The Companies Bill 2012 has been refined, simplified to a large extent and it consists of 470 clauses and 7 schedules divided into 29 chapters, a far cry from 658 Sections and 15 Schedules in the present Companies Act, 1956
“Significant Influence” means control of at least twenty per cent. of total share capital, or of business decisions under an agreement;
Related Party with reference to a company to mean the following:A director or his relative A Key Managerial Person or his relativesA Firm, in which a director, manager or his relative is a partnerA private company in which a director or manager is a member or directorA public company in which a director or manager is a director or holds along with this relatives, more than two per cent of its paid up capital Any body corporate whose Board of Directors, Managing Director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or managerAny person on whose advice, directions or instructions a director or manager is accustomed to actAny company which is a holding, subsidiary or an associate company of such company or a subsidiary of a holding company to which it also a subsidiary Such other person as may be prescribed
2 (16) “charge” means an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage;2(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
2(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
14 (2) Every alteration of the articles under this section and a copy of the order of the Tribunal approving the alteration as per sub-section (1) shall be filed with the Registrar, together with a printed copy of the altered articles, within a period of fifteen days in such manner as may be prescribed, who shall register the same.
28. (1) Where certain members of a company propose, in consultation with the Board of Directors to offer, in accordance with the provisions of any law for the time being in force, whole or part of their holding of shares to the public, they may do so in accordance with such procedure as may be prescribed.(2) Any document by which the offer of sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company and all laws and rules made thereunder as to the contents of the prospectus and as to liability in respect of mis-statements in and omission from prospectus or otherwise relating to prospectus shall apply as if this is a prospectus issued by the company.
53. (1) Except as provided in section 54, a company shall not issue shares at a discount.(2) Any share issued by a company at a discounted price shall be void27(2) The dissenting shareholders being those shareholders who have not agreed to the proposal to vary the terms of contracts or objects referred to in the prospectus, shall be given an exit offer by promoters or controlling shareholders at such exit price, and in such manner and conditions as may be specified by the Securities and Exchange Board by making regulations in this behalf.
Voting Rights Under Clause 47(2)“Provided further that where the dividend in respect of a class of preference shares has not been paid for a period of two years or more, such class of preference shareholders shall have a right to vote on all the resolutions placed before the company”62. (1) Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered—to persons who, at the date of the offer, are holders of equity shares of the company in proportion, as nearly as circumstances admit, to the paid-up share capital on those shares by sending a letter of offer subject to the following conditions, namely:—62(3) Nothing in this section shall apply to the increase of the subscribed capital of a company caused by the exercise of an option as a term attached to the debentures issued or loan raised by the company to convert such debentures or loans into shares in the company:Provided that the terms of issue of such debentures or loan containing such an option have been approved before the issue of such debentures or the raising of loan by a special resolution passed by the company in general meeting.
55. (1) No company limited by shares shall, after the commencement of this Act, issue any preference shares which are irredeemable.(2) A company limited by shares may, if so authorised by its articles, issue preference shares which are liable to be redeemed within a period not exceeding twenty years from the date of their issue subject to such conditions as may be prescribedProvided that a company may issue preference shares for a period exceeding twenty years for infrastructure projects, subject to the redemption of such percentage of shares as may be prescribed on an annual basis at the option of such preferential shareholders:
73(2) A company may, subject to the passing of a resolution in general meeting and subject to such rules as may be prescribed in consultation with the Reserve Bank of India, accept deposits from its members on such terms and conditions, including the provision of security, if any, or for the repayment of such deposits with interest, as may be agreed upon between the company and its members, subject to the fulfilment of the following conditions,namely:—(a) issuance of a circular to its members including therein a statement showing the financial position of the company, the credit rating obtained, the total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the company and such other particulars in such form and in such manner as may be prescribed;(b) filing a copy of the circular along with such statement with the Registrar within thirty days before the date of issue of the circular;
