2. Companies Act, 1956 was passed in first decade of free India. In this interim period
Business acumen in India has been changed radically.
In order to address these changes and subsequent economic issues , India Govt. has
adopted certain social & economic policies.
The companies bill , 2013 is vibrant steps towards development of companies in India on
healthy lines.
INTRODUCTION
3. Changes in Fundamentals
Sr.
No.
Particulars Companies Act, 1956 Companies Act, 2013
1. Types of Companies Privet & Public companies Privet company
Public Company
One Person Company
2. Max. No. of members for
Pvt. Co.
50 members 200 members
3 One Person Company An OPC means a Co.
with one person as
member.
4. Sr.
No.
Particulars Companies Act, 1956 Companies Act, 2013
4. Commencement of
Business
Provision is applicable Privet company
Public Company
One Person Company
5 Max. No. of Directors 12 15 More can be
appointed by passing SR
6 Woman Director NA It is compulsory to
appoint a woman
director in Every Public/
Listed company .
5. • Mandatory requirement for consolidated financial statement (CFS) [section 129]
• New definition of subsidiary, associate, joint venture Company [sections 2(6) and 2(87)]
• Revision in financial statement [sections 130 and 131]
• Financial year to be uniform [section 2(41)]
• Changes in depreciation regulation [section 123(2) and Schedule II]
• Mandatory internal audit and reporting on internal financial controls [section 138]
Major Impact In Finance Domain
6. Mandatory requirement for consolidated financial statement (CFS)
The 2013 Act mandates preparation of consolidated financial statements for
all companies that have one or more subsidiaries. These would be in addition
to the separate financial statements and are required to be prepared in the
same form and manner as the separate financial statements. For the purpose of
this requirement, the word subsidiary would include associate companies and joint
ventures.
7. New definition of Subsidiary, Associate, Joint Venture Company
Holding Company
Owns/controls >50% total share capital
or exercises control of board
Susidiary Company
Owns/controls ≥ 20% total share capital
or business decisions under agreement
Associates
Company
8. Financial Year to be Uniformed
The 2013 Act also requires all companies to adopt a uniform financial year
of 1 April to 31 March with limited exception to a company which is a
holding company or subsidiary of a company incorporated outside which
may be required to follow a different financial year for consolidation
outside India. All exceptions would however require the approval of the
National Company Law Tribunal (the Tribunal). As
part of transition provisions, Companies would be given a period of 2 years
to change their accounting year to 1 April to 31 March.
9. Revision in financial statement
Under the 1956 Act, companies are generally not permitted to revise or restate
financial information presented in their financial statements. Material misstatements
in the accounts related to previous years, whether due to occurrence of fraud or
error are reported as a ‘prior period adjustment’ in the financial statements of the
year / period in which such misstatements are discovered.
The New Act introduces a new provision on re-opening/restatement
of financial statements in the following circumstances:-
1. A statutory regulatory authority (e.g., Central Government, SEBI, income tax
authorities, etc.) or any person concerned applies to the Tribunal or a court of law
when the accounts of the company were prepared in a fraudulent manner or the
affairs of the company were mismanaged thereby casting a doubt on reliability of
the financial statements.
2. Voluntary restatement is permitted after obtaining approval of the Tribunal in
respect of three preceding financial years. Further, such restatement cannot be
carried out more than once in a financial.
10. Revision in financial statement
2. Voluntary restatement is permitted after obtaining approval of the Tribunal in
respect of three preceding financial years. Further, such restatement cannot be
carried out more than once in a financial.
11. Related Party Transaction
Most of the provisions under Section 188 of 2013 Act are quite similar to the requirements
under sections 297 and 314 of the 1956 Act. Some of key changes envisaged in the
2013 Act include the following:
• Need for central government approval has been done away with.
• The 2013 Act has widened the ambit of transactions such as leasing of property
of any kind, appointment of any agent for purchase and sale of goods, material,
services or property.
• Cash at prevailing market price has now been substituted with ‘arm’s length
transaction’ which has been defined in the section.
