[2013] 38 taxmann.com 74 (Article)
50 Hotshots of Companies Act, 2013
SRINIVASAN ANAND G.
CA
THE TOP 50 NEW CONCEPTS OR PROVISIONS INTRODUCED BY THE COMPANIES ACT, 2013 HAVE BEEN GIVEN IN ALPHABETICAL ORDER
ARM'S LENGTH
1. Transactions by company with related parties do not require compliance with the provisions of section 188 (Board's consent and/or previous approval of special resolution as applicable if such transactions are in ordinary course of business at arm's length)
AUDITING STANDARDS
2. Auditing Standards accorded statutory recognition. Auditing Standards shall be prescribed by the Central Government. The notified Auditing Standards shall be based on recommendations of ICAI and in consultation with NFRA. Till Auditing Standards are prescribed by Central Govt., standards on auditing issued by ICAI shall be the auditing standards. Section 143(9) provides that every auditor shall comply with the auditing standards.
3. AUDITOR
| (i) | Compulsory rotation of auditors - …Audit firm after 2 consecutive terms of 5 years, Individual auditor after 5 years term…Cooling off period (period during which rotated auditor not eligible to be appointed auditor of the sane company)-5 years from the completion of term. | |
| (ii) | Duty of auditor who resigns- To file a statement in prescribed form with ROC stating reasons and relevant facts. In case of auditor of Govt. Co./Govt.-owned/controlled co., statement to be filed with CAG as well. | |
| (iii) | Duty of auditor to report To Central Govt. if he has reasons to believe that an offence involving fraud has been or is being committed – Auditor to report immediately in prescribed form to Central Govt. Duty of confidentiality not violated if auditor so reports in good faith. | |
| (iv) | Auditor not to render certain non-audit services to auditee company/its holding company/subsidiary company- These prohibited non-audit services are specified in section 144 and include accounting and book keeping, internal audit, actuarial services etc. | |
| (v) | Auditor to attend general meetings- It was optional for auditor to attend general meetings under the 1956 Act. The 2013 Act makes compulsory attendance by auditor himself or by a representative duly qualified to be auditor. However, such attendance can be exempted by the company. | |
| (vi) | Auditor's criminal liability, liability for damages and liability to refund remuneration received- Section 147 |
CANCELLATION OF INCORPORATION OF COMPANIES INCORPORATED FRAUDULENTLY
4. Unlike the 1956 Act, section 7(7) of the 2013 Act provides that where a company has been got incorporated by furnishing any false or incorrect information in any of the documents or declaration filed or made for incorporating such company, or by any fraudulent action, the Tribunal may, on an application made to it, on being satisfied that the situation so warrants,—
| (a) | pass such orders, as it may think fit, for regulation of the management of the company including changes, if any, in its memorandum and articles, in public interest or in the interest of the company and its members and creditors; or | |
| (b) | direct that liability of the members shall be unlimited; or | |
| (c) | direct removal of the name of the company from the register of companies; or | |
| (d) | pass an order for the winding up of the company; or | |
| (e) | pass such other orders as it may deem fit. |
Before making any order in (a) to (e) above:
| (i) | the company shall be given a reasonable opportunity of being heard in the matter; and | |
| (ii) | the Tribunal shall take into consideration the transactions entered into by the company, including the obligations, if any, contracted or payment of any liability. |
The above provisions of section 7(7) of the 2013 Act which enable the Tribunal to direct the removal of the name of the company from the register run counter to the concept of certificate of incorporation being conclusive evidence that all formalities and requirements of incorporation have been duly completed. Hence, the 2013 Act omits section 35 of the 1956 Act (section 35 of the 1956 Act laid down this rule of certificate of incorporation being conclusive evidence).
