New Delhi: The Cabinet on Thursday approved the Companies Bill 2011 which, once approved by Parliament, will replace half-a-century-old Act.

Prime Minister Manmohan Singh. File photo.

The Bill, which has already been vetted by the Parliamentary Standing Committee of Finance and also by different ministries, seeks to update the company law in line with the best global practices.

The Bill has introduced ideas like Corporate Social Responsibility (CSR), class action suits and a fixed term for independent directors.

Among other things, it also proposes to tighten laws for raising money from the public. The Bill also seeks to prohibit any insider trading by company directors or key managerial personnel by treating such activities as a criminal offence.

Further, it has proposed that companies should earmark 2% of the average profit of the preceding three years for CSR activities and make a disclosure to shareholders about the policy adopted in the process.

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