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The Companies Act, 2013
The dawn of a new era
The Companies Act, 2013 (‘2013 Act’) was enacted on 29 August 2013 on
accord of Hon’ble President’s assent, and has the potential to be a historic
milestone as it aims to improve corporate governance, simplify regulations,
enhance the interests of minority investors, and for the first time legislates
the role of whistle-blowers. The new law replaces the nearly 60-year-old
Companies Act, 1956 (‘1956 Act’).
The 2013 Act provides an opportunity to catch up and make our corporate
regulations more contemporary, as also potentially to make our corporate
regulatory framework a model to emulate for other economies with similar
characteristics. The 2013 Act is more of a rule-based legislation containing
only 470 Sections, which means that the substantial part of the legislation
will be in the form of Rules. There are over 180 Sections in the 2013 Act
where rules have been prescribed.
To facilitate the ease of implementation, a phased approach is being
followed by the Ministry of Corporate Affairs (‘MCA’). Accordingly, 282
sections have been notified and are in force as of 1 April 2014. Final Rules
for 19 chapters have also been released by the MCA, which are applicable
with effect from 1 April, 2014. The Rules for the remaining chapters are in
draft stage.
Governance
• At least one woman director
• At least one India resident director
• Independent director (ID) legislated;
roles and responsibilities defined
• Database of IDs to be maintained;
may select IDs from this database
• One-person company permitted
unlike the minimum two before
• Maximum number of directors
increased to 15; any additional
directors only through Special
Resolution
• Maximum 20 directorships per
person; maximum 10 public
companies
• Consolidated financial statements
mandatory for all Groups, including
Unlisted/ Private companies, with
more than one entity; includes
associates or joint ventures;
• Mandatory rotation of audit firm for
listed companies post 10 years
• Financial year for all companies to be
March 31 (exception for subsidiaries
of foreign entities)
• Re-casting and re-statement of
financial statements can be ordered;
Voluntary revision of financial
statements for previous periods now
permitted
• Increased restrictions on non-audit
services provided by Auditors
Accounts, Audit and Auditors
Independent
director legislated;
roles and
responsibilities
defined
• Auditor to also report on adequacy of
internal financial controls system and
the operating effectiveness of such
controls
• Auditor to be a whistle-blower to
Central Government, if becomes
aware of any fraud
• The maximum limit of 20 companies
per Partner in an Audit firm
• Prescribed companies to appoint
internal auditor; manner, period and
reporting to be prescribed by Central
Government
• Significant enhancement of penalties
for auditors
Mandatory rotation
of audit firm for
listed companies
post 10 years
Grant Thornton can help dynamic businesses navigate complexities of the new
legislation and simplify the regulatory maze through a bouquet of its assurance, business
and risk advisory services. For any assistance, contact us at:
E: CompaniesAct@in.gt.com M: +91 9930001230
• Stakeholders Relationship Committee
introduced
• Mandatory appointment of Key
Management Personnel (KMP)
• Directors responsible for design and
operating effectiveness of internal
financial controls
• Significantly enhanced penalties for
directors
• 2% of the average net profit of
preceding three financial years to be
spent annually on Corporate Social
Responsibility (CSR) or explain why
not; applicable for companies with
net worth of Rs 500 crore or more,
turnover of Rs 1,000 crore or more,
or net profit more than Rs 5 crore
• Valuations of any property, stocks,
shares, goodwill or any other assets,
net worth of a company etc. must be
performed by a registered valuer
• Class action suits introduced as a
remedy for small investors against
wrongful acts
Mergers without
Tribunal approval,
permitted between
two small companies,
or between a holding
company and its
wholly-owned
subsidiary
Large companies
to spend 2% of
average net profit of
preceding three
financial years on
CSR activities or
explain why not
spent
Other provisions
• Establishment of a National Financial
Reporting Authority (NFRA), with
the objective of monitoring and
enforcing compliance of auditing and
accounting standards
• Establishment of vigil mechanism
(whistle-blowing) in the prescribed
manner by every listed company
• Deposit accepted (including interest
due) to be repaid within 1 year from
enactment or from due date of such
payments, whichever is earlier
"Obviously, the intent is towards simplification, which is critical for India to become
more competitive on the ease of doing business. Whether this objective is finally
delivered will depend on two things - the rules that supplement the Act and what they
look like, and the change in attitude towards enforcement."
