IMPACT OF SOME OF THE

PROVISIONS OF THE COMPANIES ACT, 2013

ON LISTED AND UNLISTED PUBLIC AND
PRIVATE COMPANIES
HISTORY/ BACKGROUND

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 31 st August,
2010.

2
 HISTORY/ BACKGROUND

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of Stakeholders the Companies Bill 2009 was withdrawn by the Central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, 14 th
December 2011.
10. The Companies Bill, 2011 was referred to the Standing Committee on Finance on 5 th
January, 2012 after an objection was raised against it in Parliament.
11. Based on the SCF’s 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 8 th August
2013
14. Now the assent of the President of India and the Bill‘s publication in the Official
Gazette will be necessary before the Bill becomes an Act
3
New Provisions Introduced in Companies Bill- 2013

 For the first time introduced the concept of One Person Company [Clause 2(62)].

 Inclusive definition of Financial Statement [Clause 2(40)].

 Entrenchment Provisions in Articles of Association (Clause 5).

 Public Offer and Private Placement deals with issue of securities by a public and a
private company (Clause 23).

 E-governance in all company processes (Clause 120).

 Corporate Social Responsibility - 2% of average net profits of the previous three years
(Clause 135).

 Mandatory Internal Audit for prescribed classes of companies (Clause 138).

 Mandatory Rotation of auditors for listed companies and other prescribed classes of
companies after 1 terms of 5 consecutive years in case of individual auditor and after
4
2 terms of 5 consecutive years for audit firm (Clause 139)
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013 Impact Implementation Remarks
NO. Time
Uniform Financial Year

1. 2(41) Companies are now required to have a uniform Companies can follow any other 31st March, 2016.
financial year ending on March 31 every year. period as financial year of the
Company upto March 31 2016
and thereafter, if it wants to do
A company which is a subsidiary of a foreign so, it will have to apply to NCLT
entity and is required to follow a different for exemption
financial year for consolidation of its accounts
outside India may have a different financial
year with prior approval of the National
Company Law Tribunal (‘NCLT’).

Change in Official Publication

2. 12 A company shall disclose certain information in A company is required to 1st April, 2014
its business letters, billheads, letter papers and disclose the following -
in all its notices and other official publications. (a) Full name of the Company
(c) Address of its registered
office
(d) Corporate Identity Number
allotted by ROC)
(e) Telephone number, fax
number, e-mail and website
addresses, if any.
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013 Impact Implementation Remarks
NO. Time

Change in promoter shareholding

3. 93 Every listed company shall file return with the Mechanism to monitor 1st April 2014
Registrar of Companies for any change in the shareholding of
holding of Promoters or top 10 shareholders promoters and top 10
within 15 days of such change. shareholders should
be in place.

Annual General Meetings

4. 101 An annual general meeting and an extra Earlier, holding of Annual 1st April, 2014
ordinary general meeting can be held by giving General Meetings at a shorter
not less than clear twenty-one (21) days’ notice required the approval
notice. However such meetings may be held at of 100% of the members
a shorter notice with approval of ninety five entitled to vote at such
percent (95%) of the members entitled to vote meeting of the company.
at such meeting of the company.
 
Explanatory Statement is now made Earlier, Extra-ordinary general
mandatory for all the special business items for meetings could have been
all companies. Previously private companies held outside India.
had the option to dispense with the need for
having explanatory statement for special
business.
 
