RAVI VARMA

HIGHLIGHTS OF THE COMPANIES ACT 2013:

There are 470 Sections , 29 Chapters and 7 Schedules in the Companies Act 2013.
SOME NEW DEFINITIONS:
1. Officer in Default
means any of the following officers of a company, namely:-
(i) whole-time director;
(ii) key managerial personnel;
(iii) where there is no key managerial personnel, such director or directors as specified by the Board in
this behalf and who has or have given his or their consent in writing to the Board to such
specification, or all the directors, if no director is so specified;
(iv) any person who, under the immediate authority of the Board or any key managerial personnel, is
charged with any responsibility including maintenance, filing or distribution of accounts or records,
authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to
prevent, any default;
(v) any person in accordance with whose advice, directions or instructions the Board of Directors of
the company is accustomed to act, other than a person who gives advice to the Board in a professional
capacity;
(vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of
such contravention by virtue of the receipt by him of any proceedings of the Board or participation in
such proceedings without objecting to the same, or where such contravention had taken place with his
consent or connivance;
(vii) in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars
and merchant bankers to the issue or transfer.
2. Promoter
A person -
(a) who has been named as such in a prospectus or is identified by the company in the annual return, or
(b) who has control over the affairs of the company, directly or indirectly whether as a shareholder,
director or otherwise; or
(c) in accordance with whose advice, directions or instructions the Board of Directors is accustomed to act.
Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional
capacity.
MODI FI ED
DI SCLAI MER:
These questions on highlights of Companies Act, 2013 have been prepared based on the
Companies Act 2013 and rules notified by MCA only for the CS Examinations purpose and
hence it is not a summary of the entire Act.
Every company shall deliver debenture certificate within six months of allotment.
A private company, subsidiary of public company will now be deemed as Public
Company.
Number of Members increased from 50 to 200 in Private Companies.
The Central Government shall, by notification, constitute, a Tribunal to be known as
National Company Law Tribunal and an Appellate Tribunal to be known as
NATI ONAL COMPANY LAW APPELLATE TRI BUNAL.

RAVI VARMA


3. Small Company
A company other than a public company having a paid-up share capital of which does not exceed 50
lac or such higher amount as may be prescribed not exceeding Rs.5 crore or turnover of which does
not exceed 2 crore rupees or such higher amount as may be prescribed not exceeding twenty crore
rupees.
4. Key Managerial Personnel
KMP, in relation to a company, means-
(i) the Chief Executive Officer or the Managing Director or the Manager,
(ii) the Company Secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer; and
(v) such other officer as may be prescribed
5. Associate Company
A company is considered to be an associate company of the other, if the other company has significant
influence over such company (not being a subsidiary) or is a joint venture company. Significant
influence means control of at least 20 per cent. of total share capital of a company or of business
decisions under an agreement.
Answer following questions in light of the Companies Act 2013:
1. Can a single person form a Company under the Companies Act 2013?
Ans. Yes, concept of One Person Company has been introduced. Only a natural person who is an
Indian citizen and resident in India can form such company.

2. Can a Company commence its business immediately after incorporation under the
Companies Act 2013?
Ans. A Company can commence its business only if the company has filed its verification in form
INC.21 that every subscriber has paid the value of Shares, paid up capital of the Company is as
minimum required under the law and the Company has filed with the Registrar the verification of its
registered office in form INC.22.
A Person can hold the position of Director in Maximum 20 Companies, out of
which maximum of 10 public companies is permissible.
Provisions related to remuneration and % of profits available for remuneration are
same as of 1956 Act.
I nsider Trading by Directors / KMP is a criminal offence now. Even forward
dealing by the Directors is prohibited.
Secretarial Standards 1, 2, 5 and 7 now mandatory and the duties of CS includes
compliance with Secretarial Standard.
RAVI VARMA



3. What are entrenchment provisions under the Act 2013?
Ans. Flexibility to specify that certain provisions of the articles may only be altered if specified
conditions or procedures more restrictive than a special resolution are complied with.
For a private company, entrenchment provisions must be inserted at the time of formation or by a
unanimous shareholder resolution
For a public company, entrenchment provisions must be inserted at the time of formation or by a
special resolution

4. Is cross border merger allowed under the Companies Act 2013?
Ans. The cross border merger may be made between companies registered under this Act and
companies incorporated under jurisdiction of such countries as may be notified by the Central
Government. (Rules are yet to be notified for this section)

5. Verification of the Registered Office of the Company is required at the time of
incorporation of the Company under the Companies Act 2013?
Ans. A Company shall on and from 15
th
day of its incorporation and at all times thereafter shall have a
registered office capable of receiving and acknowledging communication.
Company is also required to furnish to the Registrar verification of the Registered office in
form INC.22 within 30 days of its incorporation.