Vishesh C Chandiok, National Managing Partner,
Grant Thornton India LLP
Mergers and Restructuring
• No more than two layers of
investment companies (certain
exemptions to foreign acquisitions/
to comply with the law)
• Mergers without Tribunal approval
permitted between two small
companies or between holding
company and its wholly-owned
subsidiary
• Merger into foreign companies
introduced
• Valuation report mandatory along
with notice to concerned parties in
case of proposed mergers
• Scheme of compromise or
arrangement must be in line with
accounting standards; auditors'
certificate attesting the same needed
• 'Reverse merger' of listed company
into unlisted company now possible;
exit option to be provided to listed
company shareholders
• Holding of treasury shares directly or
through a Trust, prohibited
About Grant Thornton India LLP
Grant Thornton India LLP is a member firm within Grant Thornton International Ltd. It is a leading professional
services firm providing assurance, tax and advisory services to dynamic Indian businesses.
With a partner led approach and sound technical expertise the Firm has extensive experience across many
industries and businesses of various sizes. Moreover, with our robust compliance solutions and ability to navigate
complexities we help dynamic organisations unlock their potential for growth through global expansion, global
capital or global acquisitions.
Today, the Firm is recognised as one of the largest accountancy and advisory firms in India with nearly 2,000
professional staff in New Delhi, Bengaluru, Chandigarh, Chennai, Gurgaon, Hyderabad, Kolkata, Mumbai, Noida
and Pune, and affiliate arrangements in most of the major towns and cities across the country.
As a member firm within Grant Thornton International Ltd, the Firm has access to member and correspondent
firms in over 120 countries, offering our clients specialist knowledge supported by international expertise and
methodologies
NEW DELHI
National Office
Outer Circle
L 41 Connaught Circus
New Delhi 110 001
T +91 11 4278 7070
CHENNAI
Arihant Nitco Park, 6th floor
No.90, Dr. Radhakrishnan Salai
Mylapore
Chennai 600 004
T +91 44 4294 0000
KOLKATA
10C Hungerford Street
5th floor
Kolkata 700 017
T +91 33 4050 8000
CHANDIGARH
SCO 17
2nd floor
Sector 17 E
Chandigarh 160 017
T +91 172 4338 000
GURGAON
21st floor, DLF Square
Jacaranda Marg
DLF Phase II
Gurgaon 122 002
T +91 124 462 8000
HYDERABAD
7th floor, Block III
White House
Kundan Bagh, Begumpet
Hyderabad 500 016
T +91 40 6630 8200
MUMBAI
16th floor, Tower II
Indiabulls Finance Centre
SB Marg, Elphinstone (W)
Mumbai 400 013
T +91 22 6626 2600
PUNE
401 Century Arcade
Narangi Baug Road
Off Boat Club Road
Pune 411 001
T +91 20 4105 7000
BENGALURU
“Wings”, 1st floor
16/1 Cambridge Road
Ulsoor
Bengaluru 560 008
T +91 80 4243 0700
For more information on the Companies Act 2013, visit
http://www.grantthornton.in/companiesact2013 or write to us at CompaniesAct@in.gt.com
NOIDA
Plot No. 19A, 7th Floor,
Sector 16-A,
Noida 201301.
T +91 120 7109001
Our offices
© Grant Thornton India LLP. All rights reserved.
Grant Thornton India LLP (formerly Grant Thornton India) is registered with limited liability with identity
number AAA-7677 and its registered office at L-41 Connaught Circus, New Delhi, 110001
Grant Thornton India LLP is a member firm within Grant Thornton International Ltd (‘Grant Thornton
International’).