Extra-ordinary general meetings shall now be
held in India.
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013 Impact Implementation Remarks
NO. Time
Quorum for General Meetings
5. 103 Unless the articles provide for a larger number, In case the adjourned general Need based
in case of a public company: meeting or change of day, time implementation.
(i) 5 members personally present if the or place, a notice of not less
number of members as on the date of than 3 days shall be given to the
meeting is not more than 1000; members either individually or
(ii) 15 members personally present if the by publishing an advertisement
number of members as on the date of in newspapers (one in English
meeting more than one thousand but up and one in vernacular
to 5000; language).
(iii) 30 members personally present if the
number of members as on the date of In the adjourned meeting, the
meeting exceeds 5000. members personally present
shall constitute quorum.
Consolidation of Accounts
6. 129 The 2013 Act now mandates consolidated financial If consolidation of associate is A company is required to
statements for any company having a subsidiary and not possible, reasons for the comply with this provision
its adoption at the annual general meeting of the same will have to be stated. based on the audited
company. The financial statements to be placed financials commencing
before annual general meeting shall include a effective from 1st April,
separate statement containing the salient features 2014.
of the financial statement of a company’s
subsidiaries. ‘Subsidiary’ for the purpose of this
requirement shall include associate company and
joint venture.
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013 Impact Implementation Remarks
NO. Time

Corporate Social Responsibility (CSR)

7. 135 Every company having net worth of INR 5 A company is required to
billion or more, or turnover of INR 10 billion or comply with this provision
more or a net profit of INR 50 million or more based on the threshold limits in
during any financial year shall constitute a CSR the audited financials
Committee. commencing from 1st April,
2014
A CSR Committee
consisting of three (3) or
more directors, out of
which at least one (1)
director should be an
independent director is
required to be constituted
in the ensuing Board
Meeting.

Appointment of Internal Auditor

8. 138 Every listed and unlisted public company having A company may be required to A company is required to
paid up share capital of INR 500 million or more appoint an Internal Auditor appoint an Internal
or turnover of INR 2 billion or more in the depending on the aforesaid Auditor within 6 months’
preceding financial year or outstanding loans or limits. i.e. by 30th September,
borrowings from banks or public financial 2014.
institutions of INR 1 billion or more at any point
of time during the preceding financial year or
outstanding deposits of INR 250 million or
more at any point of time during the preceding
financial year is required to appoint an Internal
Auditor.
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, Impact Implementation Remarks
NO. 2013 Time
Appointment of Internal Auditor
Every private company having turnover
of INR 2 billion or more; or having
outstanding loans or borrowings from
banks or public financial institutions
exceeding INR 1 billion or more at any
point of time during the last financial
year shall be required to appoint an
internal auditor to conduct internal
audit of the functions and activities of
the company.

Rotation of Statutory Auditors

9. 139 Listed and unlisted public companies A company may be required to rotate its The period for which the
having paid up share capital of INR 100 current Auditors. individual or the firm has
million or public borrowings/ deposits held office as auditor prior to
of INR 500 million or more shall rotate the commencement of the
its Auditors. After 1 term of 5 years in Act shall be taken into
case of individual Auditor and after 2 account for calculating the
terms of 5 years in case of an Audit period of five consecutive
Firm. years or ten consecutive
Private limited companies with a paid years, as the case may be.
up share capital of INR 200 million or
more and companies with public
borrowings from financial institutions,
banks or public deposits of INR 500
million or more will have to comply
with the auditor rotation requirement.
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec. Provision of Companies Act, 2013 Impact Implementation Remarks
NO. Time

Woman Director (Applicable)

10. 149 Every listed company and every other A company is required to appoint a woman The woman
(1) public company having a paid-up director based on the limits prescribed. director is
share capital of INR 1 billion or more, required to be
or turnover of INR 3 billion or more, appointed on or
shall appoint at least 1 woman before 31st March,
director. 2015.

Resident Director

11. 149 Every company shall have at least one Every company will now require to appoint a 1st April, 2014
(3) (1) director who has stayed in India Resident Director
for a total period of not less than one
hundred and eighty-two (182) days in
the previous calendar year.
 IMPACT OF THE COMPANIES ACT, 2013 ON LISTED AND
UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013 Impact Implementation Remarks
NO. Time

