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Presentation on COMPANIES BILL 2013 (as passed by the Lok Sabha on 18.12.12 and by the Rajya Sabha on 08.08.13) BY CA. SAMIR BISWAS (Fr. Regional Director- Ministry of Corporate Affairs) & CA. ASHOK AJMERA (Chairman & Managing Director - Ajcon Global Services Limited)
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Table of Contents
Sr. No. 1 2 3 4 5 6 7 8 9 10 Topics History/ Background Salient Features New Provisions Introduced Provisions Amended Provisions Cited in Companies Bill 2013 for Better Governance Concepts and Amendments in the Companies Bill, 2013 Introduction of CSR Provisions in the Companies Bill 2013 Gist of the Companies Bill, 2013 List of Chapters Differences between Companies Act 1956 & Companies Bill 2013 How would the Companies Bill 2013 affect the Corporates Page Number 3 6 8 12 16 19 22 24 28 36
HISTORY/ BACKGROUND
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1. Government constitutes an Expert Committee on Company Law under the Chairmanship of Dr. J. J. Irani on 2nd December 2004 to advice on new Companies Bill. 2. The Committee submitted its report to the Government on 31st May 2005. 3. Companies Bill 2008 was introduced on 23rd October, 2008 in the Lok Sabha to replace existing Companies Act, 1956. 4. Dissolution of the 14th Lok Sabha, leads to lapse in Companies Bill, 2008 lapsed.
5. Ministry of Corporate Affairs introduces the Companies Bill, 2009 in the Lok Sabha on August 3, 2009.
6. Bill referred to the Standing Committee on Finance (SCF) of the parliament for examination in September 09, 2009. 7. Report of the SCF on Companies Bill introduced in the Lok Sabha on 31st August, 2010.
HISTORY/ BACKGROUND
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8. In view of amendments made by recommendation made by SCF and suggestions of Stakeholders the Companies Bill 2009 was withdrawn by the Central Government. 9. A fresh Companies Bill 2011 was introduced in Parliament on Wednesday, 14th December 2011. 10. The Companies Bill, 2011 was referred to the Standing Committee on Finance on 5th January, 2012 after an objection was raised against it in Parliament. 11. Based on the SCFs recommendations, the Bill was amended and introduced as the Companies Bill 2012. 12. The Lok Sabha on 18th December, 2012 approved the Companies Bill 2012; but could not be placed in that session in the Rajya Sabha. 13. In the Current Session of the Parliament Rajya Sabha passes the Bill on 8th August 2013 14. Now the assent of the President of India and the Bills publication in the Official Gazette will be necessary before the Bill becomes an Act
SALIENT FEATURES
OF
THE COMPANIES BILL 2013
Salient Features
COMPANIES ACT 1956 13 Parts 658 Sections 15 Schedules COMPANIES BILL 2013 29 Chapters 470 Clauses 7 Schedules
Specific framework for Merger and Acquisitions of companies. Single forum for approval of mergers and acquisitions (Clause 233)
Merger or Amalgamation of a Company with Foreign Company (Clause 234) Protection to Minority Shareholders, Class Action Suits for Prevention of Oppression and Mismanagement [Clause 245] Registered Valuers (Clause 247) Interim Administrators or Company Administrators [Clause 259] Mediation and Conciliation Panel (Clause 442) Punishment for Fraud (Clause 447)
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PROVISIONS AMENDED
Provisions Amended
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Financial Year in relation to any company or body corporate, means the period ending on the 31st day of March every year (Clause 2(41)) Limit on maximum number of members of private company increased to 200 from 50 (Clause 2(68)(ii)) Matter to be stated in Prospectus (Clause 26) Unlike Companies Act, 1956 which presently require compliance of schedule II/III/IV as the case may be. Allotment of Securities by Company (Clause 39) the scope has been widened from shares to Securities defined under Clause 2(81). According to Clause 2(81) Securities means the securities as defined in Clause (h) of Section 2 of the Securities Contracts (Regulation) Act, 1956 (Securities broadly includes shares, debentures , bonds, scrips or any other marketable securities including derivatives. Further issues of share capital (Clause 62) No restriction on the nature of companies to which this clause is applicable and for the purposes of further issue of capital such shares shall also be offer to employees under a scheme of employees stock option and conversion of debenture/loan into shares in public interest.
