we provide a summary
of important changes occurred in Companies Act, 2013.
1. Stationery
requirements: The Company’s (i) letterhead {business letters}, (ii) bill heads,
(iii) letter papers, (iv) notices; (v) other official publications to capture
these additional requirements: Company’s 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 MD’s 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 mandatory 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. Know more about: Service tax online
Contributed by: Rajput Jain & Associates,
Chartered Accountants Team members:
