1 the companies bill, 2009 presentation on the salient features of new bill september 26, 2009

11

THE COMPANIES BILL, 2009THE COMPANIES BILL, 2009

Presentation on the salient Presentation on the salient featuresfeatures

Of new Bill Of new Bill

September 26, 2009September 26, 2009

22

MANAGEMENT MANAGEMENT AND AND

ADMINISTRATIONADMINISTRATION(Notice, AGM, Boards’ Report, (Notice, AGM, Boards’ Report,

Annual Return)Annual Return)

33

Section 78 - Register of Members, Section 78 - Register of Members, etcetc..

Registers to be kept and maintained by Registers to be kept and maintained by every company :every company :• Register of members containing details Register of members containing details

of of both equity and preference both equity and preference shares heldshares held by each by each membermember – residing – residing in India and outsidein India and outside

• Register of debenture holdersRegister of debenture holders• Register of Register of other security holdersother security holders

Registers to be in such form and manner Registers to be in such form and manner as may be prescribedas may be prescribed

44

Section 78 - Register of Members, etcSection 78 - Register of Members, etc. .

(Cont…)(Cont…)

Index of members and debenture-holders Index of members and debenture-holders to be part of the Registersto be part of the Registers

Foreign Register - If authorized by articles, Foreign Register - If authorized by articles, a part of the above registers, containing a part of the above registers, containing names and particulars of members, names and particulars of members, debenture holders, other security holders debenture holders, other security holders and beneficial owners residing outside and beneficial owners residing outside India can be maintained in any country India can be maintained in any country outside Indiaoutside India

55

Section 78 - Register of Members, etcSection 78 - Register of Members, etc. . (Cont…)(Cont…)

Particulars of the place where the Particulars of the place where the Register of members, Register of Register of members, Register of debenture holders, Register of other debenture holders, Register of other security holders and foreign registers security holders and foreign registers is kept and the fact of change or is kept and the fact of change or discontinuance of the same shall be discontinuance of the same shall be filed with the Registrar within filed with the Registrar within thirty thirty daysdays (this is presently required only (this is presently required only for foreign registers)for foreign registers)

66

Section 81 - Power to close Register of Section 81 - Power to close Register of Members, etc.Members, etc.

A company may after giving A company may after giving seven seven daysdays notice close the Register of notice close the Register of Members, Register of debenture Members, Register of debenture holders or Register of holders or Register of other security other security holdersholders

The extant provision of section 154 The extant provision of section 154 provides only for Register of members provides only for Register of members and Register of debenture holdersand Register of debenture holders

77

Section 82 -Section 82 -Annual ReturnAnnual Return

Number of new requirements Number of new requirements introducedintroduced

Annual Return to contain particulars Annual Return to contain particulars as they stood on the as they stood on the close of the close of the financial year financial year (Presently particulars (Presently particulars as on date of AGM required)as on date of AGM required)

88

Section 82 -Section 82 -Annual Return (Cont…)Annual Return (Cont…)

Following additional information shall be Following additional information shall be required : required :

Principal business activities of the companyPrincipal business activities of the company

Particulars of the holding company, subsidiary Particulars of the holding company, subsidiary and associate companiesand associate companies

Particulars of other securities (other than shares Particulars of other securities (other than shares and debentures)and debentures)

99


Particulars of members and debenture Particulars of members and debenture holders along with changes therein since holders along with changes therein since the close of the last financial year (Once the close of the last financial year (Once in 5 years provision deleted)in 5 years provision deleted)

Particulars of promoters, directors and Particulars of promoters, directors and key managerial personnel along with key managerial personnel along with changes therein since the close of the changes therein since the close of the last financial year (particulars of last financial year (particulars of directors, manager and company directors, manager and company secretary required presently)secretary required presently)

1010


Meetings of members or a class of Meetings of members or a class of members, Board and its various members, Board and its various committees along with attendance committees along with attendance detailsdetails

Remuneration of directors and key Remuneration of directors and key managerial personnelmanagerial personnel

Penalties imposed on the company, its Penalties imposed on the company, its directors or officers and details of directors or officers and details of compounding of offences compounding of offences

1111

Section 82 -Section 82 -Annual Return Annual Return (Cont…)(Cont…)

• Matters related to certification of Matters related to certification of compliances, disclosurescompliances, disclosures

Such other matters as may be Such other matters as may be prescribed (leaving flexibility for the prescribed (leaving flexibility for the Government to add on to the list of Government to add on to the list of information already provided)information already provided)

1212

Section 82 - Section 82 - Annual Return Annual Return (Cont…)(Cont…)

Annual Return to be signed by a director Annual Return to be signed by a director and company secretary and where there is and company secretary and where there is no company secretary, by a company no company secretary, by a company secretary in practice (No requirement for secretary in practice (No requirement for managing director to sign)managing director to sign)

In case of OPC and Small Company, annual In case of OPC and Small Company, annual return to be signed by the Company return to be signed by the Company Secretary and where there is no Company Secretary and where there is no Company Secretary, by one director of the companySecretary, by one director of the company

1313


In case of a listed company and/or a In case of a listed company and/or a company having such paid up share company having such paid up share capital and turnover as may be prescribed, capital and turnover as may be prescribed, the annual return shall also be the annual return shall also be signedsigned by by a company secretary in whole time a company secretary in whole time practice practice certifyingcertifying that the annual return that the annual return states the facts states the facts correctly and correctly and adequately and the company has adequately and the company has complied with all the provisions of complied with all the provisions of the Actthe Act (very high responsibility cast on (very high responsibility cast on PCS)PCS)

1414


Extract of Annual Return in prescribed form shall Extract of Annual Return in prescribed form shall form part of Boards’ Reportform part of Boards’ Report

Annual return to be filed within Annual return to be filed within 30 days30 days from the from the date of AGM (presently date of AGM (presently 60 days60 days))

New penal provisions :New penal provisions :

Company punishable with fine Company punishable with fine

Officer in default is punishable with Officer in default is punishable with imprisonment imprisonment (new)(new) or fine or with both or fine or with both

