Seminar NewCompaniesBIll 23032013

Name Membership Number
Background Material
Seminar on
New Companies Bill
Hotel the Suryaa New Friends Colony, New Delhi
23rd March 2013
Northern India Regional Council of

The Institute of Chartered Accountants of India
Organised by
Overview OF
"The illiterate of the 21st century will not be those
Seminar New Companies Bill 2012 Delhi 23rd March 2013
who cannot read and write, but those who cannot learn, unlearn, and relearn."
Thanks Pavan Kumar Vijay
Alvin Toffler Eminent Writer of USA
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A Paradigm Shift For the Corporate
The Companies Act, 1956
The Era of Opportunities

The Companies Bill, 2012
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HIGHLIGHTS 29 Chapters, 470 Sections & 7 Schedules
The Preliminary Provisions

Associate Company Auditing Standards Introduction of new definitions in the Bill which were not existing under the Companies Act 1956 One Person Company Key Managerial Personnel Books of Account CEO/CFO Independent Director Expert
Substantial Part of the Bill in form of rules which are to be prescribed separately
33 New Definitions
Control
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The Preliminary Provisions

Introduction of new definitions in the Bill which were not existing under the Companies Act 1956 Turnover Small Company Voting Right
A Paradigm Shift For the Corporate
Promoter
The Companies Act, 1956
Postal Ballot
Related Party Transaction
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Re-enacting the Companies Act, 1956

THE OBJECTIVE
Bringing Flexibility & Adoption of Internationally Accepted Practices Self Regulation with more disclosures Stringent Punishment for violation

MAJOR CHANGES PROPOSED
Effective protection for different sections of Society
New Concepts
Corporate Corporate Governance Governance
Liberalization
Healthy Growth of India Inc.
Disclosures & Accountability
Accounts & Audit
Enforcement of Law
Efficient enforcement of law
Investor Protection
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Restructuring
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NEW CONCEPTS

NEW CONCEPTS
Introduction of One Person Company One Woman Director on Board of Specific Class
Fast Track Merger for Holding & Subsidiary Companies, Cross Border Merger Introduction of Dormant Company
Class Action suits by members against prejudicial acts of the Company Management Specification of term Associate Company Introduction of Registered Valuer
Use of electronic mode: E-voting, E-participation of experts, Board Meeting through video conferencing Maintenance of documents, records, registers, books of accounts, etc. in e-form
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ENHANCED CORPORATE GOVERNANCE
At least 1/3rd of the directors of the board of listed company should be Independent Directors
Independent directors can serve 2 consecutive terms of 5 years each on the Board of a Company. Liability of Independent Directors made limited

ENHANCED CORPORATE GOVERNANCE
Quorum of General Meeting of a Public Company to depend upon the number of its members
Instead of Conducting EGM, Private Companies have the option of Postal Ballot for business conduction
Mandatory Internal & Secretarial Audit for prescribed Companies

Compulsory rotation of Individual Auditors every 5 years & of Audit firms every 10 years, cap of 20 Companies for audit by a firm
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Restriction on Insider Trading & Forward Dealing by Directors & Key Managerial Personnel

IMPROVED CORPORATE ENHANCED CORPORATE GOVERNANCE GOVERNANCE
Consolidated financial statements of all subsidiaries to be laid before AGM along with financials, subsidiaries to include Associate companies & Joint Ventures Provision to spend at least 2% of Average Net Profit on CSR by Companies meeting a specific criteria The Scope of Officer in default has been widened to include Share Transfer Agents, Registrars Merchant Bankers For uniformity & better compatibility, Financial year of the Companies can be from April to March only
exceptions: Foreign Holding/ Subsidiary subject to tribunals approval)
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SOME LIBERAL PROVISIONS
Bifurcation of the Objects clause into main, ancillary & other objects has been done away with. Only objects to be stated in MOA For paying monthly salary to Non-Executive director (Some Limits) (Section 309(4) approval has been done away with) For holding the place of profit by the Director to in Company or its Subsidiary (Section 314 approval has been done away with)
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No approval from Central Govt. for related party transaction/loan to wholetime Director/MD - (Section 295, 297 approval has been done away with) Rationalization of process of removing the name of Company by ROC
Enabling provisions for issue of GDRs
Summary Procedure for winding up of Companies

DISCLOSURES & ACCOUNTABILITY

Exit opportunity to dissenting shareholders if the Company intends to vary the objects as specified in the Prospectus
The bill defines the term Private Placement:

PRIVATE PLACEMENT OFFER
CONDITIONS
Offer to section of public other than QIBs Not more than 50 number of people or such higher number as may be prescribed In compliance of prescribed terms & conditions Made through Private Placement offer letter and not Prospectus
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PUBLIC OFFER
Comply with provisions of Bill, Securities Contract Regulation Act, 1956 and SEBI Act, 1992
Enhanced Disclosures in the Prospectus , source of promoters contribution is also required to be disclosed
YES
Conditions fulfilled?
NO
Company Investment through more than 2 layers of Investment Companies not allowed (exemptions available)
Disclosure of interest of every director now mandatory & not discretionary
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Immunity to Independent & Non-Executive Directors not being Promoters or KMPs
(Liability only if the act occurred with their knowledge attributable through Board Process)
Duties of Directors towards the Company now prescribed
Disclosure of the Risk Management Policy in the Board Report
NBFCs to be governed by the rules issued by RBI, provisions relating to acceptance of deposit will not be applicable
Audit & Auditors
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
Acceptance of deposit from members will require shareholders approval and public can accept deposits from non- members subject to certain conditions
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Major changes towards

Audit & Auditors

Audit & Auditors
Apart from the Balance Sheet, P & L auditors are required to report on the Cash Flow of the Company Now Auditors to Comply with the Auditing Standards also along with the Accounting Standards These Auditing Standards will be prescribed by ICAI in consultation with National Financial Reporting Authority
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 or itself from practice for a period which can extend upto max. 10 years
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Audit & Auditors
Rotation of Auditor
Listed or other prescribed class of Companies Shall NOT appoint OR re-appoint

Audit & Auditors
TRANSITION PERIOD
A period of 3 years will be given to Companies existing on the enactment of this law to comply with the provisions
INDIVIDUAL AUDITOR: For more than 1 term of 5 consecutive years
AUDITOR FIRM: For more than 2 terms of 5 consecutive years
SOME FREEDOM GIVEN TO COMPANIES APPOINTING A FIRM

Decision regarding intervals at which the auditing partner and his team be rotated
RE-APPOINTMENT:
A gap of at least 5 years should elapse after completion of the aforesaid term before the same auditor (individual/ firm) can be re-appointed
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Auditor shall not provide the following services whether directly/ indirectly to Company and its Holding & subsidiary Companies:

Certain new disqualification have been added for the appointment of director in a Company:
Holding any security of the Company or its Subsidiary/ Holding/Associate or Subsidiary of such Holding Company, either by himself or through relative or partner. The relatives however may hold securities upto Rs. 1,000 or such sum as may be prescribed
Design & Implementation of Financial Information system
Accounting & book Keeping Services
Internal Audit
Actuarial Services Indebted to the Company or its Subsidiary/ Holding/Associate or Subsidiary of such Holding Company, such sum as may be prescribed.
Investment Banking & Advisory
Management Services
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Given any guarantee or provided any security of the prescribed amount, with regard to the indebtness of third person to the Company or its Subsidiary/ Holding/Associate or Subsidiary of such Holding Company, either by himself or through relative or partner.

