There are some amendments of Comapny Law. I am trying to compile at one place which is usable to us as practice in respect of Companies Law matters:-
1. Meaning of Private Company
As per Section 2(68) “Private Company” means a company having a minimum paid-up share capital of one lakh rupees or such higher paid-up share capital as may be prescribed, and which by its articles,—
(i) Restricts the right to transfer its shares;
(ii) Limits the number of its members to 200; and
(iii) prohibits any invitation to the public to subscribe for any securities of the company;
1. Joint holders shall be counted as one.
2. (a) Employees holding shares; and
(b) Person formerly in employment were, who members during such employment and still continue to be the members shall not be counted in the limit of 200.
2) CIN To Be Mentioned on Printed Stationery of The Company (Section 12(3)(C))
Every company shall get its name, Address of Registered office & Corporate Identity Number (CIN) along with Telephone Number, fax number, if any and website etc., on all its Business letter heads, bill heads, invoices, letter paper in all notices & other official publication.
Penalty - Company and officer in default shall be liable to a penalty of Rs. 1000/- per day not exceeding Rs. 1,00,000 /-.
3) Board Meeting (Section 173)
Every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year and that not more than 120 days shall intervene between two consecutive meetings of the Board
The participation of directors in a meeting of the Board may be either in person or through video conferencing or other audio visual means which are capable of recording and recognizing the participation of the directors and of recording and storing the proceedings of such meetings along with date and time. However, it is compulsory for a director of a company to attend at least one board meeting in person in a financial year.
As per Section 173 of the Companies Act, 2013 at least 7 days notice in writing is required to be given to every director of the company and record of sending notices is to be maintained properly.
However meeting of the Board may be called for a shorter notice to transact urgent business subject to condition that at least one Independent Director if any shall be present at the meeting. In the absence of Independent director from the meeting, decision at such meeting shall be circulated to all such directors and shall be final only on such ratification thereof by atleast one independent director, if any.
A OPC, small company & dormat company shall be deemed to have complied with all the provision of this section if at least one meeting of the BOD has been coducted in each half of a calender year & the gap betwee two meetings is not less then 90 days.
Penalty:- Every officer of the company whose duty is to give notice under this section and who fails to do so shall be liable to a penalty of twenty-five thousand rupees.
Note: This section 173 is corresponds to section 285 & 286 of Co Act 1956.
4) Quoram of Board of Meeting.
The quoram for a meeting of the BOD of a company shall be 1/3 of its total strength or 2 directors, whichever is higher, and the particiation by Audio/Video confrencing shall be also be counted for the purpose of Quoram under this sub- section.
Note: This section 174 is corresponds to section 288 & 286 of Co Act 1956.
5) Maximum Number of Directorships (Section 165)
As per Section 165 no person, after the commencement of this Act, shall hold office as a director, including any alternate directorship, in more than 20 companies at the same time. Further provided that a person can become Director in maximum 10 Public Companies.
For this purpose, Private companies who are either holding or subsidiary of Public company shall be taken as public company. A company may by passing special resolution at its general meeting reduce the limit of directorships of its directors.
Transitional Phase:- A transitional period of 1 year is allowed for compliance with this requirement, for those wo hold more than that before commencement of this act.
Penalty: If any person accept as an appointment as a directorin contravention of this above section shall be punishable with fine which shall not be less than Rs 5000 may exten to Rs 25000 for every day after the first during which the contravention continues.
May be Director have to give resignation through FORM NO. DIR. 11( Notice of Resignation of a Director to the Registrar)
Note: This section 165 is corresponds to section 275 of Co. Act 1956.
6) Corporate Social Responsibility (Section 135)
Now a Company having,
a. Net worth of Rs. 500 crore or more, or
b. Turnover of Rs. 1000 crore or more, or
c. Net profit of Rs. 5 crore or more
during any financial year shall contribute 2% of its net profit in CSR activities as mentioned in rules pertaining thereto and shall also have a CSR committee consisting of minimum 3 directors (2 in case of a private company), with at least 1 Independent Director. However, in case of Private Company the criteria of independent Director shall not apply.
The CSR Committee shall:
a) formulate & recommend to the Board, a CSR policy which shall indicate the activities to be undertaken by comany as specified in Schdule VII.
b) recommend the amount of expenditure to be incurred on the activities refered in Schdule VII.
