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| Bill aims at enhanced accountability |
| BS Reporter / New Delhi Dec 15, 2011, 00:31 IST |
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Inching closer towards a comprehensive revision of the 56 year-old law that governs Indian companies, Corporate Affairs minister M Veerappa Moily on Wednesday introduced Companies Bill 2011 in the Lok Sabha.
The Bill seeks enhanced accountability on the part of the companies and introduces provisions for e-governance, corporate social responsibility and added investor protection measures.
It introduces the concept of independent directors and prescribes their tenure, code of conduct and liability. It mandates appointment of women directors.
The Bill proposes a vigil mechanism that will reward whistle blowers who share information about any deviant practices of the management. New disclosures like development and implementation of risk management policy, CSR policy, manner of formal evaluation of performance of the Board of directors have been included.
Audit accountability through rotation of auditors and audit firms, proposal for renaming the National Advisory Committee on Accounting and Audit Standards (NACAAS) as National Financial Reporting Authority with added (quasi judicial) powers to ensure independent oversight over professionals etc are among the proposals. The Bill also provides statutory status to the Serious Fraud Investigation Office, with powers to arrest in specific offences that comes under the definition of “fraud”.
“Taking a cue from the Satyam experience, the Bill now seeks to provide for a rotation of auditors/ audit firms, i.e. a minimum cooling of a period of four years in between two fixed terms of four years each. The bill additionally requires rotation of the concerned partner handing the audit on the part of the audit firm every year”, Manoj Kumar, managing partner of corporate law firm Hammurabi & Solomon said. In addition, proposals to facilitate raising of capital, mergers and acquisition and protection of investors and minority shareholders, have all been incorporated in the Statement on Objects and Reasons of the Bill.
Welcoming the move, industry chamber Ficci said it has lot of important implications for large, established businesses as it prescribes the manner in which a Board should be composed and how it should operate. The introduction of “Key Management Personnel” will result in enhanced as well as a true reflection of accountability, Ficci notes.
The new bill is a revised version of the Companies Bill 2009, which was introduced in the Parliament and sent to the Standing Committee, which presented its report in August 2010. A large number of recommendations were made by it and suggestions came in from several stakeholders. Many of these were accepted by the government, which then decided to withdraw the 2009 measure and introduce a fresh legislation incorporating the recommendations.
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