Overview of The Modern Company Law Presented by Pavan Kumar Vijay - - PowerPoint PPT Presentation

Overview of The Modern Company Law

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Presented by – Pavan Kumar Vijay

ERIC HOFFER

“In a time of drastic change, it is the unlearners who inherit the future. The learned find themselves equipped to live in a world that no longer exists”.

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A Paradigm Shift For the Corporate The Companies Act, 1956 The Companies Bill, 2013

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Passed by both the Houses

The Companies Bill, 2013

29 Chapters 470 Sections

Facts about the Bill

33 Definitions 7 Schedules

Substantial Part of the Bill in form of rules which are to be prescribed separately

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Re-enacting the New Companies Law

THE OBJECTIVE

Effective protection for different sections of Society Bringing Flexibility & Adoption of Internationally Accepted Practices Self Regulation with more disclosures Stringent Punishment for violation Healthy Growth of India Inc. Efficient enforcement of law

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The Companies Bill, 2013

Enforcement of Law- New Institutions New Concepts Investor Protection Liberalization Disclosures & Accountability Corporate Governance Restructuring Accounts & Audit Tightening Provisions

Major Areas of Focus

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Major Changes

New Concepts

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The Companies Bill, 2013

New Concepts

• Introduction of One Person Company
• Stipulation of Woman Director
• Class Action suits by members
• Associate Company
• Introduction of Registered Valuer
• Fast Track Merger for Holding & Subsidiary Companies
• Cross Border Merger
• Concept of Dormant Company
• Further Use of electronic mode: Maintenance of documents, records,

registers, books of accounts, etc. in e-form

• Summary Procedure for Winding up of Company
• Enabling provisions for issue of GDRs

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Types of entities under New Law

Entity Structure recognized under Law

Private Limited Company Public Limited Company One Person Company Limited Liability Partnership Nidhi Company Producer Company Foreign Company

Small Company Dormant Company

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Defunct Company

Major Changes

Corporate Governance

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Enhanced Corporate Governance

Independent Directors – Exhaustive Definition, Code of conduct, Performance Evaluation, Separate Meetings

• f

Independent Directors, Restricted Tenure, Limited Liability etc. such concepts added as to Independent Directors Provision to spend at least 2% of Average Net Profit on CSR by Companies meeting a specific criteria Compulsory rotation of Individual Auditors every 5 years & of Audit firms every 10 years, cap of 20 Companies for audit by a firm Quorum of General Meeting of a Public Company to depend upon the number of its members

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Restriction on Insider Trading & Forward Dealing by Directors & Key Managerial Personnel

Consolidated financial statements of all subsidiaries to be laid before AGM along with financials, subsidiaries to include Associate companies & Joint Ventures

For uniformity & better compatibility, Financial year

• f

the Companies can be from April to March only exceptions: Foreign Holding/ Subsidiary subject to tribunal’s approval) Mandatory Internal & Secretarial Audit for prescribed Companies

Enhanced Corporate Governance Cont….

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Major changes

Liberalization

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The Companies Bill, 2013

SOME LIBERAL PROVISIONS

For holding the place of profit by the Director to in Company or its Subsidiary – (Section 314 approval has been done away with) No approval from Central

• Govt. for related party

transaction/loan to whole- time Director/MD - (Section 295, 297 approval has been done away with) For paying monthly salary to Non-Executive director

(Some Limits) – (Section

309(4) approval has been done away with) Rationalization of process of removing the name of Company by ROC Bifurcation

• f

the Objects clause into main, ancillary &

• ther
• bjects

has been done away with. Only

• bjects to be stated in MOA

Summary Procedure for winding up of Companies

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Major changes

Disclosures & Accountability

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Private placement norms made more stringent

Justification of entering into Related Party Transaction required to be disclosed in the Directors Report

Verification of registered

• ffice address required

The Companies Bill, 2013

DISCLOSURES & ACCOUNTABILITY

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Enhanced Disclosures in the Prospectus , source of promoters contribution is also required to be disclosed Exit opportunity to dissenting shareholders if the Company intends to vary the objects as specified in the Prospectus Company Investment through more than 2 layers

• f Investment Companies

not allowed (exemptions available) Disclosure of interest of every director now mandatory & not discretionary

The Companies Bill, 2013

DISCLOSURES & ACCOUNTABILITY

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Duties of Directors towards the Company now prescribed

Scope of officer in default widened to include directors aware of the default by way of their participation in the board meeting or receipt of minutes

Disclosure of the Risk Management Policy in the Board Report

The Companies Bill, 2013

DISCLOSURES & ACCOUNTABILITY

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The scope of Officer in Default widened to include RTA, MB to the issue or transfer related to issue of shares.

