Companies Act - 2013

KIRTANE & PANDITCHARTERED ACCOUTANTS CA Suhas Deshpande 1

Companies Act - 2013

For Private Circulation only

Overview – Comparative Analysis

Special Features of New Act

New Concepts / Definitions

Formation of Companies and MOA / AOA

Issue of Shares & Securities

Impact on Private Limited Companies

Accounts, Audit, Directors & Related Party Transactions

KIRTANE & PANDITCHARTERED ACCOUTANTS CA Suhas Deshpande

Companies Act - 2013


Companies Act 2013

• Lok Sabha approved on 18 December, 2012

• Rajya Sabha approved on 8 August, 2013

• The President of India approved on 29 August, 2013

• Rules 340+ released on 31st March, 2014


Companies Act,1956 Companies Act, 2013

658 Sections 470 Sections

13 Parts 29 Chapters

15 Schedules 07 Schedules



Overview – Comparative AnalysisArrangement of Analysis

Chapter Title Sections of Companies Act, 2013

Corresponding Sections of

Companies Act, 1956

I Preliminary 1,2 1 to 10II Incorporation of Companies 3 to 22 11 to 54III Prospectus and allotment of securities 23 to 42 55 to 81IV Share Capital and Debentures 43 to 72 82 to 123V Acceptance of deposits by Companies 73 to 76 58A to 58BVI Registration of charges 77 to 86 124 to 145VII Management and administrations 88 to 122 146 to 197VIII Declaration and payment of dividend 123 to 127 205 to 207IX Accounts of Companies 128 to 138 209 to 223





Companies Act, 1956

X Audit & Auditors 139 to 148 224 to 233BXI Appointment and qualification of

directors149 to 172 252 to 284

XII Meeting of Board and its powers 173 to 195 285 to 308XIII Appointment and remuneration of

managerial personnel196 to 205 309 to 311

XIV Inspection, inquiry and Investigation 206 to 229 234 to 251XV Compromise, Arrangements and

Amalgamations230 to 240 390 to 396A

XVI Prevention of oppression and mismanagement

241 to 246 397 to 409

XVII Registered Valuers 247 --

Arrangement of Analysis (Contd..)





Companies Act, 1956

XVIII Removal of names of companies from the Register

248 to 252 560

XIX Revival and rehabilitation of sick companies

253 to 269 424A to 424L

XX Winding up 270 to 365 425 to 559XXI Companies authorized to register

under this Act and Winding up of unregistered companies

366 to 378 565 to 581 & 582 to 590

XXII Companies incorporated outside India 379 to 393 591 to 608XXIII Government Companies 394 to 395 617 to 620XXIV Registration offices and fees 396 to 404 609 to 614A






Companies Act, 1956

XXV Companies incorporated outside India 405 615 XXVI Nidhis 406 620AXXVII NCLT and NCLAT 407 to 434 10FB to 10GFXXVIII Special Courts 435 to 446XXIX Miscellaneous 447 to 470 621 to 658



Special Features of New Act


Self Regulation

Forced Compliance

Balancing of Private & Public Co(s)

Harmonise with internationally accepted practice

Strict Penal Provisions

Special Features


33 new definitions inserted

3 new schedules inserted :

o Corporate Social Responsibility (CSR)

o Code for independent directors

o Infrastructure projects & facilities

Special Features (Contd…)


New Concepts /Definitions


Associate Company [Section 2(6)]

2(6) defines “Associate company”, in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.

Explanation.—For the purposes of this clause, “significant influence” means control of at least twenty per cent of total share capital, or of business decisions under an agreement;

New Concepts / Key Definitions


New Concepts / Key Definitions (Contd.)

‘Book and paper’ and ‘book or paper’ [section 2(12)]– ‘Book and/or Paper’ include books of account, deeds, vouchers,

writings, documents, minutes, registers maintained on paper or electronic form.

Books of account [Section 2(130]– Books of account includes records maintained in respect of:-

o (i) all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place.

o All sales and purchases of goods and services of the companyo The assets and liabilities of the company; ando The items of cost as may be prescribed under section 148 in

the case of a company which belongs to any class of companies specified under that section. (Cost Audit)


Chief Executive Officer [Section 2(18)] 2(18) “Chief Executive Officer” means an officer of a company, who

has been designated as such by it;

Chief Financial Officer [Section 2(19)] 2(19) “Chief Financial Officer” means a person appointed as the

Chief Financial Officer of a company;

Control [Section 2(27)] 2(27) defines “control” shall include the right to appoint majority of

the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner;



Financial Statements [Section 2(40)]

o defines “financial statement” in relation to a company, includes—o (i) a balance sheet as at the end of the financial year;o (ii) a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year;o (iii) cash flow statement for the financial year;o (iv) a statement of changes in equity, if applicable; ando (v) any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) to sub-clause (iv):

o Provided that the financial statement, with respect to One Person Company, small company and dormant company, may not include the cash flow statement;



Financial Year [Section 2(41)]

o 2(41) defines “financial year”, in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up:

o Provided that on an application made by a company or body corporate, which is a holding company or a subsidiary of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year:

o Provided further that a company or body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause;



1. Need to align their Financial Year with the new requirement

within two years from the commencement of the new law.

2. Incorporated on/after 1 January to close books on 31 March

in the following year (i.e. more than 12 months period)

3. If incorporated before 1 January, then the year-end will be 31

March (period would be less than one year)

4. Not clear whether it is a one-time application to the Tribunal



Key Management Personnel [Section 2(51)]

o defines “key managerial personnel”, in relation to a company, means—

o (i) the Chief Executive Officer or the managing director or the manager;

o (ii) the company secretary;

o (iii) the whole-time director;

o (iv) the Chief Financial Officer; and

o (v) such other officer as may be prescribed;



Net Worth [Section 2(57)]

o defines “net worth” means the aggregate value of the paid-up

share capital and all reserves created out of the profits and

securities premium account, after deducting the aggregate

value of the accumulated losses, deferred expenditure and

miscellaneous expenditure not written off, as per the audited

balance sheet, but does not include reserves created out of

revaluation of assets, write-back of depreciation and

amalgamation;



Promoter [Section 2(69)

o “promoter” means a person—

o (a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or

o (b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or

o (c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act:

o Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity;



