Updation of India's Corporate Laws to Realities of 21st Century

The Satyam fraud has shattered the dreams of different categories of investors, shocked the government and regulators alike and led to questioning the accounting practices of statutory auditors and corporate governance norms in India. Severe corporate governance problems emerged out of the above-mentioned corporate wreckage. Many of the governance problems were noticed in several other such corporate failures in USA, UK and Europe. These countries reacted strongly to the corporate failures and codes & standards on corporate governance came to the centre stage. Corporate scandals especially in the United States triggered reforms in corporate governance, accounting practices and disclosures the world over and many countries have amended their corporate I aw s to keep pace with the changed world. The long awaited Companies Bill, passed by both the Houses of Parliament got finally the nod of Honorable President of India and has also been notified. With the notification, Indian corporate sector will soon be governed by a new, modified law and bid goodbye to 57 year old Companies Act. The essence of the recently passed Companies Act is to totally overhaul the Company law with a view to promote self-regulation, eradicate unwarranted regulatory approvals, vest shareholders with greater powers and encourage greater transparency in the disclosures by corporate entities. The new law replaces the 1956 Act and consolidates a number of its provisions. It allows for a number of issues, currently specified in the Act, or its schedules, to be specified in the rules. In the light of Satyam fiasco, many new and unheard concepts have been introduced in the new law that proposes sweeping changes to the existing company laws. Corporate governance is one aspect where heightened emphasis has been given in the law to ensure accountability of individuals at the helm of affairs of a company. The new law seeks to strengthen corporate governance by introducing new provisions related to independent director, rotation of auditors, class action, secretarial audit, insider trading and CSR.