Companies bill 2012 vis a-vis companies act, 1956

Companies Bill 2012 vis-a-vis Companies Act,1956

By G. Praneeth Abhishek

Student of Institute of Company Secretaries of India

Student Reg. No. 320617948/09/2010

NEED FOR COMPANIES BILL 2012

• To Increase: Transparency Corporate Social Responsibility Accountability Shareholder and Stakeholder Protection

• To meet the internationally accepted concepts, practices.

• To address the needs of the Shareholders/ Stakeholders/Government/ and public at large.

Introduction

INTRODUCTION

Companies Bill Companies Act, 1956

470 SECTIONS 658

29 Chapters CHAPTERS/ PARTS 13 Parts, Further divided into Chapters

7 SCHEDULES 15

Number of Sections

• “One Person Company” (Clause 2(62)) – A Company which has a Single Member

• “Key Managerial Personal” (Clause 2(51)) – Includes CEO, MD, Manager, Company Secretary and CFO (if appointed by the Board of Directors)

• “Class Action Suit” (Clause 37) - Class action suits can be filed by person or group of persons affected by any misleading statement or the inclusion or omission of any matter in the prospectus

New Concepts

• “Small Company” (Clause 2(85)) – Means a company with paid up capital < 50 lakh or whose turnover < 2 crore

New Concepts

• “Promoter” (Clause 2(69)) – Includes a person – Named in prospectus/ identified by company as such in Annual Return– Who has control over the affairs of the company– In whose directions the directors are accustomed to act

• “Associate Company” (Clause 2(6))- Means a company in which other company has significant influence (Excluding Subsidiary Company) and includes a Joint Venture company

Existing Concepts – Definition

• “Related Party” (Clause 2(75)) – Elaborate definition is given in Companies Bill, 2012, which is not present in Companies Act, 1956.

• “Foreign Company” (Clause 2(42)) – Means a company or body corporate incorporated outside India

• “Independent Director” (Clause 149(5)) – Definition has been given for the first time, and nominee director cannot be considered a independent director


• “Financial Statements” Clause 2(40) includes the following– Balance sheet – Statement of profit and loss account/ Statement of income and

expenditure – Cash flow statement (not applicable for one person and small

companies)– A statement of changes in equities, if applicable– Any Explanatory statement note, annexed or forming part of any

document referred above


• “Charge” (Clause 2(16)) - Means an interest or lien created on the property or assets of a company or any of its undertaking or both as security and includes a mortgage

• “Private Company” (Clause 2(68)) – Limit of Members extended from 50 to 200

• “Subsidiary Company” (Clause 2(87)) – As per changes made– No distinction between equity and preference share capital in calculation of

> 50% – Company includes Body Corporate (i.e. Subsidiary or Holding)– There is a limit to number of step down subsidiaries

Existing Definition – Modifications

• “Financial Year” Clause 2(41) means, in relation to any company or body corporate, the period ending on the 31st day of March every year.

Existing Definition – Modifications

• Financial Statement doesn’t need to include cash flow statement

• Signing of Annual Return:– By Company Secretary in employment or– By 1 Director (Where no CS)

• Exemption from conducting Annual General Meeting

• Approval of Financial statements can be done by only one director for submission to auditors

One Person Company - Exemptions

• Min. No. of directors is only 1

• Only 1 board meeting conducted in each half calendar year, deemed proper compliance

One Person Company - Exemptions

• The MOA of the One person company to include:– Name of Nominee – Consent of Nominee– Nominee can be changed (and such change not treated as Alteration

of MOA)

• One person Company can be:– Limited by shares – Limited by guarantee – Unlimited company

• Capital :– Minimum – Rs. 100,000– Maximum – No limit

One Person Company - Incorporation

Memorandum and Articles of Association

Power of Tribunal – Incase of Wrong/false info. /Misrepresentation/fraudulent actions `

• Pass such Orders for/to: Regulation of Management of Company Changes in MOA, AOA

• Direct the liability of members to be unlimited

• Pass order for winding up

• Pass such other orders, as it deems fit


Companies Bill, 2012 Companies Act, 1956

Divided into- Objects to be pursed by Company on incorporation- Incidental Objects

MOA objects

Divided into - Main objects- Incidental objects- Other objects

To be filed with ROC within 15 days Alteration of AOA To be filed with ROC

within 30 days


Companies Bill, 2012 Registered Office Companies Act, 1956

On and from 15th day of incorporation Company shall have On and from 30th day of

incorporation

Central Government shall dispose of application with 60 days

Shift from one state to another No such time limit


Both Public Companies and Private companies Applicable to Public companies

No Certificate Issued Certificate Issued COB

Documents to be submitted under new bill:

