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Companies Bill, 2012

Presented by:
CA. Suresha Balachandran FCA, DISA, ICA
Director,
Sympro Consulting Private Limited
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Structure of the Bill:


Contains 29 Chapters, 470 Clauses
(Sections) and 7 Schedules
Substantial part of the Bill will be in
the form of Rules, which will be
prescribed separately

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New Concepts:

One person company


Independent Directors (Sch. IV)
Associate
Dormant company
Class Actions

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New Concepts continued.


Corporate Social Responsibility
(Sch. VII)
Secretarial Audit
National Authority for Financial
Reporting

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Incorporation:
Particulars
Companies Act, 1956
Companies Bill, 2012
Maximum number of members
50
200
for Pvt. Companies
Minimum number of members Public Co., - 7
No change. Concept of one person
Private Co., - 2
company introduced
Objects clause of MOA
Bifurcated into - Main objects, No such bifurcation, the objects
incidental or ancillary objects considered necessary for furtherence
and other objects
of business to be given
Registered Office
Companies to furnish the details Within 15 days of incorporation to have
of registered office of the a registered office. Company to furnish
company by filing eForm 18 at verification details of its registered
the time and incorporation and office to the Registrar within 30 days of
subsequently whenever there is its incorporation in a prescribed
a change within 30 days
manner. Any subsequent change to to
notified within 15 days
Commencement of business
Applicable only to public Applicable to all companies having
companies
share capital

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Shares and Share Capital:


Particulars
Issue of shares at a discount

Companies Act, 1956


Companies Bill, 2012
Sec.79 permits issue of shares at Issue of shares at discount is
discount subject to compliance prohibited except for sweat equity
of conditions
shares
Issue of Preference shares for Sec.80 prohibits issue of Issue of preference shares for period
irredeemable pref. shares and exceeding 20 years is permitted for
more than 20 years
pref. shares redeemable after 20 infrastructure projects
years
Issue of shares on private No specific provisions
Specific provision introduced
placement
Companies permitted to
Consolidation and division which
Consolidation and division of
consolidate or sub divide its
results in changes in the voting
shares
shares by passing resolution in percentages of shareholders shall
General Meeting
require approval of the Tribunal

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Board Meeting:
Particulars
First board meeting

Companies Act, 1956


Companies Bill, 2012
No specific time stipuated for First board meeting of the directors to
be held within 30 days of its
holding first board meeting
incorporation
Time gap between two meetings Atleast one meeting to be held Not more than 120 days gap between
in every quarter
tow consecutive board meeting
Length of notice
No specific length of notice
Notice of not less than 7 days be given,
specified
lesser notice can also be given if an
independent director is a director and
attends the board meeting
Meeting through video
conferencing

Penalty

Permitted and subject to the Clause 173(2) permits meeing through


rules framed thereunder
video conferencing and other audiot
visual means. Central Govt. may by
notification specify the matters which
shall not be dealt with in a meeting
thrugh video conferencing or other
audio visual means
Every officer who fails to give Every officer who fails to give notice
notice shall be fined which may shall be fined which may extend to
extend to Rs.1,000/Rs.25,000/-

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General Meeting:
Particulars
Companies Act, 1956
Maximum time for holding first 18 months from incorporation or
AGM
9 months from closure of
accounts which ever earlier
During the busines hours and
Time and day
on a day that is not a public
holiday
Length and mode of notice
Private companies are permitted
to specify the length of notice in
Articles and written notice is
mandatory
Consent for shorter notice
Consent to be given by all
members entitled to vote at the
meeting
Quorum
Private Companies - 2 Members
Public Companies - 5 Members

Statuotry Meeting

Companies Bill, 2012


9 months from the closure of accounts

During business hours i.e., between


9AM to 6PM on any day that is not a
National Holiday
21 days clear notice to be given by all
companies. Notice may be given in
writing or in electronic form in the
manner prescribed
Consent to be given by not less than
95% of the members entitled to vote at
the meeting
Private Companies - 2 Members
Public Companies (a) 5 Members where total number of
members do not exceed 1000.
(b) 15 Members where total number of
members are between 1000 - 5000
(c) 30 Members where total number of
members are between more than 5000