Related Party [Section 2(76)] “related party”, with reference to a company, means—o (i) a director or his relative; o (ii) a key managerial personnel or his relative;o (iii) a firm, in which a director, manager or his relative is a partner;o (iv) a private company in which a director or manager is a member or

director;o (v) a public company in which a director or manager is a director or

holds along with his relatives, more than two per cent of its paid-up share capital;

o (vi) any body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager;

o (vii) any person on whose advice, directions or instructions a director or manager is accustomed to act: (professionals excluded)

o (viii) any company which is—o (A) a holding, subsidiary or an associate company of such company; oro (B) a subsidiary of a holding company to which it is also a subsidiary;

o (ix) such other person as may be prescribed



Relative [Section 2(77)]o ‘‘relative’’, with reference to any person, means any one who is

related to another, if—o (i) they are members of a Hindu Undivided Family;o (ii) they are husband and wife; oro (iii) one person is related to the other in such manner as may be

prescribed;o Under the Rules, a person is related to the other if he or she is

related to another in the following manner: Father (including Step-father) ; Mother (including step-mother) Son (including Step-son); Son’s wife Daughter; Daughter’s husband Brother (including step-brother) Sister (including step-sister)



Small Company [Section 2(85)]o ‘‘small company’’ means a company, other than a public company,—o (i) paid-up share capital of which does not exceed fifty lakh rupees

or such higher amount as may be prescribed which shall not be more than five crore rupees; or

o (ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees:

o Provided that nothing in this clause shall apply to—o (A) a holding company or a subsidiary company;o (B) a company registered under section 8 (Non-Profit Organization);

oro (C) a company or body corporate governed by any special Act;



Subsidiary company [Section 2(87)]o “subsidiary company” or “subsidiary”, in relation to any other company (that is

to say the holding company), means a company in which the holding company—o (i) controls the composition of the Board of Directors; oro (ii) exercises or controls more than one-half of the total share capital either at its

own or together with one or more of its subsidiary companies:o Provided that such class or classes of holding companies as may be prescribed

shall not have layers of subsidiaries beyond such numbers as may be prescribed.

o Explanation.—For the purposes of this clause,—o (a) a company shall be deemed to be a subsidiary company of the holding

company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;

o (b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;

o (c) the expression “company” includes any body corporate;o (d) “layer” in relation to a holding company means its subsidiary or subsidiaries;



Sweat Shares [Section 2(88)]o “sweat equity shares” means such equity shares as are issued by a

company to its directors or employees at a discount or for consideration, other than cash, for providing their know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called;

Turnover [Section 2(91)]

o “turnover” means the aggregate value of the realisation of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year; (Ind AS 18 – Excludes Taxes)

Total Share Capital

o Total Share Capital means the aggregate of the paid-up equity share capital and convertible preference share capital



Sick Company [Section 253(1)]

o “Where on a demand by the secured creditors of a company

representing fifty per cent or more of its outstanding amount of debt,

the company has failed to pay the debt within a period of thirty days

of the service of the notice of demand or to secure or compound it to

the reasonable satisfaction of the creditors, any secured creditor may

file an application to the Tribunal in the prescribed manner along with

the relevant evidence for such default, non-repayment or failure to

offer security or compound it, for a determination that the company

be declared as a sick company.



Dormant Company [Section 455]

o Where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.

Inactive Companyo “inactive company” means a company which has not been

carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;



Significant Accounting transaction means any transaction other than:

o (a) payment of fees by a company to the Registrar;

o (b) payments made by it to fulfil the requirements of this Act or any other law;

o (c) allotment of shares to fulfil the requirements of this Act;

o (d) payments for maintenance of its office and records



Types of Companies - Private Company; Public Company & One Person Company (OPC).

Private Company

Section 2(68) defines “private company” means a company and which by its articles,—o (i) restricts the right to transfer its shares;o (ii) limits the number of its members to two hundred:

o Joint holders treated as oneo Employees/ex-employees who have taken shares while in employment

excluded.

o (iii) prohibits any invitation to the public to subscribe for any securities of the company; and

o having a minimum paid-up share capital of one lakh rupees or such higher paid-up share capital as may be prescribed,



Public Companyo Section 2(71) defines “public company” means a company which

—o (a) is not a private company;o (b) has a minimum paid-up share capital of five lakh rupees or

such higher paid-up capital, as may be prescribed:o Provided that a company which is a subsidiary of a company, not

being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles ;

One Person Company

2(62) defines “One Person Company” means a company which has only one person as a member;



Companies with charitable objects [Section 8]

(1) Where it is proved to the satisfaction of the Central Government that a person or an association of persons proposed to be registered under this Act as a limited company—

o (a) has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other useful object;

o (b) intends to apply its profits, if any, or other income in promoting its objects; and

o (c) intends to prohibit the payment of any dividend to its members,



Expert 1(38): Includes an Engineer, Valuer, a CA, a CS or a Cost Accountant and any other person who has the power or authority to issue a certificate in pursuance of any Law for the time being in force

Fraud (Section 447): The term Fraud, first time defined in the Act.

Any person who is found to be guilty of fraud shall be punishable with imprisonment for a term, which shall not be less than six months but which may extend to ten years and shall also be liable to fine, which shall not be less than the amount involved in the fraud. Where the fraud involves public interest, the term of imprisonment shall not be less than three years



Formation of Companies And

MOA / AOA


Sr. no.

Particulars Companies Act, 1956

Companies Act, 2013

1 Types of Companies Private CompanyPublic Company

Private Company Public Company One Person Company

2 Maximum number of members for private companies

A private company can have a maximum of 50 members

A private company can have a maximum of 200 members

3 Commencement of Business

Provision is applicable only to Public limited companies

Now applicable to all companies having share capital

Formation of Companies and MOA / AOA


Sr. no.

Particulars Companies Act, 1956 Companies Act, 2013

4 Registered Office

Companies are required to furnish the details of the Registered Office of the company by filing Form 18 at the time of incorporation

A Company shall on and from the 15th day of its incorporation to have a registered office capable of receiving & acknowledging communications and notices as may be addressed to it

5 Object Section of MOA

Object clause bifurcated into Main Objects incidental or Ancillary Objects and Other Objects

MOA to contain the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof.

Formation of Companies and MOA / AOA (Contd..)