PCS punishable with fine PCS punishable with fine

1515

SectionSection 83 - Place of keeping and 83 - Place of keeping and inspection inspection of registers, returns etc. of registers, returns etc. (Cont…)(Cont…)

Registers and Returns to be kept at registered Registers and Returns to be kept at registered officeoffice

With approval of shareholders by special With approval of shareholders by special resolution, they may also be kept at any other resolution, they may also be kept at any other place in India in which more than place in India in which more than 1/10th1/10th of the of the total members of the Company residetotal members of the Company reside

Copy of such proposed special resolution should Copy of such proposed special resolution should be be givengiven to the Registrar in advance to the Registrar in advance

1616

SectionSection 83 - Place of keeping and 83 - Place of keeping and inspection inspection of registers, returns etc. of registers, returns etc. (Cont…)(Cont…)

Registers, Indices and copies of Registers, Indices and copies of returns shall be open for inspection returns shall be open for inspection for members, debenture holders, for members, debenture holders, other securities holder, or any other securities holder, or any beneficial owner and beneficial owner and not to any not to any other person as is presently other person as is presently allowedallowed

1717

Section 85 - Annual General Meeting Section 85 - Annual General Meeting (AGM)(AGM)

First AGM to be held within First AGM to be held within nine monthsnine months from the close of the first financial year from the close of the first financial year (Present provision is that first annual (Present provision is that first annual general meeting shall be held within 18 general meeting shall be held within 18 months from the date of incorporation)months from the date of incorporation)

The first financial year of a company The first financial year of a company incorporated on or after the first day of incorporated on or after the first day of January of any year shall be the 31st day January of any year shall be the 31st day of March of the following year. (Hence a of March of the following year. (Hence a period of more than 18 months is available period of more than 18 months is available for first AGM)for first AGM)

1818

Section 85 - Annual General Meeting (AGM) Section 85 - Annual General Meeting (AGM) (Cont…)(Cont…)

Subsequent AGM shall be held within 6 months Subsequent AGM shall be held within 6 months from the close of the financial year and not more from the close of the financial year and not more than 15 months gap between two AGM’sthan 15 months gap between two AGM’s

OPC need not hold AGMOPC need not hold AGM

AGM can now be held on a public holiday, but not AGM can now be held on a public holiday, but not a National Holidaya National Holiday

The business hours during which AGM to be held The business hours during which AGM to be held is now specified as between 9.00 a.m. and 6.00 is now specified as between 9.00 a.m. and 6.00 p.m.p.m.

1919

Section 89 - Calling of Extraordinary General Section 89 - Calling of Extraordinary General MeetingMeeting

Meeting of members called by the Meeting of members called by the Board Board on its ownon its own shall also be now considered shall also be now considered as an extraordinary general meeting as an extraordinary general meeting (presently called general meeting)(presently called general meeting)

2020

Section 90 - Notice of general Section 90 - Notice of general meetingmeeting

Notice for general meeting – Not less than 21 Notice for general meeting – Not less than 21 clearclear days days

Notice of every meeting of the company - To Notice of every meeting of the company - To be given to be given to every director every director of the companyof the company

Notice to be given to every member of the Notice to be given to every member of the company (company (member now includes member now includes preference shareholderpreference shareholder))

Notice may be given in electronic mode; if Notice may be given in electronic mode; if sent by post it shall be registered postsent by post it shall be registered post

2121

Section 91- Explanatory Statement to Section 91- Explanatory Statement to be be

annexed to Notice annexed to Notice Additional Information required to be disclosed in Additional Information required to be disclosed in

the statement of special business :the statement of special business :

Nature of concern or interest, if any, of every Nature of concern or interest, if any, of every key managerial personnelkey managerial personnel in addition to every in addition to every director and manager for items to be director and manager for items to be transacted at a meetingtransacted at a meeting

Extent of shareholding of every director, Extent of shareholding of every director, manager or other key managerial personnel manager or other key managerial personnel holding more than 2 % of the paid up share holding more than 2 % of the paid up share capital in any other company, if the special capital in any other company, if the special business includes any item to be transacted at business includes any item to be transacted at the meeting relates to or affects such other the meeting relates to or affects such other company. As per the extant provisions the company. As per the extant provisions the limit limit is 20 %.is 20 %.

2222


annexed to Notice (Cont…) annexed to Notice (Cont…)

Any benefit accruing to any director, Any benefit accruing to any director, manager, key managerial persons or his manager, key managerial persons or his relatives as a result of non-disclosure or relatives as a result of non-disclosure or insufficient disclosure shall be held in insufficient disclosure shall be held in trust for the company and shall be trust for the company and shall be compensated to the companycompensated to the company

Default in compliance could result in a Default in compliance could result in a fine of 5 times the amount of the benefit fine of 5 times the amount of the benefit accruingaccruing

2323


annexed to Notice (Cont…) annexed to Notice (Cont…)

Relative defined as the spouse, Relative defined as the spouse, brother, sister and all lineal brother, sister and all lineal ascendants and descendants of such ascendants and descendants of such individual related to him either by individual related to him either by marriage or adoption.marriage or adoption.

Lineal ascendants or descendants Lineal ascendants or descendants should only include blood relatives – should only include blood relatives – in direct line – For eg. – children, in direct line – For eg. – children, grand children, parent, grand parentsgrand children, parent, grand parents

2424

Section 92 -Section 92 -Quorum for MeetingsQuorum for Meetings Meetings called by requisitionists shall stand Meetings called by requisitionists shall stand

cancelled for lack of quorumcancelled for lack of quorum

Any other meeting shall stand adjourned to the Any other meeting shall stand adjourned to the same day, same time and same place in the next same day, same time and same place in the next weekweek

Such adjourned meeting shall require not less Such adjourned meeting shall require not less than 3 days noticethan 3 days notice

Notice to be given individually or by press Notice to be given individually or by press announcement announcement

At such adjourned meeting if quorum is not present At such adjourned meeting if quorum is not present within half an hour, members present shall be the within half an hour, members present shall be the quorumquorum

2525

Section 94 -Section 94 -ProxiesProxies Proxies can be in electronic modeProxies can be in electronic mode