Public
companies
to
hold No such provision
meeting after one month and
before 6 months from the date
of
entitlement
of
commencement of business and
file statutory report with ROC

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Directors:
Particulars
Maximum number of directors 12

Companies Act, 1956

15, excludes private companies, un


Maximum number of directorship
limited
companies,
alternate
directorship and directorship in nonprofit associations
Composition of Board
Minimum 2 directors in case of private
and 3 in the case of public companies.
Maximum 12 directors

Disclosures in Board Report

Directors responsibility
statement

Companies Bill, 2012


15, More than 15 with special resolution
20, out of which not more than 10 can be
public companies. Includes alternate
director. No specific exclusions are
provided for others.
Certain class of companies to have atleast 1
woman director. Every company to have
atleast one director who has stayed for
atleast 182 days in India in previous
calender year. Listed Companies to have
atleast 1/3rd independent directors.

Sec 217 contains disclosure requirements Additional disclosures proposed by the


of Board report
bill, namely extract of annual returns,
number of board meetings, CSR initiatives
and
policy,
particulars of
loans,
guarantees, investments etc.,
Sec 217 (2AA) prescribes the content of Additional clauses proposed by the bill in
Director's responsibility statement which respect of "internal financial controls" and
contains 4 clauses
"System to ensure compliance with laws".

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Independent Directors:
Independent director means a director other than a MD,
WTD and Nominee Director
No pecuniary relationship with company
May be appointed by another 5 years on special resolution
Independent director to give declaration in board meeting
whether he meets the criteria of independence as stipulated
An independent director is not entitled to stock option and
receive remuneration by way of fee
Term of office 5 years. Thereafter, may join the board after a
gap of 3 years
Independent director shall be held responsible for such acts
of omission or commission by a company which had occurred
with his knowledge, consent and connivance
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Independent Director:
Listed companies 1/3rd Independent directors
Appointment to be approved by shareholders
in GM
Existing companies to comply within one year
Entitled for remuneration by way of fees for
services rendered as professionals
Independent director to hold prescribed
qualification
Not to associate with the company either
directly or indirectly in any capacity during the
tenure and after 3 years
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Code for Independent Directors:


Schedule IV prescribes code for Independent
directors and which contain:
Guidelines for professional conduct
Role and functions
Duties
Manner of appointment and re appointment
Resignation and removal
Schedule provides for a at least one meeting in
a year for review and evaluate the performance
of non independent directors, chairperson and
board as a whole
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Restriction - Independent Directors:


Not an employee or partner or proprietor of auditors
or company secretaries or cost auditors to the
company or its holding or subsidiary company or its
associate or a legal or consulting firm having or had
transaction with company or holding or subsidiary
or associate exceeding 10% of gross turnover of the
firm
Not a CEO or director of NGO that receives 25% or
more of its receipts from company or any of its
promoters, directors, subsidiary or holding company
or associate company or an entity holding 2% or
more of the total voting power of company
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Restriction - Independent Directors:


Together with his relatives shall not hold
more than 2% of the share in the
company
He should not have been an employee of
the company or holding or subsidiary or
its associate in any three preceding
financial years
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Directors:
Right of any persons other than retiring director to
stand for directorship:
Notice in writing shall be given at the registered office not
less than 14 days before the meeting
A sum of Rs. 1 Lakh or such higher amount as may be
prescribed shall be deposited
Alternate director appointment shall be for a director during
his absence for a period of not less than 3 months from India
No alternate director for independent director unless the
proposed director is qualified to be appointed as independent
director
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Vacation of office by directors:


Absents from all meetings of the board of directors held
during a period of twelve months with or without seeking
leave of absence of the board

Having been appointed a director by virtue of his holding any


office or other employment in the holding, subsidiary or
associate company, ceases to hold such office or other
employment in that company
For contravention, imprisonment for a term which may
extend to one year or fine not less than one lakh rupees to five
lakhs rupees or both
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Resignation by director:
Can resign by giving notice
A director shall forward a copy of his resignation along with
detailed reasons for the resignation to ROC within 30 days
Resigned director is liable for offences which occurred during
his tenure

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Accounts:
Particulars
Consolidation of accounts

