The much-awaited Companies Bill, 2013, which will replace the Companies Act, 1956, has been notified

been notified in The

Gazette of India dated 30th August 2013 . With this move, India has now got a new company law that has replaced the
erstwhile Companies Act 1956. The Bill is now known as Companies Act, 2013. The Bill has travelled a long journey of
over 7 years, which began with the Irani Committee Report of May, 2005. The Bill was referred twice to the
Parliamentary Standing Committee (PSC) and the Lok Sabha made 122 amendments before it passed the Bill on
December 18, 2012.
The earliest piece of legislation in India relating to companies
was the Act of 1857. The next came companies Act,1866 . After
this the companies Act 1882 was enacted and it was replaced by
Indian Companies Act,1913. Following the recommendations of
Company law committee set up in 1950 , the Indian Companies
act,1956 was enacted. Since India was revising its Company Law
after over five decades, the corporate sector was expecting that
the new law will introduce substantive reforms and create an
enabling and facilitating architecture for companies to raise
capital, conduct their activities, undertake corporate
restructuring, etc. without being required to go to the
Government for approvals. While the Act has several positive
features, it has undoubtedly failed to reform Indias Company
Law to an extent desired by the corporate sector. The present
1956 Act is based on the English Companies Act of 1948 and while the Company Law in England has undergone
revision four times since then, India has lagged behind. The Bill, in large measure, seems to have been influenced
by some of the recent corporate scams, which was expected and is reasonable too, but in the process it also
appears to be tilting towards overregulation as the provision on private placements has been proposed. No
attempt has been made to provide a legal framework for any new class of instruments to raise capital, both by way
of private placement and public issue of capital. The Act is divided into 29 Chapters and has 470 Clauses and 7
Schedules. One positive feature of the bill is the logical re-arrangement of the provisions on a particular matter
while deleting certain redundant provisions, which
had outlived their utility, and regrouping related
provisions.





Clause Companies Act, 1956 Companies Act, 2013
Maximum Number
of members in a
private company
Limited to 50 Increased to 200
Maximum
Number of
Directors
Previously 12 Increased to 15 If more directors need to be
added then can be done by special resolution.
No Central Government approval is required.
Concept of One
Person Company
No such provision previously It is no longer mandatory to have a minimum
of 2 persons to incorporate a company. A
company can be formed by just one person
that is to say a private company. [Clause
2(62)]
Woman Director
mandatory
No such provision previously Prescribed class of companies shall have at
least one woman director on board [Clause
149]
Prohibition on
Insider Trading
No such provision previously. Earlier this
provision was covered by SEBI (Prohibition
on Insider trading) Regulation, 1999
applicable only to the Listed
Companies.

No Director or Key Managerial Person shall
either on his own behalf or on behalf of any
other person deal in securities of the
company or counsel about, procure or
communicate either directly or indirectly any
non public price sensitive information to any
person.

Resident Director


This clause was not covered in Section 252 of
the Companies Act, 1956.

At least one of the Directors shall be Person
Ordinarily Resident in India [Clause 149(3)].
Public Offer and
Private Placement

No such provision previously

A separate clause on Public Offer and Private
Placement is introduced which was not there in
2009 Bill. (Clause 23 and 42) .
Acceptance of
deposits from Public

No such provision previously

Clause 76 allows certain Public Companies
having such turnover and net worth as
prescribed in Clause to accept deposits from
public notwithstanding anything contained in
Clause 73 subject to the rules which the Central
Govt. may prescribe in consultation with RBI.
Every company accepting secured deposits from
the public shall within thirty days of such
acceptance, create a charge on its assets of an
amount not less than the amount of deposits
accepted in favour of the deposit holders.

Change in number of
shares held by
Promoters and Top
ten shareholders

No such provision previously

Clause 93 of Bill requires a company to intimate
change in the shareholding of promoter and top
ten shareholders by filing a return within 15
days of date of such change. Earlier no such
provision was there.
Corporate Social
Responsibility

No such provision previously

A separate Clause 135 is inserted for provisions
related to CSR. Every company having net worth
of rupees five hundred crore or more, or
turnover of rupees one thousand crore or more
or a net profit of rupees five crore or more
during any financial year is required to
constitute a CSR Committee consisting of three
or more Directors, one out of which should be
an independent Director. The composition of
committee is required to be disclosed in Boards
Report. This committee is required to formulate
and monitor CSR Policy and also decide the
amount of expenditure to be incurred for
activities to be undertaken under CSR. The
Board should ensure that at least 2 percent of
the net profits of the company for preceding
three financial years shall be spent on CSR
activities and ensure to put CSR policy on
companies website.
Internal Audit

