The Rajya Sabha on 8th August, 2013, gave its assent to
Companies Bill 2013, and it became Companies Act, 2013 on 29th August, 2013.
Companies Act- 2013 introduced significant changes in provisions relating to: E-Governance; E-Management; Compliance and Enforcement; Disclosure Norms;
Auditors and Mergers and Acquisitions.
From Banker’s point of view, it is extremely necessary to
understand following new concepts incorporated in the act so as to entertain
corporate clients more effectively:
a)One Person Company,
b)Small Companies,
c)Dormant Companies,
d)Class Action Suits,
e)Registered Valuers,
f)Corporate Social Responsibility
One Person Company:
A One Person Company (OPC) means a company with only one
person as its member (Sec.3 (1)). This can be formed as a private limited
company. The concept is introduced to restrict the liability of one investor
limited to his share holding and also to crystallize assets as well as the
liabilities of the entity. The company is required to comply with all the
requirements of the Act and must indicate the status as “OPC” after its name.
In memorandum, the name of the person who, in the event of death of the
subscriber, shall become the member of the company must be stated. In case the
Banker insists for guarantee of the promoter of OPC, the very spirit of
introducing this type of company will be defeated.
Small Company:
Act has defined / classified the Small Company since few
relaxations in compliance are envisaged in the Companies Act, 2013: (Section 2
(85))
A company other than a Public Company where in “Paid up
Capital does not exceed Rs. 50 Lakhs Or such higher amount as may be prescribed
which shall not be more than Rs. 5 Crores; or Turnover of which as per its last
Profit and loss account does not exceed Rs. 2 Crores Or such higher amount as
may be prescribed which shall not be more than Rs.20 Crores. However, this
section does not apply to a Holding company or Subsidiary Company and a Company
or Body Corporate governed by any Special act.
Dormant Company:
(Section 455) This is a new section which deals with
Dormant Company i.e. where no business activities are being carried out and the
company has not made any significant accounting transactions in the last two
financial years. Further, many a times, the promoters intent to have some legal
entity for any future projects and in such eventuality a company can be formed.
Act defines Dormant company as: A Company can be classified as a Dormant
Company when it is form and registered under this act for future Projects or to
hold an Asset or Intellectual Property and has no significant accounting
transaction.
Such company or an inactive one may apply to the ROC in
prescribed manner for obtaining status of a Dormant Company.
Class Action Suit:
A class action is a Legal Form of Lawsuit where a large
group of individuals collectively bring the claim to Court. To protect the
interest of Small shareholders, Act empowers shareholders to take joint action
against the Management of the company for any fraud or irregularity. For such
action, minimum number of members should not be less than 100 OR not less than
such percentage of the total number of its members as prescribed, whichever
less is or member / members holding not less than such percentage of the issued
share capital of the company (Sec.245).
This concept is more prevalent in USA and implementation
in India will be very interesting to watch as there will always be
apprehensions about misuse of this provision. This leverage should not be an
impediment in the day to day operations / business growth of the company.
Registered Valuers:
Act has mandated the Valuation report from the Registered
valuer approved / appointed by the Audit Committee or in its absence by the
Board of Directors of the company in issues relating to: a) Further Issue of
Capital; b) Non Cash Transactions involving Directors ; c) Compromises,
arrangements and amalgamations; d) Purchase of Minority Share holding; e)
Submission of report by the company liquidator; and f) Declaration of solvency
in case of proposal to wind up voluntarily. (Sec 247).
The Registered Valuer is expected to have qualifications
/ knowledge and experience in the relevant area. He is expected to make
valuation in a most impartial, true and fair valuation of assets required to be
valued. Generally, various professional bodies will maintain the panel of such
valuers who are registered with Institute of Valuers. Act provided penal action
in case of Fraud / misrepresentation and non compliance of the provisions made
in the Act.
Corporate Social
Responsibility (CSR):
Companies Act, 2013, has dealt with CSR issue in detail.
Provisions apply to every company with- a) Net Worth of Rs.500 Crores or more,
; or b) Turnover of Rs.1000 Crores or more, or c) A Net Profit of Rs. 5 Crores
or more, during the Financial Year. It is prescribed that a CSR Committee of
the Board to be formed of three or more Directors and the Company to spend
at-least 2% of average of Net Profit made during immediate three preceding
financial years. It is directed that Board to monitor / review the CSR
initiatives periodically.
