Companies bill 2011 @ a glance

GENERAL:

An attempt has been made to bring out the most important points into sharp relief through the new Companies Bill, 2011. The various mechanics involved like formation, management & administration, accounts, audits etc within the limits of a company will be analyzed and governed on the basis of the sections inscribed within the very bill.

THE COMPANIES BILL,2011

INTRODUCTION; This is a new bill for the laws related to various company affairs of our nation. This new bill is to be enacted by the parliament in its 62nd year of republic after a notification of such is made by the Central Government.

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1) The new Bill yet to be produced covers 94 terms and certain terms like public holiday , existing company etc are removed and a modest attempt has been taken in improvising the term’s list by inducing terms like associate company , chartered accountant , auditing standards , account standards and so on.

1) Section 2 of the Act dealt with definitions whereby 50 terms were being defined including terms like Company law boards, financial year, public holiday, existing company etc .

A CLOSE STUDY OF THE FLEXIBILITIES MADE WITHIN THE PRESCRIBED BILL.

The Companies Act, 1956 The Companies Bill, 2011


2) Section 12 of the Act dealt with Formation of a company and was confined to seven or more persons for public companies & any 2 or more persons for private companies . No other criterions were included.

2) The new bill however highlights a new criterion whereby a private company may be formed by a single person that is to say an one person company.

FORMATION OF COMPANY


3) Section 14 of the Act prescribed the use of forms B , C, D ,& E of schedule 1 as applicable for the memorandum.

3) The new bill however included the application of form A along with the forms B , C , D & E of schedule 1 for the similar purpose.

FORM OF MEMORANDUM


4) Sections 18 & 19 of the Act dealt with alteration of memorandum or articles. Any alterations made shall be duly registered within 3 months from the date of alteration made & failing such would make the changes inoperative and void.

4) The amended Act of 2006 however reduced the time period to 30 days and a fine of Rs 500/day until the default continued but clause 15 of the new bill further reduced it to 15 days and a fine of Rs1000/day but not exceeding Rs100000/-.

ALTERATION OF MEMORANDUM OR ARTICLES


Part 3 of the Companies Act,1956 deals in prospectus & other related matters of allotment. It deals with the fundamentals of prospectus & the various other strategies relating to issue of shares & debentures.

The proposed bill of 2011 however emphasized mainly on issues related to allotment of securities. Clauses 23,30,25,28,32,33,37, 39,41 of chapter 3(part-1) of the bill deals with securities. Clause 32 of the bill highlights about the concept of Red Herring prospectus.& part 2 of chapter 3 initiates about the concept of private placement.

PROSPECTUS AND ALLOTMENT


Part 4 of the Act described about share capitals & debentures. Natures, kinds & other miscellaneous provisions regarding the same.

The proposed bill of 2011 modified the heading under chapter 4,Clauses 48,50,52,56,63,72 are the modified inserted versions.

SHARE CAPITAL & DEBENTURES


Part 5 of the Act of 1956 deals with registration of charges.

Chapter 6 of the new bill inserted clauses 77,79,& 84 under the head of registration of charges.

REGISTRATION OF CHARGES


Part 6 of the Act deals with management & administration & it has certain other provisions which are discussed from chapters 1 to 8 of part 6 of the following Act.

The proposed bill of 2011 mentions about the same among the chapters 7,8,9,10,11,12,13,&14 respectively. However, clause 165 of the bill says no persons shall hold office as director in more than 20 companies at a time which was estimated as 15 previously under section 275 of the 1956, Act.

MANAGMENT & ADMINISTRATION


THE COMPANIES BILL, 2011

HIGHLIGHTS:

CLAUSE 23

this clause informs about how the public or private companies issue securities.

CLAUSE 28

Provides the member or the members of a company can consult with the board of directors for holding of shares to public.


HIGHLIGHTS AT A GLANCE

CLAUSE 37

Informs the right to suit against misleading statements in the matter of prospectus by the persons associated with the company.

CLAUSE 41

Says that depository modes with foreign country could be dealt by issuing global depository receipts


HIGHLIGHTS

CLAUSE 63

Informs that fully paid-up bonus shares could be issued to its members.

CLAUSE 74

It provides that before the commencement of this act if any interest was due it must be paid within 1year but now it can be extended by the tribunal by application.


HIGHLIGHTS

CLAUSE 75

This inserted clause makes the officers of a company liable towards the depositors if it fails to pay back the deposits or any interests thereon without any limitation for liability.

CLAUSE 76

Under this clause a public company can accept deposits from persons other than its members subject to compliance with provisions of clause 73(2) and rules to be prescribed after consultation with the RBI of India.


HIGHLIGHTS

CLAUSE 83

The clause says that the registrar may enter in the register of charges that the charges are satisfied and also the affected parties about the satisfaction.

CLAUSE 93

The clause says that if there’s a change in the number of shares held by promoters and top 10 shareholders in a listed company then such company shall file a return with the registrar about such changes.


HIGHLIGHTS

CLAUSE 108

The clause informs that electronic means could be used to exercise the right to vote by a member in prescribed class of companies.

CLAUSE 120

The clause highlights about right to inspect of the various documents , records , register or minute etc.


HIGHLIGHTS CLAUSE 121

The clause directs every listed company to prepare a report on each annual meeting and a copy of the same should be filed within the registrar. It also informs about penalties if the company fails to file the reports before the expiry of the period specified under clause 403.

CLAUSE 122

This clause informs that certain sections of chapter 7 i.e management & administration shall be applied to one person company.


HIGHLIGHTS

CLAUSE 130

The clause seeks to provide for the reopening of books of accounts & recasting its financial statements by the order of any competent court if it is found that the earlier were prepared in a fraudulent manner.

