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-December
2012
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2012
December 2012
2008 Bill Introduced in Lok Sabha on 23.10.08 To replace the Companies Act, 1956 Lapsed due to dissolution of Parliament
Bill referred to Standing Committee for review Report tabled in Lok Sabha on August 31, 2010
Was shelved for taking up the same in winter session of Parliament on December 22, 2011
2011 Bill Passed by Lok Sabha on December 18, 2012 as the Companies Bill 2012
December 2012
December 2012
DEFINITIONS
Details Companies Bill, 2012 New Definitions as Some of the new definitions as introduced are of Accounting introduced Standards, Auditing Standards, Associate Company, Chief (Clause 2) Executive Officer, Chief Financial Officer, Control, Deposit, Employee Stock Option, Financial Statement, Global Depository Receipt, Indian Depository Receipt, Independent Director, Interested Director, Key Managerial Personnel, Promoter, One Person Company, Small Company, Turnover, Voting Right etc.. Details Definitions Modified/ other important terms Companies Act, 1956 vis--vis Companies Bill, 2012 Incase of Private Limited Company [Section 3 & Cl. 2(68) Maximum number of members proposed to be increased from 50 to 200 Private company which is a subsidiary of a public company shall be deemed to be a public company. Key Managerial Person (KMP) Cl. 2(51) states that KMP includes the Chief Executive Officer or the managing director or the manager; the company secretary; the Chief Financial Officer if the Board of Directors appoints him; and such other officer as may be prescribed;
DEFINITIONS
Details Definitions Modified/ other important terms Companies Act, 1956 vis--vis Companies Bill, 2012
Scope of the term officer who is in default enlarged The term was defined in Section 5 of the Act. Its scope has now been enlarged. It now states includes as under: (i) whole-time director; (ii) key managerial personnel; (iii) where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified; (iv) any person who, under the immediate authority of the Board or any key managerial personnel, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default; (v) any person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, other than a person who gives advice to the Board in a professional capacity; (vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance; (vii) in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars and merchant bankers to the issue or transfer.
DEFINITIONS
Details Definitions Modified/ other important terms Companies Act, 1956 vis--vis Companies Bill, 2012
Definition of the term Subsidiary Company modified The term is defined in Section 4 of the Act. Its scope has now been modified to mean a Company in which the holding Company (i) Controls the composition of the Board of Directors; or (ii) Exercises or controls more than one half of the total share capital (instead of equity share capital as prescribed under the 1956 Act) either at its own or together with one or more of its subsidiary companies. Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.
Every company having specified net worth or turnover or net profit during any FY shall constitute the Corporate Social Responsibility Committee of the Board. The composition of the committee shall be included in the Board's Report. The Board shall disclose the content of policy in its report and place on website, if any of the Company. The Board shall endeavour to ensure that atleast two per cent of average net profits of the Company made during three immediately preceding financial years shall be spent on such policy every year. If the company fails to spend such amount the Board shall give in its report the reasons for not spending.
Investor Protection
Investor Protection
SHARES - TRANSFER
[S. 111
OF THE
Companies Act, 1956 Securities or other interest of any member freely transferable. [sub-sections (1) and (2) of section 111]
Companies Bill, 2012 Freely transferable, however there needs to be a contract/agreement with regard to the transfer of securities which can be made enforceable as a contract. [Cl. 58]
SECURITIES BUY-BACK
Details Companies Act, 1956 Companies Bill, 2012
Where buyback is by Board (10 per cent of the total paid up equity capital and free reserves), no further offer of buyback is permissible within one year from the date of last offer of buyback. [S. 77A]
No offer of buy-back shall be made within a period of one year reckoned from the date of the closure of the preceding offer of buy-back, if any. [Cl. 68]
Public Companies are permitted to accept deposits from public and shareholders in accordance to Companies (Acceptance of Deposit) Rules. [Section 58A)
No Company except Banking Company and such other Company as may be specified in this behalf shall invite, accept or renew deposits from the subject to fulfillment of certain conditions. A Company may, subject to the passing of a resolution in general meeting and prescribed rules accept deposits from its members on such terms and conditions as may be agreed upon between the Company and its members, subject to the conditions prescribed:
contd. - providing deposit insurance in the manner and extent prescribed - certifying that the Company has not defaulted in the repayment of deposits or payment of interest - providing security, if any for the due repayment of the amount of deposit or the interest thereon including the creation of such charge on the property or assets of the company. However, where a Company does not secure the deposits or secures such deposits partially, then, the deposits shall be termed as 'unsecured deposits' and shall be so quoted in every circular, form, advertisement or in any document related to invitation or acceptance of deposits.
