Compnies Bill 2011

Started by TechShristi, December 29, 2012, 05:49:43 pm

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THE INSTITUTE OF COST ACCOUNTANTS OF INDIA (Statutory Body under an Act of Parliament)

19th December 2012

Press Release

The Institute of Cost Accountants of India compliments Shri Sachin Pilot, Honourable Union Minister of State, Ministry of Corporate Affairs (I/C), Government of India for revamping the Companies Act 1956 by getting the Companies Bill, 2011, passed in Lok Sabha. The revised bill shall replace the 56 years old Companies Act, 1956.

Companies Bill, 2011 brings about  concepts  like responsible  self-regulation  with adequate disclosure and accountability, enhanced  shareholders' participation and provides for a single forum  to  approve  mergers  & acquisitions  and  brings the  management of the  corporate sector in line with global norms.

As per  the  revised bill, companies  must  ensure  spending  at least  2 per  cent  of their  net profit towards  corporate social responsibility  (CSR)  activities to  change  the  way CSR  has been perceived so far. The firms having Rs.5 crore or more profit in the last three  years to allocate  2% of their  profit  to  ensure  that  corporate entities  contribute   meaningfully  to society.

The Companies Bill  seeks  to  provide  that  the  Central Government  may  by notification constitute the  National Financial Reporting Authority to  provide  for matters relating  to accounting  and  auditing  standards. It shall perform  the  functions  as specified under  the clause including monitoring the compliance and overseeing the quality of service of professionals  associated  with ensuring the  compliance with such standards. The authority shall have power  to investigate  the  matters of misconduct  committed  by any member  of Institute of Charted Accountants of India, Institute of Cost Accountants of India or Institute of Company Secretaries  of India or  any other  prescribed  profession.  The clause  further provides for the  members,  their  qualification, terms  and conditions  of appointment, who

shall constitute the  Authority. The clause also provides maintenance of books of accounts and  other  books  in  relation  of  its  accounts  in  the  manner   prescribed  by  the  Central Government in consultation with Comptroller and Auditor General of India.

Appointment  of  professionals   like  cost  accountants /  chartered accountants /  other professionals  for  undertaking  internal  audit  in certain  class of companies  will help  the corporate help in improving the  Risk Management capabilities. The new responsibility has also been  thrown  on  the  shoulders  of the  auditors  to  report  the  matter  to  the  central government  if during the course of their official assignment they have reason to believe that offence  involving fraud  has  been   committed   against  the   company  by  the   officers  / employees.

The new Bill is expected  to improve the quality of corporate governance  by strengthening the  hand  of the  Serious Fraud Investigation Office (SFIO). The Bill allows more  statutory powers  to the  government's investigative arm Serious Fraud Investigation Office (SFIO) to tackle corporate fraud and provides SFIO with powers to conduct searches  and seizures on the premise  of a fraudulent  company. The Bill seeks to give SFIO more teeth  and create  a National Company Law Tribunal.

The concept  of class action suit is introduced  wherein depositors  or a unit of shareholders can collectively sue the company committing fraud.

Concepts  like  one   person-company  and  making  independent  directors   and  company auditors more accountable,  the Bill also seeks to keep a tab on remunerations for the board of directors  and other  executives of the companies  to protect  the interest  of shareholders and workmen.

It  also  introduces   the   concept   of  class  action  suit  wherein   depositors   or  a  unit  of shareholders can sue the firm committing fraud.

The Bill encourages  firms to undertake social welfare voluntarily instead  of imposing that through  "inspector  raj". Safeguarding workmen  in the  legislation, the  new law mandates payment of two years' salary to employees in companies which wind up operations.

It also includes 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 amended legislation limits the  number  of companies  an  auditor  can serve  to  20. It prescribes  stringent  rules for auditors,  and seeks to protect  small investors  by regulating entities such as chit funds, the oversight of which was previously a grey area.

The revised Companies Bill will not only bring about  greater  transparency in the corporate sector,  but  will also  make  companies  more  accountable.   The  Bill  provides  for  greater protection  of minority shareholders and  employees,  seeks  to reduce  gender  disparity by mandating at least one woman director in certain companies.

The law also mandates that companies publish the average salary of their employees  along with the current practice of stating the remuneration of their board members.


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