The Companies Act 2013 Aims at Introducing some Modifying the existing provisions NEW Concepts
Some New Concepts Introduced One Person 1 Company Independent 2 4 Class Action Director Woman 3 Director 5 7 Treasury Stock Secretarial Audit Corporate Social 6 Responsibility Registered Holding Subsidiary 10 8 Valuer Merger 9 Private Placement 11 13 Dormant Company Associate Rotation 12 of Auditors
ONE PERSON COMPANY Formed for lawful purpose by only one person as its member Characterized as a Private Company The Single Member to subscribe to the Memorandum of Association and ensure all compliances A nominee member indicated with his prior consent to act in case of the only member’s incapacity to contract or death No Compulsion to hold an Annual General Meeting Filing of a copy of Financial Statements mandatory Contd. ..
ONE PERSON COMPANY Required to conduct at least one Board Meeting in each half year with a gap of not less than 90 days between 2 consecutive meetings Non Applicability of the provision of Quorum of a Board Meeting in case of only one director on the Board Business considered transacted if simply recorded in the minutes book, especially where: -A company is otherwise required to pass an ordinary or a special resolution at a General Meeting -The Board of Directors of the One-Person Company has only one Director
INDEPENDENT DIRECTOR Number of Independent Directors 1/3rd of the Total Directorship for other Public Limited of a listed Company to be Companies to be prescribed Independent byCentral Government 3-year gap required for more A tenure of up to 5 years than 2 terms of Consecutive 5 allowed but reappointment may years, as an Independent Director be considered in the same Company Appointment of Independent All such Directors to meet Director in General Meeting only separately atleast once a year
INDEPENDENT DIRECTOR Liability only in respect of Specified role and duties of omission or commission by the Independent Director under the Company occurred with the Companies Act knowledge, consent and non- diligence of such Director Transitional Phase of 1 year allowed No remuneration except for sitting to any company existing at the time fee, reimbursement of expenses of enactment of the Act for related to meeting and profit related commission compliance with this requirement
INDEPENDENT DIRECTOR Eligibility to be an Independent Director Be a Director other than Managing/ Whole Time/ Nominee Director Be a person of integrity & possess relevant expertise & experience Not be a promoter/relative of promoter of the Company, its holding, subsidiary or associate Company Not have a pecuniary relationship with the Company, its holding, subsidiary or associate company and its promoters and directors during 2 immediately preceding financial years Possess other prescribed qualification
INDEPENDENT DIRECTOR Not have any RELATIVES who have had any pecuniary relationship with the Company, it’s holding, subsidiary and associate Companies, their directors or promoters, 2 or more percent of its gross turnover or total income Amounting To: Rs. 50 Lakh or a higher amount as may be prescribed Himself or the relatives: Should not have been a KMP of the Should not have been an employee/ Company, its holding/subsidiary or partner/ proprietor of the auditor associate Company in any of the 3 firm/ legal firm or a consulting previous financial years firm of the Company Should not be a Chief Executive of Should not hold together 2% or any NPO which receives 25% or more voting power in the Company more of its receipts from the Company
WOMAN DIRECTOR The Companies Act, 1956 has no specifications or compulsions which specifically calls for appointing female directors. Once the Companies Act 2013 is enacted, the Central Government will prescribe a class of Companies which will have to mandatorily appoint at least 1 Woman Director. The Companies existing at the time of enactment of the Act will have 1 year to comply with the provisions
CLASS ACTION Class Action is the right to members, deposit holders or representatives of these persons to file an application before the Tribunal for restraining the Company from some specified acts Eligible Eligible member or depositor or class of class of member(s) depositor (s) May file application before the Tribunal seeking some specified orders IF Management/ Conduct of the Company is prejudicial to interests of the Company or its members/depositors
