Issues with sudden notification of 98 sections of the Companies Act, 2013

The Ministry of Corporate Affairs notified 98 sections of the Companies Act, 2013 on 12th September. Although notification of 98 sections of New Act is welcome but MCA has notified these sections when only a part of the draft rules made live for public comments.

Now in the present situation and until the remaining sections are notified, one will need to follow both old and new Act for planning the transactions and day to day compliance purposes. More surprisingly, in some notified section, certain sub-sections have not been notified now and that section is brought into force with exception for the un-notified sub-section.

Some of the key issues/highlights are follows: 

1.  Section 465 of the Act which deals with repeal and saving has not been notified. As a result, the entire Companies Act 1956 will continue to remain in full force and effect.

2. Now even component of preference capital will be counted to determine this relationship of holding and subsidiary between various Companies. These resulting in creation of numerous unplanned subsidiaries suddenly and necessitating various compliances like consolidation of financial statements etc. by the new ‘holding companies’.

3. The new Act under Section 185, expressly prohibited that loans/guarantees etc., cannot be provided by a company to its directors (including directors of holding company) or entities in which such directors are interested. In view of these, this may hamper companies’ plans to diversify the business and structuring to fund their projects and business requirements. Although with the prior approval of the Central Government, but it was allowed under the Companies Act, 1956.

4. The new Act removed the most of the privileges which Private Companies enjoyed under the old Act.  Most of the exemptions given to Private companies under the old Act have been removed.  Now Private Companies are brought on par with Public Companies. For example, section 180 of the Companies Act 2013 (restriction on the Powers of the Board) is applicable to every company, whereas the corresponding Section 293 of the Companies Act 1956 was not applicable to the Private Companies.

5. New definitions of CEO, CFO, company, company secretary, control, cost accountant, debentures, derivatives, director, dividend, ESOPs, experts, financial statements, financial institutions, global depository receipts, government company and holding company, have also been notified.

No doubt, The Companies Act, 2013 comes as a welcome change for the stakeholders as it emphasizes to bring reforms in enforcement measures and mandates increased transparency and accountability. But it is always advisable to give adequate time to create a proper infrastructure for implementation before the new law is notified as Companies Act is a basic charter for the corporate sector.

follow me on caarticles.com

SEBI Circular on the Subject : Arbitration Mechanism - Fees for Appellate Arbitration

SEBI issued Circular # CIR/MRD/ICC/29/2013 dated 26.09.2013 on the subject  : Arbitration Mechanism - Fees for Appellate Arbitration.

Official link:http://www.sebi.gov.in/cms/sebi_data/attachdocs/1380196498090.pdf

SEBI Circular on the Subject : Investor Grievance Redressal Mechanism

SEBI issued Circular # CIR/MRD/ICC/30/2013 dated 26.09.2013 on the subject  : Investor Grievance Redressal Mechanism.

Official link: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1380197235076.pdf

Tax audit report due date for e-filing extended to 31.10.2013​​

Tax audit report due date for e-filing extended to 31.10.2013

​​

​​

F.No. 225/117/2013/ITA.II

Government of India

Ministry of Finance

Department of Revenue

​                                                                                                                                                                                           ​

Central Board of Direct Taxes

                                                           ​

Dated- 26th September, 2013

Order under Section 119 of the Income-tax Act. 1961.

CBDT in exercise of power under sec 119(2)(a) of the IT Act, 1961 read with Sec 139 and Rule 12, has decided to relax the requirement of furnishing the Report of Audit electronically as prescribed under the proviso to sub-rule (2) of Rule 12 of the IT Rules for the Assessment Year 2013-14 as under

(a) The assesses, who are presently finding it difficult to upload the prescribed Reports of Audit (as referred to above) in the

​ 

system electronically may also furnish the same manually before the jurisdictional Assessing Officer within the prescribed

​ 

​

​d​

ue date.​

​

(b) The said Report of Audit should however be furnished electronically on or before 31.10.2013.

Rohit Garg

Deputy-Secretary to Government of India

Official link to the Notification :-  http://incometaxindia.gov.in/archive/BreakingNews_Order119_ITAct_26092013.pdf​

Draft Rules for 9 chapters under the Companies Act 2013 is made live for public comments in 2nd phase

As all we are aware that the Draft Rules for following Chapters under the Companies Act, 2013 is made live for public comments in 1st phase. 