CERTIFICATE OF COMPLIANCE WITH ACCOUNTING STANDARDS FROM COMPANY'S AUDITOR FOR REDUCTION OF CAPITAL, MERGER
5. No compromise or arrangement shall be sanctioned by the Tribunal unless:
| ♦ | the accounting treatment, if any, proposed by the company for such reduction is in conformity with the accounting standards specified under section 133 of the 2013 Act; and | |
| ♦ | a certificate to that effect from the company's auditor has been filed with the Tribunal. |
CHANGE OF AUDITORS CAN BE DIRECTED BY NCLT IF AUDITOR ACTS FRAUDULENTLY OR COLLUDES WITH MANAGEMENT
6. Tribunal may direct the company to change its auditors if Tribunal satisfied that auditor acted fraudulently or colluded in any fraud in relation to or by the company or its directors or officers. The 1956 Act contained no such provisions.
CLASS ACTION
7. The 2013 Act has introduced a new provision (section 37) enabling class action by persons or association of persons affected by misleading prospectus. There were no such provisions in the 1956 Act. The 2013 Act also has a new provision (section 245) permitting class action by members or depositors against company, its directors and auditors. There were no such provisions in the 1956 Act.
COMPANY SECRETARY- FUNCTIONS
8. New provision (section 205) inclusively defining the functions of the company secretary. This includes ensuring that the company complies with applicable secretarial standards.
CONSOLIDATION OF ACCOUNTS
9. The 1956 Act was silent on consolidated financial statements. Consolidated financial statements have been made mandatory under the 2013 Act in cases where company has one or more subsidiaries or associates or joint ventures.
CORPORATE SOCIAL RESPONSIBILITY
10. Section 135 of the 2013 Act is a new section. This section provides that every company having specified networth or turnover or net profit during any financial year shall constitute the Corporate Social Responsibility Committee of the Board. The composition of the committee shall be included in the Board's Report. The Committee shall formulate policy including the activities specified in Schedule VII of the 2013 Act. The Board shall disclose the content of policy in its report and place on website, if any of the company. This section further provides that the Board shall ensure that atleast 2% of average net profits of the company made during three immediately preceding financial years shall be spent on such policy in every financial year. If the company fails to spend such amount, the Board shall give in its report the reasons for not spending. There was no provision along these lines for mandatory CSR policy and CSR spends in the 1956 Act.
COST AUDITING STANDARDS
11. Cost auditor shall comply with cost auditing standards(CAS) issued by ICWAI with the approval of the Central Govt.-Section 148(3)
CROSS BORDER MERGERS
12. Section 234 of the 2013 Act enables mergers between companies registered under the 2013 Act and foreign companies (cross border mergers). Under the 2013 Act, such mergers were possible only if the transferee company was an Indian company.
D&O INSURANCE
13. Premium paid on insurance taken by a company for indemnifying any of its key managerial personnel against any liability in respect of any negligence, default, misfeasance, breach of duty or breach of trust shall not be treated as part of the remuneration payable to any such personnel. If such person (KMP) is proved guilty, the premium paid on such insurance shall be treated as part of remuneration.
DEPOSIT INSURANCE
14. The 1956 Act was silent on deposit insurance. The 2013 Act makes deposit insurance compulsory for acceptance of deposits from the public or members.
DISGORGEMENT
15. Section 38 of the 2013 Act provides punishment for personation for acquisition etc. of 'securities'. The 2013 Act introduces disgorgement provisions. Section 38 of the 2013 Act provides that where a person has been convicted of any of the offences, the Court may also order disgorgement of gain, if any, made by, and seizure and disposal of the securities still in possession of, such person and amount received through disgorgement or disposal of securities shall be credited to the Investor Education and Protection Fund. The 1956 Act did not contain disgorgement provisions.
