COMPANIES ACT 1956VS

COMPANIES ACT 2013

ContentsTHE COMPANIES ACT, 2013...............................................................................................................................................3

An overview of Companies Act 2013 .............................................................................................................................. 3

Comparative study on some of the provisions of Companies Act 1956 and Companies Act 2013.........................4

I. Significant changes in Definitions and new inclusions ....................................................................4

II. Incorporation ............................................................................................................................................. 8

III. Directors ................................................................................................................................................... 10

IV. Share capital............................................................................................................................................. 12

V. Acceptance of deposits by Companies................................................................................................ 14

VI. Investments.............................................................................................................................................. 14

VII. Books of Accounts and Financial Year................................................................................................ 15

VIII. Reports ...................................................................................................................................................... 16

IX. Prospectus, Raising of funds & Allotment......................................................................................... 16

X. Utilising Securities Premium Account................................................................................................ 17

XI. Annual returns and related issues ....................................................................................................... 17

XII. Notices, Meetings, Quorums, Voting, Resolutions, Minutes ......................................................... 19

XIII. Internal Audit .......................................................................................................................................... 21

XIV. Cost Audit ................................................................................................................................................ 21

XV. Statutory compliance.............................................................................................................................. 21

XVI. Transfer to reserves ................................................................................................................................ 22

XVII. Dividends................................................................................................................................................. 22

XVIII. Auditors .................................................................................................................................................... 22

XIX. Nomination & Remuneration committee ........................................................................................... 25

XX. Prohibitions & Restrictions................................................................................................................... 25

XXI. Company Secretary.................................................................................................................................25

XXII. Investigations .......................................................................................................................................... 26

XXIII. Corporate Restructuring ........................................................................................................................ 26

XXIV. Class action Suits ....................................................................................................................................27

XXV. Valuations ................................................................................................................................................ 27

XXVI. Winding up .............................................................................................................................................. 27

XXVII. Other legal provisions............................................................................................................................ 28

XXVIII. National Financial reporting Authority .............................................................................................. 28

XXIX. Schedules – Companies Act 2013 ......................................................................................................... 30

References: ........................................................................................................................................................................31

PPER

THE COMPANIES ACT, 2013(Passed in both houses of Parliament on 8th August 2013)

We all know that the 57 year old Companies act, 1956 has now got replaced with the new CompaniesAct, 2013. This write up has been made with an effort to compare some of the major clause / issues inthe new Companies Act, 2013 and the Companies Act 1956.

History of Companies Bill 2012

An overview of Companies Act 2013

2013•Enacted as Companies Act 2013, with President assent on 29th August 2013•Bill passed in Rajya Sabha on 8th August 2013

2012•Companies Bill passed in Lok Sabha on 18th December 2012

2011•Introduced in Lok Sabha on 14 th December 2011

2010•Bill referred to standing committee for review , report tabled in Lok Sabha on 31st August2010

2009•2008 Bill modified and re introduced on 3rd August 2009

2008

•Companies bill 2008 introduced in Lok sabha on 23rd October 2008 for the first time, toreplace 52 year old Companies Act , 1956

•But it lapsed due to dissolution of parliament.

COMPANIES ACT 2013

VII SCHEDULES

470 CLAUSES

29 CHAPTERS

THE COMPANIES ACT, 2013(Passed in both houses of Parliament on 8th August 2013)

We all know that the 57 year old Companies act, 1956 has now got replaced with the new CompaniesAct, 2013. This write up has been made with an effort to compare some of the major clause / issues inthe new Companies Act, 2013 and the Companies Act 1956.

History of Companies Bill 2012

An overview of Companies Act 2013

•Enacted as Companies Act 2013, with President assent on 29th August 2013•Bill passed in Rajya Sabha on 8th August 2013

•Companies Bill passed in Lok Sabha on 18th December 2012

•Introduced in Lok Sabha on 14 th December 2011

•Bill referred to standing committee for review , report tabled in Lok Sabha on 31st August2010

•2008 Bill modified and re introduced on 3rd August 2009

•Companies bill 2008 introduced in Lok sabha on 23rd October 2008 for the first time, toreplace 52 year old Companies Act , 1956

•But it lapsed due to dissolution of parliament.

COMPANIES ACT 2013

VII SCHEDULES

470 CLAUSES

29 CHAPTERS

THE COMPANIES ACT, 2013(Passed in both houses of Parliament on 8th August 2013)

We all know that the 57 year old Companies act, 1956 has now got replaced with the new CompaniesAct, 2013. This write up has been made with an effort to compare some of the major clause / issues inthe new Companies Act, 2013 and the Companies Act 1956.

History of Companies Bill 2012

An overview of Companies Act 2013

•Enacted as Companies Act 2013, with President assent on 29th August 2013•Bill passed in Rajya Sabha on 8th August 2013

•Bill referred to standing committee for review , report tabled in Lok Sabha on 31st August2010

•Companies bill 2008 introduced in Lok sabha on 23rd October 2008 for the first time, toreplace 52 year old Companies Act , 1956

•But it lapsed due to dissolution of parliament.

COMPANIES ACT 2013

VII SCHEDULES

470 CLAUSES

29 CHAPTERS

Comparative study on some of the provisions of Companies Act 1956 and Companies Act 2013Caption Companies Act 1956 Companies Act ,2013 New

ClausesI. Significant changes in Definitions and new inclusions

A) Associate company In relation to another company, means acompany in which that other companyhas a significant influence, but which isnot a subsidiary company of thecompany having such influence andincludes a joint venture company.

Explanation.—For the purposes of thisclause, “significant influence” meanscontrol of at least twenty per cent oftotal share capital, or of businessdecisions under an agreement

2(6)

B) Control For the purposes of this Act,acompany shall, subject totheprovisions of sub- section (3),be deemed to be asubsidiaryof another if, butonly if,

a) that other controlsthe composition ofits Boardof directors;or

b) that other-i) where the first-

mentioned company is anexisting company inrespect of which theholders of preferenceshares issued before thecommencement of thisAct have the same votingrights in all respects asthe holders of equityshares, exercises orcontrols more than half ofthe total voting power ofsuch company;

ii) where the first-mentioned company isany other company,holds more than half innominal value of itsequity share capital; or]

c) The first- mentionedcompany is a subsidiaryof any company which isthat other's subsidiary.

“control”, shall include the right toappoint majority of the directors or tocontrol the management or policydecisions exercisable by a person orpersons acting individually or inconcert, directly or indirectly, includingby virtue of their shareholding ormanagement rights or shareholdersagreements or voting agreements or inany other manner

2 (27)

C) Director includes any personoccupying the position of

Means a director appointed to the Boardof a company.

2(34)

director, by whatever namecalled

D) Financial Statement i. a balance sheet as at theend of the financial year,

ii. a profit and loss account,or in the case ofaccompany carrying onany activity not for profit,an income andexpenditure account forthe financial year

In relation to a company includes:i. a balance sheet as at the end of

the financial year,ii. a profit and loss account, or in

the case of accompany carryingon any activity not for profit, anincome and expenditureaccount for the financial year;

iii. cash flow statement for thefinancial year,

iv. a statement of changes inequity; and

v. any explanatory note attachedto or forming part of anydocumentreferred to in sub-clause (i) to sub-clause (iv);

provided that the financialstatementwith respect to One PersonCompany,small company and dormantcompany may not include the cash flowstatement

Issue: Cash Flow Statement becomesmandatory.

