2. COVERAGE
SIGNIFICANT PROVISIONS OF COMPANIES ACT,2013
Journey till now
Introduction
Significant concepts (inclusions and deletions)
Varieties of companies
Directors
Related party Transactions
Financial statements
Meetings
Professionals
CSR
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3. HOW THIS ACT WAS ENACTED?
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4. Journey Till Now
• Companies Bill, 2011
introduced in Lok Sabha on 14th
December 2011
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5. • Companies Bill, 2012 passed by Lok
Sabha on 18th
December 2012
• Companies Bill, 2012 passed in
the Rajya Sabha on 8th
August
2013
• Companies Bill 2013 received
assent from the President Pranab
Mukherjee on 29th
August 2013
• 98 Sections of Companies Act, 2013
were made effective from 12th
September 2013
Journey Till Now
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6. You know why the new Act has been
introduced ?
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8. NEED FOR COMPANIES ACT 2013
•To Increase:
Transparency
Corporate Social Responsibility
Accountability
Shareholder and Stakeholder Protection
•To meet the internationally accepted concepts, practices
•To address the needs of the Shareholders/ Stakeholders/Government/ and
public at large
Introduction
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15. Subsidiary Company
Companies Act, 2013 Companies Act, 1956
More than half of the
total share capital
Exercise or control of
share capital
More than half of the
total equity capital
Present –to be prescribed
Restriction on layers of
Subsidiaries No restrictions present
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16. Financial Year
Companies Act, 2013 Companies Act, 1956
1st
April to 31st
March
1st
April to 31st
March
OR
1st
January to 31st
December
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17. Promoter
Companies Act, 2013 Companies Act, 1956
An exhaustive definition
which covers promoters
named as such in its
annual returns, persons
who control the company
and shadow directors.
Persons acting merely in
professional capacity will
not be regarded as
shadow directors and as
promoters.
Definition
It is section specific . Sec
62(6)(a) defined
‘promoter’ as a person
who is party to unture
statement in prospectus.
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23. Government Company
Government Company means any company in which not less
than fifty-one percent of the paid-up share capital is held by
the Central Government, or by any State Government or
Governments, or partly by the Central Government and partly
by one or more State Governments, and includes a company
which is a subsidiary company of such a Government
company.
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31. Board Meetings
• Mode
Board Structure in India is Unitary
• Mode of Presence
In Person or through Video Conference
• Notice
At least 7 days prior through post/ electronic
means/ hand delivery
• Number
At least 4 meetings every year. Maximum gap- 120 days
between two Meeting
• Separate Meeting of Independent Directors
At least one in a year
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34. Resignation of Directors
• No provisions in the old Companies Act.
• Section 168 of the Companies Act, 2013 contains
provisions regarding resignation of Directors
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36. Loan to Directors
• Applicable to both public & Private Companies
• Exemptions
Co. gives in ordinary course of business at
rate not less than RBI prescribed rates
Loan to MD/WTD:
Pursuant to conditions of service
Pursuant to Scheme approved by
members by special resolution
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37. Chairman, MD and WTD
• Same person Cannot be appointed as Chairman, MD/CEO
unless Articles authorize or Company is not engaged in
Multiple businesses.
• Type of Resolution – Special
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40. Audit, Audit Committee and
Appointment of Auditors
• Term of Auditors : Individual – Maximum 5 years LLP, Firm – Maximum 10 years
• Max. No. of Companies in which a CA can act as Auditor – 20
• Special Resolution not required for appointment unlike under the 1956 Act
•Composition of Audit Committee
Number of Directors – 3
Independent Directors to form majority
• No obligation for Chairman of Audit Committee to attend AGM (under the old Act it was
compulsory)
• Vigil Mechanism
• Every Listed Company shall establish a vigil mechanism for directors and employees to
report genuine concerns and it shall be monitored and implemented by audit committee
• Details of Vigil Mechanism shall be disclosed in Board’s Report
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43. • First AGM – within 9 months of end of
financial year
• Other AGM’S – 6 months from the end of
financial year
• Gap between two AGM’s – not more than 15
months
Annual General Meeting
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44. Annual General Meeting
•AGM cannot be held on:
National Holidays
Outside business hours (9 a.m. to 6 p.m.)
