Highlights of new Companies Bill 2012

The New Companies Bill was finally passed in Rajya Sabha on 8th August 2013, making it mandatory for profit making companies to spend on activities related to Corporate Social Responsibility (CSR).

With the new legislation, India would possibly become the first country to have Corporate Social Responsibility (CSR) spending through a statutory provision.

The bill will now go for presidential assent. The lower house of parliament Lok Sabha cleared the bill Dec 18 last year.

Below are the Highlights of New Companies Bill 2012:

Maximum number of directors in a private company increased from 12 to 15 which can be increased further by special resolution.

The limit in respect of maximum number of companies in which a person may be appointed as auditor has been proposed as 20.

Companies are required to spend at least two per cent of their net profit on Corporate Social Responsibility.

To help in curbing a major source of corporate delinquency, introduces punishment for falsely inducing a person to enter into any agreement with bank or financial institution, with a view to obtaining credit facilities.

Independent directors' shall be excluded for the purpose of computing 'one third of retiring directors'.

Appointment of auditors for 5 years shall be subject to ratification by members at every Annual General Meeting.

'Whole-time director' has been included in the definition of the term 'key managerial personnel'.

The term 'private placement' has been defined to bring clarity.

Financial Year of any company can end only on March 31 and only exception is for companies, which are holding/subsidiary of a foreign entity requiring consolidation outside India, can have a different financial year with the approval of Tribunal.

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Ten things you wanted to know about the new Companies Bill

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Ten things you wanted to know about the new Companies Bill

Its time to know the Basic thing about companies Bill 2012
Ten things you wanted to know about the new Companies Bill

The Companies Bill 2012 has been tabled in the Rajya Sabha and is expected to be passed in the monsoon session. Business Standard brings you some key facts you need to know about the bill.

Why do we need a new company law?

When the existing company law - The Companies Act, 1956 was passed, Bill Gates was a few months old. Many of our own corporate leaders were toddlers. Sachin Pilot, the corporate Affairs minister, was not even born. It is a relic of an era bygone. The law, though amended 25 times, is perceived to be not in sync with the new corporate world. Hence, the new bill.

How long has it taken to change the law?
An entire term of the government. It was first introduced as Companies bill 2009 in Loksabha on August 3, 2009. It was referred to standing committee on finance a month later. It came back to the house as Companies Bill 2011. But was referred to the standing committee again.

What is the course the latest version of the bill took?
More than 7 months have passed since Lok Sabha passed the Bill. More than 12 months have passed since the submission of second report on Companies Bill by Parliamentary Standing Committee on Finance.

What happens if the Rajya Sabha does not pass it in this session?
With the elections looming large, the bill may not get another chance. If it is not passed in the upper house, being a finance bill it will lapse with this Lok Sabha and has to reintroduced in the lower house all over again.

What are the key changes?
The law has been rewritten extensively with several new provisions for investor protection, better corporate governance and corporate social responsibility etc. It defines a number of new terms that have come into vogue in recent times.

What are the new corporate terms defined in the bill?
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

What are the investor protection measures?
The bill provides for class action suit, which is key weapon for individual shareholders to take collective action against errant companies. Better disclosure requirements in financial statements and disclosure of interests of directors etc. It has also streamlined procedures relating to disclosure of transactions with parties related to directors, promoters etc.

What are the anti-fraud measures?
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.

How does it help ease of doing business?
It provides for new concepts such as a single person company. Cap on number of persons in a private company raised to 200. E-voting has been recognized.

What happens after Rajya Sabha passes the bill?
The bill goes for presidential assent. The draft rules on the companies act will then be made public and the act comes into effect with notification by Ministry of Corporate Affairs.