16. DISCIPLINARY POWERS OF NFRA OVER CAS
| ♦ | National Advisory Committee on Accounting Standards (NACAS) set up under the 1956 Act has been renamed by the 2013 Act as National Financial Reporting Authority (NFRA). | |
| ♦ | NFRA is also empowered by the 2013 Act with quasi-judicial powers to ensure independent oversight over CAs which was not the case with NACAS under the 1956 Act. | |
| ♦ | NACAS was a mere advisory body under the 1956 Act. The 2013 Act renamed it as NFRA and has converted it into a body with quasi-judicial powers to discipline CAs. |
DIVERSIFICATION OF BUSINESS OF THE COMPANY
17. Section 179(3)(h) provides that diversification of business of the company requires sanction of the Board of Directors by a resolution passed at the meeting of the Board. The power to sanction diversification cannot be delegated by BOD.
DORMANT COMPANIES
18. Section 455 provides that where a company is registered under this Act for a future project or to hold as asset or intellectual property and has no transaction, such a company may make an application for obtaining the status of a dormant company.
An inactive company may also apply to ROC for status of dormant company. An inactive company means a company which:
| ♦ | has not been carrying on any business operation, or has not made any significant transaction during the last 2 financial years, or | |
| ♦ | has not filed financial statements and annual returns during the last 2 financial years. |
ENTRENCHMENT PROVISIONS IN ARTICLES OF ASSOCIATION
19. The articles may contain provisions for entrenchment.
| ♦ | Provisions for entrenchment provide more restrictive conditions or procedures than that applicable to passing a special resolution for altering certain provisions in the articles. [For example, the articles could mandate that certain provisions in it can be altered only if agreed to by all members of the company in writing.] | |
| ♦ | The entrenchment provisions shall only be made either : |
| • | on formation of a company, or | |
| • | by an amendment in the articles agreed to by all the members of the company in the case of a private company and | |
| • | by a special resolution in the case of a public company. |
| ♦ | The company shall give notice to the Registrar of entrenchment provisions. [Section 5(3)/(4)/(5)] |
FRAUD
20. New provisions introduced by the 2013 Act defining the term "fraud" and providing punishment for "fraud" in relation to a company or body corporate. There was no definition of 'fraud' in the 1956 Act nor was there any punishment for fraud in the 1956 Act. [Section 447]
INDEPENDENT DIRECTORS
21. Every listed public company shall have at least one-third of the total number of directors as independent directors. The Central Government may prescribe the minimum number of independent directors in case of any class or classes of public companies. An independent director shall not be entitled to stock options. He shall not be entitled to any remuneration other than sitting fee, reimbursement of expenses for participation in the Board and other meetings and profit-related commission as may be approved by the members [Section 149].
INTERNAL AUDIT
22. Section 138 of the 2013 Act is a new provision. Such class or description of companies as may be prescribed shall appoint an internal auditor to conduct internal audit of books of account of the company. Internal auditor shall be a Chartered Accountant or a Cost Accountant or such other professional as may be decided by the Board. The Central Government may make rules to prescribe the manner and the intervals in which internal audit shall be conducted and reported to the Board. [Section 149]
ISSUE OF SHARES AT A DISCOUNT PROHIBITED
23. In terms of section 53, issue of shares at a discount (except issue of sweat equity shares) is prohibited issue of shares at a discounted price shall be void
LAYERS OF SUBSIDIARIES
24. The 2013 Act introduces a new requirement. Such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed. Layer in relation to a holding company means its subsidiary or subsidiaries.
MATERIAL FACTS
25. Section 102 of the 2013 Act clarifies that material facts are those that may enable members to understand the meaning, scope and implication of the items of business and to take decision thereon.
Section 102 of the 2013 Act goes much further than section 173 of the 1956 Act when it provides that where as a result of the non-disclosure or insufficient disclosure in any Explanatory statement, being made by a director, manager, if any, or other key managerial personnel, any benefit accrues to such director, manager or other key managerial personnel or his relatives, the director, manager or other key managerial personnel, as the case may be, shall hold such benefit in trust for the company, and shall be liable to compensate the company to the extent of the benefit received by him.
