SEBI Act made supreme in market-related conflicts
After a two-year wait, the revamped and slimmer version of the Companies Bill is ready to be tabled before Parliament during the ongoing winter session.
The Companies Bill 2011, with tighter disclosure norms, stricter penal provisions, greater shareholder democracy and introducing the concept of Corporate Social Responsibility, for the first time, was cleared by the Cabinet on Thursday.
The Bill will replace the existing Companies Bill 2009, which will be subsequently withdrawn. The reforms in the Companies Act, 1956 were initiated after a series of white-collar crimes, including the Satyam accounting fraud.
It proposes to introduce the concept of class action suits for investor protection as well as a fixed term for independent directors and their liability in a company.
The spat between the Finance Ministry and the Ministry of Corporate Affairs over conflicting jurisdiction with market regulator SEBI in matters such as insider trading and forward dealings in listed companies has been settled, with the SEBI Act being made supreme in cases of conflict.
The Bill also mandates at least one position for woman on the boards of all listed companies.
The concept of treasury stocks has also been done away with.
The Bill also proposes stricter norms for raising money from the public. It has proposed that companies would need to earmark two per cent of their profits of the previous three years for CSR activities and make a disclosure of it in their balance-sheets.