This PPT was presented by me and my group for a course that we studied in MBA called "Legal Aspects of Business"

1. DIFFERENCE BETWEEN
COMPANIES ACT 1956
&
COMPANIES ACT 2013
AADITYA NAGPAL
ASHIMA AGGARWAL
AKRITA FOTEDAR
HARSIMRAT KAUR
SHIVI GARG

2. Introduction
The Companies Bill 2012 was passed in Rajya Sabha on
8th August 2013 (during the monsoon session of the
parliament). Earlier, the bill was passed by the Lok Sabha
on 18th December 2012. Now, It has also got the
Presidential assent and has now become the Companies
Act, 2013.
 The new Act comprises of 29 chapters, 470 Sections
and 7 Schedules as against 658 sections and 14
Schedules in the Companies Act, 1956. In 470 Sections
the word “as may be prescribed” has been used at
around 336 places.

3.  The Act extents to the whole of India and
different 4 provisions of the Act will be
applicable on such date(s) as the Central
Government, by notification in the official
gazette, may appoint and different dates may
be appointed for different provisions of the
Act.

5. Purpose
• The existing Companies Act, 1956 has been
amended several times in the past 57 years,
with many of its provisions found to be
outdated and inadequate.
• The objective behind the 2013 Act is lesser
Government approvals and enhanced self-
regulations coupled with emphasis on
corporate democracy

6. ONE PERSON COMPANY
Old Companies Act
1956
New Companies
Act 2013
Definition of “One
Person Company”
No Provision It allows for
formation of a
company having
only one member
•It's a Private Company having only one Member and at least
One Director.
•No compulsion to hold AGM.
•Conversion of existing private Companies with paid-up capital
up to Rs 50 Lacs and turnover up to Rs 2 Crores into OPC is
permitted.

7. MEMBERS OF A PRIVATE
COMPANY
Old Companies Act
1956
New Companies Act
2013
No. of Permissible
members
Maximum no. of
members/sharehold
ers was 50
The limit of
maximum no of
members has been
increased to 200

8. BOARD OF DIRECTORS
Old Companies Act
1956
New Companies Act
2013
Maximum no. of
directors
Maximum no. of
directors is 12. The no
can be increased by
taking permission from
the Government
Maximum no. directors
have been increased to
15. The no can be
increased by a
resolution in the AGM
Woman Director No compulsion for
appointment of a
woman director to the
BOD
Every Listed Company
/Public Company with
paid up capital of Rs
100 Crores or more /
Public Company with
turnover of Rs 300
Crores or more shall
have at least one
Woman Director.
Resident Director The law does not talk
about this aspect

9. INDEPENDENT DIRECTORS
Provision in Companies Act 2013 :
Every listed public company shall have at
least one-third of the total number of directors
as independent directors and the Central
Government may prescribe the minimum
number of independent directors in case of any
class or classes of public companies.

10. WHO IS AN INDEPENDENT DIRECTOR
An independent director in relation to a
company, means a director other than a
managing director or a whole-time director or
a nominee director,—
(a) who, in the opinion of the Board, is a
person of integrity and possesses relevant
expertise and experience;
(b) (i) who is or was not a promoter of the
company or its holding, subsidiary or associate
company;

11. (ii) who is not related to promoters or directors
in the company, its holding, subsidiary or
associate company;
(c) who has or had no pecuniary relationship with the
company, its holding, subsidiary or associate company,
or their promoters, or directors, during the two
immediately preceding financial years or during the
current financial year;
(d) none of whose relatives has or had pecuniary
relationship or transaction with the company, its
holding, subsidiary or associate company, or their
promoters, or directors,Bamounting to two per cent. or
more of its gross turnover or total income or fifty lakh
rupees or such higher amount as may be prescribed,
whichever is lower, during the two immediately
preceding financial years or during the current financial
year;

12. Corporate social responsibility

14. 14
What is CSR? What is not CSR?
It should be rupee
measurable;
That which is not rupee
measurable is not a CSR
activity;
It must bring direct benefits
to marginalized ,
disadvantaged, poor or
deprived sections of the
community;
If it does not benefit the poor
& backward sections of the
community it is not a CSR
activity;
It should not benefit only the
employees of the company &
their families;
Employee benefits will not
count as CSR;

