The document discusses key provisions of the Companies Act 2013 relating to one person companies (OPCs) and small companies. Some of the key points summarized are: 1. A company may now be formed as an OPC with a sole member and director, with the subscriber nominating another person and obtaining their consent at incorporation. 2. OPCs enjoy certain relaxations such as having a minimum of one director and not requiring board meetings if there is a sole director. 3. To qualify as a small company, a company must have a paid up capital of less than Rs. 50 lakhs or turnover of less than Rs. 2 crores and not be a subsidiary or holding company. Small companies enjoy

1. Companies Act 2013
IMPACT ON SMALL & MEDIUM COMPANIES
CA DS VIVEK
Partner, Suresh & Co.,
www. sureshandco.com

2. NEW CONCEPT – ONE PERSON COMPANY
A company may be an OPC having a sole member.
Formation of Company – Section 3
Subscriber of one person company (OPC) shall nominate another
person
MOA of OPC to have a specific succession clause stating name of
such person
Nominated person’s consent is required at the time of incorporation
Nominee may be changed – to be reported to ROC
12 Dec 2013
Suresh & Co

3. ONE PERSON COMPANY (OPC)
Relaxation provided:
• OPC can have minimum 1 Director
•Provisions of board meeting, quorum & interested director shall not apply to OPC
•Where an OPC has only 1 director, the date on which the resolution is signed and dated by
such director is considered as the date of the board meeting
•OPC need not hold AGM. File Financials with in 180 days. Annual Return can be signed by
Director and not by a CS
•Financial Statements can be signed by only 1 Director (No need for a Cash Flow)
•OPC can contract with the sole member who is Director
TAKE AWAY:
Converting a sole proprietary concern into OPC will help carrying on the business with limited liability, if the
conditions under tax laws are satisfied, such conversion may be tax neutral
12 Dec 2013
Suresh & Co

4. ONE PERSON COMPANY (OPC)
• One can incorporate not more than 5 OPCs
• Conversion of OPC into public or private company is permitted
• Mandatory conversion where Paid up exceed 50 lacs Or average Turn over for 3 years
exceeds 2cr
• “One Person Company” to be mentioned below the Name
•Board report can contain only comments on auditors qualifications or remarks
TAKE AWAY:
To Convert with in 6 months of event
12 Dec 2013
Suresh & Co

5. ONE PERSON COMPANY (OPC)
Incorporation of OPC
Natural Person
Indian Citizen &
Resident
Prior Consent
of Nominee
Board Meetings
1 per calendar half year
If only 1 director
No Meeting is required, merely intimation to company by the Director
•
12 Dec 2013
Suresh & Co

6. ONE PERSON COMPANY (OPC)
Section 193 - Contracts by one person company
OPC either limited by capital or
guarantee
Enters into a contract with sole members who is also the
Director
The Terms of
Contract
Contained in Memorandum
OR
Recorded in the Minutes of 1st Board Meeting held next after entering
the contract
• Sec 193 not applicable to the contracts entered by Co. in the ordinary course of business
• Every such contract entered by Co. u/s 193 shall intimate ROC within 15 days of its approval by board
12 Dec 2013
Suresh & Co

7. SMALL COMPANY
Not a Public Company
Paid up share capital less than 50 Lacs or higher amount as may be prescribed
(not exceeding Rs.5 Crores)
Turn over not more than Rs.2 Crore or higher amount as may be prescribed
(not exceeding Rs.20 Crore)
Not a holding or Subsidiary Company
12 Dec 2013
Suresh & Co

8. SMALL COMPANY BENEFITS
Relaxations provided to a small company and OPC:
Cash flow statement is not required
Annual Return can be signed by CS or one director if there is no CS
Board meeting is required to be held at least once in each half of a calendar year and the gap
between the 2 meetings is not less than 90 days
Merger process between 2 or more ̳small companies‘ is to be approved on fast track basis. Such
merger would require approval of ROC, OL, members holding at least 90% of total number of
shares and majority of creditors representing 9/10th in value
Auditors Rotation not applicable as per Draft Rules
12 Dec 2013
Suresh & Co

