Companies bill vs. co.'s act

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Companies bill vs. co.'s act

  1. 1. Companies Bill, 2013 Companies Act, 1956 vis-à-vis Prepared by: Harshit Lakhotia Reg. No.: ERO 0144641
  2. 2. I. Journey of Companies Bill II. Background III. New Introduction: 1. One Person Company (OPC) 2. Small Company 3. Special Courts 4. Class Action Suit 5. Key Managerial Personnel [Clause 2(51)] 6. Dormant Company 7. Woman Director 8. Secretarial Audit 9. Secretarial Standards 10. Independent Directors 11. Prohibition of Insider Trading & Forward Dealings 12. Board’s Report 13. Provision for Entrenchment 14. Corporate Social Responsibility (CSR) (Clause 135) 15. Rotation/ Appointment / Re-Appointment of Auditors IV. Modifications 1. Financial year 2. Members in Pvt. Ltd. Companies 3. Notice for change of Registered office 4. Disposal of application for change of Registered office by CG 5. Registered office of Company. Particulars Page No.
  3. 3. IV. Modifications 5. Commencement of Business 6. Restriction on multilayer Investment subsidiaries 7. Statutory Meeting to be conducted 8. Printing of CIN (Corporate Identity Number) 9. Number of Directors 10. Alteration in AOA 11. Object Clause in MOA 12. Appointment of Debenture Trustees (DT) 13. Directors 14. Board of Directors 15. Related Party Transactions 16. Key Managerial Personnel (KMP) [Clause 203(1)] 17. National Financial Reporting Authority (NFRA) (Clause 132) 18. Removal of names of companies from the Register of Companies [Clause 248] 19. Winding up of a company [Clause 213] 20. Restructuring and Liquidation 21. Company Liquidators (Clause 275) 22. National Company Law Tribunal and Appellate Tribunal [Clause 408] 23. Inspection, Inquiry and Investigation 24. Acceptance of Deposits 25. Shares and Debentures: Issue, Allotment and Transfer of Securities 26. Dividend 27. Financial Statements Particulars Page No.
  4. 4. IV. Modifications 28. Annual Return 29. Annual General Meetings 30. Compromises, Arrangements and Amalgamations 31. Depreciation Particulars Page No.
  5. 5. 2008 2009 2010 2011 2012 2013 Companies Bill, 2008 was introduced on 23 October 2008 in the Lower House (Lok Sabha) to replace existing Companies Act 1956 (the Act) Due to the dissolution of the 14th Lok Sabha, the Companies Bill, 2008 had lapsed Companies Bill, 2009 (Bill) was reintroduced on 3 August 2009 in the Lok Sabha to replace existing Companies Act 1956 with minor modifications to the Companies Bill, 2008) Bill was referred to the Standing Committee on Finance of the Parliament (the SCF) for examination and report on 9 September 2009 Report of the SCF on Companies Bill, 2009 was introduced in the Lok Sabha on 31 August 2010 Companies Bill 2011 introduced in the Lok Sabha on 14th December 2011 Companies Bill 2012 was passed in the Lok Sabha on 18th December 2012 and introduced in Rajya Sabha Companies Bill 2013 was passed in Rajya Sabha now awaits with President Pranab Mukherjee for his assent before it becomes law
  6. 6. Structure of the Companies Act 1956 & the Companies Bill 2013 Background Companies Act 1956 Companies Bill 2013 • 13 Parts • 750+ Sections • 15 Schedules • 29 Chapters • 470 Clauses(i.e. sections) • 7 Schedules
  7. 7. New Introduction One Person Company (OPC) No Provision New concept of One Person Company has been introduced in Clause 3(1)(C), while Clause 2(62) defines the same. Here, the formation of the Company requires only one member. The provision relating to holding of AGM is not mandatory for OPCs’. The Memorandum of an OPC should include : • Name of Nominee • Consent of Nominee • Nominee can be changed (and such change not treated as Alteration of MOA) One person Company can be: • Limited by shares • Limited by guarantee • Unlimited company Capital : Minimum – Rs. 100,000 Maximum – No limit Exemptions: 1. Financial Statement doesn’t need to include cash flow statement 2. Signing of Annual Return: • By Company Secretary in employment or • By 1 Director (Where no CS) 3. Exemption from conducting AGM, while GM/EGM are not applicable. 4. Approval of Financial statements can be done by only one director for submission to auditors 5. Only 1 board meeting conducted in each half calendar year, deemed proper compliance. [For facilitating Individuals to adopt Corporate Structures for carrying out Business under a simplified regime] Companies Act 1956 Companies Bill 2013Particulars
  8. 8. New Introduction Small Company No Provision Separate Regime for ‘Small Company’ has been introduced in Clause 2(85). A Small Company is a company whose: •paid up share capital does not exceed 50 Lakh rupees or such higher amount as may be prescribed (which shall not be more than 5 Crore Rupees); OR •Turnover of which as per last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees; Provided that this would not apply to: i) a holding company or a subsidiary company, ii) a company registered under sections 8; or iii) a company or a body corporate governed by a special Act; [For facilitating Individuals to adopt Corporate Structures for carrying out Business under a simplified regime] Companies Act 1956 Companies Bill 2013Particulars Special Courts No Provision For the speedy trial of offences, the Central Government has been empowered to establish special courts in consultation with the Chief Justice of the High Court within whose jurisdiction the judge is to be appointed. [clause 435]. All offences under this Act shall be triable by the Special Court established for the area in which the registered office of the company in relation to which the offence is committed or where there are more special courts than one for such area, by such one of them as may be specified in this behalf by the High Court concerned. [clause 436] The Special Court would have the liberty to try summary proceedings for offences punishable with imprisonment for a term not exceeding three years, although it may order for the regular trial [clause 436].