73(2) A company may, subject to the passing of a resolution in general meeting and subject to such rules as may be prescribed in consultation with the Reserve Bank of India, accept deposits from its members on such terms and conditions, including the provision of security, if any, or for the repayment of such deposits with interest, as may be agreed upon between the company and its members, subject to the fulfilment of the following conditions,namely:—(a) issuance of a circular to its members including therein a statement showing the financial position of the company, the credit rating obtained, the total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the company and such other particulars in such form and in such manner as may be prescribed;(b) filing a copy of the circular along with such statement with the Registrar within thirty days before the date of issue of the circular;76. (1) Notwithstanding anything contained in section 73, a public company, having such net worth or turnover as may be prescribed, may accept deposits from persons other than its members subject to compliance with the requirements provided in sub-section (2) of section 73 and subject to such rules as the Central Government may, in consultation with the Reserve Bank of India, prescribe:Provided that such a company shall be required to obtain the rating (including its networth, liquidity and ability to pay its deposits on due date) from a recognised credit rating agency for informing the public the rating given to the company at the time of invitation of deposits from the public which ensures adequate safety and the rating shall be obtained for every year during the tenure of deposits
77. (1) It shall be the duty of every company creating a charge within or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise, and situated in or outside India, to register the particulars of the charge signed by the company and the charge-holder together with the instruments, if any, creating such charge in such form, on payment of such fees and in such manner as may be prescribed, with the Registrarwithin thirty days of its creation:Provided that the Registrar may, on an application by the company, allow such registration to be made within a period of three hundred days of such creation on payment of such additional fees as may be prescribed:
92. (1) Every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of the financial year regarding—(a) its registered office, principal business activities, particulars of its holding, subsidiary and associate companies;(b) its shares, debentures and other securities and shareholding pattern;(c) its indebtedness;(d) its members and debenture-holders along with changes therein since the close of the previous financial year;(e) its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year;(f) meetings of members or a class thereof, Board and its various committees along with attendance details;(g) remuneration of directors and key managerial personnel;(h) penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment;(i) matters relating to certification of compliances, disclosures as may be prescribed;(j) details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors indicating their names, addresses, countries of incorporation, registration and percentage of shareholding held by them; and (k) such other matters as may be prescribed
93. Every listed company shall file a return in the prescribed form with the Registrar with respect to change in the number of shares held by promoters and top ten shareholders of such company, within fifteen days of such change.
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.
137. (1) A copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting in such manner, with such fees or additional fees as may be prescribed within the time specified undersection 403:Provided that where the financial statements under sub-section (1) are not adopted at annual general meeting or adjourned annual general meeting, such unadopted financial statements along with the required documents under sub-section (1) shall be filed with the Registrar within thirty days of the date of annual general meeting and the Registrar shall take them in his records as provisional till the financial statements are filed with him after their adoption in the adjourned annual general meeting for that purpose
Under Companies Bill, 2012 – Statutory Recognition Clause 118(10) - Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980, and approved as such by the Central Government.clause 205 - the functions of the company secretary is mentioned to include, ensuring the company complies with the applicable secretarial standards.
As per the Companies Bill, 2012, every company having net worth of Rs. 500 crore or more or turnover of Rs. 1000 crore or Net profit of Rs. 5 crore or more, shall make every endeavor to ensure that the company spends, in every Financial year, at least 2% of the average net profits of the company made during the 3 immediately preceding financial years
Restriction on declaration of dividend Final Dividend-When the company fails to comply with the provisions of the bill relating to acceptance of and repayment of deposits, the company cannot issue any dividend during the period the non-compliance continuesInterim Dividend-As per Clause 123(3) of the Bill, in case the company has incurred loss during the current FY up to the end of the quarter immediately preceding the date of declaration of such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during the immediately preceding 3 financial years
124(6) All shares in respect of which unpaid or unclaimed dividend has been transferred under sub-section (5) shall also be transferred by the company in the name of Investor Education and Protection Fund along with a statement containing such details as may be prescribed:
Maximum number of companies in a person can be a DirectorUnder Companies Bill, 2012 Maximum number is 20Maximum Number of public companies in which he can be a director is 10In calculation of limits, alternate directorships and private company directorships are included
Managerial Remuneration in case of Inadequate profits Under Companies Bill, 2012 Under Companies Act, 1956Effective Capital – Yearly limit (Rs.) Effective Capital –Monthly limit (Rs. )Less than 5 crore – 30 lakhs Less than 1 crore – 75,0005 to 100 crore – 42 lakhs 1 to 5 crore - 1,00,000100 to 250 crore – 60 lakhs 5 to 25 crore – 1,25,000250 crore and above – 60 lakhs plus 0.01% 25 to 50 crore – 1,50,000of the effective capital in excess of Rs. 250 crore 50 to 100 crore – 1,75,000 100 crore and more 2,00,000
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 itsemployees; or(ii) pursuant to any scheme approved by the members by a specialresolution; 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.