Reservation of Name (Form INC. 1)

Applicant to have DIN

Memorandum of Association –

o Name Clauseo Domicile Clauseo Objects Clauseo Capital Clauseo Liability Clauseo Subscription Clause o Formats – Schedule I Tables A - E


Content: The 2013 Act specifies the mandatory content for the

memorandum of association which is similar to the existing

provisions of the 1956 Act and refers inter-alia to the following:

Name of the company with last word as limited or private limited as

the case may be

State in which registered office of the company will be situated

Liability of the members of the company



Application for Reservation of Name (Form INC. 1)

Undesirable name

Name Clauseo Should not be identical with or resemble too nearly to the name of

an existing companyo Should not be such that its use will constitute an offence under

any law for the time being in forceo Is undesirable in the opinion of the Central Governmento Should not contain any word or expression which o is likely to give the impression that the company is in any way

connected with or having the patronage of the Government or local authority, corporation or body constituted by the Government; or

o may be prescribed



Where the application for availability of name was made by furnishing wrong or incorrect information:

A) where the company is not incorporated : Cancel the reservation of name, and the applicant shall be liable to a penalty upto one lakh rupees

B) where the company is incorporated : o Show cause to be issuedo Direct the company to change its name within 3 months after

passing Ordinary resolutiono Strike off the name of the companyo Make a petition for winding up of the company



Application for change of name

– Form No. INC. 24– Special Resolution – [File Form no. MGT. 14]– Reasons for change of name– Relevant extract of minutes/resolutions– Certificate of Incorporation pursuant to change of name will be

issued by ROC in Form No. INC. 25. Change of name effective from

the date of issue of such certificate



A company shall on or from the fifteenth day of its incorporation and at all times thereafter have a registered office capable of receiving and acknowledging all communications and notices addressed to it. (Form INC. 22)

Verification of the registered office:

o Registered document of title or Notarised copy of lease/rent

agreement

o Authorisation from the owner/authorised occupant

o Document of connection of utility service depicting the name of

the owner



In case of change of Registered office from one State to another:

o Special Resolution [File Form no. MGT. 14]o Application for approval to Regional Director in Form No. INC. 23o Copy of Memorandum and Articles of Associationo Copy of extract of minutes o Copy of challan for fees paido Letter of Authority.o Advertisement to be published in Form No. INC. 26 o File Form No. INC. 28 after the order is passed by the Regional

Director.



In case of change of Registered office from one State to another (Contd.) :o Form No. INC. 22 for giving notice to Registrar of Companies

after approval from RD is received.o List of debenture-holders, depositors, creditors or lenders and a

notice to them seeking objections, if any.

Other requirements (Section 12)o Paint or affix its name and address outside its registered officeo Engrave its name on the company sealo Print name, registered office address, CIN, website address,

contact details on all its business letters, billheads, letter papers, notices, and other official publications (Rule 26)



Objects clause to stateo A) The objects for which the company is incorporatedo B) any matter considered necessary in furtherance thereof

The basic purpose in the 1956 Act for such a classification as set out in section 149 of the 1956 Act, is to restrict a company from commencing any business to pursue ‘other objects of the company’ not incidental or ancillary to the main objects except on satisfaction of certain requirements as prescribed in the 1956 Act like passing a special resolution, filing of declaration with the ROC to the effect of resolution.

Reservation of name: The 2013 Act incorporates the procedural aspects for applying for the availability of a name for a new company or an existing company in sections 4(4) and 4(5) of 2013 Act.



Change of objects for which money is raised through prospectus:

o Send Notice for passing resolution through postal ballot to the

members/shareholders. Notice to contain the following particulars: the

total money received, utilised for the objects, unutilised money (raised

through prospectus), justification, estimated impact on the

earnings/cash flow and other relevant information. The place from

where a copy of the resolution to be passed can be obtained. The

notice should be hosted on the company’s website.

o Special Resolution [File Form no. MGT. 14]




Types of shares

o Equity Shares Equity with differential rights

o Preference Shares

The number of shares, each subscriber to the MoA agrees

to subscribe, which shall not be less than one share, shall

be indicated opposite/against his name.



Limited by Share Capital

Limited by Guarantee

o With share capital

o Without share capital Right to participate in the divisible profits to a person

other than a member is void

Unlimited Company


The MoA and the AoA shall be signed each of the subscribers giving

their name, address, description and occupation, before at least one

witness who shall sign giving the same details and state that:

o “I witness to the subscriber(s), who has/have subscribed and signed in

my presence (date and place); Further I have verified his/her/their identity

details for their identification and satisfied myself of his her/their

identification particulars as filled in.”

Rules specify in case where:

o The subscriber is an illiterate

o The subscriber is a foreign national residing outside India.



Articles of Associationo Entrenchment provisions [Section 5(3)]o The articles may contain provisions for entrenchment to the effect that

specified provisions of the articles may be altered only if conditions or procedures as that are more restrictive than those applicable in the case of a special resolution, are met or complied with.

o Formats – Schedule I Tables F - J

Articles of association

The 2013 Act introduces the entrenchment provisions in respect of the articles of association of a company. An entrenchment provision enables a company to follow a more restrictive procedure than passing a special resolution for altering a specific clause of articles of association. A private company can include entrenchment provisions only if agreed by all its members or, in case of a public company, if a special resolution is passed [section 5 of 2013 Act].



Certificate of Incorporation (Form INC. 11)

Copies of documents in relation to the registration of the company, and filed with the Registrar at that time, should be maintained and preserved till the dissolution of the company.

Consequences of formation of the company on the basis of false or incorrect information

Certificate for Commencement of Business o Declaration – (FORM INC. 21)o Proof of address - verification of address (along with Form INC. 22)

Proof of Registered Office – Deed/Agreement/Rent Receipt. Copy of recent (not older than two months) utility bills at the address. NOC to use the office as registered office from the owner.



Documents to be submitted for incorporation of a company, (other

than OPC and company with licence under Section 8):

o Application for Incorporation of Company (Form INC. 7)

o Declaration regarding compliance (Form INC. 8)

o Affidavit regarding his non-conviction in any offence or guilty of any

fraud or misfeasance or for any breach of any duty under the

company law during the last five years (Form INC. 9)

o Form for verification of signature of subscribers (Form INC. 10). NOC

in case there is change in promoters.

o Address for correspondence till the registered office is established.



Documents to be submitted for incorporation of a company, (other

than OPC and company with licence under Section 8) (Contd.):

o Memorandum and Articles of Association

o Particulars of subscribers including proof of identity, proof of residence

and PAN Card. Proof of nationality in case of foreign nationals.

o Particulars of first directors including proof of identity, proof of

residence and PAN card.

o Consent and other directorships/interests of the first directors o Entrenched Articles of Association, if any.



