Download - Companies Act 2013 Updates and Way Forward
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COMPANIES ACT 2013 UPDATES ,
WAY FORWARD
From
CS GAURAV KUMAR SHARMA
www.csgauravsharma.com
9990694230
W W W . C S G A U R A V S H A R M A . C O M
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Amendments
Under Companies
Act,2013
W W W . C S G A U R A V S H A R M A . C O M
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Associate
Company
New Concepts
Introduced In
The Act
Auditing Standards
CEO & CFO
CEO & CFO
Promoter
Key Managerial
Personnel
Global Depository
Receipt
Related Party
Small Company
Independent
Director
Corporate Social
Responsibility
One Person
company
Secretarial
Audit
Women
Director
Regulators
Dormant
Company Entrenchment
of Articles W W W . C S G A U R A V S H A R M A . C O M
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Company
Incorporation
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ONE PERSON COMPANY
Only ONE PERSON as a member
Can be incorporated only as a PRIVATE COMPANY
One Person Company should be mentioned below the
name of the company wherever the name is affixed, used
or engraved.
Basic
Requirements: Minimum PSC=Rs. 1 Lakh
Restricts transfer of shares
&
Prohibits invitation to
subscribe for the securities
of the Company
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OPC COMPULSORY CONVERSION INTO PUBLIC OR
PRIVATE COMPANY
OPC WILL ENJOY SAME PRIVILIGES AND EXEMPTIONS AS AVAILABLE TO
PRIVATE COMPANY . Additional Exemptions shall be Section
96,98,100,101-111 of Companies Act,2013.
The annual return of a One Person Company shall be signed by the
company secretary, or where there is no company secretary, by the
director of the company.
Compulsory Conversion, if
Paid Up Share Capital
exceeds Rs. 50 Lakhs
Annual Turnover > Rs. 3
crore in 3 immediately
preceeding consecutive
years
OR
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SMALL COMPANY- SEC-2(85)
Only a private company can be classified as a small company.
Basic requirements
Paid-up share capital
50 lakhs- 5 crore
Turnover
2 crore-20 crore
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EXCEPTIONS TO THE ABOVE RULE:
A holding company or a subsidiary company
Company registered under section 8 of CA,2013
Company or body corporate governed by any special Act
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PRIVATE COMPANY [SECTION 2(68)]
The 2013 Act introduces a change in the definition for a private
company, inter-alia, the new requirement increases the limit of
the number of members from 50 to 200.
Increase in the Limit of Number of
Members from 50 to 200
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DORMANT COMPANY (SECTION 455)
The 2013 Act states that a company can be classified as
dormant when it is formed and registered under this 2013 Act for
a future project or to hold an asset or intellectual
property and has no significant accounting
transaction.
Such a company or an inactive one may apply to the ROC in such manner as may be prescribed for obtaining the status of a
dormant company.
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SECTION 8 COMPANIES
New objects like environment protection, education, research,
social welfare etc., have been added to the existing object for
which a charitable company could be incorporated.
REVOCATION OF
LICENSE
Contravenes the
provisions of the
Act
Affairs of the
company are
conducted in a
FRAUDLENT
MANNER
Prejudicial to the
interest of
Public W W W . C S G A U R A V S H A R M A . C O M
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OFFICER (SECTION 2(59) )
FINANCIAL YEAR (section 2(41))
Now Includes KMP &
PROMOTERS
Also
Company or body corporate to
adopt uniform financial year of
1st April to 31st March every
year except in certain
exceptional cases
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KEY MANAGERIAL PERSONNEL(KMP) (SECTION 2(51) )
CEO* CS WTD
CFO OTHER
OFFICER**
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CHANGES IN INCORPORATION- MOA
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ARTICLES OF ASSOCIATION (SEC 5)
An entrenchment provision enables a company to follow a more restrictive procedure than passing a special resolution for altering a specific clause of articles of association.
A private company can include entrenchment provisions only if agreed by all its members or, in case of a public company, if a special resolution is passed.
