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Companies act 2013 highlights


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Key Highlights of New Indian Companies Act 2013

Key Highlights of New Indian Companies Act 2013

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  • 1. Companies Act 2013 Key Highlights Compiled by: CA Vikas Pagar, G P W & Associates
  • 2. Index 2 Sr. No. 1 2 3 4 Particulars Introduction Purpose Key Highlights Disclaimer Page No. 3-4 5 6-13 14 Compiled by: CA Vikas Pagar
  • 3. Introduction 3 The Companies Bill 2012 was passed in Rajya Sabha on 8th August 2013 (during the monsoon session of the parliament). Earlier, the bill was passed by the Lok Sabha on 18th December 2012. Now, It has also got the Presidential assent and has now become the Companies Act, 2013. The next step is to finalize the Rules and define the procedural aspects of this Act. The Ministry of Corporate Affairs has put the draft rules for public comments. The relevant portions of the Act will be notified, in a step by step manner, along with the rules applicable. Compiled by: CA Vikas Pagar
  • 4. Introduction... 4 The new Act comprises of 29 chapters, 470 Sections and 7 Schedules as against 658 sections and 14 Schedules in the Companies Act, 1956. In 470 Sections the word “as may be prescribed” has been used at around 336 places. The Act extents to the whole of India and different provisions of the Act will be applicable on such date(s) as the Central Government, by notification in the official gazette, may appoint and different dates may be appointed for different provisions of the Act. Compiled by: CA Vikas Pagar
  • 5. Purpose 5 The existing Companies Act, 1956 has been amended several times in the past 57 years, with many of its provisions found to be outdated and inadequate. The objective behind the 2013 Act is lesser Government approvals and enhanced self-regulations coupled with emphasis on corporate democracy. Compiled by: CA Vikas Pagar
  • 6. Key Highlights 6 The concept of ‘One Person Company’ has been introduced with the new Act which will be a private company. Maximum number of members in a private limited company has been increased from 50 to 200. Small company is introduced for lesser regulatory framework. Objects clause in the Memorandum of Association of a company not required to be divided into main, ancillary and other objects. Only the objects for which the company is incorporated along with matters considered necessary for its furtherance to be mentioned. The company cannot provide for other object clause. Compiled by: CA Vikas Pagar
  • 7. Key Highlights... 7 Shares cannot be issued at a discount (Exception- Sweat Equity). Reduction of share capital is subject to the approval of Tribunal (NCLT). For defined infrastructural projects, preference shares can be issued for a period exceeding 20 years. Buyback provisions eased. Provisions relating to further issue of capital made applicable to all companies Compiled by: CA Vikas Pagar
  • 8. Key Highlights... 8 Stringent norms provided for acceptance of fresh deposits from members and public. E.g. Mandatory credit rating & deposit insurance etc. (Not applicable to NBFCs. They will be governed by RBI). In respect of all the companies (except one person companies and small companies), whether private or public, listed or unlisted, the annual return has to be signed by either a company secretary in employment or by a company secretary in practice. Requirement of Compliance Certificate is done away with the above change. Compiled by: CA Vikas Pagar
  • 9. Key Highlights... 9 Appointment of at least one director resident in India, i.e., a director who has stayed in India for at least 182 days in the previous calendar year, is made mandatory for all companies. Maximum number of directors has been increased from 12 to 15 directors. Further no Central Government approval is required to increase the maximum no. of directors beyond 15. Shareholders of companies may do so by passing a special resolution. Individual limits for remuneration enhanced in the Act. Compiled by: CA Vikas Pagar
  • 10. Key Highlights... 10 The central government permission under section 295 and section 372A of Companies Act, 1956 is dispensed with. To align with the provisions of the Income tax Act, companies to have a uniform financial year – ending on 31st March each year. Contents of Directors’ Report elaborated. Directors to annually report on the existence and effective operations of systems on compliance with all applicable laws. Secretarial audit mandatory for listed and prescribed classes of companies. Compiled by: CA Vikas Pagar
  • 11. Key Highlights... 11 Scope of related party transactions has been widened and definition of relatives has also been enlarged. Every related party transaction to be disclosed in Board’s report along with the justification. 2% of average net profits of last 3 years to be mandatorily spent on CSR by companies having – net worth of Rs. 5 billion or more; or – turnover of Rs. 10 billion or more; or – net profit of Rs. 50 million or more Compiled by: CA Vikas Pagar
  • 12. Key Highlights... 12 The previous approval of Central Government is no longer required for appointment of Cost Auditor Quorum of the public company has been increased from 5 to 30 members personally present depending upon the number of members as under: 1. Upto 1000 members = 5 members personally present 2. 1001 to 5000 members = 15 members personally present 3. More than 5000 members = 30 members personally present Compiled by: CA Vikas Pagar
  • 13. Key Highlights... 13 Compulsory Rotation of Auditors has been incorporated in the Act. Listed and certain other prescribed classes of companies cannot appoint:(a) an individual as auditor for more than one term of five consecutive years. (b) an audit firm as auditor for more than two terms of five consecutive years. Compiled by: CA Vikas Pagar
  • 14. Disclaimer 14 These materials and the information contained herein are provided by us and are intended to provide general information on a particular subject and should not be treated as professional advice or services. We do not make any express or implied representations or warranties regarding these materials or information contained therein. Your use of these materials or information contained therein is at your own risk and you assume full responsibility of the outcomes from the use thereof. In case you need any further information/clarifications please contact us at Compiled by: CA Vikas Pagar
  • 15. 15 Compiled by: CA Vikas Pagar