Companies Act 2013

Structure of the Act

Existing Act had some 658 sections and 14 Schedules.

New Act has 470 sections and 7 schedules diided into !"
cha#ters.
$uge amount of law has %een moed into the rules

&here are 416 occurrences of the word '#rescri%ed(

&his means a tremendous %od) of rule ma*ing

Seeral sections hae %een consolidated into single section

+n fact, there are lots of new #roisions, new restrictions and a##roals
to %e sought
74 occurrences of 's#ecial resolution(

-an) new cha#ters hae %een introduced i.. /egistered 0aluers

12h.173, 4oernment 2om#anies 12h.!53, 2om#anies to furniesh
information or statistics 12h.!53, Nidhis 12h.!63, National 2om#an)
6aw &ri%unal 7 A##ellate &ri%unal 12h.!73, S#ecial 2ourts 12h.!83
among 8thers.

15 occurrences of 'a##roal of the 2entral 4oernment(

8ut of the 470 Sections, "8 sections hae %een #u%lished in the 8fficial
4a.ette on the 1!
th
da) of Se#tem%er, !015

1&he remaining #roisions of this Act shall come into force on such date
as the 2entral 4oernment %) notification in the 8fficial 4a.ette
s#ecifies3
Seeral new conce#ts

8ne #erson com#an)

9ormant com#an)
2lass action

:ree.e action

-andator) cor#orate social res#onsi%ilit)

-andator) retirement of inde#endent auditors

A whole new set of #roisions for #riate #lacements
National :inancial /e#orting Authorit)

Non;<udicial a##roal of mergers

-oratorium #owers in case of sic* com#anies

9E:+N+&+8NS
NEW DEFINITIONS: ALTERED DEFINITIONS
Accounting standards =ranch 8ffice
Associate 2om#an) > defined in
AS !5 .Accounting for inestments
in associates in consolidated financial statements.
2om#an)
Auditing Standards 2ourt
Authorised 2a#ital or nominal ca#ital 9irector
=oo*s of Account Em#lo)ees Stoc* 8#tion
2alled;u# ca#ital :inancial ?ear
@nder the new Act com#anies has to ado#t 1
st
a#ril >
51
st
march as the financial )ear exce#t for some
com#anies;for holding and su%sidiar) of a foreign
com#an) can choose an) #eriod as financial )ear with
the a##roal of the tri%unalA.
&his was not mandator) under 1"56 Act.
2harge 4oernment 2om#an)
2hartered Accountant $olding 2om#an)
NEW DEFINITIONS: ALTERED DEFINITIONS
2hief Executie 8fficer -em%er
2hief :inancial 8fficer Net Borth
2om#an) limited %) guarantee 8fficer who is in default
2om#an) limited %) shares Caid;u# 2a#ital or 2a#ital #aid;u#
2om#an) 6iDuidator Crescri%ed
2om#an) Secretar) or Secretar) Creious com#an) law
2om#an) Secretar) in Cractice Criate com#an)
6imit u# to !00 mem%ers
+nitation and acce#tance of de#osits excluded %ut
#rohi%ition still a##lies irtue of section75 and 76
Su%sidiar) of #u%lic com#an) deemed to %e a #u%lic
com#an).
2ontri%utor) Cros#ectus
2ontrol Cu%lic 2om#an)
2ost Accountant Cu%lic :inancial +nstitution
9e#osit /ecognised Stoc* Exchange
NEW DEFINITIONS: ALTERED DEFINITIONS
8fficial 6iDuidator
8ne Cerson 2om#an)
New form of entit) with sim#ler com#liance regime for 8C2 and
small com#anies.
Ordinary or special resolution
Cromoter
/elated Cart)
/emuneration
Serious :raud +nestigation 8ffice
Small 2om#an)
Su%scri%ed 2a#ital
Sweat eDuit) shares
&urnoer
@nlimited 2om#an)
0oting /ight
whole;time 9irector
NEW DEFINITIONS: ALTERED DEFINITIONS
Ex#ertE
includes an engineer, a aluer, a chartered accountant, a com#an)
secretar), a cost accountant and an) other #erson who has the
#ower or authorit) to issue a certificate in #ursuance of an) law for
the time %eing in forceF
/egistrar of 2om#anies
:inancial institution /elatie
:inancial Statement
+ncludes cash flow statement also exce#t for one #erson com#an),
small com#an), dormant com#anies.
Also includes a statement of changes in eDuit).
Su%sidiar) 2om#an) or su%sidiar)
:oreign com#an) :ree /eseres
&here were different definitions for different #ur#oses all
these multi#le definitions hae %een re#laced with single
definition.
4lo%al 9e#ositor) /ecei#t
+nde#endent 9irector
+ndian 9e#ositor) /ecei#t
+nterested 9irector
+ssued 2a#ital
Ge) -anagerial #ersonnel
Notification
+n most of the #roisions the time limit for com#liance with the #roisions
hae %een reduced %) 50H; for 50 da)s it has made 15 da)s as limit.
Een #enalt) or im#risonment for non com#liance has also %een
drasticall) increased.
Types of Companies
Companies
By Liability
By Type
By Listing status
Limited Unlimited
By Shares
By
guarantee
One Person
company
Public
Company
Private
Company
Unlisted
Company
Small
Company
Not a
Small
Company
Listed
Company
8ne #erson com#an) > one mem%er 1section 53
+t is a t)#e of Criate 2om#an).
-8A to inidicate state the name of the other person with prior written
consent who shall in the eent of the !eath of the s"#scri#ers #ecome
mem#er of the company an! the written consent of s"ch person sho"l!
also #e file! with ROC at the time of incorporation of one person
company$
Criate com#an) > can hae u#to !00 mem%ers 1earlier it was 503
Small com#anies

Caid u# ca#ital of not more than /s 50 lacsF 1or3 turnoer of not more
than /s ! crores
8ther #riate com#anies