ENTRENCHMENT PROVISIONS
INTRODUCTION OF:
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ROC Empowered to strike off name of the
company
Person deliberately furnishing any false/incorrect
information at the time of incorporation shall be
responsible for fraud u/s 447
Winding Up of the Company
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Prospectus and
Public Offer
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BASIC PROVISIONS
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ISSUE OF PROSPECTUS
The 2013 Act states that the report by the auditors on the assets and liabilities of business shall not be earlier than 180 days before the issue of the prospectus [section 26 (1) (b)(iii) of 2013 Act]
Additional
Mandatory
disclosures
introduced:
1. Pending litigation during
the last 5 years immediately
preceding the year of issue of
prospectus against promoter
2. Sources of Promoter
Contribution
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Variation in terms
of contract or
objects
Offer of sale of
shares by certain
members of the
company
By Passing
Special
Resolution
EXIT OFFER by Promoters to
Dissenting
Shareholders
Members may
in consultation
of BOD offer
their share
holding to
public
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S H E L F
P R O S P E C T U S
SEBI prescribes the
classes of
companies in this
aspect
G L O B A L
D E P O S I T O R Y
R E C E I P T S
Company, may, after
passing a special
resolution in its
general meeting,
issue GDRs subject
to conditions.
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PRIVATE PLACEMENT OFFER
CONDITIONS:
Offer to Section of Companies other
than QIBs
Not more than 50 number of people
The allotment with respect to any
earlier offer or
invitation may have
been completed
Money payable through Cheque/DD
but not in cash
Prior names to be recorded by company
before making offer
No advertisement to inform public at large
Conditions fulfilled
YES
NO
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Share capital and
debentures
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GENERAL CHANGES:
COVERAGE OF
ALL TYPES OF SECURITIES
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VARIATION OF SHAREHOLDERS RIGHTS
(SECTION 48(1) )
an additional requirement in respect of those classes of share
holders whose rights are affected pursuant to any variation.
if the variation by one class of shareholders affects the
rights of any other class of shareholders,
Consent of 3/4th of the class of
shareholders shall be obtained
& apply provisions of this section
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FURTHER ISSUE OF SHARE CAPITAL (SEC 62)
Rights issue can also be made to the
employees of the company who are under
a scheme of employees stock option,
subject to a special resolution and subject
to conditions as prescribed.
price of such
shares should
be determined
using the
valuation report
of a registered
valuer, which
would be
subject to
conditions as
prescribed
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ISSUE OF SHARES AT A DISCOUNT
No shares other than
sweat equity shares
can be issued at
discount
No provision has been made for issue of shares on
discount with the approval of CENTERAL GOVERNMENT
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ISSUE OF BONUS SHARES
New provision introduced in the act
PROHIBITIONS
No default in payment of interest or
principle of fixed deposit
No default i.r.o statutory dues of
employees like PF, Gratuity and
Bonus.
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OTHER CHANGES
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ACCEPTANCE
OF DEPOSITS
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NBFCs will be governed by the rules issued
by Reserve Bank of India
Deposits from persons other than members
not allowed
Shareholders Approval Required for
accepting deposits from members
Concept of Small Depositors no more in
existence.
An amount equivalent to 15% of deposits
maturing during the financial year shall be
kept in separate bank account in a
scheduled bank W W W . C S G A U R A V S H A R M A . C O M
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MANAGEMENT
AND
ADMINISTRATION
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ANNUAL RETURN (SEC 92)
Certification by PCS
Unlisted Co.
PSC
10 Cr or more
Turnover
>=50 Cr.
Listed Co.
Mandatory
Form MGT-8
or
Extract of AR
shall form part
of Board Report
PCS IN DEFAULT- 50K-5L
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PENALTY CLAUSE
C O M PA N Y O F F I C E R I N D E F A U L T
FINE
Rs. 50,000-
5,00,000
More
than 6
months
OR
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PLACE OF KEEPING REGISTERS AND RETURNS
(SEC-94)
At any place in India, where
More than 1/10th of
the member resides
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ANNUAL GENERAL MEETINGS (SEC-96)
First General Meeting
Time Period
for holding
AGM
During
Business
Hours (9.00
A.M. to 6.00
P.M.)
