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Home > Legal Articles > Business Law > Companies Act 2013
 
Companies Act, 2013 – Most Awaited Statute
The new companies bill has been passed by both the Hon’ble Houses of Parliament and it has also received the Hon’ble President assent on 29th August, 2013 which will make it into a law replacing the nearly six-decade old regulations that govern corporates in the country.  The new Companies Act, 2013 is a sweep change in the way companies operate and are regulated in the country. 

In the new Companies Act, 2013 bucket various new provisions has been inserted which requires companies to spend on social welfare activities, empowers investors against any frauds committed by promoters, encourages companies to have women directors, and seeks to bring in greater transparency in corporate governance matters. It also provides about three dozen new definitions, including for terms such as frauds, promoters, turnover, small companies, associate companies and employee stock options.

Bird’s eye view on the new Companies Act, 2013

  • The Bill has 470 clauses as against 658 Sections in the existing Companies Act, 1956.
  • The entire bill has been divided into 29 chapters.
  • New chapters have been introduced, viz., Registered Valuers, Government companies, Companies to furnish information or statistics, Nidhis, National Company Law Tribunal & Appellate Tribunal, Special Courts.
New definitions are introduced in the Bill, some of which are accounting standards, auditing standards, associate company, CEO, CFO, control, deposit, employee stock option, financial statement, global depository receipt, Indian depository receipt, independent director, interested director, key managerial personnel, promoter, one person company, small company, turnover, voting right etc.

The Bill particularly promotes good governance, relies heavily on self-regulation by the corporate sector, has removed several ambiguities that existed in the extant Act, and is a great attempt to bring it at par with the current realities of the economy.

There are some significant provisions in the new act that merit attention, such as additional powers to the Serious Fraud Investigation Office, auditor's liability for fraudulent conduct, one-person company, concept of independent directors, setting up of the National Company Law Tribunal (NCLT) and many more.

A glance on the key insertions and amendment in the new Companies Act, 2013  
                                                                                               

Private company definition changed

Limit on maximum number of members    increased from 50 to 200

Private company which is a    subsidiary of public company

Shall be deemed to be a public    company

Listed Company

A company which has any of its    securities listed on any recognised stock exchange

Associate company

A new concept introduced

Dormant company

A new concept introduced

Expert

A new definition introduced

Foreign company

Definition Changed

Key Managerial Personnel (KMP)

A new concept inserted

Officer in default

Definition changed

Promoter

Definition introduced

Subsidiary Company

Definition changed

One Person Company

New concept introduced

Small Companies

A new concept introduced

Provision of conversion of companies    already registered

Introduced

Registration Process

Faster and compatible with    e-governance.

Entrenchment Provision

Inserted in the Articles

Registered office

Provision changed

Commencement of business

Provision changed

Prospectus & Allotment of    Securities

Provision changed

Share Capital & Debentures

Amendment in the recent provision

E-Governance

Maintenance & inspection of    documents, books of accounts in electronic form, placing of financial    statements on companies website, holding of board meetings through video    conferencing/other electronic mode, voting through electronic means.

Number of Directors

Limit increased from 12 to 15

Women Director

One women director on prescribed    companies

Resident Director

Every company shall have at least    one director who has stayed in India for a total period of not less than 182    days in the previous calendar year.

Independent Directors

Concept introduced for the first    time

Resignation of director

Provision changed

Notice of board meeting

Now required

Duties of directors

First time defined

Annual Return

Amended

Board’s Report

Amended

Corporate Social Responsibility

Introduced for prescribed companies

Deposits

Provisions amended

Investment by companies

Clause modified

Company Secretary

Secretarial Audit & Secretarial    Standard introduced

General Meeting

Provisions amended

Auditors

Provisions amended with respect to    appointment, term and number of audit

Financial Statement

New Term introduced

National Financial Reporting    Authority

Central Government may constitute

Investors Protection Measures

New measures to combat investor    protection

Inspection, Enquiry and    Investigation

New clause introduced

Restructuring and Liquidation

Provisions amended

Company Liquidator

New concept introduced paving way    for Company Secretaries, Chartered Accountants, Advocates and Cost    Accountants

Compounding of offences

Provisions amended

National Company Law Tribunal (NCLT)

Tribunal be named by NCLT

Special Courts

New concept for speedy disposal of    cases

Mediation or Conciliation Panel

New concept introduced

Cross Border Mergers

Nod by Central Government

Registered Valuers

New Chapter on Registered Valuer    introduced


    
The best thing about the new Companies Act is that it is simple, with greater clarity of intent and purpose. It replaces the old law with over 700 conflicting clauses with something shorter and sweeter: 470 clauses and all of it in 309 pages. Not bad for something that will govern all listed and unlisted companies in the country.
 

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