15. 15
What is CSR? What is not CSR?
CSR activities must be in the form of
projects/programmes. Thus CSR activities
should be projectivized ;
Components of a project are as follows:
•Need Based Assessment/Baseline
Survey/Study
•Clearly identified time frame
•Specific annual financial allocation
•Clearly identified milestones
•Clearly identified & measurable objectives
/goals
•Robust & periodic review & monitoring
•Evaluation & Assessment (Where possible, by
third party)
Pure philanthropy or mere
donations will not count as
CSR

16. What is CSR and what is not?
16
What is CSR What is not CSR?
Corporates are expected to fund
projects from their own accounts
through implementing agencies;
Government
programmes/initiatives can be
complemented/supplemented
Programmes/projects must be
within India;
Funds/moneys deposited
in Central or Government
accounts will not count as
CSR;
Government
programmes/initiatives
should not be duplicated.
Programmes/projects
undertaken outside India
will not count as CSR;

17. 17
What is CSR What is not CSR?
It should be independent
of compliance with any
regulation or law;
Activities which are in
compliance with any
regulation or law will not
count as CSR;
Activities undertaken in
pursuance of normal
course of business of a
company.

18. Under the Companies Act, 2013, any company
having a net worth of rupees 500 crore or more or a
turnover of rupees 1,000 crore or more or a net
profit of rupees 5 crore or more should mandatorily
spend 2% of their net profits per fiscal on CSR
activities. The rules came into effect from 1 April
2014.

19. The CSR provisions within the Act is applicable to companies with an annual
turnover of 1,000 crore INR and more, or a net worth of 500 crore INR and more, or
a net profit of five crore INR and more. The new rules, which will be applicable from
the fiscal year 2014-15 onwards, also require companies to set-up a CSR committee
consisting of their board members, including at least one independent director.
The Act encourages companies to spend at least 2% of their average net profit in the
previous three years on CSR activities.

20. Benefits of CSR:
•Communities provide the licence to Operate
•Attracting and retaining employees:
•Communities as suppliers:
•Enhancing corporate reputation:

22. • Surplus arising out of CSR activities will have to be reinvested into CSR initiatives,
and this will be over and above the 2% figure
-• Only CSR activities undertaken in India will be taken into consideration
• Activities meant exclusively for
employees and their families will not
qualify
• A format for the board report on CSR has been provided which includes amongst
others, activity-wise , reasons for spends under 2% of the average net profits of the
previous three years and a responsibility statement that the CSR policy,
implementation and monitoring process is in compliance with the CSR
objectives, in letter and in spirit. This has to be signed by either the CEO, or the MD
or a director of the company

23. Companies Act, 1956 Companies Act, 2013
“Financial Year” means, in
relation to any body corporate,
the period in respect of which
any profit and loss account of
the body corporate laid before
it in annual general meeting is
made up, whether that period
is a year or not:
“Financial Year” means in
relation to any company or
body corporate, means the
period ending 31st day of the
March every year, and where it
has been incorporated on or
after the 1st day of January of a
year, the period ending on 31st
day of march of the following
year, in respect where of
financial statement of the
company or body corporate is
made up.
D.P. Shah – D. Shah & Associates 23

24. Changes
• 1. Definition - now financial year can only be of April to
March and only a company or body corporate, which Is
a holding company or subsidiary company of a
company incorporate outside India and is required to
follow a different financial year for consolidation of its
accounts out side India, may have different financial
year subject to approval of tribunal.
• 2. A transition period of 2 year has been prescribed for
companies existing on the commencement of this Act
to align their financial year to April-March.

25. Consolidated Financial Statement (CFS)
Neither the Companies Act, 1956 nor AS 21 requires
the Companies to prepare Consolidated Accounts. At
present, Clause 32 of the Listing Agreement mandates
listed Companies to publish its Consolidated Accounts
which is neither required to be laid before the AGM
nor to be filed with ROC.
s 25

26. • Under the Companies Act, 2013 where a company has
one or more subsidiaries, it shall, in addition to
financial statements, prepare consolidated financial
statement of the company and laid before the annual
general meeting of the company.
• All subsidiaries, associates and joint ventures will be
covered under CFS.
• Company shall prepared the Consolidated Financial
Statements according to Schedule III of the Companies
Act, 2013 which is in line with revised schedule VI.
• All Companies including unlisted and private
companies, with subsidiaries will need to prepare CFS.
26