·         Chapter I - Preliminary

·         Chapter II - Incorporation of Company and Matters Incidental Thereto

·         Chapter VI - Registration of Charges

·         Chapter VIII - Declaration and Payment of Dividend

·         Chapter IX - Accounts of Companies

·         Chapter X - Audit and Auditors

·         Chapter XI - Appointment and Qualification of Directors

·         Chapter XII - Meeting of Board and its Powers

·         Chapter XVI - Prevention of Oppression and Mismanagement

·         Chapter XVIII – Removal of Name of Companies from the Register of Companies

·         Chapter XIX – Revival and Rehabilitation of Sick Companies

·         Chapter XXII – Companies Incorporated Outside India

·         Chapter XXIV – Registration Offices and Fees

·         Chapter XXVI – Nidhi

·         Chapter XXVII – National Company Law Tribunal and Appellate Tribunal

·         Chapter XXIX – Miscellaneous

Please note that the last date of receiving comments on these Rules is 08 October 2013.

Similarly, the draft Rules for following 9 chapters under the Companies Act 2013 is made live for public comments in 2nd phase. The last date of receiving comments on these rules is 19/10/2013.

Chapter III - Prospectus and Allotment of Securities

Chapter IV - Shares Capital and Debentures

Chapter VII - Management and Administration

Chapter XIII - Appointment and Remuneration of Managerial Personnel

Chapter XV - Compromises, Merger and Amalgamations

Chapter XVII - Registered Valuers

Chapter XXI - Companies authorized to register under this Act

Chapter XXVII - National Company Law Tribunal and Appellate Tribunal

Chapter XXVIII - Special Courts (Mediation and Conciliation Panel)

The details pertaining to aforementioned draft rules of Phase I and Phase II can be downloaded from http://14.140.191.91/.

One can visit http://14.140.191.91/ and register himself/herself for posting suggestions/comments to aforementioned draft rules.

                                                                            You can find my Articles also on caarticles.com.

"Highlights of New Provisions of Companies Act 2013 notified on 12/09/2013 ​"

Many of the sections of Companies Act, 2013 which have been notified on 12/09/2013​,​ have provisions similar to that of Companies Act, 1956. But here are analysis (part I) of some important Sections of Companies Act, 2013.

​​

Highlights of New Provisions of Companies Act 2013 notified on 12/09/2013 - 

Companies Act 2013	Companies Act 1956	Changes	Remarks
Definitions under Section 2 (There are 94 definitions in the new Act out of which all definitions except 12 definitions have been notified.) In some definitions, a particular portion remains unnotified.	Definitions under Section 2	The definition of Private Company  is different from the earlier Act.	The Ministry on 13th September 2013 has clarified that all incorporation  documents being filed on or after 12.09.2013 must contain the new definition only.
Section 102  -Statement to be annexed to notice	Section 173 -Statement to be annexed to notice	o    Disclosure of interest made mandatory for directors/ manager and every key managerial personnel and relatives of directors, manager and KEY MANAGERIAL PERSONNEL. Earlier, interest of only directors/ manager has to be disclosed. o    Earlier, with regard to any special business concerning another company, disclosure of shareholding interest of director/manager in that other company had to be disclosed if such share holding was more than 20%. Now the percentage has been changed to 2% and also the same has been made applicable to all promoters, directors, manager and KEY MANAGERIAL PERSONNEL. o    NEW ACT specifies the consequences of non-disclosure or insufficient disclosure. It said that if any benefit accrues to any director, manager, promoter or KEY MANAGERIAL PERSONNEL or their relatives because of non-disclosure or insufficient disclosure, then the concerned person will be deemed to be holding the amount of benefit in trust for the company. o    New Act also contains the penalty clause which provides for a penalty of Rs. 50,000/- or 5 times the amount of benefit, whichever is more. Earlier no specific penalty was provided. o    As per new Act, applicability of this Section is for all companies except to a One Person Company. Earlier, as per Section 170 of CA, 1956, the provisions of section 173 will apply to private companies only if the Articles do not provide anything otherwise.	MCA has clarified that the provisions of this section will apply to all notices issued on or after 12th September, 2013.
Section 103 – Quorum for meetings	Section 174 - Quorum for general meetings.	Quorum requirement for public companies  No. of members as on date of Meeting -1000 or less Quorum Requirement 5 members personally present No. of members as on date of Meeting -1000-5000 Quorum Requirement 15 members personally present No. of members as on date of Meeting -More than 5000 Quorum Requirement 30 members personally present The quorum requirement for private companies remains same at 2 members personally present.
Section 180 – Restrictions on powers of Board	Section 293 - which contains a list of items which can be transacted by the Board only after obtaining approval of the shareholders.	o    NEW ACT mandates approval by means of special resolution only. o    CA, 1956 mandated that approval has to be obtained in a meeting.This requirement seems to have been dispensed with in NEW ACT as the word “meeting” has been replaced with “special resolution”. o    This Section is applicable to all companies as compared to only public companies and subsidiaries of public companies as contained in CA, 1956.

