The Lok Sabha on Friday unanimously passed amendments to the Companies Act to make compliance stricter, especially in the context of corporate social responsibility. The amendment bill was introduced on Thursday by Finance Minister Nirmala Sitharaman.
One of the amendments proposes to force companies that do not fulfil their corporate social responsibility obligations to deposit the money that should have been spent for that purpose in a special account. Under the existing law, companies earning profits over Rs 5 crore or having a turnover of Rs 100 crore or having a net worth of more than Rs 500 crore, must spend at least 2% of their three-year annual average net profit into activities under corporate social responsibilities.
The bill also proposes to get a company’s name removed from the Register of Companies if it is not carrying on any business or operation in according with the law.
Sitharaman said the amendments were an attempt to improve ease of business and also to curb compliance burden on the companies, especially smaller ventures, according to PTI.
Sitharaman also said that the government had identified and de-registered four lakh companies. She said not maintaining a registered office will be a basis for de-registration of companies. The minister, addressing concerns of members, said that the words “shell companies” had not been defined in the rule book but is a reference to inactive companies without a registered office.
The bill also adds provisions for re-categorisation of 16 minor offences as civil defaults, transfer of powers on conversion from public to private companies from National Company Law Tribunal to the Centre. It also clarifies certain powers of the National Financial Reporting Authority.
The bill was passed by the Lok Sabha after Leader of the Congress Adhir Ranjan Chowdhury withdrew his statutory resolution opposing the bill.