The Lok Sabha on Tuesday gave its approval for the Companies Bill 2011, paving the way for a new modern company law.

The proposed legislation will replace the existing Companies Act 1956, which was enacted 56 years ago. The Companies Bill 2011 was passed by a voice vote in Lok Sabha in a marathon late night sitting.

Besides making independent directors more accountable and improving the corporate governance practices, the Bill seeks to make corporate social responsibility mandatory for certain companies.   

Corporate frauds

Replying to the discussions on the Bill, Corporate Affairs Minister Sachin Pilot said that more powers are being conferred upon Serious Fraud Investigation Office to tackle the issue of corporate frauds.

“When the current Companies Act of 1956 was made, there were only 30,000 registered companies in India. In 2012, there are over 8,50,000 companies,” Pilot said.

SFIO will be given more statutory powers in the new Bill. Moreover, there will be better co-ordination between investigative agencies at the State and Centre, I-T Department and the Information Technology Ministry with SFIO.

The Minister also sought more cooperation from the state investigative agencies in this regard.

Corporate social responsibility

The Companies Bill proposes that profit-making companies that meet certain conditions will be required to set aside 2 per cent of the net profit towards CSR. Companies should voluntarily undertake CSR and should not see this as return of “inspector raj’’, Pilot said.

srivats.kr@thehindu.co.in  

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