  9. 9. New Introduction Companies Act 1956 Companies Bill 2013Particulars Class Action Suit No Provision Clause 37: For the first time, a provision has been made for class action suits. It is provided that specified number of member(s), depositor(s) or any class of them, may, if they are of the opinion that the management or control of the affairs of the company are being conducted in a manner prejudicial to the interests of the company or its members or depositors or affected by any misleading statement or the inclusion or omission of any matter in the prospectus, can file an application before the Tribunal on behalf of the members or depositors. Where the members or depositors seek any damages or compensation or demand any other suitable action from or against an audit firm, the liability shall be of the firm as well as of each partner who was involved in making any improper or misleading statement of particulars in the audit report or who acted in a fraudulent, unlawful or wrongful manner. The order passed by the Tribunal shall be binding on the company and all its members, depositors and auditors including audit firm or expert or consultant or advisor or any other person associated with the company. (clause 245) Key Managerial Personnel [Clause 2(51)] Includes CEO, MD, Manager, Company Secretary and CFO (if appointed by the Board of Directors). No Provision
  10. 10. New Introduction Dormant Company No Provision Separate Regime for ‘Dormant Company’ has been introduced. A company which is formed and registered under this Act for a future project or to hold an asset or intellectual property and which has not been carrying on any business or operation or has no significant accounting transaction during the last 2 FYs, such a company or an inactive company may make an application to the Registrar for obtaining the status of a Dormant Company. A company which has not filed financial statements or annual returns for 2 FYs consecutively will be classified as Dormant Company by the ROC. A company can get its removed from the Register of Companies by obtaining a status of a dormant company under section 455. A company not carrying on any business or operation for a period of two years immediately preceding financial year and has not made any application within such period, make an application to the Registrar. [For facilitating flexibility to create entity to house a future project/valuable assets such as IPRs(Intelectual Property Rights ), Etc.] Woman Director No Provision At least 1 woman director shall be on the Board of such class or classes of companies as may be prescribed. Secretarial Audit No Provision to mandate. Every Listed company and such companies as may be prescribed shall annex with its Board’s report under section 134, a SECRETARIAL AUDIT Report, given by a Company Secretary in practice, following the Secretarial Standards issued by ICSI, as per section 204. Companies Act 1956 Companies Bill 2013Particulars
  11. 11. New Introduction Companies Act 1956 Companies Bill 2013Particulars Independent Directors No Provision All listed companies are required to appoint 1/3rd of the board as independent directors. The manner of selection of independent directors shall be prescribed by the Central Government. The independent director would be appointed for a period of 5 years and is eligible of re-appointment for the following consecutive term. However a director cannot hold for more than two consecutive terms (i.e. 10 years). Prohibition of Insider Trading & Forward Dealings No Provision No person including any director or KMP of a company shall enter into insider trading (as defined) except to any communication required in the ordinary course of business or profession or employment or under any law.(Clause 195). Further, Directors and the key managerial personnel of a company are prohibited from forward dealings in securities of the company (Clause 194) Board’s Report Not mandatory to include Secretarial Audit Report Mandatory to include Secretarial Audit Report Secretarial Standards No provisions relating to applicability Statutory Recognition given under Clause 118(10) and Clause 205 Provision for Entrenchment Earlier there was no provision for entrenchment. Articles may contain provisions for entrenchment u/s 5(3).
  12. 12. Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. New Introduction Corporate Social Responsibility (CSR) (Clause 135) The Bill has made it mandatory for profit making companies to spend on activities related to Corporate Social Responsibility (CSR). India would possibly become the first country to have Corporate Social Responsibility (CSR) spending through a statutory provision. Provisions applicable to every company having:  net worth of ` 5 billion or more; or  turnover of ` 10 billion or more; or  net profit of ` 50 million or more during any FY. Such companies to constitute CSR committee of its BOD consisting of minimum 3 directors including 1 Independent Director. CSR committee shall formulate and recommend to the BOD, CSR Policy which shall indicate the activity or activities to be undertaken by the company as specified in schedule VII and shall also recommend the amount of expenditure to be incurred on the CSR activities BOD of such companies shall mandatorily spend, in every FY, minimum 2% of the average net profits of the company made during the 3 immediately preceding FYs, in pursuance of its CSR Policy. If the company fails to spend such amount, BOD shall specify the reasons for not spending the amount in the BOD report. The company shall give preference to local areas where it operates, for spending amount earmarked for Corporate Social Responsibility (CSR) activities.
  13. 13. Appointment of Auditor in unlisted companies [Clause 139]: New Introduction Rotation, Appointment & Re-Appointment of Auditors: Appointment Period of Appointment At first AGM to hold office till conclusion of 6th AGM subject to ratification by members at every AGM Appointment Period of Appointment Individual 1 term of 5 consecutive years, subject to ratification by members at every AGM Appointment of Auditor in listed and specified class of companies [Clause 139]: Audit Committee: The Board of Directors of every listed company and such other class or classes of companies, as may be prescribed, shall constitute an Audit Committee u/s 177. All appointments, including the filling of a casual vacancy of an auditor under this section shall be made after taking into account the recommendations of such committee. to hold office till the next AGM and can be reappointed thereat. Subsequent to hold office till conclusion of 6th meeting, subject to ratification by members at every AGM to hold office till the next AGM and can be reappointed thereat. Companies Bill, 2013 Companies Act, 1956 Cooling off period Audit Firm 2 terms of 5 consecutive years, subject to ratification by members at every AGM 5 years before next appointment Companies Bill, 2013 Companies Act, 1956 to hold office till the next AGM and can be reappointed thereat. to hold office till the next AGM and can be reappointed thereat. No such Provision
  14. 14. Provisions relating to auditors applicable to all companies: 1. Company may resolve [Clause 139(3)] : • If Audit firm is appointed, the audit partner and his team shall rotate at such intervals as may be resolved by members. • Audit shall be conducted by more than 1 auditor (i.e. joint auditor). 2. Qualification of firm as auditors [Clause 141] : • Majority of partners practicing in India are qualified for appointment; • If LLP is appointed as auditor, only partners who are CA shall be authorized to sign. New Introduction Removal/ Resignation of Auditors [Clause 140]: • The auditor appointed u/s 139 may be removed from his office before the expiry of his term only by a Special Resolution, after obtaining the previous approval of the CG in the prescribed manner. Provided that before taking any action, the auditor concerned shall be given a reasonable opportunity of being heard [Clause 140(1)]. • The auditor who has resigned from the company shall file within a period of 30 days from the date of resignation, a statement in the prescribed form with the ROC and in case of Govt. Co. held by CG/ SG/ Both u/s 139(5), the auditor shall also file such statement with the C AG of India, indicating the reasons and other facts as may be relevant with regard to his resignation [Clause 140(2)], failure of which may attract fine of Rs.50000 which may extend to Rs. 500000 u/s 140(3). Rotation, Appointment & Re-Appointment of Auditors: Common conditions for appointment of auditor in listed and specified class of companies: • Incoming audit firm should not have any common partners who were the partners of the outgoing audit firm, i.e., the audit firm whose tenure expired in the immediately preceding FY by virtue of mandatory rotation requirement [Clause 139(2) 1st proviso] . • CG shall prescribe the manner in which the companies shall rotate their auditors [Clause 139(4)]. • Transition period of 3 years provided to the companies to comply with the mandatory rotation of auditor requirement [Clause 139(2) 2nd proviso].
