Companies Act 2013

The Companies Act

Empowers the Central Government to

regulate the formation, financing,
functioning and winding up of companies

It empowers the Government to inspect the

books of accounts f the company, direct
special audits and other investigations into
the affairs of the company if they are in any
way violating the act
 It is administered by the Central
Government and the Offices of Registrar of
Companies, Official Liquidators, Public
Trustee, Company Law Board, Director of
Inspection etc.

Incorporation and the administration of

running companies is done by the Registrar
of Companies
Objectives of The Companies
Act, 1956
Management of companies
Control over companies
Protection of consumers interest
Enforcement of proper performance of
duties by management
Investors protection
Full disclosure of information
Companies Bill 2012

On 18th December, 2012, Lok Sabha

passed this bill
It has 29 chapters, 7 schedules and 470
clauses as against 658 sections, 13 parts
and 15 schedules in the existing Companies
Act, 1956
The bill received the Presidents assent on
29th August, 2013 and now is on its way to
becoming an act
New introductions
Concept of One Person Company
E- governance in all company processes
Insider trading of securities is prohibited
Punishment for fraud
Nomination and remuneration committee
 Independent Directors- one-third of board
members
Corporate Social Responsibility- set aside a
certain percentage of profits for CSR
Excessive Bureaucracy- Director
Identification Number (DIN)
 Women Directors- more number of women
reaching higher levels of hierarchy
Class Action Suits- a large group of people
can bring a claim to court in which a group
of defendants are sued
Company Secretary- Elevates their role to
management level
 New Definitions Introduced
Associate Company- a company has
significant influence over another company,
controls 20% of share capital of other
company or business decisions
Auditing Standard- standards of auditing for
companies or class of companies
Global Depository Receipt- an instrument
created by foreign depository and authorised
by company making an issue of such
depository receipt
 Employee Stock Option- option given to
directors, officers or employees of a company
to purchase or subscribe for the shares of the
company in the future
Financial year- a period ending on 31st March of
every year in which respect financial statements
are made
Turnover- aggregate value of realisation of
amount made from the sale, supply or
distribution of goods by a company in a
financial year
 One Person Company- a company which has
only one person as the member
Key Managerial Personnel- it consists the
following
-the chief executive officer or managing
director or manager
- Company secretary
- Whole time director
- Chief Financial Officer
 Comparison between the Former and
New Act
Basis Companies Act, 1956 Companies Act, 2013
Maximum no. of 50 200
members in private
company

Minimum no. of Public- 7 No change but

members Private- 2 concept of 1 member
company introduced

Maximum no. of 12 15, more by passing a

directors resolution
Statutory meeting Public company- mandatory to No provision
hold after 1 month but before 6
months from date of entitlement
of commencement

Cross boarder mergers No specific provisions Mergers of Indian and foreign

companies permitted and rules
to be notified by Central
Government

Certification of financial By manager or secretary, if any, Chairman alone can sign if so

statements and by not less than 2 directors, authorised by the Board
one of whom shall be an MD, if
there is one

Maximum time for holding first 18 months from incorporation or 9 months from closure of
Annual General Meeting 9 months from closure of accounts
accounts, whichever is earlier

Mode of notice for holding and Written notice mandatory In writing or in electronic form
Annual General Meeting
Object Clause of Consists of main objects, Contains the object for
Memorandum of Association incidental or ancillary which the company is
objects and other objects proposed to be incorporated
and any matter considered
necessary in furtherance
thereof

Issue of preference shares for Prohibited Permitted only for infrastructure

more than 20 years projects

Maximum tenure of auditors
No specific provisions For listed and other prescribed
companies:
- individual auditors to be rotated
after 5 years
- Audit firm after every 10 years
Financial Year and Extension
First Board Meeting
Restrictions on commencement
of business
Time gap between two board
meetings
Quorum of General meeting of
private and public companies
Not to exceed 15 months but
can be extended to 18 months
by ROC, financial year can end
on a date other than 31st March
No specific provision
Provisions applicable to only
public companies
At least one meeting every
quarter
Private- 2
Public- 5
Financial end on 31st March of
every year for all companies
and no other provisions for
extension are given
Within 30 days from date of
incorporation
Applicable to all companies
having share capital
Not more than 120 days of gap
between 2 meetings
Private- 2
Public- 5 if total members is
greater than 1000
-15 if total is greater than 1000
but less than 5000
- 30 if total is greater than 5000