1. Declaration by Directors of payment of money by subscribers of MOA2. Verification of Registered office filed with ROC

Commencement of Business

Issue and Allotment of Securities


Not a Conclusive Evidence Certificate of Incorporation Conclusive Evidence

Clause 7 Section 35



Under Clause 28

•Members of the Company in consultation with the board can offer there shares to public

•Such Offer of Sale shall be deemed to be a “Prospectus issued by the Company”

Offer of SaleNo such provision exists under the Act



Mandatory Clause 29 for:

• Companies Making public offer• Certain Companies as may be specified

Issue of Securities in Dematerialized Form

Only

Mandatory Sec 68B for every listed company making IPO of any security for a sum of 10 crore or more



Under Clause 53

• Issue of shares at discount prohibited • Sweat Equity shares can be issued at Discount

Issue of Shares at Discount

Under Section 79

Shares can be issued at discount

Under clause 27(2)

•Exit offer should be given to dissenting shareholders by promoters or controlling shareholders

Exit Offer by promoters to

dissenting shareholders

No such Provision Exists


Under Clause 62Applicable to Both Private and Public Companies

Provisions of Rights Issue Under Section 81Applicable only to public companies

Under Clause 47•Bill Doesn’t Differentiate cumulative and non-cumulative preference shares •Same period prescribed after which preference shareholders have voting rights

Voting Rights of Preference Shareholders

Different period are specified for Cumulative and Non-Cumulative Preference Shares after which preference shareholders have voting rights

Share Capital and Debentures


Under Clause 55(2)Redeemable preference shares with a term of more than 20 years can be issued by a company limited by shares

Issue of preference Shares for infrastructural projects

Preference shares with a term of more than 20 years cannot be issued under the act

Share Capital and Debentures

Companies Bill, 2012 Deposits from members Companies Act, 1956

To be framed by Reserve Bank of India Rules

For all deposits Companies (acceptance of deposits) Rules, 1975 are applicable

Under Clause 73 (2)

General Meeting resolution from members required to accept deposits

Authorization Companies Can accept deposits from members

Circular to Members and circular to Registered with ROC

Mode of Intimation

Advertisements in newspaper and Statement in lieu of advertisement to be filed with ROC for all deposits

Acceptance of Deposits

Companies Bill, 2012 Deposits from public Companies Act, 1956

To public companies having such net worth or turnover as may be prescribed

Applicability To all public companies

• Mandatory • From Recognized rating

agency• To be obtained every

year during the tenure of deposits

Credit Rating Not Required

All provisions applicable to acceptance of deposits from members shall apply mutatis mutandis to acceptance of deposits from public

Acceptance of Deposits


Under clause 77• Wide and ambiguous • Covers

Property Assets Any of its

undertaking, whether tangible or otherwise

Scope Definite and clear

Can allow registration within period of 300 days of creation of charge on payment of additional fee

Power of ROCROC can condone delay for registration beyond 30 and within 60 days from date of creation of charge

Registration of Charge


Under clause 92

More Disclosures Content

Minimal Disclosures

Annual Return

New disclosures to be made:

•Change of promoters/ KMP since previous FY

•Details of meetings of Board/Committee’s/ Members or class thereof along with attendance details

•Remuneration of Directors, KMP

•Penalties/Punishment imposed on: Company

Directors or Officers Compounding of offences Appeals against penalty or punishment

Annual Return

New disclosures to be made:

• Certification of Compliances, Disclosures

•Details of shares held by or on behalf of FII

Annual Return

Return by Listed Company – Clause 93

• Every listed Company shall file with ROC, within 15 days a return with respect to change in number of shares:

Held by promoters Top Ten Shareholders of such company

Companies Bill, 2012 Signing Companies Act, 1956

• Director and CS • Where no CS, by CS in Practice

General Companies •Director and Manager/ Secretary •If No Manager/Secretary, then by CS in practice

•Company Secretary •If no, CS, by Director

One Person/ Small Company

Not Applicable

To be also certified by CS in practice

Listed Company/ Other prescribed Companies Only Listed Companies

Annual Return


• Balance sheet• Statement of Profit and

Loss/ Income and Expenditure Account

• Cash Flow statement• Statement showing

Changes in equity• Notes of the above

Include• Balance Sheet• Statement of Profit and

Loss • Notes

Under clause 131, voluntary revision of Financial statements and Boards report is possible

Revision of Financial Statements No such revision possible

Financial Statements


• Balance sheet and Statement of Profit and Loss including consolidated financial statement

• Cash Flow statement• Statement showing

Changes in equity• Notes of the above

Submission at AGM• Balance Sheet• Statement of Profit and

Loss • Notes

To be filed with ROC with 30 days of AGM or adjourned AGM

Un adopted Financial Statements No such provision

Financial Statements


• Companies Not Required to conduct Statutory Meeting

Statutory Meeting to be conducted

• Every Company:Limited by SharesLimited by guarantee Except Private Limited Co.