9. Benefits for Private Limited Company- New Act
Loan for Purchase of own Shares can continue to be given by Pvt Co ( sec 67 of new Act ) ( Sec 77 of Old
Act)
Sec 164 ( 1) & (2) provides various scenarios for Directors Disqualification of Appointment . As per Sec 164
(3) a Pvt Co in its Article provides for Additional Clause for disqualification of directors. This can be beneficial
to have business specific disqualifications.
Retirement of Directors by rotation – continues to be not applicable ( Sec 152(6) of New Act & Sec 255(1) of
Old Act )
Restriction on Remuneration to MD & WTD– in case of inadequate profits applicable only to public co. ( Sec
197 of the New Act and Sec 309 of the Old Act)
Section 190 provides Inspection by Members Copies of employment contracts/details of employment
contracts with Managing Director or WTD . This is exempted for a Pvt Co.
12 Dec 2013
Suresh & Co

10. Benefits for Private Limited Company- New Act-2
Sec 149(1) prescribes at least 1 Women Director for prescribed class of companies. The prescribed class does
not have Pvt Co ( Listed Co & Public Co with paid up capital 100cr or more OR Turnover 300cr or more)
Sec 149(4) specifies 1/3rd Independent Directors for listed Cos and prescribed no. for prescribed class of
public company. Pvt Co need not have independent directors. ( Public Co with paid up capital 100cr or more
OR Turnover 300cr or more OR aggregate loans or deposits outstanding more than 200 cr )
Only listed Co to have Small Share holders Director (optional ) and not for Pvt Co.
12 Dec 2013
Suresh & Co

11. Private Ltd. Co. – Benefits under old law but not under new law-1
Pvt ltd can not Allot Shares on Preferential basis ( Further issue of shares ) ( Discussed Later)
Pvt Ltd should now follow Pvt Placement Rules for further issue of shares
Pvt ltd can now Issue Shares with differential rights only in line with Prescribed Rules
Regulations related to General meetings should now be as per law and not as per Articles. Such as length
of meeting, Quorum, Proxies , Explanatory notes etc . ( Sec 170 of Old Act) ( no such new Sec. )
12 Dec 2013
Suresh & Co

12. Private Ltd. Co. – Benefits under old law but not under new law-2
Directors appointment requires consent, earlier required only for Public Company. To be filed with ROC
with in 30 days
Director now not eligible for appointment – if not filed Statements or Annual Returns even of Pvt Ltd
A Director who wants to be elected should file Statutoy notice not less than 14 days as per Sec 160 of
new Act ( earlier exemption to Pvt Co as per Sec 257(2) of Old Act )
All Directors appointment can not be voted by a single resolution ( Earlier Sec 263(1) of Old act gave
exemption to Pvt Co. Sec 162 of new act applicable for all companies.
Pvt Co also has to appoint Key Managerial Persons now ( discuused later) if certain conditions
are met ( Sec 203 of New Act) ( Earlier Sec 269 exempted appointment of MD or Whole Time
Director for Pvt. Co
12 Dec 2013
Suresh & Co

13. Private Ltd. Co. – Benefits under old law but not under new law-3
Even Pvt Co Directorship is now counted for Max of 20 ( Earlier 15) Directorship ( Sec 165 of New Act )
that can be held by a person. ( Earlier Sec 278 excluded Pvt Co Directorship and Alternate Directors from
this count)
Even a Pvt Co to obtain consent of company by a special resolution ( Sec 180 of New Act) to sell. Lease or
dispose any undertaking , boorow money more than paid up capital & free reserves , remit or give time
for repayment of any debt due by a Director OR contribute to bona fide charitable fund more than 5% of
net profits for average 3 years (Sec 181 of New Act ) (earlier these restrictions were not applicable for a
Pvt Co ( Sec 293 of Old Act))
Even a Pvt Co can not give loan to Directors or related entities ( Sec 185 of New Act , discussed later) .
Earlier this restriction was not there for Pvt Co (Sec 295 of Old Act)
12 Dec 2013
Suresh & Co

14. Private Ltd. Co. – Benefits under old law but not under new law-4
Even in Pvt Co Interested Director cannot participate in a Board Meeting where a contract in which he is
interest is discussed ( New Sec 184) Earlier Old Sec 300(2) exempted Pvt Co. from this. In case there are
only 2 Directors and one is Interested, it can not be taken up in Board Meeting
Even Pvt Co now have restrictions on granting loans or investing in other companies subject to obtaining
a special resolution ( Sec 186 of New Act). ( Earlier Sec 370(2) & 370(14) gave relaxation from these
provisions to Pvt. Co.)
Even a Pvt Ltd should now file decleration for Commencement of Business ( Discussed later)
12 Dec 2013
Suresh & Co