MEDIATION AND CONCILIATION PANEL
26. New provisions inserted by the 2013 Act for setting up a M & C panel (panel of experts) to mediate (at the request of parties to the proceedings) in any proceedings under the 2013 Act before the Central Government/NCLT/NCLAT. [Section 442]
MERGER BETWEEN HOLDING COMPANY AND ITS WHOLLY-OWNED SUBSIDIARY
27. Simplified procedure for merger of holding company and its WOS is laid out by section 233.
NON-CASH TRANSACTIONS INVOLVING DIRECTORS
28. Section 192 of the 2013 Act is a new section. It regulates arrangements in respect of acquisition of assets for consideration other than cash between a company and a director of the company or its holding company or its subsidiary or its associate or person connected with such director. This section provides that such arrangements shall require prior approval by a resolution in general meeting. If the director or connected person is a director of its holding company, approval is also required to be obtained by passing a resolution in general meeting of the holding company. An arrangement entered into by a company or its holding company in contravention of the provisions is voidable at the instance of the company.
ONE PERSON COMPANY
29. The 2013 Act provides for a new entity in the form of One Person Company (OPC), empowering the Central Government to provide for a simpler compliance regime for OPC and small companies.
Formation of One Person Company (OPC)
The 2013 Act allows the formation of a one person company (OPC). The 1956 Act did not allow formation of OPCs.
The following provisions regarding formation of OPCs may be noted :
| ♦ | For forming a private company being a one person company, one person should subscribe his name to a memorandum and comply with the requirements of the 2013 Act in respect of registration. [Section 3(1)(c) of the 2013 Act] | |
| ♦ | The memorandum should indicate the name of the other person with his prior written consent in the prescribed form who shall become the member of the company in the event of the subscriber's death or his incapacity to contract. Such written consent shall be filed with ROC at the time of incorporation of the OPC along with its memorandum and articles. [First proviso to section 3(1) of the 2013 Act] | |
| ♦ | Such other person may withdraw his consent in such manner as may be prescribed. [Second proviso to section 3(1) of the 2013 Act] | |
| ♦ | The member of the OPC may at any time change the name of such other person in such manner as may be prescribed. [Third proviso to section 3(1) of the 2013 Act] |
| • | The member of a One Person Company shall intimate the company the change, if any, in the name of the person nominated by him by indicating in the memorandum or otherwise within such time and in such manner as may be prescribed. The company shall intimate such change to ROC within such time and in such manner as may be prescribed [Fourth proviso to section 3(1) of the 2013 Act]. Such change in the name of the other person shall not be deemed to be an alteration of the memorandum [Fifth proviso to section 3(1) of the 2013 Act]. | |
| • | An OPC (which has more than one director)/small company/dormant company must hold board meetings as follows— |
| (i) | At least one meeting of Board of Directors to be conducted in each half of a calendar year | |
| (ii) | Gap between two meetings should not be less than 90 days. |
An OPC which has only one director need not comply with the above provisions.
PARTICIPATION OF DIRECTORS AT BOARD MEETING THROUGH VIDEO CONFERENCING
30. The 2013 Act allows participation of directors in board meetings through video conferencing or through such other audio visual means, as may be prescribed, which are capable of recording and recognising the participation of the directors and of recording and storing the proceedings of such meetings [Such participation to count for quorum purposes also - See section 174(1) of the 2013 Act].
31. PRIVATE PLACEMENT
| ♦ | Let alone defining 'private placement', the 1956 Act did not even refer to the expression 'private placement'. In terms of the 1956 Act, the following offers of shares or debentures/invitations to subscribe for shares or debentures to any section of the public were not regarded as public issues : |
| (i) | Where shares or debentures are available for subscription or purchase only to those receiving the offer/invitation. [Section 67(3)(a) of the 1956 Act] | |
| (ii) | Offer/invitation is domestic concern of the issuer and those receiving the offer/invitation [Section 67(3)(b) of the 1956 Act] |
The above exclusions (in the 1956 Act) from the scope of 'public issue' were referred to in commercial parlance as 'private placement'.
