India's New Corporate Laws: Completing the CircleDocument Transcript
AUGUST 20, 2013
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PattonBoggs.com Client Alert: India's New Corporate Laws: Completing the Circle 1
INDIA’S NEW CORPORATE LAWS:
COMPLETING THE CIRCLE
AS INDIA’S UPPER HOUSE PASSES THE COMPANIES BILL
2012, 50 YEARS OF CORPORATE LEGISLATION IS
REPLACED BY AN ENABLING AGENDA FOR BUSINESS FOR
THE NEXT 50
Whilst improving corporate governance strictures, enhancing protection for
investors, combatting fraud and facilitating greater entrepreneurship are some of
the declared aims of the new BILL it is the requirements for companies to
deliver upon Corporate Social Responsibility (CSR) that may be the jewel in the
corporate crown for many. Patton Boggs’ Washington, DC office and lawyers
based in Australia have significant experience in developing CSR projects
throughout India, particularly in the areas of carbon offsetting and health and
environmental project work with a range of international consultancies which
will now be given even greater effect by the passing of the 2012 Companies Bill
The main elements of the new legislation include the following.
Stricter Rules on Corporate Governance
→ Simplified company structures;
→ One third of a board must be independent;
→ Greater director accountability, and
→ At least one director of a company must be female.
PattonBoggs.com Client Alert: Enter Title Here 2
Greater Investor Protection
These provisions allow aggrieved parties to now petition the new National Company Law Tribunal which, together
with a revised appeals process, significantly advances the 13-year-old Investor Education and Protection Fund and, in
line with global peers, recourse to a raft of new remedies as well as class action processes.
The legislation contains a new mechanism for mergers with international companies which it is hoped will facilitate
greater opportunities. This will now be facilitated through an approval process managed by the Reserve Bank of India.
Corporate Social Responsibility
Companies with a net worth of RS 500 Crore (US$7.9 million) or more, a turnover of RS 1,000 Crore (US$158
million) or more, and a net profit of RS 5 Crore (US$790, 000) or more during any financial year (from April 1 each
year) are now required to:
1. Establish a CSR Committee with at least 1 independent director
2. Have a CSR spend of 2 percent of the average net profits for the preceding three financial years
The legislation recognizes several such activities and include (but are not limited to):
1. Ensuring environmental sustainability
2. Eradicating extreme hunger and poverty
3. Combating disease
4. Social business projects
5. Promoting gender equality and empowering women.
It is anticipated that we will see a range of the new carbon offset projects which will seek to bring innovative practices
and technologies into play, coupling several of these key areas into a range of holistic projects which, whilst being met
by the companies initially through their CSR requirements, would also seek to attract revenues for the communities
they are operating in through such new project designs. For example, an environmental sustainability offset could
generate new skill sets and regional employment which could be coupled with a food security element.
Should you have any questions regarding the developments addressed in this Client Alert, please contact Simon Harrison at
firstname.lastname@example.org or +61 (7) 3211 9992, or Sonia Barber at email@example.com or +61 (7) 3211 9992.