Companies Bill 2012,compnies act 1956 - PPT.pptx

NEED 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.
Introduction

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Need for Companies Bill 2012

Need for Companies Bill 2012

INTRODUCTION
Companies Bill Companies Act, 1956
470 SECTIONS 658
29 Chapters CHAPTERS/ PARTS
13 Parts, Further divided
into Chapters
7 SCHEDULES 15
Number of Sections

New Concepts
One person Company
Key Managerial Personal
Class Action Suit
Small Company

• “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
• “Small Company” (Clause 2(85)) – Means a company with paid
up capital < 50 lakh or whose turnover < 2 crore
New Concepts

Existing Concepts – Definition
Promoter
Associate Company
Related Party
Foreign Company
Independent Director
Financial Statement

• “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

• “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

• “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

• “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.
Existing Definition – Modifications

• Commencement of Business
• Statutory Meetings
• Concept of Compliance Certificate
Deleted Concepts

Companies
Bill, 2012
Companies
Act, 1956
Both Public
Companies
and Private
companies
Applicable to
Public
companies
No Certificate
Issued
Certificate Issued COB
Documents to be submitted under new bill:
1. Declaration by Directors of payment of
money by subscribers of MOA
2. Verification of Registered office filed with
ROC
Commencement of Business

• 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 - Exemptions

• 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
One Person Company - Incorporation

Memorandum and Articles of
Association
Power of Tribunal – Incase of Wrong/false info. /Misrepresentation/fraudulent
actions `
• 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

Association
Companies Bill, 2012 Companies Act, 1956
Divided into
- Objects to be pursed by
Company on
incorporation
- Incidental Objects
MOA objects
Divided into
- Main objects
- Incidental objects
- Other objects
To be filed with ROC
within 15 days
Alteration of AOA
To be filed with ROC
within 30 days

Association
Companies Bill, 2012 Registered Office Companies Act, 1956
On and from 15th day of
incorporation
Company shall have
On and from 30th day of
incorporation
Central Government shall
dispose of application
with 60 days
Shift from one state to
another
No such time limit

Certificate of Incorporation
Companies Bill, 2012 Companies
Act, 1956
Not a Conclusive Evidence Certificate of Incorporation
Conclusive
Evidence
Clause 7 Section 35

• Companies Not
Required to conduct
Statutory Meeting
Statutory Meeting to
be conducted
• Every Company:
Limited by Shares
Limited by guarantee
Except Private Limited
Co.
Statutory Meeting

Offer of Sale
Companies Bill, 2012 Companies
Act, 1956
Under Clause 28
•Members of the Company in
consultation with the board can
offer there shares to public
•Such Offer of Sale shall be
deemed to be a “Prospectus
issued by the Company”
Offer of Sale
No such
provision
exists under
the Act

Issue and Allotment of Securities
Under Clause 53
• Issue of shares at discount -
prohibited except Sweat Equity
Shares
Issue of Shares at
Discount
Under Section 79
Shares can be issued
at discount
Under clause 27(2)
•Exit offer should be given to
dissenting shareholders by
promoters or controlling
shareholders
Exit Offer by
promoters to
dissenting
shareholders
No such Provision
Exists

Dematerialisation
Mandatory Clause 29 for:
• Companies Making public
offer
• Certain Companies as may be
specified
Issue of Securities in
Dematerialized Form
Only
Mandatory Sec 68B
for every listed
company making IPO
of any security for a
sum of 10 crore or
more

Under Clause 62
Applicable to Both Private
and Public Companies
Provisions of Rights Issue
Under Section 81
Applicable only to public
companies
Under Clause 47
•Bill Doesn’t Differentiate
cumulative and non-
cumulative preference
shares
•Same period prescribed
after which preference
shareholders have voting
rights
Voting Rights of Preference
Shareholders
Different period are
specified for Cumulative
and Non-Cumulative
Preference Shares after
which preference
shareholders have voting
rights
Share Capital and Debentures