Section 97 - VotingSection 97 - Voting

Electronic mode of voting acceptable in Electronic mode of voting acceptable in such manner as may be prescribedsuch manner as may be prescribed

2626

Section 98 -Demand for Section 98 -Demand for PollPoll

Limits for demanding poll enhanced from Limits for demanding poll enhanced from 50,000 to 5,00,000 (Paid up)50,000 to 5,00,000 (Paid up)

Chairman can appoint such number of Chairman can appoint such number of persons as he deems necessary as persons as he deems necessary as scrutinisers (presently minimum two scrutinisers (presently minimum two personspersons))

2727

Section 99 -Section 99 -Postal BallotPostal Ballot

Ordinary business items and items in Ordinary business items and items in respect of which directors or auditors respect of which directors or auditors have a right to be heard cannot be have a right to be heard cannot be taken by postal ballot taken by postal ballot

Approval for merger can also be Approval for merger can also be taken by postal ballottaken by postal ballot

2828

Section 100 - Circulation of Section 100 - Circulation of Member’s ResolutionMember’s Resolution

No restriction on number of words to be No restriction on number of words to be contained in the statement to be contained in the statement to be circulated to the members upon circulated to the members upon requisition (presently restricted to 1000 requisition (presently restricted to 1000 words)words)

Number of members who can requisition Number of members who can requisition increased to 1/10th of the total paid up increased to 1/10th of the total paid up share capital or 1/10th of the total voting share capital or 1/10th of the total voting power (presently it is not less than 1/20th power (presently it is not less than 1/20th of the total voting power or 100 members of the total voting power or 100 members holding not less than Rs. 1 lakh paid-up holding not less than Rs. 1 lakh paid-up share capital)share capital)

2929

Section 100 - Circulation of Section 100 - Circulation of Member’s Resolution (Cont…)Member’s Resolution (Cont…)

Central Government may direct the Central Government may direct the requisitionists to reimburse the cost requisitionists to reimburse the cost incurred by the Companyincurred by the Company

3030

Section 104 - Resolutions requiring Section 104 - Resolutions requiring special noticespecial notice

New provision to the effect that notice of New provision to the effect that notice of intention to move such resolution shall be intention to move such resolution shall be given given by such number of persons as may by such number of persons as may be prescribed.be prescribed. (Presently even one person (Presently even one person holding one share can give such notice) holding one share can give such notice)

This would prevent frivolous notices This would prevent frivolous notices

3131

Section 107 - Section 107 - MinutesMinutes

Minutes of meetings of class of shareholders or Minutes of meetings of class of shareholders or creditors and every resolution passed by postal creditors and every resolution passed by postal ballot to be keptballot to be kept

Whether minutes of meetings of Whether minutes of meetings of shareholders/creditors approving scheme of shareholders/creditors approving scheme of arrangement/ amalgamation should be kept?arrangement/ amalgamation should be kept?

All appointments of officers made at any of the All appointments of officers made at any of the meetings to be included in the minutes.- ‘Officer’ meetings to be included in the minutes.- ‘Officer’ not defined not defined

Secretarial Standards as may be prescribed to be Secretarial Standards as may be prescribed to be observed for Board and General Meetingsobserved for Board and General Meetings

3232

Section 109 - Report on general Section 109 - Report on general

meetingmeeting New requirementNew requirement

Every listed company to prepare a report Every listed company to prepare a report of each AGM confirming that the meeting of each AGM confirming that the meeting was convened, held and conducted as per was convened, held and conducted as per the provisions of the Act and the rules the provisions of the Act and the rules made thereundermade thereunder

Such report to be filed with RoC within 30 Such report to be filed with RoC within 30 days of the conclusion of AGMdays of the conclusion of AGM

3333

DECLARATION DECLARATION

ANDAND

PAYMENT OF DIVIDENDPAYMENT OF DIVIDEND

3434

Section 110 - Declaration of Section 110 - Declaration of DividendDividend

Transfer to reserves before declaring Transfer to reserves before declaring dividend now optional dividend now optional

Even in case of inadequacy or absence in Even in case of inadequacy or absence in profits in any financial year – dividend can profits in any financial year – dividend can be declared be declared

• with unanimous consent of all directorswith unanimous consent of all directors• approval of financial institutions whose term approval of financial institutions whose term

loans are subsistingloans are subsisting• approval of shareholders by special resolution approval of shareholders by special resolution

at AGMat AGM• Central Government approval no longer Central Government approval no longer

requiredrequired

3535

Section 110 - Declaration of Dividend Section 110 - Declaration of Dividend (Cont…)(Cont…)

Board may declare interim dividend during Board may declare interim dividend during any financial year only out of the profits of any financial year only out of the profits of the company the company for part of the yearfor part of the year (Presently interim dividend can be (Presently interim dividend can be declared out of accumulated profits kept in declared out of accumulated profits kept in profit and loss account)profit and loss account)

No dividend can be declared by a No dividend can be declared by a company contravening the provisions company contravening the provisions relating to repayment of depositsrelating to repayment of deposits

3636

Section 110 - Declaration of Dividend Section 110 - Declaration of Dividend (Cont…)(Cont…)

Transfer to IEPF required after 7 years Transfer to IEPF required after 7 years from the date of transfer to unpaid from the date of transfer to unpaid dividend account (Date of declaration dividend account (Date of declaration + 30 days + 7 days + 7 years+ 30 days + 7 days + 7 years))

Dividend warrant / ECS intimation will Dividend warrant / ECS intimation will have to be sent by registered posthave to be sent by registered post

3737

Section 112 - IEPFSection 112 - IEPF

Central Government to establish a separate IEPF subject to Central Government to establish a separate IEPF subject to CAG AuditCAG Audit

IEPF will also be credited with the following IEPF will also be credited with the following

Unclaimed/Unpaid amount in the General Unclaimed/Unpaid amount in the General Revenue Account of the Central Government - Revenue Account of the Central Government - Extant section 205A transfers.Extant section 205A transfers.