Any person whose relative is being a Key Managerial Personnel or director of the Company
Having any direct/indirect business relation with the Company/its subsidiary/holding/associate or Subsidiary of such Holding Company
Person who has been convicted by a court of any offence involving fraud and a period of 10 years has not been elapsed from the date of such conviction
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ENFORCEMENT OF LAW

COMPLIANCES & ENFORCEMENTS
Establishment of National Company Law Tribunal
Fraud has been defined in the Companies Bill 2012 to clearly identify the defaulters
Establishment of Special Courts, Mediation & Conciliation panel for speedy trial of offences under the Act
Stringent Punishment for fraud imprisonment maximum up to 10 years & fine maximum up to to 3 times of the amount involved
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COMPLIANCES & ENFORCEMENTS

ENFORCEMENT OF LAW
Serious Fraud Investigation Office (SFIO)- A separate agency for investigation of Company related frauds Centralized Agency for investigating the affairs of the Company
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
The power of other authorities for investigation shall be stopped once the case has been authorized to SFIO Power to Arrest
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INVESTOR PROTECTION

INVESTOR PROTECTION
Class Action suit empowering minority shareholders
Shares in respect of which unpaid/unclaimed dividend has been transferred to IEPF shall also be transferred to IEPF
Provision for purchase of minor shareholding in case of acquisition
Person claiming Share/amount in the Unpaid Dividend Account that got transferred to IEPF may apply to the authority for the money claimed/Shares
Mandatory Exit Opportunity to the dissenting shareholders in case of Change of Objects or terms of Contract in Prospectus
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RESTRUCTURING
The Elevated Horizon
Process of revival & rehabilitation of Sick Companies overhauled
Provision for Cross Merger Amalgamations
Easy merger of Holding & Subsidiary Companies -
Abolition of the concept of treasury shares
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16.01.2010
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FOR ENTREPRENEURS

FOR REGULATORS
Self Regulatory Regime
One Person Company Simplified merger of Small Companies & Holding/ Subsidiary Companies Liberalization of Related Party Transactions
Towards the NATION
Special Provisions for Small Companies Recognition of Partnership or Association of up to 100 Members
Time Bound rehabilitation of Sick Companies

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FOR REGULATORS

FOR REGULATORS
Towards the ENTREPRENEURS

Growth orientation & Liberalized outlook Automated systems & self governance regime Increased Quasi Judicial Authorities for faster action More health checks for corporates and more shelf life through rehabilitation & restructuring modes Facilitation provisions of inorganic growth through relaxed
Towards the INVESTORS

Systematic Dispute Management System Ability to peruse Class Action Suits
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FOR INVESTORS
Better participation in decision making due to e-voting regime Increased Investor Awareness by availability of more information on line on public portals Responsive Investor Protection Better dissemination of information from India Inc. Ability to file Class Action Suit

For Professionals-Increased scope in existing assignments
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For Professionals- New assignments

For Professionals- Extended Role
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For Professionals - Opportunity

For Professionals - Opportunity
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2 Chapter I Sec. 2 (40)
Financial Statements

Presently no specific definition in Companies Act AS 3 requires non SMCs to prepare cash flow Companies Bill defines financial statements including cash flow statement
Exemption from cash flow being presented given to OPC, small
COMPANIES BILL 2012

Key changes and issues for discussion CA Vinod Jain Vinod Kumar & associates CAs Member INMACS Global 98110 40004 vinodjainca@gmail.com
company and dormant company
Concerns:
To bring uniformity, AS 3 to be amended to exclude OPC, Small Company and Dormant Company a defined in the Bill OPC and Dormant companies which happen to be holding or subsidiary will also be covered for preparing cash flow statements
4 Chapter IX Sec. 129 (3)
Financial Statements
SMC vs Small Company - difference Aspect
Turnover Paid up capital Market Excluded types of companies
Consolidated Financial Statements

Consolidation made mandatory for all companies having
SMC as per AS now

<=Rs.50 crore NA Equity / Debt not listed or not in the process of listing Bank, FI and Insurance
subsidiaries or associates or joint ventures
Small Company under Companies Bill

<=Rs.2 crore unless higher sum prescribed <=Rs.50 lacs unless higher sum prescribed Should not be a public company Not governed by any special act and not formed for charitable purpose NA Company is not a holding / subsidiary of any type
Statement of salient features of the subsidiary (including
associates and JV now) will also have to be presented! with SFS for CFS also
All requirements for preparation, adoption and audit as in line

Would the use of words mutatis, mutandis limit the need to present
information as in Sch III for CFS?
Concerns:
definition as per Bill and AS 21 different Do we harmonise? intermediate companies require to prepare a CFS, even though ultimate parent does there is no exemption provided for intermediate parent Presentation of statutory information for CFS will be a challenge to get similar information for all subsidiaries, JV and associates (especially overseas) Because of explanation subsidiary includes JV and associates even companies with no subsidiary (only JV / associate) will have to prepare CFS
Even Subsidiary
Borrowings (incl. deposits) Holding / Subsidiary
<=Rs.10 crore Company is not a holding / subsidiary of a non-SMC
Note: Cash flow is not required under the new Bill for OPC and Dormant companies also
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Financial Statements Signing
Chairperson, if so authorised Two directors, including the MD (if appointed) and CEO (if a
Board Report
To be signed by (including for a Banking Company which had an exemption in the present companies act)
director)
Also, by the CFO and Secretary, if so appointed
Board report is to include much more details Extract of KMP remuneration, changes etc., Independence declaration from independent directors Companys policy on director appointment and remuneration Explanations / comments on all audit qualifications Particulars of related party transactions, loans, guarantees and
investments
Risk management and CSR policy For listed and other public companies with a paid up capital
threshold prescribed annual evaluation of board performance adequately
Internal financial controls have been laid down and are operating Proper systems are in place to ensure that statutory compliances
are are addressed
Board Report
Copies of FS to members
Circulation of SFS and CFS required. AFS could be sent
Concerns: Responsibility on CFO for true and fair accounts More companies need to implement risk management in a documented manner to ensure Board can report thereon Rules need to also clarify whether Board report is to be on the basis of CFS or SFS It might make sense for it to be on the basis of SFS; CFS a summary could be presented, if so desired
optionally
Manner of circulation (physical, electronic, on website etc.,) to Listed companies (and other companies as prescribed)
be prescribed for different classes of companies through rules required to place the financials on their website
Subsidiarys audited accounts (SFS) to be placed in the
website and such SFS to be shared to members who seek the same
Concerns:
Own SFS / CFS is not required to be placed in website by an unlisted entity but, subsidiarys SFS is required to be placed in the website
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9 Chapter IX Sec. 130 & 131
Revision of Accounts

