Impact of companies act 2013.

1. 1.

2. Note: This presentation uses the word “prescribed” in
many slides. It refers to that part of the law, which will be
prescribed later through Rules.
1.

3. INTRODUCTION
The Companies Act 2013 will impact some of below given areas of
corporate behaviour & conduct of business:

4. INTRODUCTION

5. 4.

6. RAISING OF MONEY
Fund Raising
Through
Securities
Through
Deposits
Initial/ Follow on Public
Offers (IPO/FPO)
Private Placement
Rights/ Bonus Shares
The Act seeks to regulate raising of money through all types of securities, and not just shares or debentures
The Act also requires all listed companies or companies intending to get listed have to comply with the provisions of
The SEBI Act, 1992
Only prescribed companies
with a prescribed credit
rating allowed this route

7. RAISING OF MONEY
Changes in provisions regarding fund
raising through SECURITIES
6.
RAISING OF MONEY

8. PRIVATE PLACEMENT OFFER
CONDITIONS
 To a section of public other
than QIBs and Employees
under ESOP
 To not more than 50 people
or such higher number as
may be prescribed
 Should comply with
prescribed terms &
conditions
 Invitation through private
placement offer letter and
not prospectus
Conditions
fulfilled?
YES NO
PUBLIC OFFER
Comply with provisions of
Companies Act, Securities
Contract Regulation Act, 1956
and SEBI Act, 1992
RAISING OF MONEY

9. PROCEDURALASPECTS OF PRIVATE
PLACEMENT
Funds to be
received only
through the
banking
channel, and not as
cash
Allotment to be
made within 60
days of receipt of
funds
Offer to be made by
name and to those
whose name is
recorded by the
company prior to
invitation
Offer to be made
only after
allotments under
any previous offer
have been
completed
RAISING OF MONEY

10. Significant changes in the provisions of PROSPECTUS
9.
VARIATION IN OF PROSPECTUS OR
WILL BE :
Subject to Special Resolution
Require Mandatory Exit Option to dissenting shareholders
Face restriction on use of amount raised by it for buying,
trading or dealing in equity shares of another company
RAISING OF MONEY

11. ISSUANCE OF
 The provision will no
more be limited to Public
Financial
Institutions, Public Sector
Banks or Scheduled Banks
RAISING OF MONEY

12. Separate Provisions with respect
to offer of Sale by existing
shareholders
Subject to prescribed
conditions, Global Depository Receipts
may be issued by passing a Special
Resolution under the current scenario
Preferential Guideline is to be followed
RAISING OF MONEY

13. A Company may pay commission to any person
in connection with subscription
of its securities but subject to prescribed
conditions
RAISING OF MONEY

14. Changes in provisions regarding fund
raising through DEPOSITS
RAISING OF MONEY

15. The provisions relating to acceptance of
deposits will not apply to NBFCs. They
will be governed by rules issued by the
Reserve Bank of India.
Only those companies fulfilling the
prescribed conditions and carrying a
prescribed credit rating are eligible to
accept deposits
RAISING OF MONEY

16. RAISING OF MONEY- By Deposits
Prohibition on accepting deposits from
public, except in the prescribed manner
Accepting deposits from members subject
to approval by shareholders only

17. 16.

18. SHARES & SECURITIES
GENERAL CHANGES
Changes regarding
VOTING RIGHTS
Changes regarding
ISSUE OF SHARES
Various changes regarding Shares & Securities

19. Act seeks to regulate all
type of securities as
opposed to equity and
debentures only, causing
an
C
SHARES & SECURITIES

20. Company can issue shares
with
to other
matters
VARIATIONS IN
SHARES & SECURITIES

21. SHARES & SECURITIES – General Changes
Recognition and
or more
persons regarding transfer of
securities, enabling
OF SHARES in
Public Companies also

22. that
comply with
accounting standards
prescribed for such
companies
USE OF
SHARES & SECURITIES

23. GENERAL CHANGES
Changes regarding
VOTING RIGHTS
Changes regarding
ISSUE OF SHARES
Various changes regarding Shares & Securities
SHARES & SECURITIES

24. SHARES & SECURITIES – Voting Rights
Equitable voting rights for
equity and preference
shareholders with respect to
their paid up capital
On resolutions affecting
rights of both categories
Preference shareholders allowed
to vote on every resolution
placed before shareholders’
meeting
If dividend payable to any
class of preference
shareholders in arrear for
more than 2 years
No classification between
cumulative and
non-cumulative preference
shares
For identification of voting
rights

25. GENERAL CHANGES
Changes regarding
VOTING RIGHTS
Changes regarding
ISSUE OF SHARES
Various changes regarding Shares & Securities
SHARES & SECURITIES