Appointment of Independent Directors

12. 149
(4) IMPACT OF THE COMPANIES ACT, 2013 ON Inrequired
Listed companies shall have at least one-third of A listed company is required to The IDs are required to be
its Board as Independent Directors (IDs).
case a company is
have at least one-third of the appointed on or before
to appoint
total number of its directors as 31st March, 2015.
higher number of IDs
ESSAR GROUP [LISTED AND PUBLIC COMPANIES]
Unlisted public companies having paid up share IDs. Any fraction contained in
due to composition
capital of INR 100 million or more or turnover of such one-third number shall be
of its Audit
INR 1 billion or more or borrowings exceeding rounded off as one. Committee, such
500 million shall have at least two directors as higher number of IDs
Independent Directors (IDs). shall be applicable to
Review board constitution to such companies.
Term of Independent Directors fixed for 5 years ensure at least 2/3rd of the total
with 5 year extension with approval by special directors liable to retire by
resolution. rotation under section 152
excluding ID’s.
Retirement by rotation not applicable
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013 Impact Implementation Remarks
NO Time
.
Duties of Directors
13. 166 The Companies Act, 2013 has specifically The Directors need to specifically adhere to the Ongoing adherence to
prescribed duties of directors: (i) act in prescribed duties of the directors. prescribed duties.
accordance with the Articles of the Company,
(ii) act in good faith to promote the objects of
the Company, (iii) exercise his duties with due
and reasonable care, skill and diligence, (iv)
not get involved in a situation in which he may
have a direct or indirect conflict of interest
with the Company, (v) not achieve or attempt
to achieve any undue gain or advantage either
to himself or to his relatives, partners, or
associates, and (vi) not to assign his office.
Board Meetings
14. 174 A meeting of the board shall be called by giving The following matters cannot be dealt with in 1st April, 2014
not less than seven (7) days’ notice in writing any meeting held through video conferencing or
to every director and such notice shall be sent other audio visual means:
by hand delivery or by post or by electronic  
means. a) the approval of the annual financial
  statements;
The meeting of the board has to be held four b) the approval of the Board’s report;
(4) times in a year in such a manner that not c) the approval of the prospectus; and
more than one hundred and twenty (120) days d) the approval of the matter relating to
shall intervene between two consecutive amalgamation, merger, demerger,
meetings of the board. acquisition and takeover.
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013 Impact Implementation Remarks
NO Time
.
Audit Committee

15. 177 Every listed and unlisted public companyA company may be required to constitute an 1st April, 2014. In case a company is
Audit Committee depending on the
having paid up capital of INR 100 million required to appoint
or more or turnover of INR 1 billion or thresholds prescribed. A company is higher number of IDs
more or which have, in aggregate, required to have at due to composition
outstanding loans or borrowings or For the purpose, a minimum of 2 IDs are least 2 IDs on its of its Audit
debentures or deposits exceeding INR 500required to be appointed. board within one Committee, such
million shall constitute an Audit year from higher number of IDs
Committee. commencement of shall be applicable to
the Act i.e., by 31st such companies.
The Audit Committee shall consist of at March, 2015.
least 3 directors majority being IDs.
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013 Impact Implementation Remarks
NO. Time
Vigil Mechanism under Audit Committee
16. 177 Every listed company and the (i) A company may be required to constitute a 1st April, 2014
companies which accept deposits from Vigil Mechanism based on the thresholds
the public; and (ii) companies which have prescribed.
borrowed money from banks and public
financial institutions in excess of INR 500 Review current “Whistle Blower Policy” of
million shall establish a vigil mechanism the company.
for their directors and employees to
report their genuine concerns or Align with the new requirements such as
grievances. incorporating the provision of access to the
Chairman of the Audit Committee in
The vigil mechanism shall provide for appropriate or exceptional cases.
adequate safeguards against victimization
of persons who use such mechanism.
The company should disclose the details
of establishment of such vigil mechanism
on its website, if any, and in the Board’s
report.