| ♦ | Sahara India Real Estate Corpn. Ltd. v. SEBI [2012] 25 taxmann.com 18 (SC) dealt with public issue in the garb of private placement, i.e., abuse of private placement. The Supreme Court interpreted section 67(3) of the Companies Act, 1956 as under: |
| • | If shares/debentures allotted to more than 49 persons, it is ipso facto a public issue in terms of the first proviso to section 67(3) of the 1956 Act even if shares/debentures are available for subscription only to those to whom offer/invitation is made. | |
| • | Limit of 49 cannot be circumvented by approaching groups of 49 at a time. | |
| • | Violating the limit of 49 will automatically make it a public issue. However, mere adherence to the limit will not qualify the issue of securities as 'private placement'. | |
| • | To qualify as private placement, in addition to adherence to the limit of 49, either of the two exceptions in section 67(3) of the 1956 Act should be satisfied. |
| ♦ | Section 42 of the 2013 Act defines 'private placement' keeping in view the above interpretation of the Supreme Court. Accordingly, "Private placement" means any offer of securities or invitation to subscribe securities by a company which satisfies the following conditions: |
| (i) | Such offer or invitation is to a select group of persons; | |
| (ii) | Such offer or invitation is other than by way of public offer; | |
| (iii) | Such offer or invitation is through issue of a private placement letter; | |
| (iv) | Such offer or invitation satisfies other conditions in section 42 of the 2013 Act including the condition that the offer or invitation is made to not more than 50 or such higher number of persons as may be prescribed (excluding QIBs and employees offered securities under ESOP) in a financial year. |
| ♦ | The limit of 50 persons or such higher limit as prescribed stipulated by section 42 of the 2013 Act is with reference to a financial year in view of Supreme Court ruling in Sahara's case (supra) that the limit of 49 cannot be circumvented by approaching groups of 49 at a time. |
The 1956 Act did not contain stringent provisions to curb public offers in the garb of private placements. The 2013 Act introduces stringent provisions to curb the mischief of public offers in the garb of private placements. Accordingly, section 42 of the 2013 Act provides that a company may make an offer or invitation of securities to a class of the public otherwise than through prospectus (i.e. on private placement basis) if and only if it complies with the following conditions:
| ♦ | The offer or invitation in a financial year is to be made to such number of persons not exceeding 50 or such higher number as may be prescribed. In computing the limit of 50 or such higher number as may be prescribed, QIBs and employees to whom shares are issued under ESOPs are not to be considered. | |
| ♦ | Company shall issue securities through Private Placement Offer Letter [section 42(1) of the 2013 Act]. | |
| ♦ | If a company (whether listed or unlisted) makes an offer to allot or invites subscription or allots or enters into agreement to allot securities to more than prescribed number of persons, the same shall be deemed to be an offer to the public. This is so whether the payment for the securities have been received or not and whether the company intends to list its securities or not in India or abroad. [Explanation I to section 42(2) of the 2013 Act.] | |
| ♦ | No fresh offer/invitation shall be made unless the allotments with respect to earlier offer/invitation have been completed or that offer or invitation has been withdrawn or abandoned by the company. [section 42(3) of the 2013 Act.] | |
| ♦ | All monies payable on subscription of securities under this section shall be paid through cheque or DD or other banking channels but not by cash [section 42(5) of the 2013 Act]. | |
| ♦ | Securities to be allotted within 60 days from the receipt of application money. If company is not able to allot securities within 60 days as aforesaid, it shall repay the application money within 15 days from the completion of 60 days as aforesaid. If the company fails to repay within the said period of 15 days, it shall repay that money with interest at the rate of 12% p.a. from the expiry of the 60th day [section 42(6) of the 2013 Act]. | |
| ♦ | Moneys received on application under this section shall be kept in a separate bank account in a scheduled bank and shall not be utilized for any purpose other than: |
| (a) | adjustment against allotment of securities or | |
| (b) | for repayment of monies where company is unable to allot securities—Proviso to section 42(6). |
| ♦ | The offer/invitation to be made only to such persons whose names are recorded by the company prior to the invitation to subscribe. Such persons shall receive the offer by name. A complete record of such offers and acceptance of offers shall be kept by the company and information about such offer being made to be communicated to ROC within 30 days of circulation of relevant private placement offer letter [section 42(7) of the 2013 Act.] | |
| ♦ | Company making a private placement shall not release any advertisement and shall also not utilize any media, marketing or distribution channels or agents to inform the public at large about such offer [section 42(8) of the 2013 Act.] | |
| ♦ | Whenever a company makes any allotment of securities, it shall file with ROC a return of allotment in prescribed manner [section 42(9) of the 2013 Act.] |
PROMOTER
32. Section 2(69) of the 2013 Act gives an exhaustive definition of the term 'promoter' which covers promoters named as such in its annual returns, persons who control the company and shadow directors. Persons acting merely in professional capacity will not be regarded as shadow directors and as promoters.