Not %eing a small com#anies

Cu%lic com#anies
6imited and unlimited com#anies
2onersion from #u%lic to #riate com#anies will need sanction of N26&
$olding and Su%sidiar) 2om#anies

2hange in definition >

&he trigger is now %ased on more than 50H of total share ca#ital,
rather than 50H of oting ca#ital

+n other words, an entit) ma) hold su%stantial #art of eDuit), and still
not %e a holding com#an)
One person companies
One %erson Companies &O%Cs'
Definition:

'8ne Cerson 2om#an)( 18C23 means a com#an) which has

onl) one #erson as a mem%er. Isection !16!3J
A com#an) ma) %e formed for an) lawful #ur#ose %) one
#erson, where the com#an) to %e formed is to %e 8C2 i.e., a
#riate com#an), %) su%scri%ing his name to a memorandum
and com#l)ing with the reDuirements of this Act in res#ect of
registration ISection 51131c3J
OPCs: Privileges

&he financial statement does not include the cash flow statement
Isection !1403J
&he annual return to %e signed %) the com#an) secretar), or
where there is no com#an) secretar), %) the director of the
com#an).
No reDuirement of holding an A4- Isection "6113J

Croisions not a##lica%le as #er section 1!!113E Section "8

ICower of &ri%unal to call meetings of mem%ers, etc.J and
Sections 100 to 111 1%oth inclusie3 I2alling of E4-, notice,
ex#lanator) statement, Duorum, chairman, #roxies, restriction on
oting rights, oting methods, #ostal %allot, circulation of
mem%ersK resolutionJ
O%Cs: %riile(es &Cont!$ )'
:or ordinar) %usinessE

&he resolution 1ordinar)As#ecial3 to %e communicated %) the

mem%er to the com#an) and entered in the minutes;%oo*
1under section 1183 and signed and dated %) the mem%erF

Such date shall %e deemed to %e the date of the meeting for

all the #ur#oses under this Act. Isection 1!!153 read with su%;
section 1!3J
:or an) %usiness to %e transacted %) =o9 of the 2om#an),
where there is onl) 1 directorE
&he resolution to %e entered in the minutes;%oo* 1under
section 1183 and signed and dated %) the directorF

&he date shall %e deemed to %e the date of the meeting of the

=oard of 9irectors for all the #ur#oses under this Act.
O%Cs: %riile(es &Cont!$ *'
&he financial statement, to %e a##roed %) the =oard of
9irectors %efore the) are signed on %ehalf of the =oard onl) %)
one director, for su%mission to the auditor for his re#ort thereon.
Isection 154113J

A co#) of the financial statements dul) ado#ted %) its mem%er,

along with all the documents which are reDuired to %e attached
to such financial statements, is to %e filed within 180 da)s from
the closure of the financial )ear. ICroiso to section 157113J. :or
com#anies other than 8C2, the cut;off date for filing is 50 da)s
from the date of A4-
O%Cs: %riile(es &Cont!$ +'
-inimum num%er of directorsE 1 I2lause 14"113J

-eeting of =oardE

At least one meeting of the =oard of 9irectors in each half of a

calendar )ear and
the ga# %etween the two meetings not less than ninet) da)s.
Isection 175153JF
not a##lica%le where there is onl) one director.

section 174, regarding Luorum for =oard -eetings not

a##lica%le where there is onl) 1 director in 8C2.
8C2sE 8ther +m#ortant Coints

-emorandum to indicate the name of the other #erson, with his

#rior written consent in the #rescri%ed form, who shall, in the
eent of the su%scri%erKs death or his inca#acit) to contract
%ecome the mem%er of the com#an)F the written consent of
such #erson to %e filed with the /egistrar at the time of
incor#oration of the 8C2 along with its memorandum and
articlesE
other #erson ma) withdraw his consent in such manner as
ma) %e #rescri%edE

the mem%er of 8C2 ma) at an) time change the name of

such other #erson %) giing notice in such manner as ma) %e
#rescri%edE
dut) of the mem%er of 8C2 to intimate the com#an) the
change, if an), in the name of the other #erson nominated %)
him %) indicating in the memorandum or otherwise within such
time and in such manner as ma) %e #rescri%ed, and the
com#an) shall intimate the /egistrar an) such change within
such time and in such manner as ma) %e #rescri%ed
8C2sE 8ther +m#ortant Coints 1contd. 13

&he words MM8C2KK shall %e mentioned in %rac*ets %elow the

name of such com#an), whereer its name is #rinted, affixed or
engraed. ICroiso to section 1!153J
&he re#ort of the =oard of 9irectors to %e attached to the
financial statement under this section shall, in case of a 8C2,
mean a re#ort containing ex#lanations or comments %) the
=oard on eer) Dualification, reseration or aderse remar* or
disclaimer made %) the auditor in his re#ort.Isection 154143J
+n the a%sence of an) #roision in the Articles of Association for
the a##ointment of first director, the mem%er of 8C2 himself is
deemed to %e the first director until the director or directors are
dul) a##ointed %) the mem%er in accordance with the #roisions
of this section. Isection 15!113J
Small companies
-eaning of small com#anies
Criate com#an) Isection !1853J.

Not %eing

holding com#an) or a su%sidiar) com#an)F

a com#an) registered under section 8 1com#anies with

charita%le o%<ects3F
or a com#an) or %od) cor#orate goerned %) an) s#ecial Act.

-aximum pai!,"p share capital /s. 50 la*hs 1higher amount

ma) %e #rescri%ed %ut in an) case, not to exceed /s. 5 crores3
Isection !18531i3J

-aximum t"rnoer as #er last CA6 AAc of /s. ! crores 1higher

amount ma) %e #rescri%ed %ut in an) case, not to exceed /s. !0
crores Isection !18531ii3J
Criileges

:inancial Statement does not include cash flow statement.

