Companies act - 2013 VS 1956
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Companies act - 2013 VS 1956

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Brief Comparison between Companies Act 1956 VS Companies Act 2013.

Brief Comparison between Companies Act 1956 VS Companies Act 2013.

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  • This template can be used as a starter file for presenting training materials in a group setting.SectionsRight-click on a slide to add sections. Sections can help to organize your slides or facilitate collaboration between multiple authors.NotesUse the Notes section for delivery notes or to provide additional details for the audience. View these notes in Presentation View during your presentation. Keep in mind the font size (important for accessibility, visibility, videotaping, and online production)Coordinated colors Pay particular attention to the graphs, charts, and text boxes. Consider that attendees will print in black and white or grayscale. Run a test print to make sure your colors work when printed in pure black and white and grayscale.Graphics, tables, and graphsKeep it simple: If possible, use consistent, non-distracting styles and colors.Label all graphs and tables.
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  • Give a brief overview of the presentation. Describe the major focus of the presentation and why it is important.Introduce each of the major topics.To provide a road map for the audience, you can repeat this Overview slide throughout the presentation, highlighting the particular topic you will discuss next.
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  • Give a brief overview of the presentation. Describe the major focus of the presentation and why it is important.Introduce each of the major topics.To provide a road map for the audience, you can repeat this Overview slide throughout the presentation, highlighting the particular topic you will discuss next.
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Companies act - 2013 VS 1956 Companies act - 2013 VS 1956 Presentation Transcript

  • Welcome
  • THE COMPANIES ACT, 2013 Presented by JAYESH ALWANI New rules of the game
  •  This Presentation is prepared keeping the provisions of the 2013 Act and does not capture provisions of the Rules as the same are in Draft stage and are subject to change once the feedback of the stakeholders is received by MCA and incorporated in the final Rules.  "Prescribed" or "as prescribed" or "as may be prescribed" used in this Presentation means the Rules as may be finalized by the CG.
  • TODAY’S OVERVIEW
  • SALIENT FEATURES COMPANIES ACT 1956 COMPANIES ACT 2013 13 Parts 29 Chapters 658 Sections 470 Sections 15 Schedules 7 Schedules The entire act has been divided into 29 chapters.
  •  Passed in Lok Sabha on 18th December, 2012 (Bill no. 121 of 2011)  Passed in Rajya Sabha on 8th August, 2013 (Bill no. 121 of 2011)  Received Ascent of President 29th August, 2013 HIGHLIGHTS OF THE COMPANIES ACT, 2013
  • NEW CHAPTERS INCLUDED IN COMPANIES ACT 2013 Chapter Description Chapter Number Registered Valuers Chapter 17 Government Companies Chapter 23 Companies to Furnish Information or Statistics Chapter 25 Nidhis Chapter 26 National Company Law Tribunal & Appellate Tribunal Chapter 27 Special Courts Chapter 28
  • CHANGES REGARDING INCORPORATION RELATING MATTERS Sr no Particular Provisions under Companies Act 1956 Provisions under Companies Act 2013 1 Types of Companies Public company Private company Public company Private company One Person company 2 Maximum no of members for private companies A private company can have maximum of 50 members A private company can have maximum of 200 members 3 One person company No provision for OPC New Concept Introduced 4 Commencement of business Provisions applicable to public limited company only Now applicable to all companies having share capital
  •  The concept of “One Person Company” has been introduced and the said company will be formed as a private limited company. This will be called as “OPC Limited” [Section 2(62)].  A Company may be an OPC having a sole member.  The memorandum of such OPC is required to indicate the name of the person who shall become member in the event of death or incapacity of the sole member.  OPC is required to specifically mention the word “one person company” below the name wherever it is used. INCORPORATION OF COMPANIES Continued….
  • Continued….  2013 Act provides additional flexibility to OPC. Some of the relaxations provided to OPC are as under: – Cash flow statement is not required. – Annual Return can be signed by CS or one director if there is no CS. – Provisions of board meeting, quorum and interested director shall not apply to OPC. – OPC should have minimum 1 director. – OPC need not hold an AGM. – Financial Statements can be signed by only one director.
  • OBJECT CLAUSE OF MOA Provisions under Companies Act 1956 Provisions under Companies Act 2013 Object Clause is bifurcated into –  Main Objects,  Incidental or Ancillary Objects and  Other Objects. MOA to contain the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof.