CLAUSE 131

The clause allows the directors to prepare a revised financial statement or revised board’s report if it appears to them that the previous doesn’t comply with the requirements of clauses 129 & 134 after obtaining approval of the tribunal.


HIGHLIGHTS

CLAUSE 135

This clause provides that every company shall constitute the corporate social responsibility committee of the board. The board shall endeavor to ensure that at least 2% of average net profit made during 3 immediate preceding financial years shall be spent on such policy & if the company fails the board shall draft the reason in its report.

CLAUSE 138

The clause informs about internal audit of functions & activities of the company where the internal auditor shall be appointed by the company itself & the manners shall be prescribed by the central government.


HIGHLIGHTS

CLAUSE 144

This newly inserted clause provides that the auditor can do other services as approved by the board or audit committee & also the services not to be performed directly or indirectly towards the company .

CLAUSE 150

The clause informs about the manner & selection of independent directors & maintenance of data bank by any body, institute or association.It also provides prescription powers to central government regarding manner & procedure of selection of independent directors.


HIGHLIGHTS

CLAUSE 166

The clause seeks to provide that the director shall act in accordance with the company's articles. It highlights about the duties & penalties regarding the director.

CLAUSE 168

The clause highlights about the resignation process of a director.


HIGHLIGHTS

CLAUSE 172

The clause informs about the penalties towards a company if no specific punishment is provided under the contravened provision of this chapter.

CLAUSE 178

The clause informs about requirement & manner of constituting nomination & remuneration committee & stakeholders relationship committee of the board.


HIGHLIGHTS

CLAUSE 192

The clause informs about the relation between company & its directors regarding acquisition of assets for consideration other than cash.

CLAUSE 193

This clause highlights about the manner involved in certain transactions or contracts between a one person company & its sole member.


HIGHLIGHTS

CLAUSE 194

The clause restricts a whole time director or any of its key managerial personnel from buying certain kinds of future contracts in relation to securities of the company & also about the penalties for violating this clause.

CLAUSE 195

This clause further prohibits the directors or key managerial person of a company, directly or indirectly about any non public price sensitive information to any person & also the penal provisions in case of contravention are listed.


HIGHLIGHTS

CLAUSE 204

The clause seeks to provide that every listed company shall annex a secretarial audit report given by a company secretary in practice with its board’s report. The form of such report shall be prescribed by the central government.

CLAUSE 205

This clause lists the functions to be performed by the company secretary. The specified functions shall not affect the duties & functions of board.


HIGHLIGHTS

CLAUSE 211

The clause mentions about the SFIO (Serious Fraud Investigation Office) as formulated by the central government.

CLAUSE 212

This clause seeks to provide statutory status to SFIO.


HIGHLIGHTS

CLAUSE 218

This clause provides protection to the employees of a company during investigations.

CLAUSE 221

This clause authorizes the tribunal to imitate any prejudicial transaction regarding to the interest of the company.

HIGHLIGHTS


CLAUSE 228

This clause informs that the provisions regarding inspection listed under chapter 14 is applicable to foreign companies as well.

CLAUSE 234

The clause informs about amalgamation & mergering of registered companies under the proposed legislation & companies incorporated in the jurisdictions of such countries, which is to be notified from time to time by the central government by mutual agreement.


HIGHLIGHTS

CLAUSE 245

This clause highlights about prejudicial transactions of a company and penalties for doing so. However it also enlightens the application for class action.

CLAUSE 247

This clause informs about a registered valuer to be appointed by the audit committee or the board of directors in its absence. The valuer would valuated the various properties, stocks, shares, debentures, securities or any other assets or networth of a company.


HIGHLIGHTS

CLAUSE 249

This clause informs about certain situations under which no application can be made by the company under sub-clause 2 of clause 248 & the penalties involved thereby.

CLAUSE 251

This clause provides penalties regarding a fraudulent application made from the register of companies for removal of the name.


HIGHLIGHTS

CLAUSE 255

This clause excludes an application made to the tribunal regarding limitation specified for any suit under sub-clause 1 of clause 253 & the stay order as provided under sub-clause 3 of clause 253.

CLAUSE 258

This clause informs about the appointment of an interim administrator as company administrator by the tribunal.


HIGHLIGHTS

CLAUSE 259

This clause informs that the interim/company administrator appointed by the tribunal shall be from a data bank maintained by the central government.

CLAUSE 265

The clause informs that in case of disapproval of any schemes by the creditors the company administrator shall inform to the the tribunal within 15 days.


HIGHLIGHTS

CLAUSE 268

This clause marks about the jurisdiction, whereby no civil court can indulge in matters to be settled out within a tribunal.

CLAUSE 276

This clause mentions about the grounds for removal of liquidator by the tribunal.


HIGHLIGHTS

CLAUSE 282

This clause empowers a tribunal to consider the report, to order for sale of the assets of company if required & to order for investigation regarding the documents provided by the company liquidator.

CLAUSE 284

This clause mentions about cooperation between promoters, directors, officers & employees, past and present with the company liquidator.


HIGHLIGHTS

CLAUSE 286

This clause provides about obligations on directors and managers of limited company whose liability is unlimited.

CLAUSE 359

This clause empowers the central government to appoint as many liquidators necessary during the winding up of a company and also mentions that salary and allowances of official liquidators shall be paid by the central government.


HIGHLIGHTS

CLAUSE 455

This clause deals with a dormant company. It defines the same and its procedures for obtaining registration.

CLAUSE 470

This clause empowers the central government to remove difficulties by publishing orders in official gazettes and every made to be laid before each house of parliament.


CONCLUSION

The above mentioned report is a comparison between the Companies Act 1956 & the Companies Bill 2011 to be induced before the parliament. It also highlights the newly inserted clauses under the bill making the bill more sustained and unambiguous.

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Companies bill 2011 @ a glance