Provisions Amended
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National Advisory Committee on Accounting Standards (NACAS) renamed as National Financial Reporting Authority (NFRA) and providing wide powers and responsibilities (Clause 132) Annual Ratification of Appointment of Auditors in Annual General Meeting [Clause 139 (1)] Mandatory Compliance with Auditing Standards in addition to Accounting Standard (Clause 143) Audit Committee with extensive powers [Clause 177] Punishment for personating for acquisition etc. of securities (Clause 38) is punishable under Section 447 under punishment for fraud. Automatic re-appointment of existing auditor (without resolution) at AGM where no auditor is appointed / Re-appointed at AGM. The Central Governments role to appoint a person to fill the vacancy has been removed.
Company Liquidators [Clause 275] in addition to appointment of Company liquidator under certain circumstances.
Provisions Amended
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Under clause 186 (Loan and Investment by Company), except for the provision pertaining to making investment through not more than two layers of investment companies dealt with under sub clause 1, no other provision of Clause 186 shall be applicable to a loan made, guarantee given or security provided by a banking company, insurance company, housing finance company in the ordinary course of business and to any acquisition made by a non banking finance company (NBFC) registered under Chapter IIIB of the Reserve Bank of India Act, 1934 and whose principal business is acquisition of securities and to acquisition made by a company whose principal business is the acquisition of securities and to any acquisition of shares allotted in pursuance of clause (a) of sub section (1) of clause 62. Technical members of the National Company Law Tribunal or the Appellate Tribunal [Clause 409(3)] Relaxation of restriction limiting the number of persons in Association or Partnerships etc. at a time to a maximum of 100 [Clause 464] No ceiling on number of members/partners as to associations or partnerships formed by professionals regulated by special acts. [Clause 464].
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PROVISIONS CITED IN
COMPANIES BILL-2013
FOR BETTER GOVERNANCE
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The scope of officer who is in default has been broadened. The share transfer agents, registrars and merchant bankers to the issue or transfer related to issue of shares & Chief Financial Officer are also brought under its ambit. Directors who are aware of the default by way of participation in board meeting or receiving the minutes without objecting to the same will also be included in this category even if company has Managing Director / Whole Time Director / other Key Managerial Personnel's.
Defaults of procedural nature to be penalized by levy of monetary penalties by adjudicating officers not below level of Registrar. Appeals against such orders will lie with designated higher authorities.
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INTRODUCTION OF
CSR PROVISIONS
IN COMPANIES BILL 2013
During any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of 3 or more directors, out of which at least 1 director shall be an independent director. The Board's report under clause 134(3) shall disclose the composition of the Corporate Social Responsibility Committee.
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LIST OF CHAPTERS
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13 14 15 16 17 18 19
Chapter XII
Chapter XIII Chapter XIV Chapter XV Chapter XVI Chapter XVII Chapter XVIII Chapter XIX
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Chapter XX
Part II: Voluntary Winding up Part III: Provisions applicable to every mode of Winding up Part IV: Official Liquidators
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22 23 24 25 26 27 28 29
Chapter XXI
Chapter XXII Chapter XXIII Chapter XXIV Chapter XXV Chapter XXVI Chapter XXVII Chapter XXVIII Chapter XXIX
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DIFFERENCES BETWEEN
Declaration of Dividend in case of inadequate profits Restrictions on Declaration of Dividend/ Interim Dividend
Exemption from granting Inter-corporate loan, guarantee, security and investments Exemptions Any loan made, guarantee given or any security provided or any investment made byBanking co., or Insurance co., or Housing finance Co., or Company established with the object of financing industrial enterprises or providing infrastructural facilities, or Any company whose principal business was acquisition of shares, stocks, debentures or other securities; A private co., unless it is a subsidiary co.; Holding Co. to its WOS Any investment made in shares allotted pursuant to further issue of capital Any loan, guarantee or security provided byBanking co.; or insurance co.; or housing finance co., in ordinary course of their business; Co. engaged in the business of financing of companies or of providing infrastructural facilities Investment and lending by NBFC whose principal business is acquisition of securities Acquisition by companies having principal business of acquisition of securities Acquisition of shares pursuant to further issue of capital
Approval required
Prior consent of the BoD by resolution passed at Board meeting Prior approval of Regional Director, in case the paidup capital of company is exceeding Rs.1 crore.
