The Lok Sabha on Friday passed the Companies (Amendment) Bill, 2019. The legislation is aimed at tightening the Corporate Social Responsibility (CSR) compliance and reducing the load of cases before the National Company Law Tribunal (NCLT).
The Bill was adopted by the Lower House with a voice vote after Congress party leader Adhir Ranjan Chowdhury withdrew his statutory resolution opposing it.
Piloting the Bill, Finance and Corporate Affairs Minister Nirmala Sitharaman told the Lok Sabha that it would ensure a greater accountability and a better enforcement of the corporate governance norms.
Responding to the concerns of members with regard to shell companies, Sitharaman said the word “shell companies” had not been defined in the rule book, but it loosely referred to inactive companies or those which did not maintain a registered office. “Four lakh companies have been identified and de-registered,” she said.
Under the Act, companies with a turnover of Rs 100 crore, net worth of more than
Rs 500 crore and earning a profit of over Rs 5 crore are required to shell out at least two per cent of their three-year annual average net profit for CSR activities. India, Sitharaman said, has become the first country to make CSR spending mandatory through a law. The companies will have one year to firm up the CSR proposal and another three years to spend funds.
In case money remains unspent for one plus three years, it will have to be moved to an escrow account, she said, adding that it could even be the Prime Minister’s Relief Fund.
The Bill seeks to empower the Registrar of Companies to initiate action for the removal of the name of a company from the Register of Companies if it is not carrying on any business or operation in according with the Company Law. The legislation also envisages a re-categorisation of 16 minor offences as purely civil defaults.
Opposing the ordinance brought earlier, Chowdhury said it was not required as the law had been amended on several occasions. He said, “I take strong exception to the invocation of ordinance. It appears that the government is going to be ordinance-addicted… It appears as if the government is in a hurry to pass legislation after legislation. We can easily say that the government is heading towards, ‘one nation, one session’.”
Saugata Roy of the Trinamool Congress said, “The unfortunate part is that after the present government came to power in 2014, they made repeated amendments to the law. There were 22 amendments in 2015. Then there were a large number of amendments in 2017 and again the present Bill has come with 36 clauses…It seems that the companies are not satisfied with any law that you bring. So, they bring pressure on the government to change the law.”
Pinaki Misra of BJD described the Bill as “disastrous” and A Raja of the DMK said the Registrar of Companies had been given “excessive powers”.