No such provision previously

Clause 138 requires such class or classes of
companies as may be prescribed to appoint
Internal Auditor who may be a Chartered
Accountant, Cost Accountant or any other
professional as decided by Board to conduct the
Internal Audit. Central Govt. by rules will
prescribe the manner and intervals within which
the internal audit can be conducted. Provisions
regarding Internal Audit were not covered in
Companies Act, 1956.
Term of Auditor

No fixed term was prescribed

As per the new bill the term of the Auditor shall
be 5 years i.e. if appointed in first AGM he will
continue to hold office till conclusion of 6th
AGM. The company needs to file notice of
appointment of auditor with the Registrar within
15 days of his appointment. Further Listed
Company shall not appoint individual auditor for
more than one term of five consecutive years
and audit firm for more than two terms of five
consecutive years. (Clause 139)

Secretarial Audit for
bigger companies

No such provision previously

It has been made mandatory for Listed
Companies and other class of companies as
prescribed by Central Govt. to annex Secretarial
Audit Report given by Practicing Company
Secretary to its Board Report. Any qualifications
in the secretarial report need to be addressed
with adequate explanations in the Directors
report. (Clause 204)
Serious Fraud
Investigation Office

No such provision previously

Central Govt. shall establish an office known as
Serious Fraud Investigation office to investigate
into affairs of company: (a) on receipt of a
report of the Registrar or inspector under
section 208; (b) on intimation of a special
resolution passed by a company that its affairs
are required to be investigated; (c) in the public
interest; or (d) on request from any Department
of the Central Government or a State
Government (Clause 211 and 212)
Merger or
Amalgamation
company with
Foreign Company

No such provision previously

Central Govt. may in consultation with RBI allow
Indian Company to merge with company
incorporated in notified countries in accordance
with the scheme drawn up for that purpose.
(Clause 234)
Independent
Director

Not dealt with the concept of independent
director. Company may pay sitting fee up to
a maximum of Rs. 20,000 for each meeting
to Independent Director [Rule 10 B of
Company (Central Government) General
Rules and Forms,1956]

Appointment of one third of the total no. of
directors as independent directors has been
proposed for every listed public company having
a prescribed paid up share capital. [Clause 149
(4)] Such other public companies and
subsidiaries of public companies as may be
prescribed by the Central Government shall also
be required to appoint independent directors.
[Clause 149 (4)] Only an independent director
can be appointed as alternate director to an
independent director. [Clause 161(2)]. An
independent Director shall not be entitled to
any remuneration, other than sitting fee and
reimbursement of expenses. [Clause 149(9)] He
is also entitled to profit-related commission as
may be approved by the members. [Clause
149(9)]

Appointment of
Company Secretary

Section 383A (1)- Every company having such
paid-up share capital as may be prescribed
shall have a whole-time Company Secretary.
At present the paid up capital prescribed is
Rs. 5 crores and above. Defences Available:-
To prove that all reasonable efforts were
taken to appoint CS and the financial
condition of company was such that it was
beyond its capacity to engage CS.

Every company belonging to such class or
description of companies as may be prescribed
shall have whole-time key managerial
personnel. [Clause 203(1)] Every CS being Key
Management Personnel shall be appointed by
Board Resolution which shall contain the terms
and conditions of the appointment including the
remuneration. [Clause 203 (2)] If any vacancy is
created in his office such vacancy shall be filled
by the Board Meeting within 6 months from the

date of such vacancy.[Clause 203 (4)] Specific
functions of the Company Secretary have also
been assigned. [Clause 205]

Time Gap between
two Board Meetings

Board meetings shall be held at least once in
every 3 months and at least 4 such meetings
shall be held every year

The maximum gap between two meetings is
proposed to be 120 days [Clause 173(1)]

Board meeting by
Video Conferencing

No concept of video conferencing

Board meeting with Video Conferencing is
proposed with some restrictions imposed by
Central Govt.[Clause 173(2)]
Annual Return

Section 161 speaks that:- Annual Return to
be signed both by a Director and by the
manager or Secretary, where there is no
manager or Secretary, by two directors, one
of whom shall be the MD, where there is
one. Every company shall, within sixty days
from the date on which the annual general
meeting is held or where no annual general
meeting is held in any year within thirty days
from the date on which the annual general
meeting should have been held together
with the statement specifying the reasons
for not holding the annual general meeting,
file with the Registrar a copy of the annual
return with such fee as may be prescribed.
[Section 159&160] Penalty-the company, and
every officer of the company who is in
default, shall be punishable with fine which
may extend to [five hundred rupees] for
every day during which the default
continues.

