Companies Bill 2012 : Overview of Modern Company Law

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A presentation on "Overview of Modern Company Law: Companies Bill 2012" given at NIRC- ICSI.

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Companies Bill 2012 : Overview of Modern Company Law

  1. 1. Overview OF Companies Bill 2012- An Introduction 23rd Feb 2013 New Delhi2/23/2013
  2. 2. "The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn." Alvin Toffler – Eminent Writer of USA2/23/2013
  3. 3. The Era of Opportunities2/23/2013
  4. 4. The Companies Bill, 2012 HIGHLIGHTS 29 Chapters, 470 Sections & 7 Schedules Substantial Part of the Bill in form of rules which are to be prescribed separately 33 New Definitions2/23/2013
  5. 5. A Paradigm Shift For the Corporate The Companies Act, 1956 The Companies Bill, 20122/23/2013
  6. 6. Re-enacting the Companies Act, 1956 THE OBJECTIVE Bringing Flexibility & Adoption of Effective protection Internationally for different Accepted Practices sections of Society Self Regulation Healthy Growth of with more India Inc. disclosures Stringent Efficient Punishment for enforcement of law violation2/23/2013
  7. 7. The Companies Bill, 2012 MAJOR CHANGES PROPOSED Corporate New Concepts Corporate Liberalization Governance Governance Disclosures & Enforcement of Investor Accountability Law Protection Restructuring2/23/2013
  8. 8. Highlights New Concepts2/23/2013
  9. 9. The Companies Bill, 2012 NEW CONCEPTS Introduction of One Person Company One Woman Director on Board of Specific Class Class Action suits by members against prejudicial acts of the Company Management Specification of term “Associate Company” Introduction of Registered Valuer2/23/2013
  10. 10. The Companies Bill, 2012 NEW CONCEPTS Fast Track Merger for Holding & Subsidiary Companies, Cross Border Merger Introduction of Dormant Company Use of electronic mode: E-voting, E-participation of experts, Board Meeting through video conferencing Maintenance of documents, records, registers, books of accounts, etc. in e-form Summary procedure for winding-up of Companies2/23/2013
  11. 11. Major changes towards Corporate Governance2/23/2013
  12. 12. The Companies Bill, 2012 ENHANCED CORPORATE GOVERNANCE At least 1/3rd of the directors of the board of listed company should be Independent Directors Independent directors can serve 2 consecutive terms of 5 years each on the Board of a Company. Liability of Independent Directors made limited Mandatory Internal & Secretarial Audit for prescribed Companies Compulsory rotation of Individual Auditors every 5 years & of Audit firms every 10 years, cap of 20 Companies for audit by a firm2/23/2013
  13. 13. The Companies Bill, 2012 ENHANCED CORPORATE GOVERNANCE Quorum of General Meeting of a Public Company to depend upon the number of its members Instead of Conducting EGM, Private Companies have the option of Postal Ballot for business conduction Restriction on Insider Trading & Forward Dealing by Directors & Key Managerial Personnel2/23/2013
  14. 14. The Companies Bill, 2012 IMPROVED CORPORATE ENHANCED CORPORATE GOVERNANCE GOVERNANCE Consolidated financial statements of all subsidiaries to be laid before AGM along with financials, subsidiaries to include Associate companies & Joint Ventures Provision to spend at least 2% of Average Net Profit on CSR by Companies meeting a specific criteria The Scope of Officer in default has been widened to include Share Transfer Agents, Registrars Merchant Bankers For uniformity & better compatibility, Financial year of the Companies can be from April to March only exceptions: Foreign Holding/ Subsidiary subject to tribunal’s approval)2/23/2013
  15. 15. The Companies Bill, 20122/23/2013
  16. 16. The Companies Bill, 2012 SOME LIBERAL PROVISIONS Bifurcation of the Objects No approval from Central clause into main, ancillary & Govt. for related party other objects has been transaction/loan to Director done away with. Only - (Section 295, 297 objects to be stated in MOA approval has been done away with) For paying monthly salary to Non-Executive director Rationalization of (Some Limits) – (Section process of removing 309(4) approval has been the name of Company done away with) by ROC For holding the place of profit by the Director to in Enabling provisions Company or its Subsidiary – for issue of GDRs (Section 314 approval has been done away with)2/23/2013
  17. 17. Major changes towards Disclosures & Accountability2/23/2013
  18. 18. The Companies Bill, 2012 DISCLOSURES & ACCOUNTABILITY The bill defines the term Private Placement: PRIVATE PLACEMENT OFFER CONDITIONS PUBLIC OFFER  Offer to section of public Comply with provisions of Bill, other than QIBs Securities Contract Regulation Act, 1956 and SEBI Act, 1992  Not more than 50 number of people or such higher number as may be prescribed YES NO  In compliance of prescribed terms & conditions Conditions fulfilled?  Made through Private Placement offer letter and not Prospectus2/23/2013
  19. 19. The Companies Bill, 2012 DISCLOSURES & ACCOUNTABILITY Exit opportunity to Enhanced Disclosures in the dissenting shareholders if Prospectus , source of the Company intends to vary promoters contribution is the objects as specified in also required to be disclosed the Prospectus Company Investment Disclosure of interest of through more than 2 layers every director now of Investment Companies mandatory & not not allowed (exemptions discretionary available)2/23/2013
  20. 20. The Companies Bill, 2012 DISCLOSURES & ACCOUNTABILITY Duties of Directors towards Disclosure of the Risk the Company now Management Policy in the prescribed Board Report Scope of officer in default widened to include directors Streamlined procedure & aware of the default by way of disclosure with regard to their participation in the board Related Party Transactions - meeting or receipt of minutes2/23/2013