2(40)

E. Financial Year In relation toanybodycorporate, theperiod inrespect of whichany profit and loss account ofthe body corporate laidbefore it in annual generalmeeting is made up, whetherthat period is a year or not

Provided that, in relation toan insurance company,"financial year" shall meanthe calendar year referred toin subsection (1) of section 11of the Insurance Act, 1938 (4of 1938)

The Financial can mandatorily end on31st March

Exception-a) Entities which are holding

companies or subsidiarycompanies of foreign companiesrequiring consolidation outsideIndia with the approval ofTribunal.

b) Existing companies to alignwithin 2 years

2(41)

F. Free reserves "free reserves" means allreserves created out oftheprofits and sharepremiumaccount but doesnot includereserves createdout ofrevaluation of assets,writeback ofdepreciationprovisionsandamalgamation

Share premium account doesnot form part.

Credit balance in Statement ofProfit & Loss is not free reserve

2(43)

G. Key ManagementPersonnel

No provision exist the Chief Executive Officer orthemanaging director or themanager;

the company secretary;

2(51)

the Chief Financial Officer if theBoard of Directors appointshim;and

such other officer as may beprescribed

H. Net Worth Means the sum total of thepaid-up capital andfreereserves after deductingthe provisions or expenses asmay be prescribed.

Explanation. - Forthepurposes of this clause,"free reserves" means allreserves created out of theprofits and share premiumaccount but does not includereservescreated out ofrevaluation of assets, writebackofdepreciationprovisions andamalgamation

it says that only paid upcapital,share premium andreservescreated out of profit willbetreated asnet worth.

Credit balance in Statement ofProfit & Loss has been left out.

2(57)

I. Officer includes any director,manager or secretary or anyperson in accordance withwhose directions orinstructions the Board ofdirectors or any one or moreof the directors is or areaccustomed to act

to include CEO/ CFO or any otherofficer as may be prescribed

2(59)

J. Officer in default In relation to any provisionreferred to in section 5, hasthe meaning specified in thatsection ;

Scope broadened Directors aware of the default CFO KMP’s if knowingly commits

default

2(60)

K. ‘relative A person shall be deemed tobe a relative of another, if,and only if,a) they are members of

a Hindu undivided family ;or

b) they are husbandand wife ;

c) the one is related tothe other in the mannerindicated in Schedule IA

with reference to any person, meansanyone who is a related to another, if—

they are members of a HinduUndivided Family;

they are husband and wife; or one person is related to the

other in such manner as may beprescribed

2(77)

L. Related partytransactions

Section 297 covered only saleand purchase of goods,rendering of services,underwriting the subs-cription of any shares ordebentures.Where paid up share capitalof the company exceeds Rs. 1crore, prior approval of theCentral Govt. required. Notapplicable to contracts

Also covers leasing of property appointment of agent for the

sale or purchase, related party’s appointment to

any office or place of profit inthe company, its subsidiary orassociate company.

Prior CG approval done away it andonly Members approval required byway of a special resolution.

188

between two publiccompanies Applicable to contracts between two

public companies as wellM. Small Company No provision exists. means a company, other than a public

company,- paid up share capital of which

does not exceedfifty lakhrupees or such higher amountas may be prescribed whichshall not be more than fivecrores rupees; or

turnover of which as per its lastprofit and loss account doesnotexceedTwo crore rupees orsuch higheramount as may beprescribed whichshall not bemore than twenty crorerupees

Provided that nothing in this clauseshall apply to :

a. a holding company or asubsidiary company;

b. a company registered undersection 8;

c. a company or body corporategoverned by any special act.

subjected to a lesser stringent regulatoryframework

2(85)

N. SickIndustrialCompanies

Treatment meted out underSICA,1985 coverage limitedonly to Industrial companies.SICA determines sicknessbased on negative net worthcriteria

Treatment meted out under chapter XIXof the Bill:

Covers revival and rehabilitation of allcompanies irrespective of the industrythey are in.Sickness of company to be determinedon the basis of whether co is able to payits debts or not.

O. Dormant Company Not defined Clause 455 defines inactive company asa company which: Has not been carrying on any

business or operation or has notmade any significant accountingtransaction during the last twofinancial years, or

Has not filed financial statementsand annual returns during the lasttwo financial years

455

P. Nidhi Companies Section 620A-Necessary forCentral Govt. to notify acompany as a Nidhi for it toqualify as such

No such notification required.Nidhi defined in this clause.

406

Q. PublicCompany Considers aprivatecompanywhich isasubsidiary ofapubliccompanyas apubliccompany.

Further enhanced to provide that aprivate subsidiaryof a public companydeemed to be a public companyeventhough the subsidiary continues to be aprivatecompany in the articles

R. PrivateCompany Restricts themaximumnumberof members to 50

To restrict the maximum number ofmembers to 200

S. One personCompany

No provision exists. Concept of One Person Company hasbeen introduced and the OPC can beformed as private limited companyPrivileges Providedto OPCs

The financial statement may notinclude the cash flow statement[Proviso to Clause 2(40)]

The annual return to be signedby the company secretary, orwhere there is no companysecretary, by the director of thecompany.

No requirement of holding anAGM [Clause 96(1)]

Inapplicability of the provisionsof Section 98 and Sections 100 to111 (both inclusive) [Clause122(1)]

Minimum number of directors:1[Clause 149(1)]

Board Meetings- Minimum 1ineach half of a calendar yearandthe Gapbetween thetwomeetings shall not be lessthan90 days. Notapplicablewherethere is only oneDirector.Clause 173 (5)

Quorum for Board Meetingsnotapplicable where there isonly 1director in OPC. (Clause174)

3

II. IncorporationIncorporation ofcompany

Certificate of Incorporation tobeconclusive evidence

Action can be taken even afterincorporation, if incorporation is on thebasis of false or incorrect incorporation.Thus the certificate is not treated asconclusive evidence

7

Companies that canbe formed

Public Limited , private Limitedcompanies, Section 25companies, Governmentcompanies

List includesOne person company as aprivate company

3

Reservation of newname-proceduralaspects

Procedural aspects not covered. On payment of prescribed fees to ROCand by an application the new name/change of name can be reserved.

4(4), 4(5)

Memorandum ofAssociation

MoA should have Clauses suchas Name, state, main objects,other objects, subscriptionclause

MoA not to have other objects, otherthings remains the same

4(1)

Formats of AoA Table – B – Company limitedby shares

Table – C – Company limitedby guarantee and not havingshare capital

Table – D- company limited

Table –F- company limited by shares Table – G- company limited by

guarantee and having share capital Table – H- Company limited by

guarantee and not having share capital Table – I – Unlimited company having

by guarantee and havingshare capital

Table – E- Unlimited company

share capital Table – J- Unlimited company not

having share capitalFormation ofcompanies withcharitable objects

Section 25 Company. Didnotspecifically provide forsports,education, research,socialwelfare andenvironmentprotection. Couldbe only by wayof a public orprivate company.Max. action that can be takenbyCentral Government (CG)wasrevocation of license andthattoo only for violation ofanyterms of the license.

Specifically provides for all thesewords.Could be as a OPC or anAssociation ofPersons (AOP). Actionbesidesrevocation can be directionfor windingup of the Company oramalgamationwith another companyregistered withsame objects.

