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Companies Act, 2013 – Most Awaited Statute
Companies Act, 2013 – Most Awaited Statute
The new companies bill has been passed by both the Hon’ble Houses of Parliament and it has also received the Hon’ble President assent on 29th August, 2013 which will make it into a law replacing the nearly six-decade old regulations that govern corporates in the country. The new Companies Act, 2013 is a sweep change in the way companies operate and are regulated in the country.
In the new Companies Act, 2013 bucket various new provisions has been inserted which requires companies to spend on social welfare activities, empowers investors against any frauds committed by promoters, encourages companies to have women directors, and seeks to bring in greater transparency in corporate governance matters. It also provides about three dozen new definitions, including for terms such as frauds, promoters, turnover, small companies, associate companies and employee stock options.
Bird’s eye view on the new Companies Act, 2013
- The Bill has 470 clauses as against 658 Sections in the existing Companies Act, 1956.
- The entire bill has been divided into 29 chapters.
- New chapters have been introduced, viz., Registered Valuers, Government companies, Companies to furnish information or statistics, Nidhis, National Company Law Tribunal & Appellate Tribunal, Special Courts.
New definitions are introduced in the Bill, some of which are accounting standards, auditing standards, associate company, CEO, CFO, control, deposit, employee stock option, financial statement, global depository receipt, Indian depository receipt, independent director, interested director, key managerial personnel, promoter, one person company, small company, turnover, voting right etc.
The Bill particularly promotes good governance, relies heavily on self-regulation by the corporate sector, has removed several ambiguities that existed in the extant Act, and is a great attempt to bring it at par with the current realities of the economy.
There are some significant provisions in the new act that merit attention, such as additional powers to the Serious Fraud Investigation Office, auditor's liability for fraudulent conduct, one-person company, concept of independent directors, setting up of the National Company Law Tribunal (NCLT) and many more.
A glance on the key insertions and amendment in the new Companies Act, 2013
Private company definition changed |
Limit on maximum number of members increased from 50 to 200 |
Private company which is a subsidiary of public company |
Shall be deemed to be a public company |
Listed Company |
A company which has any of its securities listed on any recognised stock exchange |
Associate company |
A new concept introduced |
Dormant company |
A new concept introduced |
Expert |
A new definition introduced |
Foreign company |
Definition Changed |
Key Managerial Personnel (KMP) |
A new concept inserted |
Officer in default |
Definition changed |
Promoter |
Definition introduced |
Subsidiary Company |
Definition changed |
One Person Company |
New concept introduced |
Small Companies |
A new concept introduced |
Provision of conversion of companies already registered |
Introduced |
Registration Process |
Faster and compatible with e-governance. |
Entrenchment Provision |
Inserted in the Articles |
Registered office |
Provision changed |
Commencement of business |
Provision changed |
Prospectus & Allotment of Securities |
Provision changed |
Share Capital & Debentures |
Amendment in the recent provision |
E-Governance |
Maintenance & inspection of documents, books of accounts in electronic form, placing of financial statements on companies website, holding of board meetings through video conferencing/other electronic mode, voting through electronic means. |
Number of Directors |
Limit increased from 12 to 15 |
Women Director |
One women director on prescribed companies |
Resident Director |
Every company shall have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year. |
Independent Directors |
Concept introduced for the first time |
Resignation of director |
Provision changed |
Notice of board meeting |
Now required |
Duties of directors |
First time defined |
Annual Return |
Amended |
Board’s Report |
Amended |
Corporate Social Responsibility |
Introduced for prescribed companies |
Deposits |
Provisions amended |
Investment by companies |
Clause modified |
Company Secretary |
Secretarial Audit & Secretarial Standard introduced |
General Meeting |
Provisions amended |
Auditors |
Provisions amended with respect to appointment, term and number of audit |
Financial Statement |
New Term introduced |
National Financial Reporting Authority |
Central Government may constitute |
Investors Protection Measures |
New measures to combat investor protection |
Inspection, Enquiry and Investigation |
New clause introduced |
Restructuring and Liquidation |
Provisions amended |
Company Liquidator |
New concept introduced paving way for Company Secretaries, Chartered Accountants, Advocates and Cost Accountants |
Compounding of offences |
Provisions amended |
National Company Law Tribunal (NCLT) |
Tribunal be named by NCLT |
Special Courts |
New concept for speedy disposal of cases |
Mediation or Conciliation Panel |
New concept introduced |
Cross Border Mergers |
Nod by Central Government |
Registered Valuers |
New Chapter on Registered Valuer introduced |
The best thing about the new Companies Act is that it is simple, with greater clarity of intent and purpose. It replaces the old law with over 700 conflicting clauses with something shorter and sweeter: 470 clauses and all of it in 309 pages. Not bad for something that will govern all listed and unlisted companies in the country.
Gautam Khurana
India Law Offices
5th September 2014
2 comments :
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Eyaroyi Godfrey said:
Every things happen for a reason . Just imagine if covid 19 did come only God knows what will happen
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Bhardwaj Pushtie said:
I am a part of this world and it’s my fundamental duty. So I will help in this
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