KEY HIGHLIGHTS

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New Terms Introduced

Accounting Standards Auditing Standards Associate Company Associate Company Chief Executive Officer Chief Financial Officer Control Deposit Employees Stock Option Global Depository Receipts Independent Director Interested Director Key Managerial Personnel One Person Company Promoter Related Party Small Company Turnover Voting Right

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Incorporation & Registered Office of Companies

Concept of One Person Company (OPC limited) introduced. Concept of Small companies, subject to lesser stringent regulatory framework has been introduced. In case of Change of name, Company will have to affix along with its name, the former name or names so changed during the last two years. A company shall appoint an individual or a firm as auditor at annual general meeting who shall hold office till the conclusion of sixth annual general meeting & thereafter till the conclusion of every sixth Annual General Meeting. Concept of Dormant Companies introduced, formed for a future project or to hold an asset or intellectual property. A Private Company can have a maximum of 200 members. . Prohibition on appointment of an individual as auditor for more than one term of five consecutive years and an audit firm as auditor for more than two terms of five consecutive years on all listed & other prescribed Companies.

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Board and Governance

Companies can have a maximum of 15 Directors, without any approval. MD or CEO or manager or whole-time director and Company Secretary designated as Key Managerial Personnel. Personnel. Directors required to be appointed by every Listed Company (even in case of Independent certain Public Companies). One third of the Board of Directors shall comprise of Independent Directors. Mandatory setting up of Audit, Nomination, Remuneration and Stakeholder Relationship Committees for all listed Companies. Duties of Directors defined. One person companies have been given the option to dispense with the requirement of holding an AGM. At least one woman director will be mandatory in the prescribed class or classes of companies. Central Government approval is not required to enter into related party transaction or to give loans to Directors. Every Company shall have at least one director, who was Resident in India for 182 days, during previous calendar year. Every Company Secretary being a KMP shall be appointed by a resolution of the Board. If a director of the company contravenes the provisions of clause 166 i.e. Duties of Directors, such director shall be punishable with a minimum fine of one lakh rupees. Boards Report has been made more informative including extensive disclosures. Every contract or arrangement entered into with a related party shall be referred to in the Boards Report along with the justification for entering into such contract or arrangement. Companies can accept deposits only from its members, subject to prior Shareholders approval in general meeting. A public company having prescribed net worth or turnover may accept deposits from persons other than its members subject to compliance of rules as may be prescribed by Central Government in consultation by Reserve Bank of India. Companies can issue sweat equity by passing required resolution.

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Investor Protection Measures

Fraudulent inducement to invest money is punishable with imprisonment for a term extending 10 years and with fine extending to three times the amount involved. A suit may be filed by a person who is affected by any misleading statement in prospectus. Exit option must for minority shareholders in case the Company gets new promoters. Shareholders approval must for Inter-corporate loans. Secretarial Audit is mandatory for all Listed & other prescribed Companies. Concept of Class Action Suit is introduced. Prohibition of insider trading and on forward dealing in securities of the Company is included. Public Deposits can be accepted by only banking Companies, NBFCs and other allowed firms.

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Corporate Social Responsibility

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 shall constitute the Corporate Social Responsibility Committee of the Board. The composition of the committee shall be included in the Boards Report. Setting aside 2% of average net profit in previous 3 years for CSR activities.

Empowerment of Regulatory Bodies

Powers of arrest and cognizance to SFIO [Serious Fraud Investigation Office] in case of certain offences. Composition and constitution of the National Company Law Tribunal [NCLT] and Special Courts for summary trials. Central Government is empowered to make rules, etc. through delegated legislation.

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Restructuring & Liquidation

The entire rehabilitation and liquidation process has been made time bound. The Tribunal may appoint an interim administrator or a company administrator from the panel of Company Secretaries, CAs, CWAs, etc. maintained by the Central Government. The Company Administrator shall prepare a scheme of revival and rehabilitation. If revival scheme is not approved by the creditors, the Tribunal shall order for winding up of the company. No civil court shall have jurisdiction in respect of any matter on which NCLT or Appellate Tribunal is empowered. The Tribunal may appoint Provisional Liquidator or the Company Liquidator from a panel maintained by the Central Government consisting of Company Secretaries, Chartered Accountants, Advocates and Cost Accountants

Empowerment of Regulatory Bodies

In case of contravention of the provisions for private placement, the Company, its promoters and directors shall be liable for a penalty which may extend to the amount involved in the offer or invitation or two crore rupees, whichever is higher and the Company will also have to refund the money within 60days of order imposing penalty. Every officer of the company whose duty is to give notice of Board Meeting to Directors shall be liable to a penalty of twenty-five thousand rupees, if he fails to do so. Every director who fails to comply with the provisions to maintain Register of contracts or arrangements, in which directors are interested or Register of Contract of employment with managing or whole-time directors shall be liable to a penalty of twenty-five thousand rupees. Every officer, who is guilty of fraud, shall be punishable with minimum imprisonment of 1 year to a maximum of three years and with a minimum fine of Rs. 1 Lac to a maximum of Rs. 3 lac. Companies contravening the provisions of audit shall be liable to a maximum fine of Rs. 5 lac. Also, every office in default shall be liable to imprisonment for a minimum term of 5 year or with fine, of with both.

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Miscellaneous Provisions

Financial year, in relation to any company or body corporate, means the period ending on the 31st day of March every year. In case of Private Placement, Companies will have to allot securities within 60 days of receipt of money. Also, Qualified Institutional buyers will not be counted while calculating number of persons to whom the securities are offered. Companies need to file return of allotment for all kind of securities. Global Depository Receipts can be issued by the Company by passing a special resolution and complying with other prescribed provisions. One auditor can audit maximum 20 Companies. Independent directors can hold office for a maximum of two consecutive terms of three years. Investment Companies cannot have more than two layers of subsidiaries.

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Disclaimer: This document has been prepared on the basis of Companies Bill, 2011 as passed in the Lok Sabha on 18th December, 2012. SPN Legal does not own the responsibility of any error or omission. The users and readers are advised to seek specific opinion before acting upon this document.

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