Companies Bill 2012 passed in Parliament: Corporate Social Responsibility becomes mandatory

Companies Bill 2012 was passed by the Rajya Sabha on Thursday. It will amend the corporate companies more transparent and Corporate Social Responsibility will become mandatory.

The Bill had already been passed by the Lok Sabha in December 2012.

Corporate Affairs Minister Sachin Pilot said, "It is a historic day for the country. Companies Bill 2012 will introduce a new era in the Corporate Governance".

Companies Bill on its enactment will be a revision of existing Companies Act, 1956, which has been considered for a long time in view of the changing economic and commercial environment nationally as well as internationally.

Companies Bill 2012 will provide improved corporate governance norms and will raise the level of transparency of the corporate companies. It will also protect interests of investors.

Features of Companies Bill 2012 are:

• Companies must spend at least two percent of their net profit on Corporate Social Responsibility.
• Falsely inducing a person to enter into any agreement with a bank or financial institution is prohibited and will be punished.
• A person can be appointed as auditor in maximum of 20 companies.
• Auditor’s appointment for 5 years will be confirmed at Annual General Meeting.
• The maximum number of directors in a private company is 15. The number can be increased by a special resolution.
• Financial year of any company can only end on March 31 except for companies, which are a holding/subsidiary of a foreign entity.