ICroiso to section !1403J

Ann"al Ret"rn to %e signed %) the 2S or where there is no 2S,

%) the director of the com#an) ICroiso to Section "!113J.
+n other com#anies 1other than 8C2s, and small com#anies3,
the annual return is to %e signed %) a director and the 2S, or
where there is no 2S, %) a 2S in #ractice.
=oard meetingsE -inimum 1 meeting in each half of a calendar
)earF minimum ga# %etween ! meetings is "0 da)s Isection
175153J. &herefore, the general reDuirement of minimum 4 =oard
meetings and maximum ga# of 1!0 da)s not a##lica%le.

Self approe! mer(ers: 2onditions for a scheme of mer(er or

amal(amation ma) %e entered into %etween two or more small
com#aniesE section !55113, non;o%stante clause; oerrides
2lauses !50 1Cower to com#romise or ma*e arrangements with
creditors and mem%ers3 and !5! 1-erger and Amalgamation of
com#anies3.
-emorandum of Association
1Section 43

O#-ect cla"se:
8%<ects need not %e classified as main , incidental . other o%<ects %ut
instead o%<ects for which the com#an) is #ro#osed and matters
considered for furtherance thereof.
So there is no need for com#liance of section 14" of 1"56 Act for
commencement of new %usiness or o%<ect.

Name cla"se:
&he name should not contain the word or ex#ression #rescri%ed without
the #ermission of central goernment.
Articles of Association
1Section 53

-a) contain entrenchment #roision that s#ecific #roisions of the

articles ma) %e altered if conditions or #rocedure are met.1exam#leE
certain #roisions in the A8A can %e altered onl) if all the mem%ers
consent to it3.
4ie notice of such #roisions in the articles to /82 in #rescri%ed form.
+ncor#oration
1Section 73

9eclaration %) #rofessional and director, manager or secretar) named

in the Articles %oth has to gie the declaration .earlier declaration %) an)
one is enough.
All the com#anies should hae a registered articles, earlier Articles are
not mandator) for #u%lic com#an) limited %) shares.
New %roisions:

Affidait %) su%scri%ers with #rescri%ed #articulars

Carticulars of su%scri%ers with #rescri%ed #articulars
Carticulars of first directors with #rescri%ed #articulars.
Crohi%ition of Association
1Section 4643

No association or #artnershi# consisting of more than #rescri%ed

num%er of #ersons 1should not %e more than 1003 shall %e formed for
the #ur#ose of carr)ing on an) %usiness that has for its o%<ect the
acDuisition of gain %) the association or #artnershi# or %) the indiidual
mem%ers thereof, unless it is registered as a com#an).
2harita%le 2om#an)
1Section 83

&he #roisions relating to section !5 com#an) is similar to the 1"56 Act.

A com#an) registered under this section ma) conert itself into com#an)
of an) other *ind onl) after com#l)ing with such conditions as ma) %e
#rescri%ed earlier there was no such #roision.
2ommencement of =usiness
1Section 113

&he issue of #ros#ectus or statement in lieu of #ros#ectus has %een

dis#ensed with.
:or commencement of =usiness the com#an) has to file the following E

9eclaration that mone) has %een receied.

:ile erification of registered office.

+t is a##lica%le to all the com#anies. Earlier section 14" was a##lica%le
to #u%lic com#anies onl).
/egistered 8ffice
1Section 1!3

&he 2om#an) to Setu# registered office within 15 da)s and intimate the
same to /82 within 50 da)s of incor#oration.
Een 2+N num%er must %e #rinted on the letter head of the com#an).

+ntimation of change in /8 %e gien within 15 da)s of change to /82

earlier it was 50 da)s.
Alteration of -8A
1Section 153

A 2om#an) 2an alter -8A %) #assing a s#ecial resolution.

Since authorised ca#ital is also a #art of the contents of the -oA, S/

is needed for that as well

2hange of name change in /8 from one state to another reDuires the

a##roal of central goernment

Alteration of /8 from state to state and o%<ect clause should %e for

s#ecified #ur#oses > the reDuirement of s#ecified #ur#oses has %e
dis#ensed with in the new Act.
+n case of change of o%<ects for com#anies which hae raised #u%lic
mone) %) #ros#ectus, l)ing unutilised, change of o%<ects will hae to %e
su##orted %) an exit o#tion
Alteration of A8A
1Section 143

Alteration reDuires s#ecial resolution.

:ile the alteration within 15da)s 150 da)s as #er 1"56 Act3

2onersion of #u%lic to #riate com#an) reDuires a##roal of tri%unal.

@#on conersion of #riate to #u%lic com#an) > the reDuirement of
issuing #ros#ectusA statement in lieu of #ros#ectus has %een dis#ensed
with under the new Act.
Serice of 9ocuments
1Section !03

!015 Act sa)s 'such electronic or other mode as ma) %e #rescri%ed( for
serice of documents to mem%ers.
+t also recogni.es courier or s#eed #ost as a mode of serice for
documents on the mem%ers of the com#an) or on the /82.
Share 2a#ital

&he #roisions relating to Ginds of Share 2a#ital, its &ransfera%ilit),

issue of du#licate shares, registers, ;fee to %e #aid, oting rights of the
shareholders, 0ariation of rights, A##lication for 2ancellation of
ariation of rights, are similar to the one #roided in the 1"56 Act.
+ssue of Shares at Cremium
1Section 5!3

&he #remium can %e used for the following #ur#osesE

+ssue of %onus shares
Brite off #reliminar) ex#enses

Brite off commission, discount

Croide #remium on redem#tion

.
#urchase of own shares or other securities.

So as to eliminate conflict with Accounting Standards such class of

com#anies which com#l) with such accounting standards cannot utili.e
#remium for writing of #reliminar) ex#enses, commission or discount on
issue of #reference shares or de%entures, #a)ment of redem#tion
#remium on #reference shares or de%entures
+ssue of Shares at 9iscount E Section 55, 54.

