The much-awaited Companies Bill was passed by the Rajya Sabha on 08 August, 2013.

The Bill, vetted twice by a Parliamentary panel, had already obtained the approval of the Lok Sabha in December 2012. Now, only the President's assent will be required for it to become law. The new legislation, with 470 clauses, limits to 20 the number of companies an auditor can serve. It has also brought in more clarity on auditors' criminal liability. Besides, the approved Bill also includes annual ratification of appointment of auditors for five years and introduction of a new clause related to offence of falsely inducing banks for obtaining credit. Companies will have to disclose ratio of remuneration of each director on the board to the average of employees' salary.

The government has also made provisions regarding incorporation of companies. According to the new law, even one person can form a company, as against the earlier requirement of at least two people. Safeguarding workmen in the legislation, the new law mandates payment of two years' salary to employees in companies that wind up operations.

Besides, the changed law allows more statutory powers to the government's investigative arm, the Serious Fraud Investigation Office, to tackle corporate frauds.

Once the new law is put in place, profit-making companies will be required to spend two per cent of their average net profit of three years on activities related to corporate social responsibility. Three years will be counted as preceding the one during which CSR was to be undertaken.

The Bill, aimed at improving corporate governance, also contains provisions to strengthen regulations for companies, as well as auditing firms. The Bill now requires Presidential assent. The draft rules on the Companies Act will then be made public and the Act.