companies bill 2013 [carocks.wordpress.com]

7/27/2019 Companies Bill 2013 [Carocks.wordpress.com]

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Companies Bill, 2013

By CSMamtaBinani ,

PractisingCompanySecretary

[email protected]

Room No.6, 4thFloor, Commerce House

dated:18.08.2013

2A, Ganesh Chandra Avenue, Kolkata 700013

Connect me @ : (033) 3028 8955-57; (033) 3002 5630-33; 98310 [email protected]

Visit me @ : www.mamtabinani.com


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`


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Ob ective

In line with global corporate laws

Encourage self regulation

ere ore prov e or a pragmat c structure

for offencesFoster entrepreneurship and growth

Furtherance of e overnance

Major provisions taken from J.J. Irani


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Notsolenientstandanymore

The new Bill looks to put more information in thepublic domain, particularly related to unlisted andpr vate ompan es.

As of now, this set has much more lenientreporting requirements as compared to the listed

,1.06 million Companies registered with the MCA


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CompaniesAct,1956 CompaniesBill,2013

It

was

introduced

on

1st

April,1956.y

As passed by the LokSabha on 18th December,

Ithas658Sectionsand15Schedules.

.

y Rajya Sabha passed it on

8th August, 2013 by oice

It extends to the whole of

vote

y TheBillhas470Clauses

India (Sikkim has its ownCompanies Act).

,and7Schedules.

y Ita liestothewholeofIndia.


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SlatedtobecomeaLaw

In 100 years, this is the second time that a newcompanies law has been legislated, Minister said.

As an w en consente to y Presi ent PranaMukherjee, the new legislation will replace the 57

, .

Around 193 recommendations have been included inthe Companies Bill by the Parliamentary Standing

Committee and with passing of this Bill, theCompanies Act of 1956 will be replaced.


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na yThe new law will be called the Com anies Act

2013But the lon wait is not over et. The fine rint of

the clauses will be defined by rules that the

corporate affairs ministry will frame now. Almosta re evant c auses nee to ave ru es, w ic t eMCA would now put on its website to seek

Until the rules are formulated, the Act will not get


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AssociateCompany

A company is considered to be an associatecompany of the other:

1. if the other company has significant influence

over such company (not being a subsidiary) or2.isajointventurecompany.

(Significant influence means control of at least 20

per cent o tota s are capita o a company or obusiness decisions under an agreement)


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orman

ompany

this Act:

2. to hold an asset or intellectual property and

. ,company or an inactive company may make ana lication to the Re istrar for obtainin the

status of a dormant company.


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nac ve

ompanyAcompanywhich:

1.which

has

not

been

carrying

on

any

business

or

operationor

2.hasnotmadeanysignificantaccounting

transactionduring

the

last

2FY

or

3.hasnotfiledfinancialstatementsandannualreturnsduringthelast2FY

Registrar

may

a so

issue

anotice

to

suc

company

andentertheirnameintheRegisterofDormant


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SmallCompany

Acompany

which

is:

1.otherthanapubliccompany

2.paidupsharecapital


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u s ary

ompany

In relation to any other company (that is holdingcom an ), means a com an in which the holdincompany

Controls the composition of the Board of Directors; orExercises or controls more than one half of the total

share capital (instead of equity share capital as

together with one or more of its subsidiary companies.


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TheMDorCEOorManager

TheCompany

Secretary

Suchotherofficerasmaybeprescribed

NoEscapeclause

Ever Com an belon in to such class es as ma beprescribed shall have a whole time KMP Clause203(1))


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PenaltyfornotappointingKMP

On Company Rs.1.00 lakh, may extend to Rs.5.00lakhs

On every Director & KMP who is in defaultRs.50,000

For continuing default Rs.1000PER DAY


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of incorporation.

Registered office address is required to be intimated

within 30 days of its incorporation.

Notice of every change of the situation of the

reg stere o ce s a e g ven to t e eg strar w t n15 days of the change, who shall record the same.


