Key Highlights of New Indian Companies Act 2013

1. Companies Act 2013
Key Highlights
Compiled by: CA Vikas Pagar, G P W & Associates
vikas.pagar@gmail.com

2. Index
2
Sr. No.
1
2
3
4
Particulars
Introduction
Purpose
Key Highlights
Disclaimer
Page No.
3-4
5
6-13
14
Compiled by: CA Vikas Pagar

3. Introduction
3
The Companies Bill 2012 was passed in Rajya Sabha on
8th August 2013 (during the monsoon session of the
parliament). Earlier, the bill was passed by the Lok Sabha
on 18th December 2012. Now, It has also got the
Presidential assent and has now become the Companies
Act, 2013.
The next step is to finalize the Rules and define the
procedural aspects of this Act. The Ministry of Corporate
Affairs has put the draft rules for public comments. The
relevant portions of the Act will be notified, in a step by
step manner, along with the rules applicable.
Compiled by: CA Vikas Pagar

4. Introduction...
4
The new Act comprises of 29 chapters, 470 Sections and
7 Schedules as against 658 sections and 14 Schedules in
the Companies Act, 1956. In 470 Sections the word “as
may be prescribed” has been used at around 336 places.
The Act extents to the whole of India and different
provisions of the Act will be applicable on such date(s) as
the Central Government, by notification in the official
gazette, may appoint and different dates may be
appointed for different provisions of the Act.
Compiled by: CA Vikas Pagar

5. Purpose
5
The existing Companies Act, 1956 has been amended
several times in the past 57 years, with many of its
provisions found to be outdated and inadequate.
The objective behind the 2013 Act is lesser Government
approvals and enhanced self-regulations coupled with
emphasis on corporate democracy.
Compiled by: CA Vikas Pagar

6. Key Highlights
6
The concept of ‘One Person Company’ has been
introduced with the new Act which will be a private
company.
Maximum number of members in a private limited
company has been increased from 50 to 200.
Small company is introduced for lesser regulatory
framework.
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.
Compiled by: CA Vikas Pagar

7. Key Highlights...
7
Shares cannot be issued at a discount (Exception- Sweat
Equity).
Reduction of share capital is subject to the approval of
Tribunal (NCLT).
For defined infrastructural projects, preference shares can
be issued for a period exceeding 20 years.
Buyback provisions eased.
Provisions relating to further issue of capital made
applicable to all companies
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8. Key Highlights...
8
Stringent norms provided for acceptance of fresh deposits
from members and public. E.g. Mandatory credit rating &
deposit insurance etc. (Not applicable to NBFCs. They will
be governed by RBI).
In respect of all the companies (except one person
companies and small companies), whether private or
public, listed or unlisted, the annual return has to be
signed by either a company secretary in employment or
by a company secretary in practice. Requirement of
Compliance Certificate is done away with the above
change.
Compiled by: CA Vikas Pagar

9. Key Highlights...
9
Appointment of at least one director resident in India, i.e.,
a director who has stayed in India for at least 182 days
in the previous calendar year, is made mandatory for all
companies.
Maximum number of directors has been increased from
12 to 15 directors. Further no Central Government
approval is required to increase the maximum no. of
directors beyond 15. Shareholders of companies may do
so by passing a special resolution.
Individual limits for remuneration enhanced in the Act.
Compiled by: CA Vikas Pagar

10. Key Highlights...
10
The central government permission under section 295 and
section 372A of Companies Act, 1956 is dispensed with.
To align with the provisions of the Income tax Act,
companies to have a uniform financial year – ending on
31st March each year.
Contents of Directors’ Report elaborated. Directors to
annually report on the existence and effective operations
of systems on compliance with all applicable laws.
Secretarial audit mandatory for listed and prescribed
classes of companies.
Compiled by: CA Vikas Pagar

11. Key Highlights...
11
Scope of related party transactions has been widened
and definition of relatives has also been enlarged.
Every related party transaction to be disclosed in Board’s
report along with the justification.
2% of average net profits of last 3 years to be
mandatorily spent on CSR by companies having
– net worth of Rs. 5 billion or more; or
– turnover of Rs. 10 billion or more; or
– net profit of Rs. 50 million or more
Compiled by: CA Vikas Pagar

12. Key Highlights...
12
The previous approval of Central Government is no
longer required for appointment of Cost Auditor
Quorum of the public company has been increased from 5
to 30 members personally present depending upon the
number of members as under:
1. Upto 1000 members = 5 members personally present
2. 1001 to 5000 members = 15 members personally
present
3. More than 5000 members = 30 members personally
present
Compiled by: CA Vikas Pagar

13. Key Highlights...
13
Compulsory Rotation of Auditors has been incorporated in
the Act.
Listed and certain other prescribed classes of companies
cannot appoint:(a) an individual as auditor for more than one term of five
consecutive years.
(b) an audit firm as auditor for more than two terms of
five consecutive years.
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14. Disclaimer
14
These materials and the information contained herein are provided
by us and are intended to provide general information on a
particular subject and should not be treated as professional advice
or services.
We do not make any express or implied representations or
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contact us at vikas.pagar@gmail.com
Compiled by: CA Vikas Pagar

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Compiled by: CA Vikas Pagar