Unclaimed/unpaid amount lying to the credit of Unclaimed/unpaid amount lying to the credit of IEPF under extant Section 205CIEPF under extant Section 205C

Amount received for penalties imposed for Amount received for penalties imposed for disgorgement of securities acquired by disgorgement of securities acquired by impersonation and by making multiple impersonation and by making multiple applications in an IPOapplications in an IPO

3838

Section 112 – IEPF Section 112 – IEPF (Cont..)(Cont..)

Only unclaimed/unpaid dividend to be transferred Only unclaimed/unpaid dividend to be transferred to IEPF to IEPF

No reference to the following items presently No reference to the following items presently required to be credited to IEPFrequired to be credited to IEPF

Unclaimed matured debenturesUnclaimed matured debentures

Unclaimed interest on debenturesUnclaimed interest on debentures

Unclaimed application money received on any Unclaimed application money received on any securitiessecurities

3939

Section 112 – IEPF (Cont..)Section 112 – IEPF (Cont..)

Any person claiming to be entitled to the Any person claiming to be entitled to the dividend transferred to IEPF may apply to dividend transferred to IEPF may apply to the authority prescribedthe authority prescribed

The amount transferred to IEPF can be The amount transferred to IEPF can be utilized for refund of utilized for refund of unclaimed dividends, unclaimed dividends, application money due for refunds and application money due for refunds and interest thereoninterest thereon

4040

BOARD’S REPORTBOARD’S REPORT

4141

Section 120 - Board’s Section 120 - Board’s ReportReport

New requirements set out for Board’s New requirements set out for Board’s Report to include –Report to include –• Extract of the Annual Return in such Extract of the Annual Return in such

form as may be prescribedform as may be prescribed• Number of Board Meetings held Number of Board Meetings held • Directors’ Responsibility StatementDirectors’ Responsibility Statement• Declaration by independent directors Declaration by independent directors

required to be appointed for listed required to be appointed for listed companies and other public companies companies and other public companies as may be prescribedas may be prescribed

4242

Section 120 – Board’s Report Section 120 – Board’s Report (Cont..)(Cont..)

• Report of the Remuneration Committee of Report of the Remuneration Committee of directorsdirectors

• Explanations or comments by the Board on Explanations or comments by the Board on every qualification, reservation or adverse every qualification, reservation or adverse remark made by the auditor in his reportremark made by the auditor in his report

• Particulars of loans, guarantees or Particulars of loans, guarantees or investments exceeding the prescribed investments exceeding the prescribed limits and has been approved by limits and has been approved by shareholders by a special resolutionshareholders by a special resolution

• Particulars of contracts or arrangements Particulars of contracts or arrangements (related party contracts)(related party contracts)

4343

Section 120 – Board’s Report (Cont..)Section 120 – Board’s Report (Cont..)

In case of a listed company, the Directors’ In case of a listed company, the Directors’ Responsibility Statement, shall also state that Responsibility Statement, shall also state that ‘the directors had laid down internal financial ‘the directors had laid down internal financial controls to be followed by the company and that controls to be followed by the company and that such internal financial controls have been such internal financial controls have been complied with’complied with’

The statement should be reworded to confirm the The statement should be reworded to confirm the adequacy or otherwise of the internal financial adequacy or otherwise of the internal financial controls and their operating effectiveness.controls and their operating effectiveness.

4444


The following information presently being The following information presently being provided in / along with the Board’s Report would provided in / along with the Board’s Report would not be required :not be required :

• Information on the state of company’s affairsInformation on the state of company’s affairs• Details of amounts proposed to be transferred Details of amounts proposed to be transferred

to reserves (probably because the requirement to reserves (probably because the requirement to transfer to reserves before declaring to transfer to reserves before declaring dividend is done away with)dividend is done away with)

• Amount recommended for dividendAmount recommended for dividend• Material changes and commitments which Material changes and commitments which

have occurred between the end of the financial have occurred between the end of the financial year and the date of report affecting the year and the date of report affecting the financial position of the companyfinancial position of the company

4545

Section 120 – Board’s Report Section 120 – Board’s Report (Cont..)(Cont..)

• Particulars relating to conservation of Particulars relating to conservation of energy, technology, absorption, foreign energy, technology, absorption, foreign exchange earnings and outgoexchange earnings and outgo

• Particulars of employees drawing Particulars of employees drawing remuneration in excess of a prescribed remuneration in excess of a prescribed limitlimit

• Reasons for failure to complete the Reasons for failure to complete the buyback within stipulated timebuyback within stipulated time

4646


Board’s Report and any annexures thereto Board’s Report and any annexures thereto shall be signed by its Chairman, if he is shall be signed by its Chairman, if he is authorised by the Board or shall be signed authorised by the Board or shall be signed by at least two directors, one of whom shall by at least two directors, one of whom shall be a managing directorbe a managing director

In case of OPC the Report shall be signed by In case of OPC the Report shall be signed by one directorone director

Board’s Report along with the financial Board’s Report along with the financial statements and notice for the AGM should statements and notice for the AGM should be sent to members by registered post or by be sent to members by registered post or by such electronic mode as may be prescribedsuch electronic mode as may be prescribed

4747

REGISTERED VALUERSREGISTERED VALUERS

4848

Sections 218 to 223 - Registered Sections 218 to 223 - Registered ValuersValuers

New conceptNew concept

Valuation of any property, stocks, shares, Valuation of any property, stocks, shares, debentures, securities, goodwill, net worth debentures, securities, goodwill, net worth or assets of a company required under the or assets of a company required under the Act, shall be carried by a registered valuer Act, shall be carried by a registered valuer

Registered valuer to be appointed by the Registered valuer to be appointed by the Audit Committee or in its absence by the Audit Committee or in its absence by the Board of DirectorsBoard of Directors

4949

Sections 218 to 223 - Registered Valuers Sections 218 to 223 - Registered Valuers (Cont..)(Cont..)

Valuer should be registered with the Valuer should be registered with the Central GovernmentCentral Government

Persons qualified to be registered as Persons qualified to be registered as valuers:valuers: Chartered AccountantChartered Accountant Cost and Works Accountant Cost and Works Accountant Company SecretaryCompany Secretary Any other person possessing such Any other person possessing such

qualifications as may be prescribedqualifications as may be prescribed

5050

Sections 218 to 223 - Registered Valuers (Cont..)Sections 218 to 223 - Registered Valuers (Cont..)