within nine months from the date of closing of
the first financial year of the company
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Shorter notice for calling AGM
Possible, with the consent of 95% of the
members
Disclosure of interest of every director,
manager and KMP and their relatives
need to be mentioned in the notice of the
meeting
Threshold
disclosure of
shareholding
Reduced from
20% to 2%
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QUORUM IN SHAREHOLDERS MEETING
(SEC-103)
Public Company Private Company
No of members as on
date of meeting
Quorum
1000 5
1000
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PROXY (SEC-105)
Number of members which a
proxy can represent:
Number of
Members
number of
shares holding in the aggregate
50 not more than 10
% of the total
share capital of
the company
carrying voting
rights
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REPORT ON ANNUAL GENERAL MEETING
(SEC-121)
New
Provision
under
CA,2013
Listed companies will be required to
file with the ROC a report in the
manner prescribed in the rules on
each annual general meeting
including a confirmation that the
meeting was convened, held and
conducted as per the provisions of the
2013 Act and the relevant rules
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DIRECTORS
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WOMAN DIRECTOR (SECTION 149(1))
Women director
Other public co
PSC
100 Cr or more
T/O
300 cr. Or more
Listed co
Mandatory
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NUMBER OF DIRECTORSHIP
A company can have maximum 15 directors instead
of earlier 12 directors
15
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INDEPENDENT DIRECTORS (SEC-149)
Paid Up Share
Capital
10crores or
more
Turnover Rs.100 crores
or more
outstanding
loan,
debentures and
deposits
Exceeding Rs.
50 crores
New
Provision
Public Companies Listed Companies
at least one-third
of the total
number of
directors as
independent
directors
Differing compliance requirements with respect to the appointment of
independent directors, remuneration thereto, imposed by multiple
regulators will lead to hardship as well increased cost of compliance for
companies.
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OTHER PROVISIONS FOR ID
Tenure of
office of an
independent
director
a maximum of two tenures of five consecutive years, with a
cooling-off period of three years between the two tenures.
Stock
options
an independent director will not be eligible to get stock
options but may get payment of fees
and profit linked commission subject to limits specified or to
be specified in the rules [section 149 (9) of 2013 Act]. This
again, is in contradiction with SEBIs requirements, whereby
for the purpose of granting stock options, the term employee
includes independent directors also.
MCA had released the corporate governance voluntary guidelines in
2009, which permitted 3 tenures (with other conditions) for an ID
while as per the clause 49 of the equity listing agreement, an ID
cannot serve for more than nine consecutive years.
Contradict
ory
Provision
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APPOINTMENT OF AN ADDITIONAL DIRECTOR
Sec 161 of CA,2013
any person who fails to get elected as a
director in the general meeting can no
longer be appointed as an additional
director by the board of directors
W W W . C S G A U R A V S H A R M A . C O M
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ADDITIONAL COMPLIANCE REQUIREMENTS FOR
PRIVATE COMPANIES
Appointment of director to be voted
individually
Option to adopt principle of proportional
representation for appointment of directors
Ineligibility on account of non-compliance with
section 274(1)) (g) now extended for
appointment or reappointment as a director in
a private limited company also.
Provisions mandated
only for public
companies and private
companies which are
subsidiaries of public
companies.
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CHANGES - MANAGEMENT & MEETINGS
Board Meeting
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Notice of the Meeting
Participation
of Directors
Number & Timing of
Meetings
Minimum 7 days Notice
In person, or
At least 4 meetings in
a year
To be given to all
directors whether or not
in India
By video conferencing, or
Not necessary to be
held in every quarter
Can be sent through
any means; hand
delivery, post or e-form
Any other audio-visual
means capable of
recording, recognizing
and storing the
participation of director
with date & time
Time gap of not more
than 120 days
between 2 meetings
Meeting at shorter notice allowed subject to attendance by at least 1
Independent director or subsequent ratification of decision by all
directors.
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BOARD COMMITTEES
Every Listed Company All public companies Audit committee
Every Listed Company All public companies
Nomination and remuneration
committee
more than one thousand shareholders, debenture-holders, at any time during a financial year
stakeholders relationship committee
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AUDIT COMMITTEE (SEC 177)
Listed
Companies
Public Companies
All
Companies
Paid Up Capital Rs.10 Crores or more
Turnover Rs.100 Crores or more
Outstanding Loans Or
Borrowings Or
Debentures Or Deposits
exceeding Rs.50 Crores
or more.