The Board of company after taking into consideration reccomendation made by Committee approve the CSR Policy and disclose content of such policy in its report and also place it on company website, if any in such perscribed manner.
Note: This section 135 is new as per Co Act 2013. to contribute towards socaility having specified net worth etc.
7) Deposits (Section 73-76)
Definition of deposits has been changed drastically and the following amounts have been included in the definition of deposits in respect to acceptance of Deposit Rules:-
1. Loan from directors if he has not given loan out of his own funds (Borrowed Fund)
2. Loan from relatives of directors.
3. Loan from members.
4. Share application money pending allotment for more than 60 days.
5. Any amount received in the course of or for the purpose of the business, as advance and is outstanding for 365 days.
6. Secured debentures and compulsorily convertible debentures convertible within five years from the date of issue.
Now a Private Company cannot accept deposits from relatives of Directors or Shareholders as was allowed under Companies Act, 1956 unless Section 73 of the Companies Act, 2013 and Companies (Acceptance of Deposit) Rules, 2014 are complied with. Further share application money pending allotment for more than 60 days shall also be treated as deposits, if not refunded with 15 days.
As per Section 74(1)(a) and Companies (Acceptance of Deposit) Rules, 2014 every company who has accepted deposit before commencement of Companies Act, 2013 has to file a return in Form DPT-4 within 3 months from commencement of Companies Act, 2013 (i.e. upto 30th June, 2014) and further it has to be repaid within 1 year from commencement of this Act.(i.e. by 31st March, 2015).
On reading of this section no company shall invite, accept or renew deposits under this act from the public except in a manner provided under the chapter, but nothing in this sub- section shall apply to Banking Co & Non Banking Company financial Company as defined in the RBI Act 1934 & to such other company as the CG may after consultation with the RBI, specify in ths behalf.
Private Company may accept deposits from its members subject to fulfilment of the following conditions:
a. Passing of resolution in a general meeting.
b. Issue of circular to members showing the financial position of the Company, the credit rating obtained the total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the Company etc.
c. Circular in Form DPT-1
d. Deposit Trust Deed in Form DPT – 2 (to be executed seven days before executing circular)
e. Filing a copy of the circular with the Registrar within 30 days before the date of issue of the circular.
f. Providing deposit insurance.
g. Certification by the Company that it has not defaulted in the repayment of deposits.
h. Provision of security in respect of deposit and interest and creation of charge on company’s properties and assets.
i. An amount of not less than 15% of the deposits maturing during a financial year shall be deposited in Deposit Repayment Reserve account which shall not be used for any other purpose.
Precaution- A Private Company being subsidiary of a Public Company shall become public company and all the provisions related to public companies shall apply on such private companies. However, the provision of erstwhile Section 4(7) of the Companies Act, 1956, has been dispensed with and now not applicable w.e.f. 1 April 2014.
8) Internal Audit (Section 138):
Section 138 provides for the appointment of Internal Auditor to conduct internal audit of books of accounts of a company. Rule 13 of the Companies (Accounts) Rules, 2014 provides that the following class of companies shall be required to appoint an internal Auditor or a firm of internal auditors:-
1. Every listed company
2. Every unlisted public company having-
i. Paid up share capital of Rs. 50 crore or more during the preceding financial year; or
ii. Turnover of Rs. 200 crore or more during the preceding financial year; or
iii. Outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 crore or more at any point of time during the preceding financial year; or
iv. Outstanding deposits of Rs. 25 crore or more at any point of time during the preceding financial year; and
3. Every Private Company-
i. Turnover of Rs. 200 crore or more during the preceding financial year; or
ii. Outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 crore or more at any point of time during the preceding financial year.
- An existing Company covered under any of the above criteria shall comply with the requirements of section 138 and this rule within 6 months of commencement of this Act.
- Internal Auditor shall be a Chartered Accountant or a Cost Accountant or such other Professional as may be decided by the Board.
Note: This section 138 is new in the Companies Act 2013 and prescribed companies shall be require to conduct Internal Audit of functions.
9) Loan to Directors Section 185: (Applicable w.e.f 12.09.2013)
Save as otherwise provided in this Act, no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person:
Provided that nothing contained in this sub-section shall apply to—
(a) the giving of any loan to a managing or whole-time director—
(i) as a part of the conditions of service extended by the company to all its employees; or
(ii) pursuant to any scheme approved by the members by a special resolution; or
(b) a company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the bank rate declared by the Reserve Bank of India.