A 2om#an) cannot issue shares at discount exce#t for sweat eDuit)

shares.
Creference Shares and its /edem#tionE Section 55.

&he #eriod of /edem#tion cannot exceed !0 )ears. $oweer for infra

#ro<ects the #eriod can exceed !0 )ears su%<ect to annual redem#tion.

+ssue of fresh shares for redem#tion of existing shares ; 2om#an) has

to ta*e consent of the holders of 5A4 th 175H3 in alue and a##roal of
tri%unal.
&ransfer of Securities E Section 56.

&he transfer deed is not reDuired to %e #resented to #rescri%ed authorit)

%efore execution.

9eed has to %e deliered within 60 da)s of execution; earlier it was 1!m

or closure of transfer %oo* A ! months for #t com#anies
Deliery of share certificate:
)$ + months from allotment
*$ * months from application of
transfer$
Deliery of share certificate:
)$ * months from incorporation,
s"#scri#ers
*$ * months from allotment,in case
of allotment of shares$
+$ ) month from application of
transfer$
/$ 0 months from allotment of
!e#ent"res$
/efusal of /egistration of &ransfer E Section 58.
&he time limit for refusal of transfer has %een reduced.
Ref"sal to transfer:
With in * months sen! notice of
ref"sal$
Appeal within * months of notice or
/ months of !eliery to company$
%riate company:
Within +1 !ays sen! notice of
ref"sal$
Appeal within +1 !ays of notice or
01 !ays of !eliery to company$

%"#lic company:
Within +1 !ays sen! notice of
ref"sal$
Appeal within 01 !ays of ref"sal or
21 !ays of !eliery to company$
& Earlier there was no time limit for
appeal a(ainst p"#lic company'
/ectification of /egister of -em%ers E Section 5".
Earlier aggrieed #erson has to a##roach 26= now this function has
%een transferred to &ri%unal.
@nder the new Act, foreign mem%ers, de%enture holders residing outside
india ma) #refer a##eal to a com#etent court outside india s#ecified %)
the central goernment; there was no corres#onding #roision earlier in
1"56 Act.
/ecognition of #riate contracts in relation to transfer of
shares
A #roiso to sec 58 1!3 recognises contracts #ertaining
to transfer of shares
#riate contracts a%out transfer or restrictions on transfer are
alid
Luestion is, is this contract enforcea%le against the com#an)N
Sure enough, no contract can %e enforcea%le against the
com#an) unless the com#an) is a #art), or a confirming #art)
Alteration of Share 2a#ital E Section 61.
2om#an) can alter ca#ital %ut where consolidation and diision results
in change of oting #ercentage reDuires approal of tri#"nal$

Earlier earlier there was no such #roision regarding see*ing a##roal

+ssue of =onus Shares E Section 65.
Earlier there was no corres#onding #roision relating to %onus shares.
@nder the new Act a com#an) ma) issue %onus shares if certain
conditions are satisfied; which are similar to the oneKs issued %) SE=+.
=u) =ac* of Shares E Section 68.
&he onl) change is that there should %e a minimum ga# of 1 )ear from
the closure of #receeding offer of %u)%ac*. Earlier this restriction of ga#
of 565 da)s was a##lica%le to onl) the offer authori.ed %) the %oard
resolution.
@nder the new Act Ceriod %e rec*oned from the closure of #reious offer
and not from the date of the offer
Acce#tance of 9e#osits E Section 75 > 76.
&here are ! classes of de#osits > mem%ers de#osits and #u%lic de#osits
As regards mem%ers de#osits
2ircular %e issue for acce#ting de#osits > also file with /82
Croision for de#osit re#a)ment resere 1Now 15H of current )ear and the
)ear next following
Also #roide for de#osit insurance
Cu%lic de#osits > sec 76
Separate section deals !ith public deposits
Only public companies may raise public deposits
C" to lay do!n rules about net !orth and turnover# that is#
eligibility to accept deposits $rom non%members
&o!ever# ' substantial changes
(very company obtain rating $rom credit rating agency ) every year
The company creates a charge on its assets# to the e*tent o$ the amount o$
deposits
To provide deposit insurance to the depositors
/egistration of 2harges E Section 77.
Eer) charge has to %e registered with /82 > earlier it was onl)
s#ecified charges need to %e registered.
/egister charges within 50 da)s. /82 can extend %) 500 da)s 150O!703
on an a##lication %) the com#an).
2om#an) can see* extension after 500 da)s from the central
goernment.
+ntimate satisfaction within 50 da)s.
4ien that eer) charge %e registered; h)#othecation or #ledge of
moa%le also %e registered > $oweer as #er the draft rules these are
not reDuired to %e registered %ut must %e disclosed in the %alance sheet.
9eclaration of =eneficial +nterest E Section 8".
&his is similar to the one #roided in section 1872, the onl) difference is
the com#an) has to maintain a se#arate register and note the
declarations receied %) it in the register.
2losure of /egister of -em%ers E Section "1.
4ie 7 da)s notice or lesser #eriod as s#ecified %) SE=+ in manner as
#rescri%ed.
9raft rules; #u%lish in ernacular news#a#er, English news#a#er,
#u%lish on we%site notified %) central goernment and on the we%site of
the com#an).
Annual /eturn E Section "!.
:or all the com#anies, Annual /eturn %e Signed %) director and 2S; if
there is no 2S then %) C2S.
:or one #erson com#an) and small com#anies >it has to %e signed %)
2S > if no 2S then %) a 9irector.
:or listed com#anies or 5 cr #aid u# and !5 cr turnoer com#anies > it
has %e certified %) C2S also.
2hange in num%er of Shares E Section "5.
&his is a new #roision a##lica%le to 6isted 2om#anies.
:ile a return in #rescri%ed form with /82 eer) time there is a change in
num%er of shares held %) #romoters and to# 10 shareholders > within 15
da)s.
Annual 4eneral -eeting
1Section "63

1
st
A4-; %e held within " months from closure of financial )ear.

