On 8^th August, 2013, the upper house of the Indian Parliament (Rajya Sabha) gave its nod for the new Companies Bill. It was first introduced as Companies Bill 2009 in the Lok Sabha on August 3, 2009, and was then referred to standing committee on finance. It came back to the house as Companies Bill 2011, but was referred to the standing committee again. Around 193 recommendations have been included in the present Companies Bill by the Parliamentary Standing Committee and with the passing of the neo Bill, the Companies Act of 1956 will be replaced.  The number of clauses has run down to 470 from 658 of erstwhile legislation. The Bill prescribes 33 new definitions (such as CEO, CFO, Promoter, etc.); it contains VII schedules as against XVI in the 1956 enactment. 

In December, 2012, it was the Lok Sabha that gave thumbs up for the bill. This Bill includes lessons from the Satyam debacle and aims to safeguard the interests of the small and minority shareholders. It also increases responsibilities of auditors, as they could face criminal liability, for their failure to report ignominious corporate frauds. The bill seeks to strengthen the institution of independent directors; it will be mandatory for companies to ensure that one-third of their board comprises of independent directors, with their term been fixed for five years. In order to ensure gender justice, the new bill seeks to place on board at least one woman representative, in the capacity of a director. On the dispute resolution front, National Companies Law Tribunal (NCLT) will see the light of the day, once the new Companies Bill is implemented.

With the new legislation, India would possibly become the first country to have Corporate Social Responsibility (CSR) spending through a statutory provision. Corporate Affairs Minister, Sachin Pilot termed the passage of the Bill to be, progressive, forward-looking as it encourages more disclosures and better governance. The minister highlighted that the 2-percent CSR mandate is neither a tax nor a cess and corporate India is more than willing to spend money on CSR initiatives.

Now that both houses of Parliament have passed the Bill, it will require President’s assent to become a law of the land, following which the Ministry of Corporate Affairs will issue a notification. The law thus reformed and in material particulars is likely to usher in a new era of company law reforms and is designed to take into account the interests of hitherto neglected stakeholders.