Statutory Meeting


Within 9 months of end of FY First AGM Within 18 months from date of incorporation

In case of Public Co.• 5 members where no. members is < 1000• 15 members where no. of members is 1000 >≤ 5000• 30 members where no. of members is > 5000

In case of Private Company 2 members personally present

Quorum

Public Company

5 members personally present

Private Companies

2 members personally present

Annual General Meetings

Companies Bill, 2012 Demand for Poll Companies Act, 1956

By Person/ Proxy Holding:• ≥ 1/10 voting power or shares• Shares with value of more than Rs. 500,000

Public CompanyBy Person/Proxy Holding:• ≥ 1/10 voting power• Paid up Shares with value of more than Rs. 50,000

By any member(s)/proxy with ≥ 1/ 10 voting power Other Company

Private Company with:• <7 members personally present , by any member• >7 members, by two membersOther Company:By member(s)/proxy with > 1/10 voting power



National holidays Outside Business Hours (9am to

6pm) AGM Cannot be

on Public Holidays and Outside Business Hours

Either in writing or electronic mode Mode of Notice In writing

Consent of not less than 95 % of members entitled to vote at that meeting required

Shorter Notice Consent of All members entitled to vote required



Under Clause 204, Mandatory for:

• All Listed Companies • Such Class of Companies as may be prescribed

Secretarial Audit Not Mandatory

To include Secretarial Audit Report Board’s Report Not Mandatory

Secretarial Audit


Statutory Recognition given under Clause 118(10) and Clause 205

Secretarial Standards

No provisions relating to applicability

Secretarial Standards

Corporate Social Responsibility


Mandatory for certain class of Companies

Corporate Social Responsibility Not Mandatory


Under Clause 123

Not Mandatory Transfer to Reserves

•Mandatory •depends on rate of dividend

Under Clause 123(3) and (6)Restrictions on declaration:•Final•Interim dividend

Restriction on declaration of Dividend

No Such Restrictions are provided

Dividend


Clause 124(2)

To be prepared within 90 days of transfer to unpaid Dividend A/c

Statement of unpaid Dividend

Companies are not required to prepare any such statement

Under clause 124(6)

Have to Transfer :•Unpaid Dividend•Respective Shares

Transfer of shares and unpaid dividend

Under section 205A(5) Only Unpaid Dividend

Dividend


15* Max. No. of Directors 12*

Listed Companies – 1/3rd of the Board Independent Directors No such provision

At least one Women Directors No such provision

≥ 1 director who has been in India - For ≥ 182 days in the previous calendar year

Situation No such provision

Directorship


• One term – 5 years• Eligible for 2 consecutive terms• Cooling period – 3 years

Term of Independent Directors Can be appointed for 3 years

Disqualified to be appointed in all companies

Failure to File:• Accounts• Annual Returns • Repay deposits • Interest on deposits etc.

Disqualified to be appointed in public companies

Nominee Directors of:• Financial Institutions• Holding Co. • GovernmentNot to be considered Independent Directors

Nominee Directors No such provision

Directorship


Listed Company May have one small shareholder director

Small Shareholders Director Public Co. having:• Paid up capital ≥ 5 crore• 1000 ≥ small shareholders May have a representative director

20* Max. No. of Directorships 15*

Clause 166 provides for the duties of Directors

Duties of Directors Duties of Directors are not provided in the Act

Directorship


• Cannot be appointed• Unless the AOA authorize

Same person – MD and Chairman Can be Appointed

Special Resolution Ordinary

Applicable to:• Public Co.• Private Co.

Appointment of MD/WTD

Applicable to:•Public Co.•Private Companies which are subsidiary of public co.

Chairman and Managing Director

•Limits of Managerial Remuneration payable incase of inadequate profit has been changed


Individual – Max. 5 yearsLLP, Firm – Max. 10* years

Term of Auditor No such term specified

Provided in clause 144 Negative List of Services No Restrictions on services

Independent Directors Should form the majorityNo. of Directors – 3

Audit Committee Composition

No specific provision present No. of Directors - 3

Audit, Audit Committee and Appointment of Auditors

Vigil Mechanism

Every Listed Company shall establish a vigil mechanism for directors and employees to report genuine concerns and it shall be monitored and implemented by audit committee


• Fine – Rs. 25000 to Rs. 500,000• 1 year imprisonment or fine of Rs. 10,000 to Rs. 100,000 or both

Penalty for Non-Compliance by Company Fine up to Rs. 5000

• Fine – Rs. 25000 to Rs. 100000• For Willful Contravention – Imprisonment which may extend to one year or fine not less than Rs. 100,000 or both

Penalty for Non-Compliance by Auditor Fine up to Rs. 10000

Audit, Audit Committee and Appointment of Auditors


• No Buy-back within 1 year reckoned from the date of closure of the preceding offer of buy-back, if any.