  15. 15. New Introduction Rotation, Appointment & Re-Appointment of Auditors: An auditor or audit firm who or which has been performing any non-audit services on or before the commencement of 2013 Act shall comply with the above before the closure of the 1st FY after the date of such commencement. "Directly or Indirectly" shall include rendering of services by the auditor,— • Where auditor is an individual - Either himself or through his relative or any other person connected or associated with such individual or through any other entity, whatsoever, in which such individual has significant influence or control, or whose name or trade mark or brand is used by such individual • Where auditor is a firm – Either itself or through any of its partners or through its parent, subsidiary or associate entity or through any other entity, whatsoever, in which the firm or any partner of the firm has significant influence or control, or whose name or trade mark or brand is used by the firm or any of its partners. 5. Limits on number of audits i.e. 20 has been prescribed through the Rules [Clause 141(3)(g)]. 6. No person appointed u/s 139 as an auditor of the company shall be appointed for conducting the audit of cost records [Clause 148(3) 1st Proviso]. 3. Additional grounds for disqualifications for appointment as auditor provided [Clause 141(3)]. 4. Auditor cannot provide following services "directly or indirectly" [Clause 144] to the company or its holding company or subsidiary company, namely:— a) accounting and book keeping services; b) internal audit; c) design and implementation of any financial information system; d) actuarial services; e) investment advisory services; f) investment banking services; g) rendering of outsourced financial services; h) management services; and i) services prescribed under the Rules.
  16. 16. New Introduction Rotation, Appointment & Re-Appointment of Auditors: Companies Act 1956 Companies Bill 2013Particulars Penalty for Non- Compliance by Auditor [Clause 147(2)] Fine up to Rs. 10000 • Fine – Rs. 25000 to Rs. 500000 • For Willful Contravention – Imprisonment which may extend to one year or fine not less than Rs. 100,000 which may extend to 2500000 or both Penalty for Non- Compliance by Company [Clause 147(1)] Fine up to Rs. 5000 • Fine – Rs. 25000 to Rs. 500000 • 1 year imprisonment or fine of Rs. 10,000 to Rs. 100,000 or both Prosecution by NFRA: Where professional or other misconduct is proved, have the power to make order for— A. Imposing penalty of— i. not less than 100000, but which may extend to five times of the fees received, in case of individuals; and ii. not less than 1000000, but which may extend to ten times of the fees received, in case of firms; B. Debarring the member or the firm from engaging himself or itself from practice as member of the ICAI refund to in clause (e) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 for a minimum period of 6 months or for such higher period not exceeding 10 years as may be decided by the National Financial Reporting Authority. Explanation — For the purposes of his sub-section, the expression "professional or other misconduct" shall have the same meaning assigned to it under section 22 of the Chartered Accountants Act, 1949.
  17. 17. Modifications Companies Act 1956 Companies Bill 2013Particulars Financial year The financial year was defined not to exceed 15 months. Further, there was no hardship to align the F.Y. to 31st March (i.e. April to March). Now the new provision has restricted the F.Y. to 31st March (i.e. April to March) for all companies. No question of extension of financial year. Furthermore, as per section 2(41) all existing companies shall within a period of two years align it financial year as per the provisions. Exemption can be claimed in respect of foreign subsidiary companies which are required by the laws of foreign countries to adopt different accounting year, by applying to the Tribunal. Members in Pvt. Ltd. Companies The maximum members were restricted to 50 Members. The restriction of 50 Members has been extended to 200 Members facilitating Companies to access large pool of Capital without the need to go Public. Notice for change of Registered office The time limitation was of 30 Days. Now the time limitation has been cut down to 15 Days. Disposal of application for change of Registered office by CG There was No such time limit defined. Central Government shall dispose of application with 60 days.
  18. 18. Companies Act 1956 Companies Bill 2013Particulars Modifications Restriction on multilayer Investment subsidiaries A company unless otherwise prescribed can make investment through not more than 2 layers of investment companies. Exception to this rule is: • acquisition of a foreign company which has investment subsidiary beyond 2 layers as per the applicable foreign law; and • a subsidiary company making investment to comply with any applicable law. There was no restriction on Multilayer Investment Subsidiary. Registered office of Company. Company shall have a Registered Office from the 15th day of its incorporation and at all times thereafter, have a registered office capable of receiving and acknowledging all communications and notices as may be addressed to it. Company shall have a Registered Office from the 30th day of incorporation. Commencement of Business Applicability : Public Company Certificate of COB was issued. Applicability : Both Public and Private Company No Certificate of COB will be issued. Documents to be submitted under new bill: 1. Declaration by Directors of payment of money by subscribers of MOA. 2. Verification of Registered office filed with ROC Statutory Meeting to be conducted Every Company: • Limited by Shares • Limited by guarantee • Except Private Limited Co. Companies are Not Required to conduct Statutory Meeting [To prevent the abuse of diversion of funds through many step- down subsidiaries.]
  19. 19. Companies Act 1956 Companies Bill 2013Particulars Modifications Printing of CIN (Corporate Identity Number) As per sections 12 (3), every company shall have to from now paint or affix its name (provided that where a company has changed its name within last two years, shall get its name printed on along with former name(s) changed within last two years), registered office and Corporate Identity Number (CIN) along with telephone number, fax number, if any, e-mail and website address in all the business letters, billheads, letter papers and in all its notices and other official publications. Also in case of an One Person Company the words One Person Company shall be mentioned in brackets below the name of such company, wherever its name if printed, affixed or engraved. There was no compulsion of printing the CIN. Number of Directors Minimum : Public company -3 Private -2 Maximum : Limit of 12, beyond which CG approval was required u/s 259.(For Public Co. and Pvt. Co. which is a subsidiary of any Public Co.),while the act lies silent in case of Private Co. Minimum : Public company -3 Private -2 , OPC-1. Maximum : Limit increased to 15 from 12 . Moreover, directors can be added by passing of special resolution without getting the approval of Central Government as earlier required.
  20. 20. Companies Act 1956 Companies Bill 2013Particulars Modifications To be filed with ROC within 15 days Clause 12 (4).To be filed with ROC within 30 days Sec.581 I. Object Clause in MOA Earlier the clause was divided into :  Main objects  Incidental objects  Other objects Now the Objects Clause of memorandum has been relieved. As per section 4 (1) (c) object clause to contain ‘objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof. Hence, divided into:  Objects to be pursed by Company on incorporation  Incidental Objects Alteration in AOA Appointment of Debenture Trustees (DT) Section 117B: No such ceiling of 500 existed. Appt. of DT compulsory for company issuing prospectus or a letter of offer to the public for subscription of its debentures. Clause 71: Appointment of Debenture Trustees compulsory for public issue of debentures through prospectus to more than 500 persons.