26. Private companies have to comply
with provisions for further issue of
shares that were applicable to public
companies only
New provision for allotment of ESOP, rules
will be provided soon
SHARES & SECURITIES

27. ISSUE OF
Shares cannot be issued at a discount, except
as which can be issued at a
discount even now
SHARES & SECURITIES

28. Company can dispose off only those shares in a Rights
issue that haven’t been subscribed to by shareholders in a
manner advantageous to the company
OF RIGHTS SHARES
SHARES & SECURITIES

29. A company cannot go for a
bonus issue if it has defaulted
in payment of:
 Interest or principal on
fixed deposits or debt
securities issued by it
 Statutory dues of employees
such as contribution to
provident fund, gratuity
and bonus
PROHIBITION ON
SHARES & SECURITIES

30. Issue price of shares offered to persons other than existing
shareholders and employees under ESOP shall be computed
on the basis of Registered Valuer’s report
CALCULATION OF
SHARES & SECURITIES

31. 31.

32. RESTRUCTURING & REVIVAL
32.
Sick Company
Fast Track
Merger
Compromise or
Arrangement
Reduction of
Capital

33. Reduction of Capital
accounting treatment
proposed by the company for such reduction conforms with the
accounting standards
if the company is in arrears for payment of
deposits
RESTRUCTURING & REVIVAL

34. Compromise or Arrangement
Notice of any meeting in this matter
required by the Tribunal to also be
given to the Central
Government, Income Tax
Authorities, RBI, SEBI and CCI
Calling of meeting of members or
creditors now mandatory (after
consent received by postal ballot) for
approval of compromise by persons
representing at least 3/4th of the
value of members of creditors
M
E
E
T
I
N
G
S
RESTRUCTURING & REVIVAL

35. Additional Disclosures in the
notice for
Compromise/Arrangement
35.
Valuation Report
Effect on creditors,
KMPs, members,
debenture holders
Effect on material
interests of the directors
or the debenture
trustees
RESTRUCTURING & REVIVAL

36. RESTRUCTURING & REVIVAL
Shares arising out of arrangement
or compromise to be cancelled
and extinguished and not to be
held by the transferee company in
its own or a Trust’s
name, whether on its behalf or on
behalf of a subsidiary or associate
company
Compromise or Arrangement
Abolition of Treasury Stocks

37. Additional information to be included in affidavit for
the compromise/arrangement application
of company, if
any
consented by at
least 75% secured
creditors
RESTRUCTURING & REVIVAL

38. Affidavit for Scheme of Corporate Debt Restructuring
(CDR) should include
Safeguards for
secured/
unsecured
certifying
that fund
requirements post
CDR will confirm
to liquidity test
Statement if
for
CDR adopted
for all assets by a
Registered Valuer
RESTRUCTURING & REVIVAL

39. Fast Track Merger
for merger between two or more small
companies or a holding and its wholly owned subsidiary or some other
class of companies
to approve & effect the scheme if the
Official Liquidator and the Registrar to the scheme have no objections
RESTRUCTURING & REVIVAL

40. between Indian companies and foreign
companies incorporated in prescribed jurisdictions
and the scheme must provide for
payment to shareholders of the merging companies in any combination of
cash and depository receipts
Fast Track Merger of certain Companies
RESTRUCTURING & REVIVAL

41. Sick Company
: Any company, and not just an industrial unit, can be
declared as a sick company
 Erosion of 50% of net worth no longer a criteria
 Inability to repay 50% or more of secured debts within 30 days
of being served notice by the creditors. Application to declare a
company sick may be moved by:
 The company itself, OR
 The creditors representing 50% or more of secured
debts
RESTRUCTURING & REVIVAL

42. 42.

43. ACCOUNTS & AUDIT
Financial Statements
and statement of changes in company’s equity
now to be parts of Financial Statements
i.e. Apr-Mar to be adopted by all the
companies. (Relaxation only to foreign companies and subsidiaries of
overseas companies subject to Tribunal’s approval)
combining accounts of
subsidiaries, associates and joint ventures

44. Re-opening/ Revising Books of Accounts
Allowed subject to Tribunal/ Court’s
directions, which shall also notify
Central Government & Income Tax
Authorities
Can also be done by Tribunal/Court in
case of frauds, mismanagement or
financial irregularities
Revision allowed for up to three preceding
financial years but detailed reasons for
change to be mentioned in the Board’s
report
Change allowed to rectify mistakes or on
change of accounting policy
ACCOUNTS & AUDIT

45. Auditors
To be appointed for a term of 5 years
In case of an audit firm, the auditing partner and team to be
rotated annually, if the shareholders desire
ACCOUNTS & AUDIT

46. Auditor’s Duty
Additional reporting in the
Auditor’s report
Reporting to the central
government
Qualification/ reservation or
remark regarding maintenance of
accounts
Remarks on adequacy &
effectiveness of internal financial
controls
Addition disclosures requirements
for certain companies to be
prescribed by the central
government
1
2
3
Any offence/ fraud committed by
company’s officers noticed during
the course of audit
ACCOUNTS & AUDIT

47. 47.

