THE COMPANIES ACT, 2013

New rules of the game

Presented by :

Mahida MinaxiLimbachiya KomalMalek NushratGosai HardikChandarana Kevin

The origin of corporate legislation in India has its roots in the English company act. The first legislative enactment for ‘Registration of joint stock companies” was passed in the country during the British raj in the year 1850Its based on English companies act , known as the joint stock companies act 1844 Replaced by companies act 1857 Act 1857 replaced by act 1866 , its based on English company act 1862Act 1913 Based on recommendation Bhabha committee Companies act 1956 was passed.

Background

Passed in Lok Sabha on 18th December, 2012 (Bill no. 121 of 2011)

Passed in Rajya Sabha on 8th August, 2013 (Bill no. 121 of 2011)

Received Ascent of President on 29th August, 2013

Notified in the official gazette on 30th august 2013

HIGHLIGHTS OF THE COMPANIES ACT, 2013

Structural Comparison

Companies Act 1956

13 Parts

658 Sections

15 Schedules

• The existing law is over half a century old

• New law helps to consolidate and bring related

provisions under a single roof

• Objective is lesser government approvals,

enhanced self regulation and emphasis on

corporate democracy

• In line with the changed national and international

economic environment

• Brings about better transparency and stringent

regulations

Why a new companies act 2013?

Better governance Tighter and wider disclosure norms More power in the hands of shareholders Roles of directors defined Stringent audits in place CSR mandated Special courts established Synchronization with SEBI and other acts

Cont…

New Concepts in Companies Act 2013

Introduction of new definitions in the Act which were not

existing under the Companies Act 1956

Associate Company

Private Company

DormantCompany

Promoter

One Person Company

Small Company

Key Managerial Personnel

One-person company

• The 2013 Act introduces a new type of entity to the existing list.

• An OPC means a company with only one person as its member [section 3(1) of 2013 Act].

Private Company

• The 2013 Act introduces a change in the definition for a private company, the new requirement increases the limit of the number of members from 50 to 200. [section 2(68) of 2013 Act].

Changes towards Incorporation of Entity

Introduction of concept of One Person Company

No approval required for conversion of Private

Company to One Person Company or vice versa

No approval required for conversion of Private Company into Public

Company

Small Company

• A small company has been defined as a company, other than a public company.

(i) Paid-up share capital of which does not exceed 50 lakh INR or such higher amount as may be prescribed which shall not be more than five crore INR

(ii) Turnover of which as per its last profit-and-loss account does not exceed two crore INR or such higher amount as may be prescribed which shall not be more than 20 crore INR:

2. Key Managerial Personal (KMP)

• KMP is commonly used in investment agreements and now finds a place in the 2013 Act.

3. Promoter The term Promoter was not defined in the 1956 Act. However it was extensively used through company law. 2013 Act now specifically defines Promoter

Management and Meeting

DirectorsMaximum

Number of Directors

Number of Directorship

Resident Director

Woman Director

Small Shareholder Director

Duties of the Director

A prescribed class of Companies will be required to have:

Managing Director/ CEO/ Manager

Whole Time Director in the absence of MD/CEO/Manager

Company Secretary

A mandatory requirement to appoint such persons will ensure proper Governance of the Company

DIRECTOR’S APPOINTMENT

Board Meetings

SOME NEW PROVISIONS

Notice of the Meeting

Minimum 7 days Notice

To be given to all directors whether or not in India

Can be sent through any means; hand delivery, post or e-form

Participation of Directors

In person, or

By video conferencing, or

Any other audio-visual means capable of recording, recognizing and storing the participation of director with date & time

Number & Timing of Meetings

At least 4 meetings in a year

Not necessary to be held in every quarter

Time gap of not more than 120 days between 2 meetings

1 2 3

CORPORATE SOCIAL RESPONSIBILITY (CSR)

NEW CONCEPTS

Constitution of CSR Committee by a company having any of the following:

NET WORTH of Rs 500 crore

or moreTURNOVER

of Rs 1,000 crore or more

NET PROFITof Rs 5 crore or

more

Companies to spend on CSR activities at least 2% of the average net profit

of the preceding 3 financial years.

Reasons in case of failure to be disclosed in the

Board report

Shareholders Meeting

QUORUM

QUORUM shall now be considered as:

QUORUM (No. of Members

personally Present)

NUMBER OF MEMBERS AS

ON THE DATE OF MEETING

5 ≤ 1000

15 1000 < number ≤ 5000

30 ≥ 5000

Fixing of a higher quorum as compared to the earlier requirement will ensure greater participation by shareholders

Audit & Auditors

• Appointment of Auditors• Mandatory Rotation• Non Audit Service• Secretarial Audit

Share Capital & Debentures

SHARES & SECURITIES

GENERAL CHANGES

Changes regardingVOTING RIGHTS

Changes regardingISSUE OF SHARES

Various changes regarding Shares & Securities

Voting Right Changes

Equitable Voting rights for Equity and Preference share holders with respect to their paid up

capital

For vote on resolutions affecting rights of both

categories

Preference shareholders allowed to vote on every resolution placed before shareholders’

meeting

If dividend payable to any class of preference

shareholders in arrear for more than 2 years

No classification between cumulative and

non-cumulative preference shares

For identification of voting rights

Restructuring & Revival

Sick Company

Fast Track Merger

Compromise or Arrangement

Reduction of Capital

Bibliography

Websites:• www.mca.gov.in• www.companiesact.in

Magazine:• The Indian Banker