  21. 21. The Companies Bill, 2012 DISCLOSURES & ACCOUNTABILITY Immunity to Independent & Non- Executive Directors not being Promoters or KMPs (Liability only if the act occurred with their knowledge attributable through Board Process)2/23/2013
  22. 22. Major changes towards Compliances & Enforcements2/23/2013
  23. 23. The Companies Bill, 2012 ENFORCEMENT OF LAW Establishment of National Company Law Tribunal Establishment of Special Courts, Mediation & Conciliation panel for speedy trial of offences under the Act Concept of fraud is introduced, Stringent Punishments in case of fraud & coverage of more activities under fraud2/23/2013
  24. 24. The Companies Bill, 2012 COMPLIANCES & ENFORCEMENTS Imprisonment & twice the prescribed penalty in case of repeated defaults committed within a span of 3 years Offences punishable with fine or imprisonment or both to be compounded only by Special Courts2/23/2013
  25. 25. The Companies Bill, 2012 ENFORCEMENT OF LAW Serious Fraud Investigation Office (SFIO)- A separate agency for investigation of Company related frauds • Centralized Agency for investigating the affairs of the Company • The power of other authorities for investigation shall be stopped once the case has been authorized to SFIO • Power to Arrest2/23/2013
  26. 26. Major changes towards Investor Protection2/23/2013
  27. 27. The Companies Bill, 2012 INVESTOR PROTECTION Class Action suit empowering minority shareholders Provision for purchase of minor shareholding in case of acquisition Mandatory Exit Opportunity to the dissenting shareholders in case of Change of Objects or terms of Contract in Prospectus2/23/2013
  28. 28. The Companies Bill, 2012 INVESTOR PROTECTION Shares in respect of which unpaid/unclaimed dividend has been transferred to IEPF shall also be transferred to IEPF Person claiming Share/amount in the Unpaid Dividend Account that got transferred to IEPF may apply to the authority for the money claimed/Shares2/23/2013
  29. 29. Highlights Restructuring2/23/2013
  30. 30. The Companies Bill, 2012 RESTRUCTURING Process of revival & Provision for rehabilitation of Cross Merger Sick Amalgamations Companies overhauled Easy merger Abolition of the of Holding & concept of Subsidiary treasury shares Companies -2/23/2013
  31. 31. The Elevated Horizon The Elevated Horizon For For For For Investor Entrepreneurs Regulator Professional16.01.2010
  32. 32. The Elevated Horizon For Entrepreneurs2/23/2013
  33. 33. The Elevated Horizon FOR ENTREPRENEURS Self Regulatory Regime One Person Company Simplified merger of Small Special Provisions for Small Companies & Holding/ Companies Subsidiary Companies Recognition of Partnership Liberalization of Related or Association of up to 100 Party Transactions Members Time Bound rehabilitation of Sick Companies2/23/2013
  34. 34. The Elevated Horizon For Regulators2/23/2013
  35. 35. The Elevated Horizon FOR REGULATORS Towards the NATION  More avenues for global representation owing to the streamlined procedures  Flexibility in functioning due to framework of rules  Increased time value due to Self Regulatory regime with dictum of “  Exhaustive database creation for Nation Building2/23/2013
  36. 36. The Elevated Horizon FOR REGULATORS Towards the ENTREPRENEURS  Growth orientation & Liberalized outlook  Automated systems & self governance regime  Increased Quasi Judicial Authorities for faster action  More health checks for corporates and more shelf life through rehabilitation & restructuring modes  Facilitation of inorganic growth through relaxed provisions2/23/2013
  37. 37. The Elevated Horizon FOR REGULATORS Towards the INVESTORS  Systematic Dispute Management System  Ability to peruse Class Action Suits2/23/2013
  38. 38. The Elevated Horizon For Investors2/23/2013
  39. 39. The Elevated Horizon FOR INVESTORS  Better participation in decision making due to e-voting regime  Increased Investor Awareness by availability of more information on line on public portals  Responsive Investor Protection  Better dissemination of information from India Inc.  Ability to file Class Action Suit2/23/2013
  40. 40. The Elevated Horizon For Professionals2/23/2013
  41. 41. The Elevated Horizon For Professionals Slates are being re-written, you should be the torch bearer to guide the corporates, professionals and investor community New law brings new interpretations and issues leading to increased need for opinions and advisory Increased compliance & stringent penalties will stimulate the role of Company Secretary Increased shareholders rights and activism will lead to greater focus on company-investor relationship2/23/2013
  42. 42. The Elevated Horizon For Professionals New law brings everyone at par, presents golden opportunity for young professionals2/23/2013
  43. 43. Companies Bill 2012 “Belief in self & not in legal “OPPORTUNITIES AHEAD FOR support” COMPANY SECRETARY ”2/23/2013
  44. 44. Opportunities ahead “ Current Role Future Ahead • Certification • Compliance Certificate • Secretarial Audit • Minutes of the Meetings • Corporate Compliance • Maintenance of Management Statutory Documents • Entire Company Law • Annual Filling • Strategic Advisory • Routine Procedural • Vigilance Officer Works2/23/2013
  45. 45. A stitch in time saves nine “ secret of & not in in life “TheBelief in selfsuccesslegal is for a man support” to be ready for his opportunity when it comes -Benjamin Disraeli Ex – British Prime Minister Thanks Pavan Kumar Vijay2/23/2013

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