Proposed Company Law Bill and its impact on Voluntary sector

As requested by some of the SRRF Dialogue members, in this post major changes proposed in the Companies Bill 2009 which are likely to impact the Voluntary Sector, as well as some other pertinent facts likely to be of interest generally.

  • Objective of the proposed Act is to provide a statutory platform for Corporate Governance requirements essential for functioning of the companies with transparency & accountability, recognizing and protecting the interests of various stakeholders.
  • Numbers of companies have expanded from 30,000 in 1956 to more than 8 lakhs.
  • A new entity in the form of One Person Company to provide for a simpler compliance regime.
  • More stringent regime for companies with charitable objects to check misuse.
  • Based on suggestions rec’d from Parliamentary standing committee, Ministry of Corporate Affairs has proposed that every company having a minimum
    • networth of Rs 500 crore, or
    • turnover of Rs 1000 crore or
    • a net profit of Rs 5 crore during a year

Shall be required to formulate a CSR policy and to ensure that every year at least 2% of its average net profits during the 3 immediately preceding financial years shall be spent on CSR activities as may be approved and specified by the company. In case such a company does not have adequate profits or is not in a position to spend prescribed amount on CSR activities, the director would be required to give suitable disclosure / reasons in their report. CSR activities undertaken during the year have to be given in the Director’s report.

  • S. 25 to be replaced with Clause 4. New allowed objects included are ‘sports, education, research and social welfare’. More stringent penalties in case of defaults.
  • More stringent provisions for independence and integrity of auditor and for holding him more accountable in case of defaults. Auditor prohibited from rendering non-audited services. Auditing Standards now recognized in law.
  • Rotation of individual auditor and audit firm to be mandated in the Bill.
  • Statutory recognition to Audit Committee, which will be mandated to determine remuneration and terms of engagement, evaluation of auditors’ independence, functioning, etc.
  • Whistle blowing mechanisms incorporated in the Bill.

The above summary is based on various reports available, such as, Companies Bill 2009, Parliamentary Committee Report. The provisions mentioned are subject to change, since the decision on final provisions will be taken up only by the Parliament.


Socio Research & Reform Foundation

(A Non Government Organisation)

512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Tele/Fax: +91-11-25821088, 25817157, 25722044



This entry was posted in Corporate Governance. Bookmark the permalink.