Su%seDuent A4-Ks has to held. > earlier of 5 dates.

6 months from closure of financial )ear.

Not %e more than 15 months shall ela#se %etween ! A4-Ks

6ast da) of the calendar )ear.

Exem#tion from holding the A4- in the )ear following the )ear of
incor#oration is not aaila%le > exem#tion is aaila%le onl) for the )ear of
incor#oration.
Notice of 4eneral -eeting
1Section 1013
!1 da)s clear notice %e gienthrough #h)sical or electronic mode.
2onsent for shorter notice %e gien %) "5H of the mem%ers %oth for
A4- 7 E4-.;earlier it was 100H for A4-.

electronic mode means; communication sent %) a com#an) through its

authori.ed and secured com#uter #rogramme which is ca#a%le of
#roducing confirmation and *ee#ing record of such communication
addressed to the #erson entitled to receie such communication at the
last electronic mail address #roided %) the mem%er

Notice ma) %e sent through e;mail as a text or as an attachment to e;

mail or as a notification #roiding electronic lin*A @niform /esource
6ocator 1@/63 for accessing such notice

&he su%<ect line in e;mail shall state the name of the com#an), notice of
the t)#e of meeting and the date on which meeting is scheduled.
Notice must %e simultaneousl) #laced on the we%site of the com#an)
and on the we%site as ma) %e notified %) the 2entral 4oernment
Luorum for the -eeting E Section 105.

:or #u%lic com#anies;5 mem%ers #ersonall) #resent is the Duorum

irres#ectie of the num%er of mem%ers as #er 1"56 Act

@nder the New Act Luorum is fixed %ased on the num%er of mem%ers
for #u%lic com#anies.

5 > 1000 mem%ers.

15 > 1000;5000 mem%ers.

50 > exceed 5000 mem%ers.

:or #riate com#anies; ! mem%ers #ersonall) #resent is the Duorum.

Costal =allot E Section 110.

Earlier it was a##lica%le to listed #u%lic com#anies for the items of

%usiness notified %) the central goernment.

Now under the new Act #ostal %allot is a##lica%le to all the com#anies.
-aintenance and +ns#ection of 9ocuments E Section 1!0

&he records, registers, minutes ma) %e maintained in electronic mode

also.

+t is a##lica%le onl) to those com#anies which are listed or a com#an)

haing not less than one thousand share holders, de%enture holders and
other securit) holders
&he records must %e digitall) signed.
/e#ort on Annual 4eneral -eeting E Section 1!1.

&his is a new #roision which reDuires the listed com#anies to file re#ort
in the #rescri%ed manner on each Annual 4eneral -eeting with in 50
da)s of the meeting.
9eclaration and Ca)ment of 9iidend

9eclaration of 9iidend E Section 1!5
+n the new Act transfer to reseres at a s#ecified #ercentage is not ; earlier
it is mandator) to transfer atleast P10H to reseres.
Ca)ment of diidend through electronic means has %een ex#ressl) allowed
under the new Act.
@n#aid 9iidend AccountE Section 1!4.
@n#aid diidend has to %e transferred to un#aid diidend account within 7
da)s of ex#ir) of 50 da)s from date of declaration.
Bithin "0 da)s of transfer #re#are statement containing the names, last
*nown address and diidend amount and #lace the same on the we%site of
the com#an) and also on an) we%site a##roed %) the central goernment
in this regard; earlier this #roision was not there.
&ransfer unclaimed diidend after 7 )ears to inestor education #rotection
fund and also corres#onding shares to fund 1 this is a new #roision3. &he
claimants can claim the shares following the #rocedures #rescri%ed in this
regard.
9eclaration and Ca)ment of 9iidend

+nestor Education and Crotection :undE Section 1!5.

&he following %e transferred to the fund; the im#ortant %eingE;

@nclaimed 9iidend amount and corres#onding shares.

Sale #roceeds of fractional shares arising out of %onus issue, merger

and amalgamation.
/edem#tion amount of #reference shares.

&hese %e transferred if unclaimed A un#aid for 7 )ears.

2laimants can claim the amount een after 7 )ears after following the
due #rocedures #rescri%ed in this regard
Accounts of 2om#anies

:inancial Statements E Section 1!".
2onsolidated financial statement is made mandator) if the com#an) has
an) su%sidiar) A associate A <oint enture.; earlier it was not mandator)
com#an) has onl) to show interest in su%sidiar) uAs !1!.
=oardKs /e#ort E Section 154

2ontents of 9irectorsK re#ort greatl) enhanced

Also im#ortantl) a 9irectorsK /es#onsi%ilit) Statement > almost similar to
that gien in Sar%anes 8xle) Act of @SA.
2or#orate Social /es#onsi%ilit)
1Section 1553

&he #roisions of Section 155 shall %e a##lica%le in case of a com#an)

fulfilling an) one of the following conditions during an) financial )earE

1. net worth of /s. 500 1fie hundred3 crores or moreF or

!. turnoer of /s. 1,000 1one thousand3 crore or moreF or

5. net #rofit of /s. 5 1fie3 crore or more

+f an) com#an) Dualifies, then a 2S/ 2ommittee has to %e constituted

consisting of 5 1three3 or more directors with atleast 1 1one3 %eing an
inde#endent director.

What !isclos"res are re3"ire! to #e ma!e4 &he =oardKs /e#ort

should state the com#osition of 2S/ committee and the details of 2S/
actiities on which the com#an) has s#ent. +f the com#an) fails to s#end
the earmar*ed #rofits on 2S/, state the reasons in the =oard re#ort.