  • FINANCIAL YEAR  Financial Year in relation to any company or body corporate, means the period ending on the 31st day of March every year in order to align with the provisions of the income tax act. (Section 2(41))
  • KEY MANAGERIAL PERSON (KMP) Companies Act 1956 Companies Act 2013 No provision except in AS 18 Related Party Disclosures Includes:  CEO or MD or Manager;  Company Secretary;  WTD;  CFO; and  Such other officer as may be prescribed [Section 51]
  • APPOINTMENT OF WHOLE TIME KMP Companies Act, 1956 Companies Act, 2013 Public Company having paid-up capital of Rs.5 Crore or more to have WTD or MD And Company Secretary Every Company belonging to class or classes of companies as may be prescribed shall have KMPs – MD or CEO or Manager and in absence of a WTD – Company Secretary – Chief Financial Officer (Sec. 269) (Section 203)
  • DIVIDEND TRANSFER TO RESERVES Companies Act 1956 Companies Act 2013 No Dividend can be declared more than 10% for any F.Y out of the profits of the company for that F.Y, except after the transfer of profit to the reserves such portion of profits of the company for that F.Y, not exceeding 10% of its profits. A company to transfer voluntarily a portion of its profits to the reserves as consider appropriate, before declaration of any dividend. Mandatory transfer to reserve done away. [section 205A(3)] [Section 123 (1)]
  • REGISTERED VALUER Companies Act 1956 Companies Act 2013 No provision provided for registered valuer. When valuation is required to be made under the Act, in respect of any property, stocks, shares, debentures, securities or goodwill or other assets or net worth of company or its liabilities, such valuation shall be done by a registered valuer. [Section 247] The Central Government shall maintain a register of valuers.
  • CHANGES REGARDING ISSUE OF SHARES CAPITAL Sr No Particular Provisions under Companies Act 1956 Provisions under Companies Act 2013 1 Issue of Shares at a discount Section 79 permits issue of shares at discount subject to compliance with conditions. Shares, other than sweat equity shares, cannot be issued at a discount. 2 Issue of preference shares for more than 20 years Section 80 prohibits issueof irredeemable preference shares and preference shares Redeemable after 20 years. Preference shares have to be redeemed within 20 years of issue except for the shares issued for prescribed infrastructure projects, provided a certain percentage of shares are redeemed annually at the option of shareholders Continued……..
  • CONTINUED… Sr No Particular Provisions under Companies Act 1956 Provisions under Companies Act 2013 4 Notice of alteration of share capital Notice of redemption of preference shares is not required to be filed with ROC. Company shall file a notice in the prescribed form with the Registrar within a period of thirty days of redemption of redeemable preference shares. 5 Consolidation and division of shares Company permitted to consolidated or sub divide its shares by passing resolution in general meeting Consolidation and division which results in changes in the voting percentage of shareholders shall require approval of the Tribunal to be effective.
  • AUDIT AND AUDITORS
  • SCOPE OF AUDIT  Scope of auditor enhanced to report on additional matters such as : ‒the existence and operating effectiveness of internal financial controls ‒any qualification, reservation and adverse remark relating to the maintenance of accounts ‒any fraud by officers or employees on the Company (immediate reporting to CG): is being or has been committed  Does not provide for audit qualifications to be in thick/bold or italics
  • AUDITORS  Every company is required at its first annual general meeting (AGM) to appoint an individual or a firm as an auditor. The auditor shall hold office from the conclusion of that meeting till the conclusion of its 6th AGM and thereafter till the conclusion of every 6th meeting  The appointment of auditor is to be ratified at every AGM.  Individual Auditors are to be compulsorily rotated every 5 years and audit firm every 10 years in listed companies & certain other classes of companies, as may be prescribed.  Transition period of 3 years provided to the companies to comply with the mandatory rotation of auditor requirement. Continued…
  • Continued… • Internal audit may be made mandatory for prescribed companies. • Auditors are restricted from rendering other services like bookkeeping, accounting etc. directly or indirectly to the company or its holding company or subsidiary company. • The Act provides for new disqualifications of Auditor . • Auditors can audit maximum 20 Companies including Private companies .