  21. 21. Modifications Directors Appointment and qualifications of directors [Clause 149]: • Limits on maximum number of directors in a company increased to 15. It can be further increased by passing a special resolution. • Prescribed class of companies to have at least 1 woman director. Existing companies to comply with this requirement within 1 year. • One of the directors in a company shall be a person who has stayed in India for 182 days or more in the previous calendar year. • Director to vacate office if he remains absent from all the meetings of the BOD held during 12 months whether with or without seeking leave of absence of the BOD [Clause 167]. Independent Directors(IDs) [Clause149(5)]: •Listed companies to have at least 1/3rd of its total number of directors as IDs (as defined – further, the Rules may prescribe additional qualifications to be an ID). CG may prescribe minimum number of IDs in case of any class of public companies. This requirement is to be complied within 1 year: a) By existing listed companies from the commencement of 2013 Act; and b) By the prescribed class of public companies from the date Rules are notified •Alternate director of an ID can be appointed if such an alternate director is also an ID. •ID is not liable to retire by rotation. •ID not to be included in the ‘total number of directors’ liable to retire by rotation. • OPC should have minimum 1 director. • Duties of directors have been defined under Clause 166.
  22. 22. Modifications Directors • IDs not entitled to any stock option but may receive remuneration by way of sitting fee, re-imbursement of expenses for participation in meetings, profit related commission as approved by the members of the company. • ID and Non Executive Director (not being promoter or Key Managerial Personnel), shall be held liable, only for such acts by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently. • Only an independent director can be appointed as alternate director to an independent director [Clause 161(2)]. • Nominee director nominated by any financial institution, or in pursuance of any agreement, or appointed by any government to represent its shareholding shall not be deemed to be an independent director. Director elected by small shareholders [Clause 151]: • A listed company may have 1 director elected by a small shareholders i.e. shareholders holding shares of nominal value of not more than ` 20,000 or such other sum as may be prescribed. • Manner, terms and conditions of appointment of such director will be prescribed. Independent Directors(IDs) [Clause149(5)]: • ID shall be appointed for a term upto 5 consecutive years and are eligible for re-appointment subject to compliance with conditions including performance evaluation by the entire BOD and approval by members through special resolution. • Once the 2 consecutive terms are completed, the ID shall be eligible for appointment after a cooling period of 3 years, provided he is not associated with the company during this 3 years period in any capacity, either directly or indirectly. • An ID may be selected from data bank maintained by notified institute or association having expertise in creation and maintenance of such data bank [Clause 150].
  23. 23. Modifications Directors Maximum number of directorship [Clause 165]: • A person cannot be a director, including alternate director, in more than 20 companies including not more than 10 public companies.  For determination of public companies for this purpose, directorship in private companies that are either holding or subsidiary company of a public company shall be regarded as a public company. • Shareholders may specify lesser number of companies in which a director of the company may act as director. • Transition period to comply with the limit on directorship - 1 year from the commencement of 2012 Act. Resignation of directors [Clause 168]: • Resignation of director to take effect from the date on which notice of resignation is received by the company, or the date, if any, specified by director in the notice, whichever is later [Clause 168(2)]. • Resigning director to also file his resignation letter with the ROC within 30 days, in prescribed manner, giving detailed reasons for resignation [Clause168(1)]. • Where all directors of a company resigns or vacate office, the promoter or in his absence, the CG to appoint the required number of directors till new directors are appointed in a general meeting [Clause 168(3)]. Additional grounds for disqualification of Director: • A person who has been convicted of offence dealing with related party transactions at any time during the preceding 5 years [Clause 164 (1) (g)]. • Directorship in private companies too under ambit of disqualification on ground of non-filing of financial statements or annual return for any continuous 3 years or failure to repay deposits accepted by it or redeem debentures on due date or pay interest due thereon or pay any dividend declared and such failure continues for 1 year or more.
  24. 24. Modifications Directors Loan to Directors: • Company shall not directly or indirectly make any loan including book debt or give any guarantee or provide any security to its director or to any other persons in whom the director is interested. This provision is not applicable to  Loan to MD / WTD  as a part of contract of services extended to all its employees; or  Pursuant to scheme approved by members by special resolution  A company which in the ordinary course of its business provides loan, guarantee or security for due repayment of any loan and charges interest thereon being not less than bank rate declared by RBI. • Provisions made applicable to private companies and need to obtain CG approval for such loans are removed. Duties of Directors [Clause 166]: In Companies Act 1956, no provision regarding Duties of Directors has been specified, but Companies Bill has incorporated it u/s 166, levying obligation on part of Directors .These duties will include: • Acting in accordance with the articles of the company. • Acting in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment. • Exercising his duties with due and reasonable care, skill and diligence and shall exercise independent judgment. • Shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates. If found guilty, shall be liable to pay an amount equal to that gain to the company. • Shall not assign his office and any assignment so made shall be void. Contravention of provisions of this act will attract fine of 1 lakh to 5 lakhs rupees.
  25. 25. Modifications Board of Directors Meetings of BOD: • First meeting of the BOD of a company must be held within 30 days of its incorporation. Minimum 4 meetings of BOD to be held every year with the gap between the 2 consecutive meetings not exceeding 120 days. CG may by notification provide different requirement or modify the requirement for specific class or description of companies. • In case of OPC, small companies and dormant companies 1 board meeting to be in each half of the calendar year and gap between 2 meetings should not be less than 90 days. • Participation in the board meeting through prescribed video conferencing or other audio visual means (VC) recognized. CG may provide a list of businesses where meeting by means of VC will not be recognized [Clause 173]. • At least 7 days’ notice for board meeting shall be given. A board meeting may be called at a shorter notice to transact urgent business, if at least 1 ID is present at such meeting. Decision taken at such meeting in absence of an ID is final only on ratification thereof by at least 1 ID. Committees of BOD: 1. Audit Committee: • Mandatory for listed companies and other prescribed classes of companies. • Composition – Minimum 3 directors with majority comprising of IDs. • Chairperson and majority of directors shall be persons with ability to read and understand the financial statement. • Transitional period for compliance – 1 year from the commencement of this Act. • Listed companies and prescribed companies to have vigil mechanism for directors and employees to report genuine concern in prescribed manner.
