Companies Act, 2013

By
Dr P V S Jagan Mohan Rao
M Com, LL B, FCS, FCMA, Ph D,
MCJ, M A (Astrology) & MA (Sanskrit)

Past President – The Institute of Company

Secretaries of India – New Delhi

Former Council Member – The Institute of Cost

Accountants of India

Member PAIB Committee of IFAC (International

Federation of Accountants)

President – SAFA (South Asian Federation of Accountants)

Companies Act, 2013

 Lok sabha – 18 12 12
 Rajya Sabha – 8 8 13
Companies Act, 2013
 29 Chapters
 470 Sections
 7 Schedules
 Substantial part of the Bill will be in the form of rules –
will be prescribed
 The Government of India has power to notify different
provisions of the Act at different parts of time
 The bill has 33 new definitions
Companies Act, 2013
Chapters
 Chapter I
 Preliminary
 Short Title, Commencement and Application
 Definitions
 Chapter II
 Incorporation of Companies and Matters Incidental
Thereto
 Chapter III
 Prospectus and Allotment of Securities
 Part I – Public Offer
 Part II – Private Placement
 Chapter IV
 Share Capital and Debentures
 Chapter V
 Acceptance of Deposits by Companies
 Chapter VI
 Registration of Charges
 Chapter VII
 Management and Administration
 Chapter VIII
 Declaration and payment of Dividend
 Chapter IX
 Accounts of Companies
 Chapter X
 Audit and Auditors
 Chapter XI
 Appointment and Qualifications of Directors
 Chapter XII
 Meetings of Board and its Powers
 Chapter XIII
 Appointment and Remuneration of Managerial Personnel
 Chapter XIV
 Inspection, Inquiry and Investigation
 Chapter XV
 Compromise, Arrangements and Amalgamations
 Chapter XVI
 Prevention of Office and Mismanagement
 Chapter XVII
 Registered Valuers
 Chapter XVII
 Removal of Names of Companies from the Register of
Companies
 Chapter XIX
 Revival and Rehabilitation of Sick Companies
 Chapter XX
 Winding Up
 Winding Up by the Tribunal
 Voluntary Winding Up
 Provisions applicable to every mode of Winding Up
 Official Liquidators
 Chapter XXI
 Companies Authorised to register under this Act
 Chapter XXII
 Companies Incorporated outside India
 Chapter XXIII
 Annual Report of Government Companies
 Chapter XXIV
 Registration Offices and Fees
 Chapter XXV
 Companies to Furnish Information and Statistics
 Chapter XXVI
 Nidhis
 Chapter XXVII
 National Company Law Tribunal and Appellate
Tribunal
 Chapter XXVIII
 Special Courts
 Chapter XXIX
 Miscellaneous
Schedules
 Schedule I
 Memorandum and Articles of Association
 Schedule II
 Useful Lives to Compute Depreciation
 Schedule III
 General Instructions for preparation of Balance Sheet
and Statement of Profit and Loss of Company
 Schedule IV
 Code for Independent Directors
Schedules
 Schedule V
 Conditions to be fulfilled for the appointment of a
Managing or Whole-Time Director or Manager without
approval of Central Government
 Schedule VI
 Infrastructure Projects
 Schedule VII
 Activities -- CSR
New chapters
 Registered Valuers
 Government companies
 Companies to furnish information or statistics
 Nidhi companies
 NCLT - NCLAT
 Special courts
new definitions
 Accounting standards
 Auditing standards
 Associate company
 CEO, CFO
 Control
 Employee stock option
 Financial statements
 GDR
 IDR
 Independent director
 Interested director
 Key managerial personnel
 Promoter
 One person company
 Small company
 Definition of private company
 200 members
 Associate company
 Dormant company
 expert
 Small companies – with lesser control
 Public offers
 Private placements
egovernance
 Maintenance and inspection of documents in
electronic form
 Option to keep books in electronic form
 To be placed on company’s website
 Board meetings – video conferencing
 Minimum directors
 Maximum directors
 Resident director
 Women director
Independent Directors
 Independent director - Section 149 (6)
 Listed companies one third - independent directors
 At least two Independent Directors
 - Public Companies – Paid up Capital
of Rs. 10 Crore or more
 - Public Companies – Turnover of 100
Crore or more
 - The Public companies which have in aggregate
outstanding loans, debentures and
deposits, exceeding fifty Crore
Woman Director
 Woman Director –
 Every listed company
 Paid up capital – 100 crores
 Turnover - 300 crores
 Vacancy to be filled in 3 months / next
board meeting which ever is later
 Independent director – for five years
 For two terms of five years
 Gap of three years after the two terms
 Retirement by rotation Section 152 (6) and section 152
(7) – not applicable to Independent directors
DIRECTOR
 Appointment
 Qualifications
 Disqualifications – Section 164
 Remuneration
 Retirement by rotation
 Resignation
 Role
 Code of conduct
Audit Committee
 Minimum three directors majority Independent
 Majority including chairman with read and
understand financial statements
 Every listed company
 Public Companies – Paid up Capital of Rs. 10 Crore or
more
 Public Companies – Turnover of 100 Crore or more
 The Public companies which have in aggregate
outstanding loans, debentures and deposits,
 exceeding fifty Crore
 Section 164 – disqualification of directors
 Section 166 – duties of directors
 Section 149 – directors
 Schedule IV – Code for independent directors
 Meetings
 Attendance
 Quorum
 Independent Director
Director Identification Number
 Application for allotment of Director Identification
Number
 Allotment of Director identification Number
 Prohibition to obtain more than one Director
identification Number
 Director to intimate Director identification number
 Company to inform director Identification Number to
Registrar
 Obligation to indicate Director identification Number
Code of Conduct - Independent
Directors
 I. Guidelines of professional conduct
 II. Role and Functions
 III. Duties
 IV. Manner of Appointment
 V. Re-appointment
 VI. Resignation or removal
 VII. Separate Meetings
 VIII. Evaluation Mechanism
Duties of directors
CSR
 Net worth – 500 crore
 Turnover – 1000 crore
 Net Profit – 5 crore
 Corporate social responsibility committee – 3 directors
and atleast one independent directors
 CSR policy
 Schedule VII
 2% - average net profits – 3 years
 Company Secretary
 Secretarial Audit
 Secretarial Standards
Board
 Composition
 Meetings
 Quorum
 Minutes
Board Committees
 Audit Committee Section - 177
 Nomination and Remuneration Committee Section –
178
 Stakeholders Relationship Committee – Section - 178
 Corporate Social Responsibility Committee Section -
135
 Auditors
 Internal Audit
 Cost Audit
National Financial Reporting
Authority
Independent Directors