Provides for additional groundsforrevocation like affairsbeingconducted fraudulently orprejudicialto public interest.

8

Commencement ofBusiness

Applicable only toPublicCompanies. If notcomplied,no powers to the ROCtoinitiate action for theremovalof the name of theCompanyfrom the RegisterofCompanies

Applicable to both Public and Private –ROC is empowered to remove the nameof the company from the register ofcompanies if declaration is not filedwithin 180days from the date ofincorporation of the company and ROChas reasonable cause to believe that thecompany is not carrying on anybusiness.

11

Entrenchmentprovision in articles

No such provisions existed. Articles may provide for more stringentor restrictive procedure than passing ofspecial resolution for altering the certainprovisions of AoA ( a provision can bealtered only if agreed by all themembers of the company in writing)

5

Name change duringthe last two years

No such provision existed. Every company should have its formername printed or affixed outside itsoffice, in its letter head, etc during lasttwo yearsIt is not necessary to have a registeredoffice at the time of incorporation, but itshall have at all times a registered officefrom the 15th day of incorporation

12

New restrictions onalteration of objectsclause wherecompany has anyunutilised proceedsfrom public issue

Objects clausealterationrequired onlyspecialresolution of membersandfiling of Form 23 withtheROC.

It cannot alter its clause unless it passesa special resolution and the details asmay be prescribed , of the notice, shallbe published in two newspapers andshall also be placed on the company’swebsite of the company;Dissenting shareholder shall be givenexit opportunity in accordance withSEBI regulations.

13

Change of promoters No such provision existed. Company has to file a return with theROC in case of changes in promoters ortop ten shareholders of the companywithin 15 days of such change

93

Applicability ofcertain provisions toOPC-clause

Not applicable Power to call meetings of members, calling for EOGM, notice of meeting, statement to be annexed to notice, quorum for meetings, chairman for meetings,

98100101102103104

proxies, restriction on voting rights, voting by show of hands, voting through electronic means, demand for poll, postal ballot, circulation of member’s resolution

105106107108109110111

Contract by OPC No OPC concept existed Where OPC limited by shares or byguarantee enters into a contract with itssole member, who is also a Director; thecompany should preferably enter into awritten contract.

If not the above, the OPC will have torecord the contract in the board minutesbook and file a return with the ROCwithin 15 days of the date of approvalby the BOD, with prescribed fees.

193

Conversion of LLPsintoCompanies

Not permitted under the presentregime

Provides for conversion of LLPs intocompanies

371

Companiesincorporated outsideIndia

Service of documents on foreigncompany now can be servedthrough any electronic mode.

The foreign offices are alsorequired to comply with theprovisions ofwinding up.

383

391

E-governance No such provision Maintenance and allowing inspection ofdocuments by companies in electronicform

120

Vigil Mechanism No provision exists. 177(9)-Every listed company or suchclass orclasses of companies, as maybeprescribed,shall establish avigilmechanism for directors andemployeesto report genuine concernsinsuchmanner as may be prescribed.

177(10)- The vigil mechanism undersub-section (9) shall provide foradequatesafeguardsagainstvictimisation ofpersons who use suchmechanism andmake provision for directaccess to thechairperson of theAudit Committee inappropriate orexceptional cases.

177(10)

III. DirectorsWomen Director No such provision existed In prescribed class or classes of

companies there should be 1 womendirector

149(1)

Resident Directors No such provision existed Every company shall have at least oneDirector who has stayed in India for atotal period of not less than 182 days inthe previous calendar year.

Panel of ID’s to be maintained by abody/institute notified by theCGfacilitating appointment ofIndependent Directors.

149(1)

150

Listed companies may have one directorby small share holder

151

Independent directors No such provision existed Tenure of such directors- notexceeding two consecutive term of 5years

Can be reappointed after a gap of 3years, however he should not beassociated with the company directlyor indirectly in this gap

Not liable to retire by rotation Excluded for the purpose of

computing ‘1/3rd of the retiringdirectors’

149

Maximum number ofDirectors

Section 259 provided formax. 12 and beyond 12required prior Central Govt.Approval

provides for max 15 and beyond 15by passing a special resolution

149(1)

Right of the personother than retiringdirectors to stand fordirectorship

Section 257 provides thatsuch a person has todeposit Rs. 500 whichwould be refunded in casehe is appointed as Director

Clause 160 has increased this amountto Rs. 100,000 which is refundablewhen he is appointed or even whenhe gets more than 25% of the totalvalid votes cast either on show ofhands or on poll on such resolution

160

Alternate Director Section 313-Absence for 3months from the ‘state wherethe Board Meetings areordinarily held’, is thecriteria

Clause 161-has been modified toinclude ‘India’, instead of the ‘statewhere the board meetings areordinarily held’, to be the criteria

161

Duties of Director Not specifically provided Provides for the following duties: To act in accordance with

co’sAoA; Act in good faith; Exercise his duties with due

care and diligence. A director shall not involve in

any conflicting interest with thecompany

Achieve or attempt to achieveany undue advantage;

Assign his office.

166

Resignation of directors No such provisionspecifically existed

Provision for director to resign bytendering his resignation letter: whichthe Board has to note and place beforethe members in the next generalmeeting.

Date of resignation will be datementioned in the letter or the date ofreceipt of the resignation by thecompany, whichever is later.

Director who has resigned shall be liableeven after his resignation for offenceswhich occurred during his tenure

168

Loan to Directors sec 295-not applicable toprivate companies and prior

CG approval done away with andapplicable to private companies as well.

185

approval of the CG requiredRemuneration ofmanagerial personnel incase of no profits orinadequate profits.

Governed by Schedule XIII To be governed by schedule V. IDs notto get stock option but may get paymentof fees and profit linked commissionsubject to limits. CG may prescribeamount of fees under the rules

Appointment of WholeTime Director

Section 269-every publiccompany having capital ofmore than Rs 5 cr.-to have aManaging director/ WTD/Manager

Every company belonging to suchclassor description of companies as maybe prescribed shall have MD or CEO orManager and in their absence, a WTDand a Company Secretary.Individual not to be the Chairman of theCo. as well as the MD or CEO of the Co.at the same time (AoA can provide forthis);

Every whole time KMP to be appointedby a resolution at BOD meeting;A WTKMP not to hold office in morethan one company at the same time.Any vacancy in the office of any KMP tobe filled up by the BOD within 6 m.Provisions relating to separation ofoffice of Chairman and ManagingDirector (MD) modified to allow, incertain cases, a class of companieshaving multiple business and separatedivisional MDs to appoint same personas ‘chairman as well as MD’

203

Number of directorship 20, out of which not more than 10 can bea public companies and includesalternate directorship also

165

IV. Share capitalIncrease in subscribedcapital

Apart from existing shareholders, if thecompany having share capitalatanytime, proposes to increase itssubscribedcapital by the issue offurthershares, such shares may also beoffered toemployees by way ofESOPsubject to approval ofshareholders by way of specialresolution. (Clause62)

62

Issue of bonus shares No such provisions existed.However rules framed forpublic unlisted company.

Private limited companies are notpermitted to issue bonus shares.

