saugata Roy (TMC)
for more time to discuss the provisions of the Bill which will have a
wide ranging impact on farmers and industries.
The Bill provides for a fair compensation to land owners in both
rural and urban areas with the stipulation that consent of 80 per cent
of the people for acquiring land for private industry is necessary.
Despite Sonia Gandhi-led National Advisory Council pushing for the law for long, the Bill has been hanging fire for sometime.
It was referred to a GoM in the wake of differences in the Cabinet
over certain provisions in the Bill, which has been described by Rural
Development Minister Jairam Ramesh as a balanced one.
The Land Acquisition, Rehabilitation and Resettlement Bill, 2011
was introduced in Parliament in September last year and was referred to a
Parliamentary Standing Committee which submitted its recommendations in
May.
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