 Role , Responsibility and Accountability

 Section - 2 (47) – definition of Independent Director
 With reference to Section - 149 (5)
 Section 149 (6)
 A director other than a managing director, whole time
director and independent director
 He must be a person of integrity
 Has relevant expertise and experience
 Not related to promoter directors the company,
holding, subsidiary or associate.
 No pecuniary relationship
 Possesses such other qualifications as may be
prescribed
 Declaration as to compliance of criteria for being a an
Independent director. Independent director shall give
a declaration in the first board meeting he attends and
in the first board meeting every year and whenever
there is a requirement.
 Every listed company shall have atleast one third of the
total number of directors as independent director
 If an independent director resigns – the vacancy shall
be filled in 180 days - When it leads to less than the
required number
 Alternate director to an independent director shall
comply with the criteria for an independent director
 Nomination and Remuneration Committee for listed
and such other companies..
 Shall have three or more non executive directors
 Shall have one-half independent directors
 Chairman shall be independent director
Audit Committee
 Minimum 3 directors
 Majority independent directors
 Members should be able to read and understand
financial statements
 Statement of declaration given by the independent
directors shall form part of the annual reports placed
at AGMs
Meetings of Independent Directors
 Independent directors shall hold at least one separate
meeting every year
 Other directors and members of management are not
to attend these meetings
 Independent directors must attend these meetings
 Review of the performance of non independent
directors and the board as a whole is carried on these
meetings.
 Review of the performance of the chairperson
 Quality quantity and timeliness of the information
being provided to the directors and the board is
reviewed
 Independent directors are liable only when acts are
occurred
 with his knowledge
 Attributable through board processes
 With his consent and connivance
 When he has not acted diligently
 Training for independent directors
 Remuneration of independent directors
 Resignation of independent directors
Schedule IV
 Uphold the ethical standards of integrity and probity
 Act objectively and constructively
 Act in the bona fide manner in the interests of the
company
 Devote sufficient time
 Not to allow anything which may vitiate the
independence
 Not to use his position for personal benefits
 Assist the company in implementing the best
corporate governance practices
Role and functions
 Help in bringing the independent judgment in board
deliberations
 Bring in objectivity in reviewing the performance
 Satisfy and deal with the financial information and
statements as to their integrity.
 Safeguard the investors
 Balance the conflicting interests of stakeholders
 Determine the appropriate levels of remuneration
Duties
 Update their skills, knowledge and familiarity
 Seek needed information
 Follow the professional advice
 Attend the meetings
 Insist on appropriate recording of minutes
 Keep informed about the company and external
environment
 Not to unfairly obstruct the functioning
 Ensure proper deliberations take place regarding
related party transactions.
 Appropriate vigil mechanism
 Participate actively in ensuring the company’s code of
conduct
 Not to disclose confidential information
Auditor not to render certain
services
 Accounting and book keeping services
 Internal audit
 Design and implementation of any financial
information system
 Actuarial services
 Investment advisory services
 Rendering of outsourcing financial services
 Management services
 Any other services as may be prescribed
Chapter IX – Accounts of
Companies
 Section -128 -- Books of Accounts
 Section – 129 Financial Statements
 Section ‐ 130 Re – Opening of accounts on Court’s or
Tribunal’s Orders
 Section ‐ 131 Voluntary Revision of Financial
Statements or Board’s Report
 Section - 132 Constitution of NFRA
 Section - 134 Financial Statements, Board Report, etc
 Section ‐ 135 Corporate Social Responsibility
 Section – 136 Right of member to copies of audited
financial statements
 Section – 137 Copy of financial statement to be filed
with the registrar
 Section ‐ 138 Internal Audit
 Schedule II Useful lives to Compute Depreciation
 Schedule III General Instructions for Preparation of
Balance Sheet and Profit and Loss Account
Audit and Auditors
 Sec 139 – Appointment of Auditors
 Sec- 140 – Removal , resignation of auditor and giving
of special notice
 Sec – 141 – Eligibility, qualifications and
disqualifications of auditors
 Sec – 142 – Remuneration of Auditors
 Sec – 143 – powers and duties of auditors and auditing
standards
 Sec – 144 – Auditor not to render certain services
 Sec – 145 – Auditor to sign audit reports, etc
 Sec – 146 – Auditors to attend general meeting
 Sec – 147 - Punishment for contravention
 Sec – 148 – Central Government to specify audit of
items of cost in respect of certain companies
Thank You