  26. 26. Modifications Board of Directors Committees of BOD: 2. Nomination and Remuneration Committee: • Mandatory in case of listed companies and other prescribed classes of companies. • Composition – 3 or more NED of which at least ½ shall be IDs. The Chairperson of the company can be a member of the committee but cannot be a chairperson of the committee. • This committee shall amongst other:  Identify persons who are qualified to be directors and who can be appointed in senior management;  Recommend to BOD, policy relating to remuneration to directors, KMP and other employees keeping in mind appropriate performance bench mark; striking a balance between fixed and incentive pay etc.;  be responsible for evaluation of every director of BOD. 3. Stakeholders Relationship Committee: • SRC mandatory where total number of shareholders, deposit holders, debenture holders and other security holder exceeds 1,000 at any time during a FY. • Composition – Chairperson shall be NED and such other number of directors as determined by the BOD. • This committee to consider and resolve grievances of the security holders of the company. Restrictions on powers of BOD: • Restriction on power of BOD to exercise specified powers with general meeting approval extended to private companies. In all cases approval of shareholders by a special resolution is made necessary. • In case of sale, lease or otherwise disposal of one or more undertaking or the whole or substantially the whole of undertaking, quantitative tests provided for determination of ‘undertaking’ and ‘substantially the whole of the undertaking.
  27. 27. Modifications Related Party Transactions: • Without the consent of the Board of Directors given by a resolution at a Board Meeting and subject to such conditions as may be prescribed, no company shall enter into any contract or arrangement with a related party with respect to— a) sale, purchase or supply of any goods or materials; selling /disposing of/ buying property of any kind; leasing of property of any kind; availing or rendering of any services; b) appointment of any agent for purchase or sale of goods, materials, services or property; c) such related party's appointment to any office or place of profit in the company, its subsidiary company or associate company; and d) underwriting the subscription of any securities or derivatives thereof, of the company: • Every contract or arrangement entered into with a related party shall be referred to in the Board's Report along with the justification for entering into such contract or arrangement [Clause 188(2)]. • Any arrangement between a company and its directors in respect of acquisition of assets for consideration other than cash shall require prior approval by a resolution in general meeting and if the director or connected person is a director of its holding company, approval is required to be obtained by passing a resolution in general meeting of the holding company [Clause 192]. • Where a one person company limited by shares or by guarantee enters into a contract with the sole member of the company who is also its director, the company shall, unless the contract is in writing, ensure that the terms of the • contract or offer are contained in the memorandum or are recorded in the minutes of the first Board meeting held after entering into the contract. The company shall inform the Registrar about every contract entered into by the company and recorded in the minutes [Clause 193]. • Related party transactions by a company having prescribed paid-up capital or value of transaction exceeding prescribed limits will require prior approval of members by special resolution. The related party who is a member of such a company cannot vote in such special resolution. • The provisions would not apply to transactions entered into in the ordinary course of business, unless they are not on an arms’ length basis. • BOD report to disclose related party transactions along with the justification.
  28. 28. Modifications Key Managerial Personnel (KMP) [Clause 203(1)] : • Prescribed class of companies should have Whole-time KMP:  A Chairperson can be an MD or CEO at the same time, if the Articles of the company permits or if the company does not have multiple businesses or where the company has multiple businesses and has appointed 1 or more CEOs for each such business as may notified by CG,  A whole-time KMP shall not hold office in more than 1 company at the same time.  CFO made responsible and liable for penalty and / or prosecution for compliance with various provisions such as – maintenance of books of accounts, preparation & filing of annual accounts, disclosure of financial information in offer document, risk management, internal control etc., • In case of companies with no profits or inadequate profits, managerial remuneration can be paid as per Schedule of remuneration (Schedule V – similar to existing Schedule XIII to 1956 Act). If the conditions of such Schedule are not complied with, payment of managerial remuneration will require approval of CG. • Insurance premium paid by company for indemnifying specified KMPs against the liabilities for negligence, breach of duty etc. of such specified KMPs shall not be treated as part of remuneration of such KMPs. • MD or WTD of the company who is in receipt of any commission from the company shall not be disqualified from receiving any remuneration / commission from its holding company or subsidiary company subject to necessary disclosures in the BOD report. • Prior approval of shareholders required in general meeting for a company to enter into an arrangement specified in [Clause 192]. • Director or KMP of a company shall not buy in the company, its holding, subsidiary or associate company [Clause194(1)] –  a right to call for delivery or a right to make delivery at a specified price and within a specified time, of a specified number of relevant shares or a specified amount of relevant debentures; or  a right, as he may elect, to call for delivery or to make delivery at a specified price and within a specified time, of a specified number of relevant shares or a specified amount of relevant debentures.
  29. 29. 1 Modifications National Financial Reporting Authority (NFRA) (Clause 132) : • The functions of NFRA shall include:  Make recommendations to CG on the formulation of accounting and auditing policies and standards;  Monitor and enforce compliance with accounting and auditing standards;  Oversee the quality of service of the professions and suggest measures required for improvement in quality of services and such other related matters as may be prescribed;  Perform other prescribed functions in relation to above as may be prescribed. • NFRA shall consist of a Chairperson and other part time and the full time members not exceeding the prescribed limit of 15 [Clause 132(3)]. • The Chairperson and full time members of NFRA shall not be associated with any audit firm (including related consultancy firms) during the course of their appointment and 2 years thereafter [Clause 132(3)]. • Powers of NFRA shall include:  Investigate into the matters of professional or other misconduct committed by member or firm of CA.  Powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit.  Where professional or other misconduct is proved, NFRA have the power to make order for imposing monetary penalty or debarring the member or the firm from engaging himself or itself from practice as member of the institute for a minimum period of 6 months or for such higher period not exceeding 10 years. • Any person aggrieved by the order of NFRA can prefer appeal to Appellate Authority constituted by the Central Government • The Central Government may, by notification, constitute a NFRA, to be headquartered at New Delhi, to provide for matters relating to Accounting and Auditing Standards applicable to companies or their auditors.
  30. 30. 1
  31. 31. 1 Modifications Removal of names of companies from the Register of Companies [Clause 248]: • A company may be struck off by ROC for following reasons -  subscribers to MOA have not paid the subscription money within 180 days from the date of incorporation;  company has failed to commence its business within 1 year of its incorporation;  company is not carrying on any business or operation for 2 immediately preceding FY and has within such period applied for status of a dormant company. • Companies can also by passing a special resolution apply for removal of name. Winding up of a company [Clause 213]: There are still 9 Circumstances in which a Company may be wound up by Tribunal, but, 3 Circumstances has been Removed while 3 Circumstances has been added: 3 Circumstance which have been removed : • Failure to commence business within 1 year • Minimum no. of members falling below prescribed limit • Failure to hold statutory meeting or deliver statutory report 3 Circumstance which have been added : • Affairs of the Company conducted in fraudulent manner • Company has been incorporated for fraudulent or unlawful means • persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members
  32. 32. 1 Modifications Restructuring and Liquidation : • The entire rehabilitation and liquidation process has been made time bound. • Winding up is to be resorted to only when revival is not feasible. (clause 258). • The Tribunal may appoint an interim administrator or a company administrator from the panel of Company Secretaries, CAs, CWAs, etc. maintained by the Central Government. [clause 259(1)]. • The Company Administrator shall prepare a scheme of revival and rehabilitation [clause 261(1)]. • If revival scheme is not approved by the creditors, the Tribunal shall order for winding up of the company (clause 258). • No civil court shall have jurisdiction in respect of any matter on which Tribunal or Appellate Tribunal is empowered. (clause 268). Company Liquidators (Clause 275): • The Tribunal may appoint Provisional Liquidator or the Company Liquidator from a panel maintained by the Central Government consisting of Company Secretaries, Chartered Accountants, Advocates and Cost Accountants. • On an appointment as provisional liquidator or Company Liquidator, such liquidator is required to file a declaration in the prescribed form disclosing conflict of interest or lack of independence in respect of his appointment, if any, with the Tribunal. • Professional assistance to Company Liquidator (Clause 291) The Company Liquidator may, with the sanction of the Tribunal, appoint one or more professionals including Company Secretaries to assist him in the performance of his duties and functions under the Act.