Under Clause 55(2)
Redeemable preference
shares with a term of more
than 20 years can be issued
by a company limited by
shares
Issue of preference Shares
for infrastructural projects
Preference shares with a
term of more than 20 years
cannot be issued under the
act
Preference Share

Acceptance of Deposits

Companies Bill, 2012 Deposits from members Companies Act, 1956
To be framed by Reserve
Bank of India
Rules
For all deposits Companies
(acceptance of deposits)
Rules, 1975 are applicable
Under Clause 73 (2)
General Meeting resolution
from members required to
accept deposits
Authorization
Companies Can accept
deposits from members
Circular to Members and
circular to Registered with
ROC
Mode of Intimation
Advertisements in
newspaper and Statement
in lieu of advertisement to
be filed with ROC for all
deposits

Companies Bill, 2012 Deposits from public Companies Act, 1956
To public companies having
such net worth or turnover
as may be prescribed
Applicability To all public companies
• Mandatory
• From Recognized rating
agency
• To be obtained every
year during the tenure
of deposits
Credit Rating Not Required
All provisions applicable to acceptance of deposits from members shall apply mutatis
mutandis to acceptance of deposits from public

Under clause 77
• Wide and ambiguous
• Covers
 Property
 Assets
 Any of its
undertaking, whether
tangible or otherwise
Scope
Definite and clear
Can allow registration
within period of 300 days
of creation of charge on
payment of additional fee
Power of ROC
ROC can condone delay for
registration beyond 30 and
within 60 days from date of
creation of charge
Registration of Charge

Punishment for Contravention Under Clause 86
Penalty levied on:
• Company
1. Not less than Rs. 100,000 and Not more than Rs. 10,00,000
• Every officer in default
1. Imprisonment up-to 6 months or
2. Fine which is not less than Rs. 25,000 or both
Registration of Charge

Under clause 92
More Disclosures
Content
Minimal Disclosures
Annual Return

New disclosures to be made:
•Change of promoters/ KMP since previous FY
•Details of meetings of Board/Committee’s/ Members or class thereof along with
attendance details
•Remuneration of Directors, KMP
•Penalties/Punishment imposed on:
 Company
 Directors or Officers
 Compounding of offences
 Appeals against penalty or punishment
Annual Return

New disclosures to be made:
• Certification of Compliances, Disclosures
•Details of shares held by or on behalf of FII
Annual Return
Return 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

Companies Bill, 2012 Signing Companies Act, 1956
• Director and CS
• Where no CS, by CS in
Practice
General Companies
•Director and Manager/
Secretary
•If No Manager/Secretary,
then by CS in practice
•Company Secretary
•If no, CS, by Director
One Person/ Small
Company
Not Applicable
To be also certified by CS in
practice
Listed Company/ Other
prescribed Companies
Only Listed Companies
Annual Return

• Balance sheet
• Statement of Profit and
Loss/ Income and
Expenditure Account
• Cash Flow statement
• Statement showing
Changes in equity
• Notes of the above
Include
• Balance Sheet
Loss
• Notes
Under clause 131,
voluntary revision of
Financial statements and
Boards report is possible
Revision of Financial
Statements
No such revision possible
Financial Statements

• Balance sheet and
Statement of Profit and
Loss including
consolidated financial
statement
• Cash Flow statement
• Statement showing
Changes in equity
• Notes of the above
Submission at AGM
• Balance Sheet
Loss
• Notes
To be filed with ROC within
30 days of AGM or
adjourned AGM
Un adopted Financial
Statements
No such provision
Financial Statements

Within 9 months of end of FY First AGM
Within 18 months from
date of incorporation
In case of Public Co.
• 5 members where no. members is <
1000
• 15 members where no. of members
is 1000 >≤ 5000
• 30 members where no. of members
is > 5000
In case of Private Company
2 members personally present
Quorum
Public Company
5 members personally
present
Private Companies
2 members personally
present
Annual General Meeting

