Companies Act Current Affairs
Union Cabinet has approved proposal for promulgation ordinance to amend the Companies Act, 2013. The ordinance had received assent from President Ram Nath Kovind under Article 123 and has been promulgated. The amendments to the Act are aimed to promote ease of doing business as well as ensure better compliance levels.
The ordinance to change Companies Act seeks to declog National Company Law Tribunals (NCLTs) and decriminalise minor offences by companies. The ordinance will transfer 90% of the cases to regional directors under Ministry of Corporate Affairs from NCLTs. Moreover, it will retain status of all non-compoundable offences since they are serious in nature.
Union Government-appointed Committee (headed by Corporate Affairs Secretary Injeti Srinivas) had suggested various changes to Act, including restructuring of corporate offences under companies law and in-house adjudication mechanism to ensure that courts get more time to deal with serious violations.
Apart from restructuring of corporate offences to relieve special courts from adjudicating routine offences, the committee had mooted re-categorisation of 16 out of 81 compoundable offences under the Act. This move was recommended to bring down NCLT’s load as it looks at insolvency and bankruptcy cases as well.
It also recommended disqualification of directors in case they have directorships beyond permissible limits and capping an independent director’s remuneration. It also had suggested that remuneration any independent director gets from company should be capped at 20% of his gross income in year to prevent any material pecuniary relationship, which could impair their independence on the board.
The Union Ministry of Corporate Affairs (MCA) has constituted High Level Committee on Corporate Social Responsibility – 2018 (HLC-2018) under Chairmanship of Injeti Srinivas, Secretary, MCA. It will review existing framework and guide and formulate roadmap for coherent policy on Corporate Social Responsibility (CSR).
Committee’s Terms of Reference
It will review existing CSR framework as per Act, Rules and Circulars issued from time to time and recommend guidelines for better enforcement of CSR provisions. It will analyze outcomes of CSR activities, programmes and projects and suggest measures for effective monitoring and evaluation of CSR by companies. It will also give suggestions on innovative solutions, use of technology, platform to connect stakeholders, and social audit. It will submit its report to Government within three months from date of holding its first meeting.
Corporate Social Responsibility (CSR)
CSR is referred as initiative undertaken by CST to assess and take responsibility for company’s effects on environment and impact on social welfare and to promote positive social and environmental change. Its basic philosophy is that income is earned only from the society and therefore it should be given back. Thus, CSR aims at promoting responsible and sustainable business through inclusive growth.
The provisions of section 135 of Companies Act, 2013 (Act) pertains to CSR. The existing provisions of in Companies Act, 2013 fully empower Board of Company to decide on their CSR Policy, approve projects and oversee implementation. Under this Act, any company with net worth of Rs 500 crore or more or turnover of Rs 1000 crore or more o net profit of Rs 5 crore or more has to spend at least 2% of last 3 years average net profits on CSR activities as specified in Schedule VII of Act.