63 and23

Buy back of shares [77B. PROHIBITION FORBUY-BACK IN CERTAINCIRCUMSTANCES1. No company shall

directly or indirectlypurchase its own shares orother specified securities –

a) through anysubsidiary companyincluding its ownsubsidiary companies ; or

b) through any

A company can make a buy back even ifit had at any time defaulted

in repayment of deposit orinterest thereon, redemption ofdebentures or preference sharesor payment of dividend to anyshareholder

Repayment of term loan orinterest thereon

Provided that default must have been

66(6)

investment company orgroup of investmentcompanies ; or

c) if a default, by thecompany, in repayment ofdeposit or interest payablethereon, redemption ofdebentures orpreferenceshares or payment ofdividend to anyshareholder or repaymentof any term loan or interestpayable thereon to anyfinancial institution orbank is, subsisting.

2. No company shalldirectly or indirectlypurchase its ownshares orother specified securities incase, such company hasnot complied with theprovisions of sections 159,207and 211.]

remedied and a period of 3 years musthave elapsed after such default ceased tosubsist.

Exit option ofshareholder

No provision Shareholders have exit option if themoney raised has not been utilised

27

Permissible mode ofissuance of securities

Companies couldissuesecurities by way ofpublicissue, privateplacement,rights issues orbonus issue

Private companies can issue securitiesonly through private placements aftercomplying with Part II of Chapter II .Thus Private companies cannot rightsshares or bonus shares.

23, 62,63

Voting rights onpreference shares

Section 87-Differentcriteriaforcumulativeandnon-cumulativepreferencesharesfortrigger ofvotingrights.

No difference between cumulative ornon – cumulative, voting rights arise ifdividends payable are in arrears for aperiod of two years or more.

47

Prohibition of issue ofshares at discount

Section 79-Issue of sharesatdiscount permissiblesubjectto conditions and CentralGovernment approval

Issue of shares at discount is void andnot permissible except for Sweat equityshares

54

Preference sharesbeyond 20 years

Section 80-Issue ofirredeemablepreferencesharesorredeemablebeyond 20 yrsis prohibited

Only infrastructure companies can issuepreference shares beyond 20 yearssubject to annual redemption of suchpercentage of preference shares as maybe prescribed on annual basis at theoption of such preferential shareholders

55

Redemption ofunredeemed preferenceshares by issue offurther shares

No such provision Company may redeemunredeemed preference shares byissuing further redeemable preferenceshares equal to the amount due, alongwith the dividend thereon , with theconsent of 75% of shareholders (invalue) and approval from tribunal on apetition made.

Such issue or redemption shallnot be deemed to be an increase or asthe case may be reduction of share

55 (3)

capital of the company.Alteration of sharecapital by consolidationor division of sharecapital into shares oflarger amount

Section 94(1)permittedthesame if therewas aprovisionfor the same intheAoA treatingit as amerealteration notinvolvinganyreduction in thesharecapital.

Noapproval of theCourt oranyother authorityrequired.

Can be made only after makingapplication and obtaining approval fromTribunal

Approval is required for consolidationand division of share capital only if thevoting percentage of shareholderschanges consequent on suchconsolidation

61 (b)

Issue of bonus shares No provision inthe act.HoweverRules framedforpublic unlistedCompany

Private companies are excluded in thisclause for issue of bonus shares, butapparently clause 23 does not permitprivate companies to issue bonus shares

63 and23

No reduction of capitalif deposits not repaid

No such provision existed. No reduction of capital shall be made bya company if the company is in arrearsin the repayment of any depositsaccepted by it or the interest payablethereon irrespective of the depositsbeing accepted before or after thecommencement of this act

66

Issue of debentures withconversion option andother provisions

No suchrequirementexisted. Needs special resolution of members forthe issue of debentures with conversionoption wholly or partly

71

Private placements Qualified Institutional Buyers shall notbe covered under the provisionsrelatedto Private Placement

Appointment ofDebenture trustee

Section 117B-Nosuch ceiling of500 existed.Appointment of Debenturetrustee compulsoryforcompanyissuingprospectus or aletterof offer tothe publicforsubscription ofitsdebentures

Is compulsory for public issue ofdebenture through prospectus to morethan 500 persons

71

V. Acceptance of deposits by CompaniesAcceptance of Depositsby Companies

Private companies areprohibited from inviting oraccepting deposits frompersons other than itsmembers, directors or theirrelatives

NBFCs are not covered by theprovisionsrelating to acceptance ofdepositsandthey will be governedunder rules issuedby Reserve Bank ofIndia.(Clause 73)

Company may accept depositfrompersons other than its membershavingnet worth and turnover ofcertainamount as prescribed subjecttocomplying with necessaryconditionsand after consultation withRBI.(Clause 76)

73

76

VI. InvestmentsInvestment restriction No such provision existed in

section 372A of theCompanies act 1956, whichdealt with inter corporateloans and investments.

Provides that investments not to bemade through more than 2 layers ofinvestment companies.

The rate of interest on inter corporate

186

loans will be the prevailing rate ofinterest on dated Government Securities

VII. Books of Accounts and Financial YearFinancial Year In relation to

anybodycorporate, theperiod inrespect of whichany profit and loss account ofthe body corporate laidbefore it in annual generalmeeting is made up, whetherthat period is a year or not

Provided that, in relation toan insurance company,"financial year" shall meanthe calendar year referred toin subsection (1) of section 11of the Insurance Act, 1938 (4of 1938)

Financial year can only be from April-March , existing companies has to alignwithin 2 years of the commencement ofthe act

2 (41)

Maintenance of books ofaccount in electronicmode

Not permitted Provides for electronic maintenanceof the same

128(1)

Preservation period ofbooks of account

Section 209- books andvouchers for 8 yrs period

where investigation is ordered, CGmay direct books to be preserved forlonger period

128(5)

Corporate socialresponsibility

Did not exist. Mandatory for companies: Having Net Worth of Rs.500

crore or more;or Turnover of Rs.1000 crore or

more or A net profit of Rs.5 crore or

more during the any financialyear

Every financial year atleast 2% of theaverage net profits of last 3 years to bespent on CSR activities, otherwisereason for not spending to be given inBoard's Report.

135

Re-opening of accountsin certain cases

No such provision existed If an order is passed by the court ortribunal to the effect the relevant earlieraccounts were prepared in fraudulentmanner, re-opening of accounts can bedone.

130

Voluntary revision offinancial statement orboard report withtribunal’s consent

No such provision existed If the Board feels that the financialsor the Report do not comply with theapplicable provisions of clause 129 or134, they may revise the aforesaid inrespect of any of the three precedingfinancial years after obtainingapproval of the Tribunal.. Cannot berevised for more than once in onefinancial year. CG may makeseparate rules for this.

131

Consolidation ofaccounts

Section 212 providedforattachment of accountsofsubsidiaries along withtheholding company

Compulsory consolidation of accountsof holding and subsidiaries including itsassociates and joint ventures

129

accounts. No provision forconsolidation

VIII. ReportsSecretarial audit report Section 383A provided only

for secretarial audit bycompanies having paid upcapital between Rs. 10 lakhto Rs. 5crores. Did notspecifically provide forattachment of such report tothe Directors’ report

Every listed company and otherprescribed companies shall annex withits Board’s Report, a Secretarial AuditReport. Directors shall explain in full intheir DR, qualification/ observation/remarks in the secretarial audit report

204

IX. Prospectus, Raising of funds & AllotmentRaising capital throughPublic- offer

No such provision existed Only public companies can issuesecurities by making public offer andthat too by complying Part I of chapterIII

28

Misleading statement inProspectus

No suchprovisionexisted Any group of persons or AOP affectedby this misleading prospectus , may takeaction against the guilty persons

37

Punishment forfraudulently inducing aperson to invest money

Section 68-Any person who,either by knowingly orrecklessly making anystatement, promise orforecast which is false,deceptive or misleading, orby any dishonestconcealment of materialfacts, induces or attempts toinduce another person toenter into, or to offer to enterinto – any agreement for, or

with a view to,acquiring, disposing of,subscribing for, orunderwriting shares ordebentures ; or

any agreement thepurpose or pretendedpurpose of which is tosecure a profit to any ofthe parties from theyield of shares ordebentures, or byreference to fluctuationsin the value of shares ordebentures ;

shall be punishable withimprisonment for a termwhich may extend to fiveyears, or with fine whichmay extend to one lakhrupees, or with both.

