companies bill, 2013

Mukesh Raj & Co. (www.mukeshraj.com)

�The much awaited Companies Bill, 2013 (approved

by Lok Sabha as on 18th December, 2012) was

approved by the Rajya Sabha as on 08th August, 2013.

� The Bill so approved shall be presented before the

President for his assent and approval.

Introduction

President for his assent and approval.

� The Bill has 29 Chapters, 470 clauses as against

658 Sections in the existing Companies Act, 1956 and

7 Schedules.


Key Highlights of Companies Bill, 2013� Uniform Financial Year for all the Companies i.e from April to March.

(Exception where in approval from the National Company Law

Tribunal have been granted).

� A Private Company can now have maximum of 200 members.

� Concept of One person Company have been introduced. (But the

Company can only be incorporated as a Private Company).

� Object Clause of Memorandum of Association need not be divided� Object Clause of Memorandum of Association need not be divided

into Main, Ancillary and Other Objects Clause.

� All types of securities are governed by Bill.

� The money raised by the Company through prospectus, cannot be

used for any other purpose other than the purpose for which it was

raised unless a special resolution have been passed and the said

proposal is published by way of an advertisement. Otherwise an exit

opportunity shall be provided to the existing shareholders of the

Company.


� The prospectus has to be more detailed.

� If a Company, listed or unlisted, makes an offer to allot or

invites subscription, or allots, or enters into an agreement to

allot, securities to 50 or such higher number as may be

prescribed, whether the payment for the securities has been

received or not or whether the Company intends to list its

securities or not on any recognized stock exchange in or

outside India, the same shall be deemed to be an offer to theoutside India, the same shall be deemed to be an offer to the

public and shall accordingly be governed by the provisions

provided in this regard by the Securities And Exchange Board

of India(SEBI).

� There is no provision for issue of shares at a discount (other

than issue of Sweat Equity Shares).


� The provisions of clause related to further issue of capitalwill now be applicable to all type of companies.

� Apart from existing shareholders, if the Company havingshare capital at any time proposes to increase its subscribedcapital by issue of further shares, such shares may also beoffered to employees by way of ESOP, subject to theapproval of shareholders by way of Special Resolution.approval of shareholders by way of Special Resolution.

� Buyback provisions eased. Companies can buy back its shareseven if it has defaulted in repayment of deposit or interestpayable thereon, redemption of debentures or preferenceshares or payment of dividend to any shareholder orrepayment of any term loan or interest payable thereon to anyfinancial institution or bank, provided that such default hasbeen remedied and three years have lapsed after such defaultceased to subsist.


� NBFCs not to be covered by the provisions relating toacceptance of deposits. They will be governed by theReserve Bank of India rules on acceptance of deposits.

� Companies can accept deposits only from its membersafter seeking permission of its shareholders at a generalmeeting.

� Certain public companies, as prescribed, can acceptdeposits from persons other than its members, subject todeposits from persons other than its members, subject toconditions such as credit rating.

� Bill provides for registering of all types of charges.

� Certification of Annual Return by practicing companysecretary mandatory in case of companies with prescribedpaid up capital and turnover.

� First annual general meeting of a company shall be heldwithin nine months from the closure of its first financialyear . Mukesh Raj & Co. (www.mukeshraj.com)

� Postal Ballot to be applicable on all Companies, whether listed

or not.

� Every company has to follow the Secretarial Standardswhile preparing the minutes of board and general meeting.

� Listed companies required to file a return in a prescribedform with the Registrar regarding any change in thenumber of shares held by promoters and top 10shareholders of such company, within 15 days of suchshareholders of such company, within 15 days of suchchange.

� Listed public companies to prepare a report, in the manneras may be prescribed, on each annual general meetingincluding the confirmation that meeting was convened,held and conducted as per the Act and the Rules madethereunder.


� Interim dividend declared by a Company in a currentfinancial cannot exceed the average rate of dividend ofthe preceding three years if a company has incurredloss up to the end of the quarter immediatelypreceding the declaration of such dividend.