Companies Bill, 2012 Demand for Poll Companies Act, 1956
By Person/ Proxy Holding:
• ≥ 1/10 voting power or shares
• Shares with value of more than Rs.
500,000
Public Company
By Person/Proxy Holding:
• ≥ 1/10 voting power
• Paid up Shares with value
of more than Rs. 50,000
By any member(s)/proxy with ≥ 1/ 10
voting power
Other Company
Private Company with:
• <7 members personally
present , by any member
• >7 members, by two
members
Other Company:
By member(s)/proxy with >
1/10 voting power

 National holidays
 Outside Business Hours (9am to
6pm)
AGM Cannot be
on
 Public Holidays and
 Outside Business Hours
Either in writing or electronic mode Mode of Notice In writing
Consent of not less than 95 % of
members entitled to vote at that
meeting required
Shorter Notice
Consent of All members
entitled to vote required

Definitions:-
“National Holiday” means and includes a day declared as National Holiday by the
Central Government.
“Public holiday" means a public holiday within the meaning of the Negotiable
Instruments Act, 1881;
The expression" public holiday" includes Sundays and any other day declared by the
Central Government, to be a public holiday

Under Clause 204, Mandatory for:
• All Listed Companies
• Such Class of Companies as may be
prescribed
Secretarial Audit Not Mandatory
To include Secretarial Audit Report
Board’s Report Not Mandatory
Secretarial Audit

Statutory Recognition given under
Clause 118(10) and Clause 205
Secretarial
Standards
No provisions relating to
applicability
Secretarial Standards

Corporate Social Responsibility

Mandatory for all 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
Corporate Social
Responsibility
Not Mandatory
• CSR Committee
 Composition – 3 or more directors (at least one being Independent)
 Board Report to disclose the composition of CSR Committee
 At least 2% of Avg. Net Profits during immediately 3 preceding FY must be
spent on CSR activities and incase of failure to spend such amount, the
boards report such specify the reasons for not spending the amount.

Schedule VII – Activities which may be included by Companies in their CSR policies
 Eradicating extreme hunger and poverty
 Promotion of education
 Promoting gender equality and empowering women
 Reducing child mortlity and improving maternal health
 Combating HIV, Acquired Immune Deficiency Syndrome, Malaria and other
diseases
 Ensuring enviromental sustainability
 Employment enhancing vocational skills
 Social business projects
 Contributions to PM’s National Relief Fund or other fund set up by Central or State
Government etc.
Under Finance Bill 2013-14 - Funds provided by Corporates to business incubators
located in academic institutes will be considered as part of their CSR

Under Clause 123
Not Mandatory
Transfer to
Reserves
•Mandatory
•depends on rate of dividend
Under Clause 123(3)
and (6)
Restrictions on
declaration:
•Final
•Interim dividend
Restriction on
declaration of
Dividend
No Such Restrictions are provided
Dividend

Clause 124(2)
To be prepared within
90 days of transfer to
unpaid Dividend A/c
Statement of unpaid
Dividend
Companies are not
required to prepare any
such statement
Under clause 124(6)
Have to Transfer :
•Unpaid Dividend
•Respective Shares
Transfer of shares and
unpaid dividend
Under section 205A(5)
Only Unpaid Dividend
Dividend

Directorship

15* & can be increased by
Special Resolution passed
at General Meeting
Max. No. of
Directors
12* & can be increased
only with permission of
Central Government
Listed Companies – 1/3rd of
the Board
Independent
Directors
No such provision
≥ 1 director who has been
in India - For ≥ 182 days in
the previous calendar year
Situation No such provision
Directorship

At least one Women Directors No such provision
•One term – 5 years
• Eligible for 2 consecutive
terms
• Cooling period – 3 years
Term of Independent
Directors
Can be appointed for 3 years
Directorship

