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Salient features of Important Sections of the Companies Act, 2013

  • A Private Company has been allowed to have a maximum of 200 members as against 50 in the Companies Act, 1956 [Section 2 (68)].
  • The concept of One-Person-Company has been introduced. In fact, it can be formed as a Private Limited Company and only a natural person who is an Indian citizen and resident in India shall be eligible to incorporate a One-Person-Company or be appointed as a nominee for the sole member of a One-Person-Company. The term “resident in India” means a person who has stayed in India for a period of not less than 182 days during the immediately preceding one calendar year (Section 3)
  • Where the company changed its activities which are not reflected in its name, it has to change its name in line with its activities within a period of six months from the change of activities (Section 4)
  • "Objects" In the Memorandum of Association of a Company are not required to be divided into Main, Ancillary and Other Objects. (Section 4)
  • Key Provisions with respect to private placement are as under (Section 42) :-
    1. A company shall not make any private placement unless the same has been approved by a special resolution. Moreover, special resolution is required to be passed for each offer or invitation;
    2. The said offer cannot be made to more than 200 persons in aggregate in a financial year excluding Qualified Institutional Buyers (QIB) and employees offered securities under Employees Stock Option (ESOP);
    3. The minimum investment size shall not be less than Rs.20,000/- of face value of the securities per person and payment for subscription shall be made through the bank account of the subscriber only;
    4. Some provisions of the rules will not be applicable to Non-Banking Financial Companies (NBCFs) and Housing Finance Companies if they are complying with regulations made by Reserve Bank of India or National Housing Board in respect of offer or invitation to be issued on private placement basis;
    5. Allotment under each private placement has to be done within 60 days on the receipt of application money;
  • Shares other than Sweat Equity, cannot be issued at a discount (Section 53);
  • Any amount received from the Members or relative of director in a private company shall also be considered as deposits;
  • Companies are required to disclose additional information in its annual returns with regard to particulars of its holding, subsidiary and associate companies, certification of compliances, remuneration of directors and key managerial personnel etc. (Section 92 );
  • The annual return of a listed company or a company having paid-up share capital of Rs.10 crores or more and turnover of Rs.50 crores or more are required to be certified by a Company Secretary in practice (Section 92 );
  • First annual general meeting of a Company shall be held within 9 months from the closure of its first financial year instead of 18 months from the date of its incorporation as provided in the Companies Act, 1956. (Section 96)
  • Every Company has to follow the secretarial standards while preparing the minutes of the Board of Directors as well as general meetings. (Section 118)
  • The maintenance and inspection of document(s) in electronic form is specifically provided for, whereby ‘records’ has been defined to mean any register, index, agreement, memorandum, minutes or any other document required by the Companies Act, 2013 or the rules made thereunder. The requirement is imposed on every listed Company or a Company having not less than 1000 shareholders, debenture holders or other security holders. (Section 120)
  • Every Company shall, at the first annual general meeting (AGM), 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 AGM and thereafter, till the conclusion of every sixth meeting. However, the Company shall place the matter relating to such appointment by members at every AGM. (Section 139)
  • Auditors of the following classes of Companies excluding one person companies and small companies, shall retire by rotation:-
    1. All unlisted public companies having paid up share capital of Rs. 10 crores or more;
    2. All private limited companies having paid up share capital of Rs. 20 crores or more;
    3. All Companies having paid up share capital of less than the threshold limit mentioned under (a) & (b) above, but having public borrowings from financial institutions, banks or public deposits of Rs. 50 crores or more. (Section 139).
  • Companies can have maximum of 15 directors as against 12 directors under the Companies Act, 1956. This number may further be increased after passing a special resolution to such effect. (Section 149)
  • A director can participate in a board meeting through video conferencing or other audio visual modes as may be prescribed.
  • A director intending to participate through video conferencing or other visual means shall communicate his intention to the Chairperson or the Company Secretary of the Company. At the same time, certain conditions and safeguards have also been provided for meetings through video conferencing. (Section 173)
  • The Companies Act prohibits grant of any loans, giving of guarantee or providing of any security to the directors or any other person in whom the director is interested; otherwise than for the given exemptions. Further, the provision for seeking the approval of the Central Government for such purpose has been deleted. (Section 185)
  • The board of every company is to ensure that the company spends in every financial year, at least 2% of the average net profits made during the 3 immediately preceding financial years in pursuance of its CSR Policy. The board in its report is to explain reasons for failure to spend such amount. (Section 135)
  • The company may undertake the CSR activities through a registered trust or registered society or a company established by the company or its holding or subsidiary or associate company under Section 8 of the Companies Act, 2013 or otherwise. [(Section 135 read with Rule No.2 (2)]
  • Fraud has been specifically defined and declared as a non-cognizable offence. The Serious Fraud Investigation Office (SFIO) is to investigate big frauds and scams relating to companies and the said office has been given statutory recognition with very wide powers of search, seizure, arrest etc. (Section 211).
  • The National Company Law Tribunal and National Company Law Appellate Tribunal are to be formed. (Sections 408 and 410).

 

We look forward for a rewarding and a fruitful professional association in the above field of Company law, Taxation Laws and other related laws provided given a chance of executing professional assignments.

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