Company Act, 2013

THE EXECUTION
• Long awaited Companies Act, 2013 ("The 2013 Act") has come
into existence by the President of India on 29th August, 2013 and
published in the Official Gazette on 30th August, 2013.

• The 2013 Act comprises of 29 chapters, 470 sections with 7

schedules as against 658 sections, 14 schedules in the Companies
Act, 1956
1. Appointment of Directors:
• The 1956 Act provided that the limit for maximum number of
directors be based on its articles or twelve (12) whichever is lower.

• The 2013 Act provides that the company shall have a maximum of
fifteen (15) directors on the Board of Directors and appointing more
than fifteen directors would require approval of shareholders through
a special resolution.
• The 1956 Act did not prescribe any academic or professional
qualifications for directors. The 2013 Act provides that majority of
members of Audit Committee including its Chairperson shall be
persons with ability to read and understand the financial statements.

• The 2013 Act provides for appointment of at least one woman director
on the Board for such class or classes of companies i.e., (Company
having paid–up share capital of one hundred crore rupees or more or a
turnover of three hundred crore rupees or more as on the last date of
latest audited financial statements).
• The 2013 Act provides that a company should have at least one
director who has stayed in India for a total period of not less than
hundred and eighty two days in the previous calendar year.

• The 2013 Act introduces a new category of a company, One Person

Company (“OPC”), which should have at least one director. 
• To act in accordance with co.’s AOA
• Act in good faith
• Exercise his duties with due care and diligence.
 
A director shall not:

• Involve in any conflicting interest with the co.

• Achieve or attempt to achieve any undue advantage.
• Assign his office.
2. INDEPENDENT DIRECTORS
• Under 1956 Act ,  the Board of listed entities having non-executive
chairman and executive chairman should comprise of at least one-
third and one-half of the Board as ID respectively.

• The 2013 Act proposes that the public companies having paid up
share capital of ten crore rupees or more [or] having turnover rupees
100 crores or more (or) which have, in aggregate, outstanding loans
or borrowings or debentures or deposits, exceeding fifty crore rupees
as per the latest audited financial statements shall have atleast two of
the total number of its directors as IDs.
3. Separate meeting
• The independent directors of the company shall hold at least one
meeting in a year, without the attendance of non-independent
directors and members of management
FUNCTIONING OF THE BOARD
1. Notice of Board meeting
• The 1956 Act provided that notice of every Board meeting should be
given in writing. However, it did not specify the period of notice. 

• The 2013 Act provides that a minimum of seven days notice to the
Board is required to call a Board meeting.
2. Frequency of Board meetings
• The 1956 Act required atleast one Board meeting to be conducted in
every three calendar months and four such meetings in a financial
year. Further, Listing Agreement requires at least four meetings in a
year with a maximum time gap of four months between two meetings.
• The 2013 Act, consistent with the Listing Agreement requirement,
provides that the company should have at least four meetings in a year
with a maximum time gap of one hundred and twenty days between
two meetings. The 2013 Act also requires that the first Board meeting
of the company be held within thirty days of incorporation of the
company.
CONSTITUTION OF COMMITTEES
1. Audit committee
• The Board of Directors of every public company having paid up capital
of ten crore rupees or more [or] turnover of hundred crore rupees or
more [or] which have, in aggregate, outstanding loans or borrowings
or debentures or deposits exceeding fifty crore rupees shall constitute
an Audit Committee. The Audit Committee shall consist of a minimum
of three directors with independent directors forming a majority:
Provided that majority of members of Audit Committee including its
Chairperson shall be persons with ability to read and understand, the
financial statement
2. Establishment of vigil mechanism
• The vigil mechanism shall provide for adequate safeguards against
victimisation of employees and directors who avail of the vigil
mechanism and also provide for direct access to the Chairperson of
the Audit Committee. An audit committee shall oversee the vigil
mechanism through the committee.
3. Nomination and Remuneration
Committee
• The Committee shall consist of three or more non-executive directors
out of which not less than one-half shall be independent directors.
Main Activity is to lay the criteria for recommending to the Board for
the appointment of directors in senior management and their
removal. Also formulate the criteria for determining the remuneration
of directors, key managerial personnel and other employees and
recommending to the board.