Government Set To Further Amend Companies Law

The government plans to make more amendments of “urgent nature” to the companies law, including to certain provisions regarding Corporate Social Responsibility spending, according to a notice.

Days after promulgating an ordinance to amend the Companies Act, 2013, the Corporate Affairs Ministry has now sought comments from stakeholders for proposed changes to the law. In a notice, the ministry said certain amendments of “urgent nature would be required to further strengthen the corporate governance and enforcement framework”.

A committee to review the penal offences under the Act had suggested various amendments to the law. Pursuant to the recommendations, an ordinance was promulgated on Nov. 2. Now, the ministry has sought comments from stakeholders on the fresh set of proposed amendments by Nov. 20.

Among others, amendments have been proposed to the CSR provisions. Under the law, certain class of profitable companies are required to shell out at least 2 percent of their three-year annual average net profit towards social welfare activities. In case the entities concerned fail to spend the requisite amount, they have to provide reasons for the same.

According to the proposed changes, any amount remaining under CSR provisions should be transferred by the company within 30 days from the end of the financial year to “a special account to be opened by the company in that behalf for that financial year in any scheduled bank”.

It would be called “the Unspent Corporate Social Responsibility Account, and such amount shall be spent by the company in pursuance of its Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer,” the notice said.

Certain amendments have also been proposed regarding the National Financial Reporting Authority.