Government Introduces Bill To Amend Companies Law In Lok Sabha
Allowing companies to transfer their unspent Corporate Social Responsibility funds to a separate account and providing more teeth to the central government to deal with violators are among the provisions proposed in amendments to India’s companies law.
The Companies (Amendment) Bill, 2019 -- tabled in Lok Sabha on Thursday -- also seeks to enable the National Financial Reporting Authority to perform its functions through divisions and executive body.
As many as 16 sections of the Companies Act, 2013 would be amended to modify punishments in order to lessen the burden on special courts. Besides, the bill seeks to empower Registrar of Companies to initiate action for removal of a company’s name if the latter is not carrying out business activities as per the Act.
Amendments have been proposed to Section 135 of the Act that pertains to CSR. In a particular fiscal, certain classes of profitable companies are required to shell out at least two per cent of their three-year average annual net profit towards CSR activities.
Now, the unspent CSR funds can be carried forward to a special account and the same has to be spent within three financial years. In case, the money remains unspent, then it should be transferred to any fund specified in Schedule VII of the Act.
Following recommendations of a committee that was constituted by the corporate affairs ministry in July 2018, it was decided to amend the Act. An ordinance was issued in Nov. 2018 and then a bill to replace the ordinance was passed in Lok Sabha in Jan. 2019. However, the bill was not taken up by the Rajya Sabha.
In January this year, a second ordinance was issued and the same is to be replaced by the new bill. There are also some additional changes.
Corporate Affairs Minister Nirmala Sitharaman on Thursday said the bill to replace the ordinance along with certain other amendments is being brought in to “ensure more accountability and better enforcement to strengthen the corporate governance norms and compliance management in corporate sector”.
On July 17, the government approved 43 amendments to the companies law.
Sources had said a bill would be introduced in Parliament to carry out the 43 amendments to the Act. A total of 12 additional amendments in 11 sections of the Act are proposed to be made, in addition to amendments in 29 sections and insertion of 2 new sections carried out through the ordinance, they had said. With the amendments, procedural and technical defaults would be decriminalised while compliance would be incentivised.