Cos Bill may come up in Monsoon Session: Moily
New Delhi: The new Companies Bill that rewrites the 56-year old law incorporating social responsibility obligations on corporates and recasts the SFIO with powers of prosecution and arrest may see the light of the day in the coming Monsoon Session of Parliament.
However, the government is not in favour of making the CSR obligations mandatory against the backdrop of stiff resistance from the corporates.
The Companies Bill that seeks to keep pace with the changing modern industrial climate is in the last stages of considerations before the Parliamentary Standing Committee and government hopes that its recommendations will be placed in parliament shortly.
"I was told that the Parliamentary Commitee had its last meeting on June 5. They will formulate recommendations and send it to us. If they send it to us in time, we can move it.
"If there are substantial changes, then we will send it to the Cabinet before taking it for passing in Parliament," Corporate Affairs Minister M Veerapa Moily said in an interview.
Under the provisions of the bill, the recast Serious Fraud Investigation Office (SFIO) will have powers to arrest and prosecute cases of corporate crime. A completely new provision will be that SFIO will have powers to issue Letters Rogatory to foreign jurisdictions in cases where people involved are located outside the country.
Also, for the first time in the world, there will be a law which incorporates the corporate social responsibility (CSR) obligations provisions.
"First time CSR is included in any enactment, company law anywhere in the world. We have made reporting mandatory and they will have to explain if they cannot perform. That is the provided in the bill," he said.
Moily said this would give social sanction and create some kind of pressure on corporates.
"For the present, this is enough. Making it mandatory will create a lot of problem for the corporates," he said indicating that there would be a step-by-step progress on the issue.
The obligations involving spending of 2 percent of net profit on CSR activities has already created quite a storm with India Inc bitterly opposed to it. The corporates say they already perform a lot of social responsibility and would not like a police raj if such obligations are made mandatory.
As per the Bill, every company with a networth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore and above in a fiscal will have to form a CSR Committee, consisting of three or more directors, of which at least one director should be an independent director.
Introduced in the wake of the Rs 14,000-crore Satyam fraud, the fresh bill proposes to enhance the accountability of companies, seeking greater disclosure and protection of investors and minority shareholders.
The new Bill is a shorter version of the existing half-a-century old Act and tries to harmonise the company law framework with sectoral regulations.
Among other things, it makes it mandatory for listed companies to have 33 percent independent directors and provides for formation of One Person Company, while empowering the government to provide a simpler compliance regime for small companies.
Moily said the Bill also proposes to make stringent provisions for companies seeking to raise money from the public.
Besides, there will be a single forum for approval of mergers and acquisitions, whether domestic or with foreign entities. Also the procedure for merger of holding and wholly-owned subsidiaries would be shortened.
The bill will make it mandatory for firms to maintain their documents in electronic format. It also introduces the concept of e-governance, makes provision for encouraging ethical corporate behaviour and rewards employees for their integrity.
The Bill was first introduced in August 2008, but had to be withdrawn because of the dissolution of the Lok Sabha. It was again introduced in Parliament in 2009 and sent to the Standing Committee, which presented its report in August 2010.
Moily said his ministry was working on a number of initiative to Foster corporate growth and promote healthy competition in the market.
"We have come out with a National Corporate Policy. We have formed a Committee headed by Adi Godrej. The Committe will work on how corporate responsibility can be promoted and how they will build standards for ethics and reputation...Sets of does and dont's," he said.
He added that the ministry was also working on a National Competition Policy which would cover all sectors. The draft policy has been submitted to the Cabinet, he said.
"If that policy comes into effect, that will be the real instrument to combat inflation, also remove market barriers. It will create a level playing ground. As petroleum products are concerned, in the US with competition policy in place, 50 percent of the petro products have come down. Price escalation is only about that," he said.
An amendment to the Competition Act 2002, which seeks among other things revising the threshold for companies that would require mandatory approval of the Competition Commission of India, is also awaiting response of a group of ministers.
Also, he said, the Ministry plans to bring out a Business Confidence Index "that would indicate a sense of well being among the role players in the corporate sector vis-a-vis their own organisation and its linkages with the larger world".
He said he is also promoting a lot of initiative towards creating awareness among investors and promoting good governance in capital market.