Companies Act 2013-Client (1)

8/13/2019 Companies Act 2013-Client (1)

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TheNeed

Satyam Case

Sahara Case

Necessity ofCorporate

Governance

Alignmentwith variousjudgments

Administrativeconvenience

Flexible, morepower to CG


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Changes in Incorporation

New Types of CompaniesOne Person

Company, Small Company, Dormant Company

Private Companymax. 200 shareholders

Memorandumwill not have bifurcation of

main, incidental and other object

Business can be commenced only upon

bringing share subscription and filing ofverification of regd. Office with ROC

(applicable to a Private Company as well)

Promoter need to file identification proofs


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Share Capital

1stSubscription to be brought in2 months

Time for issue share certificates reduced by 1

month (Now, 2 months as against 3 months)

Allotment can not exceed to 50 persons in a year

Preference shares for infra cos can be for >20 yrs

Presentation of TD (Transfer Deed) with ROC is

eliminated TD to be presented with co, in 60 days of

execution

New provisions of bonus issue applicable to pvt

co


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Deposit / Charges

Company can accept deposit only from

members

New definition of deposit to be prescribed

Existing deposits to be repaid in 1 year

New deposit acceptance require credit rating

Public cos. may be allowed accept deposit

from public

Charge is also required for pledge and lien

Forms can be filed in 30+270 days


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Management & Administration

AGM can be held on Sunday. Can not be held

on National Holidays

Regulation related general meeting eg. Notice,

explanatory stat, proxy applicable to private co

Postal ballot may be required for all

companies

Scope of annual return is widened Promoters holding is required to be disclosed


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Accounts and Audit

New Accounting and Auditing Standards

Financial Year = April to March

National Financial Reporting Authority [NFRA]

Consolidation is mandatory [including associate co.] Internal audit will be mandatory

Max no. of audits not more than 20 companies

Erstwhile 23B to be filed by Company

Appointment of Auditor will be for 5 years

Liabilities of Auditor is unlimited

Auditor to report fraud to CG

Directors Reportscope enlarged


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Directors

Max. Directorship = 20 cos (including a Private

Company, Maximum 10 public)

One resident director is mandatory

Woman Director , Independent Director

Duties of Directornot to make undue gains, not

to have conflict of interest

7 days notice is mandatory for board meeting Erstwhile sec. 257 is applicable to pvt. Co.

Leave of absence cannot be for full year

Attendance thr Video Conferencing is allowed


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Related Party Transactions

Erstwhile se. 297 / 314 is clubbed

Rationalization in type of related parties covered

Scope of Nature of transactions and type of parties

enlarged KMP covered in related party transactions

CG approval is replaced with non interested

shareholders approval

Erstwhile 24AA to be taken in April

Company can not give loan to directors or related

entities

Exemption of loan to subsidiary - withdrawn Restriction on non cash transactions


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Loans / Borrowings /

Investment

Erstwhile 293 and 372A is applicable to pvt.

Cos.

If borrowing exceed net-worth requires

special resolution

Exemption to holdingsubsidiary withdrawn

Requires filing with ROC of every board

resolution for investment / loan / guarantee /security

Erstwhile se. 372A is extended to transactions

with all entities


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ROC Filings

eForm

under

1956

Act

Impact on

timelines as

per 2013 Act

vis--vis 1956

Act

Relevan

t

Section

of 2013

Act

Additional details to be filed

18 15 days against30 days

Sec 12 -

Existing

Deposit

s

3 months from

commencement

of Act

Sec 74 Statement of all deposits accepted and

remaining unpaid to be filed. All such

existing deposits to be repaid within 1 year

from commencement of 2013 Act or their

due date, whichever is earlier

8/10 30 days.

Additional

period of 270

days

Sec 77 Charge created of any asset / property of the

Company needs to be registered with ROC


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ROC Filings

eForm

under

1956 Act

Impact on

timelines as

per 2013 Act

vis--vis

1956 Act

Relevan

t

Section

of 2013

Act


AnnualReturn

No change intimelines

Sec 92 Details are to be given as on the endof financial year as against as on the

AGM date under 1956 Act.

Additional Information - Details of

Associates, details of promoters, KMP,

dates of meetings, remuneration of

directors and KMP, compoundingdetails during the year also to be

mentioned

32 No change in

timelines

Sec

170(2)

Details for changes in KMP also need

to be filed with ROC, along with such

particulars as may be prescribed


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ROC Filings

eFor

m

under

1956

Act

Impact on

timelines

as per

2013 Act

vis--vis

1956 Act

Relevan

t

Section

of 2013

Act


23 No

change in

timelines

Sec 117 In addition to the existing matters, the resolutions

passed by the Board for making calls on

shareholders, authorization for buy back, issue of

securities including debentures, borrow monies,

invest funds, grant loans, giving guarantee,

providing security, approval of Directors Report,diversification of business, approval for merger,

acquisition of entire or substantial state in another

Company and any other matters as may be

prescribed also need to be registered.