No change, but in addition to which itincludes punishment for falselyinducing a person to enter into anyagreement with bank or financialinstitution, with a view to obtainingcredit facilities.

36

Allotment of securities Section 69- Minimum subscription extended to all 39

and minimumsubscription

Minimumsubscriptionapplicableonly toshares.

securities

Issue of GlobalDepository receipts(GDR)

No such provision existed. Company may after passing a specialresolution in its general meeting ,issueGDR’s subject to conditions

41

X. Utilising Securities Premium AccountUtilisation of securitiesPremium account (SPA)

Section 78-SPA canbeutilized for writingoffpreliminary expenses orforproviding premiumpayableon redemption ofpreferenceshares ordebentures

Prescribed class of companies whosefinancial statements comply withAccounting standards prescribed forsuch class cannot utilize for SecPremium Account for writing offpreliminary expenses and premium onredemption of preference shares ordebentures

52(3)

XI. Annual returns and related issuesAnnual return(AR) Details to be furnished in

Annual return

its registered office, the register of its

members, the register of its

debenture holders, its shares and debentures, its indebtedness, its members and

debenture holders, pastand present, and

its directors, managingdirectors managers andsecretaries, past andpresent

Following additional details to bementioned

Details of principal businessactivities, particulars of holdingand subsidiary and associatecompanies

Promoters, directors, keymanagement personnel alongwith changes since last year

Meetings of members or classthereof, board and its variouscommittees along with theattendance details

Remuneration of directors andKey managementpersonnel(KMP)

Penalties and punishmentsimposed on the company, itsdirectors, or officers and appealsmade against penalties orpunishments

Matters related to certificationof compliances, disclosures asmay be prescribed

Details of shares held on behalfof FII’s

Such other matters as may beprescribed

92

Certification of Annualreturn (AR)

The copy of the annualreturn filed with theRegistrar under section 159or 160, as the case may be,shall be signed both by adirector and by the manageror secretary of the company,or where there is no manageror secretary, by two directorsof the company, one ofwhom shall be the managingdirector where there is one.

In case of an OPC and small company,AR to be signed by a Company secretary(CS), where there is no CS, by apractising company secretary

For listed companies, having turnoverand paid up capital as may beprescribed- By a Director and CS, wherethere is no CS then by PCS.

In addition to this the PCS shall alsocertify that the AR discloses the factscorrectly and adequately and thatcompany has complied with all the

92

provisions of the act.

Other Companies – by a director and aCS, where there is no CS then by a PCS

Time limit for filing AR Every company shall, withinsixty days from the day onwhich each of the annualgeneral meetings referred toin section 166 is held, prepareand file with the Registrar areturn containing theparticularsspecified in Part Iof Schedule V, as they stoodon that day,

Where AGM is held then within 30 daysfrom the date of AGMWhere AGM is not held – within 30 daysof the due date of the AGM along withreasons for not holding the AGM

92(3)

Consequences fordefault in filing AR

1. If a company fails tocomplywith any of theprovisionscontained insection 159, 160or 161.The company, andeveryofficer of thecompanywho is indefault, shallbepunishable with finewhich may extend to[five hundred]rupees forevery day during whichthe default continues.

2. For the purposes of thissection and sections 159,160 and 161, theexpressions "officer" and"director" shallincludeany person in accordancewith whose directions orinstructions the Board ofdirectors of the companyisaccustomed to act

Filed between30 days – 300 days : additional fees asper clause 403

Fails to file beyond the above date:

the company shall be punishable withfine not less than Rs.50000 but whichmay extend upto Rs.500000 and

every officer of the company who is indefault shall be punishable not less thanRs.50000 but which may extend uptoRs.500000 or with both

Additional disclosuresin the Board Report

Section 217 – Disclosures inthe boards’ report

Number of meetings of Board; Statement of declaration by

independent directors; Company’s policy on director

appointment /remuneration; Explanation on every qualification

made by PCS in his report; Particulars of loans, guarantee,

investment; Related party contracts; Implementation of risk management

policy; Policy developed on Corporate Social

Responsibility; Statement of formal evaluation of the

performance of the board and itscommittees in case of listed andpublic companies, as may beprescribed

134

Directors’ responsibilitystatement

217(2AA) ;Disclosures required on fourfronts: Applicable accounting

standards followed; True and fair view of the

financials; Detecting and preventing

fraud; Accounts on a going

concern basis

Provides for additional disclosures:In case of a listed company:

a) Directors have laid down internalfinancial controls and they have beencomplied with;

b) Directors have devised propersystems to ensure compliance withthe provisions of this Act, rules, andthat such systems were adequate andoperating effectively.

134(5)

Report on AGMrequired to be submittedby listedcompany

No provision existed provides that every listed company shallprepare a report on each AGM and file acopy of the same with the ROC within30 days from the AGM

121

XII. Notices, Meetings, Quorums, Voting, Resolutions, MinutesNo. of meetings In the case of every

company, a meeting of itsBoard of directors shall beheld at least once in everythree months andat least foursuch meetings shall be heldin every year

Atleast 4 meeting should be held eachyear.

There is no requirement ofholding themeeting every quarter; the onlyrequirement is that not morethan 120days shall elapse between twoconsecutive meetings.

173 (1)

Holding of First AGM Company may holdits first annual generalmeeting within a period ofnot more than eighteenmonths from the date of itsincorporation; and if suchgeneral meeting is heldwithin that period, it shallnot be necessary for thecompany to hold any annualgeneral meeting in the yearof its incorporation or in thefollowing year that the Registrarmay, forany special reason,extend the time withinwhich any annualgeneralmeeting (not beingthe first annual generalmeeting) shall be held, by aperiod not exceeding threemonths

To do away with 18 months timeline incase of the 1st AGM

96

Timing of AGM 166(2)-Every annual generalmeeting shall be called for atime during business hours,on a day that is not apublicholiday, and shall beheld either at the registeredoffice of the company or atsome other place within thecity, town orvillage in whichthe registered office of thecompany is situate.

During the business hours between 9.00to 6.00– defined

AGM cannot be calledon which days

AGM can be called on a daythat is not a publicholiday,and shall be held either at theregistered office of thecompany or at some otherplace within the city, townorvillage in which theregistered office of thecompany is situate

Can be called on a public holiday butcannot be called on national holidays.National holidays means and includes aday declared as such by the central govt.

Explanatory statementin respect of materialfacts

173(2)-Where any items ofbusiness to be transacted atthe meeting are deemed to bespecial as aforesaid, thereshall be annexed to the noticeof the meeting a statementsetting out all material factsconcerning each such item ofbusiness,including inparticular the nature of theconcern or interest, if any,therein, of every director,and the manager, if any.