6. Can a Company limited by Shares issue irredeemable preference Shares
under the Companies Act 2013 ?
Ans. No, A Company limited by Shares may issue preference shares redeemable within 20 years (for
infrastructure projects, the Company may issue for more than 20 years).

7. What are the requirements to be done after the Change of the name of the Company ?
Ans. Change of Name by the Company:
- A Company to give notice of the change of name to the Registrar within 15 days from such
change.
- A Company if changes its name in last two years, shall paint, affix or print along with its name
so changes during the last two years.
BOARD OF DIRECTORS:
Minimum Directors


Public Co 3 OPC 1 Private- 2






Only I ndependent Director can be appointed as Alternate Director to I ndependent Director.
I ssue and transfer of securities and non-payment of dividend by listed companies, shall be
administered by SEBI by making regulations.


RAVI VARMA

There has to be one RESIDENT DIRECTOR who has stayed in India for a total period of not less
than one hundred and eighty two days in a previous calendar year.

There has to be one WOMAN DIRECTOR in case of following Companies:
1. Listed Company
2. Public Company with a paid up Capital of 100 crore or more OR turnover of 300 crore or more.

8. Can Stock Options be granted to Independent Directors ?
Ans. No, an independent Director is not entitled to Stock Options.

9. In a Company X, Listed Company, there are 7 Directors including Mr A, B
whole time Directors, Mr. C, D and E nominee Directors of financial institutions and rest two
directors are independent. Is the composition of Board in accordance with the
Companies Act 2013?
Ans. No. Companies Act 2013 requires Listed Companies to have atleast 1/3
rd
of the Board as
INDEPENDENT DIRECTORS. Therefore, out of 7, 3 Directors have to be independent.
It is also to be noted that Nominee Director shall NOT be deemed as Independent Director under the
Companies Act 2013.
In the given case there are two whole time directors and 3 nominee directors. Therefore rest two are
Independent Directors which is not the minimum requirement of 1/3
rd
Independent Directors.

10. What will be your answer with respect to question no. 9 if it is a Public Company which in
not listed.
Ans. It will be YES in this case, as Act Public Companies with paid up capital of 10 crore or more,
turnover of 100 crore or more, outstanding borrowing, debentures and deposits of more than 50 crore,
to have atleast TWO INDEPENDENT DIRECTORS. Therefore, out of 7, 2 Directors have to be
independent.
It is to be noted that Nominee Director shall NOT be deemed as Independent Director under the
Companies Act 2013. In the given case there are two whole time directors and 3 nominee directors.
Therefore requirements fulfilled.

11. A Director resignation in writing is not necessary under the Companies Act 2013.
Ans. A Director may resign by giving notice in WRITING. The Board on receipt of such notice shall
send the same with the detailed reason to the Registrar.
Resignation become effective from the date, the letter is received or the date mentioned specifically in
the letter, whichever is later.
12. Independent Directors to retire after every 3 years under the Companies Act 2013.
Ans. False, An independent director can be appointed for a period of 5 year and can be
re-appointed for another 5 years if the Company gets the Special Resolution passed in the Meeting
i.e. in total 10 years. After that, there has to be a cooling off period of 3 years for
further re-appointment.
For the speedy trial of offences, the Central Government has been empowered to
establish SPECI AL COURTS in consultation with the Chief J ustice of the High Court
within whose jurisdiction the judge is to be appointed
The Special Court would have the liberty to try summary proceedings for offences
punishable with imprisonment for a term not exceeding three years, although it may
order for the regular trial.
RAVI VARMA


13. A Board Meeting can also be called at a Shorter Notice i.e. less than 7 days notice under
the Companies Act 2013.
Ans. Yes. At least 7 days notice is required for Board Meeting. However, it may also be called at a
shorter notice provided that one Independent Director has to be present in the Meeting.
Provided further that if such independent director is not present in the Meeting, then decisions of that
Meeting have to be ratified by One Independent Director.

