Companies Act 2013

The Companies Act

Empowers the Central Government to regulate the formation, financing, functioning and winding up of companies It empowers the Government to inspect the books of accounts f the company, direct special audits and other investigations into the affairs of the company if they are in any way violating the act

It is administered by the Central Government and the Offices of Registrar of Companies, Official Liquidators, Public Trustee, Company Law Board, Director of Inspection etc.
Incorporation and the administration of running companies is done by the Registrar of Companies

Objectives of The Companies Act, 1956

Management of companies Control over companies Protection of consumers interest Enforcement of proper performance of duties by management Investors protection Full disclosure of information

Companies Bill 2012

On 18th December, 2012, Lok Sabha passed this bill It has 29 chapters, 7 schedules and 470 clauses as against 658 sections, 13 parts and 15 schedules in the existing Companies Act, 1956 The bill received the Presidents assent on 29th August, 2013 and now is on its way to becoming an act

New introductions

Concept of One Person Company E- governance in all company processes Insider trading of securities is prohibited Punishment for fraud Nomination and remuneration committee

Independent Directors- one-third of board members Corporate Social Responsibility- set aside a certain percentage of profits for CSR Excessive Bureaucracy- Director Identification Number (DIN)

Women Directors- more number of women reaching higher levels of hierarchy Class Action Suits- a large group of people can bring a claim to court in which a group of defendants are sued Company Secretary- Elevates their role to management level

New Definitions Introduced

Associate Company- a company has significant influence over another company, controls 20% of share capital of other company or business decisions Auditing Standard- standards of auditing for companies or class of companies Global Depository Receipt- an instrument created by foreign depository and authorised by company making an issue of such depository receipt

Employee Stock Option- option given to directors, officers or employees of a company to purchase or subscribe for the shares of the company in the future Financial year- a period ending on 31st March of every year in which respect financial statements are made Turnover- aggregate value of realisation of amount made from the sale, supply or distribution of goods by a company in a financial year

One Person Company- a company which has only one person as the member Key Managerial Personnel- it consists the following -the chief executive officer or managing director or manager - Company secretary - Whole time director - Chief Financial Officer

Comparison between the Former and New Act

Basis Maximum no. of members in private company Companies Act, 1956 Companies Act, 2013 50 200

Minimum no. of members

Public- 7 Private- 2

No change but concept of 1 member company introduced 15, more by passing a resolution

Maximum no. of directors

12

Statutory meeting

Public company- mandatory to hold after 1 month but before 6 months from date of entitlement of commencement No specific provisions

No provision

Cross boarder mergers

Mergers of Indian and foreign companies permitted and rules to be notified by Central Government Chairman alone can sign if so authorised by the Board

Certification of financial statements

By manager or secretary, if any, and by not less than 2 directors, one of whom shall be an MD, if there is one 18 months from incorporation or 9 months from closure of accounts, whichever is earlier Written notice mandatory

Maximum time for holding first Annual General Meeting

9 months from closure of accounts

Mode of notice for holding and Annual General Meeting

In writing or in electronic form

Object Clause of Consists of main objects, Memorandum of Association incidental or ancillary objects and other objects

Contains the object for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof

Issue of preference shares for more than 20 years

Prohibited

Permitted only for infrastructure projects

Maximum tenure of auditors

No specific provisions

For listed and other prescribed companies: - individual auditors to be rotated after 5 years - Audit firm after every 10 years

Financial Year and Extension

Not to exceed 15 months but can be extended to 18 months by ROC, financial year can end on a date other than 31st March No specific provision

Financial end on 31st March of every year for all companies and no other provisions for extension are given Within 30 days from date of incorporation Applicable to all companies having share capital

First Board Meeting

Restrictions on commencement of business

Provisions applicable to only public companies

Time gap between two board meetings Quorum of General meeting of private and public companies

At least one meeting every quarter Private- 2 Public- 5

Not more than 120 days of gap between 2 meetings Private- 2 Public- 5 if total members is greater than 1000 -15 if total is greater than 1000 but less than 5000 - 30 if total is greater than 5000