 The 2013 Act replaces the Companies Act,1956.  The Indian Parliament has passed the Companies Bill, 2013 on 8 th August  Assent given by the President on 29 th August  Notified in official gazette on 30 th August

Companies Act, 1956Companies Act, Parts13 Parts 658 Sections 15 Schedules Companies Act, Chapters 470 Sections 7 Schedules

Clause 2(62)  One Person company is a private company subscribed by one person.  Promoter shall be a natural person, Indian citizen and resident in India (182 days during the previous year)  Has to appoint a nominee with his consent and he shall be natural person, Indian citizen and resident in India and in any event of death etc of the member, nominee becomes member.  No person shall incorporate more than five OPC.  OPC can be Sec.8 company ( Not for Profit company )  Board Meeting once in 6 months and No general meetings requirement.

 Corporate Social Responsibility (CSR) is defined as the voluntary activities undertaken by a company to operate in an economic, social and environmentally sustainable manner.  2 % of average net profits of last 3 years to be mandatorily spent on CSR by companies having :  Net worth of Rs. 5 billion or more; or  Turnover of Rs. 10 billion or more; or  Net profit of Rs. 50 million or more  It should consists of minimum 3 directors and atleast 1 director being an independent director.

 Central Government should constitute SFIO.  Headed by director and will consists experts from various fields.  For the investigation of frauds related to the companies.  No other investigation agency or central or state government proceed with investigation if it is assigned to SFIO.  Submit the investigation report to Central Government.

 Not more than 20 companies  Maximum number of public companies in which a person can be appointed as a director shall not exceed 10.  For defined infrastructural projects, preference shares can be issued for a period exceeding 20 years.  Shares cannot be issued at discount except sweat equity shares.  Time gap between 2 buy backs shall be minimum 1 year.

 Atleast one director of a company shall be a person who has stayed in India for 182 days or more in a previous calendar year.  Listed companies to have atleast 1 woman director.  Existing companies to comply with the above provisions within 1 year from the date of commencement of 2013 Act.  Following committees of the board made mandatory for listed and prescribed class of companies : Audit Committee Stakeholder relationship committee Nomination and Remuneration committee Corporate social responsibility committee  Director to vacate office on remaining absent from all the meetings of the Board of Directors held during 12 months with or without obtaining leave of balances.  Contents of Directors report elaborated. Directors of listed companies to annually report on the existence and effective operations of systems on internal financial controls. Directors of all companies to annually report on the compliance with all applicable laws.

 The 2013 Act defines the term “ Financial Statement “ in relation to a company to include: A balance sheet as at the end of FY; A profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the FY; Cash flow statement for the FY; A statement of changes in equity; if applicable; and Any explanatory note annexed to, or forming part of, any document referred to above.  The Books of account and other relevant papers are to be kept at the registered office or such other place in India as Board of Directors may decide and such books can also be kept in electronic mode in the manner to be prescribed.  Consolidation of financial statements of subsidiaries (Whether in India or abroad) is applicable to all the companies.  CG may direct maintaining of books of accounts of a company for a period of more than 8 years where any investigation has been ordered.  CFO made responsible and liable for penalty and / or prosecution for non compliance with various provisions such as maintenance of books of accounts, preparation & filling of annual accounts, disclosure of financial information in offer document, risk management, internal control etc.

 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 fit, to exercise and discharge the powers and functions conferred including approval of merger, corporate recognizition, capital reduction, extension of financial year etc.  Consists of President and such number of Judicial and technical members as CG may thinks fit.  President shall be the judge of High court for atleast 5 years.  CA, CMA, CS in practice for atleast 15 years are eligible to appoint as technical member of NCLT.  All cases pending on CLB will be transferred to NCLT after its constitution.

Internal Audit Outstanding loans & borrowings > 25 crores Every Listed Company Paid up capital > 10 crores Accepted Deposits > 25 crores Internal Auditor being: Chartered Accountant OR Cost Accountant OR Any other professional decided by the board Internal Auditor being: Chartered Accountant OR Cost Accountant OR Any other professional decided by the board

 One person company is not required to hold Annual general meeting.  May conduct on Sunday ( except national holiday )  First AGM within 9 months of the closure of first accounts.  Subsequent AGMs within 6 months from the date of closing of financial year.  15 months shall not elapse between two subsequent AGMs.  AGM should be conducted during business hours ( 9 a.m. to 6 p.m. )  Lack of quorum within half an hour will be reason of adjournment and members present on adjourned meeting will be quorum.  Members may exercise their votes at meetings by electronic means.