14. Nomination and Remuneration Committee and Stakeholders Relationship Committee are
recommendatory in the Companies Act 2013.
Ans. No,
1. Every Listed Company or
2. other public company having Paid-up share capital of Rs. 10 crores or more OR turnover of
Rs. 100 Crore or more OR Aggregate outstanding loans, borrowings, debentures or deposits
exceeding Rs. 50 crores is required to form Nomination and Remuneration Committee with
at least 3 non-executive directors of which majority should be independent.
(Hint: for public company criteria are same as for atleast 2 independent directors Ref Q.9 )
If the Company has 1000 or more shareholders , then Stakeholders Relationship Committee is
required to be formed under the chairmanship of non executive director.

15. Secretarial Audit is mandatory for the Companies incorporated under the
Companies Act 2013.
Ans. Secretarial Audit is mandatory for
1. Listed Companies or
2. Public Company with a paid up capital of 50 Crore or more OR turnover of
Rs. 250 Crore or more.
Secretarial Audit can be done practising Company Secretary.
Report of Secretarial Audit is also to be attached to the Boards Report.
16. Only Listed Companies to mandatorily have a CSR Committee under the
Companies Act 2013.
Ans. False, A Company having networth of 500 Crore or more OR turnover of 1000 Crore or more
OR net profit of 5 Crore or more is required to form CSR Committee with at least 3 directors, of
which at least one director shall be INDEPENDENT.
17. What are Non-cash transactions under the Companies Act 2013?
Ans. Any arrangement between a company and its directors in respect of acquisition of assets for
consideration other than cash shall require prior approval by a resolution in general meeting and if
the director or connected person is a director of its holding company, approval is required to be
obtained by passing a resolution in general meeting of the holding company. These are non-cash
transactions.
Signing of Financial Statement:
Chairperson or two directors of whom one shall be MD, if any.
CEO, if he is a director in the Company
CFO, if any and
Company Secretary, if any.

RAVI VARMA


18. Can a Company give Loan to its Directors after Central Government approval under the
Companies Act 2013 ?
Ans. 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-
(a) any director of the lending company, or of a company which is its holding company or any partner
or relative of any such director;
(b) any firm in which any such director or relative is a partner;
(c) any private company of which any such director is a director or member;
(d) any body corporate at a general meeting of which not less than twenty-five per cent. of the total
voting power may be exercised or controlled by any such director, or by two or more such directors,
together; or
(e) any body corporate, the Board of directors, managing director or manager, whereof is accustomed
to act in accordance with the directions or instructions of the Board, or of any director or directors, of
the lending company.
HOWEVER, this section does not apply to-
Loan to MD/WTD
-as a part of contract of services extended to all its employees OR
-pursuant to scheme approved by members by special resolution.

19. Short Note on Financial Statement:
Ans. the term 'financial statement' has been defined to include:-
(i) a balance sheet as at the end of the financial year;
(ii) a profit and loss account, or in the case of a company carrying on any activity not for profit, an
income and expenditure account for the financial year;
(iii) cash flow statement for the financial year;
(iv) a statement of changes in equity, if applicable; and
(v) any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i)
to sub clause (iv)
20. Can a Company send its financial statement in electronic form to the Shareholders?
Ans. Yes, following Companies may send financial statement in electronic form.
In case of
1. Listed Companies
2. Public Company having net worth of 1 Crore or more OR turnover of 10 Crore or more.
However, it may send the statement to those shareholders, whose e-mail IDs are registered with the
Company.
The limit in respect of maximum number of companies in which a person may be appointed as
auditor has been made TWENTY COMPANI ES.
SERI OUS FRAUD I NVESTI GATI ON OFFI CE SFI O shall have power to arrest in respect of
certain offences of the Act which attract the punishment for fraud. Those offences shall be
cognizable and the person accused of any such offence shall be released on bail subject to certain
conditions provided in the relevant section of the Act.
RAVI VARMA

21. What are the statutory requirements related to signing of Annual Return ?
Ans. It requires to be signed by a Director and the Company Secretary (Form MGT.7).
Where there is no Company Secretary, it has to be signed by a Company Secretary in Practice.
In case of
1. Listed Companies
2. A company having paid-up share capital of 10 Cr or more OR turnover of 50 Cr rupees or
more, it has to be signed by Company Secretary in Practice (along with certificate in
Form MGT.7) mandatorily apart from the signature of Whole time Company Secretary.

