NEW COMPANIES BILL 2013

New Companies Bill 2013 now Passed by both Houses .A historic moment …        

The New Companies Bill has been  passed in Rajya Sabha this evening on 08.08.2013. The bill will now go for presidential assent. The Lok Sabha cleared the bill on Dec 18,2012 last year. It will go to President Pranab Mukherjee for his assent before it becomes law, following which the Ministry of Corporate Affairs will issue a notification. The Companies Act of 1956 will be replaced now by a new Companies Act of 2013 therefore  this is a historic moment for the country.

SALIENT CHANGES OF NEW LAW:

·         Around 193 recommendations have been included in the Companies Bill by the Parliamentary Standing Committee and with passing of this Bill,.

·         would ensure setting up of special courts for speedy trial and stronger steps for transparent corporate governance practices and curb corporate misdoings.

·         would require companies that meet certain set of criteria, to spend at least 2%  of their average profits in the last 3 years towards Corporate Social Responsibility (CSR) activities. But only companies reporting Rs 5 crore or more profits in the last three years have to make the CSR spend. Cos. to give preference to the local areas of their operation for such spending. Otherwise, they would face action, including penalty.

·         allows companies the freedom to choose areas of work for CSR . It aims to encourage firms to undertake social welfare voluntarily instead of imposing that through "inspector raj".

·         The rotation of auditors will take place every five years

·         Financial year of any company can end only on March 31 and the only exception is for companies which are holding/subsidiary of a foreign entity requiring consolidation outside India

·         The term for independent directors have been fixed for five years too. Independent directors shall be excluded for the purpose of computing "one-third of retiring directors".

·         Mandatory for companies that 1/3rd of their board comprises independent directors to ensure transparency.

·         At least one woman on the Board .

·          The maximum No. of directors in a private company has been increased from 12 to 15, which can be increased further by special resolution.

·         Cap on number of persons in a private company raised to 200.

·          Speedy amalgamations and mergers process.

·          Class action suits provided, as a key weapon for individual shareholders for collective action against errant companies

·         Cos. must disclose the difference in salaries of the directors and that of the average employee

·         Mandates  2 years’ salary to employees in companies which winds up /shuts operations.

·         More statutory powers to the government’s investigative arm Serious Fraud Investigation Office (SFIO) to tackle corporate fraud.

·         Punishment for falsely inducing  any agreement with bank or financial institution,  to obtain credit facilities.

·         The Bill prescribes 33 new definitions. Some of these are:

Associate Company
Small Company
Employee Stock Option
Promoter
Related Party
Turnover
Chief Executive Officer
Chief Financial Officer
Global Depository Receipt

·         It provides for prohibition on forward dealings in securities of company by key managerial personnel, insider trading rules and restriction on non-cash transactions involving directors.

·         It also helps ease of doing business as It provides for new concepts such as a single person company.

·         E-voting has been recognized…….and many more ..