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private) shall not commence any business or exerciseany borrowing power unless declaration is filed by adirector with the Registrar and

A con irmation t at t e Company as i e wit t eRegistrar a verification of its registered office


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Compromise,Amalgamation&Mergers

Simplified for someTransferee Company may continue as an unlisted

entity

Minority squeeze out conceptAuditors certificate Compliant with applicable

accounting standards

Objection criteria


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y Governs the issue of not only

y Provides that a public Companycan only issue securities byfollowing the provisions related toPublic Offer or Private Placement

or by way of bonus or right issue.y Private Company may issue

securities only through privatelacement.

y QIB shall not be covered underthe provisions related to Private

.


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y Now any person (includingroup or association) affectedby any misleading statement,

matter in the prospectus file

any suit or take any actionprov ng or c v a ty orfraudulently inducing personsto invest money.

y In addition to shares, return ofallotment is required to be

.


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Shares

Company cannot issue shares at discount other than assweat

Company may issue preference shares redeemable


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y Every listed Company shall disclose in the

Boards Report, the ratio of the remuneration ofeach director to the median employeesremunerat on an suc ot er eta s as may eprescribed

y The Directors responsibility statement in case of

s e company s a a so nc u e a onastatement related to internal finance control and.


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Accordin toaBusinessStandardstud in anuar :

1. 457 of the 500 companies on the BSE 500 Indexwill have to provide for CSR

2. Based on the avera e net rofits for threepreceding years, they will have to fork out Rs 6,751crore in CSR spends. ONGC would have to spend

around Rs 405 crore a year and Reliance Rs 377crore, the newspaper says


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Every listed Company and Companies belonging to

other class of Companies as prescribed will have tomandatorily get the secretarial audit done.

By a Practising Company Secretary

In a prescribed form

Annex the same with Directors ReportQualifications, if any to be specifically explained in

Directors Report

con raven on, e ompany, every o cer o eCompany or the PCS, who is in default shall be fined:not less than 1 00 000 ma extend to 00 000


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y In case a PCS certifies the Annual Returnotherwise in conformity with the requirements ofthe specified section, such PCS shall be punishable

w t ne w c s a not e ess t an s.50,000but which may extend to Rs.5,00,000

anges n s are o ng o promo ers an op 10shareholders

with respect to changes in the above details (toensure audit trail of ownershi


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epor

on

yListed com an alon with the re ort on

each AGM, shall also file a confirmation thatthe AGM was convened, held and conductedas per law

y

yTo be filed with the ROC within 30 days of

yNonfiling will be a punishable offence

A dit & A dit


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Audit&Auditors

block of 5 years thereafter, respectively

companies Compulsory rotation in 5 years(individual)/ 10 ears (firm)

In addition to accounting standards, auditing

standards also being made compulsoryCasual vacancy caused due to resignation to be

filled in 3 months by general body

Errant auditorremoved and may not be allowed to

become auditor of other Companies also for 5 years


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rstau tor

nterest ng

prov s on

y Shall be a ointed b the BOD within 0 da s

from the date of registration of the Companyy In case the BOD fails to do so, it shall inform the

members of the Company

yThe members shall appoint the auditor within 90days

y At an EGM

y The auditor to hold office till the conclusion of thefirst AGM


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InternalAudity Prescribed class of companies shall be required to

appoint an internal auditor to conduct internalau t o t e unct ons an act v t es o t eCompany.

y s n erna au or cou e a or a osAccountant or such other professional, as may be

.

y Appointment to be done by the Board.