 Quorum for a private company shall be 2 members personally present.  Quorum for public company is depended on the number of members in the company as shown below: Total Number of members Quorum Upto 1000 members5 Between 1000 to 5000 members 15 More than 5000 members30  Appointed by the audit committee or in its absence by the Board of Directors of that company.  Functions: Valuation of shares, net worth, assets, liabilities, goodwill etc.  Valuer on committing default shall be liable to refund the remuneration received by him to the company and pay for damages caused by such company or person due to misleading statements in his report.

 Every company is required at its first annual general meeting ( AGM ) to appoint an individual or a firm as an auditor who shall be Chartered Accountant(s).  Individual Auditors are to be compulsorily rotated every 5 years and audit firm every 10 years in listed companies and certain other classes of companies, as may be prescribed.  Statutory Auditors are restricted from rendering other services like bookkeeping, accounting, Internal Audit, Actuarial services, Investment banking services etc. directly or indirectly to the company or its holding or subsidiary company.  Auditor can audit maximum 20 companies.  All the AGMs shall now be mandatorily attended by the auditor or through his representative

 In case of appointment of auditor, the company has to intimate both, the auditor and the registrar within 15 days of the appointment…as against the provisions of Companies Act, 1956 wherein the onus of intimation of appointment was upon the auditor.  First auditor of the company ( except Govt. co. ) shall be appointed by the board within 30 days of its incorporation and in case of failure, the members shall appoint the same within 90 days of incorporation.  In case of Govt. companies, the first auditor shall be appointed by the C&AG within 60 days of from incorporation.  Along with the approval of CG, the permission of the shareholders by way of Special resolution is also required for the removal of auditor.  Auditors during the course of performance of its duties, are required to immediately report to the Central Government, any offence involving fraud that is being or has been committed against the company by its officers or employees

 Uniform financial year for all the companies, i.e. April to March (Companies formed on or after 1st January of a year, the period ending on 31st day of March of the following year).  Minimum number of members for private company is 2 and Maximum number of members in a private company increased from 50 to 200.  Objects clause in the Memorandum of Association of company not required to be divided into main, ancillary and other objects. Only the objects for which the company is incorporated along with matters considered necessary for its furtherance to be mentioned.  Amount transferred to unpaid dividend account is required to be shown on the company’s website within 90 days of such transfer.

ParticularsCompanies Act 1956Companies Act 2013 DIVIDEND Transfer to Reserves No dividend can be declared for any F.Y. out of the profits of the Company for that F.Y., except after the transfer 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 considered appropriate, before declaration of any dividend. Mandatory transfer to reserves done away. Declaration of dividend in case of inadequate profits In case of inadequacy or absence of profits in any F.Y., the company can declare dividend out of the reserves only after complying with the Companies (Declaration of Dividend out of Reserves) Rules,1975, wherein the maximum rate of dividend is prescribed as 10%. In case of inadequacy or absence of profits in any F.Y., the company can declare dividend out of the accumulated profits transferred to reserves in accordance with the rules to be prescribed. Restrictions on Declaration of Dividend/ Interim Dividend No declarations are provided for declaring interim Dividend. Interim Dividend may be declared out of the surplus in the Profit & Loss A/c as well as profits of the financial year in which dividend is sought to be declared. In case company has incurred loss up to the preceding quarter of the current financial year, then interim dividend shall not be declared at a rate higher than the average dividends declared by the company during the immediately 3 preceding financial years. Failure to comply with provisions relating to acceptance and repayment of deposits will bar the company to declare any dividend during the period of non-compliance. CONSOLIDATION OF FINANCIAL STATEMENTS Consolidation of financial statements No existing provisionsIn case a company has one or more subsidiaries, it shall in addition to stand-alone financials, prepare a consolidated financial statement of all the subsidiaries in the same form and manner as that of its own which shall also be laid before the AGM of the Company. Further, such companies shall also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiaries in such form as may be prescribed. 18

ParticularsCompanies Act 1956Companies Act 2013 RELATED PARTY TRANSACTIONS Scope of Section A company cannot enter into the contracts relating to- Sale, purchase or supply of any goods or materials; Sale, purchase or supply of any services; Underwriting the subscription of any shares, debentures of a co. A company cannot enter into contracts relating to- Sale, purchase or supply of any goods or materials; Selling or disposing of,or buying, property of any kind; Leasing of property of any kind; Availing or rendering of any services; Appointment of any agents for purchase or sale of goods, materials, services or property; Appointment to any office or place of profit in the company, its subsidiary co. or associate co.; Underwriting the subscription of any securities or derivatives thereof, of the co. Approval required Prior consent of the BOD by resolution passed at Board meeting Prior approval of Regional Director, in case the paid-up capital of company is exceeding Rs.1 crores. Prior consent of the BOD by resolution passed at Board meeting Prior approval of Shareholders, in case the paid-up capital of co. or transaction amount exceeds prescribed limit. Specified persons with whom contracts are covered Director of the Company Relative of such Director A firm in which such Director or Relative is a partner Any other partner of such firm in which Director or Relative is a partner Private co. in which such director is a director or member Director or his relative Firm, in which director, manager or his relative is a partner Private Company in which director or manager is a member or director. Public company in which a director or manager is a director or holds along with his relatives, more than 2% of its paid up share capital. Any body corporate whose BoD, MD, or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager Any person under whose advice, directions or instructions, a director or manager is accustomed to act 19