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The Companies Bill 2012 by CA Prashant Doshi

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Difference Between Company VS Partnership VS LLP

Features	Company	Partnership firm	LLP
Registration	Compulsory registration required with the ROC. Certificate of Incorporation is conclusive evidence.	Not compulsory. Unregistered Partnership Firm will not have the ability to sue.	Compulsory registration required with the ROC
Name	Name of a public company to end with the word “limited” and a private company with the words “private limited”	No guidelines.	Name to end with “LLP”” Limited Liability Partnership”
Capital contribution	Private company should have a minimum paid up capital of Rs. 1 lakh and Rs.5 lakhs for a public company	Not specified	Not specified
Legal entity status	Is a separate legal entity	Not a separate legal entity	Is a separate legal entity
Liability	Limited to the extent of unpaid capital.	Unlimited, can extend to the personal assets of the partners	Limited to the extent of the contribution to the LLP.
No. of shareholders / Partners	Minimum of 2. In a private company, maximum of 50 shareholders	2- 20 partners	Minimum of 2. No maximum.
Foreign Nationals as shareholder / Partner	Foreign nationals can be shareholders.	Foreign nationals cannot form partnership firm.	Foreign nationals can be partners.
Taxability	The income is taxed at 30% + surcharge+cess	The income is taxed at 30% + surcharge+cess	Not yet notified.
Meetings	Quarterly Board of Directors meeting, annual shareholding meeting is mandatory	Not required	Not required.
Annual Return	Annual Accounts and Annual Return to be filed with ROC	No returns to be filed with the Registrar of Firms	Annual statement of accounts and solvency & Annual Return has to be filed with ROC
Audit	Compulsory, irrespective of share capital and turnover	Compulsory	Required, if the contribution is above Rs.25 lakhs or if annual turnover is above Rs. 40 lakhs.
How do the bankers view	High creditworthiness, due to stringent compliances and disclosures required	Creditworthiness depends on goodwill and credit worthiness of the partners	Perception is higher compared to that of a partnership but lesser than a company.
Dissolution	Very procedural. Voluntary or by Order of National Company Law Tribunal	By agreement of the partners, insolvency or by Court Order	Less procedural compared to company. Voluntary or by Order of National Company Law Tribunal
Whistle blowing	No such provision	No such provision	Protection provided to employees and partners who provide useful information during the investigation process.

This Article has been posted by CA Prashant Doshi. He Can be reached at prashantdoshi22@gmail.com

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An analysis of the important provisions of the Companies Bill, 2011

The Companies Bill 2011 contains 29 Chapters, 7 Schedules, 470 clauses as against the Companies Bill, 2009 which consists of 426 clauses under 28 chapters and the Companies Act, 1956 which consists of 658 sections under 13 Parts and 15 schedules.

The Bill applies to the whole of India and is also applicable to certain companies or Bodies corporate governed by Special Acts 

• A very substantial part of the Bill will be in form of rules, which will be prescribed separately.

• The Government of India, has the power to notify different provision of the Act at different point of time.

• The Financial Year of any Company can be only from April-March and only certain Companies complying with certain conditions can have a different financial year with The approval of Tribunal. Under the Companies Act 1956, there was no restriction on the period of financial year.

• The maximum number of members, which a Private Company can have, is increased from 50, as provided in the Companies Act 1956 (and Companies Bill 2009), to 200 (except in case of One Person Company).

• The scope of “officer who is in default” has been broadened. The share transfer agents, registrars and merchant bankers to the issue or transfer related to issue of shares & Chief Financial Officer are also brought under its ambit. Directors who are aware of the default by way of participation in board meeting or receiving the minutes without objecting to the same will also be included in this category even if company has Managing Director /Whole Time Director / other Key Managerial Personnel.

• Defaults of procedural nature to be penalized by levy of monetary penalties by adjudicating officers not below level of Registrar. Appeals against such orders will lie with designated higher authorities.

This Article has been Authored by: CA Venkatesh Repala. He can be reached at: venkat6repala@gmail.com

  

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Governmemt Withdrew Companies Bill 2011

Two important bills slated for passage this session have been yanked back from Parliament for fresh tweaks, in another embarrassing climbdown by a government attempting to convey an impression of decisiveness after being pilloried for months over paralysis in policymaking. 
The government withdrew the Companies Bill and Pension Fund Regulatory and Development Authority Bill on Wednesday after the BJP opposed the first and coalition ally Trinamool Congress withdrew its support for the other. 
The passage of the two bills during the ongoing winter session was key to the government's efforts to show it had finally managed to wrest back the initiative after the failure to push FDI in multi-brand retail earlier this month. 

