A bill to amend the companies law to strengthen corporate governance standards, initiate strict action against defaulting companies and help improve ease of doing business in the country, was passed by Parliament on Tuesday.
Replying to issues raised by the members during a discussion on the bill, Minister of State for Corporate Affairs P P Chaudhary said the amendment would ensure better corporate governance and improve the ease of doing business in the country.
The bill provides for more than 40 amendments to the Companies Act, 2013, which was passed during the previous UPA regime.
The bill was introduced in the Lok Sabha in March 2016 and then referred to the Standing Committee on Finance. After taking into consideration the recommendations of the panel, the Cabinet had cleared a revised bill in March this year.
The Companies Act, 2013 has already been amended once under the present government.
The latest legislation would help in simplifying procedures, make compliance easy and take stringent action against defaulting companies, Chaudhary said.
The minister dismissed the apprehensions raised by members that the government was not doing enough to ensure that companies comply with the Corporate Social Responsibility (CSR) provisions.
Intervening during the reply, Congress leader Jairam Ramesh said CSR has become PSR or political social responsibility, especially for the public sector undertakings.
"There should be an independent audit for the objective of the CSR" spending of PSUs, Ramesh said.
The minister said the government has already issued notices to many companies for not complying with CSR provisions under the Companies Act.
On the government's promptness in taking action against companies at fault, the minister said the government has taken several steps against such firms which were not taken in last several years.
He said the government has taken action against over two lakh shell companies and Special Fraud Investigation Office was looking into it.
Under the Act, certain classes of profitable companies are required to shell out at least two per cent of their 3- year annual average net profit towards Corporate Social Responsibility (CSR) activities. In case of non-expenditure, such entities are required to provide the reasons for it to the ministry.
R Ramakrishna (BJP) said there was no provision of carrying forward the CSR funds and they should be given more time to use these funds.
The minister said the upper limit of 300 days for filing returns under the Act led to non-compliance and hence changes have been made in the law to improve timely filings.
While the minister was pushing the bill for passage, former finance minister P Chidambaram pointed out,"Why are you taking power to prescribe another number when Directors' Index Number (DIN). DIN is a number. Why do you need another number? What is the idea?"
He also opposed the proposal to give loans to directors and persons, saying a company should not give loans to the director or to those of interest to a director.
He also opposed the amendment to delete Section 195 and 196 which provide for prohibition of insider and forward trading.
The minister said insider and forward trading is barred d under the SEBI law and therefore there was no need of this provision in the Act which would anyway is superseded by the SEBI law.
Chidambaram said the provision should be part of the Act as SEBI does not have jurisdiction over unlisted companies and there could associate or subsidiary companies of listed companies, which can do insider or forward trading.
The minister said unlisted companies do not do insider or forward trading.
V Vijayasai Reddy (YSRCP) said the independent directors should not have any pecuniary interest in the company and they should not continue for longer terms.
He also proposed having a statutory body for appointment of independent directors and provision of special resolution for their removal from the board.
T S Reddy (INC) said the independent directors should not be responsible for companies' liabilities as this would discourage them to come on board.
D Raja (CPI) did not support the bill, saying it was a reiteration of the government to secure private capital and extend help to private corporates and big companies.
Naresh Gujaral (SAD) opposed the provision to make it mandatory to have full time company secretary for those firms whose paid equity capital is Rs 5 crore and above irrespective of turnover as per Section 2 and 3 of the Act.
Tapan Sen (CPI-M) said that this bill would not lead to ease of doing business in the country but would take our country to ransom.