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Presentation byManoj Kumar
E: manoj@indiacp.com
M: +919910688433
Corporate Professionals
D-28, South Ex., Part-I
New Delhi...
History
The Companies Act, 1956 is
an act of Parliament that
was enacted in 1956

The Companies Act, 2013 was recently
pas...
An Overview
Companies Act, 1956

Companies Act, 2013

The Companies Act has a substantial part of the law prescribed
withi...
Companies Act 1956
vs.
Companies Act 2013
The Preliminary Provisions
The Preliminary Provisions

THE COMPANIES Act, 2013:

The Companies Act, 1956 was however enacted on 1st April,
1956 in it...
The Preliminary Provisions
Introduction of new definitions
in the Act which were not
existing under the Companies
Act 1956...
The Preliminary Provisions

Earlier excluded, Corporation
sole has now been covered in the
definition of body Corporate

T...
Incorporation and Matters Incidental
Changes - Incorporation

Introduction of concept of
One Person Company

No approval required for
conversion of Private
Com...
Changes - Incorporation

MOA to carry the main objects
only. Bifurcation of the Objects
clause into main, ancillary &
othe...
Changes - Incorporation
Penalizing Provisions
ROC empowered to strike off the name of a
Company incorporated with wrong/in...
Prospectus & Allotment of Securities
Changes - Prospectus & Allotment of Securities

Specification for raising of
funds by Public Company
Scope widened to incl...
Changes - Prospectus & Allotment of Securities
The Act defines the term Private Placement:
PRIVATE PLACEMENT OFFER
PUBLIC ...
Changes - Prospectus & Allotment of Securities
Person responsible for fraudulently
inducing others to invest money now lia...
Changes - Prospectus & Allotment of Securities

Power of SEBI to administer provisions related to listed
Company or Compan...
Changes - Prospectus & Allotment of Securities
Penalizing Provisions
Persons authorizing the issue of the
prospectus havin...
Share Capital & Debentures
General Changes - Share Capital & Debentures
Various changes in respect to Shares & Securities

GENERAL CHANGES

Changes w...
General Changes - Share Capital & Debentures
Various changes in respect to Shares & Securities
OVERAGE OF

C

Act seeks to...
General Changes - Share Capital & Debentures
NEW VARIATIONS IN
Company can issue shares
with
as to other
things also
Voting Right Changes
Equitable Voting rights for
Equity and Preference share
holders with respect to their paid
up capital...
General Changes - Share Capital & Debentures
Various changes in respect to Shares & Securities

GENERAL CHANGES

Changes w...
Issue of Shares
Private Companies also to comply
with the provisions of further issue of
shares, which were applicable to
...
Changes - Share Capital & Debentures

No other shares except
to
be issued at discount

No provision has been made for issu...
General Changes - Share Capital & Debentures

PROHIBITION ON
Prohibition on Bonus Issue if the
Company has defaulted in
pa...
Changes - Share Capital & Debentures

No reduction in Capital allowed if the
Company is in arrears for payments of
deposit...
Acceptance of Deposits
Acceptance of Deposits
NBFCs will be governed only by the rules issued by
the Reserve Bank of India

Deposits from persons...
Charges
Changes – Registration of Charges

1.
2.
3.
4.

Whether created within or outside India
On property, or
On assets, or
On a...
Management & Meetings
Changes - Management & Meetings

The new law brings about changes in respect of
some very important components of a Compan...
Changes - Management & Meetings

DIRECTOR’S
A prescribed class of Companies will be required to have:

Managing Director/ ...
Changes - Management & Meetings

DIRECTORS
A Company can have maximum 15 Directors at Board instead of
earlier 12 director...
Changes - Management & Meetings

DIRECTORS
Only prescribed number of members can pass a resolution for removal
of a Direct...
Changes - Management & Meetings
DUTIES OF A DIRECTOR
To act in accordance to the Articles of Association

To act in good f...
Changes - Management & Meetings
EXPRESS DUTIES OF DIRECTORS

Bring accountability in the
functioning of Director
Ease of f...
Changes - Management & Meetings
Shareholders Meeting
Management & Meetings
QUORUM shall now be considered as:
QUORUM
(No. of Members
personally Present)

NUMBER OF MEMBERS AS ...
Changes - Management & Meetings
Board Meeting
Changes - Management & Meetings
SOME NEW PROVISIONS
1