48. MANAGEMENT & MEETING
The new law brings about changes to aspects of
management of a company and infuses more
accountability
DIRECTORS & KEY
MANAGERIAL
PERSONS
SHAREHOLDERS’
MEEETING
BOARD
MEEETING
 Requirement for
appointment
 Maximum number
 Condition for
removal
 Extended duties
 Quorum
 Postal Ballot
 Notice
 Participation of
Directors
 Number & Timing

49. MANAGEMENT & MEETING

50. A prescribed class of companies required to have:
Managing Director/ CEO/ Manager
Whole Time Director in the absence of
MD/CEO/Manager
Company Secretary
Appointment of such persons to ensure better governance of the
company
DIRECTOR’S
MANAGEMENT & MEETING

51. A company can have maximum 15 directors on the board instead of
12 earlier
No need for the central government’s approval for
increase in number of directors
DIRECTORS
Any increase beyond 15 will require
the approval of shareholders by way
of Special Resolution
MANAGEMENT & MEETING

52. DUTIES OF A DIRECTOR
To not assign his office (any such assignment will be void)
To act in accordance with the Articles of Association
To act in good faith to promote the objects of the company in the best
interests of its members, shareholders, employees, community and
environment
To exercise duties with due and reasonable care, skill and diligence
To avoid getting involved in situations in which he may have a direct/
indirect interest that conflicts or may conflict with the interest of the
company
To not achieve or attempt to achieve any undue gain or advantage to
himself or his relatives/ partners or associates
MANAGEMENT & MEETING

53. EXPRESS DUTIES OF DIRECTORS
Bring accountability in the
functioning of director
Ease of finding the case of
negligence by directors
MANAGEMENT & MEETING

54. Shareholders Meeting
MANAGEMENT & MEETING

55. QUORUM shall now be considered as:
QUORUM
(No. of Members
personally Present)
NUMBER OF MEMBERS AS ON
THE DATE OF MEETING
5 ≤ 1000
15 1000 < number ≤ 5000
30 ≥ 5000
A higher quorum, as compared to the earlier requirement, will
ensure greater participation by shareholders
MANAGEMENT & MEETING

56. POSTAL BALLOT
Apart from the prescribed resolutions, any other
resolution can be passed by postal ballot except
that of ordinary business or that where a
director /auditor has right to be heard
Provision now applicable to all companies
whether listed or not
MANAGEMENT & MEETING

57. Board Meeting
MANAGEMENT & MEETING

58. BOARD MEETING- SOME NEW PROVISIONS
Notice of the
Meeting
 Minimum 7 days
notice
 To be given to all
directors, whether in
India or not
 Can be sent through
any means: hand
delivery, post or
electronically
Participation
of Directors
 In person, or
 By video
conferencing, or
 Any other audio-
visual means capable
of
recording, recognizin
g and storing the
participation of
director with date &
time
Number & Timing
of Meetings
 At least 4 meetings in
a year
 Not necessary to be
held in every quarter
 Time gap of not
more than 120 days
between two
meetings
1 2 3
Meeting at shorter notice allowed, subject to attendance by at least one independent director
or subsequent ratification of decision by all directors
59.
MANAGEMENT & MEETING

59. 60.

60. COMPLIANCE & DISCLOSURES
Enactment of the Companies Act 2013 will bring:
Increased compliances and
disclosures
Stringent penalties for
contravention of law

61. 62.
Enhanced disclosures have been
mandated in:
Annual Return
Director’s Report
COMPLIANCE & DISCLOSURES

62. Additional disclosures required in the Annual
Return of a company
Details regarding:
PRINCIPAL BUSINESS ACTIVITIES
of the company, its subsidiary, holding and
associates
PROMOTERS and KMPs
of the company & changes regarding them
since closure of last financial year
COMPLIANCE & DISCLOSURES

63. FIIs’
shareholding, their names, addresses &
other details
PENALTIES
imposed on the company, directors &
officers and the compounding of
offences
COMPLIANCE & DISCLOSURES

64. Additional Disclosures in the Director’s Report of
the Company
Company’s policy and selection criteria for
appointment of directors
Details of Loans, Guarantees and
Investments u/s 186
COMPLIANCE & DISCLOSURES

65. Contracts & arrangements with related
parties & justification
CSR policy and reason failure to spend 2%
on CSR, if applicable
Remuneration policy for Directors and
KMPs and ratio of each director’s
remuneration to employees’ median
remuneration
COMPLIANCE & DISCLOSURES

66.  A Return on change in shareholding of promoters and
top ten shareholders to be filed with Registrar within 15 days of
such change
 A Report on every Annual General Meeting and inclusion
of confirmation that meeting was convened, held and conducted as
per the Act and Rules there under.
Other Compliances
COMPLIANCE & DISCLOSURES

67. The increased
disclosures
will improve the
manner in which
annual general
meetings are held
and lead
to more
transparency
COMPLIANCE & DISCLOSURES

68. 69.