You can also find my Articles on caarticles.com

Disclaimer

Whilst every effort has been made to ensure that details provided above are correct and up-to-date, it does not constitute any professional or legal advice. ​​

MCA notifies the 98 Sections of new Companies Act, 2013

As all we are aware that the Ministry of Company Affairs (MCA) has initiated the process of implementation of the Companies Act, 2013. The first set of draft rules have been notified on 9^thSeptember, 2013. Now, MCA vide Notification dated 12/09/2013 (click here to download the notification) bringing into effect 98 sections of the new act. These sections shall come into immediate effect.

These are -

Chapter I -Preliminary (1 – 2)

·         Section 2- Definitions.

Chapter II -Incorporation of Company and Matters Incidental Thereto (3 – 22)

·         Section 19- Subsidiary company not to hold shares in its holding company.

·         Section 21- Authentication of documents, proceedings and contracts.

·         Section 22- Execution of Acts of exchange, etc.

Chapter III -Prospectus and Allotment of Securities (23 – 42)

·         Section 23- Public offer and private placement.

·         Section 24- Power of Securities and Exchange Board to regulate issue and transfer of securities, etc.

·         Section 25- Document containing offer of securities for sale to be deemed prospectus.

·         Section 29- Public offer of securities to be in dematerialised form.

·         Section 30- Advertisement of prospectus.

·         Section 31- Shelf prospectus.

·         Section 32- Red herring prospectus.

·         Section 33- Issue of application forms for securities.

·         Section 34- Criminal liability for mis-statements in prospectus.

·         Section 35- Civil liability for mis-statements in prospectus.

·         Section 36- Punishment for fraudulently inducing persons to invest money.

·         Section 37- Action by affected persons.

·         Section 38- Punishment for personation for acquisition, etc., of securities.

·         Section 39- Allotment of securities by company.

·         Section 40- Securities to be dealt with in stock exchanges.

Chapter IV -Share Capital and Debentures (43 – 72)

·         Section 44- Nature of shares or debentures.

·         Section 45- Numbering of shares.

·         Section 49- Calls on shares of same class to be made on uniform basis.

·         Section 50- Company to accept unpaid share capital, although not called up.

·         Section 51- Payment of dividend in proportion to amount paid-up.

·         Section 57- Punishment for personation of shareholder.

·         Section 58- Refusal of registration and appeal against refusal.

·         Section 59- Rectification of register of members.

·         Section 60- Publication of authorised, subscribed and paid-up capital.

·         Section 65- Unlimited company to provide for reserve share capital on re-registration.

·         Section 69- Transfer of certain sums to capital redemption reserve account.

·         Section 70- Prohibition for buy-back in certain circumstances.

Chapter VI -Registration of Charges (77 – 87)

·         Section 86- Punishment for contravention.

Chapter VII -Management and Adminstration (88 – 122)

·         Section 91- Power to close register of members or debenture holders or other security holders.

·         Section 100- Calling of extraordinary general meeting.

·         Section 102- Statement to be annexed to notice.

·         Section 103- Quorum for meetings.

·         Section 104- Chairman of meetings.

·         Section 105- Proxies.

·         Section 106- Restriction on voting rights.

·         Section 107- Voting by show of hands.

·         Section 111- Circulation of members’ resolution.

