THE COMPANIES ACT, 2013 New rules of the game Presented by : Mahida Minaxi Limbachiya Komal Malek Nushrat Gosai Hardik Chandarana
THE COMPANIES ACT, 2013
New rules of the game
Presented by :
Mahida MinaxiLimbachiya KomalMalek NushratGosai HardikChandarana Kevin
The origin of corporate legislation in India has its roots in the English company act. The first legislative enactment for ‘Registration of joint stock companies” was passed in the country during the British raj in the year 1850Its based on English companies act , known as the joint stock companies act 1844 Replaced by companies act 1857 Act 1857 replaced by act 1866 , its based on English company act 1862Act 1913 Based on recommendation Bhabha committee Companies act 1956 was passed.
Background
Passed in Lok Sabha on 18th December, 2012 (Bill no. 121 of 2011)
Passed in Rajya Sabha on 8th August, 2013 (Bill no. 121 of 2011)
Received Ascent of President on 29th August, 2013
Notified in the official gazette on 30th august 2013
HIGHLIGHTS OF THE COMPANIES ACT, 2013
Structural Comparison
Companies Act 1956
13 Parts
658 Sections
15 Schedules
• The existing law is over half a century old
• New law helps to consolidate and bring related
provisions under a single roof
• Objective is lesser government approvals,
enhanced self regulation and emphasis on
corporate democracy
• In line with the changed national and international
economic environment
• Brings about better transparency and stringent
regulations
Why a new companies act 2013?
Better governance Tighter and wider disclosure norms More power in the hands of shareholders Roles of directors defined Stringent audits in place CSR mandated Special courts established Synchronization with SEBI and other acts
Cont…
New Concepts in Companies Act 2013
Introduction of new definitions in the Act which were not
existing under the Companies Act 1956
Associate Company
Private Company
DormantCompany
Promoter
One Person Company
Small Company
Key Managerial Personnel
One-person company
• The 2013 Act introduces a new type of entity to the existing list.
• An OPC means a company with only one person as its member [section 3(1) of 2013 Act].
Private Company
• The 2013 Act introduces a change in the definition for a private company, the new requirement increases the limit of the number of members from 50 to 200. [section 2(68) of 2013 Act].
Changes towards Incorporation of Entity
Introduction of concept of One Person Company
No approval required for conversion of Private
Company to One Person Company or vice versa
No approval required for conversion of Private Company into Public
Company
Small Company
• A small company has been defined as a company, other than a public company.
(i) Paid-up share capital of which does not exceed 50 lakh INR or such higher amount as may be prescribed which shall not be more than five crore INR
(ii) Turnover of which as per its last profit-and-loss account does not exceed two crore INR or such higher amount as may be prescribed which shall not be more than 20 crore INR:
2. Key Managerial Personal (KMP)
• KMP is commonly used in investment agreements and now finds a place in the 2013 Act.
3. Promoter The term Promoter was not defined in the 1956 Act. However it was extensively used through company law. 2013 Act now specifically defines Promoter
Management and Meeting
DirectorsMaximum
Number of Directors
Number of Directorship
Resident Director
Woman Director
Small Shareholder Director
Duties of the Director
A prescribed class of Companies will be required to have:
Managing Director/ CEO/ Manager
Whole Time Director in the absence of MD/CEO/Manager
Company Secretary
A mandatory requirement to appoint such persons will ensure proper Governance of the Company
DIRECTOR’S APPOINTMENT
Board Meetings
SOME NEW PROVISIONS
Notice of the Meeting
Minimum 7 days Notice
To be given to all directors whether or not in India
Can be sent through any means; hand delivery, post or e-form
Participation of Directors
In person, or
By video conferencing, or
Any other audio-visual means capable of recording, recognizing and storing the participation of director with date & time
Number & Timing of Meetings
At least 4 meetings in a year
Not necessary to be held in every quarter
Time gap of not more than 120 days between 2 meetings
1 2 3
CORPORATE SOCIAL RESPONSIBILITY (CSR)
NEW CONCEPTS
Constitution of CSR Committee by a company having any of the following:
NET WORTH of Rs 500 crore
or moreTURNOVER
of Rs 1,000 crore or more
NET PROFITof Rs 5 crore or
more
Companies to spend on CSR activities at least 2% of the average net profit
of the preceding 3 financial years.
Reasons in case of failure to be disclosed in the
Board report
Shareholders Meeting
QUORUM
QUORUM shall now be considered as:
QUORUM (No. of Members
personally Present)
NUMBER OF MEMBERS AS
ON THE DATE OF MEETING
5 ≤ 1000
15 1000 < number ≤ 5000
30 ≥ 5000
Fixing of a higher quorum as compared to the earlier requirement will ensure greater participation by shareholders
Audit & Auditors
• Appointment of Auditors• Mandatory Rotation• Non Audit Service• Secretarial Audit
Share Capital & Debentures
SHARES & SECURITIES
GENERAL CHANGES
Changes regardingVOTING RIGHTS
Changes regardingISSUE OF SHARES
Various changes regarding Shares & Securities
Voting Right Changes
Equitable Voting rights for Equity and Preference share holders with respect to their paid up
capital
For vote on resolutions affecting rights of both
categories
Preference shareholders allowed to vote on every resolution placed before shareholders’
meeting
If dividend payable to any class of preference
shareholders in arrear for more than 2 years
No classification between cumulative and
non-cumulative preference shares
For identification of voting rights
Restructuring & Revival
Sick Company
Fast Track Merger
Compromise or Arrangement
Reduction of Capital
Bibliography
Websites:• www.mca.gov.in• www.companiesact.in
Magazine:• The Indian Banker