Nomination and Remuneration Committee (NRC)

17. 178 Every listed and unlisted public company A company may be required to constitute a 1st April, 2014.
having paid up capital of INR 100 million or NRC depending on the thresholds
more or turnover of INR 1 billion or more prescribed. A company is
or which have, in aggregate, outstanding required to have at
loans or borrowings or debentures or least 2 IDs on its
deposits exceeding INR 500 million shall board within one
constitute a NRC. year from
commencement of
The NRC shall consist of 3 or more non- the Act i.e., by 31st
executive Directors out of which not less ½ March, 2015.
shall be IDs.
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013 Impact Implementation Remarks
NO. Time

Restrictions on powers of Board

18. 180 Under the 1956 Act, only ordinary
resolution of shareholders was required
for the board to exercise certain powers.
Under the 2013 Act, a special resolution is
required for the board to exercise those
powers as described below.
 
i. to sell, lease or otherwise disposal
of one or more undertaking or the
whole or substantially the whole of
undertaking.
 
ii. to invest otherwise in trust securities
the amount of compensation received by
it as a result of any merger or
amalgamation.
The restrictions on powers of board 12th September,
prescribed under Section 293 of the 1956 2013
Act applied only to public companies or a
private company which is a subsidiary of
public company; however, under Section
180 of the 2013 Act, the restrictions are
applicable to all type of companies.
 
The 1956 Act did not define the
expressions “undertaking” and
“substantially the whole of the
undertaking”. 2013 Act defines these
expressions using 20% criteria (20% of net
worth/income/value of undertaking).
 
 
 
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013 Impact Implementation Remarks
NO. Time

Restrictions on powers of Board

 
iii. to borrow money in excess of  
aggregate of the paid-up share capital and  
free reserves of company, apart from
temporary loans obtained from the
company’s bankers in the ordinary course
of business.

iv. to remit, or give time for the repayment

of, any debt due from a director.
 
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013 Impact Implementation Remarks
NO. Time
Loans and Advances
19. 186 A company unless permitted under the Rules Whenever a company intend to give any loan/ Need based "Investment
can make investment through not more than 2 advance/ guarantee it is required to follow the implementation. Company" has
layers of Investment Companies. below procedure – been defined to
  (1) disclose in the Financial Statement, the full mean a company
Exceptions to this basic law are: particulars of the loan, investment made, whose principal
• acquisition of a foreign company which has guarantee given or security provided and its business is the
investment subsidiary beyond 2 layers as per utilization. acquisition of
the relevant foreign law; and (2) No loan shall be given at a rate of interest shares, debentures
• a subsidiary company making investment to lower than the prevailing yield on Government or other securities.
comply with any relevant law. Security. 
  (3) The company has to maintain the prescribed
Loans, guarantee and security made to any register.
person (The 1956 Act dealt only with body
corporate) exceeding 60% of its paid-up share
capital and free reserves and securities premium Under the 1956 Act, one could escape
account or 100% of its free reserves and punishment of imprisonment by fully repaying
securities premium account, whichever is more the inter-corporate loan contravening the
will now attract compliance requirements. provisions of 1956 Act. This is not possible under
the 2013 Act.
The above limits will not apply in case of loan or
guarantee is given or where a security has been
provided by a company to its WOS or joint
venture company or acquisition is made by the
holding company by way of subscription,
purchase or otherwise of the securities of its
WOS.
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES] contd.
SR. Sec Provision of Companies Act, Impact Implementation Remarks
NO 2013 Time
.

Related Party Transactions

20. 188 There is no requirement of obtaining A company is required to obtain prior Need based No approval of
Central Government approval for related approval of members by means of special implementation. Central Government
party transactions. Approval of related resolution to enter into any contract or is required for
party transactions by board of directors arrangement with any related party in excess entering into related
party transactions.
at board meeting has been made of the prescribed limits.
mandatory.
  Ensure proper mechanism to identify the
Related party transactions will also related parties covered under the new
require prior shareholder’s approval by definition and rules.
special resolution for companies having
paid up capital of INR 100 million or Process to evaluate if transactions are in the
more or transactions exceeding below ordinary course of business and at arms
limits: length basis.
 
No member shall vote if he is a Related
Party.

