New concepts in companies act 2013 - By Jayanth Viswanathan


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New concepts in companies act 2013 - By Jayanth Viswanathan

  1. 1. New Concepts in Companies Act 2013 By Jayanth Viswanathan 15.10.2013 (Total Slides 16)
  2. 2. History of Companies Act  Companies Act 1866  Companies Act 1882  Companies Act 1913  Companies Act 1956 COMPANIES ACT 2013 1
  3. 3. When and how did Bill change to Act  December 2004 – J.J. Irani Committee formed to advise on New Companies Act  Report Submitted on May 2005 and First Companies Bill was placed before Lok Sabha in 2008 as Companies Bill 2008  Then came Companies Bill 2009, formation of Standing Committee, Then companies Bill 2010  Then Companies Bill 2011, again Standing Committee  Then Companies Bill 2012 was placed and approved by Lok Sabha on 18th December 2012 and Rajya Sabha on 08th August 2013  PRESIDENT OF INDIA ON AUGUST 29, 2013 SIGNED THE BILL AND THUS COMPANIES BILL BECOMES COMPANIES ACT 2013 (18 OF 2013) 2
  4. 4. Why Companies Act 2013?  Better Governance  Tighter and wider disclosure norms  More powers in the hands of Shareholders  Roles of Directors defined  Stringent Audits in place  CSR mandated  Special Courts established  Synchronisation with SEBI and other acts 3
  5. 5. Features COMPANIES ACT 1956 COMPANIES ACT 2013 13 Parts 29 Chapters 658 Sections 470 Sections 15 Schedules 7 Schedules Some New Concepts in Companies Act 2013 One Person Company Small/Dormant Company Clause Action Suit Key Managerial Person/Secretarial Audit Woman/Resident Director Rotation of Auditors/Internal Auditor Independent Directors NCLT/Special Courts/NFRA Corporate Social Responsibility 4
  6. 6. One person Company (OPC)  Section 2(62) read with section 3 (1)(c) of the Companies Act 2013 provides for One Person Company.  One Single Individual (not artifical) can start a Company.  Shall be registered as Private Limited ending with OPC Pvt. Ltd.  MOA to mention name of theof OPC Advantages Successor Limited Liability Single Individual AGM concept not applicable Exemptions 5
  7. 7. Key Managerial Personnel(KMP)  Sec. 2(52) read with sec. 230 of the CA ’13 deals in KMP  Managing Director or CEO or Manager and in their absence, a WTD  Company Secretary  Chief Financial Officer Key provisions relating to KMP Shall be appointed by the Board vide Resolution Is officer in default Cannot hold office in more than one company (except MD in 2 co.) Contravening penalty for Co.- Rs. 1 lakh upto Rs. 5 lakhs for KMP Rs. 50,000 and Rs. 1000 everyday 6
  8. 8. Secretarial Audit  Every Listed Company and company belonging to such other class shall annex with its Board’s report a Secretarial Audit Report given by a Practicing Company Secretary  It is an Independent appraisal of the secretarial practices, system and procedures.  The Directors shall explain in full any qualification in their report.  Contravening penalty for Co/any officer or PCS Rs. 1 lakh may go upto Rs.5 lakhs 7
  9. 9. Small/Dormant Company  Small Company Sec. 2(85) A company other than Public company  Having paid-up capital not more than Rs.50,00,000  Turnover not exceeding Rs. 2,00,00,000 Exception: 1. Holding/Subsidiary companies;2.section 8 co. • Dormant Company Sec 455. A company formed and registered for a future project or hold any assets or IPR without any accounting transaction may apply for “Inactive Company” status with ROC who will verify the application and give dormant status certificate 8
  10. 10. Auditors  Listed and such other class of companies as may be prescribed – Rotation of Auditors mandated  Listed company- Individual auditor to retire every five years. Partnership firm every 10 years.  Other company – To be appointed for a period of five years. Appointment for every year to be ratified.  Auditors not to provide services such as book keeping, accounting directly or indirectly to co., its holding and subsidiary too.  Auditing • • Standards mandatory along with Accounting Standards made Internal Auditor: Mandatory for prescribed Companies Internal Auditor can be qualified CA, CWA or CS 9
  11. 11. Independent, Resident & Woman Director  Maximum of 15 Directors in the Board  Prescribed class to have 1 woman director  Atleast one director shall be a person who has stayed in India for a period of not less than 182 days in the previous calendar year. •First time Independent Director concept introduced in Companies Act, although it has been in practice since the year 2000. •Independent Director’s to follow code as per Schedule IV of Companies Act 2013. 10
  12. 12. Corporate Social Responsibility  Every Company having    Networth of Rs.500 Crores or more (or) Turnover of Rs. 1000 Crores or more (or) Net Profit of Rs. 5 Crores of more • Shall spend atleast 2% of their avg. Net profit in the past three years for CSR activities • Activities Listed in Schedule VII of CA 2013. • Shall mandatorily have a CSR Committee with minimum of three directors all of whom must be Independent. 11
  13. 13. Class Action Suit  A provision which enables group of shareholders/depositors to file a combined case against the company to restrain from a particular act and/or claim damages/compensation for improper conduct, misleading statements and fraudulent or illegal acts by the company or its directors. • Based on US model. Class Action suit famous in the United States with companies like Enron paying upto $7.2 Billion as compensation some went upto $206 Billion over a period of 25 years.  New concept in India let us we hope that it stands the test of time and gives us a more efficient and transparent company law regime. 12
  14. 14. National Company Law Tribunal/ Special Courts  The Company Law Board is replaced by NCLT. • • All pending cases shall be transferred from CLB to NCLT after it is notified by Central Government Cases should be completed by NCLT within 3 months Cases under NCLT Arbitration & Compromise Amalgamation & Reconstruction • • BIFR cases Winding Up SPECIAL COURTS: All such violations of the Companies Act 1956 shall be tried by the Special Courts established for the area in which the registered office of the company is situated It may follow Code of Criminal Procedure 1973 13
  15. 15. National Financial Reporting Authority  An investigation authority to investigate on its own or by orders of CG   the Company Professionals misconducts conducted by members/firms registered under ICAI •Exclusive powers to make recommendations on auditing & accounting policies, monitor and enforce Accounting and Auditing Standards. •Exclusive authority to investigate into the misconducts and issue penalty not less than Rs. 10lakhs or 10times the fee w.e.h. 14
  16. 16. Quick bites on other provisions  33 New definitions  Financial Year to end only on 31st March every year  Private Limited Company no. of members increased to     200 Associate company, Fraud defined No more bifurcation of Main object, Ancillary object, Other object. A Co. cannot give other object clauses. Maintenance of Accounts in Electronic Form Scope of Annual Returns huge. 15
  17. 17. Quick bites on other provisions  No change in Managerial remuneration limits  Nomination and Remuneration committee, Stake       Holder relationship committee mandated No stock option for Independent Directors Courier mode recognised Cross border amalgamation recognised Insider Trading Introduced Secretarial Standards mandated Registered valuers defined 16
  18. 18. Email: