The much-awaited Companies Bill has been introduced in the Rajya Sabha. It has already been passed by the Lok Sabha in December 2012, replacing 56-year-old Companies Act, 1956. The Bill seeks to consolidate and amend the law relating to the companies and intends to improve corporate governance and to further strengthen regulations for corporates.
Salent features of the Bill are:
a) The concept of One Person Company has been introduced.
b) Number of permissible members in a private company has been raised to 200 from 50
c) Provisions for offer or invitation for subscription of securities on private placement basis have been revised to ensure more transparency and accountability.
d) Every company shall have a Board of Directors with a minimum number of three directors in the case of a public company, two directors in the case of a private company, and one director in the case of a One Person Company; and a maximum of fifteen directors.
e) At least 1 woman director to be part on the board.
f) Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.
g) Every listed public company shall have at least one-third of the total number of directors as independent directors and the Central Government may prescribe the minimum number of independent directors in case of any class or classes of public companies.
h) A person can hold directorship of up to 20 companies, of which not more than 10 can be public companies.
i) An independent director shall not be entitled to any remuneration, other than sitting fee, reimbursement of expenses for participation in Board meeting and profit related commission as approved by the members.
j) The Board of Directors is required to constitute an Audit Committee (Clause 177), Nomination and Remuneration Committee [Clause 178 (a)] and Stakeholders Relationship Committee [Clause 178 (5)]. These committees shall have Independent Directors/non-executive directors to bring more independence in the functioning of the Board and for protection of interests of minority shareholders.
k) Every company having net worth of Rs.500 crore or more, or turnover of Rs.1000 crore or more or a net profit of Rs.5 crore or more during any financial year is required to constitute a Corporate Social Responsibility Committee. The Corporate Social Responsibility Committee will formulate a Corporate Social Responsibility Policy.
Such a company is required to spend at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. If the company fails to spend such amount the Board shall give in its report the reasons for the same making it a binding obligation on the Board.