Companies Bill 2012

Companies Act,1956
• The Company Act 1956 Came into force from
1st April 1956
• The act was based upon the recommendation
of company law committee appointed under
the chairmanship of Mr.C.H.Bhava on
25.10.1950.
• This 56year old Act is going to repeal by the
commencement of Companies Bill 2012.
© Deepak Jijo, 2013

Flash Back to Companies Bill

WHY NEW COMPANIES ACT?
Modernization & regulatory harmony in the wake
of corporate scandals; (Satyam Saga & Sahara OFCD’s
issue)
To attract the investors from abroad.
Recognition of good corporate practices & technological
improvements;
Simplification of law by placing related provisions under
one clause/section
Introduction of new provisions to meet the current
economic environment
Giving more power to in the hands of shareholders.

STRUCTURAL COMPARISON
Companies
Act 1956
13 Parts
750+
Sections
15 Schedules
Companies
Bill 2011
29 Chapters
470 Clauses
(i.e.
Sections)
7 Schedules

New Company Law
• Goods corporate governance
• Introduction of new KMP concept (CEO/MD/Manager,CS,WTD,CFO)
• Makes companies socially responsible
• Recognition of keeping Books of accounts in electronic form
• Inclusion of One Women Director in the Board for certain Companies
• Ceiling on auditors to audit maximum 20 companies
• Auditors not to render allied services
• Auditors criminal liability
• Compulsory rotation of auditors
• Stricter anti –corporate fraud norms (SFIO)
• Any one person can form company (OPC)
• Private company to have upto 200 member (presently 50)
• Uniform financial year; i.e. April to March
• Appointment of Registered Valuer
• Introduction of New provisions in CSR

CEO/MD/Manager
Company
Secretary
Whole-Time
Director
Chief Financial
Officer
KMP

ONE PERSON COMPANY (OPC)
Introduction of One Person company akin to UK
Companies Act
A private Company subscribed by one Individual
Name shall affix OPC or one person CompanyName shall affix OPC or one person CompanyName shall affix OPC or one person Company
Name shall affix OPC or one person Company

Corporate Social Responsibility
(CSR)
Every company having net worth of Rs.500 crore or more, or
turnover of Rs.1000 crore or more or a net profit of Rs.5 crore
or more during any financial year is required to constitute a
Corporate Social Responsibility Committee.
Spend at least two per cent of the average net profits of the
company made during the three immediately preceding
financial years for CSR activities.

Secretarial audit for bigger companies.
Every listed company and a
company belonging to other class
of companies as may be prescribed
shall annex with its Board’s
report made in terms of sub-
section (3) of section 134, a
secretarial audit report
given by a company
secretary in practice, in
such form as may be
prescribed.

AUDITORS
•.
The Bill
provides for
mandatory
rotation of
auditors
every five
years.
Clause 139 (2)
prescribes that no
listed company shall
(a) appoint an
individual as auditor
for more than one term
of five consecutive
years and (b) an audit
firm as auditor for
more than two terms of
five consecutive years.
Clause 139 (3) empowers
members of the company
to decide by resolution
that the auditing partner
and his team (of an audit
firm appointed by the
company) shall be rotated
every year or that audit
shall be conducted by
more than one auditor.

Changes Regarding MoA
Objects clause in the
Memorandum of
Association of a
company not required
to be divided into
main, ancillary and
other objects.
Only the objects for
which the company
is incorporated along
with matters
considered necessary
for its furtherance to
be mentioned.
The company
cannot provide
for other
object clause.

Changes Regarding AoA
Articles of Association of the Company may contain
provision with respect to entrenchment.
Entrenchment provisions provide a more restrictive
procedure than passing a special resolution for altering
certain provisions in the Articles of Association.

The Bill clearly provides the
manner in which securities
can be issued by both public
and private company.
The Bill governs the issue
of all types of
securities, as opposed to
only shares and
debentures in the
Companies Act, 1956.

Public Company can
issue securities
Public
Offer
Private
Placement
Bonus
Issue
Rights
Issue

Private Company
can issue securities
Private
Placement
Bonus Issue Rights Issue

Changes in Prospectus
• The prospectus has to be more detailed.
• A Company shall not vary the terms of contract
referred to in Prospectus or objects for which it is
issued without the approval of shareholders by
way of special resolution and providing exit
opportunity to the dissenting shareholders.

• SEBI to prescribe class/classes of companies that
can file shelf prospectus with the Registrar.
• Any person (including group or association)
affected by any misleading statement or inclusion
or omission of any matter in the prospectus can
file any suit or take any action under clause 34
(Criminal liability for misstatement in
prospectus), clause 35 (Civil liability for
misstatement in prospectus) and clause 36
(Punishment for fraudulently inducing persons to
invest money). .

Changes regarding Allotment
• In addition to shares, return of allotment is
required to be filed for all type of securities.
• Companies may now issue Global Depository
Receipts by passing a Special Resolution and
subject to such conditions as may be
prescribed.

• The number of persons to which a company
may make an offer or invitation of securities to
a section of the public otherwise than through
issue of a prospectus, by way of private
placement basis is 50.
• Qualified Institutional Buyers (QIB) not be
counted for the purpose of calculating number
of persons offered under private placement

• If a Company, listed or unlisted, makes an offer to
allot or invites subscription, or allots, or enters
into an agreement to allot, securities to 50 or such
higher number the same shall be deemed to be an
offer to the public and shall accordingly be
governed by the provisions provided in this regard
by the Securities And Exchange Board of
India(SEBI).

• Bill to be passed in Rajya Sabha and assent of
the President
• Rules to be prescribed and notified for
implementation of Companies Bill
• Preparing the Regulatory bodies with adequate
resources and training

By,
Deepak Jijo

Companies Bill 2012

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