What are the !"ties of CSR committee4

1. :ormulate and recommend to the =oard, a 2S/ #olic). &his should
%e in line with the actiities s#ecified in Schedule 0++.
!. /ecommend the amount of ex#enditure as in the 2S/ #olic).
5. -onitor the 2S/ #olic) from time to time.

What are the responsi#ilities of the 5oar! with respect to CSR4

1. A##roe the 2S/ #olic) as recommended %) the 2S/ committee and
disclose contents of the same in its re#ort and the com#an)Ks we%site.
!. Ensure the com#an) com#lies with the 2S/ #olic).

6ow m"ch sho"l! the company spen! on CSR4 &he com#an) shall
make endeavour to s#end at least !1two3 H of the aerage net #rofits of
the com#an) made during the three immediatel) #receding financial
)ears, in #ursuance of its 2S/ Colic). &he Act states that if the com#an)
fails to s#end such an amount, the =oardKs re#ort shall state reasons for
not s#ending the amount.
+nternal AuditE Section 158.

&he following are the #rescri%ed class of com#anies which need to

underta*e internal audit;

eer) listed com#an)

1%3 eer) #u%lic com#an) haing #aid u# share ca#ital of /u#ees ten
crores or moreF
1c3 eer) other #u%lic com#an) which has an) outstanding loans or
%orrowings from %an*s or #u%lic financial institutions exceeding twent)
fie crore ru#ees or which has acce#ted de#osits of twent) fie crore
ru#ees or more at an) #oint of time during the last financial )ear.
Audit and Auditors

A##ointment of AuditorsE Section 15"

A##ointment for a consecutie term of 5 )ears

Crocedure of a##ointment is as #rescri%ed.
A##ointment %e #laced at eer) A4- for ratification.

8%tain consent letter.

A certificate that a##ointment is in com#liance with #rescri%ed conditions

also indicate that section 141 criteria has %een satisfied
+nform auditor of a##ointment > no timelimit #rescri%ed.
:ile notice of a##ointment with /82 within 15 da)s.

+f audit committee constituted > all a##ointment including casual

acanc) %e made on the recommendation of the committee.

&hese #roisions are a##lica%le to all com#anies

R"les:
Audit 2ommittee shall recommend to the %oard the name of the
auditors or if no audit committee the %oard itself shall recommend
auditors for a##ointment to the mem%ers of the com#an).
Appointment of Auditors (contd..)
Liste! company an! s"ch class of companies: & e7cept one person
or small company'

+ndiidual AuditorE

Not to rea##oint after a term of 5 )ears.

Not to rea##oint for a term of 5 )ears after com#letion of term.

:irm of auditorsE
Not to rea##oint after ! terms of 5)ears each.

Not to a##ointment for 5 )ears after com#letion of terms.

:irm with common #artners whose term has ex#ired during #reious
)ear not %e a##ointed for 5 )ears.
2om#l) with this #roision within 5 )ears of commencement of Act.
&he manner of rotation of auditors shall %e as #rescri%ed %) the central
goernment.
Appointment of Auditors (contd..)

:irm a##ointed as auditors, mem%er ma) resole to rotate

#artners as auditors at such interals.

Audit can %e done %) more than 1 auditors > if mem%ers resole.

&hese #roisions are a##lica%le to all the com#anies.

A##ointment of :irst auditorE

=) %oard within 50 da)s of registration of com#an).

No %oard a##ointment > a##oint at an E4- within "0 da)s from

50 da)s.

Cas"al 8acancy:

=) %oard within 50 da)s of acanc).

+n case of resignation > confirmation at 4eneral -eeting within

5 months of =oard recommendation.
/emoal and resignation of auditorE
1Section 1403
/emoal:

S#ecial resolution O central goernment a##roal

Auditor %e gien o##ortunit) of %eing heard.
/esignationE

&he auditor to :ile with /82 and com#an) a statement in #rescri%ed

form 10.! within 50 da)s.

+n case of goernment com#an) file with 2A4.

Non com#liance with this #roision attracts a fine of /s.50,000 extend
u# to /s.5 la*hs.

Special notice+
:or a##ointing new auditor > if existing has not com#leted 5 )ears of
tenure.

Send co#) to auditor.

Auditor can ma*e re#resentation > send it to mem%ers are readout at

the meeting.

+f re#resentation not sent file it with /82 ; no time limit #rescri%ed.

&he &ri%unal can order that re#resentation not %e sentAreadout.
Auditors not to render certain sericesE Section 144.

&his is a new #roision which s#ecified the serices that should not %e
rendered %) a statutor) Auditor
Auditor can render certain serices which are a##roed %) =oard or
Audit committee.

$oweer he should not render serices which are #roided in the

section to com#an), su%sidiar) and holding.
8ther #roisions relating to Audit and Auditors
Lualifications %e read out at the A4- and is o#en for ins#ection.
/eceie notice and shall attend general meeting or see* exem#tion from the
com#an)
National Financial Reporting Authority
A new Duasi;<udicial %od) comes u# > N:/A
+t will hae #owers to la) down accounting and auditing #olicies and standards
for ado#tion %) com#anies or class of com#anies or their auditors
+t will %e res#onsi%le forE
-onitoring and ensuring com#liance of accounting and auditing standards
&o oersee Dualit) of serice of #rofessionals associated with #re#aration of
financial statements
So, it will %e a new regulator for Audit and Accounting standards and its
im#lementation.
A##ointment and Lualification of
9irectors

=oard of 9irectorsE Section 14".

-aximum num%er of 9irectors in a com#an) is 15. > more than 15 #ass

s#ecial resolution.

&he following should hae 1 women director.