Certification of accounts

Financial year and extension

Financial Statements

Manner of maintenance of
accounts

Companies Act, 1956


Consolidation not mandatory,
balance sheet of subsidiary to be
attached with the holding
company while filing the returns
with ROC
Balance sheet and Profit & Loss
Account to be signed by not less
than 2 directors and one of
whom shall be the MD where
there is one
Financial year not to exceed 15
months. Financial year can end
on date other than 31st March.
Financial year can be extended
upto 18 months by ROC
Balance sheet and Profit & Loss
Account alone were financial
statements

Maintenance of accounts
electronic form permitted

Companies Bill, 2012


Companies having subsidiaries to
prepare
consolidated
financial
statements in addition to standalone
statements.
Subsidiary
includes
associates and joint ventures
Financial statements can be signed by
the Chairman alone if so authorised
the Board of Directors

Financial year to end on 31st March


every year for all companies subject
certain rules to be prescribed. No
explicit provisions regarding extension
of financial year
Now financial statement includes
Balance Sheet, Profit & Loss Account
and Cash Flow Statement. Even Private
Companies are required to prepare
Cash Flow Statement
in Maintenance of accounts in electric
form permitted

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Filing of reports & returns:


Particulars
Board report
Duration of Annual Return
Certification of Annual Return

Annual Returns in case of Listed


Company

Companies Act, 1956


Companies Bill, 2012
Few disclosures requirements
Exhaustive disclosures requirements
AR upto the date of Annual AR upto the date of financial year end
General Meeting
AR to be certified by directors AR to be certified by Company
and Company Secretary of the Secretary of the company or Company
Company
Secretary in Practice
No such provision
Listed company to file return to ROC
regarding changes in shares held by
promoters and top 10 shareholders
within 15 days of the change

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Secretary & secretarial audit


Mandatory Secretarial Audit for all listed companies and
certain class of companies which are to be prescribed
Board to respond to qualifications contained in Secretarial
Audit by means of explanation in Boards report
Class or classes of companies as may be prescribed shall
have MD / CEO / WTD, Company Secretary and CFO. If
not punishable with fine of Rs.1 lakh to 5 lakh, every
director in default shall be punishable with fine of
Rs.50,000/- additionally in continuing offences a fine of
Rs.1,000/- per day
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Corporate social responsibility


A committee on CSR to be formed in case of the following
companies:
(a) Networth of Rs. 500 Crore or more
(b) Turnvoer of Rs.1,000/- Crore or more
(c) Net profit of Rs.5 Crore or more
Board to ensure that at least 2% of the average net profits
of last 3 years is spent on CSR activities every financial year
else reason for not spending to be specified in the Board
report.

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Appointment of First Auditors:


Particulars
Board of Directors

Members in EGM

C & AG
Board of Directors
Members in EGM

Non-Government Companies
Government Companies
Appoint first auditors within 30 NA
days from the date of
incorporation, else in members
EGM
If no auditors are appointed NA
then, members who shall within
90 days at an EGM appoint
auditor
NA
C & AG within 60 days of
incorproation shall appoint
NA
Appoint auditor within 30 days if
C&AG fails to appoint
NA
If no auditors are appointed then,
members who shall within 60 days at
an EGM appoint auditor if Board fails
to appoint

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Auditor appointment & tenure:


Particulars
Tenure of office

Firm / LLP of Chartered Accountants


Companies can appoint auditor for a
maximum term of 10 years
Ratification
Appointment to be ratified each year by
members in AGM
New Auditor each year
Company can appoint new auditor each
year, there is no bar.
Written consent and eligibility A written consent of the auditor for
before appointment
appointment and a certificate that the
appointment, if made is in accordance
with conditions prescribed and a
certificate to the effect that auditor
satisfies the criteria for appointment

Sole Proprietor Chartered Accountant


Companies can appoint auditor for a
maximum term of 5 years
Appointment to be ratified each year by
members in AGM
Company can appoint new auditor each
year, there is no bar.
A written consent of the auditor for
appointment and a certificate that the
appointment, if made is in accordance
with conditions prescribed
and
a
certificate to the effect that auditor
satisfies the criteria for appointment