69. GOVERNANCE
Considering the fact that Corporate Governance forms the main
thrust of the Companies Act, various provisions have been
modified or added relating to:
Unpaid Dividend
Internal
Audit
Loan &
Investment
Related Party
Transaction
Restrictions on
Board
Forward Dealing

70. Unpaid Dividend
Every company to list names of
shareholders, their addresses and
dividend unpaid to them on the
company’s website within 30 days
of transferring funds to unpaid
dividend account
Shares on which unpaid dividend
or other amount have been
transferred to IPEF, are to be
transferred in the name of IPEF
GOVERNANCE

71. Forward Dealings
Forward dealings in securities of
the company by key managerial
personnel now prohibited
as listed companies
already governed by insider
trading laws
GOVERNANCE

72. Internal Audit
Prescribed companies to appoint
internal auditor being a chartered
accountant or a cost accountant or
any other prescribed professional
Such professional to carry out
internal audit functions and ensure
establishment of internal financial
control system
GOVERNANCE

73. Loan and Investment by any Company
Loans & advances to any company or person allowed
only if there is a specific purpose for the use of such
loans/advances
Company in default of repayment of deposits
or interest thereon not allowed to give loans/deposits
Capital market intermediaries not allowed
to accept inter-corporate loans or deposits above a
prescribed limit
GOVERNANCE

74. 75.
NBFCs in the business of acquiring shares & securities
exempt from these provisions in respect of such acquisition
Companies restricted from making investment through
more than 2 layers of investment companies. The provision
will not effect:
Indian company acquiring an overseas company
that has more than two layers of investment
subsidiaries
A subsidiary company with
investment subsidiary for the purpose of
compliance to a law in force
GOVERNANCE

75. Restrictions on the Board
Private companies will now also be required to take
permission of shareholders through special resolution for
following matters:
Borrow money in excess of paid capital and capital
reserves
Remit or give time for a payment due from
director
Sell/lease or dispose whole or substantially whole
of the undertaking
GOVERNANCE

76. Restrictions on the Board
77.
An undertaking has now been defined under the law. An
undertaking under the Act means an undertaking:
That generates at least 20% of the
company’s income
In which the company’s investment exceed
20% of its networth as per the last audited
Balance Sheet
GOVERNANCE

77. 78.

78. NEW CONCEPTS
Constitution of CSR Committee by a company
having any of the following:
NET WORTH
of Rs 500 crore
or more
TURNOVER
of Rs 1,000
crore or more
NET PROFIT
of Rs 5 crore
or more

79. Companies to spend on
CSR activities at least 2%
of the average net profit
of the preceding 3
financial years.
Reasons in case of failure
to be disclosed in the
Board report
NEW CONCEPTS

80. Who can seek registration as a Dormant
Company:
 A future project
 Holding an asset
 Holding Intellectual Property
1.
 Not been carrying out any business or operation
 Not made any significant accounting transaction during last 2 financial years
 Not filed financial statements and annual returns during last 2 financial years
2.
NEW CONCEPTS

81. Dormant Company, which
otherwise
has very few compliance
requirements, can become
an
active company by applying
to the Registrar of
Companies
NEW CONCEPTS

82. Who can file
a class
action?
Any class of members or depositors
When can it
be filed?
If they believe that the conduct of the
company’s affairs by its management:
Is prejudicial to the interests of :
The company
Any class of members
Any class of depositors
NEW CONCEPTS

83. ORDERS THAT CAN BE SOUGHT
Declaration of a resolution altering
MOA/AOA as void if passed with
suppression of material
information/ misstatement
Restrain the company from
breaching any provision of AOA or
MOA
Restrain the company from an act
ultra vires the AOA or MOA
Restrain the company from an act
contrary to the provisions of the
Companies Act
Restrain the company from any
action contrary to the resolution
passed by members
Claim any damages/ compensation
or demand any other suitable
action in cases of wrongful/
fraudulent/ unlawful act by
directors/ auditors/experts
NEW CONCEPTS

84. To operate as MCA’s premier agency
for investigating frauds related to
companies
SFIO:
To consist of experts from specified
fields and other officers as prescribed
NEW CONCEPTS

85. The central government may also refer
cases where investigation into affairs of
a company is needed to the SFIO
In such a case, no other investigating
agency of the state or central government
will proceed with the concerned
investigation
NEW CONCEPTS

86. 33.