Companies bill 2012 vis a-vis companies act, 1956
Companies Bill 2012 vis-a-vis Companies Act,1956 By G. Praneeth Abhishek Student of Institute of Company Secretaries of India Student Reg. No. 320617948/09/2010
IntroductionNEED FOR COMPANIES BILL 2012• 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.
Number of Sections INTRODUCTIONCompanies Bill Companies Act, 1956470 SECTIONS 658 13 Parts, Further divided29 Chapters CHAPTERS/ PARTS into Chapters7 SCHEDULES 15
New Concepts• “One Person Company” (Clause 2(62)) – A Company which has a Single Member• “Key Managerial Personal” (Clause 2(51)) – Includes CEO, MD, Manager, Company Secretary and CFO (if appointed by the Board of Directors)• “Class Action Suit” (Clause 37) - Class action suits can be filed by person or group of persons affected by any misleading statement or the inclusion or omission of any matter in the prospectus
New Concepts• “Small Company” (Clause 2(85)) – Means a company with paid up capital < 50 lakh or whose turnover < 2 crore
Existing Concepts – Definition• “Promoter” (Clause 2(69)) – Includes a person – Named in prospectus/ identified by company as such in Annual Return – Who has control over the affairs of the company – In whose directions the directors are accustomed to act• “Associate Company” (Clause 2(6))- Means a company in which other company has significant influence (Excluding Subsidiary Company) and includes a Joint Venture company
Existing Concepts – Definition• “Related Party” (Clause 2(75)) – Elaborate definition is given in Companies Bill, 2012, which is not present in Companies Act, 1956.• “Foreign Company” (Clause 2(42)) – Means a company or body corporate incorporated outside India• “Independent Director” (Clause 149(5)) – Definition has been given for the first time, and nominee director cannot be considered a independent director
Existing Concepts – Definition• “Financial Statements” Clause 2(40) includes the following – Balance sheet – Statement of profit and loss account/ Statement of income and expenditure – Cash flow statement (not applicable for one person and small companies) – A statement of changes in equities, if applicable – Any Explanatory statement note, annexed or forming part of any document referred above
Existing Definition – Modifications• “Charge” (Clause 2(16)) - Means an interest or lien created on the property or assets of a company or any of its undertaking or both as security and includes a mortgage• “Private Company” (Clause 2(68)) – Limit of Members extended from 50 to 200• “Subsidiary Company” (Clause 2(87)) – As per changes made – No distinction between equity and preference share capital in calculation of > 50% – Company includes Body Corporate (i.e. Subsidiary or Holding) – There is a limit to number of step down subsidiaries
Existing Definition – Modifications• “Financial Year” Clause 2(41) means, in relation to any company or body corporate, the period ending on the 31st day of March every year.