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Interalia:

framework within which the entity operatesy

internal control systems and policies

y Determination of the effectiveness of internal controlprocedures adopted by the entity

y Determination of the nature, timing and extent of

proce ures to e per orme(source:websiteoftheICAI)


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Directors&BoardProvisionsppo ntment o anager to

continue to require board approval +or nary reso ut on

Non cash transactions with directors torequire mandatory aluation

Conce t of ualifications shares removed


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Duties

of

Directors

CarvedIn line with the UK Companies Act, 2006n accor ance w t t e ompany s o

To act in good faith, to promote objects ofthe company for benefit of members and the

best interest of the company, employees,community and environment

To exercise duties with due & reasonable

care, skill and diligence

Remuneration of Directors


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RemunerationofDirectors

Schedule XIII has become Schedule V

Rs.48 acs increase to Rs.60 acs

No Central Government approval required

Sick companies and newly incorporated

com anies till ears can a doubleremuneration

included in remuneration as perquisite


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Inde endentDirectorsListed companies to have 1/3 IDs

Nominee Director/ Representative Director not tobe considered as IDs in conflict with existinclause 49)

IDs to abide b a detailed code Schedule IVIssue of letter of appointment to ID mandatory

Letter to contain terms of a ointment Boards

expectations, fiduciary duties etc.Will not retire b rotation


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Vacation of office of Director


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VacationofofficeofDirectore a sen s mse rom a e mee ngs o eheld during a period of 12 months without or without

seeking LOA of the Board (clause 167(b))y ne s e ty e cont nues even a ter e s ou ave

vacated his officeResi nation of Director (clause 168)Director also needs to forward to ROC, a copy of hisresignation along with detailed reasons within 30 days

of resi nation in the rescribed mannerQuick fix solution

Where all directors have resigned, the promoter or in,

directors. These directors to hold office till thedirectors are appointed in General Meeting


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LookatthisRegisterofDirectorsy Theregistershallcontain:

ParticularsofitsDirectors

KMP

Detailslike:

SecuritiesheldbyeachofthemintheCompanyoritsholding,subsidiary,subsidiaryofcompanysholding

Other

details

as

may

be

prescribed


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COMMITTEE OF DIRECTORS


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COMMITTEEOFDIRECTORS

4Committees

1.Nomination & RemunerationCommittee

2.CSR Committee (where applicable)

3. a e o er e a ons p omm ee

(1000 or more securit holders)

4.Audit Committee


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u

omm eey Every listed company and such other prescribed class

y Interalia, it shall review and monitor the auditorsindependence and performance, and effectiveness of

e au process

g ec an sm

Every listed company or for those prescribed, establish

report genuine concerns. It shall provide for adequatesafeguards against victimisation


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RemodeltheCorporateStructureIt is seen how discreetly Companies route their

investments by forming a myriad matrix

T e Bi proposes to restrict t e num er o ayers oinvestment Companies to 2. This will help in

The catch is that the number of layers of subsidiariesthat the 2 investment/ holding Companies can have is

yet not specified


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ass

c on

u s ,

hands

to

claim

damages

against

the:*Com an

*Auditors

*

Consultants*ExpertsorAdvisors

foranywrongful,fraudulentorunlawfulconduct!!

Aweapon

in

the

hands

of

the

investors

to

save

their

commoninterest.


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18situations


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18 situations in w ic t e i as prescri e rau sand penalties

,

upto 3 times of the amount involved

ranging from 6 months to 10 years

Serious Fraud Investi ations Office SFIO to receivestatutory status (but not a constitutional body like theCAG). This will give more teeth to the Investigator.

As per MCAs latest annual report, there has been noconviction in the 835 cases of prosecution filed in


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NFRA (National Financial Reporting Authority) will,

currently the domain of ICAI. ,

firms were made liable for wrongdoing and not thefirm. This will change. NFRA can take action againstthe audit firm.

NCLT (National Company Law Tribunal) to replace the.

NCLT will have to complete proceedings in 3 months.


