Companies Bill ready, says Deora

The Ministry of Corporate Affairs said on Monday the final draft of the new Companies Bill, which promises greater shareholder democracy and stricter corporate governance norms, is ready and will be submitted to the Cabinet soon.

"The final draft of the Companies Bill is ready.

"It has been circulated among various ministries for their comments, as soon as we receive their comments, the Bill will go to Cabinet," Corporate Affairs Minister Murli Deora told reporters on the sidelines of a Company Law Board event in New Delhi.

The Companies Bill 2009, which will replace a half-a-century old Act, is expected to be brought before Parliament for consideration and passage in the ongoing Budget session.

Asked if the contentious issue of mandatory corporate social responsibility for companies has been addressed and how, the minister declined to comment.

Last week, the MCA had held the final consultation with the industry, which had raised 10 areas that needed a relook.

Some key issues pertained to the provisions that seek to limit the number of subsidiaries a company have, earmarking 2 per cent of a company's net profit for CSR activities, managerial remuneration and rotation of auditors, besides others, as proposed in the Companies Bill.

The Bill, if passed, will protect the rights of minority shareholders, bring about responsible self-regulation with adequate disclosure and accountability, and lesser government control over internal corporate processes.

The Companies Bill (2008), which lapsed with the dissolution of the 14th Lok Sabha, was reintroduced in the Lok Sabha in August 2009.

Subsequently, in August 2010 the Parliamentary Standing Committee on Finance gave its report after examining the provisions of the law.

It also suggested that shareholders should have a say in managerial remuneration.

The Bill proposes that no independent director can be on board of a company for more than six consecutive years, and cannot be on the board of more than seven companies.

Besides, it provides that statutory auditors and audit firms should be rotated every five years by the companies.

The Standing Committee has also recommended cap on the number of subsidiaries that a company can have and said that a firm should have only one investment company.

The pyramid-like structure, it added, is often misused for 'siphoning off funds or routing terror money'.