Company and body corporate not eligible Company and body corporate not eligible to apply for being registered as valuerto apply for being registered as valuer

Central Government to maintain a Register Central Government to maintain a Register of Valuers which shall contain the names of Valuers which shall contain the names and addresses of persons registered as and addresses of persons registered as valuervaluer

5151

Sections 218 to 223 - Registered Valuers Sections 218 to 223 - Registered Valuers (Cont..)(Cont..)

Central Government to have the power to Central Government to have the power to remove and restore the names of valuers remove and restore the names of valuers from the Register from the Register

Central Government to review the Central Government to review the performance of the registered valuers performance of the registered valuers once in 3 years and may remove the name once in 3 years and may remove the name of any person from the Register of Valuers of any person from the Register of Valuers if it thinks that the performance of the if it thinks that the performance of the valuer is such that its name should not valuer is such that its name should not remain on the Register of Valuers remain on the Register of Valuers

5252

Sections 218 to 223 - Registered Sections 218 to 223 - Registered Valuers (Cont..)Valuers (Cont..)

No person either alone or as a partner of No person either alone or as a partner of another person, can practice, describe or another person, can practice, describe or project himself as a registered valuer or project himself as a registered valuer or permit himself to be so described or permit himself to be so described or projected, unless he or all his partners are projected, unless he or all his partners are registered under the Actregistered under the Act

Rates to be charged by Registered valuer Rates to be charged by Registered valuer not to exceed prescribed ratesnot to exceed prescribed rates

5353

COMPROMISES, ARRANGEMENTSCOMPROMISES, ARRANGEMENTS

AND AND

AMALGAMATIONSAMALGAMATIONS

5454

Section 201 - Power to compromise or Section 201 - Power to compromise or make make

arrangements with creditors and arrangements with creditors and membersmembers

Provisions revamped to provide flexibilityProvisions revamped to provide flexibility

Proposals for corporate debt restructuring Proposals for corporate debt restructuring and /or takeover offers of companies other and /or takeover offers of companies other than listed companies also coveredthan listed companies also covered

Takeover offer means offer to acquire all or Takeover offer means offer to acquire all or part of shares of another companypart of shares of another company

Takeover offer of listed companies to comply Takeover offer of listed companies to comply with SEBI guidelineswith SEBI guidelines

5555

Section 201 - Power to compromise or Section 201 - Power to compromise or make arrangements with creditors and make arrangements with creditors and

members (Cont…)members (Cont…) Arrangements for reorganization of company’s Arrangements for reorganization of company’s

share capital by consolidation or division of share capital by consolidation or division of shares or both the methods, also includedshares or both the methods, also included

Reduction of share capital can be included in Reduction of share capital can be included in the scheme and specific provisions in section the scheme and specific provisions in section 59 for reduction of capital shall not apply59 for reduction of capital shall not apply

Authority to Tribunal to deal with such matterAuthority to Tribunal to deal with such matter

Time bound approval / deemed approvalTime bound approval / deemed approval

5656


members (Cont…)members (Cont…) Notice can be by advertisementNotice can be by advertisement Persons who can object - to hold 10% Persons who can object - to hold 10%

shareholding or 5% outstanding debtshareholding or 5% outstanding debt

Valuation report requiredValuation report required

Approval of majority representing three-fourths Approval of majority representing three-fourths in value required (not number any longer)in value required (not number any longer)

Approval may be sought by postal ballotApproval may be sought by postal ballot

5757


members (Cont…)members (Cont…) The Application to Tribunal to disclose the following The Application to Tribunal to disclose the following

by an affidavit :by an affidavit :

all material facts relating to the company, such all material facts relating to the company, such as the latest financial position of the company, as the latest financial position of the company, the latest auditors’ report on the accounts of the the latest auditors’ report on the accounts of the company and the pendency of any investigation company and the pendency of any investigation or proceedings against the companyor proceedings against the company

Reduction of share capital of the company, if Reduction of share capital of the company, if any, included in the schemeany, included in the scheme

5858

Section 201 - Power to compromise or make Section 201 - Power to compromise or make arrangements with creditors and members arrangements with creditors and members

(Cont…)(Cont…) In case of a scheme of Corporate Debt In case of a scheme of Corporate Debt

Restructuring (CDR) with approval of 75% of Restructuring (CDR) with approval of 75% of secured creditors in value:secured creditors in value:

A creditor’s responsibility statementA creditor’s responsibility statement

Safeguards for the protection of other secured Safeguards for the protection of other secured and unsecured creditorsand unsecured creditors

Report by auditor that the fund requirements Report by auditor that the fund requirements of the company after the CDR will conform to of the company after the CDR will conform to the liquidity test based on estimates provided the liquidity test based on estimates provided by the Boardby the Board

5959


members (Cont…)members (Cont…)

Where CDR is as per RBI guidelines, a Where CDR is as per RBI guidelines, a statement to that effectstatement to that effect

A valuation report in respect of the shares and A valuation report in respect of the shares and the property and all assets, tangible and the property and all assets, tangible and intangible, movable and immovable, by intangible, movable and immovable, by registered valuerregistered valuer

Tribunal may order for a meeting to be held for Tribunal may order for a meeting to be held for the purpose of considering the compromise or the purpose of considering the compromise or arrangementarrangement

6060


members (Cont…)members (Cont…) The notice for the meeting can be served either The notice for the meeting can be served either

individually or by an advertisement, along with a individually or by an advertisement, along with a statement disclosing :statement disclosing :

• The details of the schemeThe details of the scheme The valuation report, if anyThe valuation report, if any The effects thereof the creditors, The effects thereof the creditors,

members and debenture holdersmembers and debenture holders The effect of the scheme on any material The effect of the scheme on any material

interests of the directors of the company interests of the directors of the company or the debenture trusteesor the debenture trustees

Such other matters as may be prescribedSuch other matters as may be prescribed

6161


members (Cont…)members (Cont…) If an advertisement is issued it should indicate If an advertisement is issued it should indicate

the time when the copies of the scheme will be the time when the copies of the scheme will be available to concerned persons free of charge available to concerned persons free of charge from the registered office of the companyfrom the registered office of the company

