NEW DELHI: Industry body ASSOCHAM appreciated the Cabinet approval for the Companies Bill, saying it will promote greater shareholder democracy and stricter corporate governance norms.
“The proposed law seeks to update the company law in line with the best global practices,” said Mr D.S. Rawat, secretary general of The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
“The bill proposes to introduce the concept of class action suits for the first time in the country. This will empower investors to sue a company for oppression and mismanagement, and claim damages,” he said.
The bill proposes that companies should earmark two per cent of the average profit of the preceding three years for corporate social responsibility (CSR) activities, and make a disclosure to shareholders about the policy adopted in the process.
Mr Rawat said the industry should be allowed to monitor implementation of CSR themselves without government intervention. “There is growing awareness among Indian corporates to adopt social, environmental and economic responsibilities.”
Among other things, it also proposes to tighten the laws for raising money from the public. The bill also seeks to prohibit insider trading by company directors or key managerial personnel by treating such activities as a criminal offence.