The New Companies Bill (“Co Bill”) had received the assent of the President of India on 29th August 2013, thus creating a landmark in Indian Corporate arena. Saying Adieu to year old Anarchic law of The Companies Act 1956, which served the corporate India for about 57 years. This is historic change in old law, which was a riddle wrapped up in enigma. The new law is futuristic, sustainable and give flexibility to corporate environment. Lot of fresh changes have been made keeping in mind globalization, large scale corporatization of small and medium organizations. New ideas have been incorporated into this enactment. The law prima facie is procedural law
Salient feature of new law
1. The Act has in total 470 sections across 29 chapters along with 7 schedules. The rules have not been prescribed yet, although major part of act is dependent upon various rules, yet to be prescribed.
2. 33 New definitions have been introduced.
3. New concepts like, one man company, dormant company, class suit, corporate social responsibility, independent directors, faster procedures for holding and subsidiary mergers, merger of Indian company with foreign company, registered valuers, rotation of auditors, introduction of secretarial audits , have been introduced.
4. New limit of no of directors is 15. Earlier it was 12. Under old law if company wanted to increase the nos of directors from 12, it had to pass special resolution
5. Directors will now be able to hold directorship in 20 companies instead of 15. He can not be director in more then 10 Public companies. 1 year has been given as transitional period
6. Political contribution by companies is also increase to 7.5% of average net profits of preceding 3 financial years from 5% earlier
7. Director can participate in board meeting through video conferencing
8. New provision added for corporate social responsibility initiatives by corporate
9. Rotation of auditors in every 5 years and 10 years for audit firm
10. New provision related to investigation of fraud introduced
11. E-voting provision have been introduced
12. Now quorum for general meeting will be decided by No of members of company instead of 5 earlier
13. Postal ballot provision shall be applicable to both listed and unlisted companies.
14. Now the permission of central government is not required for giving loan to directors
15. Interested directors can not participate in matter in which he is interested, this is applicable to private companies also.
16. Central government approval is not required if company wants to pay remuneration to directors in excess of specified limits
17. No provision for inspection and Investigation by SEBI
18. Criteria for declaring a company as sick if 50% net worth is eroded has been removed.
19. Specific provision introduced related to fraud
Areas where rules will be prescribed in due course:
1. Sec 2(85) – higher paid up share capital for small company
2. Sec 4 – form and manner of application for registering the name
3. Sec 7 – manner of signing MoA and AoA, form for declaration, form for certificate of incorporation
4. Sec 12 – Manner of verification if registered office
5. Sec 13 and 14 – way to alter MoA and AoA
6. Sec 26- matter to be mentioned in prospectus and other requirements related to prospectus
7. Sec 43- rules related to share capital
8. Sec 62- rules related to further issue of share capital
9. Sec 63 – rules related to bonus share
10. Sec 88 to 121- procedures related to management and administration of company
11. Sec 123- rules related to payment of dividend
12. Sec 132- rules related to powers, functions and procedures of filing complaints to National financial reporting authority
13. Sec 135 – manner of disclosure of corporate social responsibility
14. Chapter X – rules related to appointment, removal, resignation, eligibility, qualifications, powers & duties of auditors
15. Chapter XI- appointment, removal, qualification, register of directors, allotment of DIN
16. Chapter XII- Meeting of board, audit committee, power of board, related party transactions
20. Chapter xiii – Appoinment of managerial personnel, key managerial personnel, function of company secretary
21. Chapter xv – merger and acquisition rules
22. Sec 245 – rules related to class actions like who can file etc
23. Chapter xx- winding up rules
24. Chapter xxii- rules related to foreign companies
25. Chapter xxvii- functioning of National Company law Tribunal and Appellate Tribunal
No doubt The new enactment is a refreshing change which corporate India needed it for long. Hopefully it will remove the bearucracy in its implementation at ground level.