New Delhi, Aug 8 (IANS) Parliament Thursday gave its nod to the new Companies Bill that seeks to enhance compliance and transparency, make corporate social responsibility mandatory and protects the interest of employees and small investors.
The provisions of the bill would ensure prevention of a Satyam-like fraud, the biggest in India's corporate history running into $1.5 billion detected in 2009.
The Rajya Sabha passed the bill Thursday. The Lok Sabha had done so on Dec 18, 2012.
The bill will now go to President Pranab Mukherjee for his assent. The new legislation will come into effect with notification by the corporate affairs ministry after the presidential assent.
The new law will replace the nearly six-decade-old Companies Act of 1956.
Replying to the debate on the bill in the Rajya Sabha, Corporate Affairs Minister Sachin Pilot said it sought to bring India's corporate governance in sync with the changing business environment of the 21st century.
Pilot said the bill was progressive and the main focus was on enhancing transparency and compliance and it would help growth of the economy.
"For the next two to three decades, this (new legislation) will bring positivity in the economy," said Pilot adding that the views of all the stakeholders, including industry chambers, have been taken into consideration.
"The focus of the bill is to enhance transparency and ensure fewer regulations, self-reporting and disclosure," Pilot said.
The bill was first introduced in the Lok Sabha in August 2009. It was referred to the standing committee on finance a month later. It was brought back to the Lok Sabha as Companies Bill 2011, but again referred to the standing committee.
The bill was cleared by the Lok Sabha after the standing committee submitted its report in June 2012.
"This legislation is indeed a milestone in the history of company law and will revolutionise the administration and management of businesses in the times to come," said Naina Lal Kidwai, president, Federation of Indian Chambers of Commerce and Industry (FICCI).
Kidwai said the Bill had introduced several changes and concepts which would simplify regulations and bring greater clarity and transparency in managing businesses. "The global environment calls for economic laws and regulations that are effective and efficient, have a reasonable compliance cost and keep Indian businesses competitive."
"Now that the law is ready, it is time to focus and work on the practical aspects of complying with its provisions," said Chandrajit Banerjee, director general, Confederation of Indian Industry (CII).
Banerjee said the new Companies Bill is commensurate with "global standards vis-à-vis disclosure requirements, increased democratic rights for shareholders, self-regulation and accountability."
At the same time, it also sought to restrain the management powers of promoters, who nurture the company during its initial stages and provide the seed capital.
"In a country where 75-80 percent of the businesses are family-run/promoter-driven, we hope that the new law would be able to achieve the fine balancing between ownership and management, which is crucial for success of any enterprise and also fostering the spirit of entrepreneurship," he said.