  33. 33. Modifications National Company Law Tribunal and Appellate Tribunal [Clause 408]: • On the date of the constitution of NCLT [Clause 434]:  All matters, proceedings or cases pending before CLB shall stand transferred to NCLT;  All proceedings under 1956 Act, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending before any District Court or High Court, shall stand transferred to NCLT and NCLT may proceed to deal with such proceedings either de novo or from the stage before their transfer. • Appeals against the order of NCLT shall lie to NCLAT. • An appeal arising out of order of NCLAT on any question of law shall lie to Supreme Court. • A party to any proceeding or appeal before NCLT or NCLAT, may either appear in person or authorize one or more CA or CS or CWA or legal practitioners or any other person to present his case [Clause 432]. • Central Government shall, by notification, constitute, a Tribunal known as NCLT consisting of a President and such number of Judicial and Technical members, as the CG may deem necessary, to exercise and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force. • Principal bench of NCLT shall be at New Delhi and there may be such other benches as may be specified by CG [Clause 419]. • NCLT to endeavor to dispose of the proceedings within 3 months from the date of commencement of the proceeding [Clause 422].
  34. 34. Modifications Inspection, Inquiry and Investigation: • CG may under the specified situations including in public interest refer affairs of a company to be investigated by SFIO [Clause 211]. • Where pursuant to an investigation or a compliant, NCLT is of the opinion that there is good reason to find relevant facts about any securities and such facts cannot be found out unless certain restrictions are imposed, NCLT may provide restrictions on securities for a period not exceeding 3 years [Clause 222]. • Where it appears to NCLT in specified circumstances that there are reasonable grounds to believe that the removal, • transfer or disposal of funds, assets, properties of the company is likely to take place in a manner that is prejudicial to the interests of the company or its shareholders or creditors or in public interest, NCLT may direct such transfer, assets, properties, etc. of the company shall not take place during a period not exceeding 3 years [Clause 221]. • Notwithstanding anything contained in the Code of Criminal Procedure, 1973, • KMP, auditors and practicing CS also subject to search and seizure of documents by ROC and the Inspector appointed by CG. • CG to establish Serious Fraud Investigation Office (SFIO) for investigation of frauds relating to a company. Till the time SFIO is not established, SFIO already set up by CG in terms of directions of Government of India to be used.  Special Court may try in a summary way any offence under 2012 Act which is punishable with imprisonment for a term not exceeding 3 years.  every offence under this Act except certain offences shall be deemed to be non-cognizable within the meaning of the said Code [Clause 439(1)]. Offences under this Act which are cognizable within the meaning of the said Code include those specified in Clause 212(6).
  35. 35. Modifications Acceptance of Deposits: • Companies prohibited from inviting, accepting or renewing deposits from public except following: a) Banking company; b) NBFC; c) such other company as CG may specify; and d) Public companies having such net worth or turnover and subject to prescribed Rules [Clause 76]. • Company other than those covered above can accept deposit only from its members by passing a resolution in general meeting and subject to Rules and conditions including the following: a) Credit rating; b) Deposit insurance; c) Depositing in scheduled bank 15% of amount of its deposits maturing during the current and next FY, etc. • The Rues regarding Deposits from Members will be prescribed in consultation with the Reserve Bank of India as per Companies Bill instead of Companies (acceptance of deposits) Rules, 1975 as per Companies Act 1956. • Any deposit accepted before the commencement of this Act or any interest due thereon to be repaid within 1 year from the commencement of this Act or from the date on which such payments are due, whichever is earlier. • Penalty Provisions: The penalty for failure to repay deposit has been made extremely stringent. If a company fails to repay the deposit or part thereof or any interest thereon within the time specified u/s 74(1) or such further time as may be allowed by the Tribunal u/s 74(2) the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine of Rs.1 crore which may extend to Rs.10 crore and every officer of the company who is in default shall be punishable with imprisonment which may extend to 7 years or with fine of Rs.25 lakhs but which may extend to Rs.2 crore, or with both. Where a company fails to repay the deposit and it is proved that the deposits had been accepted with intent to defraud the depositors or for any fraudulent purpose, every officer of the company who was responsible for the acceptance of such deposit shall, without prejudice to liability u/s 447 i.e. punishment for fraud), be personally responsible, without any limitation of liability, for all or any of the losses or damages that may have been incurred by the depositors [Clause 75]. Stringent punishment is proposed for failure to distribute dividend within 30 days of its declaration [Clause 127].
  36. 36. Modifications Companies Act 1956 Companies Bill 2013Particulars Issue of Securities in Dematerialized Form Only Mandatory Sec 68B for every listed company making IPO of any security for a sum of 10 crore or more. Mandatory Clause 29 for: • Companies Making public offer • Certain Companies as may be specified Issue of Shares at Discount Under Section 79 Shares can be issued at discount Under Clause 53 • Issue of shares at discount prohibited • Sweat Equity shares can be issued at Discount Exit Offer by promoters to Dissenting shareholders No such Provision Exists Under clause 27(2) • Exit offer should be given to dissenting shareholders by promoters or controlling shareholders Offer of Sale No such provision exists under the Act Under Clause 28 • Members of the Company in consultation with the board can offer there shares to public • Such Offer of Sale shall be deemed to be a “Prospectus issued by the Company” Certificate of Incorporation It is considered as a Conclusive evidence u/s 35. Now it is not considered as a Conclusive evidence [Clause 7]. Issue, Allotment and Transfer of Securities : Issue of Convertible Debentures No provision for requirement existed. Needs special resolution of the members for the issue of debentures with conversion option, wholly or partly.