Trinamool leader and West Bengal Chief Minister Mamata Banerjee on Tuesday withdrew her party's backing for the pension bill. In a letter to Finance Minister Pranab Mukherjee, she said her party could not accept the bill in its present form and asked for a fresh review. 

The government had already made substantial changes to its original legislation after initially rejecting recommendations on it by a parliamentary panel. At a meeting with senior BJP leaders on Monday, Mukherjee had agreed to accept the recommendations on the legislation made by the parliamentary standing committee on finance. Accordingly, an amended bill was prepared that fixed foreign investment ceiling at 26% and offered assured returns to subscribers. 

The government, which had thus secured the backing of the BJP for the bill, could have gone ahead with the legislation, but chose not to do so for fear of antagonising an important ally. Strident opposition from Banerjee was also responsible for scuttling FDI in retail. 

While the government had the BJP's support on the pension bill, it did not have as much luck on the Companies Bill as the main Opposition party forced it to send the legislation back to the standing committee on finance headed by senior BJP leader Yashwant Sinha. 

At a meeting with the finance minister on Wednesday morning, BJP leaders Sushma Swaraj, Arun Jaitley and Sinha objected to the government's claim that it had in general accepted the recommendations of the standing committee. 

The BJP leaders also argued that since the government had consulted other stakeholders after the standing committee gave its report on the Companies Bill in August 2010, it should be sent back to the committee again. Despite the seeming setback, the Companies Bill is unlikely to face major obstacles or delays, with the standing committee likely to take it up on January 6. Officials expect it to be presented in Parliament in the budget session. 

Industry was still disappointed. "Industry has waited quite long for this bill. Further delays will create uncertainties especially at the time that national accounts and reports are being finalised," said Rajiv Kumar, director-general of lobby group Ficci. 

The developments over the Pension Bill will represent a bigger setback to the government, dashing its hopes to pitch it as one of its showpiece legislation on financial sector reforms in the current session of Parliament. 

Analysts said the government's inability to shepherd the legislation underscored the lack of coordination within the alliance on policy issues, which could make governance tougher. 
Source:http://economictimes.indiatimes.com/news/politics/nation/government-withdrew-companies-bill-pension-fund-regulatory-and-development-authority-bill/articleshow/11199312.cms

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SCHEME OF NEW COMPANIES BILL, 2011

A simple effort has been made to analyze the Companies Bill, 2011 along with brand new provisions as introduced in the Loksabha on 14th December, 2011 with the help of inputs provided by ICSI.

SCHEME OF NEW COMPANIES BILL, 2011

1. The Bill has 470 clauses and 7 schedules as against 658 Sections and 15 schedules in the existing Companies Act, 1956.
2. The entire bill has been divided into 29 chapters.

Following chapters have been introduced, viz.

1. Registered Valuers (ch.17);
2. Government companies (ch. 23);
3. Companies to furnish information or statistics (ch. 25);
4. Nidhis (ch. 26);
5. National Company Law Tribunal & Appellate Tribunal (ch. 27);
6. Special Courts (ch. 28)

Just like previous The Bill empowers Central Government to make rules, etc. through delegated legislation after having detailed consultative process (clause 470 and others).

The Bill provides for self-regulatory process and stringent compliance regime.

THE SALIENT FEATURES OF THE BILL:

1. Concept of One Person Company (OPC limited) introduced by Companies Bill, 2011 through Clause 2(62).
2. In Clause 2(85) of Companies Bill, 2011, Small companies have been defined by fixing maximum paid-up share capital not exceeding Rs. 50 Lakhs and such companies will be required to follow less stringent regulatory provisions.
3. In Clause 18 of Companies Bill, 2011, the proper provision for Conversion of Companies already registered has been introduced.
4. In Clause 7(1)(b) of Companies Bill, 2011, A provision has been made regarding declaration to the effect that all the requirements of the Act in respect of registration and matters precedent or incidental thereto have been complied with. Company Secretaries continue to be recognized for the purpose of giving this declaration.

