Click below to get new companies bill as approved by cabinet and proposed in Lok Sabha
http://220.227.161.86/Companies-Bil-Lok-sabha.pdf
New Companies Act t have
29 chapters
470 section and
7 Schedules
Highlights of the New Company Bill tabled in Lok Sabha:
http://220.227.161.86/Companies-Bil-Lok-sabha.pdf
New Companies Act t have
29 chapters
470 section and
7 Schedules
Highlights of the New Company Bill tabled in Lok Sabha:
Corporate Social Responsibility
o 2% of average profit of last three years.
o Only disclosure mandatory.
o Mandatory CSR committee.
Auditors
o Rotation in four years.
Independent Directors
o Five-year fixed term.
o No stock options.
o Board to have one woman director.
1. The
Bill enhances the accountability for those incorporating a company, and
directors on the board, by framing additional disclosure norms.
2. At
the time of incorporation, it is now mandatory to file the consent of
directors associating with the company. The director will also have to
give particulars of other firms which they are associated with. This
will make promoters and directors more accountable. It will also address
the problem of bogus directors on company boards.
3. In case of fraud, the defaulter can get an imprisonment of anywhere between six months to 10 years along with a fine.
4. The
new Bill also proposes that persons signing the memorandum of
association—document that regulates a company’s activities—will have to
state upfront that they have not been associated with any fraud or
mismanagement or breach of duty under the companies law.
5. With
scams such as companies vanishing after raising public monies as also
opting for liquidation, the new Bill was designed with the aim of
sensing frauds early and, therefore, these provisions have been
incorporated. These will ensure that maximum responsibility is put on
the companies when they register.
6. The
Bill also proposes to strengthen the Serious Fraud Investigation
Office, a multi disciplinary body constituted by chartered accountants,
company secretaries, revenue and corporate law officials.
7. It
will also introduce concepts that are new to India, including the
one-person company and class-action suits. The proposed regulation will
also make it easier to start and shut companies.
Others Observations of the new Bill:
Serious Fraud Investigations Office
o To get power to arrest.
o No suo moto powers.
Investor protection
o Mandatory “Unpaid Dividend” account to be opened by companies in scheduled banks.
Unpaid/Unclaimed
o 30 days dividends to get transferred under Investor Education Protector Fund.
Benefit to Minority Shareholders
o Majority Shareholders shall deposit equal value of shares obtained from minority in a separate bank account.
ON AUDITORS
As part of the Companies Bill,
the government is planning an overhaul of the audit and financial
services sector to guard against corporate frauds and irregularities. A
major proposal made in the bill includes separation of audit and
non-audit functions, when offered by the same firm.
The proposal prohibits any audit firm to offer a variety of non-audit services that include accounting and book keeping; internal audit; design and implementation of any financial information system; actuarial services; investment banking; and rendering of outsourced financial services. The government has also made a provision to add further services in the future by reserving the right to add to the list of prohibited services.
The proposal prohibits offering of such services (directly or indirectly) not only to the company whose audit is being conducted but also to its holding company or subsidiary company or associate company.
And to ensure that audit firms do not offer the services through any other route, the proposal has even put restrictions on use of related entities. "...in case of auditor being a firm, either itself or through any of its partners or through its parent, subsidiary or associate entity or through any other entity, whatsoever, in which the firm or any partner of the firm has significant influence or control, or whose name or trade mark or brand is used by the firm or any of its partners."
The move will hit top multi-disciplinary companies, including the Big 4 like KPMG and Ernst & Young, all of which offer not only audit services but other allied financial services too. In fact, many a times the services are offered to the same company, which the proposal wants to stop.
"This (proposal) is ridiculous. On the one hand, the government is saying that firms should offer multi-disciplinary services while on the other hand, it is talking of audit-only firms. This will be counter-productive," P R Ramesh, chairman of Deloitte India, told TOI. He said the move will impact the operations of large firms and will reduce their ability to attract subject-matter experts. "Not only will we lose scale, we will also lose manpower. How will we make investments in people."
Pricewaterhouse had a similar view. "The Bill seeks to take quite extreme positions in each and every thing," Harinderjit Singh, Partner at Pricewaterhouse and a former council member of ICAI, said. Ramesh added that to check irregularities by audit firms, the government should establish an effective oversight mechanism. Also, the punishment in case of a fraud needs to be swift and severe."
The proposal prohibits any audit firm to offer a variety of non-audit services that include accounting and book keeping; internal audit; design and implementation of any financial information system; actuarial services; investment banking; and rendering of outsourced financial services. The government has also made a provision to add further services in the future by reserving the right to add to the list of prohibited services.
The proposal prohibits offering of such services (directly or indirectly) not only to the company whose audit is being conducted but also to its holding company or subsidiary company or associate company.
And to ensure that audit firms do not offer the services through any other route, the proposal has even put restrictions on use of related entities. "...in case of auditor being a firm, either itself or through any of its partners or through its parent, subsidiary or associate entity or through any other entity, whatsoever, in which the firm or any partner of the firm has significant influence or control, or whose name or trade mark or brand is used by the firm or any of its partners."
The move will hit top multi-disciplinary companies, including the Big 4 like KPMG and Ernst & Young, all of which offer not only audit services but other allied financial services too. In fact, many a times the services are offered to the same company, which the proposal wants to stop.
"This (proposal) is ridiculous. On the one hand, the government is saying that firms should offer multi-disciplinary services while on the other hand, it is talking of audit-only firms. This will be counter-productive," P R Ramesh, chairman of Deloitte India, told TOI. He said the move will impact the operations of large firms and will reduce their ability to attract subject-matter experts. "Not only will we lose scale, we will also lose manpower. How will we make investments in people."
Pricewaterhouse had a similar view. "The Bill seeks to take quite extreme positions in each and every thing," Harinderjit Singh, Partner at Pricewaterhouse and a former council member of ICAI, said. Ramesh added that to check irregularities by audit firms, the government should establish an effective oversight mechanism. Also, the punishment in case of a fraud needs to be swift and severe."
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