Explanation.—For the purposes of this section, the expression “to any other person in whom director is interested” means—
(a) any director of the lending company, or of a company which is its holding company or any partner or relative of any such director;
(b) any firm in which any such director or relative is a partner;
(c) any private company of which any such director is a director or member;
(d) any body corporate at a general meeting of which not less than twenty five percent of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; or
(e) any body corporate, the Board of directors, managing director or manager, whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.
Precaution: Any loan or guarantees given prior to 12.09.2013 not to be renewed and to be refunded at the earliest.
In case of contravention, the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees, and the director or the other person to whom any loan is advanced or guarantee or security is given or provided in connection with any loan taken by him or the other person, shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty five lakh rupees, or with both.
Note: This section 185 correspond with section 295 of Co. Act 1956.
10) Disclosure of Interest( Section 184)-
Every director shall at first meeting of Board in a financial year in which he participates and thereafter every first meeting of board shall disclose his concern or interest in any company or companies or bodies corporate (including shareholding interest), firms or other association of individuals, by giving a notice in writing in Form MBP 1 and Form MGT-14 is to be filed with the MCA within 30 days of the Board Meeting , taking note of such disclosure.
Every director of a company who is in any way whether directly, or indirectly concerned or interested in contract
- With body corporate in which such director or such director in association with any other director holds more than 2% shareholding of that body corporate, or is a promoter, manager, CEO of that body corporate or
- With a firm or other entity in which, such director is a partner, owner or member,
Shall disclose the nature of his concern or interest at the Board Meeting in which the contract or arrangement is discussed and shall not participate in such meeting.
a. All notices shall be kept at the registered office and such notices shall be preserved for a period of eight years from the end of the financial year to which it relates and shall be kept in the custody of the company secretary of the company or any other person authorized by the Board for the purpose.
b. According to Section 179 (3) (k), the Board of Directors of a company shall exercise the power to take note of the disclosure of director’s interest and shareholding.
c. According to Section 117(3) (g) of the Act resolutions passed in the sub section (3) of section 179 shall be filed with Registrar within 30 days of passing the resolution in Form MGT -14.
d. Thus it is necessary for all the companies to obtain declaration in Form MBP 1 from all its directors and has to file the same with MCA in form MGT 14 within 30 days of the first Board Meeting in the financial year and subsequent changes during the financial year.
Precaution: Every director to keep records of all the concerns or interest (including shareholding and to be reviewed before attending any Board Meeting of any Company.
If a director contravenes the provisions of this section he shall be punishable with imprisonment for a term which may extend to 1 year or with fine of Rs. 50,000-Rs. 1, 00,000.
Note: This Section 184 is correspond with Section 299 of Co. Act 1956.
11) Rotation of Auditors:
Every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting .Provided that the company shall place the matter relating to such appointment for ratification by members at every annual general meeting:
Provided further that before such appointment is made, the written consent of the auditor to such appointment, and a certificate from him or it that the appointment, if made, shall be in accordance with the conditions as may be prescribed, shall be obtained from the auditor:
Provided also that the certificate shall also indicate whether the auditor satisfies the criteria provided in section 141 i.e auditors can provide only specific services to the auditee company.
Provided also that the company shall inform the auditor concerned of his or it appointment, and also file a notice of such appointment with the Registrar within fifteen days of the meeting in which the auditor is appointed in Form ADT-1.
Auditor not to render certain service: Section 144:
An Auditor appointed under this act shall provide to the comapny only such services as are approved by th BOD or the Audit Committee, as the case may be, but which shall not incpude any of following services (whether such services are directly or indirectly to the company or its holding company or subsidiary company namely);-
a) Accounting & Book keeping Services
b) Internal Audit
c) Design & Implimentation of any Financial Inf System
d) Acturial Services
e) Investment Advisory Sevices
f) Investment Banking Services
g) Rendering of outsourced Financial Services
h) Management Services
i) any other kind of services whivh may be perscribed:
Note: This section 144 is new in Companies Act 2013.
I have tried my sincere effort to compile the above information from MCA websites and other Prominent Author books.
If any mistake feel free to say because by the help of you my concept will more crystalise regarding these New Act.
Thanks & regards
CA Vikas Garg
Tags Corporate Law