Presently. MCA Circular permits reopening and revising accounts to comply with technical requirements of any other law The bill provides for Re-opening of accounts on court / NCLT orders Voluntary revision of FS or Board report Revision feasible for SFS and CFS Re-opening on court / NCLT orders Application by CG, IT, SEBI, other authorities / any other person concerned Order by the NCLT / Court
No specific provision to provide a hearing to the company in case of reference being made by any of the authorities Reasons for revision Fraudulent accounts Mismanagement, casting a doubt on reliability of the FS No time limit for re-opening of accounts through Court / NCLT order Rules are to be framed on the role of auditor of the company in case of revision of accounts Provides an opportunity to revise when mergers and amalgamations occur with the effective date in the past IND AS requires effect of revision to be given in current FS may need revisit
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National Financial Reporting Authority (NFRA)
Chapter IX Sec. 132
Voluntary revision Appears to Board that the FS do not comply with Companies Act Notice to be given to CG and IT authorities Restricted to past three financial years Only with prior approval of Tribunal Detailed reasons to be disclosed in the Board report No revision permitted for the same FS more than once Subject to such further rules as may be prescribed These provisions would enable SEBI requirement for revision in
NFRA will make recommendations to the Central
respect of qualified audit reports
Concerns:
Post IND-AS, how the revision should be effected (as IND-AS requires effect of revision to be disclosed in present financials) to be addressed
Government on the formulation and laying down of accounting and auditing policies and standards for adoption by companies of class of companies or their auditors, as the case may be ;
monitor and enforce the compliance with
accounting standards and auditing standards in such manner as may be prescribed;
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13
14
Chapter IX Sec. 132

Chapter IX Sec. 132
NFRA will oversee the quality of service of the
professions associated with ensuring compliance with such standards, and suggest measures required for improvement in quality of service and such other related matters as may be prescribed; and
perform such other functions relating to clauses
NFRA will Essentially, standard setting for accounting, auditing and monitoring the adherence to the same by companies and audit firms will be centralised into NFRA Also, NFRA would have powers to undertake disciplinary action against audit partners / firms
In fact, if there is a action already underway by NFRA against an
auditor, ICAI or any other body cannot investigate the same matter
(a), (b) and (c) as may be prescribed.
Powers to investigate CFO and company officials (professionals)
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16 Chapter X Sec. 139
Proposed structure for NFRA
Auditors appointment

Auditors to be appointed for 5 years at a time in the AGM However, such appointment to be placed to AGM and ratified each year From the second set, the act says until 6th AGM would this then not make it for 6 years instead of 5 years? Before appointing / reappointing, company to obtain Written consent of the auditor Certificate that the appointment will be in accordance with the conditions to be prescribed in the rules and also that the auditor satisfies the eligibility criteria prescribed
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Auditors appointment
If no auditor is appointed / reappointed in an
Auditors Removal / Resignation
Passing of a special resolution and Also CG approval
AGM, the existing auditor shall continue as the auditor This, being a general clause, cannot prevail over the specific clause requiring audit rotation All companies required to have an Audit Committee will need to appoint an auditor after considering the recommendations of such Audit Committee Presently, only listed companies are required to do this
Removal of an existing auditor within the 5 year term requires
Also, the auditor will have to be heard before the approval is given for the change of auditor In case of a resignation by the auditor, there is a need to file (with company, ROC and where applicable, CAG) within 30 days a statement giving the reasons and other facts as may be relevant in regard to the resignation

NCLT could order for change of auditors when it is satisfied that the auditors have directly or indirectly acted in a fraudulent manner or abetted or colluded in any fraud
Auditors qualifications
Eligibility In case of an individual should be a Chartered Accountant In case of firm / LLP Majority partners practicing in India should be qualified for appointment
In such cases, only the CA partners are authroised to act and sign
Disqualifications (similar to the existing Act) A body corporate An officer or employee of the company A person who is a partner, or who is in the employment, of an officer or employee of the company A person in full time employment elsewhere The existing Act has a general clause that if the auditor is
disqualified for a subsidiary, holding or a co-subsidiary, then he is disqualified for the Company too probably because of the extensive disqualifications provided in the bill (see next slide), this has not been specifically provided now
Enhanced disqualifications If the person holds any security or interest in the Company, subsidiary, holding, associate or co-subsidiary If a relative (yet to be defined in rules) holds any security (Note interest is without any limit as per the Act) in the Company, subsidiary, holding, associate or co-subsidiary in excess of Rs.1,000 or amount as may be prescribed Indebtedness or guarantee by the person or his relative or partner is indebted or has guaranteed in excess of the limits prescribed to the Company, subsidiary, holding, associate or co-subsidiary New disqualifications Having direct or indirect business relationship (of such nature to be prescribed) with the Company, subsidiary, holding, associate or co-subsidiary Relative is a director or is employed as a director or KMP in the company A person convicted of fraud and 10 years not having elapsed from such conviction
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22 Chapter X Sec. 141 (3) (g)
Cap on number of audits
The present Act does not cover employee or director in a group company as the general omnibus clause is not there any longer
Provides a cap of twenty companies per partner