Exemptions
Purchase/Sale of goods and materials for cash at prevailing market price. Purchase/Sale of goods and materials or services, the cost of which does not exceed Rs.5000/- in any year during the period of contract. Any transaction of banking/insurance company in the ordinary course of such company.
No Public Co. shall directly or indirectly make any loan or give any guarantee or provide any security to its directors and other certain specified persons, except with the approval of CG. This section does not apply toPrivate Cos. Holding to its subsidiary Banking Cos
No Public Co. shall directly or indirectly make any loan including book debt or give any guarantee or provide any security to its directors or to any other persons in whom the director is interested. This section does not apply to Loan to MD/WTD -as a part of contract of services extended to all its employees -pursuant to scheme approved by members by special resolution. A Co. which in the ordinary course of its business provides loan, guarantee or security for due repayment of any loan and charges interest thereon being not less than bank rate declared by RBI.
Exemptions
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HOW WOULD
Registered Valuers A new Chapter has been inserted in relation to Registered Valuers Valuation in respect of any Property, Stock, Shares, Debentures, Securities, Goodwill, Net Worth or Assets of a
Company may accept deposits from its members subject to fulfillment of the following specified conditions
1. 2. 3. 4. 5. 6. passing of resolution in a general meeting issue of circular to members filing a copy of the circular along with the registrar Providing deposit insurance Certification by the Company that it hasnt defaulted in the repayment of Deposits Provision of security in respect of deposit and interest and creation of charge
public company having prescribed net worth or turnover may accept deposits from persons other than its members subject to compliance of rules as may be prescribed by Central Government
Where a Company fails to repay the deposit and it is proved that the deposits had been accepted with intent to defraud the depositors or for any fraudulent purpose, every officer shall be personally responsible, without any limitation of liability, for all or any of the losses or damages
Corporate Social Responsibility Company having Minimum Net Worth 500 Crore, or Turnover 1000 Crore or Net Profit 5 Crore to Constitute a CSR Committee consisting of Minimum 3 Directors, at least 1 director being an Independent Director Every Company to spend at least 2% of the average net profits during the 3 preceding Financial Years CSR Committee to formulate and recommend CSR Policy indicating the activities as specified in schedule VII
Prohibition of Insider Trading New clause has been introduced with respect to prohibition of insider trading of securities. The definition of price sensitive information has also been included Directors and the key managerial personnel of a company are prohibited from forward dealings in securities of the company
1.
2. 3. 4. 5.
Balance Sheet
Profit and Loss Account or Income and Expenditure Account Case Flow Statement Statement of Changes in Equity any explanatory note annexed to, or forming part of the above
The Financial Statement, with respect to One Person Company, Small Company and Dormant Company, may not
include the Cash Flow Statement
Mandatory Constitution of a Stakeholders Relationship Committee Where Shareholders, Debenture Holders, Deposit Holders and any other Security Holders > 1000
New Schedule of Remuneration to Managerial Personnel (Schedule V) for Companies with No / Inadequate Profits
Compliance Certificate under Sec 383A prescribed under Clause 92(1)(ix) Annual Return of Listed Companies to include Change in the No. of Shares held by Promoters and Top 10 Shareholders
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Note: This presentation has been prepared based on the Companies Bill passed by the Lok Sabha on 18th December 2012 and by the Rajya Sabha on 08th August 2013. This Bill shall become applicable after getting a Presidential Accent and after framing The Rules forming part of the Regulation by the Government in due Course .