Appointment afer 5 / 10 years


as the case may be
Intimation to ROC

Cannot be appointed as auditor for a


period of years after the completion
Company to intimate ROC within 15 days
of the meeting in which the auditor is
appointed
Auditor so appointed as above can be
removed or the auditor can resign even
though the appointment is for a maxium 5
years
Auditor himself or through a authorised
representative (who shall also be qualified
to be auditor) shall attend General
Meeting unless exempted by the company

Removal and resignation of


auditor

Auditor and General Meeting

Cannot be appointed as auditor for a


period of years after the completion
Company to intimate ROC within 15
days of the meeting in which the auditor
is appointed
Auditor so appointed as above can be
removed or the auditor can resign even
though the appointment is for a maxium
10 years
Auditor himself or through a authorised
representative (who shall also be
qualified to be auditor) shall attend
General Meeting unless exempted by the
company

Sympro Consulting Private Limited

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Internal Audit:
Certain classes or description of companies as may
be prescribed shall be required to appoint an
internal auditor
The internal auditor could be:
Chartered Accountant
Cost Accountant
Such other professional as may be decided by
board
CG will specify the rules, intervals and reporting of
internal audit
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One person company (OPC):


Only one person as a member and director
OPC shall be a private company
The words one person company to be
mentioned in brackets below the name of
the company
OPC to maintain minutes of BM & GM
No transfer of shares in OPC
Subscriber to intimate ROC name of the
person who shall become member of the
company in the event of his death or
incapacity
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National Financial Reporting Authority:


CG to constitute NFRA provision for
accounting & auditing standards
NFRA replaces NACAS
Recommend to CG on formulation and
laying accounting and auditing standards
Monitor and enforce AS & Audit Standards
Oversee the quality of services of
professionals and suggest measures for
improvement
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Powers of NFRA:
Powers of a Civil Court
Order for discovery and production of books
of accounts at any place
Summon and enforce attendance of persons
and examine on oath
Inspection of books at any place
Power to investigate suo moto or on
reference by CG in professional or other
misconduct of CAs
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Powers of NFRA contd.,


Powers to levy penalty and punish CAs if
found guilty
Penalty Rs.1 Lakh to Rs.5 Lakh & may extend
to 5 times the fees in case of individual CA
and minimum of Rs.10 Lakh and may
extend upto 10 times the fees in case of firm
of CAs

Debar CA from practice for 6 months to 10


years
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Associate:
A company in which other company has
significant influence, but which is not a
subsidiary and includes joint venture
company
Significant influence means control of at
least 20% of total share capital or of
business decisions under an agreement.
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Dormant company:
A company registered under new law for a future project or
to hold asset or IPR with no significant accounting
transaction such company or an inactive company may
make application to ROC for the status of dormant
company
Inactive means no business or operation carried on or not
made any significant accounting transactions during last 2
FY and has not filed AR & Financial Statement for last 2
FY
Significant accounting transaction excludes fee payment
to ROC, payment to fulfill any law requirement, allotment
of shares and payment for maintenance of office and
records
Sympro Consulting Private Limited

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Class Actions:
Members or depositors or any class can make application
to Tribunal, in their opinion management or conduct of
the affairs are conducted which are prejudicial to the
interest of the company
To claim damages / compensation / demand any other
suitable action from or against:
Auditor including audit firm for any improper or
misleading statement made in audit report or for any
fraudulent, unlawful or wrongful act or conduct
Any expert / advisor / consultant / any other person for
any incorrect or misleading statement made to the
company or for any fraudulent , unlawful or wrongful act
or conduct or any likely act or conduct on his part
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Schedules in Companies Bill, 2012:


Schedule Reference
Schedule - I
Schedule - II
Schedule - III
Schedule - IV
Schedule - V
Schedule - VI
Schedule - VII

Relates to
Format of Memorandum & Articles
Depreciation
Format of Balance sheet & Statement of
Profit & Loss
Code for Independent Directors
Managerial Remuneration
Definition of Infrastructure Projects
CSR Activities

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Thank You
Contact : Suresha Balachandran, Phone: +919845742590, 080-41203899, Email: suri@symproconsulting.com

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its opinion are relevant to the subject.

Accordingly, the information in this material is not intended to constitute accounting, tax, legal, investment, consulting, or
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