Defines material facts to be set out in theexplanatory statement,namely, thenature of theconcern or interest,financial or otherwise, if any, in respectof each item of every director andmanager, every other KMP and relativesof all the above and such otherinformation and facts that may enablemembers to understand the meaning,scope and implications of the items ofbusiness and to take decision thereon

102

Quorum Section 174-Quorum was 5memberspersonallypresentunlessAoA provides forabigger quorum.

If Members on the date of meeting is<1000 – 5 members personallypresent1000-5000 - 15 members personallypresent>5000 - 30 members personallypresent

103

Voting throughelectronic means

No such provisions existed Central government may provide forclass companies which can provide forvoting through electronic means

108

Resolutions requiringSpecial notice

Section 190-nocriteria forvotingpower or shares

Such a notice can be given by suchnumber of members holding not lessthan 1% of the total voting power orholding shares on which an aggregatesum of not less than Rs.100000 has beenpaid up

115

Gap between two boardMeetings

Section 285 provided for onemeeting to be held in everycalendar quarter. So oneboard meeting could be heldin the first month of thequarter and the next could beheld in the last month of thenext quarter, thereby a gapof almost 6 months

Provides that the gap between any twoboard meetings should not exceed 120days.For OPC: If OPC has more than onedirector, then at least one meeting ineach half of the calendar year and gapshould not be less than 90 days betweensuch meetings.

If OPC has only ONE director, no needto hold any board meetings.

173(1)

Directors’ participationbyaudio-visual meansor videoconferencing

No such provisionspecifically existed.Companies used to resort tosuch mechanism foradministrative conveniencehowever the directorparticipating through

Specifically provides for directorsattending the meetings even by way ofvideo conferencing/audio-visualconferencing.Such director to be counted for thepurpose of quorum. Central Govt. maynotify such matters which shall not be

173(2)174(1)

audio/video conferencingcould not be counted forquorum.

dealt with in a meeting through videoconferencing or other audio-visualmeans

Notice forboardmeetings(BM)

Section 286 merely providedfor notice of BMs to be givento directors in writing butdid not specify the length ofsuch notice

Provides for 7 days’ notice for BM.(canbe electronic also) Shorter consentpossible if at least one independentdirector is present at such meeting

173(3)

Withdrawal ofResolution bycirculation

Section 289 provided forpassing of board resolutionsby circulation with noprovision of withdrawal

Clause 175 provides that if a demand ismade by not less than 1/3rd of Board ofDirectors (BOD) that resolution undercirculation be decided at a BM thechairman shall circulation and have thequestion decided at a BM

175

Tampering withminutes

No such provisions exist. Any person found guilty of tamperingany minutes of the proceeding of anymeeting shall be punishable withimprisonment which may extend uptotwo years and with fine which shall notbe less than Rs.25000 but which mayextend to Rs.100000

118

XIII. Internal AuditCompulsory InternalAudit (IA)

No such provision existed. Prescribed companies to have anInternal Auditor to conduct IA, whocan be a CA or ICWA or such otherprofessional as may be decided bythe Board.

CG may prescribe rules for conductand report of IA

138

XIV. Cost AuditCost Audit Where in the opinion of the

Central Government it isnecessary so to do in relationto any company requiredunderclause (d) of sub-section (1) of section 209 toinclude in its books ofaccount the particularsreferred to therein, theCentral Government may, byorder, direct that an audit ofcost accounts of the companyshall be conducted insuchmanner as may bespecified in the order by anauditor who shall be a costaccountant within themeaning of the Cost andWorks Accountants Act, 1959(23 of 1959)

Instead of company pertaining toanyclass of companies engagedinproduction, processing,manufacturing or mining activities, thecentralgovernment can only direct costaudit tobe conducted in such classofcompanies engaged in the productionof suchgoods or providing suchservices, which have the prescribed networthorturnover and who hasbeen directed toinclude the particulars relating to theutilization of materialor labour or toother items of cost as may be prescribedin their books ofaccount .

No approval is required ofcentralgovernment for the appointmentof costauditor to conduct the cost audit.

XV. Statutory complianceStatutory recognition toSecretarialStandards(SS)

SS were recommendatory. It provides that every company shallfollow SSwith respect to General and BoardMeetings andapproved by the Central government

118

XVI. Transfer to reservesTransfer of specified %of profits not exceeding10% toReserves

Section – 205Company could not transfermore than 10% profits exceptin accordance with the rules.

Company to use its wisdom todecide % of profits to be transferredto reserves.

Its no longer mandatory forcompanies to transfer its profits toReserves.

123

XVII. DividendsRestriction on interimDividend introduced

No such restriction existed. BOD to declare interim dividend outof the surplus in the P&L a/c as wellas the profits for the financial year inwhich the interim dividend is soughtto be declared.

In case of loss, interim dividend ratenot to exceed average dividendsdeclared during preceding threefinancial years

123(3)

Transfer of shares toInvestor Education &Protection Fund (IEPF)

Only unclaimed dividend tobe transferred to IEPF

Along with the unclaimed dividend,the shares on which dividend isunclaimed, also to be transferred tothe IEPF

124

Dividends No dividend shall be paid by acompany from its reserves other thanfreereserves

123

Claim from IEPF after 7yrs

No claim lied against theFund or the Company inrespect of individualamounts which wereunclaimed or unpaid for aperiod of seven years.

Claim of an investor over a dividendnot claimed for more than a period of7 years not to be extinguished andshall be entitled to refund inaccordance with the rules

XVIII. AuditorsRotation of StatutoryAuditors

No such provision existed. Listed and other prescribedcompanies not to appoint or re-appoint

an individual auditor for more thanone term of five years and

an audit firm for more than twoterms of five consecutive years.

Members of a company may resolveto rotate the auditpartner every yearto resolve to conduct audit bymorethan one auditor.

Provisions relating to voluntaryrotation of auditingpartner (in case ofan audit firm) modified toprovidethat members may rotate thepartner ‘at such intervalas may beresolved by members’ instead of‘every year’proposed in the clauseearlier.

The limit in respect of maximum

139(2)

number of companies inwhich aperson may be appointed as auditoris twenty companies.

Re-appointment ofstatutory auditors

Board recommended the re-appointment of retiringauditors and retiringauditors could be re-appointed at the AGM.

After the expiry of term mentionedin previous point, there has to be agap of 5 yrs for reappointment afterevery cessation.Further in case of an Audit firm, noother firm which has a commonpartner to the other audit firm can beappointed as Statutory Auditors.Members can approve rotation ofaudit partners and also appointmentof joint auditors

5 years tenure forauditors

Sec 224-Auditorscould beappointed to hold office onlyupto the date of the nextAGM and could bereappointed thereat.

Audit firm or an individualincluding an LLP to be appointed for5 yrs. i.e. to hold office upto the dateof the sixth AGM.

Appointment of auditors for fiveyears shall be subject to ratificationby members at every Annual GeneralMeeting.

139(1)

Automaticreappointment ofexisting Auditors, whennot appointed/reappointed at the AGM

Section 224(3)-provided that if no Auditorwas appointed/reappointedat the AGM, the CentralGovernment could fill up thevacancy

existing auditors continue to be theauditors of the company in such ascenario

139(10)

Time bound filling up ofCasual vacancy in theoffice of Auditors

Section 224(6) -Casual vacancy to be filledup by the Board. If due toresignation, then by themembers in their meeting.

