1. Companies Act, 2013 As passed by Lok-Sabha on 18 th December 2012, By Raj-Sabha on 8 th August 2013 and Signed by Honourable President on 30 th August 2013. Covering 470 clauses, Divided into 29 chapters with many new chapter’s Introduction in it. Purvesh Pandit

2. Agenda: Directors & Meetings Auditor Company Secretary Subsidiaries & Investment Sale of Undertaking Corporate Social Responsibility Other Omissions, Introductions & Changes Purvesh Pandit

3. Directors & Meetings Limit of Maximum Directors in a Company Increased from 12 to 15. More Directors can be appointed by Special Resolution in general meeting without getting approval of Central Government. Maximum Companies in which a person can be appointed as director is made 20 out of which Not more than 10 shall be a public company. Compulsion on appointment of Resident Director to every company. Every 1 women director on board of such class or classes company as may be prescribed. Key Managerial Person defined. Every company belonging to such class or classes shall have whole time KMP. In case office of whole time KMP is vacated, same shall be filled up in board meeting within 6 months of vacation. Term ‘Independent Director’ first time defined in Companies Act. Every listed company shall have one third of it’s board as Independent Director. Central Government may prescribe company or class of them require to appoint whole time Independent Director. Nominee Director shall not be deemed to be Independent Director. Purvesh Pandit

4. Directors & Meetings Independent Director are not liable to retire by rotation, nor the calculation of total number of directors for deciding directors retire by rotation shall include number of Independent Directors. Only Independent Director can be appointed as Alternative Director of other Independent Director. At least 7 day’s notice is made required to convene Board Meeting. Shorter notice could be validated subject to presence of at least one Independent Director or rectification of decisions taken at such meeting by Independent Director. Besides Audit Committee, constitution of Nomination and Remuneration Committee has also been mandatory in case of listed companies or such other classes of companies, A company cannot appoint same person as Chair Person & MD/CEO at the same time unless article of the company provides otherwise or company is carrying multiple business. Purvesh Pandit

5. Directors & Meetings Participation of Directors at Board Meeting has been permitted through video-conferencing. However, such business or class of business may be prescribed not to transact and decide through video conferencing. Where the combined membership of shareholders, debenture holders or other security holders is more than One Thousand at any point of time during financial year, the company shall constitute a stakeholder’s relationship committee, chairperson of which shall be non-executive director. Directors and other KMPs are prohibited from forward dealing in company’s securities. Purvesh Pandit

6. Auditor A company shall appoint an individual or a firm as an auditor at annual general meeting who shall hold office till the conclusion of sixth annual general meeting. However, the company shall place the matter relating to such appointment for ratification by members at every annual general meeting. No listed company or company belonging to such class or classes as may be prescribed shall appoint i.) an Individual as Auditor for more than One term of Five Consecutive years. ii.) an Audit firm as Auditor for more than Two term of Five Consecutive yeas. Maximum Number of companies in which a person may be appointed as Auditor has been proposed as twenty company. Members of a company may resolve to provide that in the audit firm appointed by it, the auditing partner and his team shall be rotated at such intervals as may be resolved by members. An auditor shall not render such financial service to company or it’s holding or subsidiary company as restricted under the Act. Mandatory of cost audit for prescribed class of companies. Purvesh Pandit

7. Company Secretary A Company Secretary being a whole time KMP shall be appointed by Resolution of the Board. Regulation relating to KMP shall mutatis mutandis apply to CS. Functions of Company Secretary have clearly stated in the new Act. Every listed company or class of company shall attach to it’s board report, Secretarial Audit Report given by a Practicing Company Secretary. Qualification made by CS in such report shall be answered in full by board in board’s report. For the first time, Secretarial Standards has been introduced and provided statutory recognition. ANR is required to be signed by a Practicing Company Secretary. Even if the company have it’s whole time Company Secretary, in addition to that, sign of PCS is made mandatory. Purvesh Pandit

8. Subsidiaries and Investment A company is considered to be a subsidiary company of a holding company, if the holding company exercises control more than one half of the total share capital. (Total Share Capital= Not Just Equity) Consolidated financial statement to be prepared for all subsidiaries. Restriction on making Investment through more than Two layers of Investment Companies unless otherwise prescribed by Central Government. Restriction shall not apply to i. ) Outbound acquisition with existing structure ii.) Subsidiaries from having Investment Subsidiaries for meeting Statutory Requirements The restriction on the number of step-down subsidiary companies has been introduced to prevent the abuse of diversion of funds through many step-down subsidiaries. There no restriction on Lateral Subsidiaries. i.e. A Company can have n number of subsidiaries, the restriction is only on layers of subsidiaries. Purvesh Pandit