One Person Company - Exemptions• Financial Statement doesn’t need to include cash flow statement• Signing of Annual Return: – By Company Secretary in employment or – By 1 Director (Where no CS)• Exemption from conducting Annual General Meeting• Approval of Financial statements can be done by only one director for submission to auditors
One Person Company - Exemptions• Min. No. of directors is only 1• Only 1 board meeting conducted in each half calendar year, deemed proper compliance
One Person Company - Incorporation• The MOA of the One person company to include: – Name of Nominee – Consent of Nominee – Nominee can be changed (and such change not treated as Alteration of MOA)• One person Company can be: – Limited by shares – Limited by guarantee – Unlimited company• Capital : – Minimum – Rs. 100,000 – Maximum – No limit
Memorandum and Articles of AssociationPower of Tribunal – Incase of Wrong/false info. /Misrepresentation/fraudulentactions `• Pass such Orders for/to: Regulation of Management of Company Changes in MOA, AOA• Direct the liability of members to be unlimited• Pass order for winding up• Pass such other orders, as it deems fit
Memorandum and Articles of Association Companies Bill, 2012 Companies Act, 1956Divided into Divided into- Objects to be pursed by - Main objectsCompany on MOA objects - Incidental objectsincorporation - Other objects- Incidental ObjectsTo be filed with ROC To be filed with ROC Alteration of AOAwithin 15 days within 30 days
Memorandum and Articles of Association Companies Bill, 2012 Registered Office Companies Act, 1956On and from 15th day of On and from 30th day of Company shall haveincorporation incorporationCentral Government shall Shift from one state todispose of application No such time limit anotherwith 60 days
Commencement of Business Companies Bill, 2012 Companies Act, 1956Both Public Companies Applicable to Public companiesand Private companiesNo Certificate Issued Certificate Issued COBDocuments to be submitted under new bill:1. Declaration by Directors of payment of money by subscribers of MOA2. Verification of Registered office filed with ROC
Issue and Allotment of SecuritiesCompanies Bill, 2012 Companies Act, 1956 ConclusiveNot a Conclusive Evidence Certificate of Incorporation EvidenceClause 7 Section 35
Issue and Allotment of SecuritiesCompanies Bill, 2012 Companies Act, 1956Under Clause 28•Members of the Company inconsultation with the board can No suchoffer there shares to public Offer of Sale provision exists under the Act•Such Offer of Sale shall bedeemed to be a “Prospectusissued by the Company”
Issue and Allotment of SecuritiesCompanies Bill, 2012 Companies Act, 1956Mandatory Clause 29 for: Mandatory Sec 68B for every listed Issue of Securities in• Companies Making public company making IPO Dematerialized Formoffer of any security for a Only• Certain Companies as may be sum of 10 crore orspecified more
Issue and Allotment of SecuritiesCompanies Bill, 2012 Companies Act, 1956Under Clause 53 Under Section 79• Issue of shares at discount Issue of Shares atprohibited Discount Shares can be issued• Sweat Equity shares can be at discountissued at DiscountUnder clause 27(2)•Exit offer should be given to Exit Offer by No such Provisiondissenting shareholders by promoters to Existspromoters or controlling dissentingshareholders shareholders
Share Capital and DebenturesCompanies Bill, 2012 Companies Act, 1956Under Clause 62 Under Section 81Applicable to Both Private Provisions of Rights Issue Applicable only to publicand Public Companies companiesUnder Clause 47•Bill Doesn’t Differentiate Different period arecumulative and non- specified for Cumulativecumulative preference and Non-Cumulative Voting Rights of Preferenceshares Preference Shares after Shareholders•Same period prescribed which preferenceafter which preference shareholders have votingshareholders have voting rightsrights
Share Capital and DebenturesCompanies Bill, 2012 Companies Act, 1956Under Clause 55(2) Preference shares with aRedeemable preference Issue of preference Shares term of more than 20 yearsshares with a term of more for infrastructural projects cannot be issued under thethan 20 years can be issued actby a company limited byshares
Acceptance of DepositsCompanies Bill, 2012 Deposits from members Companies Act, 1956 For all deposits CompaniesTo be framed by Reserve Rules (acceptance of deposits)Bank of India Rules, 1975 are applicableUnder Clause 73 (2) Companies Can acceptGeneral Meeting resolution Authorization deposits from membersfrom members required toaccept deposits Advertisements inCircular to Members and newspaper and Statementcircular to Registered with Mode of Intimation in lieu of advertisement toROC be filed with ROC for all deposits