15. Preferential Allotment
• Preferential issue (Unlisted companies)
–
–
–
–
Issue of shares on preference basis to be authorized by Articles
Special resolution
Detailed disclosure to be made in the explanatory statement to notice
Pricing of a preferential issue of shares by a company shall be
determined by a Registered Valuer
– Amounts received as share application money by private companies
also will not be available for use until allotment of shares
12 Dec 2013
Suresh & Co

16. Private Ltd Co. - Private Placement
Issue of a Private Placement offer letter to not more than 50 persons
The above letter to be accompanied by an application form addressed specifically to that person
Approval by Special Resolution
Offer Shall not be made to more than 200 persons in a Financial Year (QIB’s & ESOP excluded for this Purpose), Max 4 with
gap of 60 days
Allottee under private placement shall not transfer his securities to more than 20 persons during a quarter
Only 1 offer in a quarter and 4 in a year is permitted with a gap of 60days
Offer size per person shall be Rs. 50,000 or more .
12 Dec 2013
Suresh & Co

17. Private Ltd Co. - Private Placement
Payment should be made through cheque / draft / banking channels and NOT CASH
Allotment in respect of Private placement of securities must be completed within 60 days from the date of receipt of
application money.
In case of non-allotment, the application money and is to be refunded within 15 days, if not interest is payable @12% from
the end of 60th day.
Not to use any media / advertising
12 Dec 2013
Suresh & Co

18. Conditions for issue of equity shares with
differential rights. (As per draft Rules)-1
• issue of shares with differential rights to be authorized by articles of association
• (b) special resolution passed at a general meeting (postal ballot in case of
listed companies)
• (c) shares with differential rights shall not be more than 25% total post-issue
paid up equity share capital
• (d) track record of dividend payment of at least 10% for last 3 years
immediately before issue
• (e) no default in filing financial statements and annual returns for 5 years
immediately before issue;
• (f) the company has not been convicted of any offence under
i)
ii)
iii)
iv)
12 Dec 2013
Reserve Bank of India Act, 1934 ,
Securities and Exchange Board of India Act, 1992,
Securities Contract Regulation Act, 1956,
Foreign Exchange Management Act, 1999 etc.,
Suresh & Co

19. Conditions for issue of equity shares with
differential rights. (As per draft Rules)
• no subsisting default in
•
•
•
•
•
i)
ii)
iii)
Iv)
v)
payment of a declared dividend
repayment of deposits
redemption of shares or debentures
payment of interest on such deposits/ preference shares/ debentures
repayment of any term loan/ interest to scheduled banks or public
financial institution
• vi)
Statutory payments relating to its employees
Complete particulars to be given in the explanatory statement to notice calling general
meeting
Conversion of existing share capital with voting rights to shares with
differential rights and vice- versa is not permitted
Detailed disclosure to be made in Directors report
12 Dec 2013
Suresh & Co

20. Commencement of Business & Borrowing Power
Incorporation
(Private or Public)
ROC may strike
off the
company’s
name
NO
Declaration filed within 180
days
- Subscription money Received
- Verification of registered office
YES
Commence Business/ Exercise
Borrowing powers
Subscribers to bring in subscription money within 180 days
12 Dec 2013
Suresh & Co

21. Issue of Share Certificates
Certificate for
Stipulated time for issuance of certificates
Shares – on subscription to the
MOA and AOA i.e. on incorporation of a Company
within 2 months from the date of incorporation
Shares – allotted subsequent to incorporation
within 2 months from the date of allotment if shares are
issued in physical form;
Shares – on transfer
within 1 month from the date of receipt of the
instrument of transfer
12 Dec 2013
Suresh & Co

22. Loan to Director – Sec 185
No Company Shall Advance
• Any Loan Directly/Indirectly
• Give any guarantee or provide any
security in connection with loan taken by
Any director or any other person in whom
he is interested.
A Company can give loan to
• Managing Director
• Whole time director
• As a part of the condition of service extended by the
Company to all its employees.
• Pursuant to any scheme approved by the members by a
Special Resolution.
12 Dec 2013
Suresh & Co