ParticularsCompanies Act 1956Companies Act 2013 RELATED PARTY TRANSACTIONS ExemptionsPurchase/Sale of goods and materials for cash at prevailing market price. Purchase/Sale of goods and materials or services, the cost of which does not exceed Rs.5000/- in any year during the period of contract. Any transaction of banking/insurance company in the ordinary course of such company. Any transaction entered by company in its ordinary course of business other than transactions which are not an arm’s length basis. LOAN TO DIRECTORS Applicability of section Public CompaniesPublic and Private Companies Scope of Section No public company shall directly or indirectly make any loan or give any guarantee or provide any security to its directors except with the approval of Central Government. No Public Co. shall directly or indirectly make any loan including book debt or give any guarantee or provide any security to its directors or to any other persons in whom the director is interested. ExemptionsThis Section does not apply to – Private Companies Holding to its Subsidiary Banking companies This Section does not apply to – Loan to Managing Director / Whole Time Director As a part of contract of services extended to all its employees Pursuant to scheme approved by members by special resolution. A company which in the ordinary course of its business provide loan, guarantee or security for due repayment of any loan and charges interest thereon being not less than bank rate declared by RBI. 20

ParticularsCompanies Act 1956Companies Act 2013 BOARD MEETINGS First Board Meeting No specific time stipulated for holding first board meeting. Every Company shall hold the first meeting of the Board of Directors within 30 days of the date of its incorporation. Length of Notice No specific length of the notice specified.Meetings of the board shall be called by giving not less than seven days notice. PenaltyEvery officer of the company whose duty is to give notice as aforesaid and who fails to do so shall be punishable with fine which may be extend to one thousand rupees. Every officer of the company whose duty is to give notice under this section who fails to do so shall be liable to a penalty of twenty – five thousand rupees. Time Gap between two meetings Atleast one meeting to be held in every quarter.Not more than one hundred and twenty days shall intervene between two consecutive meetings of the board. 21

22 Related Party Transactions Every Contract / Arrangement with a Related Party to be referred to in the Board's Report along with the Justification Arrangement between a Company and its Directors in respect of Acquisition of Assets for Consideration other than Cash to require General Resolution The One Person Company to inform the ROC about Every Contract entered into with the Sole Member One Person Company to ensure that the Terms of the Contract are Contained in the Memorandum or are Recorded in the Minutes Investor Protection Measures Issue and Transfer of Securities and Non Payment of Dividend by Listed Companies shall be administered by SEBI Fraudulent Inducement of Persons to Invest Money is punishable with Imprisonment for a Term which may extend to Ten Years and with Fine which shall not be less than Three Times the Amount involved Suit may be filed by a person who is affected by any Misleading Statement in the Prospectus or who has invested money by fraudulent inducement

23 Deposits Company may accept deposits from its members subject to fulfillment of the following specified conditions 1.passing of resolution in a general meeting 2.issue of circular to members 3.filing a copy of the circular along with the registrar 4.Providing deposit insurance 5.Certification by the Company that it hasn’t defaulted in the repayment of Deposits 6.Provision of security in respect of deposit and interest and creation of charge public company having prescribed net worth or turnover may accept deposits from persons other than its members subject to compliance of rules as may be prescribed by Central Government Where a Company fails to repay the deposit and it is proved that the deposits had been accepted with intent to defraud the depositors or for any fraudulent purpose, every officer shall be personally responsible, without any limitation of liability, for all or any of the losses or damages

24 Class Action Suits Specified No. of Members, Depositors or any Class of them may file an application before the Tribunal Where the Members or Depositors seek any Damages or demand any other suitable action from or against an audit firm, the liability shall be of the firm as well as of each partner who was involved in making any improper statement of particulars in the audit report or who acted in a fraudulent, unlawful or wrongful manner The order passed by the Tribunal shall be binding on the company and all its Members, Depositors and Auditors Prohibition of Insider Trading New clause has been introduced with respect to prohibition of insider trading of securities. The definition of price sensitive information has also been included Directors and the key managerial personnel of a company are prohibited from forward dealings in securities of the company

25