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Companies Act 2013 Vs Companies Act 1956

Companies Act 2013 Vs Companies Act 1956
Growth of Indian Economy lead to rise in number of companies and increase in expectations of stakeholders which gave rise to a more investment and growth oriented framework which is in parity with international standards – Companies Act 2013 consisting of 470 sections, 29 chapters and 7 schedules.
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Governance
  • Private companies: Limit of members increased to 200 as compared to earlier limit of 50.
  • One Person Company Introduced (Sec 3(1) of co. act 2013): It is a company which has only one member. Companies Act, 1956 requires in private companies, at least 2 shareholders and 2 directors.
1. Paid up capital does not exceed Rs. 50 lakh or amount prescribed which should not be more than Rs 5 crore.
2. Turnover does not exceed Rs2 crore or amount prescribed which should not be more than Rs 20 crore.​
  • Whistle blowing mechanism: Emphasis put to establish these concepts in company so as to report unethical behaviour.
  • Memorandum of association: MOA cannot contain more than one objective.
  • Article of association: Companies are now required to adopt Table F as AOA.
  • Ceiling on partnerships: Maximum number of partners cannot exceed 100 as compared to 20 earlier (Co. Act 1956) in any partnership or AOP except HUF and AOP formed under special acts like Lawyers ,CA,CS.
  • Restrictions imposed on layers of subsidiaries: Holding companies cannot have layers of subsidiaries exceeding the prescribed limit.

Directors Regulations
  • Resident Director: Director of every company must have stayed in India for a period of 182 days or more in previous calendar year.
  • Women Director: Every Public company with Paid up capital of not less than 100 Crore or Turnover of not less than 300Crore must have at least one women director.
  • Independent Director: Definitions and codes introduced for independent directors.
  • Limit on Directorship: A person cannot be director in more than 20 companies out of which public company should not be more than 10 whereas as per companies Act 1956, a person cannot be director in more than 15 companies.
  • Loan to directors: Now a company cannot advance any kind of loan or guarantee or security to any director, his partner, his relative, firm in which he or his relative is partner, private company in which he is director or member, any body corporate who’s 25% or more of total voting power or BOD is controlled by him.
  • Compulsory acquisition of DIN by directors.
  • Restrictions on directors and key persons imposed on dealing with forwards.
Shareholders Regulations
  • Bonus Shares: Code introduced for manner of issue of bonus shares.
  • Buyback of shares: Now Buyback can be made, even if defaults in payment of interest ,dividend or redemption of debentures , preference shares, term loan is made provided default is made good and 3 years have lapsed after such default.
  • Class Action Suits: They can be initiated by shareholders against the company.
  • Minority Shareholders can now raise objections on restructure of companies.
Accounting Enforcements
  • Financial Year: Financial year of a company can be only from April to March. Now 2 financial years cannot be there as done earlier by companies.
  • Consolidation of accounts: Now it is compulsory to prepare consolidate financial statement for a company having subsidiaries, Joint ventures or associates.
  • Secretarial Report to be attached with Board Report: This is required only in case of companies having paid up capital of more than Rs 100 crore.
  • Compliance with accounting standards: Accounting standards are getting converged with international IFRS to form IND AS which will be implemented in India from 2017.
Auditing Enforcements
  • Auditors Appointment: Every listed company can appoint an individual auditor for not more than 5 years. And firm of auditors for not more than 10 years. It requires rotation of auditors in case of publicly traded company.
  • Internal Auditor: Every listed company or public company having a paid up capital of more than Rs 10 crore or a public company having loans or borrowings from banks or public financial institutions exceeding Rs 25 crore at any point during the last financial year shall appoint internal auditor who shall either be a chartered accountant or cost accountant or such professional as decided by board.
Electronic Documentation
  • Maintenance and inspection of documents can be done electronically now.
  • Notice (seven day’s notice) for calling BOD meetings can also be given via electronic mode.
Corporate Social Responsibility
  • For sustainable growth of the country, it is necessary to put responsibility for CSR on companies. It is necessary for companies to spend 2 % of average net profit made in immediate proceeding 3 financial years towards CSR. This is mandatory for companies having net worth of Rs 500 crore or more or turnover of 1000 crore or more or net profit of 5 crore or more during a financial year.
Merger and acquisition regulations
  • Focus is on simplifying and making new norms for domestic and international mergers and acquisitions, demergers, reveres mergers.
Formation of Regulatory Authorities
  • National company Law Tribunal: Appeals from tribunal lie with NCLT.
  • National Financial Reporting Authority: They regulate accounting and auditing standards.
  • Serious Fraud Investigation Officer: Statutory auditory granted to them. They will investigate the cases of Fraud.
Conclusion
An initiative has been taken to provide more security to stakeholders by putting more regulations on companies, directors and key person’s .An effort has been made to operate in parity with international countries with a hope of more positive growth and prosperity. The introduction of New Act 2013 has increased scope for professionals.

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