One Person Company

o Deemed to be a private company

o MoA shall indicate the name of the other person (Form INC. 2) to be filed

at the time of incorporation, with his prior consent (Form INC. 3), who

shall in the event of the subscriber’s death or his incapacity to contract,

become the member of the company.

o Withdrawal of consent by such other person (Form INC. 4) within thirty

days of such withdrawal

o Subscriber may change the name of such other person (Form INC. 4)

within thirty days of the intimation to the company.

o Duty of the subscriber to notify the change in the name of such other

person (Form INC. 4).



One Person Company (Contd.)

Only a natural person who is an Indian citizen and resident in India can incorporate an OPC or be a nominee for the sole member of a OPC.

Resident shall mean a person who has stayed in India for > 182 days in the immediately preceding calendar year.

One person can form only one OPC.

Minors cannot be members or hold shares.



One Person Company (Contd.)

Restrictions:o Cannot be converted into a company with licence u/s 8 of the Act.o Cannot carry on non-banking financial investment activity

including investment in securities of any body corporate.o Cannot voluntarily convert into any kind of company unless:

Two years have elapsed since the date of incorporation of the OPC – Form INC. 6)

The paid up share capital is increased beyond Rs. 50 lakhs (being the threshold limit of paid up share capital).*

The average annual turnover during the immediately preceding three financial years (relevant period) exceeds Rs. 2 crores.*

* to be mandatorily converted – Rule 6(1). (Form INC. 5)



Documents to be submitted for incorporation of an OPC:o Application for Incorporation of OPC – Form INC. 2o Nominee Consent Form – Form INC. 3o Affidavit regarding his non-conviction in any offence or guilty of

any fraud or misfeasance or for any breach of any duty under the company law during the last five years (Form INC. 9)

o Form for verification of signature of subscribers (Form INC. 10).o List of all the companies having the same registered office, if any.o Particulars of member including proof of identity, proof of

residence and PAN Card. o Particulars of nominee including proof of identity, proof of

residence and PAN Card.o Proof of Registered Office – Deed/Agreement/Rent Receipt. Copy

of recent (not older than two months) utility bills at the address. NOC to use the office as registered office from the owner.



Documents to be submitted for incorporation of a company with licence under Section 8 :

To the Regional Director:

o Reservation of Name (Form INC. 1)o Application for licence under Section 8o Memorandum and Articles of Association (Form INC. 13)o Declaration by a chartered accountant/company secretary/cost

accountant, regarding compliance (Form INC. 14)o Declaration by the applicant in Form INC, 15o [Form No. INC. 26, in case of existing company applying for

licence u/s 8(5)]



Documents to be submitted for incorporation of a company with licence under Section 8 (Contd.) :

To the Regional Director (Contd.):o The copies of Balance Sheets, Profit & Loss Account of the

immediately preceding two financial years.o The statement showing in details of assets and liabilities of the

company- as on the date of application or in a such extended period or within thirty days preceding that date,

o An estimate of future annual income and expenditure for next three years

o Certified copies of resolutions passed in general board meetings relating to registration of the company u/s 8.




To the Registrar of Companies:o Reservation of Name (Form INC. 1)o Memorandum and Articles of Association as approved by the

Regional Director (Form INC. 13)o Copy of licence under Section 8 issued by the Regional Director

[Form INC. 16 (new company) or Form INC. 17 (existing company), as the case may be]

o Declaration regarding compliance (Form INC. 8)o Address for correspondence till the registered office is

established.




To the Registrar of Companies (Contd.):o Affidavit regarding his non-conviction in any offence or guilty of

any fraud or misfeasance or for any breach of any duty under the company law during the last five years (Form INC. 9)

o Form for verification of signature of subscribers (Form INC. 10). NOC in case there is change in promoters.

o Particulars of subscribers including proof of identity, proof of residence and PAN Card. Proof of nationality in case of foreign nationals.

o Particulars of first directors including proof of identity, proof of residence and PAN card.

o Consent and other directorships/interests of the first directors



Certificate for Commencement of Business o All companies, whether public or private, can start business

operations only after obtaining the Certificate for commencement

of Business

o Declaration prior to the commencement of business/exercising

borrowing powers (Form No. INC. 21)

o Specimen Signatures – (Form No. INC. 10)

o Certificate of registration from RBI, in case of NBFCs



Conversion of Section 8 company into company of any other kindo Apply for licence under Section 8 to the Regional Director (RD) in

Form No. INC 18 along with the following documents:o Memorandum & Articles of Association as approved by the RD.o Copies of resolutions passed at the Board Meetings relating hereto-

above.o Notice of the general body meeting and a copy of special resolution

passed relating hereto-above.o Certificate from CA/CS/CWA in practiceo Statement of Assets and Liabilities duly certified by the auditor

within 30 days thereof.o Audited financial statements and annual returns for immediately

preceding two yearso Written consent/NOC from lenders/creditors, if any.



Conversion of Section 8 company into company of any other kind (contd.)o NOC from sectoral regulatory authority such as Chief

Commissioner of Income Tax, Income Tax Officer, Charity Commissioner, Chief Secretary, State Government having jurisdiction over the company. Proof of notice given to such sectoral authorities to be attached.

o Details of donation/grants etc. received since incorporation..o Declaration that no portion of the income of the company or

property had been paid or transferred, directly or indirectly, as dividend or bonus or otherwise to members or any persons claiming through them

o Advertisement to be published in two local newspapers and hosted on the company’s website (Form No. INC 19)



Conversion of Public into private company or private into public companyo File Special Resolution (Form No. INC. MGT. 14)o Application to ROC Form No. INC. 27o Certificate of Incorporation pursuant to change of name will be

issued by ROC in Form No. INC. 25

Notice of Order of any Court or any other competent authority Notify ROC in Form No. INC. 28.

Alteration of Memorandum of Associationo Objects Clauseo Capital Clause



Issue of Securities o A) Public Offer – includes initial public offer, further public offer as also offer of sale of securities by existing shareholder(s) to the publico B) Private Placemento C) Rights Issueo C) Bonus Shares

Issue by companies having share capitalo Public companies – any of the modes specified above.o Private companies – any of the modes specified above except

public offer



Sr. no.


1. Issue of Shares at a discount

Section 79 permits issue of shares at discount subject to compliance with conditions

Shares, other than sweat equity shares, cannot be issued at a discount

2. Issue of preference shares for more than 20 years

Section 80 prohibits issue of irredeemable preference shares and preference shares Redeemable after 20 years

Preference shares have to be redeemed within 20 years of issue except for the shares issued for prescribed infrastructure projects provided a certain percentage of shares are redeemed annually at the option of shares holders.