9. Sale of Undertaking In Companies Act, 1956 sale/lease/disposal of whole/ substantially whole of undertaking was possible through ordinary resolution and such provisions were applicable to only Public Company. Companies Act, 2013 : Special resolution required for sale/lease/disposal of whole or substantially the whole undertaking. “Substantially the whole of Undertaking” defined as 20% of more of value of undertaking as per audited balance sheet of preceding financial year. Undertaking defined as undertaking which ► Has investments > 20% of net worth of preceding financial year ► Generates 20% of total income of preceding financial year Purvesh Pandit

10. Corporate Social Responsibility Every company having net worth of rupees 500 crore or more, or turnover of rupees 1000 crore or more or a net profit of rupees 5 crore or more during any financial year shall constitute a Corporate Social Responsibility committee of board consisting of three or more directors out of which at least one director shall be independent director. The Board of every company shall ensure that the company spends in every financial year at least 2% of the average net profits of the company made during the three immediately preceding financial years in pursuance of its CSR policy. The company shall give preference to local areas where it operates, for spending amount earmarked for Corporate Social Responsibility (CSR) activities Where the company fails to spend such amount, the Board shall in its report specify the reasons for not spending the amount. The approach is to 'comply or explain'. Purvesh Pandit

11. Other Major Changes : Introduction of some New Definition in the Act made the Act containing almost 95 definitions. Change in definition of private company. Limit of maximum members is made to 200 as against 50 earlier. Terms like KMP, Promoter, Registered Valuer Corporate Governance etc made clearly and inclusively defined first time in Companies Act. Introduction of concept of small company, one person company, dormant company. Dissenting shareholders to be given exit opportunity in case change in case of change in object or variation of contract for which prospectus was issued. Shareholder/s holding more than 90% shall notify their intention to buy the remaining equity shares of minority shareholders. Minority shareholders are also entitled to offer their shares suo motu. Valuation shall be in accordance with prescribed rules by registered valuer. Preference shareholders may acquire general voting rights at par with equity shareholders on account of unpaid dividend for 2 years. No specific exemption to private companies this time. (Situation likely to arise on this account) Purvesh Pandit

12. Other Major Changes : Company can issue preference shares for period beyond 20 years for Infrastructural Projects. Reduction of share capital is made subject to confirmation of court.(Read 100 to 104me) No issue of shares at discount except for sweat equity shares. When person other than one retiring by rotation stands for directorship and fails to get appointed, he shall be refunded sum deposited by him if he gets more than 25% of total valid votes. In scheme of compromise/arrangement objection could only be raised by persons holding more than i.) 10% of shareholding or ii.) 5% of total debt outstanding Restrictive provisions may be introduced in articles. Such provisions to be made at the formation of the company. If made subsequently, amendment to be agreed by i.) All member for private limited company. ii.) Special resolution for public limited company. Purvesh Pandit

13. Other Major Changes : No Buy-Back offer shall be made within a period of one year from the date of closure of the preceding buy-back offer. Exemption from court process for corporate reorganization like, amalgamation, demerger without court process. -between two or more small companies -between holding and WOS -other prescribed class of companies In case of merger of listed company with unlisted, transferee company shall remain unlisted, until it becomes a listed company. Provision of Inspection and Investigation to Indian Company shall mutatis mutandis apply to all foreign companies. The additional period for registration of charge has been increased from 30 to 300 days. Wherein the charge is not registered within extended days, then application will be required to be made to the Central Government for extension. Financial year for all the companies now will begin on 1st April and end on 31st March. Purvesh Pandit

14. Other Major Changes : A company cannot give loan, guarantee, or provide securities exceeding sixty percent of paid up share capital, free reserve or security premium account or hundred percent of free reserve and security premium account. Introduction of concept of Class Action Suit (CAS). Suit may be brought by such number of shareholders or depositors against directors. A CAS can be instituted when the management or conduct of affairs of a company are being conducted in manner prejudicial to company or it’s stakeholders.(members and depositors). Preferential allotment shall require determination of price by registered valuer in addition to special resolution of members. The bill permits outbound mergers (i.e. amalgamation of Indian Company with foreign company). Objection in scheme of compromise or arrangement can only be raised by person holding i.) 10% of shareholding. ii.) 5% of debt outstanding Corporate Reorganization without court process : - between two or more small company - between holding and subsidiary company - other prescribes class of companies Purvesh Pandit

15. Thank you! Sources - ICSI backgrounder on Companies Bill - E & Y, KPMG’s discussion. - Helping hand of Guide and Mentor- Sandip Sir, Hitesh Sir Purvesh Pandit