The government today introduced the new Companies Bill, retaining some contentious provisions such as 2% yearly spend on CSR activities and a fix term for independent directors.
According to the Companies Bill 2011, every company with a networth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more in a financial year will have to form a Corporate Social Responsibility (CSR) Committee, consisting of three or more directors, of which at least one director should be an independent director.
"The board of every company shall make every endeavour to ensure that the company spends, in every financial year, at least two% of the average net profits of the company made during the three immediately preceding years in pursuance of its CSR Policy," the Bill said.
It added that in case the company "fails to spend such amount, the board shall...Specify the reasons for spending the amount".
The Bill also limits the term of independent director in a company to five consecutive years. The independent director can be reappointed on the board after passing of a special resolution by the company and disclosure of such appointment on the board's report.
Further, regarding appointment of auditors, the Bill said that a company will have to rotate an audit firm or an auditor every five years.
Introduced in the wake of the Rs 14,000-crore Satyam fraud, the fresh Bill proposes to enhance the accountability of companies, seeking greater disclosure and protection of investors and minority shareholders, the Statement on Objects and Reasons of the Bill said.
In view of changes in the national and international economic environment and growth in the economy, the need was felt to enact a new law, it said.