27. General Instructions for preparation of CFS
• Profit or Loss attributable to ‘minority
interest’ and to owners of the parent in the
statement of profit and loss shall be
presented as allocation for the period.
• A company will disclose the list of subsidiaries
or associates or joint ventures, which have
not been consolidated along with the reasons
for non consolidation.
D.P. Shah – D. Shah & Associates 27

28. Prospectus & Allotment of Securities
This section explains that a public company may issue securities in any of the
following manners:
• To public through prospectus
• Through private placement
• Through rights issue or a bonus issue.
PRIVATE PLACEMENT
Under the Act, 1956 the conditions
relating to private placement were
applicable only to public companies.
Act, 2013 provides various conditions for
private placement of shares which apply to
both private companies and public
companies.

29. ISSUE OF PROSPECTUS:
The 1956 Act currently requires that
the report will not be earlier than 120
days before the issue of the prospectus.
The 2013 Act states that the report by
the auditors on the assets and liabilities
of business shall not be earlier than
180 days before the issue of the
prospectus.
VARIATION IN TERMS OF CONTRACT AND OBJECTS
The 1956 Act currently requires approval in
a general meeting by way of an ordinary
resolution.
The 2013 Act states that a special resolution
is required to vary the terms of a contract
referred to in the prospectus or objects for
which the prospectus was issued . It also
requires that dissenting shareholders shall
be given an exit offer by promoters or
controlling shareholders .

30. It does not have such provision. The 2013 Act includes a new section under
which members of a company, in
consultation with the board of directors,
may offer a part of their holding of shares
to the public.
OFFER OF SALE OF SHARES BY CERTAIN MEMBERS OF
THE COMPANY
SHELF PROSPECTUS
The 1956 Act currently limits the
facility of shelf prospectus to public
financial institutions, public sector
banks or scheduled banks .
The 2013 Act extends the facility of
shelf prospectus by enabling SEBI to
prescribe the classes of companies
that may file a shelf prospectus.

32. SHARE CAPITAL
The part of the capital of a company that comes from the issue of shares.
KIND OF SHARE CAPITAL
• Equity Share Capital: refers to the portion of a company's equity that has
been obtained by trading stock to a shareholder for cash.
• Preference Share Capital: Preference shares allow an investor to own
a stake at the issuing company with a condition that whenever the
company decides to pay dividends, the holders of the preference shares
will be the first to be paid.

33. There was no right of a stockholder to vote
on matters of corporate policy and who will
make up the board of directors. Voting
often involves decisions on issuing
securities, initiating corporate actions and
making substantial changes in the
corporation's operations.
Here this distinction is removed.
VOTING RIGHTS
VARIATION OF SHAREHOLDER’S RIGHTS
There is no such provision. Act states that if the variation by one class of
shareholders affects the rights of any other
class of shareholders, the consent of three-
fourths of such other class of shareholders
shall also be obtained and the provisions of
this section shall apply to such variation.

34. Companies are permitted to
issue shares at discount.
Companies would no longer
be permitted to issue shares
at a discount. The only shares
that could be issued at a
discount are sweat equity .
PROHIBITION ON ISSUE OF SHARES AT A DISCOUNT
POWER OF THE COMPANY TO PURCHASE ITS OWN
SECURITIES
A special resolution has been
passed at a general meeting of
the company authorising the
buy-back.
The only difference is that the
option available to company
for a buy-back from odd lots is
no longer available .

35. FURTHER ISSUE OF SHARE CAPITAL
If a company proposes to
increase its capital by issuing
further shares, it can do so
after the expiry of two years.
Under this act, period of two
years has been dispensed
with.
ISSUE OF BONUS SHARES
The existing 1956 Act does not
have any specific provision
dealing with issue of bonus
shares .
The 2013 Act includes a new
section that provides for issue
of fully paid-up bonus shares
out of its free reserves subject
to the compliance with certain
conditions such as approval in
the general meeting .