• Mode of Notice:
Either in writing or electronic mode
• Shorter Notice:
Consent of not less than 95% of members entitled to vote at the
meeting required
In case of Public Company
•5 Members,15members,30 members (1000,1000-5000,above 5000)
In case of Private Company
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53. Class Action Suits
Eligible
Members or
Class of
Members
Eligible
Depositors
or Class of
Depositors
May file application before the tribunal
seeking some specified orders
IF
Management or Conduct of the Company is prejudicial to
Interests of the Company/ Members/ Depositors
Right of members, deposit holders or their representatives to file an application
before the Tribunal for restraining the Company from some specified acts
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63. Special Courts
• May be established by Central Government for speedy trail of offences under the Act
• A special court shall consist of a single judge, appointed by Central Government with
concurrence of Chief Justice of High Court within whose jurisdiction the judge to be appointed is
working
• All offences under this Act shall be triable by the Special Court established for the area in
which the registered office of the company is situated
• 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
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66. • Comply Provision companies having:
Net worth of Rs. 500 Crore or more OR
Turnover of Rs. 1000 Crore or more OR
net profit of Rs. 5 Crore or more
• Composition:
3 or more Directors, at least one being independent (In case for Pvt. Ltd Companies, Two
directors shall form the committee)
• Functions:
Recommend the amount of expenditure to be incurred on the activities
formulate and recommend to the Board, a Corporate Social Responsibility Policy
monitor the CSR Policy of the company from time to time
• Board Report to disclose the composition of CSR Committee & the details about the policy
developed and implemented in respect of CSR
• Minimum Amount to be spent on CSR activities:
At least 2% of the average net profits during immediately 3 preceding financial years
In case of failure to do so Board’s Report should specify reason for the same
Corporate Social
Responsibility
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(68) “private company” means a company having a minimum paid-up share
capital of one lakh rupees or such higher paid-up share capital as may be prescribed,
and which by its articles,— (i) restricts the right to transfer its shares; (ii) except in case of One Person Company, limits the number of its
members to two hundred:
Provided that where two or more persons hold one or more shares in a
company jointly, they shall, for the purposes of this clause, be treated as a single
member:
Provided further that—
(A) persons who are in the employment of the company; and
(B) persons who, having been formerly in the employment of the company,
were members of the company while in that employment and have continued to
be members after the employment ceased,
shall not be included in the number of members; and
(iii) prohibits any invitation to the public to subscribe for any securities of
the company;
(87) “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies:
Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.
Explanation.—For the purposes of this clause,—
(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;
(b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of
the directors;
(c) the expression “company” includes any body corporate;
(d) “layer” in relation to a holding company means its subsidiary or subsidiaries;
(41) “financial year”, in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up:
Provided that on an application made by a company or body corporate, which is a holding company or a subsidiary of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year:
Provided further that a company or body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause;
“inactive company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;
(ii) “significant accounting transaction” means any transaction other than—
(a) payment of fees by a company to the Registrar;
(b) payments made by it to fulfil the requirements of this Act or any other law;
(c) allotment of shares to fulfil the requirements of this Act; and
(d) payments for maintenance of its office and records
“significant influence” means control of at least twenty per cent of total share capital, or of business decisions under an agreement
“Associate Company”, in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company
131. (1) If it appears to the directors of a company that—
(a) the financial statement of the company; or
(b) the report of the Board,
do not comply with the provisions of section 129 or section 134 they may prepare revised financial statement or a revised report in respect of any of the three preceding financial years after obtaining approval of the Tribunal on an application made by the company in such form and manner as may be prescribed and a copy of the order passed by the Tribunal shall be filed with the Registrar:
Provided that the Tribunal shall give notice to the Central Government and the Income tax authorities and shall take into consideration the representations, if any, made by that Government or the authorities before passing any order under this section:
Provided further that such revised financial statement or report shall not be prepared or filed more than once in a financial year:
Provided also that the detailed reasons for revision of such financial statement or report shall also be disclosed in the Board's report in the relevant financial year in which such revision is being made.
168. (1) A director may resign from his office by giving a notice in writing to the company and the Board shall on receipt of such notice take note of the same and the company shall intimate the Registrar in such manner, within such time and in such form as may be prescribed and shall also place the fact of such resignation in the report of directors laid in the immediately following general meeting by the company:
Provided that a director shall also forward a copy of his resignation along with detailed reasons for the resignation to the Registrar within thirty days of resignation in such manner as may be prescribed.
(2) The resignation of a director shall take effect from the date on which the notice is received by the company or the date, if any, specified by the director in the notice, whichever is later:
Provided that the director who has resigned shall be liable even after his resignation for the offences which occurred during his tenure.
(3) Where all the directors of a company resign from their offices, or vacate their offices under section 167, the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in general meeting.
185. (1) Save as otherwise provided in this Act, no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person:
Provided that nothing contained in this sub-section shall apply to—
(a) the giving of any loan to a managing or whole-time director—
(i) as a part of the conditions of service extended by the company to all its
employees; or
(ii) pursuant to any scheme approved by the members by a special
resolution; or
(b) a company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the bank rate declared by the Reserve Bank of India.
185. (1) Save as otherwise provided in this Act, no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person:
Provided that nothing contained in this sub-section shall apply to—
(a) the giving of any loan to a managing or whole-time director—
(i) as a part of the conditions of service extended by the company to all its
employees; or
(ii) pursuant to any scheme approved by the members by a special
resolution; or
(b) a company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the bank rate declared by the Reserve Bank of India.
This is a new provision introduced in the Companies Act 2013 which for the first time defines the term “Fraud” and provides for stringent penalty if fraud is proved.
Numerous sections in the Act have been linked to this one section by providing in those sections– “Penalty as prescribed under Section 447”
The Act provides for specific provisions related to any act of fraud.
“Fraud” in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss.