Friday, May 9, 2014

Highlights of the New Companies Act, 2013 Effective from 01.04.2014 - Part A

 Highlights of the New Companies Act, 2013 Effective from 01.04.2014 - Part A

S. No.
New Provisions
One Person Company(OPC)
a.       OPC means a company which only has one person as a member.
b.      It can have more than one Director. OPCs are exempted from many provisions of the Act.
Key Managerial Personnel

Appointment of KMP includes:
a.       the Chief Executive Officer or the managing director or the manager.
b.      the company secretary.
c.       the whole- time director.
d.      the Chief Financial Officer.
e.      such other officer as may be prescribed.
This provision is applicable for Public Limited Companies having paid up capital more than 10 Crores.
Private Limited Companies are exempted from the appointment of KMPs
Acceptance of Deposits
a.     The Private Limited Companies are allowed to accept deposits.
b.     However, borrowings from Directors and Promoters are not considered as Deposits subject to some conditions.
Loan to Directors
This provision is now applicable to Private Companies also.
Giving loan to Directors or the companies in which there are same directors or shareholders is strictly prohibited under Section 185.
Rotation of Statutory Auditors
a.       Rotation is required after transition period of 3 years.
b.      Following Companies are under the obligation to rotate the statutory auditors after 5 years or 10 years.
·         All unlisted public companies having paid up share capital of Rs 10 Crores or more
·         All private limited companies having paid up share capital of Rs 20 Crores or more
·         All companies having paid up share capital not more than mentioned (i) and (ii) above, but having public borrowings from financial institutions, banks or public deposits of Rs 50 crores or more.
Other Specialized Services by Statutory Auditors.
The Statutory Auditor of the Company not to give following specialized services:
a.       Accounting and book keeping services.
b.      Internal audit.
c.       Design and implementation of any financial information system.
d.      Actuarial services.
e.      Investment advisory services
f.        Investment banking services.
g.       Rendering of outsourced financial services
h.      Management services
i.         Other services as may be prescribed.
a.       If the total limit of loan exceeds paid up capital and free reserves then all companies pass special resolution for taking approval from shareholders.
b.      Now, this provision is applicable to Private companies also.
Resident Director
Every Company shall have at least one director who has stayed in India for a period of not less than 180 days in the previous calendar year.
Woman Director
The following class of Companies shall appoint at least one woman director:
a.       Every Listed company.
b.      Every Public Company:
·         Having paid-up share capital of Rs 100 Crore or more.
·         Turnover of Rs 300 Cr. or more.
Consolidation of Accounts
Mandatory for :
-Subsidiary or Associate Companies.
Corporate Social responsibility
An Indian Company have to spent 2% of the Average net profits of the last three financial year if it has:
·         Net Worth of Rs 500 Crores or
·         Turnover of Rs 1000 Crores or more or
·         Net profit of Rs 5 Crores or more
Further issue of Shares
a.       Corresponds to Sec 81 of Companies Act, 1956 which was applicable to only Public Limited Companies.
b.      For any Increase of Subscribed Share Capital an offer to be made on Pro rata basis to all existing shareholders Otherwise Special Resolution will be required to approve the proposal in which Issue Price of Shares is subject to Valuation by a Registered Valuer
Secretarial Audit
a.       It is compulsory only for Public Company:
·         Having Paid Capital more than 50 Crores.
·         Turnover 250 Crores or more.
b.      It is done by Practicing CS.
Internal Audit
The following companies are required to appoint an internal auditor:
a.       every listed company
b.      every unlisted public company having
·      paid up share capital of Rs. 50 crore or more during the preceding FY; or
·      turnover of Rs. 200 crore or more during the preceding FY; or
·      outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 crore or more at any point of time during the preceding FY; or
·      outstanding deposits of twenty five crore rupees or more at any point of time during the preceding FY
c.       every private company having
·     turnover of Rs. 200 crore or more during the preceding FY; or
·    outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 crore at any point of time during the preceding FY
Financial Statements
a. Financial Statements include :
·         A balance Sheet
·         A Profit & Loss A/c /an income & expenditure A/c
·         Cash Flow Statement
·         A Statement of Changes in equity
·         Any explanatory note annexed to, or forming part of ,any document referred to in sub clause (a) to sub clause (d)
b. All Companies are required to maintain the Financial Statements(expect OPC,small Company and dormant company which may not include the Cash Flow Statement)
Financial Year
a.       Normally Period ending on 31st March every year.
b.      In case Company Incorporated on or after 1st day of January of a year ,the period ending on the 31st day of March of the following year for which the Financial Statement is made up. All companies are required to follow same Financial Year as per the above provisions.
c.       On an application to Tribunal & if Tribunal is satisfied then a Holding or a Subsidiary Company incorporated outside india which has to follow a different Financial Year for Consolidation of its accounts outside India may be allowed to follow any period as its Financial year  whether or not that period is a year.
Fraud reporting
If any Fraud is noticed by the auditor which has been committed against by the company by the employees, he shall report the matters to the Central Government.
Attending Board Meeting
Director has to attend at least one Board meeting, Non-Compliance of which shall lead to vacancy of his office.
Appointment of Managing Director
a.     A Company can appoint a managing Director or whole time Director for a term not exceeding 5 years.
b.     No Re-appointment shall be made earlier than one year before the expiry of his term.

Registered Valuers

a.       Valuation in respect of a property, stock, shares, debentures, securities, goodwill, net worth or assets of a company shall be valued by a person registered as a valuer.
b.      The Central Government shall maintain a register of valuers.
c.       The valuer shall be a person having such qualification and experience and registered as a valuer. 

Contributed By : Ms Tanya Gagneja