1i3 eer) listed com#an) ; within one )ear from the commencement of
second #roiso to su%;section 113 of section 14"F
1ii3 eer) other #u%lic com#an) haing ;

1a3 #aid;u# share ca#ital of one hundred crore ru#ees or moreF or

1%3 turnoer of three hundred crore ru#ees or more

within three )ears from the commencement of second #roiso to su%;

section 113 of section 14"

E er) com#an) to hae atleast one director who sta)ed in india for 18!
da)s during the #reious calendar )ear.
Board o$ ,irectors.(contd..)
6isted to hae 1A5 of total directors inde#endent.
:or class of com#anies to hae #rescri%ed 11A5 of total directors 3 num%er of
inde#endent directors.
1i3 Cu%lic 2om#anies haing #aid u# share ca#ital of one hundred crore ru#ees
or moreF or
1ii3 Cu%lic 2om#anies haing turnoer of three hundred crore ru#ees or moreF or
1iii3 Cu%lic 2om#anies which hae, in aggregate, outstanding loans or
%orrowings or de%entures or de#osits, exceeding two hundred crore ru#ees
&he new Act #rescri%es the criteria for an inde#endent director.
Eer) +nde#endent director to gie declaration that he meets the criteria of
inde#endence as gien in the section to the %oard annuall) or where there is a
change in circumstances which effect his status.
+nde#endent director not hold the office for more than ! consecutie terms of 5
)ears each. A##ointment after 1 term reDuires s#ecial resolution, disclose the
same in the =oardKs /e#ort > can %e a##ointed after the ex#ir) of 5 )ears of
ceasing.
-anner of inde#endent directors selectionE Section 150.
&he com#an) to select from a data %an* maintained %) institution A %od) notified
%) central goernment.

9irector %) small shareholdersE Section 151.
A listed com#an) ma) suo motu or u#on the notice of not less than fie hundred
or one;tenth of the total num%er of small shareholders, whicheer is lower, elect
a small shareholdersK director from amongst the small shareholders.
A##ointment of directorsE Section 15!
Eer) director #ro#osed to %e a##ointed shall furnish 9+N, a declaration that he
is not disDualified to %ecome director under the Act and consent letter.
&he de#osit amount to stand for directorshi# has %een increased to 1,00,000
and is refunded if he elects or gets more than !5H of total alid otes cast.
Additional director or alternate director or filling casual acanc) #roisions are
same.
Alternate director to an inde#endent director should also satisf) the criteria for
inde#endent directors.
Dis3"alifications for appointment of !irectors: Section )0/
&wo new grounds hae %een added >

+f conicted of an offence dealing with related #art) transactions at

an) time during the last 5 )ears.

+f he has not o%tained the 9+N.

&here is a #ermanentl) de%ars from directorshi# if conicted and

sentenced to im#risonment of 7 )ears or more.; earlier there was no
such #roision.
N"m#er of Directorships: Section )09

&he maximum num%er of directorshi#s has %een increased to !0

from 15.. 8f them #u%lic com#anies shall not exceed 10.

-em%ers of the com#an) can #rescri%e less num%er of

directorshi#s than !0 A 10 %) #assing a s#ecial resolution; earlier
such #roision was not there.
-esignation o$ ,irector+ Section ./0
&his is a new #roision dealing with resignation of director.

+t #roides that resignation %e in writing and ta*e effect of the later of

the following dates.

Notice receied %) the com#an).

9ate mentioned in the notice.

2om#an) and also the 9irector has to file his resignation within 50
da)s along with detailed reasons with /82.
Meeting of Board and its Poers

1eeting o$ Board+ Section .23

&old Board 1eeting !ithin 34 days o$ incorporation

5 board meeting every year 6Calendar 7ear8 !ith not more than .'4 days gap
bet!een t!o consecutive meetings%

2 days notice be given% meeting may be held by giving shorter notice i$ one
independent director i$ any# is present% i$ no independent director is present
decision ta9en at the meeting shall be $inal on rati$ication by atleast one
independent director i$ any

,irectors may participate through video con$erence also

:uorum $or meeting o$ Board+ Section .25

,irectors participating through video con$erence ; audio visual means are

considered $or the purpose o$ <uorum

The minimum <uorum should be physically present even !hen electronic mode
participation is allo!ed
:uorum6 contd=8

,irector intending to participate through electronic mode shall

communication intention at least 3 days prior to the scheduled
date Secretary to 9eep the record o$ the re<uests and record the
same in the minutes
-esolution by circulation+ Section .2>

,ra$t resolution be sent to the director at their address in india

registered !ith the company

-esolution is said to be passed i$ ma?ority o$ the director approve

the same

@here .;3 o$ the total directors re<uire the proposed resolution

be ta9en up at the meeting then the same cannot be passed by
circulation% such a provision !as not there in the old Act
Audit Committee+ Section .22
Board o$ directors o$ the $ollo!ing classes o$ companies shall constitute an
Audit Committee
6a8 every listed companyB
6b8 every other public company)
6i8 having paid up capital o$ one hundred crore rupees or moreB or
6ii8 !hich have# in aggregate# outstanding loans or borro!ings or
debentures or deposits e*ceeding t!o hundred crore rupees
Ct be consist o$ minimum o$ three directors !ith ma?ority o$ independent
directors

Auditors and D1P have right to be heard but shall not have right to vote

The composition o$ the committee be disclosed in the board report and also
the reasons !here any recommendation o$ the committee has not been
accepted

Audit Committee 6contd8
The $ollo!ing companies besides the listed company to establish vigil mechanism $or
directors and employees to report genuine concerns +%
Companies !hich accept deposits $rom the publicB and

6'8 Companies !hich have borro!ed money $rom ban9s and public $inancial
institutions in e*cess o$ $i$ty crore rupeesB

The details o$ establishment o$ the mechanism be disclosed on the !ebsite o$ the
company and in the boardEs report