23. Loan to Directors
• A Company can however provide loan or give guarantee or provide security for the due repayment of any loan
if it is in the ordinary course of its business.
• The rate of interest shall not be less than the rate of interest prescribed by RBI.
Penal consequences for contravention of Sec.185
• The Company shall be punishable with fine which shall not be less than Rs. 5 Lacs may extend to
Rs. 25 Lacs
• The person to whom the loan etc is given shall be punishable with imprisonment which may
extend to 6 months or with fine which shall not be less than Rs. 5 Lacs may extend to Rs. 25 Lacs or
with both.
12 Dec 2013
Suresh & Co

24. Acceptance of Deposits
The new deposit rules has narrowed acceptance of Deposits :
Particulars
Companies Act 1956
Companies Act 2013
Share Application Money
To be refunded if shares not allotted within
specified period (i.e. 180 days )
If the securities are not allotted within 60 days & failed to
refund within 15 days, treated as Deposit
Amount Received from an
employee
Any amount received from an employee by
way of security deposit was not treated as
deposit
Any amount received from employee exceeding his annual
salary to be treated as Deposit.
Amount Received for Supply of
Goods/Services
Was not a Deposit
If the amount not appropriated against supply of goods
/services within 180 days
Advance against sale of Property
Was not a Deposit
Consider as Deposit if the agreement not duly registered
12 Dec 2013
Suresh & Co

25. Annual Returns – Sec 92
The return to be prepared as on close of the financial year and NOT on AGM date
Content of the returns are
Details of Registered office, Principal Business Activities, Particulars of Holding-Subsidiary-Associate Companies
Particulars of Shares, Debenture and Securities and pattern of share holding.
Details of Members and Debenture holders and changes therein
Details of Promoters, Directors and KMP and changes therein
Attendance details and meeting details of members, Board and its various committees.
Remuneration of Directors and KMP
12 Dec 2013
Suresh & Co

26. Annual Returns – Sec 92
Content of the return are ( Cont..)
Penalty and punishments and compounding of offences on Company, its Directors and/or officers.
Matters relating to Certification of Compliance, Disclosures as may be prescribed.
Details of FII as may be prescribed.
Such other matters as may be prescribed
12 Dec 2013
Suresh & Co

27. Annual Returns – Sec 92
Signed By
Director
Company secretary
If no CS, then by a CS in Practice
• For One Person Company and Small Company, if CS is not there, then to be signed by the Director
• Prescribed Companies and Listed Companies Annul Report to be signed by the CS in practice in the prescribed
form.
12 Dec 2013
Suresh & Co

28. Annual Returns – Sec 92
An extract of Annual Report should
form part of the Boards Report
Annual Report to be filed within 60
days of the AGM
Not Filed
Fine not less
than Rs.50K &
upto Rs. 5L
12 Dec 2013
imprisonment
for a period up
to 6 months
Suresh & Co

29. Accounts
Particulars
Provisions under Companies Act 2013
Financial Statements
FY is April to March . For Companies Incorporated after 1st Jan , it
is next March . 2 years transition period
Signing of financial statements
• Financial Statements to be signed at least by
Chairperson of the company, if authorized by BOD; or
2 directors including MD, where there is one; and
CEO if he is a Director,
CFO and CS, wherever they are appointed
Consolidated financial statements for all holding Co.
12 Dec 2013
Suresh & Co

30. Accounts
Particulars
Provisions under Companies Act 2013
Disclosures under Board’s
report
Additional disclosure like-
•Listed and prescribed class of companies - Policy on directors
appointment, remuneration
and annual evaluation of the performance of the BOD,
committee and individual directors
• number of meetings,
• detail of loan,
• related party transaction detail etc.
12 Dec 2013
Suresh & Co

31. Accounts
Particulars
Provisions under Companies Act 2013
Authority on Accounting and
Auditing Standard
National Financial Reporting Authority (Role of auditing and accounting standard) to make
recommendation to Central Government
Filing of Balance Sheet & Profit &
Loss
Filing of Balance Sheet and P/L separately has been withdrawn . (major concern on sensitive
information being available to competitors , customers etc)
Filing with ROC
In case financials not adopted at AGM or AGM got adjourned, then un-adopted financial
statement shall be filed to ROC within 30 days
12 Dec 2013
Suresh & Co