  37. 37. Modifications Issue, Allotment and Transfer of Securities : Companies Act 1956 Companies Bill 2013Particulars Voting Rights of Preference Shareholders Different period are specified for Cumulative and Non- Cumulative Preference Shares after which preference shareholders have voting rights. Under Clause 47 •Bill Doesn’t Differentiate cumulative and non-cumulative preference shares •Same period prescribed after which preference shareholders have voting rights Issue of preference Shares Preference shares with a term of more than 20 years cannot be issued under the act. Under Clause 55(2) Redeemable preference shares with a term of more than 20 years can only be issued by a company limited by shares for infrastructural projects. Restriction of further offer of Buy-Back In case buy-back is made by BOD (10% of the total paid-up equity capital and free reserves), no further offer of buy-back is permissible within a period of 365 days reckoned from the date of the preceding offer of buy- back. No buy-back up to period of 1 year from the date of preceding buy-back whether approved by BOD or shareholders Utilization of Securities Premium Clause 52(3): prescribed class of companies whose financial statements comply with accounting standards prescribed for such class cannot utilize SPA for writing off preliminary expenses and premium on redemption of preference shares or debentures. Section 78: It can be utilized for writing off preliminary expenses or for providing premium payable on redemption of preference shares or debentures.
  38. 38. Modifications Issue, Allotment and Transfer of Securities : Companies Act 1956 Companies Bill 2013Particulars Issue of bonus shares No provision in the act. However, Rules framed for public unlisted Company. Clause 63 provides for issue of bonus shares. Private companies are not excluded in clause 63 for issue of bonus shares but apparently clause 23 does not permit private companies to issue bonus shares. Provided that no issue of bonus shares shall be made by capitalizing reserves created by the revaluation of assets. Further, no company shall capitalize its profits or reserves for the purpose of issuing fully paid-up bonus shares, unless— • it is authorized by its articles; • it has, on the recommendation of the Board, been unauthorized in the general meeting of the company; • it has not defaulted in payment of interest or principal in respect of fixed deposits or debt securities issued by it; • it has not defaulted in respect of the payment of statutory dues of the employees, such as, contribution to provident fund, gratuity and bonus; • the partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up; • it complies with such conditions as may be prescribed bonus shares shall not be issued in lieu of dividend. Transfer of shares of Public Company Shares of public company are freely transferable Shares of public company are freely transferable. However, Contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract
  39. 39. Modifications Issue, Allotment and Transfer of Securities : Companies Act 1956 Companies Bill 2013Particulars Voting rights on Preference Shares Section 87: Different criteria for cumulative and noncumulative preference shares for trigger of voting rights. Clause 47: No such difference between cumulative and noncumulative. Voting rights to arise if dividends payable are in arrears for a period of two years or more. When is dividend said to be payable for determination of voting rights as above. Explanation to clause 87 provides for the same. Explanation omitted. May give rise to needless litigation. Variation in rights of one class of shareholders affects rights of other class of shareholders If variation by one class of shareholders affects the rights of any other class of shareholders; the consent of at least 75% of such other class shall also be obtained. Section 106-107 : Variation in rights of shareholders of any class can be made by obtaining consent in writing of not less than 3/4th of the issued shares of that class or with the sanction of the Special Resolution passed at a separate meeting of the holders of the issued shares of that class.
  40. 40. Modifications Issue, Allotment and Transfer of Securities : Companies Act 1956 Companies Bill 2013Particulars Reduction of capital if deposits not repaid No such provision existed. No reduction of capital shall be made by a company if the company is in arrears in the repayment of any deposits accepted by it or the interest payable thereon irrespective of the deposits being accepted before or after the commencement of this Act [Clause 66] Consolidation or Sub- Division of Share Capital Section 94(1) permitted the same if there was a provision for the same in the AOA treating it as a mere alteration not involving any reduction in the share capital. No approval of the Court or any other authority required. Clause 61(1) (b) provides that such alteration shall be made only after making application to the Tribunal and obtaining the approval of the Tribunal. Approval of the Tribunal shall be required for consolidation and division of share capital only if the voting percentage of shareholders changes consequent on such consolidation. Raising Capital through Private Placement Offer can be made to such number of persons as may be prescribed and for prescribed amount without issue of prospectus. If offer is made to more than prescribed no. of persons, the same shall be deemed to be an offer to the public. ‘Private Placement’ has been defined u/s 42(2)(i) to bring clarity. No such provision existed. Transfer of profits not exceeding 10% to Reserves Clause 123: Company to use its wisdom to decide % of profits to be transferred to reserves. Its no longer mandatory for companies to transfer its profits to Reserves. Section 205: Company could not transfer more than 10% profits except in accordance with the rules.
  41. 41. Modifications Other Provisions: 1. Public company permitted to issue securities through: • public offer; or • private placement by complying with the provisions of Part II of this Chapter III; or • issue of rights issue or bonus issue Subject to compliances with the Rules and SEBI Act and rules and regulations made there under. 2. Private company permitted to issue securities through: • rights issue or bonus issue in accordance with the provisions of the Act • through private placement by complying with the provisions of Part II of this Chapter III 3. A person who has been convicted for personation for acquisition etc. of securities shall also be liable for suffering disgorgement of gains, seizure and disposal of such securities and such amount received through disgorgement or disposal of securities shall be transferred to Investor Education and Protection Fund [Clause 38]. 4. Authorized, subscribed and paid-up capital of a company to be mentioned in all notices, advertisement or other official publication or any business letter, billhead or letter paper. 5. Every company shall deliver debenture certificate within six months of allotment [Clause 56(4)(d)]. 6. If a company with intent to defraud, issues a duplicate certificate of shares, the company shall be punishable with fine which shall not be less than 5 times the face value of the shares involved in the issue of the duplicate certificate but which may extend to 10 times the face value of such shares or rupees 10 crores, whichever is higher. Stringent penalties have also been imposed for defaulting officers of the company. [Clause 46(5)]. 7. Where any depository has transferred shares with an intention to defraud a person, it shall be liable u/s 447 i.e. provisions for punishment for fraud [clause56(7)]. Security Premium Account may also be applied for the purchase of its own shares or other securities [Clause 52(2)(e)]. Issue, Allotment and Transfer of Securities :
  42. 42. Modifications Dividend: Companies Act 1956 Companies Bill 2013Particulars Restriction on Interim Dividend No such restriction existed. BOD to declare interim dividend out of the surplus in the P&L A/c as well as the profits for the financial year in which the Interim Dividend is sought to be declared. In case of loss, interim dividend rate not to exceed average dividends declared during preceding 3 F.Y. [Clause 123 (3)] Transfer of shares to Investor Education & Protection Fund (IEPF) Only Unclaimed Dividend to be transferred to IEPF. Clause 124: Along with the unclaimed dividend, the shares on which dividend is unclaimed, also to be transferred to the IEPF. Claim from IEPF after 7 years Claim of an investor over a dividend not claimed for more than a period of 7 years not to be extinguished and shall be entitled to refund in accordance with the rules. No claim should lie against the Fund or the Company in respect of Individual amounts which were unclaimed or unpaid for a period of 7 years.