REGISTERED VALUERS
33. New provision (section 247) introduced by the 2013 Act to provides a framework for enabling fair valuations in companies for various purposes. Appointment of valuers is to be made by audit committee or in its absence by Board of Directors. The 1956 Act did not recognized valuation by registered valuers.
34. REGISTRATION OF LLP AS COMPANY
| ♦ | Part I of Chapter XXI consisting of sections 366 to 374 of the 2013 Act corresponds to Part IX of the 1956 Act. | |
| ♦ | Part IX provisions were commonly used to convert partnership firms into companies. But there are no provisions in the LLP Act, 2008 nor were there any express provisions in Part IX which would enable the conversion of LLPs into companies. | |
| ♦ | Part I of Chapter XXI of the 2013 Act enables conversion of LLPs into companies by registration as companies under this Part by : |
| • | Defining "Company" for the purposes of Part I to cover LLPs - See section 366(1) of the 1956 Act. | |
| • | Providing in section 371(7) of the 2013 Act that "In this section the expression 'instrument' includes deed of settlement, deed of partnership, or limited liability partnership". This section paves the way for conversion of LLPs into companies. |
| ♦ | Section 371(7) of the 2013 Act provides that "In this section the expression 'instrument' includes deed of settlement, deed of partnership, or limited liability partnership". This section paves the way for conversion of LLPs into companies. |
RELATED PARTIES CANNOT VOTE ON RESOLUTION IN AGM TO APPROVE CONTRACTS IN WHICH THEY ARE INTERESTED
35. If company has paid-up capital of not less than such amount as prescribed or if transactions exceed such sums as prescribed, prior approval of the company by special resolution is required for related party transactions. No member of the company shall 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 under the 2013 Act. There is no need for approval of Central Government.
REMOVAL OF NAME FROM REGISTER OF COMPANIES ON APPLICATION BY COMPANY BY SPECIAL RESOLUTION
36. Section 248 of the 2013 Act provides that a company (other than a charitable company - See section 8 of the 2013 Act) may make an application to ROC for removal of its name and empowers the ROC to remove name of the company from register when such application is made. There were no provisions in the 1956 Act enabling a company to make such application.
REOPENING OF ACCOUNTS
37. Section 130 of the 2013 Act is a new section which provides for the reopening of books of account of the company and recasting its financial. Section 130 of the 2013 Act is a new section which provides for the reopening of books of account of the company and recasting its financial statements on an order by the competent court or Tribunal to the effect that earlier accounts were prepared in fraudulent manner or financial statements of the company are not reliable due to mismanagement of affairs of the company during the relevant period. There were no provisions in this regard in the 1956 Act.