Disqualified to be
appointed in all
companies
Failure to File:
• Accounts
• Annual Returns
• Repay deposits
• Interest on deposits etc.
Disqualified to be appointed
in public companies
Nominee Directors of:
• Financial Institutions
• Holding Co.
• Government
Not to be considered
Independent Directors
Nominee Directors No such provision
20*
Max. No. of
Directorships
15*
Directorship

Listed Company May
have one small
shareholder director
Small Shareholders Director
Public Co. having:
• Paid up capital ≥ 5 crore
• 1000 ≥ small shareholders
May have a representative
director
Clause 166 provides for
the duties of Directors
Duties of Directors
Duties of Directors are not
provided in the Act
A person acting as
Alternate Director for
any other director in the
Company cannot be
appointed-Clause 161(2)
Alternate Director No such Restriction
Directorship

• Cannot be appointed
• Unless the AOA authorize
Same person – MD
and Chairman
Can be Appointed
Special Resolution Ordinary
Applicable to:
• Public Co.
• Private Co.
Appointment of
MD/WTD
Applicable to:
•Public Co.
•Private Companies which are
subsidiary of public co.
Chairman and Managing Director
•Limits of Managerial Remuneration payable incase of inadequate profit has
been changed

Individual – Max. 5 years
LLP, Firm – Max. 10* years
Term of Auditor No such term specified
Provided in clause 144
Negative List of Services No Restrictions on services
Should form the majority
No. of Directors – 3
Audit Committee
Composition
No specific provision
present
No. of Directors - 3
Audit, Audit Committee and Appointment
of Auditors
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

• Fine – Rs. 25000 to Rs.
500,000
• 1 year imprisonment or
fine of Rs. 10,000 to Rs.
100,000 or both
Penalty for Non-
Compliance by Company
Fine up to Rs. 5000
• Fine – Rs. 25000 to Rs.
100000
• For Willful Contravention
– Imprisonment which may
extend to one year or fine
not less than Rs. 100,000
or both
Penalty for Non-
Compliance by Auditor
Fine up to Rs. 10000
Audit, Audit Committee and Appointment
of Auditors

Companies Bill, 2012 Companies Act,
1956
• No Buy-back within
1 year reckoned
from the date of
closure of the
preceding offer of
buy-back, if any.
Restriction on
further buy back
• No buy-back (made
in pursuance of the
resolution of the
board) within a
period of 365 days
reckoned from date
of the preceding
offer of buy-back
BUY BACK OF SHARES

Board Meeting

Companies Bill, 2012 Meetings Companies Act, 1956
• In Person
• Video conference
Mode In Person
≥ 7 days, through:
• Post
• Hand Delivery
• Electronic means
Notice
No Length of Notice
prescribed
• 4 every year
• ≤ 120 days between
meetings
Number
• 4 every year
• 1 in each quarter
•Shall be held at least
once in a year
Separate Meeting of
•No Such Provisions exist
Board Meeting

Every listed Company
and such other Company
shall have mandatorily
Applicability No provisions for such
committee exists
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
Nomination and Remuneration Committee

Companies With ≥ 1000:
Shareholders
• Debenture holders
• Deposit holders
• Any other security
- At any time
during the FY
Applicability
Not Applicable
To consider and resolve
the grievances of security
holders of the company
Mandate Not Applicable
Stakeholders Relationship Committee

• Strength – To be
decided by Board
• Chairman – Non
Executive Director
Composition Not Applicable
Stakeholders Relationship Committee

• Private Companies
• Public companies
Applicability
•Public Companies
•Deemed Public Companies
•Co. gives in ordinary
course of business at rate
not less than RBI
prescribed rates
• Loan to MD/WTD:
I. Pursuant to
conditions of
service
II. Pursuant to
Scheme approved
by members by
special resolution
Exemption
• Private Companies
• Banking Companies
• Loans by Holding to Subsidiary
Co. etc.
Loan to Directors