In case of common partners between firms, the total should not
exceed 20 for the partner across the firms
Concerns:
Relatives indebtedness etc., could make it really difficult to manage may
need clarity by way of suitable rules in this regard relatives and partners?
Business relationship is restricted to person and firm what about Would Business Relationship include even permitted professional
services? This cannot be the intent
Limit is set at the proprietor level or at firm level Earlier Act provided for limits only covering public companies Presumed that CFS is not counted and Joint Audits will be considered as one for each joint auditor
MCA should ensure that business relationship does not obviate all arms
Concerns:
Cap being provided in the Act makes it infeasible to change to meet the
length transactions as these are likely to create significant challenges Whether 20 will include all the companies consolidated in a CFS or only the SFS actually audited by the said auditor? How will joint auditors be considered for 20 will it be treated as one for each of the joint auditors or pro-rata for the number of joint auditors in the company?
requirements from time to time as it would require an amendment to the Act
Ideally, this cap should be shifted to the Rules Whether branch audits will be considered as one audit? maybe in good
order to provide some exceptions
23 Chapter X Sec. 139 (2)
Auditors Rotation
same auditor
In case of a firm, after two terms of 5 years each In case of an individual, after one term of 5 years
Auditors Prohibited services
Listed companies and prescribed class of companies cannot have the
Such outgoing audit firm cannot become auditor for a period of 5 years The prohibition covers firms which have common partners too Such rotation will have to be effected by companies covered by this
requirement within 3 years of the date of commencement of this law decide
In addition, the companies (all and not only those covered above) can
To have audit partner and team rotation at such intervals as may be decided To have joint auditors Presently, RBI and IRDA have more stringent requirements for rotation /
joint audit, which would prevail over the provisions of the Bill
Concerns:
Does the rotation requirement cover firms which may not have common partners but are practicing as part of the same network?
Auditors can provide only such services as are approved by the AC / Board, but cannot provide the following either directly or indirectly to the company its holding and subsidiaries: Accounting and Book Keeping services Internal audit Design and implementation of any financial information system Actuarial services Investment advisory services Investment banking services Rendering of outsourced financial services Management services Any other kind of services as may be prescribed
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Auditors Prohibited services
Audit Reporting
In case of an audit firm, this prohibition extends to The audit firm All its partners Its parent, subsidiary and associate entity and Any other entity, whatsoever, in which the firm or any partner of the
Due to the need for report on CFS also, access to the records and information of the
subsidiaries etc., is to be made available to the auditors of the CFS (such right not provided for associates and joint ventures)
firm has significant influence or control, or whose name or trade mark or brand is used by the firm or any of its partners
One needs to note that though associate is not included in this,
sec.141 (3) (e) talks of associate also for business relationship
Concerns: There is no exemption provided for auditors of non public interested entities as well as small entities (such as OPC, Small Company, Dormant Company etc.,) Implication of same network firm providing non audit services to holding / subsidiary abroad - can we say that the jurisdiction limit applies or can we interpret as that if such services are provided abroad too, the local firm becomes in-capacitated in India? There is a need for clarity to be provided on the definitions of these terms used in the Act
Two specific additional assertions required in audit reports (irrespective of company size): observations or comments of the auditors on financial transactions or matters which have any adverse effect on the functioning of the company any qualification, reservation or adverse remark relating to the maintenance of accounts and other matters connected therewith whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls Also, there is scope to provide more such requirements by way of rules Qualifications need no longer be in Italics / Bold Mandatory for auditor (or his qualified representative) to attend the AGM, unless specifically
exempt by the Company
Items covered by CARO may get notified under 143 as part of the rules
Concerns:
Its in fact worth relooking at why even the regular assertions provided u/s 227 (1A) are still required let alone two more added to it now As per SA 265, auditor is expected to only gain an understanding of the internal controls relevant to audit for designing his audit plan and is not required to comment on the adequacy of the same. This is likely to cause additional costs of compliance for the company(especially for small companies) financial transactions or matters would it transgress into propriety? With access to subsidiary etc., is the intent to place responsibility on holding company auditor for subsidiaries too though India has actually not adopted SA 600?
27 Chapter X Sec. 143 (12)
Reporting of Frauds by Auditors
Auditors - Penalties
Act requires auditors to report on any fraud etc., to Central Government

Rules need to provide for moderation else Government is going
Contravention of law
Relating to appointment, rotation, powers and duties, prohibited services or signing of audit
report Min Rs.25 K to Max Rs.500 K to Rs.2,500 K
If done wilfully with an intention to deceive imprisonment upto 1 year and penalty of Rs.100 K Also to refund the audit fee to the Company Pay damages to those who have lost on account of such incorrect / misleading statements or
to be flooded with only this reports Act requires fraud against the company to be reported
(does not include frauds by the company!!)
particulars in his audit report
Prosecution by NFRA (on suo moto or reference based investigation)

Penalty Min Rs.100 K to 5 times the fees received, for individuals Min Rs.1,000 K to 10 times the fees received, for firms Debar Member / firm for a min 6 months to 10 years period
There is no notice to the directors / officers / employees when such reporting is done
Concerns:
Are there other ways in which the impact of this could be reduced so that
onerous burden is not placed on the auditors? frauds
Class action suit by members / depositors against the audit firm in case of improper or misleading statements in the audit report or fraudulent, unlawful or wrongful act
Liability in such cases against the firm and each partner who was involved
Rules need to provide for material frauds only and not all frauds / likely There is a need to make this applicable to branch auditors in respect of
In case of proof of fraud / abetting to fraud, then the liability will be joint and several for the auditor, his partners and firm
LLP may not provide any shield to the liability in view of the language used
the branch audited by them
Concerns:
Why
differentiate individual and firm?
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29 Chapter IX Sec. 138
Internal Audit
internal auditor
Cost Audit

Bill provides for class of companies as prescribed to appoint

Present Act provides for internal audit only for producer companies
Class of companies to which it applies and items of costs to be maintained as part of books of records
and CARO requires comment in respect of companies of a certain size (paid up capital and reserves of Rs.50 lacs or 3 year average turnover of Rs.5 crores) as to whether they have adequate internal audit system Such internal auditor to be a chartered accountant, cost
accountant or such other professional as may be determined by the board

The internal auditor could be an external agency or internal resources
CG to prescribe manner and the intervals in which the internal
audit shall be conducted and reported to the Board
Cost audit to be done by Cost Accountant and in compliance with cost audit standards No specific requirement to get CG approval for appointment of cost auditor Cost audit report to be submitted to Board and Board will file with CG along with explanations and full information on each reservation / qualification Remuneration to Cost Auditor
Where AC is there, AC to consider all factors and recommend Board to approve the fees
Concerns:
Internal auditor should be allowed to be firm too
31 Chapter XI Sec. 149 to 166
32 Chapter XI Sec. 149 & 150
Directors
least 182 days in the previous calendar year prescribed class of companies have this requirement
Independent Directors
Resident in India - At least one director must have stayed in India for at Women director at least one women director required in case of Small shareholders director Only listed companies will henceforth Maximum directors set at 15 (12 under present Act) for all companies (including
private companies not covered in the present Act); any special resolution (no more CG approval)
Bill provides that all listed companies must have 1/3rd independent directors No requirement for 50% independent director in case Chairman is an executive director (as is required by listing agreement) Minimum number of independent directors for other class of companies can be prescribed Additional attributes for independent director compared to Clause 49 Person of integrity and possesses relevant expertise and experience; Has or had no pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;
Relatives have not had pecuniary relationship or transaction amounting to two per cent or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower Relatives not being / been with audit firm, internal audit firm, consulting entity, legal firm etc., Not a Nominee director
increase beyond this will require
Limits - One person can be director in 20 companies (presently 15 companies) Of which only 10 can be public companies Bill provides for duties of directors: Act in accordance with the AOA Act in good faith to promote the objects of the company Exercise his duties with due and reasonable care, skill and diligence Not get involved into situations which may lead to conflict of interests Not achieve or attempt to achieve undue gain for himself, relatives, partners or associates Not to assign his office
Not a CEO or director, by whatever name called, of any nonprofit organisation that receives twenty-five per
cent or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent or more of the total voting power of the company; or
Other qualifications as may be prescribed.
Annual declaration of independence Data bank of independent directors to be maintained by an Institute / Association to be notified by
the CG
ESOP will not be permitted to Independent Directors Bill also elaborates detailed code of conduct for independent directors Liability restricted to cases where there is knowledge, consent, connivance or lack of diligence
Concerns:
Material pecuniary relationship has been enhanced to pecuniary relationship now Also, any professional relationship with any part of the group will now disentitle
20
33 Chapter XII Sec. 177
34 Chapter II Sec. 3 (1) (c)
Audit Committee
Committee
One Person Company (OPC)

