The parliamentary standing committee on finance has asked the ministry of corporate affairs (MCA) to to explain the differing views it has taken on suggestions the committee made on some key issues in the Companies Bill, 2011.

The issues include whether investment in corporate social responsibility (CSR) should be made mandatory, rotation of auditors, private placement of shares, and composition of members of the National Company Law Tribunal (NCLT), an MCA official said on condition of anonymity.

The draft legislation, which was tabled in the winter session of Parliament, was referred back to the committee after protests by the Bharatiya Janata Party (BJP). The panel, headed by former finance minister and BJP leader Yashwant Sinha, had submitted its report in August 2010.

“The committee had called some officials of MCA on 24 January to explain why some of its recommendations were not incorporated and why some provisions were included outside its recommendations,” said the ministry official.

Sinha could not be reached for comment.

The committee had reservations on the number of changes incorporated in the Bill on private placement of shares, the official said. MCA, through the draft law and a December notification, has tightened rules regarding preferential allotment of shares in unlisted companies to minimize money laundering.

Private placement of shares is made by a company to a select section of the public on a preferential basis. Under the Companies Act, 1956, an unlisted company can issue shares through private placement to only 49 people or entities.

According to Pavan Kumar Vijay, managing director of Corporate Professionals India Pvt. Ltd, which advises professionals and companies on corporate governance, since the Act does not specify as to how many times in a year can such a placement be made to 49 entities, firms were playing around with the clause.

“The Bill has put a limit on the maximum amount to be raised in a financial year through private placement, that no fresh offer be made unless allotment of the first offer is complete, that money involved in this is routed only through banking channels such as cheque or bank draft, that allotment is made within 60 days of receipt of funds, and allotment cannot be transferred in someone else’s name, and that complete disclosure of such offers are made to the registrar of companies,” he said.

This will check money laundering and transfer of shares in bogus names, he added.

The MCA official agreed. “There was an immediate need to tighten provisions relating to private placement as it was found that companies were misusing funds thus raised,” he said.

Most standing committee members wanted investments in CSR by a class of profit-making public companies to be made mandatory, the ministry official said. The Companies Bill makes this voluntary. The official added that the committee wanted that members of NCLT, a dispute resolution tribunal that will replace the Company Law Board, be of the rank of additional secretary and above. The Companies Bill has kept it one notch down, saying a joint secretary-level bureaucrat can be a member.