  • Appointment of Auditor in unlisted companies Appointment Period of appointment At first AGM to hold office till conclusion of 6th AGM subject to ratification by members at every AGM Subsequent to hold office till conclusion of 6th meeting, subject to ratification by members at every AGM Appointment of Auditor in listed and specified class of companies Appointment Maximum period of appointment Of an individual as an auditor 1 term of 5 consecutive years Of an audit firm as an auditor 2 terms of 5 consecutive years Cooling off period of 5 years before next appointment
  •  Every listed company shall form an Audit Committee.  The Audit Committee shall consist of minimum of three directors with independent directors forming majority.  Provided that majority of members including the Chairperson shall be persons with ability to read and understand the financial statements. Continued…
  • Summary Appointment or Reappointment Of Auditor Individual as an Auditor More than 5 Consecutive years Audit Firm More than 10 Consecutive years
  • NATIONAL FINANCIAL REPORTING AUTHORITY (NFRA)  NFRA to be constituted by CG to provide for dealing with matters relating to accounting and auditing policies and standards to be followed by companies and their auditors.  Functions of NFRA shall include :  Make recommendations to CG on the formulation of accounting and auditing policies and standards;  Monitor and enforce compliance with accounting and auditing standards;  Oversee the quality of service of the professions and suggest measures required for improvement in quality of services and such other related matters as may be prescribed
  • SECRETARIAL STANDARDS • For the first time, the Secretarial Standards has been introduced and provided statutory recognition. • Clause 118(10) read as: Every company shall observe Secretarial Standards with General and Board meetings specified by ICSI. • Clause 205 casts duty on the Company Secretary to ensure that the company complies with applicable Secretarial Standards. • It is the beginning of a new era where non financial standards have been given importance statutory recognition besides financial standards
  • APPOINTMENT OF COMPANY SECRETARY  CS being a whole-time KMP is to be appointed by a resolution of the BOD which will also contain the terms and conditions of appointment including the remuneration. The functions of CS shall include – report to BOD about compliance with the provisions of 2013 Act, the rules made there under and other laws applicable to the company; – ensure compliance with the applicable secretarial standards as may be approved by CG; and – discharge such other prescribed duties.
  •  In December 2008, the Ministry of Corporate Affairs introduced Voluntary Guidelines on Corporate Governance which inter-alia prescribed Secretarial Audit.  Now, for the first time Secretarial Audit as been included in the Act.  Secretarial audit by CS in practice made compulsory for listed and prescribed class of companies.  Every listed company and prescribed class of companies shall annex with it’s Board Report a Secretarial Audit Report given by a Company Secretary in practice, in such a form as may be prescribed. SECRETARIAL AUDIT
  • CHANGES REGARDING DIRECTORS AND THEIR POWERS  In listed and prescribed class or classes of companies, there should be at least 1 woman director.  At least 1 director of a company shall be a person who has stayed in India for 182 days or more in the previous calendar year. Existing companies to comply with this provision within 1 year from the date of commencement of the 2013 Act. Continued…
  • Continued…  The maximum limit of directors in the Company has been increased to 15 from the 12. Company can appoint more than 15 directors by passing an special resolution.  A person cannot become directors in more than 20 companies instead of 15 as provided in the Companies Act 1956 and out of this 20, he cannot be director of more than 10 public companies.  Contents of Directors’ Report elaborated. Directors to annually report on the existence and effective operations of systems on compliance with all applicable laws
  • INDEPENDENT DIRECTOR Continued…  Listed co. and prescribed class of public co. to have at least 1/3rd of its total number of directors as IDs  CG may prescribe minimum number of IDs in case of any class of public companies.  This requirement is to be complied within 1 year:  By existing listed companies from the commencement of 2013 Act; and  By the prescribed class of public companies from the date Rules are notified.  The company and independent director are required to abide by the provisions specified in Schedule IV.
  • Continued..  The company and independent director are required to comply with the provisions specified in Schedule IV.  An independent director shall hold office for a term up to five consecutive years on the Board of a company, but shall be eligible for re- appointment on passing of a special resolution by the company for another 5 year term. Thereafter 3 years gap.  The Section seeks to provide that an independent director shall not be entitled to any remuneration, other than sitting fee, reimbursement of expenses for participation in Board meeting and profit related commission as approved by the members.  A person cannot be a director, including alternate director, in more than 20 companies including not more than 10 public companies.