Issue of Shares & SecuritiesImportant Changes regarding Share Capital


Important Changes regarding Share Capital

Sr. no.


3. Issue of shares on private placement, bonus shares and GDRs

No specific provision for issue of shares on private placement, bonus shares and GDRs exist in the present Act.

Specific provision introduced for issue of shares on private placement, bonus shares and GDRs in the Act.

4. Notice of alteration of share capital

Notice of redemption of preference shares is not required to be filed with ROC

Company shall file a notice in the prescribed form with the Registrar within a period of thirty days of redemption of redeemable preference hares

5. Consolidation and division of shares

Company permitted to consolidated or sub divide its shares by passing resolution in general meeting

Consolidation and division which results in changes in the voting percentage of shareholders shall require approval of the Tribunal to be effective

Issue of Shares & Securities (Contd..)


Prospectuso Abridged Prospectus means a memorandum containing such salient

features of a prospectus as may be specified by the SEBI by making regulations in this behalf

o Shelf Prospectus means a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus

o Information Memorandum [Form No. PAS-2]o Red Herring Prospectus means a prospectus which does not include

complete particulars of the quantum or price of the securities included therein.

o Deemed Prospectus – Where a company allots or agrees to allot any securities of the company with a view to all or any of the securities being offered for sale to the public, any document by which the offer for sale is made shall, for all purposes , be deemed to be a prospectus issued by the company.

o Advertisement [Form No. PAS-1]



Contents of Prospectus Refer Section 26 of the Act Refer Rules 3, 4, 5 and 6 of Companies (Prospectus and Allotment)

Rules, 2014

Offer of Sale by members – Rule 8

Variation in terms of contracts or objects for which prospectus was issued – Rule 7o Advertisement to be published in Form No. PAS 1.

Dematerialisation of securities – Rule 9



Allotment in case of issue of securities by public offer, shall be

made only after the minimum subscription, as specified in the

prospectus) is received within thirty days from the date of issue

of prospectus

Return of Allotment of Securities [Form No. PAS 3]

o Shall be within 30 days of the date of allotment



Private placement means any offer of securities or invitation to

subscribe securities to a select group of persons by a company

(other than by way of public offer) through issue of private placement

letter and which satisfies the conditions contained in Section 42,

Private placement offer letter (PPOL) [Form No. PAS. 4]

The offer to be made to upto 50 persons, but not exceeding 200

persons in the aggregate in a year, (excluding qualified institutional

buyers and employees under ESOPs) only.

Such Invitation or offer value shall not be less than Rs. 20,000/-.



All monies payable towards subscription shall be through cheque/

demand draft or banking channels

Application money to be kept in a separate bank account and not used till

the allotment is made.

Allotment [Form No. PAS 3] shall be made within sixty days from the date

of receipt of money. Interest @ 12% p.a. shall be payable in case the

application money is not refunded within 60 days or shares not allotted.

No fresh offer unless the previous offer is logically concluded.



Relaxation in Rules for Non-Banking Financial Companies and

Housing Finance Companies in case the such offers are

regulated by RBI

List of persons to whom the offer is made to be maintained [Form

No. PAS. 5] and filed with the ROC(or SEBI, where the company is

listed), within 30 days of circulation of PPOL.

Penalty for non-compliance – Amount involved subject to a

maximum of Rupees two Crores.



Types of securities :-o Equity

With voting rights With Differential voting rights

o Preference Shares

Shares Certificate – [Form No. SH-1]

Renewed/Duplicate Share certificate – Register to be maintained – [Form No. Sh-2]o For defaced, mutilated, torn or old , decrepit worn out shareso On sub-division/consolidationo For lost/destroyed shares – can charge up to Rs. 50 per share

certificate + out-of-pocket expenses + procedure.



Issue of shares at a discount

Section 53 prohibits issue of shares at a discount except by way of

sweat shares.

Sweat Shares [Section 2(88)]

Sweat equity shares means such equity shares as are issued by a

company to its directors or employees at a discount or for

consideration other than cash , for providing their know-how or

making available rights in the nature of intellectual property rights or

value additions, by whatever name called.



Issue of sweat shares (unlisted equity shares):

o Employee means a permanent employee who has worked for at

least one year. Employee or Director of subsidiary/Holding

company shall also be eligible.

o Value additions means actual or anticipated economic benefits

derived by the company from an expert /professional for providing

know how or making available rights in the nature of intellectual

property rights for which the consideration is not paid or included

in the normal remuneration or monetary consideration under any

contract



Issue of sweat shares:o Should be authorised by a special resolution,

o Resolution to specify, the number of shares, current market price, consideration, if any, class or classes of directors or employees to whom such equity shares are to be issued.

o Validity of the resolution – 12 months

o Justification and Principal terms and conditions should also be specified in the explanatory statement

o At least one year should have elapsed from the date of commencement of business

o Where the equity shares are listed on a recognised stock exchange, the provisions to be complied shall be as per SEBI regulations, or where they are not so listed, as per prescribed Rules

o Shall rank pari passu with other equity shareholders.



Sweat Shares – Other Issues

o Valuation by a registered valuer

o Non-cash transactions – treatment in accordance with the

accounting standards

o To be treated as compensation, where there is no acquisition of

asset.

o Disclosure in the Directors’ Report

o Diluted EPS pursuant to issue of sweat shares to be disclosed

o Register of Sweat Equity Shares Issued [Form No. SH3]



Securities Premium Account o Equivalent to share capital accounto Application of Securities Premium Account : :

To issue of bonus shares* To write off expenses/commission paid or discount allowed on any

equity shares* For Buy-back of own shares/securities* To write off preliminary expenses of the company To write of f premium payable on redemption of preference shares or

debentures of the company

*Note : can be applied by such class of companies as may be prescribed and whose financial statements comply with the accounting standards prescribed under Section 133 of the Act



Issue of Equity shares with differential rights

o Authorised by Articles of Association

o Authorised by ordinary resolution of the shareholders. In case of

listed company, by postal ballot or poll at general body meeting.o Cannot exceed 26% of the total post issue paid up equity share

capital

o Track record of dividend payment of at least 10% for immediately

preceding last three financial years.

o Filed financial statements and Annual returns for immediately

preceding five financial years.o The holders shall enjoy all other rights such as issue of bonus

shares, rights shares etc.,



Issue of Equity shares with differential rights (contd.)o No subsisting default in regard to payment of dividend, repayment of

deposits or interest thereon, repayment of term loan from any financial institution or interest thereon, redemption of preference shares/debentures

o The company has not been penalised by any Court or Tribunal or any regulators during the last three years.