32. Auditor Appointment
Appointment
Auditors Appointment and reappointment
• To be appointed at first AGM
• Who shall hold office till conclusion of 6th AGM
• Gap of 5 years required for reappointment
Intimation to Registrar of
Companies (ROC) and Duty of
auditor’s when they resign
• Within 15 days of appointment in AGM
• Onus on Company
• Retiring auditor to file a statement with the ROC as well as
the Company, within 30 days of resignation, indicating
reasons .
AUDIT TERM
Of an individual as an auditor 1 term of 5 consecutive years
Of an audit firm as an auditor 2 terms of 5 consecutive years
Cooling off period of 5 years before next appointment
12 Dec 2013
Suresh & Co

33. Auditor Liabilities for Willful Default
Liability
contravened the provisions of section 139, 143, 144 and 145
willfully with the intention to deceive the company or its shareholders or tax authorities,
Imprisonment for a term
which may extend to 1 year
Fine not less than Rs.1L but may extend
upto Rs.25L
The affected Person including the statutory authorities can claim damages
Penalty for professional misconduct – NFRA shall have power to investigate, either suo moto or on reference
made by CG ( Rs.1,00,000/- may to extend 5 times of fee for Individuals / Rs. 10,00,000/- may extend to 10
times of fee received in case of firms.
12 Dec 2013
Suresh & Co

34. Internal Auditor
•
•
•
•
Appointment
Such class or classes of Companies as may prescribed need to compulsory appoint Internal Auditor to conduct
the internal audit of functions and activities of the company
Qualification
Internal Auditor shall either be a CA or a cost accountant, or such other professional as may be decided by the
BOD
• CARO contained provisions requiring auditor‘s comments on existence and efficacy of internal audit system in
case of listed companies and / or companies having net worth > ` 50 lakhs or average annual turnover > ` 5 crores
for a period of 3 consecutive FY immediately preced-ing the FY concerned. 2013 Act contains specific provision of
appointment of internal auditor
• Draft Rules
• Prescribed class of companies means:
• listed companies ; and
• public companies– with paid-up capital of ` 10 crores or more,
– with outstanding loans or borrowings from banks or public financial institutions exceeding ` 25
– crores or which have accepted deposits of ` 25 crores or more at any point of time during the last FY
12 Dec 2013
Suresh & Co

35. Appointment of KMP ( Sec 203)
• All Companies with paid up Capital above 5Cr should
appoint KMP
• KMPs are
- Managing Director or CEO or Manager, or in their absence
a Whole Time Director
- Chief Financial Officer
- Company Secretary
• Chairperson can not be MD or CEO
• KMP shall not hold office in more than 1 company other
than subsidiary ( KMP can be director in another company
with approval of the Board )
12 Dec 2013
Suresh & Co

36. Liability of Key Managerial Person
Key Managerial Personnel (KMP) includes
MD
CEO or Manager
Whole time Director
Company Secretary
CFO
Restrictions on forward dealing/insider trading by directors/ KMP
No director/ KMP can be involved in forward dealing or buying options in shares/debentures
of company or its holding/ subsidiary/associate company.
No person (including director/ KMP) shall enter into insider trading.
12 Dec 2013
Suresh & Co

37. Liability of Non –Executive Directors
Non Executive Director
Not Being Promoter /KMP
Liable if
acts of omission or commission by
a company occurred
With his Knowledge,
Consent & Not acted
diligently
Without his Knowledge
Liable
12 Dec 2013
Not Liable
Suresh & Co

38. Powers of Directors at BM only
Powers exercised only by means of resolution passed at a meeting of board (Contained in Act)
To make calls on shareholders in respect of money unpaid on their shares
To authorise buy-back of securities under section 68
To issue securities, including debentures, whether in India or outside
To borrow monies
To grant loans or give guarantee or provide security in respect of loans
To approve financial statement and the director’s report
To approve business restructuring decisions
12 Dec 2013
Suresh & Co

39. Powers of Directors in BM only
Powers exercised only by means of resolution passed at a meeting of board (Contained in Rules)
To commence a new business;
To enter into a joint venture or technical or financial collaboration or any collaboration agreement;
To fill a casual vacancy in the Board;
To shift the location of a plant or factory or the registered office;
To appoint or remove key managerial personnel (KMP) and senior management personnel one level below the KMP;
To appoint internal auditors;
To accept public deposits and related matters and to approve quarterly, half yearly and annual financial statements.
12 Dec 2013
Suresh & Co

40. Thank You
Vivek@sureshandco.com
+91-98453 78991
Suresh & Co.
Assurance – Tax – Advisory
Bangalore
www.sureshandco.com