India finally updates 1950s company laws for 21st century

India ratified its first major overhaul of company law in more than 50 years on Thursday, seeking to strengthen accounting standards and shareholder rights in a country where many businesses are family-controlled.

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Parliament approved the new bill, which has provisions that allow shareholder class action lawsuits and require companies with market capitalisation of more than 5 billion rupees to spend 2 percent of their annual net profits on corporate social responsibility, such as social work or charity.

The new bill replaces companies legislation enacted in 1956, long before reforms in the 1990s opened up the economy and laid the foundations for a boom in privately-operated companies.

"This was a long time coming. The new law brings our corporate law closer to global standards and would definitely go a long way in improving how business is done," said Dinesh Kanabar, deputy CEO of KPMG in India.

The legislation is part of an ambitious agenda for the current session of parliament that includes a USD 22 billion cheap food plan that will be a central plank of the Congress party's platform in elections due by May.

The companies bill, which will replace legislation that has often been criticised for being outdated and cumbersome, had been in the works for at least a decade but gained momentum after an accounting scandal at Satyam Computer Services in 2009.

India ranks 139th globally in the World Bank's ease of doing business report, behind smaller economies such as Zambia.

President Pranab Mukherjee is expected to sign the bill into law.