Existing equity shares with voting rights cannot be converted into equity shares with differential voting rights.

Disclose the fact of the issue in the Board’s Report for the financial year in which such shares were issued.

Existing shares to continue till they are converted as per new Act.



Redemption of preference shares (Section 55)o Cannot issue Irredeemable preference shareso Maximum term – 20 years. o However higher term may be permitted for infrastructure

projects specified in Schedule VI. Redemption at least 10% per year from the twenty first year.

o Redemption

Share Transfer – Form No. Sh-4o Notice in Form No. SH-5 to be given to the transferee in case of

transfer of party paid shares.



Employees Stock Option

o Authorised by a special resolution

o Minimum one year gap between the grant of option and vesting of

option

o Lock-in period – discretionary

o Option – not transferable; cannot be pledged or hypothecated or

mortgaged or otherwise encumbered or alienated.

o On resignation/termination of employments, all options not vested

shall expire.

o Register of Employee Stock Options to be maintained in Form No.

SH. 6



Issue of shares on preferential basis

o Authorised by Articles of Association

o Authorised by a special resolution. Notice to contain prescribed

details/disclosures.

o Process completed within 12 months of passing the special resolution

o Price to be determined by the registered valuer

o Where the issue is made for a non-cash transaction, compliance with

accounting standards

Provision of money by company to purchase its own shares by employees/trustees for the benefit of employees



Issue of Bonus Shares (Section 63)o Authorised by AOAo Recommendation of Board and Approval of general bodyo Cannot issue in case of default – deposits/employee statutory

dueso Cannot issue in lieu of dividend

Alteration of Share Capital o Return to be filed in Form No. SH.7

Reduction of Capital (Section 66)o Subject to confirmation of Tribunalo No reduction permitted in case of default – deposits



Further issue of Capital (Section 62)

o To existing members/shareholders

o To employees under ESOP, subject to special resolution

o To others, subject to special resolution and the price of the

share is determined by the Registered Valuer

Unlimited Companies

o To provide for reserve share capital



Buy Back of shares (Section 68)

o Restrictions: No public company can directly or indirectly give any

financial assistance to purchase or subscribe shares of the

company subject to exceptions specified in the section.

o Authorised by AoA and also by Special Resolution at general body.

o Buy-back out of free reserves, securities premium account or new

issue of other securities.

o Buy-back is of < 25% of the paid-up capital and free reserves

o Debt Equity ratio (post – buy back) = 2 : 1

o Offer letter to be filed with Registrar of Companies in Form No. SH.8



Buy Back of shares (Section 68) (Contd.)o No new offer of buy-back within one year of the closure of preceding buy-

backo Either by purchase from existing shareholders or by purchase from the

open market or purchase of ESOP/sweat shareso Declaration of Solvency in Form No. SH.9. Not applicable for listed

securities.o No fresh issue of the same kind of securityo Register of securities bought back – [Form No. SH.10]o Return to be filed on completion of buy back – [Form No. SH.11] along with

declaration in Form No. Sh.15 that all the provisions relating to buy-back

have been complied.



Issue of Debentures (section 71)o Debenture Trust Deed – [Form No. SH.12]o Appointment of Debenture Trusteeso Register of Debenture holders or other securities [Form No. MGT-2]

Registration of Chargeo in case of delay beyond 300 dayso Charge on all properties, whether movable or immovable, tangible or

intangible to be registered. o Charge to be filed within 30 dayso Approval of Tribunal

Nomination – [Form No. SH.13] o Cancellation or Variation of Nomination [Form No. SH.14]



Impact on Private Limited Companies


Impact on Private Limited CompaniesA quick review of the Companies Act 2013 shows that many exemptions given to Private limited companies under Companies Act are withdrawn.

The following provisions are applicable to Private limited companies under the new Companies Act 2013.

Maximum Number of members

There is no change in the minimum number of member which is 2. The maximum number the members in a private limited company are increased from 50 members to 200 members. (Section 2 sub section (68)).

Financial Year for the Balance SheetFinancial year of the balance sheet will be 31st march for all the companies.

For any relaxation approval from NCLT is required. (Section 2 sub section (41)).


Impact on Private Limited Companies (Contd..)Further Issue of SharesThe exemption given to private limited companies regarding further issue of shares is withdrawn. Further issue of shares under section 81 applicable to both private and public limited companies. Valuation of shares shall be done based on the certificate issued by registered valuer subject to such conditions as may be prescribed. (Section 62)

Certification for Annual ReturnAnnual Return must be certified by a Practicing company secretary and requirement of compliance certificate by practicing company secretary is dispensed with. The annual return should contain particulars like: (a) The extract of the annual return as provided under sub-section (3) of sec

92. (b) Number of meetings of the Board. (c) Directors’ Responsibility Statement; (d) A statement on declaration given by independent directors under sub- section.And also PCS to certify that all the provisions of the Companies Act has been complied with (Section 92)


Impact on Private Limited Companies (Contd..)

Number of days of Notice of General Meetings.

For private limited company as per the existing Companies Act is even seven days notice is sufficient. This exemption is withdrawn. As per the New Provisions 21 clear days notice has to be given to the shareholders and the notice can be given by electronic mode also. However the general meeting may be convened by giving shorter notice if consent is given in writing or electronic mode by not less than ninety nine per cent of the members entitled to vote at such meeting. (Section 101).

Postal ballot for passing the Resolutions

Till now postal ballot is applicable only for listed companies. Postal ballot is applicable to private limited companies also for certain transactions after the amendment prescribed by the central government by notification. (Section 110).



Board Report to give more details

The Board report shall contain the following information (Section 134(3)) —

(a) The extract of the annual return

(b) Number of meetings of the Board;

(c) Directors’ Responsibility Statement;

(d) a statement on declaration given by independent directors

(e) Company’s policy on directors’ appointment and remuneration including criteria for determining qualifications, positive attributes,

independence of a director and other matters if required by Section 178 provided under sub-section (3) of section 178;



Board Report to give more details (contd…)

(f) Explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made— (i) by the auditor in his report; and (ii) by the company secretary in practice in his secretarial audit report;

(g) Particulars of loans, guarantee s or investments

(h) Particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the prescribed form;

(i) The state of the company’s affairs;

(j) The amounts, if any, which it proposes to carry to any reserves;

(k) The amount, if any, which it recommends should be paid by way of dividend;




(l) Material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report;

(m) The conservation of energy, technology absorption, foreign Exchange earnings and outgo, in such manner as may be prescribed;

(n) a statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company;

(o) The details about the policy developed and implemented by the Company on corporate social responsibility initiatives taken during the year;




(p) In case of a listed company and every other public company having such paid-up share capital as may be prescribed, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors;

(q) Such other matters as may be prescribed.