The Annual Return of every company to be
signed by a Director and the Company Secretary,
or where there is no Company Secretary, by a
Company Secretary in whole-time practice.
[Clause 92 (1)] The scope of Annual Return has
been widened. It now includes, besides the
existing disclosures, the disclosures related to
Corporate Governance practices in the company
as well as certification of Compliances and
disclosures. It means that the annual return of
every company, whether private or public, listed
or unlisted, (except one person and small
companies), will be required to be signed by
either Company Secretary in employment or the
Company Secretary in practice. [Clause 92(1)]
Every company shall, within sixty days from the
date on which the annual general meeting is
held or where no annual general meeting is held
in any year within sixty days from the date on
which the annual general meeting should have
been held together with the statement
specifying the reasons for not holding the
annual general meeting, file with the Registrar a
copy of the annual return with such fee as may
be prescribed. [Clause 92(4)] Penalty- the
company shall be punishable with fine which
shall not be less than fifty thousand rupees but
which may extend to five lakhs rupees and every
officer of the company who is in default shall be
punishable with imprisonment for six months or
with fine which shall not be less than fifty
thousand rupees but which may extend to five
lakh rupees, or with both [Clause 92(5)]

Secretarial
Standards

Secretarial Standards are not mandatory

Secretarial Standard related to Board Meeting
and General Meeting (SS - 1 and 2) has been
made mandatory. [Clause 118(10)]
Vacancy in Office of
Director

Office of the director would become vacant if
he remains absents for 3 consecutive
meetings of the Board of directors, or from
Office of the director would become vacant if he
remains absent from all the meetings of the
Board for a period of 12 months with or without

all meetings of the Board for a continuous
period of three months, whichever is longer,
without obtaining leave of absence from the
Board [Sec 283(1)(g)]

seeking leave of absence of the Board [Clause
167(1)(b)] New clause for Resignation of
Director:- A director may resign by giving a
notice in writing. The Board shall on receipt of
such notice take note of the same and intimate
the registrar in such manner and in such form as
may be prescribed and shall also place the fact
of such resignation in subsequent general
meeting held by the company A director shall
also forward the notice of Resignation to the
Registrar in manner as may be prescribed The
Resignation of Director shall take effect from the
date on which the notice is received by the
company, or date if any specified by the director
in the notice whichever is later. [Clause 168]
Disqualification of
Director

Section 274(1)(g)(A) provides that a person
shall not be capable of being appointed
director of a company, if such person is
already a director of a public company
which, has not filed the annual accounts and
annual returns for any continuous three
financial years commencing on and after the
first date of April, 1999


The provision regarding Disqualification of
Director has been made more stringent by
extending default to failure to file either
Annual returns or Annual Accounts and is made
applicable to companies other than Public
Companies also. [Clause 167]







Insurance for CEO,
CFO, CS, MD and
WTD

No such provision exists

D & O Insurance may be taken for CS, MD, WTD,
CEO or CFO for indemnifying any of them
against any liability in respect of any negligence,
default, misfeasance, breach of duty or breach
of trust for which they may be guilty in relation
to the company. The premium paid on such
insurance shall not be taken as part of
remuneration payable to such personnel.
[Clause 197(13)]


Contents of Board
Report


No Specific Format Prescribed.



Director report is proposed to be made more
informative by including the following:-
Extracts of Annual Return Reports of
Remuneration Committee Declaration by
independent directors wherever they are
appointed Number of eetings of the Board
Particulars of Loans, Guarantees and
securities in excess of specified limits that
requires Shareholders Approval Particulars of
contracts entered into with related parties
that requires consent of Board of Directors of
Public Limited Companies / Prior Approval of
company by special resolution for entering
into such contract Composition of Audit
Committee Matters on which Board has not
accepted recommendation of Audit
Committee and reasons thereof. [Clause 134]



Audit Committee

Every Public Company having paid up capital
of not less than five crores rupees shall
constitute Audit Committee which shall
consists of not less than three directors and
such number of other directors as the Board
may determine of which not less than three
directors are directors, other than Managing
Director and Whole Time Director. The
members of Audit Committee shall elect one
of them as the chairman


Listed Companies and other companies notified
by Central Govt. shall constitute Audit
Committee. The Audit Committee shall consist
of minimum three directors with independent
directors forming a majority. Further, majority
of the members of the Audit Committee
including its Chairperson shall be persons with
ability to read and understand the financial
statement. [Clause 177]



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