Ct is operated by the audit committee i$ any or any director nominated by the board
This can be vie!ed positively as it gives an option to employees and directors to
detect and report genuine concerns to companies and also be guarded against any
victimiFation as a result o$ such disclosure
By prescribing vigil mechanism $or companies !ith borro!ing o$ -s>4 crore#
probably# very $e! companies have been le$t out o$ the ambit o$ establishing vigil
mechanism
Nomination G -emuneration committee and Sta9eholder -elationship
Committee+ Section .20
Board o$ directors o$ the $ollo!ing classes o$ companies shall constitute an
Nomination G -emuneration committee

6a8 every listed companyB
6b8 every other public company)

6i8 having paid up capital o$ one hundred crore rupees or moreB or
6ii8 !hich have# in aggregate# outstanding loans or borro!ings or
debentures or deposits e*ceeding t!o hundred crore rupees
Ct be consist o$ minimum o$ three directors !ith ma?ority o$ independent
directors
Company !ith .444 shareholders# debenture holders# depositors and any
other security holders shall constitute Sta9eholder -elationship Committee
The chairman o$ the committees to attend the general meeting o$ the
company
,isclosure o$ Cnterest by director+ Section .05

(arlier the director has to disclose that he is a director or

member in a company or $irm and be regarded as
interested i$ any contract or arrangement is entered by the
company !ith such companies

Cn the ne! Act there are ' di$$erent disclosures that be

made+
"eneral ,isclosure+ ,isclose the concern or interest in any
company or $irm

Speci$ic ,isclosure+ ,isclose the concern or interest in any contract

or arrangement entered into by the company !here the director .
holds H 'I holding ; a promoter# manager; C(O o$ such other
company ' !ith a $irm in !hich he is a partner ; o!ner ; member
The nature o$ interest be disclosed not the $act o$ interest
Relate! %arties an! Relate! %arty
Transactions

-elated Party+ '62/8

,e$inition becomes very !ide indeed

Ct Cncludes+

,irector ;relative

D1P ; -elative

Pvt company

Public company ) dir holds 'I o$ capital

Corporate !here director is a Shado! director

Shado! director

&olding# subs# associate co

Prescribed person

1erely holding o$ 'I o$ capital in public

companies by a director ma9es the company a
related party

,e$inition at par !ith sec 'JJ# but sec 'JJ is

merely a disclosure re<uirement

-elated party transactions under the la! are

sub?ect to serious restraint
Relate! %arty Transactions: section:)::
&he following &ransactions with 'related #arties( reDuire a##roal
of %oardE

Sale A %u) of 4oods or material

Sale A %u) of Cro#ert) of an) *ind

6easing
Aailing serices.

A## of /C to #lace of #rofit in com, associate, su%.

@nderwriting

+n case of com#anies of such si.e as ma) %e #rescri%ed,

/elated #art) transactions need the a##roal of the mem%ers %)
wa) of S#ecial resolution
2om#an) with 1 crore or more #aid u#.
&ransaction exceed 5 of turnoer or !5 H of net worth. 1 including
#reious transactions.

A## to #lace of #rofit if remuneration is Q 1 la*h.

@nderwriting remuneration exceed 10 la*hs.
Insi!er Tra!in(

The Provisions relating to insider trading is

incorporated

This section seems to be applicable to all

companies
Ge) -anagerial CersonnelE
'*e) managerial #ersonnel(, in relation to a com#an), meansR
1i) the Chief Executive Officer or the managing director or the
manager;
1ii) the company secretary;
1iii) the whole-time director;
1iv) the Chief Financial Officer; and
1v) such other officer as may be prescribed;
ection !"# of the $ct says%
Eer) com#an) %elonging to such class or classes of com#anies
as ma) %e #rescri%ed shall hae the following whole;time *e)
managerial #ersonnel,R
1i) managing director& or Chief Executive Officer or manager and
in their absence& a whole;time directorF
1ii) company secretary; and
1iii) Chief Financial Officer %
A##ointment of Ge) -anagerial CersonnelE Section !05

Eer) listed com#an) and eer) other com#an) haing a #aid;u# share
ca#ital of fie crore ru#ees or more shall hae whole;time *e)
managerial #ersonnel and a##ointed %) a =oard /esolution and shall
not hold more than 1 com#an) exce#t in its su%sidiar).
An) acanc) created should %e filled u# within a #eriod of six months.

2ontraention attracts #enalt) of /s.1,00,000 which ma) extend to

5,00,000 and eer) director and *e) managerial #ersonnel who is in
default shall %e #unisha%le with /s.50,000 and where contraention is
continuing one a further fine of /s.1,000 for eer) da)
Secretarial Audit+ Section '45

Listed company and company !ith .44 cr paid up capital

to anne* to its board report secretarial audit report given
by a company secretary in practice

Board has to e*plain any <uali$ication# observation#

reservation given in the report

Kunctions o$ company secretary+ Section '4>

This is ne! provision de$ining the $unctions o$ the

company secretary

The $ollo!ing are the $unctions+

-eport to the board on compliance !ith provisions o$ the act

and other la!s applicable to the company

(nsure compliance !ith secretarial standards

Other duties as may be prescribed

Other duties as may be prescribed=

To provide to the directors o$ the company# collectively and

individually# such guidance as they may re<uire# !ith regard to their
duties# responsibilities and po!ersB
To convene and attend Board# committee and general meetings# and
maintain the minutes o$ these meetingsB

To obtain approvals $rom the Board# general meetings# the

"overnment and such other authorities as re<uired under the
provisions o$ the Act
To represent be$ore various regulators# Tribunal and other
authorities under the Act in connection !ith discharge o$ various
$unctions under the ActB

To assist the Board in the conduct o$ the a$$airs o$ the companyB

To assist and advise the Board in ensuring good corporate governance
and in complying !ith the corporate governance re<uirements and
best practicesB and

To discharge such other duties as may be assigned by the Board $rom

time to time

Such other duties as have been prescribed under the Act and -ules