Corporate Social Responsibility.

Every company having net worth of rupees five hundred crore or more, turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility (CSR) Committee of Board consisting of three or more directors, out of which at least one director shall be an independent director and 2 per cent of the average net profits of the immediately preceding three financial years should be spent for CSR (Section 135). Schedule VII prescribes the activities to be included under Corporate Social Responsibility which is given below:

SCHEDULE VII

Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating to:—

(i) Eradicating extreme hunger and poverty;(ii) Promotion of education;



SCHEDULE VII (Contd..)

(iii) Promoting gender equality and empowering women;

(iv) Reducing child morality and improving maternal health;

(v) Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases;

(vi) Ensuring environmental sustainability;

(vii) Employment enhancing vocational skills;

(viii) Social business projects;

(ix) Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and

(x) such other matters as may be prescribed.


Impact on Private Limited Companies (Contd..)Appointment of Auditors

A. An auditor will be appointed in the first annual general meeting for a five-year term. Thereafter, the auditor will be changed as per the members’ decisions.

B. Secondly, an audit firm cannot be re-appointed for more than two five-year terms. (i.e. 10 years) For re-appointment purposes for the individual auditor or audit firm, there has to be a gap of five years. Moreover, for appointment or re-appointment purposes, there should be no common partners between the new firm and old audit firm. Another interesting clause is that members can resolve to ask the audit firm to rotate the audit partner and team every year.

The company shall inform the auditor concerned of his or its appointment, and also file a notice of such appointment with the Register within fifteen days of the meeting in which the auditor is appointed. Every company shall comply with the requirements of this sub-section within three years from the date of commencement of this Act. (Section 139)


Impact on Private Limited Companies (Contd..)Appointment of Internal Auditor

Such class or classes of companies as may be prescribed shall be required to appoint an internal auditor, who shall either be a Chartered Accountant or a Cost Accountant or such other professionals as may be decided by the Board conduct internal audit of the functions and activities of the company. (Section 138).

Duties of Directors

1. A director of a company shall act in good faith in order to promote the object of the company.

2. A director of a company shall exercise his duties with due care, skill and diligence.

3. A Director of a company shall not assign his office and any assignments so made shall be void.

4. If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than Rs.1, 00,000/- but which may extend to Rs.5, 00,000/- (Section 166).


Impact on Private Limited Companies (Contd..)Borrowing Powers

The exemption given to private limited company for borrowings under section.293 is withdrawn. Borrowing powers now require approval by shareholders and applicable to both private and public limited companies. (Section 180).

Loan and Investment

The exemption given to private limited company under Section 372A regarding loan and investment is withdrawn. Existing limit of 60% Paid up capital and free reserves or 100% of free reserves applicable to both private limited and public limited companies.(Exemption to private limited Company for loan and investment under section372A is removed now) (Section 186).

Related party TransactionsOnly with the consent of the Board of Directors given by a resolution at a meeting of the Board and subject to such conditions as may be prescribed no company shall enter into any contract or arrangement with a related party with respect to—(a) Sale, purchase or supply of any goods or materials;(b) Selling or otherwise disposing of, or buying, property of any kind;


Impact on Private Limited Companies (Contd..) Related party Transactions (contd..)c) Leasing of property of any kind;(d) Availing or rendering of any services;(e) Appointment of any agent for purchase or sale of goods, materials, services or

product.(f) Such related party’s appointment to any office or place of profit in the company, or its

subsidiary company or associate company.

No contract or arrangement, in the case of a company having a paid-up share capital of not less than such amount, or transactions not exceeding such sums, as may be prescribed, shall not be entered into except with the prior approval of the company by a special resolution. Further that no member of the company shall not vote on such special resolution to approve any contract or arrangement which may be entered into by the company, if such member is a related party. (Section 188).

Loan to Directors The exemption given to the Private Limited Company under section 295 regarding loan

given to director of a private limited of company is withdrawn. Loan should not be given to directors of any company including private limited company or to any private company in which a director is a director or member (Section 185).



Appointment of Key Managerial Personnel

Appointment of Key Managerial Personnel – Every company belonging to such class or description of companies as may be prescribed shall have the following whole time Key Managerial Personnel (Section 203).

1. Managing Director or Chief Executive Officer or Manager and in their absence a Whole Time Director.

2. Company Secretary and; 3. Chief Financial Officer.

Secretarial Audit Report

Every listed company and company belonging to other class of companies as may be prescribed shall annex with its Board’s report a secretarial audit report given by Practicing Company Secretary in such form as may be prescribed. (Section 204). ’



Director to stay in India for 182 days

Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year. Every company existing on or before the date of commencement of this Act shall, within one year from such commencement or from the date of notification of the rules in this regard as may be applicable, comply with the requirements of this provision (Section 149(3)).

Board and Annual General Meeting minutes Hereafter the companies shall follow the Secretarial Standards while making the minutes of Board and General Meeting. (Section 118 (10))

Books of AccountsThe Books of Accounts may be kept in electronic form also. (Section 128)



Managing DirectorThe exemption given to private limited company under section 269 for appointment of Managing Director is withdrawn. Provision relating to the appointment of Managing Director is also applicable to the private limited companies (Section 196).

Need for Amendment of Articles of Association of private limited company:Sec 171 to 186 sections which are not applicable to Private Limited companies is now deleted in the Companies Act. Hence, after Companies Act, 2013, comes into effect, it may require to amend the article of association of Private Limited by substituting the new set of article of association so that it will not contain any contrary provision of the Companies Act, 2013.


Impact on Private Limited Companies (Contd..)A comparison is made with respect to exemptions given in the Companies Act, 1956 and new Companies Act 2013. The following are the exemptions available to Private Limited Companies in Companies Act 1956 and its status in New Companies Act 2013.

Sr.

No

Existing Section in Companies Act, 1956.

Nature of exemptions in the Companies Act, 1956.

Status in Companies Act 2013

1. Section 77(2) Financial assistance can be given for purchase of or subscribing for its own shares in its holding company, Whereas not applicable to Public company

Section 67 – Restrictions on purchase by Company or giving of loans by it for purchase of its shares. Private limited company not specifically mentioned in the clause. Hence exemption is available.