In case of contracts with a wholly owned

subsidiary, the special resolution passed by
the holding company shall be sufficient for
the purpose of entering into the transactions
between wholly owned subsidiary and
holding company.
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES]contd.
SR. Sec Provision of Companies Act, 2013
NO
.
Related Party Transactions
21. 188 (i) individually or taken together with
previous transactions during a financial year,
for contracts or arrangements, namely,
 
(a) sale, purchase or supply of any goods or
material exceeding twenty five (25)
percent of the annual turnover;
(b) selling or otherwise disposing of, or
buying, property of any kind exceeding
ten (10) percent of the net worth;
(c) leasing of any kind of property exceeding
ten (10) percent of the net worth;
(d) availing or rendering of any services
exceeding ten (10) percent of the net
worth;
Impact Implementation Remarks
Time
“Related party”, with reference to a
company, means—
(i) a director or his relative;
(ii) a key managerial personnel or his
relative;
(iii) a firm, in which a director, manager
or his relative is a partner;
(iv) a private company in which a
director or manager is a member or
director;
(v) a public company in which a director
or manager is a director or holds along
with his relatives, more than two per
cent. of its paid-up share capital;
(vi) any body corporate whose Board of
Directors, managing director or manager
is accustomed to act in accordance with
the advice, directions or instructions of a
director or manager;
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013
NO
.
Related Party Transactions
22. 188 (e) appointment of agent for purchase or sale
of goods, material exceeding twenty five (25)
percent of the annual turnover and services or
property exceeding ten (10) percent of the net
worth; or
 
The ‘turnover’ or ‘net worth’ referred above
shall be on the basis of audited financial
statements of the preceding financial year.
 
(ii) relates to appointment to any office or
place of profit in the company, its subsidiary
company or associate company at a monthly
remuneration exceeding INR 250,000; or
 
(iii) remuneration for underwriting the
subscription of any securities or derivatives
thereof of the company exceeding one (1)
percent of net worth.
Impact Implementation Remarks
Time
(vii) any person on whose advice,
directions or instructions a director or
manager is accustomed to act:
Provided that nothing in sub-clauses
(vi) and (vii) shall apply to the advice,
directions or instructions given in a
professional capacity;
(viii) any company which is—
(A) a holding, subsidiary or an
associate company of such company;
or
(B) a subsidiary of a holding company
to which it is also a subsidiary;
(ix) a director or key managerial
personnel of the holding company or
his relative with reference to a
company.
 IMPACT OF THE COMPANIES ACT, 2013 ON
LISTED AND UNLISTED PUBLIC/PRIVATE COMPANIES
SR. Sec Provision of Companies Act, 2013 Impact Implementation Remarks
NO. Time
Appointment of Key Managerial Personnel [KMP]
23. 203 Listed companies and other public companies having If a company’s capital is more than This section or rules does
paid-up capital of INR 100 million [or] more shall have the prescribed limited, then not specify any transition
the following whole-time key managerial personnel company is required to appoint period. A company is
(KMP): KMPs. required to comply with this
(1) MD or CEO or Manager and in their absence, a provision immediately.
Whole-time Director;
(2) Company Secretary (CS); and
(3) Chief Financial Officer (CFO).
Secretarial Audit
24. 204 Public companies having a paid-up share capital of If a company’s capital or turnover A company shall have to
INR 500 million or more [or] turnover of INR 2.5 is more than the prescribed comply basis the Audited
billion or more shall annex with its Board’s report, a limited, then company is required financials of 31st March,
secretarial audit report given by a company secretary to comply with this provision. 2014.
in practice.
 Applicability of the Companies Act, 2013 as on date

• The Ministry of Corporate Affairs on –

(1) 12th September, 2013 have made effective 98 sections of the Companies Act, 2013
(2) 27th February, 2014 have notified and made effective CSR section with effect from 1st April, 2014; and
(3) 26th March, 2014 have notified and made effective another 183 sections of the Companies Act, 2013 with effect from
1st April, 2014

This presentation is for general understanding only and does not provide an exhaustive legal advice.
 How Would the Companies Bill 2013 affect the Corporates

Related Party Transactions

 Every Contract / Arrangement with a Related Party to be referred

to in the Board's Report along with the Justification

 Arrangement between a Company and its Directors in respect of Acquisition of Assets for Consideration other than
Cash to require General Resolution