Except with consent of Board of Directors:
No Company shall enter into any contract or arrangement with a related party with
respect to –
 Sale, purchase or supply of any goods or materials
 Selling or otherwise disposing of, or buying, property of any kind
 Leasing of property of any kind
 availing or rendering of any services
 Appointment of any agent for purchase or sale of goods, materials, services or
property
 Such related party’s appointment to any office or place of profit in the Company,
its subsidiary Company or associate Company
 Underwriting the subscription of any security or derivatives thereof, of the
Company
Related Party Transactions

Important Points
Except with prior approval of members by Special Resolution, no contract or
arrangement can be entered in case of:
 Certain companies having such paid up capital as may be prescribed, or
 Transaction exceeding such sums as may be prescribed
No Member(s) shall vote on special resolution as aforesaid if he is a related party
Every Contract or arrangement entered into under Clause 188(1) shall be referred to
in the Board Report with justification
Where any contract or arrangement is entered into by a director or an employee
without consent of board or approval by special resolution:
 It is voidable and must be ratified within 3 months
 In case such transaction is with any Related Party, the directors concerned
shall indemnify the company against any loss incurred by it
Related Party Transactions

To include valuation
report Notice
Not Required to annex
valuation report
3/4 value of members/
creditors voting in:
• Person or
• Through proxy or
• Postal ballot
Special Majority
3/4 value of members/
creditors among members/
proxy/ creditors present and
voting
Compromises and Arrangements

Can be Raised only by
persons:
•Holding ≥ 10% of
shareholding
•≥ 5% of total
outstanding debt
Objections
Any Member/ Creditor/
Member through proxy
To be given to all
Statutory Authorities Like
RD/IT/CCI etc.
Notice of Meeting in case
of Merger
To be given to Regional
Director

Acquirer/PAC, persons/
group holding > 90% of
equity through:
• Amalgamation
• Share Exchange
• Conversion of securities
etc.
-May purchase the
minority shareholding
Purchase of Minority
shareholding by Majority
shareholders
No Specific provisions
present

• Can be included
• Incase of Listed
Companies, SEBI
Regulations need to be
complied with
Takeover Offer in Scheme
Can not be included

Chapter XVII talks
Registered Valuer
Registered Valuer
No provisions provided for
Registered Valuer
Where any valuation is required under the Act, a person registered as valuer shall be
appointed by:
Audit Committee
Where no Audit Committee, by Board
Registered Valuer

Registered Valuer
Liability of Registered Valuer
• Violation of Clause 247 (i.e.
provision relating to
Registered Valuer)
• Fine ≥ Rs. 25,000 and ≤ Rs. 100,000
• With Intention to Defraud
Company/ Members
• Imprisonment up to 1 year
• Fine ≥ Rs. 100,000 and ≤ Rs. 500,000
• When Convicted for the
aforesaid:
• Refund remuneration received from company
• 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 off

• 9 circumstances, but:
 3 removed
 3 added
Circumstances in which
Company may be wound
up by tribunal
• 9 Circumstances

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

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

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
Strike off by ROC – Circumstances

Application to ROC for Dormant Status
Can be made by:
• Company incorporated under the Act:
1. for future project or
2. To hold an asset or intellectual property AND
• Has no significant accounting transactions
• Or by an Inactive company
Dormant Company

Inactive Company means
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
Dormant Company
Significant Accounting Transaction mean any transaction other
than -
• Payment of fees by a Company to the Registrar
• Payments made by it to fulfill the requirements of this act or any other law
• Allotment of shares to fulfill the requirement of this act
• Payments for maintenance of its office and records

Important Points
• Only one board meeting to be held in each half of calendar year and gap
between 2 such meetings is not less than 90 days
• Financial Statement not to include Cash Flow Statement
• Shall have minimum no. of directors
Dormant Company

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