CLASS ACTION ORDERS THAT CAN BE SOUGHT Declaration of a resolution altering MOA/AOA as void if passed with Restrain the Company from an act suppression of material information/ ultra vires to the AOA or MOA misstatement Restrain the Company from an act Restrain the Company from breaching contrary to the provisions of the any provision of AOA or MOA Companies Act To declare a resolution altering the Claim any damages/ compensation or MOA/AOA as void if the resolution demand any other suitable action in was passed by suppression of material cases of wrongful/ fraudulent/ unlawful facts act by Directors/ Auditors/Experts
TREASURY STOCK Till now Cross holdings in case of mergers/ acquisitions among holding/subsidiary or Group Companies are transferred to a trust created for the benefit of the transferee company and are sold later as treasury stock to raise money if required THE COMPANIES BILL NOW ABOLISHES THE CREATION OF TREASURY STOCK ADVANTAGES: DISADVANTAGES: Protection to shareholders by Reduced flexibility to the Board in barring creation of freely issuable raising money from the open trust shares market Low capital base & hence Restrictive provision as the practice doesn’t lead to any big increased EPS and return on equity misuse Transparency in transactions as Tax implications if Company further issue only with approval of decides to transfer the holding to shareholders another entity
CORPORATE SOCIAL RESPONSIBILITY EVERY COMPANY With Net Worth of Turnover of Rs. Net Profit of Rs. / / Rs. 500 Crores 1000 Crores or 5 Crores or or more more more During any Financial Year Shall constitute a Corporate Social Responsibility Committee of the Board consisting of a minimum of 3 directors with at least 1 independent director
CORPORATE SOCIAL RESPONSIBILITY DUTY OF THE BOARD DUTY OF THE CORPORATE SOCIAL RESPONSIBILITY COMMITTEE Disclose the composition of the CSR Committee in its report Formulate and recommend a CSR Policy to the Board indicating the activities to be Approve the Company’s CSR policy after undertaken by the Company considering the recommendations of the committee Recommend the amount of expenditure to be incurred on CSR related activities Disclose the CSR policy in its report and on Company Website Monitor the Company’s CSR policy from time to time Ensure the implementation of the policy To spend at least 2% of the Company’s average profit for the last 3 financial years for this purpose Give preference to spending in local areas where it operates Specify reasons in report in case of failure
SECRETARIAL AUDIT The Secretarial Audit A Requirement For Report Company Every Listed DUTY OF THE BOARD belonging to other Company prescribed class Assist and facilitate the Company Secretary in Practice for auditing the secretarial and related records of the Company Shall be given by a Practicing Explain in the Board report any Company Secretary in a prescribed qualification / observation or other form remark made in the secretarial Shall be annexed with the Board audit report Report PENALTY in case of contravention: The company, every officer of the Company or the Company Secretary in Practice, who is in default shall be punishable with fine of not less than Rs. 1 lakh, extendable up to Rs. 5 lakh
REGISTERED VALUER A person having • Property prescribed • Stock qualifications & • Shares experience • Debentures & who is • Securities To be valued by • Goodwill Registered as a • Net Worth VALUER as per the • Other Assets provisions of the • Liabilities Law A Registered Valuer Will Make an impartial, true and fair Exercise Due Diligence while valuation of any asset required to be performing the functions valued as a Valuer
REGISTERED VALUER ROLE OF THE REGISTERED VALUER 1 2 3 Value assets in an Value shares, property arrangement calling Determine price for and all assets in a for restriction on Non further issue of shares scheme of compromise/ Cash transactions arrangement involving directors 4 6 5 Declaration of Solvency Value shares of the Determine value of to be accompanied with Minority Shareholders assets as it will be a report on the assets during their purchase shown in the report of prepared by a by the Company Company Liquidator Registered Valuer A PECUNIARY PENALTY is prescribed for a Valuer who commits default under the concerned section. Imprisonment along with pecuniary penalty is prescribed if it is established that the contravention on part of the Valuer is to defraud the Company or its members
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