On December 18, 2012, the lower house of India’s parliament cleared the Companies Bill, 2012, in a significant step towards replacing the more than 50-year old Companies Act, 1956. Highlights include:
- Corporate Social Responsibility will be made mandatory for companies of a certain size, giving rise to a requirement of spending at least 2% of a company’s average net profits of the preceding three financial years on social and charitable causes annually.
- Private companies may be incorporated with up to 200 members , up from the existing limit of 50 under the current Act.
- Public companies will now mandatorily be required to have independent directors on their boards with public listed companies required to have at least one-third independent directors. Such directors may not be given any stock options and their term in office cannot exceed two five-year terms.