The Companies Act is an Act of the parliament of india, enacted in 1956, which

enabled companies to be formed by registration, and set out the responsibilities

of companies, their directors and secretaries. After 57 years the new Companies
Act, 2013 finally replacing old Companies Act, 1956. The New Act is seen as an
important step in bringing Indian company law closer to global standards and in
improving the ease and efficiency of doing business in India. It touches on areas
such as corporate governance, corporate social responsibility, auditor rotation
and investor protection.

CORPORATE GOVERNANCE
Corporate governance refers to the system by which corporations are directed
and controlled. The governance structure specifies the distribution of rights and
responsibilities among different participants in the corporation (such as the board
of directors, managers, shareholders, creditors, auditors, regulators, and other
Stakeholders) and specifies the rules and procedures for making decisions in
corporate affairs.

The main Principles of the corporate governance include the principle of

transparency, accountability, accounting standards and auditing standards in the
governance of a company.

Section 166 of the companies act 2013 while dealing with the duties of the
director, says that the director shall act in good faith in order to promote the
objectives of the company for the benefits of the member as a whole.

One of the visible fault lines of corporate governance all over the world is a lack of
effective auditors. India which is not an exception has recently witnessed a series
of corruption and bribery scandals – from the allocation of telecom licenses and
coal blocks to the more recent allegations of kick-backs in a multi-million dollar
helicopter procurement contract. When the New Act is fully implemented, it will
have a direct bearing on the way companies are governed in India – improving
corporate governance in a manner that, it is hoped, will reduce misconduct at and
by Indian companies.
 Salient features
1. Restriction on Composition: Every company shall have at least one director
who has stayed in India for a total period of not less than 182 (one hundred
and eighty two) days in the previous calendar year.
2. Independent Directors: Section 178 of the CA2013 provides that all listed
companies should have at least one-third of the Board as independent
directors. Such other class or classes of public companies as may be
prescribed by the Central Government shall also be required to appoint
independent directors. No independent director shall hold office for more
than two consecutive terms of five years.
3. Serving Notice of Board Meeting: The CA2013 requires at least seven days'
notice to call a board meeting. The notice may be sent by electronic means
to every director at his address registered with the company. The CA1956
did not prescribe any notice period to call the board meeting of a company.
4. Duties of Director defined: Under the CA1956, a director had fiduciary
duties towards a company. However, the CA2013 has NOW defined the
duties of a director.
5. Liability on Directors and Officers: The CA2013 does not restrict an Indian
company from indemnifying its directors and officers like the CA1956.
6. Rotation of Auditors: The CA2013 provides for rotation of auditors and
audit firms in case of publicly traded companies.
7. Auditors performing Non-Audit Services: The CA2013 prohibits Auditors
from performing non-audit services to the company where they are auditor
to ensure independence and accountability of auditor.
8. Strengthening Women Contributions through Board Room: The CA2013
stipulates appointment of at least one woman Director on the Board of the
prescribed class of Companies so as to widen the talent pool enabling big
Corporates to benefit from diversified backgrounds with different
viewpoints.
9. Prohibition on forward dealings and insider trading: The CA2013 prohibits
directors and key managerial personnel from purchasing call and put
options of shares of the company, its holding company and its subsidiary
and associate companies as if such person is reasonably expected to have
access to price-sensitive information .
CORPORATE SOCIAL RESPONSIBILITY
CSR is a process with the aim to embrace responsibility for the company's actions
and encourage a positive impact through its activities on the environment,
consumers, employees, communities, Stakeholders and all other members of the
public sphere who may also be considered as stakeholders.

Companies act of 2013 gives a due importance to the concept of corporate social
responsibility. Section 135 of companies act, 2013 contains provisions exclusively
dealing with corporate social responsibility. Schedule VII contains a list of the
activities which a company can undertake as a part of it CSR initiatives.

CSR will be mandatory for a company with a net worth of INR 500 crores or
more, a turnover of INR 1,000 crores or more, or net profits of INR 5 crores or
more during any financial year. Any company meeting these thresholds will be
required to spend annually at least 2% of its average net profits of the preceding
three financial years on social and charitable causes .This is a highly innovative
provision, but it could also lead to certain forms of bribery in which Indian
corporates could be tempted to use CSR spending to benefit politicians in power
by conducting CSR activities in their constituencies – a form of indirect lobbying.

While a company is not subject to liability for failing to spend on CSR, a company
and its officers are subject to liability for not explaining such a failure in the
annual report of the board of directors. Failure to explain is punishable by a fine
on the company of not less than 50,000 rupees (about U.S. $900) and up to 25
lakh rupees (about U.S. $46,000). Further, officers who default on the reporting
provision could be subject to up to three years in prison and/or fines of not less
than 50,000 rupees (about U.S. $900) and as high as 5 lakh rupees (about U.S.
$9,200).
They are bound to constitute a CSR committee for the formulation and
monitoring of a CSR policy that will envisage promotion of a wide range of
activities. The general perception is that this will not only boost corporate
charitable activity in India but also gives companies a range of varying tax
benefits.
The Union government is now looking at a proposal to float a company to manage
corporate social responsibility funds of all central public sector enterprises to
ensure efficient implementation of this social initiative and to free companies
from additional responsibility.

Activities included by company in their CSR Policies:

1. Eradicating extreme hunger and poverty.

2. Promotion of education

3. Promoting gender equality and empowering women

4. Reducing child mortality and improving maternal health.

5. Ensuring environmental sustainability.

6. Employment enhancing vocational skills.

7. social business projects.

8 .Combating human immune deficiency syndrome, malaria and other disease.