Acceptance of DepositsCompanies Bill, 2012 Deposits from public Companies Act, 1956To public companies havingsuch net worth or turnover Applicability To all public companiesas may be prescribed• Mandatory• From Recognized rating agency Credit Rating Not Required• To be obtained every year during the tenure of depositsAll provisions applicable to acceptance of deposits from members shall apply mutatismutandis to acceptance of deposits from public
Registration of ChargeCompanies Bill, 2012 Companies Act, 1956Under clause 77• Wide and ambiguous• Covers Property Assets Definite and clear Scope Any of its undertaking, whether tangible or otherwiseCan allow registration ROC can condone delay forwithin period of 300 days registration beyond 30 and Power of ROCof creation of charge on within 60 days from date ofpayment of additional fee creation of charge
Annual ReturnNew disclosures to be made:•Change of promoters/ KMP since previous FY•Details of meetings of Board/Committee’s/ Members or class thereof along withattendance details•Remuneration of Directors, KMP•Penalties/Punishment imposed on: Company Directors or Officers Compounding of offences Appeals against penalty or punishment
Annual ReturnNew disclosures to be made:• Certification of Compliances, Disclosures•Details of shares held by or on behalf of FIIReturn by Listed Company – Clause 93• Every listed Company shall file with ROC, within 15 days a return with respect to change in number of shares: Held by promoters Top Ten Shareholders of such company
Annual ReturnCompanies Bill, 2012 Signing Companies Act, 1956• Director and CS •Director and Manager/• Where no CS, by CS in General Companies SecretaryPractice •If No Manager/Secretary, then by CS in practice•Company Secretary One Person/ Small Not Applicable•If no, CS, by Director CompanyTo be also certified by CS in Listed Company/ Other Only Listed Companiespractice prescribed Companies
Financial StatementsCompanies Bill, 2012 Companies Act, 1956• Balance sheet• Statement of Profit and Loss/ Income and • Balance Sheet Expenditure Account Include • Statement of Profit and• Cash Flow statement Loss• Statement showing • Notes Changes in equity• Notes of the aboveUnder clause 131,voluntary revision of Revision of Financial No such revision possibleFinancial statements and StatementsBoards report is possible
Financial StatementsCompanies Bill, 2012 Companies Act, 1956• Balance sheet and Statement of Profit and Loss including consolidated financial • Balance Sheet statement Submission at AGM • Statement of Profit and• Cash Flow statement Loss• Statement showing • Notes Changes in equity• Notes of the aboveTo be filed with ROC with Un adopted Financial30 days of AGM or No such provision Statementsadjourned AGM
Statutory MeetingCompanies Bill, 2012 Companies Act, 1956• Companies Not • Every Company: Statutory Meeting toRequired to conduct Limited by Shares be conductedStatutory Meeting Limited by guarantee Except Private Limited Co.
Annual General MeetingsCompanies Bill, 2012 Companies Act, 1956 Within 18 months fromWithin 9 months of end of FY First AGM date of incorporationIn case of Public Co. Public Company• 5 members where no. members is <1000 5 members personally• 15 members where no. of members presentis 1000 >≤ 5000 Quorum• 30 members where no. of members Private Companiesis > 5000 2 members personallyIn case of Private Company present2 members personally present
Annual General MeetingsCompanies Bill, 2012 Demand for Poll Companies Act, 1956By Person/ Proxy Holding: By Person/Proxy Holding:• ≥ 1/10 voting power or shares Public Company • ≥ 1/10 voting power• Shares with value of more than Rs. • Paid up Shares with value500,000 of more than Rs. 50,000 Private Company with: • <7 members personally present , by any memberBy any member(s)/proxy with ≥ 1/ 10 • >7 members, by two Other Companyvoting power members Other Company: By member(s)/proxy with > 1/10 voting power
Annual General MeetingsCompanies Bill, 2012 Companies Act, 1956 National holidays AGM Cannot be Public Holidays and Outside Business Hours (9am to on Outside Business Hours 6pm)Either in writing or electronic mode Mode of Notice In writingConsent of not less than 95 % of Consent of All members Shorter Noticemembers entitled to vote at that entitled to vote requiredmeeting required