Following are few aspects /
other issues in Companies Act, 2013, concerning a banker:
a)Private Company :
Limit of the Number of members increased from 50 to 200
(Sec. 2(68)
b)Act defines Promoter as:
A person who has been named as such in a Prospectus Or is
identified by the company in annual return Or who has a control over the
affairs of the company, directly or indirectly whether as a shareholder,
director or otherwise Or in accordance with whose advice, directions or
instructions the Board of Directors of the company is accustomed to act. (Sec.2
(69)). This provision is not applicable to Professional Director.
c)Independent Director:
a. Appointment of Independent Director is made as
mandatory requirement for compliance by the companies viz. a) Listed Public
Companies; b) Other Public Companies having Paid up Share Capital of Rs.100
Crores or more or Turnover of Rs.300 Crores or more Or Aggregate Outstanding
Loans or borrowings or debentures or deposits, exceeding Rs.200 Crores must
have at least One Third of the total number of Director as Independent
Director.
b. Independent Director is to be appointed from the
panel of Data Bank of Independent Directors maintained by any Body, Institute
or association notified by the Central Government and the Director has to
follow the prescribed code as mentioned in the Act. (Schedule IV Sec. 149 (7))
c. Appointment of Independent Director shall be approved
by the company in General Meeting.
d)No. Of Directors:
Companies can have Maximum of 15 Directors.
e)Resignation:
The Director is required to mandatorily forward
resignation with detailed reasons for the resignation to the Registrar within
30 Days of resignation in prescribed manner.
f) Woman Director:
Act requires appointment of at least One Woman Director
in a) Every Listed Company; b) Every Other Public company having paid up Share
capital of Rs.100 Crores or more; OR Turnover of Rs.300 Crores or more.
g)Memorandum of
Association:
The Company is no more required to classify the main
object, incidental or ancillary or other object of the company.
h)Articles of Association:
Act introduced Entrenchment provision for alteration of
any specific clause in Article without any need of Special Resolution. This is
a restrictive provision. For a Private Company consent of all members is
required for such provisions.
i)Commencement of Business:
Provision is made applicable to ALL the companies. The
company cannot commence its business activity unless the Directors file
declaration about raising of minimum paid up capital applicable for Public /
Private Ltd. Company.
j)Issue of Shares at
Discount:
Companies are not permitted to issue the shares at
discount except in case of sweat equity where in shares are issued to employees
in lieu of their services.
k)Filing of Charge with
ROC:
All types of charges are required to be filed by the
company with ROC on movable / immovable assets in favor of charge holder within
a period of 30 Days from the date of creation. In case of failure to file the
charge within 30 days, the Registrar can permit filing of charge before 300
Days of creation after payments of additional fees / penalty.
l)Remuneration to
Executives / Key Managerial personnel:
Central Government prescribed ceiling on annual
managerial remuneration in respect of companies with inadequate profits or no
profits in the preceding year. The Companies with less than Capital of Rs. 100
Cr. - Rs.42 Lakhs p.a. and companies with Capital of Rs.100 Crores or more- Rs.
60 Lakhs p.a. In respect of all Public Limited Companies the total remuneration
not to exceed (maximum) 10% of the Net Profit. In case company intends to pay
more than above remuneration, permission from the Central Government is
required.
m)Re Opening of Books of
Accounts:
A New Sec. 130 is added which seeks to provide for re-
opening of Books of accounts and recasting of Financial Statements only against
the order from the competent court or Tribunal is available. The court will
issue order when the accounts were maintained in fraudulent manner and the
Financial Statements are not reliable. (Sec 131)
n)Voluntary Revision of
Financial statement:
If the Financial Statements or Report of the Board is not
in accordance with Sec. 129 or Sec.134, the company may approach Tribunal for
approval to revise statements / report in respect of any of the three preceding
financial years.
o)Fraud:
Act provides for specific provisions relating to act of
Fraud in relation to affairs of the company. The fraud has been defined in the
act and it covers Omission, Concealment of Facts, Abuse of position committed
by any person in connivance to deceive, to gain undue advantage, Injury to
interest of company, its shareholders, creditors or any other person for
wrongful gain or wrongful loss
p)Dissolution of Company
Law Board:
As per Section 466, with the constitution of Tribunal and
Appellate Tribunal, the Company Law Board stand dissolved.
Source:
Suneel V. Joshi, Joint Director (Faculty) Indian
Institute of Banking and Finance, 21.01.2015.
Further Reading @ : Companies
Act, 2013 | Bare Acts | Law Library | AdvocateKhoj ;
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