36. Loan to directors Not applicable to
private companies
and for public
companies, prior
approval of the CG
is required.
This section does
not apply to:
•Private companies
•Holding to its
subsidiaries
•Banking
companies
CG approval done
away with and
applicable to
private companies
as well.
Loan can be given
to MD.
A director can be
given loan
pursuant to
scheme approved
by the members by
passing a special
resolution or as a
part of the
conditions of
service extended
by the company to
all its employees.

37. A company whose
business in
ordinary course is
to provide loan or
guarantee or
securities for
repayment of such
loans, can provide
loan or guarantee
or security to its
directors provided
interest on loan is
not less than bank
rate declared by
RBI.

38. Related party
transactions
Covered only sale
and purchase of
goods, rendering of
services,
underwriting the
subscription of any
shares or
debentures.
Also covers leasing
of property,
appointment of
agent for the sale
or purchase related
party’s
appointment to
any office or place
of profit in the
company, its
subsidiary or
associate company.

39. In the case of
company’s
prescribed amount
of share capital
and transactions
exceed Rs. 1 crore,
prior approval of
CG is required.
Not applicable to
contracts between
two public
companies.
In the case of
company having
prescribed amount
of share capital
and transactions
exceeding the
prescribed
amount, prior
approval of
members of
company by way of
special resolution
is required.
Applicable to
contracts between
two public
companies as well.

40. The transactions
entered into in
ordinary course of
business require
Board’s approval.
The transactions
entered into in
ordinary course of
business are
exempted from
taking Board’s
approval except
the transactions
which are not on
arm’s length basis.

41. Debentures:
Special resolution
required for issue
of debentures
with conversion
option and other
provisions clause.
Appointment of
debenture
trustees(DT)
compulsory for
public issue of
debentures
through prospectus
to more than 500
persons.
No such
requirement
existed.
No such ceiling of
500 existed.
Appointment of
debenture
trustees(DT)
compulsory for
company issuing
prospectus or a
letter of offer to
the public for
subscription of its
debentures.
Needs special
resolution of the
members for issue
of debentures with
conversion option,
wholly or partly.
Appointment of
debenture trustees
compulsory for
public issue of
debentures
through prospectus
to more than 500
persons.

42. Redemption of
debentures
In case the DT
comes to a
conclusion that the
assets of the
company are
insufficient or are
likely to become
insufficient, then
he or she can file a
petition before the
Tribunal. The
Tribunal after
hearing the parties
concerned directly
order the company
to redeem the
debentures
forthwith the
payment of
principal and
interest due
thereon.
Petiton is filed in
this case as well
and in case of
failure to comply
with any order of
the Tribunal, the
punishment has
been increased.

43. AMAGAMATION OF A COMPANY
WITH A FOREIGN COMPANY

44. • The provision under this act shall apply mutatis
mutandis to schemes of mergers & amalgamation
between companies registered under this act.
• Central Govt may make rules in consultation with
the RBI.
• Subject to the provisions of any other law for the
time being in force, a foreign company, may with
the prior approval of RBI merge into a company
or vice-versa.
COMPANY’S ACT 2013

45. • No provision was made under this act.
COMPANY’S ACT 1956

46. • The company’s act (1956) allows a foreign
company to merge with a Indian company but
not vice-versa.
• But The Act (2013) has allowed Indian
companies to merge with their counterparts.
• The manner in which such cross border
merger will take place would be given under
rules which would be prepared in consultation
with RBI.
COMMENTS

47. PROHIBITION ON ACCEPTANCE OF
DEPOSITS

48. • After the commencement of this act, no
company shall invite, accept or renew
deposits under this Act from the public except
in a manner provided under this chapter.
• Provided that nothing in this sub section shall
apply to a banking company & non banking
financial company as defined in the RBI Act,
1934 & to such other company as the Central
Government may specify in this behalf.
COMPANY’S ACT 2013

49. • The Central Government may prescribe the
limits up to which the manner in which and
the conditions subject to which deposits may
be invited or accepted by a company either
from the public or from its members.
• No company shall invite or allow any other
person to invite any deposit.
COMPANY’S ACT 1956

50. • The depositors being in the nature of
unsecured creditors, had been subjected to a
lot of hardship and in many cases lost their
hard earned money.
• The Act 2013 proposes to prohibit companies
from accepting deposits except from
members.
COMMENTS

51. THANK YOU