The Companies Bill, which will replace the nearly 50-year-old Companies Act, was passed by Rajya Sabha by voice vote. Lok Sabha had given its assent in December last year. Wrapping up the debate, Corporate Affairs Minister Sachin Pilot termed the passage of the legislation a "historic feat".
"The passage of the Bill will give impetus to the growth momentum," Pilot said, wrapping up the debate, adding, "The focus of the bill is to enhance transparency and ensure fewer regulations, self reporting and disclosure...It will outline the positivity in the economy".
The new law requires companies that meet certain set of criteria, to spend at least two per cent of their average profits in the last three years towards Corporate Social Responsibility (CSR) activities.
Pilot said the government accepted about 96 per cent of the suggestions of the Standing Committee and will seek views of stakeholders before finalising rules for the legislation, which is compliant with "latest technologies".
The new law also makes its mandatory for companies that one-third of their board comprises independent directors to ensure transparency. Also, at least one of the board members should be a woman.
It will also encourage companies to undertake social welfare voluntarily instead of imposing the same. The legislation has provisions for "faster winding up" of firms and has also defined the word 'fraud', Pilot said.
The Companies Bill also provides for setting up of special courts for speedy trial and stronger steps for transparent corporate governance practices and curb corporate misdoings. In case entities are unable to comply with the CSR rules, they would be needed to give explanations. Otherwise, they would face action, including penalty.
The amended legislation also limits the number of companies an auditor can serve to 20 besides bringing more clarity on criminal liability of auditors. Hishey Lachungpa (SDF) contended that the provisions of the Bill are detrimental to the interest of Sikkim, as the new law is in conflict with constitutional provisions. Pilot assured him that he would speak to the Sikkim Chief Minister before notification of the Bill and the concerns would be taken into account.
Earlier, participating in the debate, Mani Shankar Aiyar (Cong) urged all members to extend full support to the Bill and asked Pilot to guard against bogus business entities.
Supporting the Bill, V P Singh Badnore (BJP) said a proper check needs to be there to ensure that unscrupulous people do not take advantage of the One-Person company provision.
S P Singh Baghel (BSP) also supported the Bill.