In major boost to ushering in better corporate governance norms, the government has approved various amendments to Companies Bill, 2011 including mandatory earmarking of funds by companies for corporate social responsibility (CSR) spending.
According to amendments approved by the Union Cabinet on Thursday, the companies would also have to give preference to the local areas of their operation for such spending.
The companies would have to either implement mandatory CSR spending or cite reasons for non-implementation or any shortfall in such spending. The bill had earlier sought for companies to make every endeavour to spend two per cent of their 3-year average profit towards CSR activities.
Among other major amendments to the bill, which would now go to the Parliament for approval, a new provision has been made for punishing those falsely inducing a person to enter into any agreement with banks or financial institutions with a view to obtain credit facilities.
The revised Companies Bill, 2011 has also put a cap on the number of companies for one auditor to 20 while bringing in more clarity on criminal liability of the auditors.
“It is a bill designed for the 21st century. It is a bill that takes note of the explosion in the number of companies and their reach and range. Therefore, the old bill is outdated,” said Finance Minister P Chidambaram while addressing media.
The Companies Bill, 2011 was introduced in the Lok Sabha on December 14, 2011 and was considered by the Parliamentary Standing Committee on Finance which submitted its report in June this year. Subsequently, the report was laid in Parliament in August.
Keeping in view the recommendations made by the committee, it was decided to make certain modifications in the Companies Bill, 2011 through official amendments.