All listed and other prescribed class of companies to have an Audit

Current Act - public companies with paid up capital not less than Rs.5 crores Listing agreement All listed companies
Minimum three directors of which majority to be independent Listing agreement 2/3rd to be independent Majority members and Chairperson to be able to read and understand
New concept introduced in this Bill Provides for a Private Limited company with one member who will also be a Director
Provision for a nominee to become the member / director on death
financial statements One year timeline to reconstitute to meet these requirements for existing companies Specifies certain identified responsibilities plus Board could prescribe further terms of reference:

/ incapacity of the original member
Review and monitor auditor independence and effectiveness of audit process Approval to new / modification to transactions with related parties Scrutiny of inter corporate loans and investments Valuation of undertakings and assets of the company, if necessary Monitoring end use of funds raised through public offer
Concerns:
Rules need to provide that member / director (including nominee) to be a natural person, resident and Indian Citizen only
Each listed and other class of companies to set up a whistle blower
mechanism including direct access to the AC chairman
Financial Year
Mandated to be standardized as April 1 to March 31 for all
Associate
companies, in general
associate company, in relation to another company, means a
Exception could be made by a Tribunal if a company (holding or subsidiary abroad) is required to maintain accounts for a different financial year
Associate / JV Companies do not have such a facility
Existing companies to align to this year end within two years
company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.
In the first year of incorporation If incorporated before 1st Jan, then period ending 31st March of the same financial year Else, period ending 31st March of the next financial year
Explanation.For the purposes of this clause, significant influence
means control of at least twenty per cent. of total share capital, or of business decisions under an agreement;
AS 23 did not specifically deal with 20% of business decisions
Concerns:
Difficulty for each company to have to approach the NCLT Instead, Act could provide for exceptions being provided for a class of companies as may be prescribed Could lead to companies still having to consolidate Associates (which may have a different year end date)
Concerns:
Intent may have been to mean all critical business decisions instead of trying to quantify at 20% AS 23 provided for not considering as an associate, even if 20% holding is there, where facts prove the relationship to be otherwise no such scope under the Bill AS 23 also provided for significant influence to be based on other parameters such as board control / material transactions etc., which is not provided in the Bill There is a need for clarity on which should form the basis for preparation of CFS
21
Control
Subsidiary
company (that is to say the holding company), means a company in which the holding company
control shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner; Control is used in relation to:
Subsidiary whether the definition is to be as wide needs to be
subsidiary company or subsidiary, in relation to any other

controls the composition of the Board of Directors; or exercises or controls more than one-half of the total share capital
either at its own or together with one or more of its subsidiary companies Different from present Act and also from AS 21 One half of voting rights and use of the wordsto obtain economic benefits from its activities
seen
In definition of manager / promoter Clause 144 dealing with auditor not to render certain services Clause 216 investigation of ownership Clause 241 Relief from oppression
Concerns:
Voting right replaced with total share capital may lead to non voting
capital being counted for this; there is a need for clarity
Control has been defined in this Bill; presumably, the word control in the
definition of subsidiary is limited and not as wide as per the separate definition control definition could extend to cover control through other mechanisms such as management rights, voting agreements etc.,
40 Chapter XII Sec. 188 & 192
Related Party
Aspect Officers Firm Private company Public company Under Companies Bill Director or his relative KMP or his relative Director, Manager or his relative is a partner Director or Manager is a member or director Director or Manager is a director or holds along with relatives more than 25% of paid up capital Accustomed to act as per advice, directors or instructions of Director or Manager On whose advice, directions or instructions, Manager / Director is accustomed to act Holding, Subsidiary, Associate, Cosubsidiary As may be prescribed Under AS 18 KMP and his relatives
Related Party Transactions
Enterprises over which individuals with significant influence in this company and / or KMPs have significant influence
Body Corporate Any person
Having an interest in voting power with significant influence over the enterprise And, their relatives Holding, Subsidiary, Co-Subsidiary; Associates and Joint Ventures
Group Others
No CG approval henceforth. Special Resolution required for related party transactions, where Company has paid up capital, which is not less than amount prescribed OR Transactions NOT exceeding such sums as may be prescribed Members who are related parties cannot vote in such resolutions CG may prescribe additional conditions for related party transactions Restrictions have been extended to all related parties in the new bill Also, transactions covered by such restrictions have been enhanced to cover: Selling or otherwise disposing of, or buying, property of any kind; Leasing of property of any kind; Appointment of any agent for purchase or sale of goods, materials, services or property; Such related party's appointment to any office or place of profit in the company, its subsidiary company or associate company; and Underwriting the subscription of derivatives on securities of the company Restrictions not applicable for arms length transaction in the ordinary course of business Every contract / arrangement to be disclosed in the Board Report along with justifications There is a need for prior approval of general meeting for non cash transactions with director
or his connected person by the company, holding, subsidiary or associate