Notice to also provide that written consent for the Notice to also provide that written consent for the scheme can be sent by the persons within one scheme can be sent by the persons within one month from the month from the date of receipt of the notice date of receipt of the notice

Objection can be made only by persons Objection can be made only by persons holding not less than 10% of the holding not less than 10% of the shareholding or having not less than 5% shareholding or having not less than 5% outstanding debt as per latest audited outstanding debt as per latest audited financial statementfinancial statement

6262

Section 201 - Power to compromise or make Section 201 - Power to compromise or make arrangements with creditors and members arrangements with creditors and members

(Cont…)(Cont…) Notice along with all the accompanying documents should Notice along with all the accompanying documents should

also be sent to:also be sent to:

Central GovernmentCentral Government RBIRBI SEBI SEBI RegistrarRegistrar respective stock exchangesrespective stock exchanges Official LiquidatorOfficial Liquidator Competition Commission of IndiaCompetition Commission of India Such authorities who may require to represent in the Such authorities who may require to represent in the

mattermatter

The above authorities to make representations within one The above authorities to make representations within one month from the date of receipt of such notice, else deemed month from the date of receipt of such notice, else deemed to be approvedto be approved

6363


members (Cont…)members (Cont…) The order of Tribunal shall also provide for the The order of Tribunal shall also provide for the

following :following :• Conversion of preference shares into equity Conversion of preference shares into equity

shares – with option to receive arrears of shares – with option to receive arrears of dividend in cash or equity sharesdividend in cash or equity shares

• Protection of any class of creditorsProtection of any class of creditors• If scheme is agreed by creditors, any If scheme is agreed by creditors, any

proceedings pending before BIFR shall abateproceedings pending before BIFR shall abate• Variation of shareholders’ rights in compliance Variation of shareholders’ rights in compliance

with applicable provisions of the Actwith applicable provisions of the Act

6464

Section 203 –Section 203 – Merger and Merger and Amalgamation Amalgamation of companies of companies

Provides for both merger and demerger Provides for both merger and demerger (division of undertaking)(division of undertaking)

Merging companies –Merging companies –

• for a merger by absorption means both for a merger by absorption means both transferor and transferee companies andtransferor and transferee companies and

• for a merger by formation of a new company, for a merger by formation of a new company, the transferor companiesthe transferor companies

6565

Section 203 –Section 203 – Merger and Merger and Amalgamation Amalgamation

of companies (Cont…) of companies (Cont…)

Where a meeting is required to be held pursuant Where a meeting is required to be held pursuant to the Order of the Tribunal, the following to the Order of the Tribunal, the following documents / information shall be circulated :documents / information shall be circulated :

• Draft scheme approved by the Board of the Draft scheme approved by the Board of the merging companymerging company

• Confirmation that a copy of the draft scheme Confirmation that a copy of the draft scheme has been filed with the Registrarhas been filed with the Registrar

6666


of companies (Cont…) of companies (Cont…)• Report adopted by the directors of the merging Report adopted by the directors of the merging

companies explaining the effect of the companies explaining the effect of the compromise on each class of shareholders, the compromise on each class of shareholders, the share exchange ratio and specifying valuation share exchange ratio and specifying valuation difficulties, if anydifficulties, if any

• Report of expert with regard to valuation, if anyReport of expert with regard to valuation, if any

• Supplementary accounting statement if the last Supplementary accounting statement if the last annual accounts of any of the merging company annual accounts of any of the merging company relate to a financial year ending more than six relate to a financial year ending more than six months before the first meeting of the company months before the first meeting of the company summoned for approving the schemesummoned for approving the scheme

6767


of companies (Cont…) of companies (Cont…) In case of a merger by formation of a new In case of a merger by formation of a new

company, in addition to all the above, copy of the company, in addition to all the above, copy of the ordinary resolution approving the draft scheme, ordinary resolution approving the draft scheme, passed by each of the transferor companies passed by each of the transferor companies would be required to be circulatedwould be required to be circulated

The order of the Tribunal approving the The order of the Tribunal approving the arrangement shall also include:arrangement shall also include: Foreign direct investment if any, to be Foreign direct investment if any, to be

allocated to the transferor and transferee allocated to the transferor and transferee companycompany

Transfer of employees of the transferor Transfer of employees of the transferor company to the transferee companycompany to the transferee company

6868


of companies (Cont…) of companies (Cont…) Where the transferor is a listed company and Where the transferor is a listed company and

the transferee is an unlisted company – the transferee is an unlisted company –

the transferee company shall continue to the transferee company shall continue to be an unlisted company be an unlisted company (not favourable in (not favourable in case of a demerger) case of a demerger)

shareholders of transferor company desiring shareholders of transferor company desiring to opt out of the transferee company should to opt out of the transferee company should be paid at a pre-determined price or as per be paid at a pre-determined price or as per valuation made and as provided by the valuation made and as provided by the TribunalTribunal

6969


of companies (Cont…) of companies (Cont…) the transferor company if not dissolved, will the transferor company if not dissolved, will

become an unlisted company and its become an unlisted company and its shareholders if desiring to opt out should shareholders if desiring to opt out should also be paid at a pre-determined price or as also be paid at a pre-determined price or as per valuationper valuation

• Where transferor company is dissolved, the fee Where transferor company is dissolved, the fee for authorized capital can be set-off against the for authorized capital can be set-off against the fees payable by the transferee companyfees payable by the transferee company

Certified copy of the order to be filed with Certified copy of the order to be filed with Registrar within 30 days of making the orderRegistrar within 30 days of making the order

7070

Section 204 –Section 204 – M & A of small M & A of small companies, companies,

Holding and WOS Holding and WOS Simplified process and easy time lines for Simplified process and easy time lines for

mergers and amalgamations of small companies mergers and amalgamations of small companies and holding company and wholly owned and holding company and wholly owned subsidiarysubsidiary