2
Notice of the
Meeting

Participation
of Directors

3
Number & Tim...
Audit & Auditors
Changes - Audit & Auditors
Listed & other prescribed companies shall not
appoint or reappoint:
An individual auditor for m...
Changes - Audit & Auditors
Auditor shall not provide the following services
whether directly/ indirectly to Company and it...
Payment of Dividend
Changes - Payment of Dividend
No dividend shall be declared or paid by a
Company from its reserves other than free
reserve...
Restructuring & Revival
Changes - Restructuring & Revival
Reduction of
Capital

Compromise or
Arrangement

Sick Company

Fast Track
Merger
Changes - Restructuring & Revival
Reduction of Capital

accounting treatment
proposed by the Company for
such reduction is...
Changes - Restructuring & Revival
Compromise or Arrangement
Notice of any meeting in this matter
also to be given to Centr...
Changes - Restructuring & Revival
Compromise or Arrangement

Abolition of Treasury Stocks

Any shares arising out of
arran...
Changes - Restructuring & Revival
Fast Track Merger
for merger between 2 small Companies or
a holding and its wholly owned...
Changes - Restructuring & Revival
Fast Track Merger
between Indian Companies and Foreign
Companies incorporated in prescri...
Changes - Restructuring & Revival
Sick Company

:

Any Company can be declared as a Sick Company and not
necessarily an In...
Changes - Restructuring & Revival

“ It is not the strongest of the species that survive, nor
the most intelligent, but th...
33.

Manoj Kumar
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Companies Act 2013 vs Companies Act 1956

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Companies Act 2013 vs Companies Act 1956