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SickCompaniesy Any secured creditor may file an application to the

Tribunal representing 50% or more of itsoutstan ng amount o e t; t e e t rema nsunpaid for more than 30 days of the service of the

y This application would be for determination that


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s

eg s ero

ompan es

y WheretheRe istrarhasreasonablecausetobelieve:

thataCompanyhasfailedtocommenceitsbusinesswithin1yearofitsincorporation

thatthesubscriptionmoneyremainsunpaidformorethan180days

t at

t e

ompany

snot

carry ng

on

any

us ness

or

aperiodof2immediatelyprecedingfinancialyears

TheROC

shall

send

anotice

to

such

companies

of

his

intentiontoremovethenamefromtheRegister


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.y Provisions for approval of Financial Statements by,

of the Board

inserted

y

debentures, goodwill etc. by a person registered asa aluer

y Appointment on such terms and conditions as maybe prescribed


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CHAPTERIIIncorporation


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No bifurcation of object clause

Entrenchment

COC done awa with. Declaration &confirmation required by both, Public and

PrivateIf raised money from public through prospectus,

raised, shall not change its objects unless SR..


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CHAPTERIVShareCap&Deb


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ompany cannot ssue s ares at scountotherwise than as sweat equity

Issue Preference shares redeemable after 20

yearsinfrastructure projects (Schedule VI)

Akin section 81(1A) applicable to all companies

No reduction of capital will be allowed if arrear

Debenture trustee appointment if offer madeo > 500 pu c mem ers

CHAPTERVDeposits


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NBFCs not covered RBI will govern

,

approval of members in general meeting

companies can take deposits from persons other

Non continuation of suomoto action ofr una n case o e au t n repayment o

deposits or interest thereon


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CHAPTERVIIMgmt&Admin


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Particulars of holding, subsidiary and associatecompany n t e sc osure am t

Listed companycertification of annual return

Companies with prescribed paid up capital and

turnover

certification will be re uiredCertification in prescribed form

and adequately and that the Company has



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If incorrect certificationpunishable with fine

which not less than Rs. 0 000 but which maextend to Rs.5,00,000

Akin section 257

very ompany to o ow nutes o oar& General Meetings

Report after AGM

Listed CompanyIndex of securit holders com ulsor



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First AGM

from the date of closure of FY/ nomore reckoned from the date of incor oration

Varying quorum for public limited companies

member may exercise his voteelectronic means

g ty or eman o po

Postal Ballot applicable for listed and unlisted

1 person cant be proxy fr more than 50 members

CHAPTERVIIIDividend


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Transfer of fixed % of profits to reserve notcompulsory. Discretionary power given

Provides that all shares in respect of which unpaid or

unclaimed dividend has been transferred to IEPF,s a a so e trans erre y t e ompany n t ename of IEPF (this provision is not in the interest of

e nves orsFunds in IEPF can be utilised for distribution of any

sgorge amoun , w o ave su ere osses ue owrong action of any person, in accordance with the


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CHAPTERXAudit&Auditors


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attended by the Auditor or through his

Unqualified auditors report need not be read int e meet ng

Any qualification etc. having adverse effect on thefunctioning of the Company shall be read beforethe Company in general meeting

No approval of CG required for appointment ofCost Auditor to conduct the cost audit

CHAPTERXAudit&Auditors


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Auditor under clause 143 shall apply mutatis

audit and the Company Secretary in practice for.

Auditor shall also report on cash flow statement

Auditor to report any offence involving fraud

Auditor not to rovide in /directl , the

specified services to the Company, its Holding &Subsidiar Com an


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Sc e u esy I MOA & AOA

y II Useful lives to compute depreciation

y III General Instructions for preparation of balancesheet and statement of profit and loss of a Company

y IV Code for Independent Directors

y V Managerial Remuneration

y VI Explanation of terms like agriculture,e ecommun ca on e c.

y VII Activities for CSR


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Waitand

Watch!!

The challenge is not to introduce newprovisions, but the implementation

The devil lies in the details.details are yet

r iv in h li m inThe aim is not to impose inspector raj. It is

investment destination.


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Proofof

Pudding

in

its

Eating!

In the weeks ahead, as companies pore over the

fine print of the Companies Bill, more issues willsur ace. ut or now t e est sumup s t s: t s agreat start, but, as always, the proof of the pudding

The Act comes into effect with notification by

Consult all stakeholders while framing the rules


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