Casual vacancy to be filled up by theBoard within 30 days. If due toresignation, then by the Company inits meeting within 3 months from thedate of recommendation of the Boardand such auditor to hold office onlyupto the date of the next AGM

139(8)

Formation&Recommendations ofAudit Committee forappointment of auditors

No such provision Existed Every Listed Company and suchother company as may be prescribedshall form Audit Committeecomprised of minimum 3 directorswith majority of the IndependentDirectors and majority of members ofcommittee shall be person withability to read and understandfinancial statement.

All the appointment of statutoryauditors including in case of casualvacancy shall be made afterconsidering the recommendations ofthe Audit Committee, where there isone.

139(1)

Auditor’s duties whenthey resign

No such provision orrequirement existed

Retiring auditor to file a statementwith the ROC as well as theCompany, within 30 days ofresignation, indicating reasons andother facts that may be relevant withregard to his resignation

140(2)/(3)

Tribunal may directcompany to change itsAuditors

Section 224(7)provided for removal ofauditors before the expiry oftheir term, only with theprior approval of the CentralGovernment

Provides that the Tribunal may, byorder, direct the company to changeits auditors on being satisfied that theauditors has acted in a fraudulentmanner or abetted or colluded in anyfraud

140(5)

Duties ofauditor/secretarialauditor/cost auditor toreport fraud to the CG

No such provision existed Auditors/CWA/CS to inform thefraud to the CG within prescribedtime and manner and the same shallnot be construed as breach of duty

143(12)-(14)

Limited LiabilityPartnership (LLP)can act as anAuditor

Section 226(3) –LLP was not to be treated asa Body Corporate for thelimited purpose of thissection and hence couldbeappointed as an Auditor.

Where a firm including an LLP isappointed as an auditor of acompany, only the partners who areChartered accountants shall beauthorized to act and sign on behalfof the firm.

Multidisciplinary partnership isallowed

141

141(1)

Auditor not torender certainservices

No suchprovisionexisted auditor not to render directly orindirectly the following services tothe company, its holdingcompany or its subsidiaries, orassociate company:

Accounting and book keepingservice; Internal audit;

Design and implementation of anyfinancialinformation system;

Actuarial services; Investmentadvisory services; Investment banking services; Rendering of outsourced financial

services; Management services; and Any other kind ofconsultancy

services.

Provisions relating torestrictions onnon-audit services modified toprovidethat such restrictions shallnot apply to associate companies andfurther to provide fortransitionalperiod for complyingwith such provisions.

144

Auditors’attendance atAGM proposed tobe madeobligatory

Section 231-Provides for all notices ofand other communicationrelating to general meeting ofa company to be forwardedto the Auditor. The Auditorwas thus entitled to but notobliged to attend any generalmeeting

provides that auditor shall, unlessotherwise exempted by theCompany, attend any generalmeeting, either by himself or throughhis Authorized representative who isqualified to be an auditor

146

Increasedaccountabilityof auditors

Penalties were providedforviolation of section227(dealing with powersandduties of auditors)

Penalties significantly enhanced-finenot less than 25000 but extendable toRs. 5 lakhs.Imprisonment upto one year and fine

147

andsection 229 (dealingwithsignature of auditreport).Meagre penalties offineupto Rs. 10000

in case there is an intention todeceive the company, itsshareholders or creditors.

Provisions relating to extent ofcriminal liability of auditorsparticularly in case of partners of anaudit firm reviewed to bring clarity.

Further, to ensure that the liability inrespect of damages paid by auditor,as per the order of the Court, (in caseof conviction under Clause 147) ispromptly used for payment toaffected parties including taxauthorities,

Central Government has beenempowered to specify any statutorybody/authority for such purpose

XIX. Nomination & Remuneration committeeNomination &RemunerationCommittee andStakeholders’Relationship Committee

A mention of Remunerationcommittee was made only inthe Schedule XIII

Provides for mandatory constitution ofNomination and RemunerationCommittee and Stakeholders’Relationship Committee for prescribedcompanies.

178

XX. Prohibitions & RestrictionsLimit on politicalcontribution by anongovernmentcompany

Section – 293A upto 5 % ofthe average net profits forpreceding three financialyears on authority of a BoardResolution.

Limit enhanced to 7.5% from 5%.Political party defined as political partyregistered under section 29A of theRepresentation of the People Act, 1951

182

New restrictions onnon-cash transactions bydirectors

No such provision existed A company shall NOT, subsidiary orassociate, enter into specified non cashtransactions with its director or adirector of its holding company orperson connected with him unlessapproved by the company in its generalmeeting. Such transactions to be treatedvoidable

192 A

Prohibition on forwarddealings in securities ofcompany by a KeyManagerial Personnel(KMP)

No such provision existed Prohibits a Director of a Company or aKMP to buy a right to call for delivery ata specified price and within a specifiedtime, of a specified number of relevantshares or debentures, right to makedelivery at a specified price and within aspecified time, of a specified number ofrelevant shares or debentures

194

Prohibition on InsiderTrading of Securities

No such provision existed Makes insider trading by a Director or aKMP, a criminal offence.Communication in the ordinary courseof business, profession or employmentwill not be treated as Insider Trading

195

XXI. Company SecretaryFunctions of CompanySecretary

No such provision existed to report to the BOD, compliance withthe Act, rules made there under; Toensure that the company complies with

205

the applicable SS; To discharge suchother duties, as may be prescribed.

XXII. InvestigationsSerious FraudInvestigating Office(SFIO)

No such provision existed statutory status to SFIO 211

Investigation report No such provision exists. Investigation report filed by SFIO withthe court for framing of chargesshall betreated as a Report filed by a PoliceOfficer. SFIO shall have the power toarrest.

212

Penal provisions formisconduct

In the process of the Investigation,Inquiry or inspection if any person:

destroy, mutilates or falsifies orconceals or tamper orunauthorized removes or is aparty to that or any documentrelating to the property, assetsor affairs of the Company orbody corporate or

makes or is a party to themaking of any false entry in thedocument concerning thecompany or body corporate or

provides any false informationwhich he knows to be false

Then he shall be liable to punishmentfor imprisonment for a term from 6months to10 years and shall also beliable to fine which shall not be less thantheamount involved in fraud but whichmay extent upto 3 times of the amountof fraud.

229

Freezing of assets ofcompany on inquiry andinvestigation

No such provision existed Clause 221 provides for freezing ofassets of company on enquiry andinvestigation

221

XXIII. Corporate RestructuringCertification fromAuditor

No compromise or arrangement shall besanctioned by the Tribunal unlessacertificate by the company’s auditor hasbeen filed with the Tribunal tothe effectthat the accounting treatment, if any,proposed in the scheme ofcompromiseor arrangement is in conformity with theaccounting standardsprescribed underClause 133.

230

Simplified procedure forcompromise betweensmall companies orbetweenHolding/subsidiarycompanies.

No such provision existed Clause 233 provides simplifiedprocedure for compromise

233

Cross Border Mergers No such provision existed Provides for cross border mergers wherea foreign company may with priorapproval of RBI, merge or amalgamatein to a co. registered under this Act orvice-versa.

