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Companies act 2013
- 1. cs.ahaladarao@gmail.com 1 By CS Ahalada Rao .V
- 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 2cs.ahaladarao@gmail.com
- 3. HOW THIS ACT WAS ENACTED? cs.ahaladarao@gmail.com 3
- 4. Journey Till Now • Companies Bill, 2011 introduced in Lok Sabha on 14th December 2011 4cs.ahaladarao@gmail.com
- 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 5cs.ahaladarao@gmail.com
- 6. You know why the new Act has been introduced ? cs.ahaladarao@gmail.com 6
- 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 8cs.ahaladarao@gmail.com
- 10. OVERALL VIEW OF THE ACT 10cs.ahaladarao@gmail.com
- 14. Private Company Companies Act, 2013 Companies Act, 1956 200 Maximum number of Members 50 14cs.ahaladarao@gmail.com
- 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 15cs.ahaladarao@gmail.com
- 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 16cs.ahaladarao@gmail.com
- 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. 17cs.ahaladarao@gmail.com
- 19. 19 SMALL COMPANY – PRIVILAGES cs.ahaladarao@gmail.com
- 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. 23cs.ahaladarao@gmail.com
- 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 31cs.ahaladarao@gmail.com
- 34. Resignation of Directors • No provisions in the old Companies Act. • Section 168 of the Companies Act, 2013 contains provisions regarding resignation of Directors 34cs.ahaladarao@gmail.com
- 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 36cs.ahaladarao@gmail.com
- 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 37cs.ahaladarao@gmail.com
- 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 40cs.ahaladarao@gmail.com
- 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 43cs.ahaladarao@gmail.com
- 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 • 2 members personally present 44cs.ahaladarao@gmail.com
- 46. How to set standards when you made mistakes ? cs.ahaladarao@gmail.com 46
- 47. 47 Standard :
- 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 53cs.ahaladarao@gmail.com
- 55. IMPACT OF SECRETARIAL AUDITIMPACT OF SECRETARIAL AUDIT 55 cs.ahaladarao@gmail.com
- 57. cs.ahaladarao@gmail.com 57 Role Of Professionals
- 58. cs.ahaladarao@gmail.com 58 New Opportunities for Professionals
- 60. E- Governance Maintenance and inspection of documents by companies in electronic form allowed 60cs.ahaladarao@gmail.com
- 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 63cs.ahaladarao@gmail.com
- 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 66cs.ahaladarao@gmail.com
- 69. 69 Follow me on….. https://www.facebook.com/ahaladarao @ csvahaladarao cs.ahaladarao@gmail.com Thank You!!!
Editor's Notes
- (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.