Impact on Private Limited Companies (Contd..)Sr.

No

Existing Section in Companies

Act, 1956.



2. Section 81(3) Further shares can be issued without passing special resolution or obtaining central government’s approval and without offering the same necessarily to existing shareholders

Section 62 – Further issue of shares now applicable to Private limited Company also. Exemption is withdrawn.

3. Section 149(7)Exemption from Certificate of Commencement of business

Section 11 – Commencement of business declaration has to be filed by Private Limited Company. Exemption is withdrawn.

4. Section 198(1)No restriction on the payment of Managerial Remuneration on net profits

Section 197 – Overall maximum managerial remuneration applicable to Public Company. For Private Limited Company this section is not applicable. Exemption is withdrawn.



Sr.

No

Existing Section in Companies Act,

1956.



5. Section 252(2) Need not have more than two directors

Section 149 – Minimum two directors. There is no change in the existing provisions. Exemption continues.

6. Section 255(1) A proportion of directors need not retire every year

Section 152 – The exemption continues but as per the AOA of the Company.

7. Section 257(2) Statutory notice, etc., is not required for a person to stand for election as a director

Section 160 – Exemption is withdrawn.

8. Section 259 Central Government’s

sanction is not required to affect increase in the number of directors beyond 12 or the number fixed by articles of association

Section 149 – The Company to have Board of Directors. Exemption given now to maximum of 15 Directors.



Sr.

No

Existing Section in Companies Act,

1956.



9. Section 263(1) In passing resolution for election of directors, all directors can be appointed by a single resolution.

Section 162 – Appointment of directors to be voted individually. Exemption is withdrawn. Single resolution for the appointment of directors can be passed both by private and public company provided, a proposal to move such a motion has first been agreed to at the meeting without any vote being cast against it.

10. Section 264(3) Consent to act as director need not be filled with registrar

Section 152 – Appointment of directors. Exemption removed. Private Limited Companies also to file consent. Exemption is withdrawn.



Sr.

No

Existing Section in

Companies Act, 1956.



11. Section 269(2) Central Government’s approval is not required for appointment of managing or whole-time director or manager

Section 196 – Exemption is withdrawn. Applicable to Private Limited Companies

12. Section 275 to 279

Restrictive provisions regarding total number of directorships which any person may hold do not include directorships held in private companies which are not subsidiary of public company

Section 165 – The maximum number of companies in which a director can hold office is 20 companies. Out of this he can hold only up to 10 public companies. There is no restriction for private limited companies. One can become director in 20 private limited companies. Exemption is withdrawn.



Sr.

No

Existing Section in




13. Section 293(1) Certain restrictions on powers of board of directors do not apply

Section 180 – Exemption is withdrawn.

14. Section 295(2) Prohibition against loans to directors does not apply

Section 185 – Exemption is withdrawn. Loan to directors applicable to private limited company

15. Section 300(2) Prohibition against participation in board meetings by interested director does not apply

Section 184 – Exemption is withdrawn. Disclosure of directors interested applicable to private limited company.



Sr.

No

Existing Section in




16. Section 303(1) Date of birth of director need not be entered in the register of directors

Section 170 – Register of directors and key managerial personnel and their shareholding. Exemption is withdrawn. Anybody can view the particulars of the directors through their DIN numbers.

17. Section 309(9) There is no restriction on remuneration payable to directors

Section 197 – Overall maximum managerial remuneration applicable to Public Company. For Private Limited Company this section is not applicable. Exemption continues.



Sr.

No

Existing Section in




18. Section 316(1) No restriction on appointment of managing director

Section 203 – Appointment of Key Managerial Personnel. Exemption is withdrawn.

19. Section 349 Provisions relating to method of determination of net profits and ascertainment of depreciation do not apply

Section 198 – Calculation of Profits. Exemption is withdrawn.

20. Section 372(A) No prohibition against purchase of shares, etc., in other companies

Section 186 – Exemption is withdrawn. Applicable to Private Limited Companies



The following provisions which exempted private limited companies have been deleted in the Companies Act, 2013.

S.NoExisting Section in Companies Act, 1956.

Particulars Status in Companies Act 2013

1. Section 70(3) Statement in lieu of prospectus need not be delivered to the registrar before allotting shares

No provisions exist

2. Section 90(2) Provisions as to kinds of share capital (sec.85), further issue of share of capital(sec.86), voting rights(sec 87), issue of shares with disproportionate rights (sec 88) and termination of disproportionate excessive rights (sec 89)

No provision exist

3. Section 165(10) Exemption from Statutory Meeting and Statutory Report

No provision exist


Impact on Private Limited Companies (Contd..)S.NoExisting Section

in Companies Act, 1956.


4. Section 170(1) Articles of private company having provisions relating to general meetings without being subject to the provisions of sections 171 to 186

No provision exist

5. Section 204(6) Can appoint a firm or body corporate to an office or place of profit under the company

No provision exist

6. Section 266(5) Restriction on appointment or advertisement of directors as regards consent and qualification of shares does not apply.

No provision exist

7. Section 268 No Central Government approval to modify any provision relating to appointment of managing, whole-time or non-rotational directors

No provision exist



S.NoExisting Section in Companies Act, 1956.


8. Section 273 No share qualification u/s 270 for Directors of a private company.

No provision exist

9. Section 310 No Government approval for change in restriction on remuneration to directors

No provision exist

10. Section 311 No central government approval for increase in the remuneration beyond specified limit of directors on an appointment or reappointment

No provision exist

11. Section 317(4) No restriction on appointment of managing director

No provision exist

12. Section 350 & 355Provisions relating to method of determination of net profits and ascertainment of depreciation do not apply

No provision exist.


Impact on Private Limited Companies (Contd..)S.No Existing Section

in Companies Act, 1956.


13. Section 370(2) No restriction on making loans to other companies

No provision exist

14. Section 388A Provisions of sections 386 and 387, which restrict the number of companies of which a person can be appointed as manger, remuneration of the manager, etc., and also provisions of sections 269, 310,311,312 and 317, do not apply

No provision exist

15. Section 409(3) Central Government cannot exercise its power to prevent change in board of directors which is likely to affect the company prejudicially

No provision exist

16. Section 416(1) Person can enter into contract on behalf of company as undisclosed principle and need not give intimation to the other directors

No provision exist

E


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Care has been taken while preparing the subject

Presentation. However, the reader should refer the

Bare Act / Rules before taking any further actions /

steps.


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Companies Act - 2013

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