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Miscellaneous

Transfer of Profit to Reserve Rules eliminated

Merger of WOS made simple

High Court / BIFR / CLB = NCLT

Penalties increased many folds

CEO / CFO / independent directorliable for

default

Roc filing after 300 days may requirecompounding

Only fine related provisions are

compoundable


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Status of Private Limited

Company

All private limited companies need to undergo

amendment in articles of association w.r.t. to

revised definition

Majority of earlier privileges stands modified


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Status Erstwhile Privileges

Exemption / Relaxation available

under companies Act, 1956

Status under Companies Act, 2013

Private Companies were allowed to

take loan from member, directors or

their relatives

Apparently it can take only from

members [ we will have to wait for the

rules


have different types of capital

Privilege not available


have different provision wrt to voting

rights


Private Companies need not obtaincommencement of business certificate


Private Companies were exempted

from taking shareholders & ROC

approval for starting business in Other

Objects


Flexibility to hold AGM at a place / Privilege not available


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Flexibility to adopt relaxed provisions

in AOA wrt General Meetings


Maximum Remuneration of 11%

towards Managerial Remuneration

Exempted for Private Company

Exemption from Ceiling on

remuneration to be paid to working or

non working directors


Exemption for counting number of

audits which can be accepted byauditor [20]


Exemption from retirement of directors

by rotation

Continues


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Exemption under 274(1)(g) Privilege not available

Exemption for counting number of

directorships which can be accepted

by person [20]

Private Companies are specifically

counted in this number

Exemption from prohibition on giving

loan to directors or his related entities


Directors are allowed to vote and

participate in transactions in which

they are interested

Directors will not be allowed to

participate as per the 2013 Act

No Maximum tenure for managerial

personnel

Maximum tenure of 5 years as per

2013 Act

Exemption from 372A Privilege not available


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Definition of Listed Company

The definition of Listed Company has been

mentioned in Companies Act, 2013it means

any company which has any of its securities

listed on any recognised stock exchange

Hence, even private companies whose debt

instruments are listed on BSE or NSE shall beconsidered as listed company under

Companies Act, 2013


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Additional compliance for listed

Co.

Sec 93A return to be filed with ROC for any

change in number of shares held by promoters

or top 10 shareholders within 15 days of such

change Sec 121Report/ Proceedings of AGM within

30 days from AGM

Sec 134(3)(p) Board of Directors report tocontain a statement regarding manner of

formal annual evaluation of the Board, its

committees and individual directors


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Co.

Sec 134(3)(p) Boards Report to confirm

having laid down internal financial controls to

be followed by Company and that such

internal financial controls are adequate andoperating efficiently

Sec 197(12)BoardsReport to mention ratio

of remuneration drawn by each director to

each median employees remuneration and

other details as may be prescribed

Sec 139(2) Restrictions on appointment of

same auditor / auditorsfirm for more than 1/2

f


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Co.

Irrespective of applicability of Corporate

Governance:-

Sec 149(4)Min 1/3 independent directors

Sec 177Constitution of Audit Committee

Sec 178 - Constitution of Nomination and

Remuneration Committee

Sec 178(5) - Constitution of StakeholdersRelationship Committee (in case of more than

1000 shareholders)

Sec 204 Secretarial Audit Report from


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Corporate Social Responsibility

Every company having a net worth of 500 cr or

more or turnover of 1000 cr or more to

formulate a Corporate Social

Responsibility(CSR) Committee CSR Committee shall constitute- Minimum 3

Directors out of which 1 shall be independent

Boards Report to include a comment about it Board to ensure that at least 2% of

average(during 3 preceding F Y) net profits

spent towards CSR


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Impact of 98 effective Sections

Majority of definitions have become effective

Private Limited Companies need to carry

different provision in their articles

Existing CEO & CFO are liable as officer indefault

Independent and Non Executive Directors may

be considered as officer in default in certaincases

ESOP can be granted by closely held

companies to employees of Holding or

Subsidiary Companies


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Foreign Subsidiary of Indian Holding Company

can hold shares of Indian holding company

Subsidiary can hold shares of Holding

Company as a Trustee CEO / CFO can certify the documents on

behalf of the Company

New Public Issues need to comply withprovisions of new Act of 2013

Any security holder can approach Tribunal for

non transfer of security within time against the

Company


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Enhanced penalty provisions w.r.t. to charges

have become effective

Book Closure will require compliance of new

Act. However SEBI has to prescribe themanner.

Explanatory Statement issued after 12

September requires compliance of new Act


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New quorum requirements for general meeting

are effective which requires following persons

to attend in person -

1. For members less than 10005 members2. For members 1000-500015 members

3. For members more than 500030 members

Relaxation of norms for circulation of membersresolution


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Every Director will be held liable for non

payment of dividend in time

A person who fails to get appointed as Director

in a general meeting, cannot be appointed asan Additional Director

Private / Public cos need special resolution for

1. Obtaining loan in excess of its paid up capital

and free reserves

2. Mortgaging property or selling undertaking


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Private Company requires approval of

shareholders for giving donation in excess of

5% of avg. profits

Restriction reg. political contribution isapplicable to private company as well

Private / public company can not give loan to

director / directors related entities Loan can be given to working director under

service rules [at par with other employees]

Earlier exemption w.r.t. loans given by holding

to subsidiary no longer exists


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Non cash transaction with directors require

approval of shareholders and valuation from

Registered Valuer

Prohibition on forward dealing in securities iseffective

Prohibition on Insider Trading is effective

Enabling provisions for constitution of NCLTand Appellate Tribunal has become effective


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Penalty provisions for following have become

effective -

1. Fraud

2. False Statement

3. False evidence

4. Penalty where no specific penalty is provided

5. For repeat default

6. For wrongful withholding of property

Power to Condon of delay in certain cases has

become effective


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CG can exempt certain class of companies

from provisions of the new act

CG can amend schedules of New Act

CG can make Rules under the new Act

CG can remove difficulties by an Order

published in official gazette.


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Documents

Companies Act 2013-Client (1)