  1. 1. Presentation byManoj Kumar E: manoj@indiacp.com M: +919910688433 Corporate Professionals D-28, South Ex., Part-I New Delhi 110049 (India) Companies Act 2013 - A comparison with the Companies Act, 1956
  2. 2. History The Companies Act, 1956 is an act of Parliament that was enacted in 1956 The Companies Act, 2013 was recently passed by Rajya Sabha on 8th August 2013 and has received Presidential assent on 29th August 2013.
  3. 3. An Overview Companies Act, 1956 Companies Act, 2013 The Companies Act has a substantial part of the law prescribed within itself The Companies Act gives substantial powers to the Government & hence major prescriptions would be in the form of Rules to be notified separately
  4. 4. Companies Act 1956 vs. Companies Act 2013
  5. 5. The Preliminary Provisions
  6. 6. The Preliminary Provisions THE COMPANIES Act, 2013: The Companies Act, 1956 was however enacted on 1st April, 1956 in its entirety
  7. 7. The Preliminary Provisions Introduction of new definitions in the Act which were not existing under the Companies Act 1956 Associate Company Auditing Standards Small Company Related Party CEO & CFO Global Depository Receipt Independent Director Promoter Key Managerial Personnel
  8. 8. The Preliminary Provisions Earlier excluded, Corporation sole has now been covered in the definition of body Corporate The term “Listed Company” now includes all companies listed on a Stock Exchange Subsidiary of a Public Co. shall be deemed to be a Public Co. even if it is a Private Co. by its Articles The definition of Employee stock Option now covers Directors, officers & employees of Holding & subsidiaries also The scope of “Officer in default” has been widened to include Registrars, Merchant Bankers related to the issue Only “Apr-Mar” to be a Financial Year(exceptions: Foreign Holding/ Subsidiary subject to tribunal’s approval)
  9. 9. Incorporation and Matters Incidental
  10. 10. Changes - Incorporation Introduction of concept of One Person Company No approval required for conversion of Private Company to One Person Company or vice versa No approval required for conversion of Private Company into Public Company
  11. 11. Changes - Incorporation MOA to carry the main objects only. Bifurcation of the Objects clause into main, ancillary & other objects has been done away with. Even the Private Companies have to file the declarations for Commencement of Business Subsidiary can hold shares in Holding Company as trustee, which is not allowed under the Companies Act 1956
  12. 12. Changes - Incorporation Penalizing Provisions ROC empowered to strike off the name of a Company incorporated with wrong/incorrect information Person deliberately furnishing any false/incorrect information at the time of incorporation shall be responsible for fraud under section 447 & stringent punishment Any person can challenge the validity of incorporation before the tribunal in case of such a Company
  13. 13. Prospectus & Allotment of Securities
  14. 14. Changes - Prospectus & Allotment of Securities Specification for raising of funds by Public Company Scope widened to include through: all type of securities than 1. IPO/FPO just shares 2. Private Placement 3. Rights/ Bonus Shares Now Company after varying the terms of contract or objects mentioned in the prospectus cannot use amount raised by it through Prospectus for buying/ trading/ otherwise dealing in Equity shares of other Company
  15. 15. Changes - Prospectus & Allotment of Securities The Act defines the term Private Placement: PRIVATE PLACEMENT OFFER PUBLIC OFFER CONDITIONS Comply with provisions of Act, Securities Contract Regulation Act, 1956 and SEBI Act, 1992  Offer to section of public other than QIBs  Not more than 50 number of people  In compliance of prescribed terms & conditions  Made through Private Placement offer letter and not Prospectus YES NO Conditions fulfilled?
  16. 16. Changes - Prospectus & Allotment of Securities Person responsible for fraudulently inducing others to invest money now liable for stringent punishment for fraud under section 447 which shall be noncompoundable Now Any person affected by misleading statement, any inclusion/omission of a matter in the prospectus can file suit/ take an action : For civil liability for misstatement in Prospectus For punishment for fraudulently inducing persons to invest money
  17. 17. Changes - Prospectus & Allotment of Securities Power of SEBI to administer provisions related to listed Company or Company going to be listed widened to include: 1. 2. 3. 4. 5. Kind of Share Capital to be issued Nature of Shares/Debentures Voting Right Variation of Shareholders’ Rights Further Issue of Capital In Companies Act, 1956, only Public Financial Institutions, Public sector Banks or Scheduled Banks with main object as “financing” were allowed to issue Shelf Prospectus
  18. 18. Changes - Prospectus & Allotment of Securities Penalizing Provisions Persons authorizing the issue of the prospectus having misleading information shall also be criminally liable besides holding the civil liability Civil liability for misstatement in prospectus has been extended to experts also
  19. 19. Share Capital & Debentures
  20. 20. General Changes - Share Capital & Debentures Various changes in respect to Shares & Securities GENERAL CHANGES Changes with respect to VOTING RIGHTS Changes with respect to ISSUE OF SHARES
  21. 21. General Changes - Share Capital & Debentures Various changes in respect to Shares & Securities OVERAGE OF C Act seeks to regulate all type of Securities as opposed to Equity and Debentures only
  22. 22. General Changes - Share Capital & Debentures NEW VARIATIONS IN Company can issue shares with as to other things also
  23. 23. Voting Right Changes Equitable Voting rights for Equity and Preference share holders with respect to their paid up capital For vote 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
  24. 24. General Changes - Share Capital & Debentures Various changes in respect to Shares & Securities GENERAL CHANGES Changes with respect to VOTING RIGHTS Changes with respect to ISSUE OF SHARES
  25. 25. Issue of Shares Private Companies also to comply with the provisions of further issue of shares, which were applicable to Public Companies only New provision for allotment of ESOP, rules will be provided soon
  26. 26. Changes - Share Capital & Debentures No other shares except to be issued at discount No provision has been made for issue of shares on discount with the approval of Central Government
  27. 27. General Changes - Share Capital & Debentures PROHIBITION ON Prohibition on Bonus Issue if the Company has defaulted in payment of:  Interest/ Principal in respect of Fixed Deposits or Debt Securities issued by it  Statutory dues of employees such as contribution to provident fund, gratuity , Bonus
