|Posted by BHARTI on September 16, 2013 at 4:05 AM|
The Rajya Sabha today approved the much awaited new Companies Bill, making it mandatory for profit makingcompanies to spend on activities related to Corporate Social Responsibility(CSR). In case, a company is not doing so, it will have to explain the reasonsfor shortfall. The Bill was already passed by Lok Sabha in December last yearand now only President’s nod is required to make it a law.
The Bill, aimed at improving corporate governance, also contains provisions to strengthenregulations for corporates as well as auditing firms. Moving the bill forconsideration, Minister of State (Independent Charge) for Corporate AffairsSachin Pilot said private companies, while maximising their growth, also haveresponsibility towards society besides equitable and sustainable growth of thecountry. The changes in the Bill include provisions making it mandatory forcompanies to spend 2% of their average net profit on CSR activities. However,only companies reporting Rs 5 crore or more profits in the last three yearshave to make the CSR spend.
Companies failing to meet the obligation willhave to explain and disclose reasons in their annual books of account.Otherwise, companies would face action, including penalty. Pilot emphasizedthat the Bill aims to encourage firms to undertake social welfare voluntarilyinstead of imposing that through “inspector raj”. Safeguarding workmen in thelegislation, the new law mandates payment of two years’ salary to employees incompanies which wind up operations. This liability would be overriding, Pilotsaid. The amended legislation, with 470 clauses, also limits the number ofcompanies an auditor can serve to 20. It has also brought in more clarity oncriminal liability of auditors. Besides, the approved amendments also includeannual ratification of appointment of auditors for five years and introductionof a new clause related to offence of falsely inducing banks for obtainingcredit. Besides, the changed law allows more statutory powers to thegovernment’s investigative arm Serious Fraud Investigation Office (SFIO) totackle corporate fraud.
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