Secretarial AuditCompanies Bill, 2012 Companies Act, 1956Under Clause 204, Mandatory for:• All Listed Companies Secretarial Audit Not Mandatory• Such Class of Companies as may beprescribedTo include Secretarial Audit Report Board’s Report Not Mandatory
Secretarial StandardsCompanies Bill, 2012 Companies Act, 1956Statutory Recognition given under Secretarial No provisions relating toClause 118(10) and Clause 205 Standards applicability
Corporate Social ResponsibilityCompanies Bill, 2012 Companies Act, 1956 Mandatory for certain Corporate Social Not Mandatory class of Companies Responsibility
DividendCompanies Bill, 2012 Companies Act, 1956 •MandatoryUnder Clause 123 Transfer to Reserves •depends on rate of dividendNot MandatoryUnder Clause 123(3)and (6)Restrictions on Restriction on declaration No Such Restrictionsdeclaration: of Dividend are provided•Final•Interim dividend
DividendCompanies Bill, 2012 Companies Act, 1956Clause 124(2) Statement of unpaid Companies are notTo be prepared within Dividend required to prepare any90 days of transfer to such statementunpaid Dividend A/cUnder clause 124(6) Transfer of shares and Under section 205A(5)Have to Transfer : unpaid dividend•Unpaid Dividend Only Unpaid Dividend•Respective Shares
DirectorshipCompanies Bill, 2012 Companies Act, 195615* Max. No. of Directors 12*Listed Companies – No such provision Independent Directors1/3rd of the BoardAt least one Women Directors No such provision≥ 1 director who hasbeen in India - For ≥ No such provision Situation182 days in theprevious calendaryear
DirectorshipCompanies Bill, 2012 Companies Act, 1956• One term – 5 years• Eligible for 2 Term of Independent Can be appointed for 3 yearsconsecutive terms Directors• Cooling period – 3 years Failure to File:Disqualified to be • Accounts Disqualified to be appointedappointed in all • Annual Returns in public companiescompanies • Repay deposits • Interest on deposits etc.Nominee Directors of:• Financial Institutions• Holding Co.• Government Nominee Directors No such provisionNot to be consideredIndependent Directors
DirectorshipCompanies Bill, 2012 Companies Act, 1956 Public Co. having:Listed Company May • Paid up capital ≥ 5 crorehave one small Small Shareholders Director • 1000 ≥ small shareholdersshareholder director May have a representative director20* Max. No. of Directorships 15*Clause 166 provides forthe duties of Directors Duties of Directors are not Duties of Directors provided in the Act
Chairman and Managing DirectorCompanies Bill, 2012 Companies Act, 1956• Cannot be appointed Same person – MD Can be Appointed• Unless the AOA authorize and ChairmanSpecial Resolution Ordinary Applicable to:Applicable to: Appointment of •Public Co.• Public Co. MD/WTD •Private Companies which are• Private Co. subsidiary of public co. •Limits of Managerial Remuneration payable incase of inadequate profit has been changed
Audit, Audit Committee and Appointment of Auditors Companies Bill, 2012 Companies Act, 1956 Individual – Max. 5 years Term of Auditor No such term specified LLP, Firm – Max. 10* years Negative List of Services No Restrictions on services Provided in clause 144 Audit Committee No specific provision Independent Directors Composition present Should form the majority No. of Directors - 3 No. of Directors – 3 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
Audit, Audit Committee and Appointment of Auditors Companies Bill, 2012 Companies Act, 1956 • Fine – Rs. 25000 to Rs. 500,000 Penalty for Non- Fine up to Rs. 5000 • 1 year imprisonment or Compliance by Company fine of Rs. 10,000 to Rs. 100,000 or both • Fine – Rs. 25000 to Rs. 100000 • For Willful Contravention Penalty for Non- Fine up to Rs. 10000 – Imprisonment which may Compliance by Auditor extend to one year or fine not less than Rs. 100,000 or both
BUY BACK OF SHARESCompanies Bill, 2012 Companies Act, 1956 • No buy-back (made in• No Buy-back within 1 pursuance of theyear reckoned from the resolution of the board) Restriction on further buydate of closure of the within a period of 365 backpreceding offer of buy- days reckoned from dateback, if any. of the preceding offer of buy-back
Board MeetingCompanies Bill, 2012 Meetings Companies Act, 1956• In Person Mode In Person• Video conference≥ 7 days, through: No Length of Notice• Post Notice prescribed• Hand Delivery• Electronic means• 4 every year • 4 every year Number• ≤ 120 days between • 1 in each quartermeetings