� Transferring of a fixed percentage of profits to reservebefore declaration of dividend is not mandatory in thebefore declaration of dividend is not mandatory in theBill.

� Financial Statements shall include Balance Sheet,Profit & Loss Account and Cash Flow Statementcollectively.

� Provisions for re-opening or re-casting of the books ofaccounts of a company provided.


� The National Advisory Committee on AccountingStandards renamed as The National FinancialReporting Authority.

� The authority to advise on Auditing Standards andAccounting Standards.

� Every company is required at its first annual generalmeeting (AGM) to appoint an individual or a firm asmeeting (AGM) to appoint an individual or a firm asan auditor. The auditor shall hold office from theconclusion of that meeting till the conclusion of itssixth AGM and thereafter till the conclusion of everysixth meeting. The appointment of the auditor is to beratified at every AGM.


� Individual auditors are to be compulsorily rotated every 5 years and audit firm every 10 years in listed companies & certain other classes of companies, as may be prescribed.

� Prescribed class or classes of companies to have atleast one woman director.

� At least one director should be a person who has � At least one director should be a person who has stayed in India for a total period of not less than 182 days in the previous calendar year.

� At least one-third of the total number of directors of a listed public company should be independent directors. Existing companies to get a transition period of one year to comply.

� Companies can have maximum of 15 directors.Mukesh Raj & Co. (www.mukeshraj.com)

� A person can hold directorship of up to 20 companies, of which not more than 10 can be public companies. The number 20 to include Private Companies aswell.

� A director can participate in a board meeting through video conferencing or other audio visual mode as may be prescribed.

� A notice of not less than 7 days in writing is required to call a board meeting. The notice of meeting to be given to all directors, whether he is in India or outside India by hand directors, whether he is in India or outside India by hand delivery post or electronic means.

� Every company with more than 1,000 shareholders, debenture-holders, deposit-holders and any other security holders at any time during a financial year shall constitute a Stakeholders Relationship Committee consisting of a chairperson who is a non-executive director and such other members as may be decided by the board.


� In a private company, an interested director cannot vote ortake part in the discussion relating to any matter in whichhe is interested.

� The provisions related to inter-corporate loans andinvestments (section 372A of Companies Act, 1956) hasbeen extended to include loans and investments to anyperson.

� Loans can be given to a Director without seekingpermission of the Central Government.permission of the Central Government.

� No central government approval required for entering intoany related party transactions.

� No approval of the central government required forappointment of any director or any other person to anyoffice or place of profit in the company or its subsidiary.


� The Bill prohibits insider trading in the company.

� The Bill provides provisions related to Corporate SocialResponsibility (CSR).

� Provisions relating to the appointment of managingdirector/whole time director/manger to apply to a privatecompany.

� The Bill provides for provision related to secretarial auditin certain prescribed class or classes of companies.in certain prescribed class or classes of companies.

� The Bill prescribes the functions of a company secretary.

� The conditions under which the Registrar can remove the name of a company from his record have been changed.

� The Registrar of Companies has been empowered to file an application with the Tribunal for restoration of the name of a company where the company was struck off inadvertently or on the basis of the incorrect information.


� The manner of declaring a company sick and process of itsrevival and rehabilitation has been completely rationalized.

� Any document or returns required to be filed under thisBill, if not filed within prescribed time, have to be filedwithin a period of 270 days on payment of such additionalfees as may be prescribed.

� New definition of Nidhi Company prescribed.

� The person to be appointed as President of the Tribunal� The person to be appointed as President of the Tribunalshall be the judge of the High Court for atleast 5 years, asopposed to the Companies Act 1956, where no term hasbeen prescribed for High Court Judge to be appointed asPresident; the only condition was that the person should bequalified for being a judge of high court.

� The National Company Law Appellate Tribunal shall now consistof a combination of technical and judicial members notexceeding 11, instead of 2 as provided in the Companies Act 1956.


� The Bill makes provision for cross border amalgamationsbetween Indian companies and companies incorporated inthe jurisdictions of such countries as may be notified fromtime to time by the central government.


companies bill, 2013

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