required
In case the director is also a director in the holding company, approval of such holding company is also
Concerns:
There is need for clarity from MCA that Bill definition is for control and
Concerns:
Presume the intent is special resolution for transactions exceeding a certain amount prescribedApparent
regulation whilst AS 18 definition is for disclosure in FS etc.,
error in drafting the section to be corrected
JV is not covered
Even arms length transactions may have to be disclosed in the Board report connected person is not defined anywhere The disclosure requirements may make the report bulky as every contract / arrangement is to be disclosed
22
42 Chapter VIII Sec. 123
Relative
they are members of a Hindu Undivided Family; they are husband and wife; or one person is related to the other in such manner as may be
Dividend
Dividend can be declared out of Profits for the year after providing for depreciation Accumulated profits after providing for depreciation Out of both Out of monies provided by CG / SG under any guarantee Under the bill, CG is no longer empowered to permit dividend
relative, with reference to any person, means any one who is related to another, if
prescribed
declaration without providing depreciation of the company reserves
Prescribed relationship is to come by way of rules
Transfer to reserves is no longer mandatory and left to the discretion Rules are yet to be framed for declaration of dividend from out of Interim dividend out of profits & surplus in P&L; if during current
Concerns:
Relative definition to encompass a wide range of relationship needs a
comprehensive relook in the current day context
With the enhanced restrictions (esp. for auditors and directors) related to
relatives, it is a dire need to have this definition made to meet the current days social and economic context
Economic dependence or independence could be a more fairer criteria
year, losses have been made, dividend not to be more than last three year average Dividend cannot be declared if the company fails to comply with the provisions relating to acceptance and repayment of deposits
43 Chapter VIII Sec. 123 (2)
44 Chapter VIII Sec. 123 (2)
Depreciation
Depreciation
Three classes of companies Prescribed class of companies with specific useful life in Schedule II Can use other rates, with justification being explained Class of companies where useful life is as provided by regulatory authority Other companies minimum depreciation as per the Schedule Useful life has been reduced in many cases compared to previous Act Also, more items have been brought into schedule industry wise WDV seems to be out; SLM or Unit of production method can be adopted After providing for residual value (generally not more than 5%) Concept of componentisation brought in No separate rates for ESD for the period II shift worked 50% more
Depreciation will have to be on the revalued amounts and the past ICAI guidance to offset from reserve may no longer be available Intangibles amortisation to be based on related AS
The rates provided for BOT assets in the Sch XIV is not carried
forward in the schedule also
depreciation and for the period II shift worked, 100% more depreciation
No specific clause requiring assets less than Rs.5,000 to be depreciated
Concerns:
Intangibles left to AS; Recent amendment to provide depreciation based on future revenue from the project may require revisit The transitional provisions may have erratic hit in the initial period there should have been an option to revise and adjust to opening retained earnings for the past period
fully From the date the bill is enacted
Depreciation will be prospectively over remaining useful life Where remaining useful life is NIL, adjust to opening retained earnings
23
45 Chapter IV Sec. 52
46 Chapter IV Sec. 63
Securities Premium
the Bill (and hence not permitted for):

Bonus Shares
Creation of Securities Premium account is the same Utilisation, though is more restrictive for prescribed class of companies in Issue of fully paid preference shares as bonus shares Writing off preliminary expenses of the company Writing off preference / debenture issue expenses Providing for premium payable on redemption of preference / debenture
For prescribed class of companies, premium payable on redemption of
preference shares will have to be provided out of profits

from profits or out of securities premium account
Except that to the extent it relates to issue made before this bill is passed, it can be
Concerns:
In view of no specific transition provision, it is understood that the application of this utilisation restriction will be only prospective Companies could make necessary provisions for DRR from out of securities premium (which may not be possible post this bill) before the bill is passed
Explicitly provided in Bill now Under previous Act, only Table A dealt with this Also, SEBI ICDR regulations and ICAI GN prohibited capitalisation of revaluation reserve Under the Bill Issue of bonus shares can be only from free reserves, securities premium and capital redemption reserve Revaluation reserve cannot be used Bill also provides for certain specific conditions to be fulfilled AOA to permit bonus issue On Board recommendation, general body to authorise No default in payment of statutory dues to employees No default in payment of principal and interest on deposits and debt securities Partly paid shares to be fully paid up before the bonus issue Bonus shares cannot be in lieu of dividend Any additional conditions as may be prescribed
47 Chapter XVII Sec. 247
Registered Valuer

Corporate Social Responsibility

Companies requiring to constite a CSR committee Networth of Rs.500 crore or more Turnover of Rs.1,000 crore or more Net profit of Rs.5 crore or more in any financial year CSR committee to have Three or more directors At least one is to be an independent director CSR committee will Formulate CSR policy and recommend to board Recommend the amount of expenditure to be incurred Monitor CSR policy from time to time
New concept introduced in this bill

Qualifications and experience etc., to be prescribed
AC or Board to appoint and decide terms for such appointment

Where there is a need for valuation of property, stocks, shares, debentures, securities, goodwill
or any other asset or net worth or its liabilities under the companies bill Non cash transactions with directors etc., {192 (2)} Issue of shares {62 (1) (c)} Compromise arrangements {230 (2) (C) (v)} Purchase of minority shareholding {236 (2)} Liquidation {281 (1) (a) proviso, 319 (3) (b)} Winding up {305 (2) (d)}
Prescribed in the bill for

Concerns:
Since notified AS will become part of the Bill, it may be considered that valuation under that also will be covered Even when companies have inhouse capabilities, still, this requirement
Schedule VII to the Bill lists out the activities which can be
considered
would have to be met
Company to give preference to local areas and areas around
which it operates
24
50 Chapter XII Sec. 185
Corporate Social Responsibility

Profits shall be calculated as done for managerial remuneration
Loan to Director
No lending / guarantee / security directly or indirectly to a
Board will Ensure that every year at least 2% of the average net profits from the immediately preceding thee financial years is spent on CSR
Approve the CSR policy Disclose in the Board report and place it in the companys website
director / a person in whom the director is interested

Exemptions:
Loan to MD / WTD as per conditions of service or as approved by members
in special resolution
If the company fails to spend such monies, Board report should
If lending / guarantee / security is the ordinary course of business, then if at
contain reasons for the same
least bank rate is charged
However, no penalties prescribed for the same
There is no provision to get CG approval for lending or
providing guarantee where there is a restriction
Concerns:
Net profit criteria seems to be significantly lower compared to the networth
Concerns:
The language of the section may lead to even subsidiaries being covered. This may have to be looked into
and revenue criteria
Whether provision to be created for unspent amount is not clear This CSR cost may have its own tax implications whether this will be
seen as setting aside of profits or as a donation or as a legal obligation for the business (and thus a business expenditure)
51 Chapter XII Sec. 186 (1)
52 Chapter XII Sec. 186 (2)
Layers of Investment Companies
Limits on Loans and Investments
A company cannot have more than two layers of investment companies

Exception is when an acquisition is made abroad and multiple
All companies have a limit for investments, loans, guarantees and security aggregating to the higher of
60% of its paid up share capital, free reserves and securities premium or 100% of its free reserves and securities premium
layers abroad is as per local regulations

Another exception being subsidiary having an investment
The restriction which earlier was only for bodies corporate now extended to any person or entity
This also includes wholly owned subsidiaries
subsidiary for the purpose of meeting the requirement of any law for the time being in force
Concerns:
Lack of transitional provisions for existing investment companies It is presumed that investment can be also considered through other than investment companies in multiple layers
Permission to exceed this limit requires prior special resolution at the general meeting FS to contain disclosure on the investments made, loans, guarantees and security provided and the purpose for which the loan, guarantee / security is to be used by the recipient Rate cannot be lower than the prevailing yield on G-sec closer to the tenor
Concerns:
Lack of transitional provision for existing investment, loans, guarantees
and security
It is presumed that this will apply only prospectively and not for existing
arrangements
53 Chapter XV Sec. 233 to 234
54 Chapter XV Sec. 230 to 232
Mergers and Amalgamations

Compromise / Arrangements

File scheme with NCLT for

Merger / amalgamation of companies
File scheme with NCLT for

Making compromise / arrangement with creditors and members
Mergers between Indian and Foreign companies permitted subject to