Grant Thornton International Ltd. and the member firms are not a worldwide partnership. Services are
delivered by the member firms independently.

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The Companies Act, 2013 - Flyer

  • 1. The Companies Act, 2013 The dawn of a new era
  • 2. The Companies Act, 2013 (‘2013 Act’) was enacted on 29 August 2013 on accord of Hon’ble President’s assent, and has the potential to be a historic milestone as it aims to improve corporate governance, simplify regulations, enhance the interests of minority investors, and for the first time legislates the role of whistle-blowers. The new law replaces the nearly 60-year-old Companies Act, 1956 (‘1956 Act’). The 2013 Act provides an opportunity to catch up and make our corporate regulations more contemporary, as also potentially to make our corporate regulatory framework a model to emulate for other economies with similar characteristics. The 2013 Act is more of a rule-based legislation containing only 470 Sections, which means that the substantial part of the legislation will be in the form of Rules. There are over 180 Sections in the 2013 Act where rules have been prescribed. To facilitate the ease of implementation, a phased approach is being followed by the Ministry of Corporate Affairs (‘MCA’). Accordingly, 282 sections have been notified and are in force as of 1 April 2014. Final Rules for 19 chapters have also been released by the MCA, which are applicable with effect from 1 April, 2014. The Rules for the remaining chapters are in draft stage.
  • 3. Governance • At least one woman director • At least one India resident director • Independent director (ID) legislated; roles and responsibilities defined • Database of IDs to be maintained; may select IDs from this database • One-person company permitted unlike the minimum two before • Maximum number of directors increased to 15; any additional directors only through Special Resolution • Maximum 20 directorships per person; maximum 10 public companies • Consolidated financial statements mandatory for all Groups, including Unlisted/ Private companies, with more than one entity; includes associates or joint ventures; • Mandatory rotation of audit firm for listed companies post 10 years • Financial year for all companies to be March 31 (exception for subsidiaries of foreign entities) • Re-casting and re-statement of financial statements can be ordered; Voluntary revision of financial statements for previous periods now permitted • Increased restrictions on non-audit services provided by Auditors Accounts, Audit and Auditors Independent director legislated; roles and responsibilities defined • Auditor to also report on adequacy of internal financial controls system and the operating effectiveness of such controls • Auditor to be a whistle-blower to Central Government, if becomes aware of any fraud • The maximum limit of 20 companies per Partner in an Audit firm • Prescribed companies to appoint internal auditor; manner, period and reporting to be prescribed by Central Government • Significant enhancement of penalties for auditors Mandatory rotation of audit firm for listed companies post 10 years Grant Thornton can help dynamic businesses navigate complexities of the new legislation and simplify the regulatory maze through a bouquet of its assurance, business and risk advisory services. For any assistance, contact us at: E: CompaniesAct@in.gt.com M: +91 9930001230 • Stakeholders Relationship Committee introduced • Mandatory appointment of Key Management Personnel (KMP) • Directors responsible for design and operating effectiveness of internal financial controls • Significantly enhanced penalties for directors
  • 4. • 2% of the average net profit of preceding three financial years to be spent annually on Corporate Social Responsibility (CSR) or explain why not; applicable for companies with net worth of Rs 500 crore or more, turnover of Rs 1,000 crore or more, or net profit more than Rs 5 crore • Valuations of any property, stocks, shares, goodwill or any other assets, net worth of a company etc. must be performed by a registered valuer • Class action suits introduced as a remedy for small investors against wrongful acts Mergers without Tribunal approval, permitted between two small companies, or between a holding company and its wholly-owned subsidiary Large companies to spend 2% of