  43. 43. Modifications Financial Statements : Companies Act 1956 Companies Bill 2013Particulars Inclusions in Financial Statements & Submission at AGM • Balance Sheet • Statement of Profit and Loss • Notes • Balance sheet • Statement of Profit and Loss/ Income and Expenditure Account • Cash Flow statement • Statement showing Changes in equity • Notes of the above Revision of Financial Statements No such revision possible Under clause 131, voluntary revision of Financial statements and Boards report for any of the 3 previous FY is possible Un-adopted Financial Statements No such provision To be filed with ROC with 30 days of AGM or adjourned AGM Companies Act 1956 Companies Bill 2013 Authentication of Financial Statements For Banking Co (Sec. 215): Sec. 29(2) of Banking Companies Act 1949. For Other Companies ( Sec.215): i. 2 director out of which one shall be managing director, Manager and Company Secretary, OR ii. Manager, Company Secretary, 1 director along with explanation for non compliance with (i). Clause 134 (1): i. Chairperson of the company where he is authorized by the BOD ii. 2 director out of which one shall be managing director iii. Chief Executive Officer, if he is director of the company iv. Chief Financial Officer v. Company Secretary No separate provision for Banking Companies.
  44. 44. Modifications Annual Return : Contents of Annual Return: More Disclosures are introduces u/s 92 instead of Minimal Disclosures in Companies Act 1956. Return by Listed Company – Clause 93: Every listed Company shall file with ROC, within 15 days a return with respect to change in number of shares:  Held by promoters  Top Ten Shareholders of such company New Disclosures to be Made: • Change of promoters/ KMP since previous FY • Details of meetings of Board/Committee’s/ Members or class thereof along with attendance details • Remuneration of Directors, KMP • Certification of Compliances, Disclosures • Details of shares held by or on behalf of FII • Penalties/Punishment imposed on:  Company  Directors or Officers  Compounding of offences  Appeals against penalty or punishment Particulars Companies Act 1956 Companies Bill 2013 Signing Authorities i. Director and Manager/Secretary ii. If No Manager/Secretary, then by 2 Director &CS in practice i. Not Applicable i. Only Listed Companies- Certified by CS a) General Companies: b) One Person/ Small Company c) Listed Company/ Other prescribed Companies i. Director and CS ii. Where no CS, by CS in Practice i. Company Secretary ii. If no, CS, by Director i. To be also certified by CS in practice Clause 92 :
  45. 45. Modifications Annual General Meetings : Companies Act 1956 Companies Bill 2013Particulars First AGM Within 18 months from date of incorporation Within 9 months of end of FY Quorum Public Company: 5 members personally present Private Company: 2 members personally present In case of Public Co. : • 5 members where no. members is < 1000 • 15 members where no. of members is 1000 >≤ 5000 • 30 members where no. of members is > 5000 In case of Private Company: 2 members personally present Demand For Poll By Person/Proxy Holding: • ≥ 1/10 voting power • Paid up Shares with value of more than Rs. 50,000 By Person/ Proxy Holding: • ≥ 1/10 voting power or shares • Shares with value of more than Rs. 500,000 A. Public Company Private Company with: • <7 members personally present , by any member • >7 members, by two members Other Company: By member(s)/proxy with > 1/10 voting power By any member(s)/proxy with ≥ 1/ 10 voting powerB. Other Company
  46. 46. Modifications Annual General Meetings : Companies Act 1956 Companies Bill 2013Particulars Mode of Notice In writing Either in writing or through electronic mode Shorter Notice Consent of All members entitled to vote required Consent of not less than 95 % of members entitled to vote at that meeting required AGM cannot be held on  Public Holidays and  Outside Business Hours  National holidays  Outside Business Hours (9am to 6pm)
  47. 47. Modifications Registration of Charge: Scope of Registration of Charge Definite and clear Under clause 77 • Wide and ambiguous • Covers  Property  Assets  Any of its undertaking, whether tangible or otherwise Power of ROC ROC can condone delay for registration beyond 30 and within 60 days from date of creation of charge Can allow registration within period of 300 days of creation of charge on payment of additional fee. Particulars Companies Act 1956 Companies Bill 2013
  48. 48. Modifications Compromises, Arrangements and Amalgamations: Cross Border Mergers No such provision existed. Clause 234 : Provides for cross border mergers where a foreign company may with prior approval of RBI, merge or amalgamate in to a co. registered under this Act or vice-versa. Payment of consideration to the shareholders of the merged company in Cash, or in Depository Receipts or partly by Cash and Depository Receipts. Holding of Treasury Stock Clause 233(10): A transferee company shall not on merger or amalgamation, hold any shares in its own name or in the name of any trust either on its behalf or on behalf of any of its subsidiary or associate company and all such shares shall be cancelled or extinguished on the merger or amalgamation. Particulars Companies Act 1956 Companies Bill 2013 No provision existed. Fast Track Merger Clause 233: Simplified procedure has been introduced for merger of : • Holding company and wholly owned subsidiary • Two small companies No provision existed. Objections to Compromise and Arrangements Can be Raised only by persons: • Holding ≥ 10% of shareholding • ≥ 5% of total outstanding debt Any Member/ Creditor/ Member through proxy
  49. 49. Modifications Compromises, Arrangements and Amalgamations: Notice of Meeting in case of Merger To be given to Regional Director Should be sent to the Central Government, the Income-tax authorities, the RBI, Securities and Exchange Board, ROC, respective stock exchanges, Official Liquidator, Competition Commission of India and such other sectoral regulators or authorities which are likely to be affected by the compromise or arrangement [Clause 230(5)]. Particulars Companies Act 1956 Companies Bill 2013 Takeover Offer Can not be included in Compromise and Arrangements Clause 230(11): • Can be included • In case of Listed Companies, SEBI Regulations need to be complied with.
  50. 50. Modifications Depreciation: Schedule and Depreciation Rates Schedule XIV provides different depreciation rates specified. Schedule II provides useful Lives of assets and no rates (SLM or WDV) Particulars Companies Act 1956 Companies Bill 2013 Separate Rates Separate rates for Intangibles/electricity companies/EST etc No Separate Rates are available. Low Value Items Assets having value of Rs. 5K to be fully depreciated. No provision for low value items or rates for intangibles. Multiple Shifts Different shifts’ rates are defined in the Schedule. The Rates defined in the Schedule is on Single shift basis. For Double shift the rates will increase by 50% and for Third shift the rates will increase by 100%.

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