ACCEPTANCE OF DEPOSITS
Details Companies Act, 1956 Companies Bill, 2012
contd.
The deposit repayment reserve account referred to in clause (c) of sub-section (2) shall not be used by the company for any purpose other than repayment of deposits. No Company except Banking Company and such other Company as may be specified in this behalf shall invite, accept or renew deposits from the public except in the manner provided. A Company may, subject to the passing of a resolution in general meeting and prescribed rules accept deposits from its members on such terms and conditions as may be agreed upon between the Company and its members, subject to the conditions prescribed:
No dividend to be declared or paid by a Company for any FY out of the profits of the Company for that year arrived at after providing for depreciation except after the transfer to the reserves of the Company of such percentage of its profits for that year, not exceeding ten per cent. Dividend to be declared in accordance to Companies (Declaration of dividend out of Reserves) Rules, 1975 with a maximum rate prescribed as 10 per cent No restrictions
Dividend to be declared out of the accumulated profits transferred to reserves in accordance to applicable rules
Interim declaration may be declared out of the surplus in P&L Account as well as profits of the FY in which dividend is sought to be declared. Failure in compliance will bar the Company to declare dividend during the period of non compliance
BOOKS OF ACCOUNT
Details Consolidated Statements Companies Act, 1956 Companies Bill, 2012 [Cl. 129] No Provisions The financial statement shall be laid in the AGM of that FY. In case of subsidiary companies, the company shall prepare a consolidated financial statement of the Company and all subsidiaries and lay before the AGM. The Central Government shall have the power to exempt a class or classes of companies from any of the requirement of this section. The clause also provide the penalty where company contravenes the provision of this section. For the purpose of above, "subsidiary" shall include 'associate company' and 'joint venture'
Details
Companies Act, 1956 Exemptions are provided in the case of: 1.Purchase/ Sale of goods and materials: (a) for cash at current Market price (b) Also services, the cost of which does not exceed Rs. 5000 in any year during tenure of Contract 2.Transactions by Banking / Insurance Companies in the ordinary course of Business.
Companies Bill, 2012 Such transactions are subject to prior approval by resolution passed by the Board of Directors in a Board Meeting. In case the paid up capital of the Company/transaction exceeds prescribed limit, prior approval of the shareholders is required. Exemptions are provided in the case of transactions in ordinary course of business, other than those which are not an arms length basis
Valuation report not to be given to shareholders/ creditors alongwith notice convening meeting
Objection can be made by any shareholder or creditor. Such objection can be made irrespective of their shareholding/ debt outstanding
Objection to be made only by: persons holding more than 10% shareholding; or having outstanding debt of more than 5% of total outstanding debt as per the last audited balance sheet
No specific requirement to serve notice on Income tax department and other regulatory body
No
LOAN TO DIRECTORS
Details Provisions Companies Act, 1956 [S. 295]
Provisions are application only to Public Companies subject to the following exceptions: - Banking Companies; Holdings to subsidiary Company ; Private Company; Prior approval of the CG is mandatory before any Public Company directly/indirectly makes loan, gives guarantee or provides security to its Directors or other specified persons.
REGISTERED VALUER
Details Companies Act, 1956 Companies Bill, 20112 [New Provision Cl. 247] Where valuation is to be made under the Act, in respect of any property, stocks, shares, debentures, ,securities or goodwill or other assets or net worth of a Company or its liabilities, such valuation shall be done by a registered valuer.
No provisions prescribed
WINDING-UP
Details Companies Act, 1956 [Ss. 433 & 434] Companies Bill, 2012
Grounds
By Special resolution If Company is unable to pay its debt. Business not commenced within one year of its incorporation or suspends its business for the whole year Minimum number of member goes below than as prescribed i.e. 2 and 7 incase of Pvt. and Public limited Company
[Cl. 271] Requirement of minimum number of member removed Following additional grounds added: i. Management of company affairs in fraudulent manner ii. Formation of Company for fraudulent and unlawful purpose iii. Persons involved/ concerned in the formation of Company guilty of fraud, misfeasance or misconduct in connection therewith.