Restriction on further buy back

• No buy-back (made in pursuance of the resolution of the board) within a period of 365 days reckoned from date of the preceding offer of buy-back

BUY BACK OF SHARES

Companies Bill, 2012 Meetings Companies Act, 1956

• In Person• Video conference Mode In Person

≥ 7 days, through:• Post • Hand Delivery• Electronic means

Notice No Length of Notice prescribed

• 4 every year• ≤ 120 days between meetings

Number • 4 every year• 1 in each quarter

Board Meeting


Every listed Company and such other Company shall have mandatorily

Applicability No provisions for such committee exists

Composition

3 or more Non – Executive directors, with not less than ½ being Independent Directors

Functions

1. Identify Prospective directors and senior management, and2. Recommend to board their appointment and removal3. Formulate criteria for determining qualifications, positive attributes,

independence of directors4. Remuneration policy for directors and senior management5. Carry out evaluation of every directors performance

Nomination and Remuneration Committee


Companies With ≥ 1000:Shareholders• Debenture holders• Deposit holders• Any other security - At any time during the FY

Applicability Not Applicable

To consider and resolve the grievances of security holders of the company

Mandate Not Applicable

Stakeholders Relationship Committee


• Strength – To be decided by Board• Chairman – Non Executive Director

Composition Not Applicable

Stakeholders Relationship Committee


• Private Companies • Public companies Applicability •Public Companies

•Deemed Public Companies

•Co. gives in ordinary course of business at rate not less than RBI prescribed rates• Loan to MD/WTD:

I. Pursuant to conditions of service

II. Pursuant to Scheme approved by members by special resolution

Exemption • Private Companies • Banking Companies • Loans by Holding to Subsidiary Co. etc.

Loan to Directors


To include valuation report Notice Not Required to annex

valuation report 3/4 value of members/ creditors voting in:• Person or• Through proxy or• Postal ballot

Special Majority 3/4 value of members/ creditors among members/ proxy/ creditors present and voting

Compromises and Arrangements


Can be Raised only by persons:•Holding ≥ 10% of shareholding•≥ 5% of total outstanding debt

Objections Any Member/ Creditor/ Member through proxy

To be given to all Statutory Authorities Like RD/IT/CCI etc.

Notice of Meeting in case of Merger

To be given to Regional Director



Acquirer/PAC, persons/ group holding > 90% of equity through:• Amalgamation• Share Exchange• Conversion of securities etc. -May purchase the minority shareholding

Purchase of Minority shareholding by Majority

shareholdersNo Specific provisions present



• Can be included

• Incase of Listed Companies, SEBI Regulations need to be complied with

Takeover Offer in Scheme Can not be included



Chapter XVII talks Registered Valuer

Registered Valuer No provisions provided for Registered Valuer

Registered Valuer

•


Chapter XVII talks Registered Valuer

Registered Valuer No provisions provided for Registered Valuer

Where any valuation is required under the Act, a person registered as valuer shall be appointed by:

Audit Committee

Where no Audit Committee, by Board

Registered Valuer

Registered Valuer

Liability of Registered Valuer

• Violation of Clause 247 (i.e. provision relating to Registered Valuer)

• Fine ≥ Rs. 25,000 and ≤ Rs. 100,000

• With Intention to Defraud Company/ Members

• Imprisonment up to 1 year• Fine ≥ Rs. 100,000 and ≤ Rs. 500,000

• When Convicted for the aforesaid:

• Refund remuneration received from company • Pay damages to Company or any person for loss arising out of incorrect or misleading statements of particulars in his report


• 9 circumstances, but: 3 removed 3 added

Circumstances in which Company may be wound

up by tribunal • 9 Circumstances

Winding up and Strike off

Circumstance which have been removed

• Failure to commence business within 1 year

• Minimum no. of members falling below prescribed limit

• Failure to hold statutory meeting or deliver statutory report


Circumstance which have been added

• Affairs of the Company conducted in fraudulent manner

• Company has been incorporated for fraudulent or unlawful means

• Persons involved in the formation and management of its affairs have been: – Guilty of fraud– Misfeasance – Misconduct, in connection therewith, and that it is proper that the company

be wound up


Circumstance which have been added

• Failure to commence business within 1 year of incorporation

• Within 198 days, subscribers to MOA have not paid subscription money

• a company is not carrying on any business or operation for a period of 2 immediately preceding FY and has not made any application for obtaining the status of a dormant company

Strike off by ROC – Circumstances

THANK YOU

Companies bill 2012 vis a-vis companies act, 1956

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Transcript of Companies bill 2012 vis a-vis companies act, 1956