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AUDIT COMMITTEE(CONT)
Companies which accept deposits from the public
Companies which have borrowed money from Banks
and PFI in excess of Rs.50 crores
Disclosed by the company in the website, if any,
and in the Boards Report
Establishment of Vigil
Mechanism
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NOMINATION AND REMUNERATION COMMITTEE
AND STAKEHOLDERS RELATIONSHIP
COMMITTEE (SEC 178)
Stakeholders
Relationship
Committee
Nomination And Remuneration Committee
The Board of Directors
of a company which
consists of more than
one thousand
shareholders,
debenture-holders,
deposit-holders and any
other security holders
at any time during a
financial year -
Listed
Companies
Other Public Companies
All
Paid up capital Rs.100 crores
or more;
Aggregate of
outstanding loans
or borrowings or
debentures or
deposits
exceeding
Rs.50 crores.
New
Provision
OR
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Audit &
Auditors
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Listed & other prescribed companies shall not appoint or
reappoint:
An individual auditor for more than 1 term of 5
consecutive years
An auditor firm for more than 2 terms of 5 consecutive
years
A gap of at least 5 years should elapse after completion of the
aforesaid term before the same auditor can be reappointed
A period of 3 years available as a transition period for
compliance after enactment of this law
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Auditor shall not provide the following services whether
directly/ indirectly to Company and its Holding & subsidiary
Companies:
Design & Implementation of
Financial Information system
Internal Audit
Investment Banking &
Advisory
Accounting & book
Keeping Services
Actuarial Services
Management Services
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Dividend
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No dividend shall be declared or paid by a Company from its reserves
other than free reserves.
Instead of transferring a fixed percentage of Profits to
reserves before declaring dividend, the Company can
transfer the amount as it deems fit
Transfer of shares to the investor education and protection fund
(IEPF)
Along with the unclaimed dividend, the shares on which dividend is
unclaimed, also to be transferred to the IEPF.
Such a transfer is not mandatory now
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CORPORATE SOCIAL RESPONSIBILITY (Section 135 )
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companies would spend at least 2% of the average net-profits
of the immediately preceding three years on CSR activities
net worth
turnover
net profit
500 crore INR, or more
5 crore INR or more
1000 crore INR or more
New
Provision
If not spent, explanation for the reasons thereof to be given in the
directors report
OR
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Revival and rehabilitation of sick companies
and Compromises, arrangements
and amalgamations
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SICK COMPANY
Any Company can be declared as a Sick Company and not necessarily an Industrial Unit
Criteria of 50% Net Worth erosion dispensed with
Company unable to repay 50% or more of secured debts within 30 days of notice served by the Creditors can be declared sick on application moved by:
The Company itself, OR The Creditors representing 50% or more of secured debts
To speed up the revival and rehabilitation process, the
2013 Act provides a one year time period for the
finalisation of the rehabilitation plan.
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STREAMLINING REQUIREMENTS
Section extends to the reduction of share capital, buy-back,
takeovers and corporate debt restructuring as well
objection to any compromise or arrangement can
now be made only
by persons holding not less than 10% of share
holding
having an outstanding debt amounting to not
less than 5% of the total outstanding debt as
per the latest audited financial statements
OR
Act merely requires filing of the order with the ROC
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CROSS-BORDER MERGERS
allowed between Indian Companies and Foreign Companies incorporated in prescribed jurisdictions
Prior approval from RBI required and the scheme must provide for payment to shareholders of the
merging Company in any combination of cash and
IDRs
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SQUEEZE OUT PROVISIONS (SEC 236 )
The 2013 Act has introduced new provisions for enabling
the acquirer of a company (holding 90% or more shares)
by way of amalgamation, share exchange, etc. to acquire
shares from the minority holders subject to compliance
with certain conditions.
This has also introduced the requirement for registered valuers, since the price to be offered by majority
shareholder needs to be determined on the basis of
valuation by a registered valuer.
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REGULATORS:
National Company Law Tribunal (Tribunal or
NCLT):
National Financial Reporting Authority
(NFRA)
Serious Fraud Investigation Office (SFIO):
W W W . C S G A U R A V S H A R M A . C O M
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THANKS
www.csguaravsharma.com
9990694230
W W W . C S G A U R A V S H A R M A . C O M