Nomination and Remuneration Committee Companies Bill, 2012 Companies Act, 1956 Every listed Company Applicability No provisions for such and such other Company committee exists shall have mandatorily Composition 3 or more Non – Executive directors, with not less than ½ being Independent Directors Functions 1. Identify Prospective directors and senior management, and 2. Recommend to board their appointment and removal 3. Formulate criteria for determining qualifications, positive attributes, independence of directors 4. Remuneration policy for directors and senior management 5. Carry out evaluation of every directors performance
Stakeholders Relationship CommitteeCompanies Bill, 2012 Companies Act, 1956Companies With ≥ 1000:Shareholders• Debenture holders• Deposit holders Not Applicable Applicability• Any other security - At any timeduring the FYTo consider and resolve Mandate Not Applicablethe grievances of securityholders of the company
Stakeholders Relationship CommitteeCompanies Bill, 2012 Companies Act, 1956• Strength – To bedecided by Board Composition Not Applicable• Chairman – NonExecutive Director
Loan to DirectorsCompanies Bill, 2012 Companies Act, 1956• Private Companies •Public Companies Applicability• Public companies •Deemed Public Companies•Co. gives in ordinarycourse of business at ratenot less than RBIprescribed rates • Private Companies• Loan to MD/WTD: • Banking Companies Exemption I. Pursuant to • Loans by Holding to conditions of Subsidiary Co. etc. service II. Pursuant to Scheme approved by members by special resolution
Compromises and ArrangementsCompanies Bill, 2012 Companies Act, 1956To include valuation Not Required to annexreport Notice valuation report3/4 value of members/ 3/4 value of members/creditors voting in: creditors among members/ Special Majority• Person or proxy/ creditors present and• Through proxy or voting• Postal ballot
Compromises and ArrangementsCompanies Bill, 2012 Companies Act, 1956Can be Raised only bypersons: Any Member/ Creditor/•Holding ≥ 10% of Objections Member through proxyshareholding•≥ 5% of totaloutstanding debtTo be given to all Notice of Meeting in case To be given to RegionalStatutory Authorities Like of Merger DirectorRD/IT/CCI etc.
Compromises and ArrangementsCompanies Bill, 2012 Companies Act, 1956Acquirer/PAC, persons/group holding > 90% ofequity through:• Amalgamation Purchase of Minority No Specific provisions• Share Exchange shareholding by Majority present• Conversion of securities shareholdersetc. -May purchase theminority shareholding
Compromises and ArrangementsCompanies Bill, 2012 Companies Act, 1956• Can be included• Incase of Listed Can not be included Takeover Offer in SchemeCompanies, SEBIRegulations need to becomplied with
Registered ValuerCompanies Bill, 2012 Companies Act, 1956 No provisions provided forChapter XVII talks Registered Valuer Registered ValuerRegistered Valuer•
Registered ValuerCompanies Bill, 2012 Companies Act, 1956 No provisions provided forChapter XVII talks Registered Valuer Registered ValuerRegistered ValuerWhere any valuation is required under the Act, a person registered as valuer shall beappointed by: Audit Committee Where no Audit Committee, by Board
Registered Valuer Liability of Registered Valuer• Violation of Clause 247 (i.e. • Fine ≥ Rs. 25,000 and ≤ Rs. 100,000provision relating toRegistered Valuer)• With Intention to Defraud • Imprisonment up to 1 yearCompany/ Members • Fine ≥ Rs. 100,000 and ≤ Rs. 500,000• When Convicted for the • Refund remuneration received from companyaforesaid: • Pay damages to Company or any person for loss arising out of incorrect or misleading statements of particulars in his report
Winding up and Strike offCompanies Bill, 2012 Companies Act, 1956 Circumstances in which• 9 circumstances, but: Company may be wound • 9 Circumstances 3 removed up by tribunal 3 added
Winding up and Strike off Circumstance which have been removed• Failure to commence business within 1 year• Minimum no. of members falling below prescribed limit• Failure to hold statutory meeting or deliver statutory report
Winding up and Strike off Circumstance which have been added• Affairs of the Company conducted in fraudulent manner• Company has been incorporated for fraudulent or unlawful means• Persons involved in the formation and management of its affairs have been: – Guilty of fraud – Misfeasance – Misconduct, in connection therewith, and that it is proper that the company be wound up
Strike off by ROC – Circumstances Circumstance which have been added• Failure to commence business within 1 year of incorporation• Within 198 days, subscribers to MOA have not paid subscription money• a company is not carrying on any business or operation for a period of 2 immediately preceding FY and has not made any application for obtaining the status of a dormant company