Having dilly-dallied for long, parliament on Thursday finally passed the Companies Bill, which many believe will provide the necessary fillip to the way business is done in the country.

The new Bill, which was passed in Lok Sabha last year, was passed by voice vote in the upper house. The Bill is expected to bring in significant changes in the way companies function by bringing subjects like corporate governance and corporate social responsibility (CSR) to the forefront.

The presence of more independent directors on boards of companies, mandatory spending of 2 percent of average net profits on CSR activities for companies generating profits of Rs 5 crore and more, etc are some of the new regulations that will come in once president Pranab Mukherjee gives his assent to replace the existing Companies Act, 1956.

The Bill, it is believed, will strengthen the regulatory mechanisms in place by fixing numerous loopholes and will also ensure that the rights and interests of various stakeholder groups, including employees and shareholders, will be enhanced.

Commenting on the development, Dr Bhaskar Chatterjee, director general and chief executive officer of Indian Institute of Corporate Affairs, said, “This is a great and positive step for the economic development of our country. It will enhance the investment climate and will be an important step in the reforms process.”

Highlighting the impact the move will have on the CSR activities of companies, he said, “In particular, it will be a landmark for the CSR efforts in our country.”

Chandrajit Banerjee, director general, CII, pointed out that the Bill was a culmination of efforts made in the last 10 years and that it would effectively improve the way business is done in the country. “The Bill is commensurate with global standards vis-à-vis disclosure requirements, increased democratic rights for shareholders, self-regulation and accountability. At the same time, it also seeks to restrain the management powers of promoters, who nurture the company during its initial stages and provide the seed capital.”

In India, where 75-80 percent of the businesses are promoter-driven, the new law, once passed, will be able to make the concept of separation of ownership and control a reality, Banerjee said. “Now that the law is ready, it is time to focus and work on the practical aspects of complying with its provisions,” he added.