Section 131 of the 2013 Act is a new section which allows the directors to prepare revised financial statement or a revised Board's report if it appears to them that the company's financial statement or the Board's Report in respect of any of the 3 preceding financial years did not comply with the requirement of section 129 or section 134 of the 2013 Act. The directors may do so after obtaining approval of the Tribunal. The Tribunal shall take into account the representations, if any, of the Central Government and of the Income Tax Department. Such revised financial statement or report shall not be prepared or filed more than once in financial year. Further, where copies of financial statement or report has been sent out to members or delivered to Registrar or laid before general meeting, the revisions must be confined to specified limits provided in the section. Such revised financial statement or report shall be subject to rules prepared by Central Government. The 1956 Act contained no provisions along the lines of section 131 of the 2013 Act.
RESIDENT DIRECTOR
38. At least one of the directors shall be a person who has stayed in India for 182 days or more in the previous calendar year.
RESIGNATION OF DIRECTORS
39. There was no provision in the 1956 Act as regards resignation of director. Section 168 of the 2013 Act is a new provision dealing with the resignation of director. The section requires that director should resign in writing – by written notice to the company. The resignation shall take effect from the later of the following 2 dates :
| (i) | date on which his notice is received by the company | |
| (ii) | date, if any, specified in the director in his notice. |
The director shall also forward a copy of his resignation along with detailed reasons for resignation to ROC within 30 days.
SECRETARIAL AUDIT
40. New provision (section 204) making secretarial audit by a company secretary in practice mandatory for every listed company and every company belonging to other classes of company as may be prescribed.
SECRETARIAL STANDARDS
41. Every company shall observe such secretarial standards with respect to General and Board meetings specified by the Institute of Company Secretaries of India (ICSI) and approved as such by the Central Government [Section 118].
SHARE TRANSFER AGENTS
42. Unlike the 1956 Act, the 2013 Act provides that share transfer agents, registrars and merchant bankers to the issue or transfer shall be regarded as officers in default in respect of issue or transfer of any shares of a company. Section 5 of the 1956 Act did not make these third parties liable as 'officers in default'.
SQUEEZE OUT PROVISIONS
43. Section 236 provides for 'squeeze out' of minority shareholders. That is, it confers on the acquirer with a statutory right to acquire minority shareholders when the acquirer's shareholding crosses a certain high percentage of the voting capital (90%) of the target company.
STAKEHOLDERS RELATIONSHIP COMMITTEE
44. The 2013 Act also provides that a company having a combined membership of more than 1000 shareholders, debenture-holders, deposit holder and other security holder at any time during a financial year shall constitute the Stakeholders Relationship Committee.
STATEMENT OF CHANGES IN EQUITY
45. The term 'financial statement' as defined in section 2(40) of the 2013 Act also covers 'a statement of changes in equity, if applicable'. The 1956 Act did not require presentation of this statement as part of financial statements.
SUMMARY PROCEDURE FOR LIQUIDATION
46. Where the company to be wound up has assets of book value not exceeding Rs. 1,00,00,000 and belongs to such class or classes of companies as may be prescribed, the Central Government may order it to be wound up by summary procedure.
Section 362 of the 2013 Act provides for time-bound sale of company's assets and recovery of company's debts within 60 days of appointment of OL as liquidator.
Section 353 provides for time-bound settlement of creditor's list within 30 days of appointment of OL.
ULTRA VIRES
47. Specified number of members or class of members or one or more depositors or any class of depositors may, if they are of the opinion that the management or control of the affairs of the company are being conducted in a manner prejudicial to the interests of the company or its members or creditors or depositors, file an application before the Tribunal on behalf of the members and creditors or depositors for seeking an order to restrain the company from committing an act which is ultra vires the articles or memorandum of the company [Section 245].
VIGIL MECHANISM
48. Every listed company or such class or classes of companies, as may be prescribed, shall establish a vigil mechanism for directors and employees to report genuine concerns. [Section 178(9)].
VOTING THROUGH ELECTRONIC MEETINGS
49. Section 108 of the 2013 Act is an enabling provision for members of prescribed class or classes of companies to exercise vote through electronic means. The 1956 Act contained no such provision.
WOMAN DIRECTOR
50. Such class or classes of companies, as may be prescribed, shall have a woman director.
Regards
Prarthana Jalan
__._,_.___
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