234

Payment of consideration to theshareholders of the merged company incash, or in Depository Receipts or partlyby cash and Depository receipts

Squeeze out provisions No such provision existed Squeeze out provision means provisionswhich confer the acquirer with astatutory right to squeeze out theminority, i.e. acquire minorityshareholders on the same terms whenthe acquirer’s shareholding crosses acertain high percentage of the votingcapital of the target company

236

Relief for pastconcluded acts ofoppression

This was not possible undersection 397 of the CompaniesAct, 1956, as the sameprovided only for the currentaffairs of the company

Clause 241 uses the phraseology-“affairsof the company have been or are beingconducted/’’. Thus relief for past acts ispossible

241

XXIV. Class action SuitsClass action bymember/s, depositor/sor any class of them

No such provision existed Provided for. Provisions relating toextent of criminal liability of auditorsparticularly in case of partners of anaudit firm reviewed to bring clarity.Further, to ensure that the liability inrespect of damages paid by auditor, asper the order of the Court, (in case ofconviction under Clause 147) ispromptly used for payment to affectedparties including tax authorities, CentralGovernment has been empowered tospecify any statutory body/authority forsuch purpose

245

Powers of registrar Registrar has the power to remove thename of a company from itsrecordunder certain circumstances

248(5)

Approval In case of a company regulated under aSpecial Act, approval of theregulatorybody constituted or established underthat Act shall also be obtained.

248(2)

XXV. ValuationsRegistered valuers No such provision existed Wherever valuation is to be done of any

property, stocks, shares, debentures,securities or goodwill or net worth of acompany or of its assets, such valuationshall be done by a person who is aregistered valuer under this chapter andappointed by the Audit Committee or inits absence by the BOD

247

XXVI. Winding upPower of Registrar toremove name of acompany from Register

Section 560 provided for theROC to suomoto strike offthe company as a defunctcompany if it has reasonablecause to believe that acompany is not carrying onits business or in operation.

Section 560 provided for the ROC to suomoto strike off the company as a defunctcompany if it has reasonable cause tobelieve that a company is not carryingon its business or in operation.

247

Bar on company making No such provision existed Provides for situations ( in the previous 248(2)

application to the ROCfor removal of its namefrom register

3 months) where such an applicationscannot be made:- Name change/registered office

change;- Disposal for value of property;- Engagement in any other activity;- Made an application to the Tribunal

forcompromise/arrangement;- Is being wound up

Fraudulent applicationby company for removalof name

No such provision existed Provides for management beingresponsible, jointly and severally, insuch a scenario to any person/s whoincurred loss or damage and shall alsobe liable to penal action. ROC mayrecommend prosecution of personsresponsible for filing of application forremoval of name, fraudulently.

248(2)

Modes of winding up By court, under supervisionof court and voluntarywinding up Voluntary couldbe members’ or creditors’

By the Tribunal and Voluntary.No such classification exists. Additionalgrounds for winding up by Tribunalprovided.

270-365

Limits for determininginability to pay debts

Section 434-Any creditorindebted for more than Rs.500/-

Limit raised to Rs. 100,000/-

XXVII. Other legal provisionsSpecial Courts. No such provision existed The Bill aims at setting up of special

courts to try offences under the Bill435-446

Punishment for fraud Fraud not defined.Punishment for fraud notquantified or provided

Fraud has been defined and penaltyprovided

447

Penalty for obtainingname by providingwrong or incorrectinformation

No recourse provided. If company is not incorporated reservedname shall be cancelled after imposing apenalty not exceeding Rs.100,000/-;

if the company is incorporated the ROCmay give direction to change of namewithin 3 months by passing ordinaryresolution or make an application forwinding up of the company

4(4), 4(5)

Power to removedifficulties

Provisions in respect of removal ofdifficulty modified to provide that thepower to remove difficulties may beexercised by the Central Governmentupto ‘five years’ (after enactment of thelegislation) instead of earlier upto ‘threeyears’. This is considered necessary toavoid serious hardship and dislocationsince many provisions of the Bill involvetransition from pre-existingarrangementsto new systems.

XXVIII.National Financial reporting AuthorityNACAAS - Constitution Section-210A. Constitution of

National AdvisoryCommittee on Accountingstandards.

The Central Government

The name of NACAAS has beenchanged to National Financial ReportingAuthority (NFRA) and authority is toadvise on matters related toauditingstandard in addition toaccounting standards

132

may, by notification in theOfficial Gazette, constitute anAdvisory Committee to becalledthe National AdvisoryCommittee on AccountingStandards (hereafter in thissection referred to as the"Advisory Committee") toadvise the CentralGovernment on theformulation and laying downof accounting policiesandaccounting standards foradoption by companies orclass of companies under thisAct.

The CG may prescribe the standards ofaccounting or any addendumthereto, asrecommended by the ICAI inconsultation with and afterexaminationof the recommendations made by theNFRA

Powers: monitor and enforce the

compliance with accounting andauditing standards

oversee the quality of service ofthe professions associated withensuring compliance with suchstandards

have the power to investigateinto the matters of professionalor othermisconduct committedby any member or firm ofcharteredaccountants andimpose penalties of not less thanRs. 1 lakhs in caseof individualsand Rs. 10 Lakhs in case of firmsand debar members/firms for aperiod of 6 months to 10 years.

Other related issues The Advisory Committeeshall give itsrecommendations to theCentral Government onsuch matters ofaccounting policies andstandards and auditing asmay be referred to it foradvice from time to time.

The members of theAdvisory Committeeshall hold office for suchterms as may bedetermined by theCentral Government atthe time of theirappointment and anyvacancy in themembership in theCommittee shall be filledby the CentralGovernment in the samemanner as the memberwhose vacancy occurredwas filled.

The non-officialmembers of the AdvisoryCommittee shall beentitled to such fees,travelling, conveyanceandother allowances as

NFRA had jurisdictions over CAs, costaccountants, company secretariesandany other profession as may beprescribed.

Now, this Clause has been amended,NFRA to have jurisdiction overonlyCAs. i.e., Professional misconductof chartered accountants alsocomesunder NFRA.

Where NFRA initiates aninvestigation, no other institute orbody shallinitiate or continue anyproceedings in such matters ofmisconduct

Penalty increased

Chairperson and members in FullTime Employment with NFRA shallnot beassociated with any audit firmincluding related consultancy firmsduringthe course of their appointmentand 2 years after ceasing to holdsuchappointment.

The Director’s report for everycompany except for One PersonCompany,shall provide various typesof additional information like number

are admissible to theofficers of the CentralGovernment of thehighest rank.]

ofmeetings of the Board, Company’spolicy on directors’ appointmentandremuneration; explanations orcomments by the Board oneveryqualification, reservation oradverse remark or disclaimer made bytheCompany Secretary in hissecretarial audit report, particulars ofloans,guarantees or investments etc.(Clause 134)

XXIX. Schedules – Companies Act 2013Schedule – I Sections 4 and 5Schedule – II Useful Lives to Compute DepreciationSchedule – III General Instructions for Preparation of Balance Sheet andStatement of Profit and

Loss of a CompanySchedule – IV Code for Independent DirectorsSchedule – V Conditions to be fulfilled for the Appointment of a Managing orWhole Time

Director or a Manager without the approval of theCentral GovernmentSchedule –VI Section 55 and 186 related to Infrastructure ProjectsSchedule –VII Corporate Social Responsibility

PPER