·         Section 112- Representation of President and Governors in meetings.

·         Section 113- Representation of corporations at meeting of companies and of creditors.

·         Section 114- Ordinary and special resolutions.

·         Section 116- Resolutions passed at adjourned meeting.

Chapter VIII -Declaration and Payment of Dividend (123 – 127)

·         Section 127- Punishment for failure to distribute dividends.

Chapter IX -Accounts of Companies (128 – 138)

·         Section 133- Central Government to prescribe accounting standards.

Chapter XI -Appointment and Qualifications of Directors (149 – 172)

·         Section 161- Appointment of additional director, alternate director and nominee director.

·         Section 162- Appointment of directors to be voted individually.

·         Section 163- Option to adopt principle of proportional representation for appointment of directors.

Chapter XII -Meetings of Board and its Powers (173 – 195)

·         Section 176- Defects in appointment of directors not to invalidate actions taken.

·         Section 180- Restrictions on powers of Board.

·         Section 181- Company to contribute to bona fide and charitable funds, etc.

·         Section 182- Prohibitions and restrictions regarding political contributions.

·         Section 183- Power of Board and other persons to make contributions to national defence fund, etc.

·         Section 185- Loan to directors, etc.

·         Section 192- Restriction on non-cash transactions involving directors.

·         Section 194- Prohibition on forward dealings in securities of company by a key managerial personnel.

·         Section 195- Prohibition on insider trading of securities.

Chapter XIII -Appointment and Remuneration of Managerial Personnel (196 – 205)

·         Section 202- Compensation for loss of office of managing or whole-time director or manager.

Chapter XXII-Companies Incorporated Outside India (379- 393)

·         Section 379- Application of Act to foreign companies.

·         Section 382- Display of name, etc., of foreign company.

·         Section 383- Service on foreign company.

·         Section 386- Interpretation.

Chapter XXIII-Government Companies (394 – 395)

·         Section 394- Annual reports on Government companies.

Chapter XXV-Companies to Furnish Information or Statistics (405)

·         Section 405- Power of Central Government to direct companies to furnish information or statistics.

Chapter XXVII-National Company Law Tribunal and Appellate Tribunal (407 – 434)

·         Section 407- Definitions.

·         Section 408- Constitution of National Company Law Tribunal.

·         Section 409- Qualification of President and Members of Tribunal.

·         Section 410- Constitution of Appellate Tribunal

·         Section 411- Qualification of Chairperson and Members of Appellate Tribunal.

·         Section 412- Selection of Members of Tribunal and Appellate Tribunal.

·         Section 413- Term of office of President, Chairperson and other Members.

·         Section 414- Salary, allowances and other terms and conditions of service of Members.

Chapter XXVIII- Special Courts (435 – 446)

·         Section 439- Offences to be non-cognizable.

·         Section 443- Power of Central Government to appoint company prosecutors.

·         Section 444- Appeal against acquittal.

·         Section 445- Compensation for accusation without reasonable cause.

·         Section 446- Application of fines.

Chapter XXIX Miscellaneous (447 – 470)

·         Section 447- Punishment for fraud.

·         Section 448- Punishment for false statements.

·         Section 449- Punishment for false evidence.

·         Section 450- Punishment where no specific penalty or punishment is provided.

·         Section 451- Punishment in case of repeated default.

·         Section 452- Punishment for wrongful withholding of property.

·         Section 453- Punishment for improper use of “Limited” or “Private Limited”.

·         Section 456- Protection of action taken in good faith.

·         Section 457- Non-disclosure of information in certain cases.

·         Section 458- Delegation by Central Government of its powers and functions.

·         Section 459- Powers of Central Government or Tribunal to accord approval, etc., subject to conditions and to prescribe fees on applications.

·         Section 460- Condonation of delay in certain cases.

·         Section 461- Annual report by Central Government.

·         Section 462- Power to exempt a class or classes of companies from provisions of this Act.

·         Section 463- Power of Court to grant relief in certain cases

·         Section 467- Power of Central Government to amend Schedules.

·         Section 468- Power of Central Government to make rules relating to winding up.

·         Section 469- Power of Central Government to make rules.

• Section 470- Power to remove difficulties.

You can also find my Articles on http://caarticles.com/.