Small company – paid up share capital less than Small company – paid up share capital less than Rs 5 crore and turnover not over Rs. 20 crore as Rs 5 crore and turnover not over Rs. 20 crore as per latest audited profit and loss account; not a per latest audited profit and loss account; not a holding or subsidiary; not a charitable company; holding or subsidiary; not a charitable company; not formed under any Special Actnot formed under any Special Act

7171


Wholly and WOS (Cont…) Wholly and WOS (Cont…) Notice of scheme inviting objections from Notice of scheme inviting objections from

any persons affected by the schemeany persons affected by the scheme within 30 days, to be issued both by within 30 days, to be issued both by transferor and transferee companytransferor and transferee company

Objections received, if any, to be Objections received, if any, to be considered in respective general meetings considered in respective general meetings and scheme to be approved by a special and scheme to be approved by a special resolutionresolution

7272


Wholly and WOS (Cont…) Wholly and WOS (Cont…) In case of creditors meeting – In case of creditors meeting –

• notice of 21 days notice of 21 days • Scheme to be approved by three-fourths Scheme to be approved by three-fourths

in value of creditors or class of creditors in value of creditors or class of creditors at a meetingat a meeting

• or by approval in writingor by approval in writing Transferee company to file copy of the Transferee company to file copy of the

approved scheme with ROC and Official approved scheme with ROC and Official Liquidator (OL)Liquidator (OL)

7373


Wholly and WOS (Cont…) Wholly and WOS (Cont…) If ROC and OL have no objections, the scheme If ROC and OL have no objections, the scheme

shall be registered and confirmation givenshall be registered and confirmation given

If OL does not communicate his objections within If OL does not communicate his objections within 30 days – no objection presumed and Registrar 30 days – no objection presumed and Registrar can register and confirmcan register and confirm

Upon objection from OL or any other person, Upon objection from OL or any other person, Registrar may apply to Tribunal within 90 days of Registrar may apply to Tribunal within 90 days of receipt of the scheme and Tribunal may issue receipt of the scheme and Tribunal may issue necessary directionsnecessary directions

7474

Section 204 –Section 204 – M & A of small companies, M & A of small companies, Wholly and WOS (Cont…) Wholly and WOS (Cont…)

If no comments or objection is received from the If no comments or objection is received from the Registrar or any other person, the Tribunal may Registrar or any other person, the Tribunal may pass an order confirming the scheme pass an order confirming the scheme

The Registrar shall register the scheme and issue The Registrar shall register the scheme and issue confirmation to the companiesconfirmation to the companies

Registration of the scheme shall be deemed to Registration of the scheme shall be deemed to have the effect of dissolution of the transferor have the effect of dissolution of the transferor company without winding upcompany without winding up

Transferee company can avail set-off of fees Transferee company can avail set-off of fees payable on authorized capitalpayable on authorized capital

7575

Section 205 - Amalgamation by Section 205 - Amalgamation by mutual agreement mutual agreement

New concept to facilitate cross border New concept to facilitate cross border mergersmergers

In case of a foreign company merging with In case of a foreign company merging with an Indian company, the scheme may an Indian company, the scheme may provide for payment of consideration to provide for payment of consideration to the shareholders of the merging company the shareholders of the merging company in cash or in Indian Depositary Receipts or in cash or in Indian Depositary Receipts or partly in cash and partly in Indian partly in cash and partly in Indian Depositary ReceiptsDepositary Receipts

7676

Section 205 - Amalgamation by Section 205 - Amalgamation by mutual agreement mutual agreement

Indian Depositary Receipts means Indian Depositary Receipts means any instrument in the form of a any instrument in the form of a depositary receipt created by a depositary receipt created by a domestic depositary in India and domestic depositary in India and authorized by a company authorized by a company incorporated outside India making an incorporated outside India making an issue of such depositary receiptsissue of such depositary receipts

7777

Section 207 - Purchase of minority Section 207 - Purchase of minority

shareholding shareholding Where any acquirer or a person acting in Where any acquirer or a person acting in

concert with such acquirer, becomes a concert with such acquirer, becomes a registered holder of 90% or more of the registered holder of 90% or more of the issued equity share capital of a company issued equity share capital of a company or or any person or group of persons becoming any person or group of persons becoming 90% majority 90% majority or or holds 90% of the issued holds 90% of the issued equity share capital by virtue of a merger, equity share capital by virtue of a merger, amalgamation, share exchange, conversion amalgamation, share exchange, conversion of securities or for any other reason, of securities or for any other reason, such acquirer, person or group of persons, such acquirer, person or group of persons, shall make an offer to the remaining shall make an offer to the remaining shareholders to buy their shares.shareholders to buy their shares.

7878

Section 207 - Purchase of Section 207 - Purchase of minority minority

shareholding shareholding (Cont…)(Cont…)

The minority shareholders may on The minority shareholders may on their own make an offer to the their own make an offer to the majority shareholders to purchase majority shareholders to purchase their shares.their shares.

Offer price shall be as determined by Offer price shall be as determined by a registered valuera registered valuer

7979



The majority shareholders shall The majority shareholders shall deposit required amount in a deposit required amount in a separate bank account to be separate bank account to be operated by transferor companyoperated by transferor company

Transferor company responsible to Transferor company responsible to receive shares and to make payment receive shares and to make payment to shareholders within 60 daysto shareholders within 60 days

8080


shareholding (Cont…) shareholding (Cont…) In the absence of physical delivery of shares In the absence of physical delivery of shares

by shareholders within specified time, the by shareholders within specified time, the share certificates shall be deemed to be share certificates shall be deemed to be cancelled and payment madecancelled and payment made

In case of an offer for full purchase by a In case of an offer for full purchase by a majority shareholder the heirs, successors majority shareholder the heirs, successors etc, of the minority shareholder can avail etc, of the minority shareholder can avail the amount up to three years from the date the amount up to three years from the date of acquisition of majority shareholdingof acquisition of majority shareholding

8181



Minority shareholders entitled to receive Minority shareholders entitled to receive on pro rata basis such higher price, at on pro rata basis such higher price, at which the majority shareholders holding at which the majority shareholders holding at least 75% of the minority shareholding, least 75% of the minority shareholding, have negotiated or have an understanding have negotiated or have an understanding with any other person for transfer of the with any other person for transfer of the said shares.said shares.