• Transactions entered into with related parties now to be included in the board’s
report along with justification for entering into such
contracts and arrangements.
• Penalty for contravention of the provisions of section 297 was covered in general
provisions in the 1956 Act. However, this is now covered specifically in the section
itself which now extends to imprisonment.
• Central government may prescribe additional conditions.
12. Certain Highlights of Amendments of companies Act, 2013 :-
Immediate Changes in letterhead, bills or other official communications, as if full
name, address of its registered office, Corporate Identity Number (21 digit number
allotted by Government), Telephone number, fax number, Email id, website address
if any.
One Person Company (OPC): It's a Private Company having only one Member and at
least One Director. No compulsion to hold AGM. Conversion of existing private
Companies with paid-up capital up to Rs 50 Lacs and turnover up to Rs 2 Crores into
OPC is permitted.
Woman Director: Every Listed Company /Public Company with paid up capital of Rs
100 Crores or more / Public Company with turnover of Rs 300 Crores or more shall
have at least one Woman Director.
Resident Director: Every Company must have a director who stayed in India for a t
otal period of 182 days or more in previous calendar year.
Accounting Year: Every company shall follow uniform accounting year i.e. 1 st April -
31st March.
Loans to director – The Company CANNOT advance any kind of loan / guarantee /
security to any director, Director of holding company, his partner, his relative, Firm
in which he or his relative is partner, private limited in which he is director or
member or any bodies corporate whose 25% or more of total voting power or
board of Directors is controlled by him.
13. Certain Highlights of Amendments of companies Act, 2013 :-
1. Immediate Changes in letterhead, bills or other official communications, as if
full name, address of its registered office, Corporate Identity Number (21 digit
number allotted by Government), Telephone number, fax number, Email id,
website address if any.
2. One Person Company (OPC): It's a Private Company having only one Member and
at least One Director. No compulsion to hold AGM. Conversion of existing private
Companies with paid-up capital up to Rs 50 Lacs and turnover up to Rs 2 Crores into
OPC is permitted.
3. Woman Director: Every Listed Company /Public Company with paid up capital of
Rs 100 Crores or more / Public Company with turnover of Rs 300 Crores or more
shall have at least one Woman Director.
4.Resident Director: Every Company must have a director who stayed in India for a
total period of 182 days or more in previous calendar year.
5. Accounting Year: Every company shall follow uniform accounting year i.e. 1
st April -31st March.
14. Certain Highlights of Amendments of companies Act, 2013 :-
6. Loans to director – The Company CANNOT advance any kind of loan / guarantee /
security to any director, Director of holding company, his partner, his relative, Firm in
which he or his relative is partner, private limited in which he is director or member or
any bodies corporate whose 25% or more of total voting power or board of Directors is
controlled by him.
7. Articles of Association- In the next General Meeting, it is desirable to adopt Table F
as standard set of Articles of Association of the Company with relevant changes to suite
the requirements of the company. Further, every copy of Memorandum and Articles
issued to members should contain a copy of all resolutions / agreements that are
required to be filed with the Registrar.
8. Disqualification of director- All existing directors must have Directors Identification
Number (DIN) allotted by central government. Directors who already have DIN need
not take any action. Directors not having DIN should initiate the process of getting DIN
allotted to him and inform companies. The Company, in turn, has to inform registrar.
15. Certain Highlights of Amendments of companies Act, 2013 :-
9.Financial year- Under the new Act, all companies have to follow a uniform Financial
Year i.e. from 1st April to 31st March. Those companies which follow a different
financial year have to align their accounting year to 1st April to 31st March within 2
years. It is desirable to do the same as early as possible since most the compliances are
on financial year basis under the new Companies Act.
10. Appointment of Statutory Auditors- Every Listed company can appoint an
individual auditor for 5 years and a firm of auditors for 10 years. This period of 5 / 10
years commences from the date of their appointment. Therefore, those companies
have reappointed their statutory auditors for more than 5 / 10 years, have to appoint
another auditor in Annual General Meeting for year 2014.