 The One Person Company to inform the RoC about Every Contract entered into with the Sole Member

 One Person Company to ensure that the

Terms of the Contract are Contained in the Memorandum or are Recorded in the Minutes

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 shall be valued by a person Registered as a Valuer

 The Central Government shall maintain a Register of Valuers

23
 How Would the Companies Bill 2013 affect the Corporates

Deposits

 Company may accept deposits from its members subject to fulfillment of the following specified conditions
1. passing of resolution in a general meeting
2. issue of circular to members
3. filing a copy of the circular along with the registrar
4. Providing deposit insurance
5. Certification by the Company that it hasn’t defaulted in the repayment of Deposits
6. 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

24
 How Would the Companies Bill 2013 affect the Corporates

Investment Companies

 Company can make investment through not more than two layers of Investment Companies

 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

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

25
 How Would the Companies Bill 2013 affect the Corporates

Investor Protection Measures

 Issue and Transfer of Securities and Non Payment of Dividend by Listed Companies shall be administered by SEBI

 Fraudulent Inducement of Persons to Invest Money is punishable with Imprisonment for a Term which may extend to
Ten Years and with Fine which shall not be less than Three Times the Amount involved

 Suit may be filed by a person who is affected by any Misleading Statement in the Prospectus or who has invested
money by fraudulent inducement

Class Action Suits

 Specified No. of Members, Depositors or any Class of them may file an application before the Tribunal

 Where the Members or Depositors seek any Damages or or demand any other suitable action from or against an audit
firm, the liability shall be of the firm as well as of each partner who was involved in making any improper statement of
particulars in the audit report or who acted in a fraudulent, unlawful or wrongful manner

 The order passed by the Tribunal shall be binding on the company and all its Members, Depositors and Auditors

26
 How Would the Companies Bill 2013 affect the Corporates

Serious Fraud Investigation Office

 Statutory status to SFIO has been proposed. Investigation report of SFIO filed with the Court for framing of charges
shall be treated as a report filed by a Police Officer.

 SFIO shall have power to arrest in respect of certain offences of the Bill 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 clause of the Bill

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

27
 How Would the Companies Bill 2013 affect the Corporates

Financial Statements

 'Financial Statement' has been defined to include

1. Balance Sheet
2. Profit and Loss Account or Income and Expenditure Account
3. Case Flow Statement
4. Statement of Changes in Equity
5. 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

28
 How Would the Companies Bill 2013 affect the Corporates

 Other Important Points

 New Definitions introduced in the Bill

 Definition of Private Company changed

 Deemed Public Company

 Security Premium Account may be applied for Buy Back

 Concept of One Person Company

 Concept of Small Companies

 Registration Process Made Faster

 Articles may Contain Provisions for Entrenchment

 No Commencement of Business unless Declaration filed with Registrar

 Clear Definition of Private Placement

29
 How Would the Companies Bill 2013 affect the Corporates

 No Issue of Shares at a Discount except Sweat Equity Shares

 Issue of Preference Shares for a period Exceeding Twenty Years

subject to Conditions

 Reduction of Share Capital subject to Confirmation by Tribunal

 Maximum No of Directors: Limit Increased to 15 from 12

 More Directors by way of Special Resolution without CG approval

 At least one Woman Director for Prescribed Class of Companies

 At Least One Resident Director

 CS being a Whole Time KMP to be Appointed by Board Resolution

 Listed Companies to have at least 1/3 rd Independent Directors

 Nominee Director not to be an independent Director

 Only Independent Director to be an Alternate for an Independent Director

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 How Would the Companies Bill 2013 affect the Corporates

 Promoter/Central Govt to Appoint Directors where all Directors Resign

 Meeting at Short Notice subject to Presence of Min 1 Independent Director

 Duties of Directors Defined in the Bill

 Constitution of Nomination and Remuneration Committee mandatory

In case of Listed Companies and Other Prescribed Companies

 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

 Board's Report made more Informative including Extensive Disclosures

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