22. Short note on Auditors :
Ans. A company shall appoint an individual or a firm as an auditor at annual general meeting who
shall hold office till the conclusion of sixth annual general meeting.
However, the company shall place the matter relating to such appointment for ratification by members
at every annual general meeting.

Rotation of Auditors:
In following companies the Auditors / Audit Firms are required to be rotated:
1. listed company or
2. Public Company having paid up share capital of 10 Crore or more or
3. Private Company having paid up share capital of 20 Crore or more.
, shall appoint or re-appoint-
(a) an individual as auditor for more than one term of five consecutive years; and
(b) an audit firm as auditor for more than two terms of five consecutive years:
Provided that-
(i) an individual auditor who has completed his term under clause (a) shall not be eligible for re-
appointment as auditor in the same company for five years from the completion of his term;
(ii) an audit firm which has completed its term under clause (b), shall not be eligible for
re- appointment as auditor in the same company for five years from the completion of such term:

23. Can Auditor render Non audit Services?
Ans,. Auditor cannot render any of the following services, directly or indirectly to the company or its
holding company or subsidiary company:
Accounting and book-keeping service , Internal audit, Design and implementation of any financial
information system, Actuarial services, Investment advisory services , Investment banking services,
Rendering of outsourced financial services, Management services and Other prescribed services

The Tribunal may appoint Provisional Liquidator or the Company Liquidator from a
panel maintained by the Central Government consisting of Company Secretaries,
Chartered Accountants, Advocates and Cost Accountants.
A company can make investment through not more than two layers of investment
companies, unless otherwise prescribed. The restriction on the number of step-down
subsidiary companies has been introduced to prevent the abuse of diversion of funds
through many step-down subsidiaries.
RAVI VARMA

24. What are the various functions of NFRA? (Rules not yet notified)
Ans. The National Financial Reporting Authority shall have various functions including-
(a) make recommendations to the Central Government on the formulation and laying down of
accounting and auditing policies and standards for adoption by companies or class of companies or
their auditors, as the case may be;
(b) monitor and enforce the compliance with accounting standards and auditing standards in such
manner as may be prescribed;

25. Which companies are required to necessarily appoint KMP ?
Ans. Following companies:
i. Every listed company
ii. every Public company having a paid-up share capital of 10 Crore or more shall have following
whole-time key managerial personnel.
(i) Managing Director, or Chief Executive Officer or manager and in their absence, a whole-time director;
(ii) Company Secretary; and
(iii) Chief Financial Officer :

26. What do you mean by Class Action Suits ?
Ans. In the case of a company having share capital, not less than one hundred members of the
company or not less than ten per cent of the total number of its members, whichever is less, or any
member or members singly or jointly holding not less than ten percent of the issued share capital of
the company, subject to the condition that the applicant or applicants have paid all calls and other
sums due on his or their shares, such members if they are of the opinion that the management or
conduct of the affairs of the company are being conducted in a manner prejudicial to the interests of
the company or its members or depositors, file an application before the Tribunal on behalf of the
members or depositors for seeking all or any of the following orders, namely few such as :
(a) to restrain the company from committing an act which is ultra vires the articles or memorandum of
the company;
(b) to restrain the company from committing breach of any provision of the companys memorandum
or articles;
(c) to declare a resolution altering the memorandum or articles of the company as void if the
resolution was passed by suppression of material facts or obtained by mis-statement to the members or
depositors; etc .
27. Can a revival scheme if not approved by the creditors be referred back to the Members for
modification ? (Rules not yet notified)

Ans. If revival scheme is not approved by the creditors, the Tribunal shall order for winding up of the
company.




Content of the Boards Report
Extract of Annual Return
Companys policy on directors appointment and remuneration
Comments on Auditors report, if any
Particulars of I nter corporate loan, investments or any contracts, agreements if there is
Conservation of energy, technology absorption, foreign exchange earnings and outgo
Risk management policy
CSR policy and expenses made on CSR, if applicable.