average net profit of preceding three financial years on CSR activities or explain why not spent Other provisions • Establishment of a National Financial Reporting Authority (NFRA), with the objective of monitoring and enforcing compliance of auditing and accounting standards • Establishment of vigil mechanism (whistle-blowing) in the prescribed manner by every listed company • Deposit accepted (including interest due) to be repaid within 1 year from enactment or from due date of such payments, whichever is earlier "Obviously, the intent is towards simplification, which is critical for India to become more competitive on the ease of doing business. Whether this objective is finally delivered will depend on two things - the rules that supplement the Act and what they look like, and the change in attitude towards enforcement." Vishesh C Chandiok, National Managing Partner, Grant Thornton India LLP Mergers and Restructuring • No more than two layers of investment companies (certain exemptions to foreign acquisitions/ to comply with the law) • Mergers without Tribunal approval permitted between two small companies or between holding company and its wholly-owned subsidiary • Merger into foreign companies introduced • Valuation report mandatory along with notice to concerned parties in case of proposed mergers • Scheme of compromise or arrangement must be in line with accounting standards; auditors' certificate attesting the same needed • 'Reverse merger' of listed company into unlisted company now possible; exit option to be provided to listed company shareholders • Holding of treasury shares directly or through a Trust, prohibited
  • 5. About Grant Thornton India LLP Grant Thornton India LLP is a member firm within Grant Thornton International Ltd. It is a leading professional services firm providing assurance, tax and advisory services to dynamic Indian businesses. With a partner led approach and sound technical expertise the Firm has extensive experience across many industries and businesses of various sizes. Moreover, with our robust compliance solutions and ability to navigate complexities we help dynamic organisations unlock their potential for growth through global expansion, global capital or global acquisitions. Today, the Firm is recognised as one of the largest accountancy and advisory firms in India with nearly 2,000 professional staff in New Delhi, Bengaluru, Chandigarh, Chennai, Gurgaon, Hyderabad, Kolkata, Mumbai, Noida and Pune, and affiliate arrangements in most of the major towns and cities across the country. As a member firm within Grant Thornton International Ltd, the Firm has access to member and correspondent firms in over 120 countries, offering our clients specialist knowledge supported by international expertise and methodologies NEW DELHI National Office Outer Circle L 41 Connaught Circus New Delhi 110 001 T +91 11 4278 7070 CHENNAI Arihant Nitco Park, 6th floor No.90, Dr. Radhakrishnan Salai Mylapore Chennai 600 004 T +91 44 4294 0000 KOLKATA 10C Hungerford Street 5th floor Kolkata 700 017 T +91 33 4050 8000 CHANDIGARH SCO 17 2nd floor Sector 17 E Chandigarh 160 017 T +91 172 4338 000 GURGAON 21st floor, DLF Square Jacaranda Marg DLF Phase II Gurgaon 122 002 T +91 124 462 8000 HYDERABAD 7th floor, Block III White House Kundan Bagh, Begumpet Hyderabad 500 016 T +91 40 6630 8200 MUMBAI 16th floor, Tower II Indiabulls Finance Centre SB Marg, Elphinstone (W) Mumbai 400 013 T +91 22 6626 2600 PUNE 401 Century Arcade Narangi Baug Road Off Boat Club Road Pune 411 001 T +91 20 4105 7000 BENGALURU “Wings”, 1st floor 16/1 Cambridge Road Ulsoor Bengaluru 560 008 T +91 80 4243 0700 For more information on the Companies Act 2013, visit http://www.grantthornton.in/companiesact2013 or write to us at CompaniesAct@in.gt.com NOIDA Plot No. 19A, 7th Floor, Sector 16-A, Noida 201301. T +91 120 7109001 Our offices
  • 6. © Grant Thornton India LLP. All rights reserved. Grant Thornton India LLP (formerly Grant Thornton India) is registered with limited liability with identity number AAA-7677 and its registered office at L-41 Connaught Circus, New Delhi, 110001 Grant Thornton India LLP is a member firm within Grant Thornton International Ltd (‘Grant Thornton International’). Grant Thornton International Ltd. and the member firms are not a worldwide partnership. Services are delivered by the member firms independently.