Immunity to Independent & Non- Executive Directors not being Promoters or KMPs (Liability only if

the act occurred with their knowledge attributable through Board Process)

NBFCs to be governed by the rules issued by RBI, provisions relating to acceptance of deposit will not be applicable Acceptance of deposit from members will require shareholders approval and public can accept deposits from non- members subject to certain conditions

DISCLOSURES & ACCOUNTABILITY

The Companies Bill, 2013

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Major changes

Audit & Auditors

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The Companies Bill, 2013

Apart from the Balance Sheet, P & L auditors are required to report on the Cash Flow of the Company Mandatory Rotation of Auditor Introduced Restriction in Non Audit functions by Auditor Now Auditors to Comply with the Auditing Standards also along with the Accounting Standards

Audits and Auditors

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The Companies Bill, 2013

Other Functions of National Financial Reporting Authority

Monitor & Enforcing the Compliance of Accounting & Auditing Standards Power to investigate the matters of Professional or other misconduct committed by any member of ICAI No other Institute or Body shall initiate or continue any proceeding where NFRA has initiated an investigation In case of misconduct, power to order the penalty of not less than Rs. 1 lakh (Individual) not less than Rs. 10 lakh (Firms) Debarring the member or the firm from engaging himself

• r itself from practice for a period which can extend upto
• max. 10 years

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Major Changes

Investor Protection

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The Companies Bill, 2013

Class Action suit empowering minority shareholders Voting by Non interested shareholders in related party transactions Mandatory Exit Opportunity to the dissenting shareholders in case of Change of Objects or terms of Contract in Prospectus Shares in respect of which unpaid/unclaimed dividend has been transferred to IEPF shall also be transferred to IEPF Person claiming Share/amount in the Unpaid Dividend Account that got transferred to IEPF may apply to the authority for the money claimed/Shares

Investor Protection

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Major Changes

Tightening Provisions

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Financial year uniform to April- March & further extension restricted Grant of ESOP to Independent Directors not allowed Acceptance of deposit from Members Private companies bought under the ambit of following Private Placement Norms Company Investment through more than 2 layers of Investment Companies not allowed (exemptions available)

Provision related to appointment of Managing Director/ Whole Time Director /Manger shall now also apply to a Private Company.

The Companies Bill, 2013

Tightening Provisions

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Major changes

Restructuring

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Easy merger of Holding & Subsidiary Companies Provision for Cross Merger Amalgamations Process of revival & rehabilitation of Sick Companies

• verhauled

Abolition of the concept

• f treasury shares

The Companies Bill, 2013 The Companies Bill, 2013

Restructuring

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Major Changes

Compliances & Enforcements

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The Companies Bill, 2013

Enforcement of Law- Redefining Roles

Establishment of National Company Law Tribunal (NCLT) &

Appellate Tribunal Establishment of Special Courts, Mediation & Conciliation panel for speedy trial of offences under the Act Serious Fraud Investigation Office (SFIO)- A separate agency for investigation of Company related frauds

National Financial Reporting Authority Investor Education & Protection Fund Registered Valuer Debenture Trustee

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Compliances & Enforcements

Fraud has been defined in the Companies Bill 2013 to clearly identify the defaulters

Stringent Punishment for fraud – imprisonment maximum up to 10 years & fine maximum up to to 3 times of the amount involved

Imprisonment & twice the prescribed penalty in case of repeated defaults committed within a span of 3 years Offences punishable with fine or imprisonment or both to be compounded only by Special Courts

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The New Company Law

 New opportunities  New thinking  New Strategy  Above all new ERA of Corporate Functioning

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What We have to Do

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LEARN RELEARN UNLEARN

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