Introdution to The Companies Act, 2013

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Few important changes in The Companies Act, 2013

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Welcome

THE COMPANIES ACT, 2013:

THE COMPANIES ACT, 2013 CA Jignesh S. Patel B.Com, ACA, DISA (ICAI) patelcajignesh@gmail.com +91 – 98500 08995

Today’s Overview :

Today’s Overview

HIGHLIGHTS OF THE COMPANIES ACT, 2013 [ Passed in Lok Sabha on 18th December, 2012 (Bill no. 121 of 2011) Passed in Rajya Sabha on 8th August, 2013 (Bill no. 121 of 2011) Received Ascent of President 29th August, 2013 ]:

HIGHLIGHTS OF THE COMPANIES ACT, 2013 [ Passed in Lok Sabha on 18th December, 2012 (Bill no. 121 of 2011) Passed in Rajya Sabha on 8th August, 2013 (Bill no. 121 of 2011) Received Ascent of President 29th August, 2013 ] The act has 470 clauses and 7 schedules as against 658 Sections and 15 schedules in the existing Companies Act, 1956. The entire act has been divided into 29 chapters . Following chapters have been introduced, viz . Registered Valuers (ch.17); Government companies ( ch. 23); Companies to furnish information or statistics ( ch. 25); Nidhis ( ch. 26); National Company Law Tribunal & Appellate Tribunal ( ch. 27); Special Courts ( ch. 28)

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Chapter I Preliminary

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The maximum number of members , which a Private Company can have, is increased from 50 as provided in the Companies Act, 1956 to 200 .  Some of the major new definitions introduced are Associate Company Small Company Employee Stock Option Promoter Related Party Turnover Chief Executive Officer Chief Financial Officer Global Depository Receipt   The scope of officer under default has been broadened . Chapter I

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Chapter II Incorporation of Company

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The concept of “ One Person Company ” has been introduced and the said company will be formed as a private limited company. This will be called as “ OPC Limited ”. 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. In the Memorandum of Association of the Company, there is no requirement as to bifurcation of the objects clause into main, ancillary and other objects. Chapter II

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Chapter III Prospectus and Allotment of Securities

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The act governs the issue of not only shares but all types of securities. Companies may now issue Global Depository Receipt by passing the special resolution and subject to such conditions as may be prescribed.  The content to be prescribed the Prospectus has now been made more detailed. Chapter III

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Chapter IV- Share Capital and Debentures

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Condition for voting rights to Preference Shareholders has been changed. Now preference shareholders can vote on all resolution placed before the company when dividends payable in respect of a class of preference shares are in arrears for a period of 2 years or more . Company cannot issue shares at discount other than as sweat equity, no provision has been provided for any approval.  A company may issue preference shares redeemable after 20 years for such infrastructure projects as may be specified subject to redemption of specified % of preference shares on annual basis at the option of the preference shareholder. Chapter IV

Chapter V Audit and Auditors:

Chapter V Audit and Auditors

Chapter V - Audit and Auditors :

Chapter V - Audit and Auditors An Audit firm as auditor for more than 10 consecutive years . Listed Company shall not appoint or re-appoint An individual as auditor for more than 5 consecutive years . Above auditors shall not be eligible for re-appointment for next 5 year . M/s. J S Patel & Co. Chartered Accountants

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Every listed company shall form an Audit Committee . The Audit Committee shall consist of minimum of three directors with independent directors forming majority. Provided that majority of members including the Chairperson shall be persons with ability to read and understand the financial statements . Chapter V

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Chapter VI Secretarial Standards

Chapter VI:

Chapter VI For the first time, the Secretarial Standards has been introduced and provided statutory recognition. Clause 118(10) read as: Every company shall observe Secretarial Standards with General and Board meetings specified by ICSI. Clause 205 casts duty on the Company Secretary to ensure that the company complies with applicable Secretarial Standards. It is the beginning of a new era where non financial standards have been given importance statutory recognition besides financial standards

Chapter VII Secretarial Audit:

Chapter VII Secretarial Audit

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In December 2008, the Ministry of Corporate Affairs introduced Voluntary Guidelines on Corporate Governance which inter-alia prescribed Secretarial Audit. Now, for the first time Secretarial Audit as been included in the bill. Every listed company and company belonging to other class of companies as may be prescribed shall annex with it’s Board Report a Secretarial Audit Report given by a Company Secretary in practice, in such a form as may be prescribed. Chapter VII

Chapter VIII Directors :

Chapter VIII Directors

Chapter VIII:

Chapter VIII In prescribed class or classes of companies, there should be at least 1 woman director . The maximum limit of directors in the Company has been increased to 15 from the 12. Company can appoint more than 15 directors by passing an special resolution. A person cannot become directors in more than 20 companies instead of 15 as provided in the Companies Act 1956 and out of this 20, he cannot be director of more than 10 public companies .

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Chapter IX Corporate Social Responsibility (CSR)

Chapter IX:

Chapter IX Every company having net worth of Rupees 500 Cr or more, or turnover of Rupees 1,000 Cr or more, net profits of Rupees 5 Cr or more during any financial year shall constitute. CSR of Board consisting of three or more directors, out of which at least one director shall be independent director. CSR Committee shall formulate and recommend policy to Board , which shall indicate activities to be undertaken by the company. Continued..

Chapter IX:

Chapter IX The board of every company shall make every Endeavour to ensure that company spends in every financial year at least 2% of net profits during immediately preceding financial year in activities specified in schedule VIII. If company fails to spend such amount, Board shall in its report specify the reason for not spending such amount .

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Chapter X Registration of Charges

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Now all types of charge would be required to be registered , earlier only specific charges were required to be registered.

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