INTRODUCTION OF E-GOVERNANCE

Another important feature added by Companies Bill, 2011 in corporate practice is formal introduction of much awaited concept of E-Governance.

E-Governance proposed for various company processes like maintenance and inspection of documents in electronic form, option of keeping of books of accounts in electronic form, financial statements to be placed on company’s website, holding of board meetings through video conferencing/other electronic mode; voting through electronic means.

After the introduction of E-Governance companies can maintain its statutory registers in electronic mode and hold its board meetings through video conferencing.

BOARD AND GOVERNANCE

Appointment of Key Managerial Personnel [Clause 203(1)]

As per clause 203 of Companies Bill, 2011 the Company Secretaries are recognized as whole-time key managerial personnel. Also Companies Bill, 2011 has made the appointment of Company Secretary mandatory.

As per clause 203 of Companies Bill, 2011, every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,—

1. Managing director, or Chief Executive Officer or manager and in their absence, a whole-time director; and

2. Company Secretary.

Unless the articles of a company provide otherwise, an individual shall not be the chairperson of the company as well as the managing director or Chief Executive Officer of the company at the same time [Proviso to Clause 203(1)].

Bill 2011, also provides the definition of Key Managerial Personnel under Clause 2(51) of the Bill, which is as follows:

“Key Managerial Personnel”, in relation to a company, means—

(i) the Chief Executive Officer or the managing director or the manager;

(ii) the Company Secretary;

(iii) the Chief Financial Officer if the Board of Directors appoints him; and

(iv) such other officer as may be prescribed;

Every Company Secretary being a KMP shall be appointed by a resolution of the Board which shall contain the terms and conditions of appointment including the remuneration. If any vacancy in the office of KMP is created, the same shall be filled up by the Board at a meeting of the Board within a period of six months from the date of such vacancy [Clause 203 (2) & (4)]

If a company does not appoint a Company Secretary, the penalty proposed is:

1. On company – one lakh rupees which may extend to five lakh rupees.
2. On every director and KMP who is in default – 50,000 rupees and 1,000 rupees per day if contravention continues.

MINIMUM PERIOD PRESCRIBED FOR AT LEAST ONE DIRECTOR ON BOARD TO STAY IN INDIA

This kind of provision also prescribed for the very first time. Every company shall have at least one director who has stayed in India for a total period of not less than 182 days in previous calendar year [Clause 149(2)].

CONCEPT OF INDEPENDENT DIRECTORS

The concept of independent directors has also been touched upon for the very first time under clause 149.

1.  All listed companies are required to appoint independent directors.
2. Such other public companies as may be prescribed by the Central Government shall also be required to appoint independent directors.
3. At least one-third of the Board of such companies should comprise independent directors.
4. Nominee director appointed by any institution, or in pursuance of any agreement, or appointed by any Government to represent its shareholding shall not be deemed to be an independent director.
5. As per first proviso to Clause 161(2) only an independent director can be appointed as alternate director to an independent director.
6. The Independent directors shall abide by a code provided in Schedule IV to the Bill.
7. Independent directors shall hold office up to two consecutive terms. One term is upto five consecutive years.
8. Eligible for appointment in same company after cooling period of three years.

BOARD MEETINGS THROUGH VIDEO-CONFERENCING ALLOWED NOW

Another master change proposed in Companies Bill, 2011 under clause 173(2) is participation of directors at Board Meetings has been permitted through video-conferencing or other audio visual means, provided such participation is capable of recording and recognizing. Also, the recording and storing of the proceedings of such meetings should be carried out.


Link:http://www.icsi.edu/WebModules/LinksOfWeeks/HIGHLIGHTS-COMPANIES%20BILL2011.pdf

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