Intended to replace the existing half-a-century-old Companies Act, the Bill has undergone several modifications in view of the Rs 14,000 crore Satyam accounting fraud.
Following Cabinet clearance, it is now likely to be taken up for consideration and passage in the ongoing Winter Session of Parliament. "Cabinet has cleared the Companies Bill, 2011. It is likely to be tabled (for consideration and passage) in the ongoing Winter Session," a Corporate Affairs Ministry official said.
Besides strengthening the provisions to check fraud, the Bill has introduced ideas like mandatory corporate social responsibility (CSR), class action suits and a fixed term for independent directors.
Among other things, it also proposes to tighten laws for raising money from the public. The Bill also seeks to prohibit any insider trading by company directors or key managerial personnel by treating such activities as a criminal offence.
Further, it has proposed that companies should earmark 2 per cent of their average profits of the preceding three years for CSR activities and make a disclosure to shareholders about the policy adopted in the process.
Welcoming the Cabinet decision, industry body CII said that on enactment, the Companies Bill will be a boon for business, corporates, investors and stakeholders at large.
"Industry anxiously awaits a new corporate law that would lay stress on responsible self-regulation. Needless to say, the new company law is expected to be more streamlined and facilitative," CII Director General Chandrajit Banerjee said
The new law would strengthen the concept of shareholders' democracy and offer protection of the rights of minority stakeholders. The law also proposes to introduce responsible self-regulation replete with disclosures and accountability. It will also facilitate the transition of controls currently exercised by the government over internal corporate processes and decisions to shareholders.
In addition, the Bill seeks to give more teeth to the Serious Fraud Investigation Office (SFIO) by providing it statutory recognition and endowing it with more powers.
The Bill, which was originally introduced in the Lok Sabha in 2008, lapsed because of the change of government. It was reintroduced in August, 2009.