  • RESIGNATION OF DIRECTORS
  • NOMINATION AND REMUNERATION COMMITTEE (NRC) Companies Act, 1956 Companies Act, 2013 No provision Mandatory in case of listed and other prescribed classes of companies Governed by Section 49 of listing agreement Composition of the committee would include three or more non-executive directors of which at least one-half shall be Independent directors. Shall formulate the criteria for determining Qualifications, positive attributes and independence for a director Shall recommend to the Board a policy, relating to the remuneration for the directors, key managerial personnel and other employees (Section 178)
  • Corporate Social Responsibility (CSR)
  • CSR…  Every company having Net worth of Rupees 500 Crore or more, or Turnover of Rupees 1,000 Cr or more, or Net profits of Rupees 5 Cr or more during any FY shall constitute CSR Committee.  Committee to consist of at least three directors out of which at least one should be independent director.  CSR Committee shall formulate and recommend policy to Board, which shall indicate activities to be undertaken by the company. Continued...
  • Continued…  Board to ensure that at least 2% of the average net profits of last 3 years is spent by the company on CSR activities (Specified in schedule VII) every financial year.  If company fails to spend such amount, reasons for not spending to be specified in the Board's report signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice.
  • RESTRICTION ON FURTHER BUYBACK OF SHARES  Whether Authorised by Board or Shareholders , No further offer for buy- back shall be made within a period of One year from the date of preceding buy-back.
  • MERGERS & ACQUISITIONS • Merger of Indian company with a foreign company allowed. • Fast track merger for small companies and between holding company and its wholly owned subsidiary introduced • Any valuation of shares / assets etc. required under 2013 Act to be performed by a Registered Valuer.
  • NATIONAL COMPANY LAW TRIBUNAL (NCLT)  2013 Act replaces the High Court with a Tribunal to be known as NCLT, which will consists of Judicial and Technical members, as Central Government may deem necessary, to exercise and discharge the powers and functions conferred including approval of merger, corporate reorganization, capital reduction, extension of financial year etc.
  • RELATED PARTY TRANSACTIONS  Requirement of obtaining Central Government approval for related party transactions not required  Approval of related party transactions by Board of Directors at Board meeting made mandatory  Related party transactions to also require prior shareholder’s approval by special resolution for companies having prescribed paid up capital or transactions exceeding prescribed amounts.  Related party transactions to be disclosed in the Director’s Report along with justification thereof.
  • COMMITTEES OF THE BOARD Following committees of the Board made mandatory for listed and prescribed classes of companies: – Audit committee – Stakeholder relationship committee – Nomination and Remuneration committee – Corporate Social Responsibility committee
  • LOAN TO DIRECTORS  No company shall directly or indirectly advance any loan (including loan represented by a book debt) or give guarantee or provide security in connection with such loan to any director / related persons. - An exception to the above rule is made for MD or a whole time director (WTD) if such loan is in accordance with the terms of services extended to all employees or is approved by shareholders by special resolution  Provisions for loan to directors are also applicable to private companies
  • WINDING UP OF A COMPANY  Certain criteria for winding-up by NCLT deleted like minimum number of members falling below prescribed limit, non- commencement of business for 1 year etc.  Additional grounds provided for winding-up.  Winding up can be ordered if NCLT is of the opinion that: – affairs of the company have been conducted in a fraudulent manner; – company was formed for fraudulent and unlawful purpose; – the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith.
  • MISCELLANEOUS  Inability to pay debts will be considered as criteria for determining a sick company  Central Government to establish Serious fraud investigation office for investigation of frauds relating to a company  Credit rating made mandatory for acceptance of public deposits  Time gap between 2 buy-backs shall be minimum 1 year.  Now all types of charge would be required to be registered,.
  • PROVISIONS CITED IN COMPANIES ACT- 2013 FOR BETTER GOVERNANCE  New Provisions for Better Governance:  Requirement to constitute Remuneration and Nomination Committee and Stakeholders.  Grievances Committee.  Granting of More powers to Audit Committee.  Specific Section pertaining to duties of directors.  Mode of appointment of Independent Directors and their tenure.  Code of Conduct for Independent Directors.  Rotation of Auditors and restriction on Auditor's for providing non-audit services.  Enhancement of liability of Auditors.
  • Why worry and have wrinkles When you can smile and have Than k You..