‘‘Acquirer’ and ‘persons acting in concert’ Acquirer’ and ‘persons acting in concert’ to have same meaning as in SEBI to have same meaning as in SEBI Takeover RegulationsTakeover Regulations

8282

Section 209 - Registration of offer of Section 209 - Registration of offer of schemes schemes

involving transfer of shares involving transfer of shares Circular containing an offer of a scheme or Circular containing an offer of a scheme or

contract involving transfer of shares or any contract involving transfer of shares or any class of shares, shall be presented to the class of shares, shall be presented to the Registrar for registration and shall not be Registrar for registration and shall not be issued unless registeredissued unless registered

Registrar to communicate refusal to Registrar to communicate refusal to register within 30 days of applicationregister within 30 days of application

8383

Section 211 - Liability of officers in Section 211 - Liability of officers in respect respect

of offences committed prior of offences committed prior

to amalgamation, transfer, to amalgamation, transfer, etc.etc.

Liability in respect of offences committed Liability in respect of offences committed under the Act by officers in default of the under the Act by officers in default of the transferor company prior to its merger, transferor company prior to its merger, amalgamation or acquisition will continue amalgamation or acquisition will continue after such merger, amalgamation or after such merger, amalgamation or acquisitionacquisition

8484

SPECIAL COURTSSPECIAL COURTS

8585

SectionsSections 396 to 405 - Special 396 to 405 - Special CourtsCourts

New conceptNew concept

Central Government to establish special Central Government to establish special courts for the purpose of providing speedy courts for the purpose of providing speedy trial of offences under the Act. trial of offences under the Act.

Special Courts situated in the area where Special Courts situated in the area where the registered office of the company is the registered office of the company is situated to have jurisdiction and if there situated to have jurisdiction and if there are more than one Special Courts in an are more than one Special Courts in an area, the one specified by the High Court area, the one specified by the High Court concerned will have jurisdictionconcerned will have jurisdiction

8686

SectionsSections 396 to 405 - Special Courts 396 to 405 - Special Courts (Cont..)(Cont..)

All offences under Companies Act to be All offences under Companies Act to be triable only by Special Courts triable only by Special Courts

Every offence under the Act shall be Every offence under the Act shall be deemed to be non-cognizable deemed to be non-cognizable

Special Court may based upon a police Special Court may based upon a police report of the facts constituting an offence report of the facts constituting an offence or upon a complaint made, take or upon a complaint made, take cognizance of the offence without the cognizance of the offence without the accused being committed for trial accused being committed for trial

8787


Extant provisions of section 621A relating Extant provisions of section 621A relating to non-cognizable offences and provisions to non-cognizable offences and provisions of section 621A relating to composition of of section 621A relating to composition of offences have been retained offences have been retained

Matters relating to accusation without Matters relating to accusation without reasonable cause shall now be dealt with reasonable cause shall now be dealt with by the Special Court or Court of Session in by the Special Court or Court of Session in accordance with Section 250 of the Code accordance with Section 250 of the Code of Criminal Procedure, 1973of Criminal Procedure, 1973

8888


Special Courts may try in a Summary Way any Special Courts may try in a Summary Way any offence under this Act which is punishable with offence under this Act which is punishable with imprisonment for a term not exceeding 3 years imprisonment for a term not exceeding 3 years (like a civil suit) – in such cases punishment (like a civil suit) – in such cases punishment cannot exceed one year. If necessary the Special cannot exceed one year. If necessary the Special Court may try the matter as a regular trialCourt may try the matter as a regular trial

Appeals shall lie with the High CourtAppeals shall lie with the High Court

Transitional provisions that existing Court of Transitional provisions that existing Court of Sessions will continue to exercise jurisdictionSessions will continue to exercise jurisdiction

8989

NATIONAL COMPANY LAW NATIONAL COMPANY LAW TRIBUNAL (NCLT)TRIBUNAL (NCLT)

AND AND

APPELLATE TRIBUNALAPPELLATE TRIBUNAL

9090

Sections 368 to 395 - NCLT and Sections 368 to 395 - NCLT and Appellate Appellate Tribunal Tribunal

Provisions relating to establishment, Provisions relating to establishment, constitution and functioning of NCLT constitution and functioning of NCLT and Appellate Tribunal laid down and Appellate Tribunal laid down elaboratelyelaborately

9191

Sections 368 to 395 - NCLT and Sections 368 to 395 - NCLT and Appellate Appellate

Tribunal (Cont…) Tribunal (Cont…) Criteria/qualification/experience for Chairperson/ Criteria/qualification/experience for Chairperson/

members of Tribunal and Appellate Tribunal members of Tribunal and Appellate Tribunal clearly set outclearly set out

Some matters presently dealt with by Company Some matters presently dealt with by Company Law Board which shall be handled by the TribunalLaw Board which shall be handled by the Tribunal

Default in repayment of principal amount and Default in repayment of principal amount and interest thereon on Debenturesinterest thereon on Debentures

Failure to repay deposits on timeFailure to repay deposits on time

9292

Sections 368 to 395 - NCLT and Sections 368 to 395 - NCLT and Appellate Appellate

Tribunal (Cont…) Tribunal (Cont…) Some matters presently requiring approval of Some matters presently requiring approval of

Central Government to go to Tribunal :Central Government to go to Tribunal :

Alteration of articles for conversion of a public Alteration of articles for conversion of a public company into a private companycompany into a private company

power to call annual general meeting,power to call annual general meeting,

refusal for transfer of securities, refusal for transfer of securities,

9393

Sections 368 to 395 - NCLT and Appellate Sections 368 to 395 - NCLT and Appellate Tribunal (Cont…) Tribunal (Cont…)

to give notice in case of an to give notice in case of an application for reduction of share application for reduction of share capitalcapital

default in repayment of principal default in repayment of principal on debentureson debentures

to decide on the financial year to decide on the financial year

9494

THANK YOUTHANK YOU

1 the companies bill, 2009 presentation on the salient features of new bill september 26, 2009

Documents

close register of members

company particulars

registers foreign register

particulars of promoters

debentures particulars

outsideregister of members

india slide

annual return slide