  28. 28. Changes - Share Capital & Debentures No reduction in Capital allowed if the Company is in arrears for payments of deposits, accepted either before or after the Commencement of Act
  29. 29. Acceptance of Deposits
  30. 30. Acceptance of Deposits NBFCs will be governed only by the rules issued by the Reserve Bank of India Deposits from persons other than members not allowed Shareholders’ approval required for accepting deposits from members The concept of Small Depositors done away with
  31. 31. Charges
  32. 32. Changes – Registration of Charges 1. 2. 3. 4. Whether created within or outside India On property, or On assets, or On any undertaking whether tangible/otherwise Whether situated within/outside India Under The Companies Act, 1956, specific events are provided when the charge has to be registered
  33. 33. Management & Meetings
  34. 34. Changes - Management & Meetings The new law brings about changes in respect of some very important components of a Company DIRECTORS & KEY MANAGERIAL PERSONS  Requirement for appointment  Maximum number  Condition for Removal  Extended Duties SHAREHOLDERS’ MEEETING BOARD MEEETING  Quorum  Notice  Postal Ballot  Participation of Directors  Number & Timing
  35. 35. Changes - Management & Meetings DIRECTOR’S A prescribed class of Companies will be required to have: Managing Director/ CEO/ Manager Whole Time Director in the absence of MD/CEO/Manager Company Secretary A mandatory requirement to appoint such persons will ensure proper Governance of the Company
  36. 36. Changes - Management & Meetings DIRECTORS A Company can have maximum 15 Directors at Board instead of earlier 12 directors Central Government’s approval for increase in number of directors has been dispensed with
  37. 37. Changes - Management & Meetings DIRECTORS Only prescribed number of members can pass a resolution for removal of a Director in the following cases Company with Share Capital Other Company Members holding 1/10th of the voting power Members holding shares valued at an aggregate of Rs. 5 lakh or more A great relief to Company from frivolous application for removal of directors by small shareholders holding 1 share only
  38. 38. Changes - Management & Meetings DUTIES OF A DIRECTOR To act in accordance to the Articles of Association To act in good faith in order 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 not involve in a situation 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 To not assign his office (any such assignment will be void)
  39. 39. Changes - Management & Meetings EXPRESS DUTIES OF DIRECTORS Bring accountability in the functioning of Director Ease of finding the case of negligence by directors
  40. 40. Changes - Management & Meetings Shareholders Meeting
  41. 41. Management & Meetings 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 Fixing of a higher quorum as compared to the earlier requirement will ensure greater participation by shareholders
  42. 42. Changes - Management & Meetings Board Meeting
  43. 43. Changes - Management & Meetings SOME NEW PROVISIONS 1 2 Notice of the Meeting Participation of Directors 3 Number & Timing of Meetings  In person, or  Minimum 7 days Notice  To be given to all directors whether or not in India  Can be sent through any means; hand delivery, post or eform  By video conferencing, or  At least 4 meetings in a year  Any other audiovisual means capable of recording, recognizing and storing the participation of director with date & time  Not necessary to be held in every quarter  Time gap of not more than 120 days between 2 meetings Meeting at shorter notice allowed subject to attendance by at least 1 Independent director or subsequent ratification of decision by all directors
  44. 44. Audit & Auditors
  45. 45. Changes - Audit & Auditors Listed & other prescribed companies shall not appoint or reappoint: An individual auditor for more than 1 term of 5 consecutive years An auditor firm for more than 2 terms of 5 consecutive years A gap of at least 5 years should elapse after completion of the aforesaid term before the same auditor can be reappointed A period of 3 years available as a transition period for compliance after enactment of this law
  46. 46. Changes - Audit & Auditors Auditor shall not provide the following services whether directly/ indirectly to Company and its Holding & subsidiary Companies: Design & Implementation of Financial Information system Internal Audit Investment Banking & Advisory Accounting & book Keeping Services Actuarial Services Management Services
  47. 47. Payment of Dividend
  48. 48. Changes - Payment of Dividend No dividend shall be declared or paid by a Company from its reserves other than free reserves.
  49. 49. Restructuring & Revival
  50. 50. Changes - Restructuring & Revival Reduction of Capital Compromise or Arrangement Sick Company Fast Track Merger
  51. 51. Changes - Restructuring & Revival Reduction of Capital accounting treatment proposed by the Company for such reduction is in conformity with the accounting standards if the Company is in arrears for payment of deposits
  52. 52. Changes - Restructuring & Revival Compromise or Arrangement Notice of any meeting in this matter also to be given to Central Government, Income Tax Authorities, Reserve Bank of India, 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
  53. 53. Changes - Restructuring & Revival Compromise or Arrangement Abolition of Treasury Stocks Any 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/associate Company
  54. 54. Changes - Restructuring & Revival Fast Track Merger for merger between 2 small Companies or a holding and its wholly owned subsidiary and some other class of Companies to approve & effect the scheme if no objections by Official Liquidator and the Registrar to the scheme
  55. 55. Changes - Restructuring & Revival Fast Track Merger between Indian Companies and Foreign Companies incorporated in prescribed jurisdictions and the scheme must provide for payment to shareholders of the merging Company in any combination of cash and IDRs
  56. 56. Changes - Restructuring & Revival Sick Company : Any Company can be declared as a Sick Company and not necessarily an Industrial Unit  Criteria of 50% Net Worth erosion dispensed with  A Company unable to repay 50% or more of secured debts within 30 days of notice served by the Creditors can be declared sick on application moved by:  The Company itself, OR  The Creditors representing 50% or more of secured debts
  57. 57. Changes - Restructuring & Revival “ It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. ” Charles Darwin 011-40622214/+91- 981027551 arun@indiacp.com
  58. 58. 33. Manoj Kumar

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