ICAI - Highlights of Companies Bill

Why a new LAW was needed?

· The changing national and international economic environment

· Exponential growth of the Indian economy

· Changes in the stakeholders’ expectations

· Manifold Increase in Number of Companies

Year	No. of Companies
1956	30,000 approx
2013	11,00,000 approx

· The need of a legal framework was felt to enable the Indian corporate sector to adopt the best international practices in a globally competitive manner, fostering a positive environment for investment and growth

· Companies Bill 2012 was passed by Lok Sabha on 18th December, 2012 and subsequently, was passed by the Rajya Sabha on 8th August, 2013.

· The bill comprises of 29 chapters, 470 Clauses with 7 Schedules as against 658 sections and 14 Schedules in the Companies Act, 1956

· Substantively a law based on Rules (as may be prescribed).

· In 470 Clauses the word “as may be prescribed” has been used at around 336 places.

New Concepts

· New definitions (Accounting Standards, Auditing Standards, Associate Company, Authorized Capital, Books of Accounts, Called up Capital, Charge, Chartered Accountant, Chief Executive Officer, Chief Financial Officer, Company Limited By Guarantee, Company Limited by Shares, Company Liquidator, Contributory, Control, Cost Accountant, Deposit, Expert, Financial Institution, Financial Statement, Foreign Company, Free Reserves, Global Depository Receipt, Independent Director, Indian Depository Receipt, Interested Director, Issued Capital, Key Managerial Personnel, Notification, Official Liquidator, One Person Company, Ordinary or Special Resolution, Postal Ballot, Promoter, Public Financial Institution, Register of Companies, Related Party, Remuneration, Serious Fraud Investigation Office, Small Company, Subscribed Capital, Sweat Equity Shares, Turnover, Unlimited Company, Voting Right, Whole Time Director).

· Private company to have a maximum of 200 members (earlier limit was upto 50). (Clause 2 (68))

· E-Governance – Maintenance and allowing inspection of documents by companies in electronic form. (Clause 120)

· Vigil mechanism (whistle blowing) introduced. (Clause 177 (10))

· In prescribed class or classes of companies, there should be atleast 1 woman director. (Clause 149 (1))

· Restrictions on layers of subsidiaries. (Clause 2 (87))

· The Financial Year of any Company can be only from April-March. Existing companies has to align within 2 years of the commencement of the Act. (Clause 2 (41))

· Memorandum not to have ‘other objects’. (Clause 4 (1))

· A person cannot become director 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. (Clause 165)

· Shareholders to have exit option if money raised has not been utilized. (Clause 27)

· A company can make buyback even if it had at any time defaulted in repayment of deposit or interest payable thereon, redemption of debentures or preference shares or payment of dividend to any shareholder or repayment of any term loan or interest payable thereon to any financial institution or bank, provided that default must have been remedied and a period of 3 years must have lapsed after such default ceased to subsist. (Clause 66 (6))

· Concept of CSR introduced. (Clause 135)

·  Definition of independent Directors introduced. (Clause 149 (5))

· Condition and manner for issue of Bonus shares has been introduced. (Clause 63)

· New provisions suggested for allowing re-opening of accounts in certain cases with due safeguards. (Clause 130)

· Consolidation of Accounts (Clause 129)

· Secretarial Audit Report given by a company secretary in practice is required to be attached with Boards’ report in case of bigger companies. (Clause 204)

Chapterwise Highlights of Companies Bill:
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Source: The Institute of Chartered Accountants of India.