Analysis of the companies bill, 2011_a must read

RG - A Helping Hand (Company Secretary) (13867 Points)

20 December 2011  

Dear All,


A simple effort has been made to analyze the Companies Bill, 2011 along with brand new provisions as introduced in the Loksabha on 14th December, 2011 with the help of inputs provided by ICSI. Hope you all appreciate the efforts:




  1. The Bill has 470 clauses and 7 schedules as against 658 Sections and 15 schedules in the existing Companies Act, 1956.
  2. The entire bill has been divided into 29 chapters.


Following chapters have been introduced, viz.


  1. Registered Valuers (ch.17);
  2. Government companies (ch. 23);
  3. Companies to furnish information or statistics (ch. 25);
  4. Nidhis (ch. 26);
  5. National Company Law Tribunal & Appellate Tribunal (ch. 27);
  6. Special Courts (ch. 28)


Just like previous The Bill empowers Central Government to make rules, etc. through delegated legislation after having detailed consultative process (clause 470 and others).


The Bill provides for self-regulatory process and stringent compliance regime.




  1. Concept of One Person Company (OPC limited) introduced by Companies Bill, 2011 through Clause 2(62).
  2. In Clause 2(85) of Companies Bill, 2011, Small companies have been defined by fixing maximum paid-up share capital not exceeding Rs. 50 Lakhs and such companies will be required to follow less stringent regulatory provisions.
  3. In Clause 18 of Companies Bill, 2011, the proper provision for Conversion of Companies already registered has been introduced.
  4. In Clause 7(1)(b) of Companies Bill, 2011, A provision has been made regarding declaration to the effect that all the requirements of the Act in respect of registration and matters precedent or incidental thereto have been complied with. Company Secretaries continue to be recognized for the purpose of giving this declaration.




Another important feature added by Companies Bill, 2011 in corporate practice is formal introduction of much awaited concept of E-Governance.


E-Governance proposed for various company processes like maintenance and inspection of documents in electronic form, option of keeping of books of accounts in electronic form, financial statements to be placed on company’s website, holding of board meetings through video conferencing/other electronic mode; voting through electronic means.


After the introduction of E-Governance companies can maintain its statutory registers in electronic mode and hold its board meetings through video conferencing.




Appointment of Key Managerial Personnel [Clause 203(1)]


As per clause 203 of Companies Bill, 2011 the Company Secretaries are recognized as whole-time key managerial personnel. Also Companies Bill, 2011 has made the appointment of Company Secretary mandatory.


As per clause 203 of Companies Bill, 2011, every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,—


  1. Managing director, or Chief Executive Officer or manager and in their absence, a whole-time director; and


  1. Company Secretary.laugh


Unless the articles of a company provide otherwise, an individual shall not be the chairperson of the company as well as the managing director or Chief Executive Officer of the company at the same time [Proviso to Clause 203(1)].


Bill 2011, also provides the definition of Key Managerial Personnel under Clause 2(51) of the Bill, which is as follows:


“Key Managerial Personnel”, in relation to a company, means—


(i) the Chief Executive Officer or the managing director or the manager;

(ii) the Company Secretary;

(iii) the Chief Financial Officer if the Board of Directors appoints him; and

(iv) such other officer as may be prescribed;


Every Company Secretary being a KMP shall be appointed by a resolution of the Board which shall contain the terms and conditions of appointment including the remuneration. If any vacancy in the office of KMP is created, the same shall be filled up by the Board at a meeting of the Board within a period of six months from the date of such vacancy [Clause 203 (2) & (4)]


If a company does not appoint a Company Secretary, the penalty proposed is:


  1. On company – one lakh rupees which may extend to five lakh rupees.
  2. On every director and KMP who is in default – 50,000 rupees and 1,000 rupees per day if contravention continues.




This kind of provision also prescribed for the very first time. Every company shall have at least one director who has stayed in India for a total period of not less than 182 days in previous calendar year [Clause 149(2)].




The concept of independent directors has also been touched upon for the very first time under clause 149.


  1.  All listed companies are required to appoint independent directors.
  2.  Such other public companies as may be prescribed by the Central Government shall also be required to appoint independent directors.
  3. At least one-third of the Board of such companies should comprise independent directors.
  4. Nominee director appointed by any institution, or in pursuance of any agreement, or appointed by any Government to represent its shareholding shall not be deemed to be an independent director.
  5. As per first proviso to Clause 161(2) only an independent director can be appointed as alternate director to an independent director.
  6. The Independent directors shall abide by a code provided in Schedule IV to the Bill.
  7. Independent directors shall hold office up to two consecutive terms. One term is upto five consecutive years.
  8. Eligible for appointment in same company after cooling period of three years.





Another master change proposed in Companies Bill, 2011 under clause 173(2) is participation of directors at Board Meetings has been permitted through video-conferencing or other audio visual means, provided such participation is capable of recording and recognizing. Also, the recording and storing of the proceedings of such meetings should be carried out.