RBI approval and Such conditions as may be prescribed
Merger application will require a certificate by auditor that the accounting prescription in the scheme is in accordance with AS Merger cannot lead to treasury shares these will be cancelled or extinguished Simplified procedure to be introduced for merger of
Holding company and wholly owned subsidiary Two small companies
Application involving CDR can be filed along with

A report from auditors on liquidity test being met A valuation report on all assets of the company by a registered
valuer
Shareholders of transferor company who want to opt out, scheme to provide for cash payment based on a valuation (which shall not be less than that specified by any regulation in this regard by SEBI)
Objection to a scheme filed with NCLT can be filed only by

Persons holding 10% of shareholding or
Concerns:
Whether the requirement for compliance with AS will apply to pending schemes (already filed) is not clear The provision in AS 14 to accept accounting as per any court approved schemes SEBI has clarified on this;
Having 5% of the outstanding debt Concerns:

Guidance will be required from ICAI for the auditors report on liquidity test
MCA must also clarify that this will not be acceptable as being in compliance
Need for clear IGAAP for acocunting in respect of demergers and spin offs Court schemes already approved (even if not in conformity with AS) will continue to apply? Clarity required on treasury shares already created
being met as this will involve evaluation of future projections be finalised
With valuation reports being required, valuation standards would need to
25

Substantial part of law shall be in the form of rules to be prescribed in due course.
29 chapters against 13 at present 470 clauses against 658 sections at present 7 schedules against 15 at present More than 400 Rules are likely.
Presentation By CA Anil Sharma
Presentation by CA Anil Sharma

Historical background
Companies Act, 1913 Companies Act, 1956 ( 30,000 cos.) 25 amendments till date ( more than 8,00,000 cos.) Corporate scams and build up for new Bill
Concept paper in 2004 Setting up of JJ Irani Committee New Companies Bill, 2008 based on recommendations of JJ Irani Committee New Companies Bill, 2009 Reference to Standard Committee on Finance and its report in August, 2010 New Companies Bill, 2011
New Concepts
One Person Company Small Company Dormant Company
26
One Person Company(OPC)

Definition in - clause 2(62) a company which has only one person as a member. Incorporation of OPC clause 3
as a private company MOA to indicate the name of other person who shall become member in case of death or his incapacity to contract Consent of that person to be filed Member can change the name of other person any time Other person can withdraw his consent any time
Dormant Company
No definition in Clause 2. Clause 455 defines it as:
A company formed and registered for a future project or to hold an asset or intellectual property And has no significant accounting transaction Or an inactive company (defined in the explanation to clause 455(1)) Can apply to Registrar to obtain the status of a dormant company Companies defaulting in filing financial statements or annual returns for two financial years can also be made a dormant company by Registrar
One Person Company to be mentioned in bracket below the name second proviso to clause 12(3).
Such company to file such documents and pay such annual fee as may be prescribed to remain as dormant. Can become an active company on application and payment of fee
Small Company
Definition in clause 2(85)
Other than a public company Paid up capital does not exceed Rs. 50 Lakhs Turnover in the last year does not exceed Rs. 2 Crores It is not a holding company or a subsidiary co. It is not a co. registered under section 8 It is not a co. governed by any special Act.
Changes in the definition of Pvt. Co.

Definition in clause 2(68) Existing section 3 (1)(iii)(b) limit on number of its members to 50 , now raised to 200. Existing section 3(1)(iii)(d)- prohibits any invitation or acceptance of deposit from persons other than its members, directors and their relatives, now removed altogether.
Merger or amalgamation of two or more small companies in Fast Track Mode under clause 233.
27
Prohibition of association of partnership of persons exceeding certain number

Present section 11
10 for banking, 20 for others
CSR
Clause 135 read with Schedule VII
applicable to a co with capital of Rs. 500 Crores or more or Turnover of Rs. 1000 Crores or more or Net profit of Rs. 5 Crores or more during any financial year
Clause 464 100 for any business
To spend in every financial year at least 2% of the average net profits of the co during the three immediately preceding financial years Local area to be given preference, activities as mentioned in Schedule VII To constitute a CSR Committee to formulate and monitor implementation
New Initiatives
Corporate Social Responsibility (CSR) Class Action suit Rehabilitation and Insolvency Fund Use of electronics in management Consolidated financial statement (CFS) Women director Fast Track Mode for merger or amalgamation Entrenchment provision Disgorgement of gain
Class Action Suit

Clause 37- Suit which can be filed by any person, group of persons or any association of persons affected- against misstatement in prospectus (clause 34) and inducement to invest money (clause 36) Clause 247- Application by prescribed number of members or depositors may file class action for seeking action against mismanagement
28
Rehabilitation and Revival Fund

Clause-269 fund to be established for rehabilitation, revival and liquidation of the sick companies. Contribution by the companies volantarily. Company which contributed is entitled to withdraw funds, in the event of proceedings for winding up, for payment to workmen, protecting the assets and to meet incidental costs during proceedings. Withdrawal restricted up to the amount contributed. Fund to be managed by the Central government.
Woman director
Clause 149
Class of classes of companies, as prescribed must have at least one woman director Existing companies on the date of commencement of the Act and if so prescribed to comply with the requirement within one year.
Use of electronics in management

Voting through electronics means by members Clause 108 Central Govt. to prescribe rules for the class of companies and manner to exercise such voting. Board meetings through video conferencing or other audio visual means ---Clause 173 (2). Provided proceedings are capable of recording with date and timing and recognition of participants. Central govt. to prescribe the item which can not be dealt with in a meeting with video teleconferencing.
Fast Track Mode for Merger/Amalgamation

Clause 233
Two or more small companies Holding and its WOS companies Such other class as may be prescribed
Process
Proposed scheme to be issued to Registrar and OL for their objections/suggestions Members of all the companies in their respective general meetings to approve with at least 90% Each company to file declaration of solvency with Registrar Scheme to be approved by 90% in value of the creditors Approved scheme to be filed with the Central Govt., Registrar and OL If Registrar and OL has no objections, the Central Govt. may confirm the merger/amalgamation Transferor co(s) shall be deemed to have dissolved without process of winding up.
29
CFS
Clause- 129 deals with Financial Statement. Clause 2(40)- New Definition of financial Statement. Sub-clause (3) of Clause 129 provides for preparation of CFS by a company having one or more subsidiaries and lying the same in AGM Rules to be provided for consolidation Subsidiary for the purpose of this clause includes associates and joint venture. CFS in addition to stand alone financial statement
Disgorgement of gains
Clause 38- provides for punishment for person for acquisition of securities in fictitious name(s), or through multiple applications in different combination of names under clause 447. Once convicted under that, the court may order disgorgement of gains, if any made and seizure and disposal of securities in possession. The amount received to be credited to Investor Education and Protection Fund under Clause 124.
Entrenchment Provision
Entrenchment to the effect that specified provisions of the AOA may be altered only if conditions or procedures more restrictive than those applicable for special resolution are met or complied with. Clause 5- the articles may contain provisions for entrenchment provided these are made:
either on the formation of the company or subsequently with the unanimous consent of all the members in the case of private company and by special resolution in the case of public company and such provisions are to be notified to the Registrar.
New Restrictions
On deposits On dividend On transactions with directors On related party transactions On revision of accounts
30
Deposits
Separate Chapter with four clauses as against one section presently. Clause 73- deposit from its members by a company - with the approval of general meeting and according to rules to be framed Clause 76- deposit from persons other than its members by a public company having prescribed net worth, or turnover and rating from recognised rating agency. In both the cases secured and unsecured deposits are covered. Clause 74 - provision of very heavy fine and imprisonment in case of default in repayment of deposits. Clause 75- if fraudulent intentions a re established, every officer responsible to be personally responsible for deposits, losses and damages.
Transactions with directors

