INDIA: RECENT DEVELOPMENT IN COMPANIES ACT, 2013: we provide a summary of important

changes occurred in Companies Act, 2013.

1. Stationery requirements: The Companys (i) letterhead {business letters}, (ii) bill heads, (iii) letter papers,
(iv) notices; (v) other official publications to capture these additional requirements: Companys former
name(s) (since the last two years), Corporate Identity Number, Telephone Number,Fax number (if any), Email
address, & Website addresses (if any).
2. Requirement of a woman director to be appointed: The Listed Company & public company having a
paid up share capital of 100 crore (approx. US$ 163 million) or more or turnover of 300 crore. (Approx.US$
491 million) class of companies needs to have mandatory representation of at least one woman on their Board.
3. At least one resident Director to be appointed.
4. All directors to procure their respective digital signature certificate.
5. Cessation from the Board: Few addition criteria has been added for Director Cessation from the Board like
Director who does not attend any meetings of the Board in a year etc
6. Senior management requirements: The Key Management Personnel (KMP) will generally be
considered as officers in default for any non-compliance by the Company. The KMP have to be in the age
group of 21 to 70 years.
7. MD provisions: The MDs appointment by the Board should be ratified at the ensuing shareholders meeting
and also by the authorities if his/her appointment is in variance with the prescribed thresholds. In case of any
fraud in the Company and if the MD or his/her predecessors have received excess payments as per its restated
accounts, the Company can recover the same from such persons.
8. Powers of the Board: The New Act has expanded such powers to be exercised only at a physical Board
meeting to include additional matters such as Issue of shares, Approval of financial statements, Diversification
of the business of the Company, takeover of other companies, etc. to approve amalgamation, merger or
reconstruction, Additionally, the restriction on the Board to exercise certain powers without the prior approval
of the shareholders has now been extended even to private limited companies
9. Venue of the EGM: The venue of the EGM needs to be a place within India
10. Proxy rules: One person cannot represent as proxy for more than 50 members.
11. Financial year: The new Act does not permit extension of financial year i.e. April to March.. Companies
which are holding/subsidiary of a foreign entity and require consolidation outside India would have to apply to
the National Company Law Tribunal (NCLT) to allow a different financial year.
12. Number of directorships: A person cannot become director in more than 20 companies of which not more
than 10 can be public companies.
13. Auditor requirements an internal auditor:
i. Statutory auditors are to be appointed for a period of five years and their appointment has to be
ratified at the AGM held every year. In listed companies and other prescribed class of companies,
unconnected auditors should be appointed every five years and no auditor can hold office for more
than two terms of five years each. The statutory auditor is restricted from rendering other services to
the Company such as --- the internal auditor, book keeper; provide investment banking/advisory
services, etc. The New Act requires that certain prescribed class of companies should mandatorily
have internal auditors.
ii. Auditors can audit maximum of 20 companies and out of which not more than 10 can be public
companies.
14. Mandatory auditor rotation: Mandatory auditor rotation requirement is for listed and prescribed classes
of companies. The rules in this regard are to be prescribed.
15. Directors report requirements: included in Director report like Extracts of Annual Report, Number of
meetings of the board, Declarations by independent directors, Explanations or comments by the board on every
qualification, reservation or adverse remark made by the Company Secretary in his Secretarial Audit Report,
Particulars of loans, guarantees or investments, Particulars of contracts or arrangements with related party,
Material changes and commitments affecting the financial position of the Company which have occurred
between the end of financial year of the Company to which financial statement relates to., Statement indicating
development and implementation of a risk management policy for the Company, Details about Corporate
Social Responsibility initiatives.
16. Related party transactions: As a relaxation step, the need to obtain prior approval of the regulatory
authorities for certain related party transactions has been done away with. It will now suffice to obtain either
the Board or the shareholders approval depending on the nature of the related party transaction. This will help
large corporations having multiple subsidiaries in India with common directors who enter into related party
transactions in India.
17. Stakeholders relationship committee: The new Act has introduced new provisions in relation to
protecting the stakeholders by requiring the appointment of a Stake Holders Relationship Committee. This
committee would be mandatory for a company which has more than 1000 shareholders or debenture holders
and other security holders. This committee would consider and resolve the grievances of stakeholders.
18. Pro rata issuance of shares : For any increase of subscribed share capital, an offer is to be made on pro
rata basis to all existing shareholders including any employee stock option (ESOP) holders by sending
letters of offer unless varied by a previous resolution of the shareholders in respect of the ESOP holders. The
ESOP holders should however be holding options/shares in the Indian Company and not in any parent or
affiliate foreign Company to be eligible to receive this offer.
19. Corporate Social Responsibility (CSR) requirements: 2% of the average net profits of the last three
financial years are to be mandatorily spent on CSR activities by an Indian Company if it satisfies any of net
worth USD 83 million, Turnover USD 166 million or Net Profit USD 830,000) or more.
20. Legal recognition to other forms of companies: New Act recognizes certain additional categories of
companies such as One Person Company Small Company and Dormant Company.
21.Provisions on fraud prevention and consequences: New company act mandates statutory auditors to
report any fraud detected during the audit period, to authorities and the strict punishment provisions have been
introduced in new companies act for any fraudulent acts.

Contributed by: Rajput Jain & Associates, Chartered Accountants Team members:
E mail: Info@carajput.com, Web site :http://carajput.com, http://caindelhiindia.com
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