Introduction of Companies Bill, 2013

The Indian Parliament has passed the Companies Bill, 2013. (The Bill / 2013 Act) on 8th August 2013. The Bill has received Presidents assent on 29th August, making it a law, replacing the old regulations that govern corporate in the country. It would come into force from date(s) as may be notified by the Central Government. The 2013 Act replaces the Companies Act 1956.It incorporates certain important provisions to facilitate ease of doing business in India. The 1956 Act was passed in the first decade of Free India; the business landscape has changed radically the last 60 years. The Companies Bill, 2013 is a vibrant step, which will play a major role in attaining the ultimate ends of social & economic policy of the government and in the development of companies in India on healthy lines.

SUMMARY
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. The Bill has 29 Chapters, 470 clauses as against 658 Sections in the existing Companies Act, 1956 and7 Schedules.

KEY HIGHLIGHTS
1.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). 2.A Private Company can now have maximum of 200 members. 3.Concept of One person Company have been introduced. (But the Company can only be incorporated as a Private Company). 4. Object Clause of Memorandum of Association need not be divided into Main, Ancillary and Other Objects Clause. 5. All types of securities are governed by Bill. 6. 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. 7. The prospectus has to be more detailed. 8. 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 the public and shall accordingly be governed by the provisions provided in this regard by the Securities And Exchange Board of India(SEBI). 9.There is no provision for issue of shares at a discount (other than issue of Sweat Equity Shares). 10. The provisions of clause related to further issue of capital will now be applicable to all type of companies. 11. Apart from existing shareholders, if the Company having share capital at any time proposes to increase its subscribed capital by issue of further shares, such shares may also be offered to employees by way of ESOP, subject to the approval of shareholders by way of Special Resolution. 12. Buyback provisions eased. Companies can buy back its shares even if it has defaulted in repayment of deposit or interest payable thereon, redemption of debentures or preference shares or payment of dividend to any shareholder or repayment of any term loan or interest payable thereon to any financial institution or bank, provided that such default has been remedied and three years have lapsed after such default ceased to subsist. 13.NBFCs not to be covered by the provisions relating to

acceptance of deposits. They will be governed by the Reserve Bank of India rules on acceptance of deposits. 14.Companies can accept deposits only from its members after seeking permission of its shareholders at a general meeting. 15. Certain public companies, as prescribed, can accept deposits from persons other than its members, subject to conditions such as credit rating. 16.Bill provides for registering of all types of charges. 17. Certification of Annual Return by practicing company secretary mandatory in case of companies with prescribed paid up capital and turnover. 18. First annual general meeting of a company shall be held within nine months from the closure of its first financial year . 19.Postal Ballot to be applicable on all Companies, whether listed or not. 20.Every company has to follow the Secretarial Standards while preparing the minutes of board and general meeting. 21.Listed companies required to file a return in a prescribed form with the Registrar regarding any change in the number of shares held by promoters and top 10 shareholders of such company, within 15 days of such change.

22.Listed public companies to prepare a report, in the manner as may be prescribed, on each annual general meeting including the confirmation that meeting was convened, held and conducted as per the Act and the Rules made there under. 23.Interim dividend declared by a Company in a current financial cannot exceed the average rate of dividend of the preceding three years if a company has incurred loss up to the end of the quarter immediately preceding the declaration of such dividend. 24.Transferring of a fixed percentage of profits to reserve before declaration of dividend is not mandatory in the Bill. 25.Financial Statements shall include Balance Sheet, Profit & Loss Account and Cash Flow Statement collectively. 26. Provisions for re-opening or re-casting of the books of accounts of a company provided. 27.The National Advisory Committee on Accounting Standards renamed as The National Financial Reporting Authority.

28.The authority to advise on Auditing Standards and Accounting Standards. 29.Every company is required at its first annual general meeting (AGM) to appoint an individual or a firm as an auditor. The auditor shall hold office from the conclusion of that meeting till the conclusion of its sixth AGM and thereafter till the conclusion of every sixth meeting. The appointment of the auditor is to be ratified at every AGM. 30.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. 31.Prescribed class or classes of companies to have atleast one woman director. 32.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. 33.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.

34.Companies can have maximum of 15 directors. 35.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. 36.A director can participate in a board meeting through video conferencing or other audio visual mode as may be prescribed. 37.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 delivery post or electronic means. 38.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. 39.In a private company, an interested director cannot vote or take part in the discussion relating to any matter in which he is interested.

40.The provisions related to inter-corporate loans and investments (section 372A of Companies Act, 1956) has been extended to include loans and investments to any person. 41.Loans can be given to a Director without seeking permission of the Central Government. 42. No central government approval required for entering into any related party transactions. 43.No approval of the central government required for appointment of any director or any other person to any office or place of profit in the company or its subsidiary. 44.The Bill prohibits insider trading in the company. 45. The Bill provides provisions related to Corporate Social Responsibility (CSR). 46.Provisions relating to the appointment of managing director/whole time director/manger to apply to a private company. 47. The Bill provides for provision related to secretarial audit in certain prescribed class or classes of companies.

48. The Bill prescribes the functions of a company secretary. 49. The conditions under which the Registrar can remove the name of a company from his record have been changed. 50. 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.

51.The manner of declaring a company sick and process of its revival and rehabilitation has been completely rationalized. 52.Any document or returns required to be filed under this Bill, if not filed within prescribed time, have to be filed within a period of 270 days on payment of such additional fees as may be prescribed. 53.New definition of Nidhi Company prescribed. 54.The person to be appointed as President of the Tribunal shall be the judge of the High Court for atleast 5 years, as opposed to the Companies Act 1956, where no term has been prescribed for High Court Judge to be appointed as President; the only condition was that the person should be qualified for being a judge of high court.

55.The National Company Law Appellate Tribunal shall now consist of a combination of technical and judicial members not exceeding 11, instead of 2 as provided in the Companies Act 1956. 56.The Bill makes provision for cross border amalgamations between Indian companies and companies incorporated in the jurisdictions of such countries as may be notified from time to time by the central government.

Conclusion
The full impact of the Companies Bill is not yet clear, as many matters will be covered by rules or circulars, which will be issued later. The Ministry of Corporate Affairs (MCA) will play a major role to ensure that there is clarity and consistency in understanding the new legislation. However, it can be hoped that the Companies Bill 2013 will soon become an Act once it is passed in the Rajya Sabha and it receives the final assent from the President of India. The new enactment is expected to be a milestone event for the Indian corporates with far-reaching consequences.