Definition of Interested director- clause 2(49). Clause 192- Restrictions on non- cash transactions (buying and selling both) involving directors- prior approval by passing resolution in general meeting. Clause 193- Restriction on contract by OPC with Sole member- contract to be in writing, terms defined in memorandum ,recording in minutes and intimation to Registrar.
Dividend
Clause 123 - No dividend from reserves other than the free reserves. Restriction on declaration of interim dividend proviso to sub-clause (3) of clause 123 in case company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend.
Related party transactions

Definition of related party- clause 2(76) Clause 188- lists Related party transactions including leasing of property of any kind. Consent of the Board to be given by a resolution In case of company with prescribed share capital, prior approval of the company in general meeting is required Does not apply to transactions entered into by the company in ordinary course of business other than those which are not on arms length basis.
31
Revision of accounts
Distinction between reopen and recast and revision Clause 130- reopen and recast can not be done with approval of Tribunal and no objections from the Central Government, Income Tax Authorities, SEBI or any other regulator/authority Allowed only if it is established that earlier accounts were prepared fraudulently or the affairs were mismanaged during the period casting doubt on the reliability of financial statement. For the three preceding financial years With the approval of the Tribunal If the Board feels that financial statements are not prepared according to Clause 129 ( accounting standards, format)
Directors Remuneration
No change in over all limit In case of absence or inadequacy of profits remuneration is payable subject to the provisions of Schedule V In Schedule V limits revised upward from those in Schedule XIII at present. Clause 197- remuneration payable to directors who are neither MD or WTD not to exceed
1% ( if there is MD or WTD) 3% (if there is no MD or WTD)
Clause 131- revision

Independent director not to entitled to stock option.

Amended provisions
Directors remuneration Depreciation Sick company Fraud Penalties and prosecutions
Useful life and depreciation

Clause 123- to provide depreciation as per Schedule II before declaration or payment of dividend. Present Schedule XIV- rate of depreciation and different rates based on shifts and method of depreciation New Schedule II- to calculate depreciation rate based on useful lives assigned to different fixed assets and shifts.
32
Sick Company
Clause 253- Only criteria of sickness is non payment to secured creditors representing 50% or more of its outstanding debts, with in 30 days from notice to pay.
Penalties and prosecutions

Harsher penalties for defaults. Provision for imprisonment in 26 clauses.
Fraud
Explanation to Clause 447 defines fraud. Any act or omission, concealment of the fact or abuse of position committed by any person himself or by other person in connivance in any manner, with intent to deceive, to gain undue advantage from or to injure the interest of the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss. Clause 447- punishment for fraud
Imprisonment not less than 6 months to 10 years and Fine which shall not be less than the amount of fraud or 3 times of such amount.
New Opportunities
Internal audit At NFRA , NCLT and NCLAT Interim administrator in revival of sick companies Company Liquidator Registered valuers
33
Internal Audit
Clause- 138 Prescribed class of companies to appoint an internal auditor Qualification of internal auditor- shall be either CA, CMA or such other professional as may be decided by the board Internal audit of functions and activities of the company. Rules to be framed by Central Govt. for determining the intervals for conducting internal audit.
Internal Administrator for revival

Clause -259 To be selected from databank maintained by the Central Government
NFRA ,NCLT and NCLAT

Clause 132 members of NFRA Clause 409- technical members of NCLT Appearance before NCLT
For approvals For amalgamation
Company Liquidator
Clause 2(23) definition of Company Liquidator To be appointed by Tribunal in case of winding up by Tribunal and by the company or creditors in case of voluntary winding up. A panel to be maintained by the Central government for the purpose.
Registered Valuer
Clause 247 valuation of assets, properties , stocks, goodwill or other assets to estimating net worth of the company to be done by a qualified professional named as Registered Valuer.
34

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Name Membership Number

New Companies Bill

Hotel the Suryaa New Friends Colony, New Delhi

23rd March 2013

Northern India Regional Council of

Thanks Pavan Kumar Vijay

Alvin Toffler Eminent Writer of USA

A Paradigm Shift For the Corporate

The Companies Act, 1956

The Era of Opportunities

The Companies Bill, 2012

The Preliminary Provisions

The Preliminary Provisions

A Paradigm Shift For the Corporate

The Companies Act, 1956

Related Party Transaction

The Companies Bill, 2012

Re-enacting the Companies Act, 1956

The Companies Bill, 2012

Effective protection for different sections of Society

Corporate Corporate Governance Governance

Healthy Growth of India Inc.

Disclosures & Accountability

Accounts & Audit

Efficient enforcement of law

The Companies Bill, 2012

The Companies Bill, 2012

The Companies Bill, 2012

The Companies Bill, 2012

Mandatory Internal & Secretarial Audit for prescribed Companies

The Companies Bill, 2012

The Companies Bill, 2012

Enabling provisions for issue of GDRs

Summary Procedure for winding up of Companies

The Companies Bill, 2012

The Companies Bill, 2012

The bill defines the term Private Placement:

Disclosure of interest of every director now mandatory & not discretionary

The Companies Bill, 2012

The Companies Bill, 2012

Duties of Directors towards the Company now prescribed

Disclosure of the Risk Management Policy in the Board Report

Audit & Auditors

Major changes towards

Major changes towards

Other Functions of National Financial Reporting Authority

Major changes towards

Major changes towards

INDIVIDUAL AUDITOR: For more than 1 term of 5 consecutive years

AUDITOR FIRM: For more than 2 terms of 5 consecutive years

SOME FREEDOM GIVEN TO COMPANIES APPOINTING A FIRM

Major changes towards

Major changes towards

Design & Implementation of Financial Information system

Accounting & book Keeping Services

Investment Banking & Advisory

Major changes towards

Major changes towards

The Companies Bill, 2012

The Companies Bill, 2012

Establishment of National Company Law Tribunal

The Companies Bill, 2012

The Companies Bill, 2012

The Companies Bill, 2012