COMPANY’S BILL 2008

COMPANY’S BILL 2008

In 1956, on recommendations of Bhaba committee, Companies Act,1956 governing the legal Framework for corporate entities in India was enacted. With Significant changes and development in National & international Environment since the introduction in this act, restoration of the companies act was long awaited. Addressing the need of sustained growth in a globalized and competitive environment, the govt. constituted an expert committee under the chairmanship of Dr. J.J.Irani in December, 2004 for a Comprehensive revision of companies act. NEW COMPANY’S BILL 2008 INTRODUCTION

Contd.. Drafted on the recommendation of the committee and the detailed consultation with various Ministries, Departments And Govt. Regulators. The Companies Bill, 2008 was introduced in the Parliament on 23rd Oct. 2008.

NEW COMPANY’S BILL 2008 • New Bill Introduced in LokSabha on 23rd Oct. 2008 • Several New Concepts/Ideas Introduced-Mainly Borrowed from UK Companies Act • Number of sections Reduced from 658 to 426 in the new Bill • All Procedural aspects Brought to Subordinate Legislation

Contd.. • Share Holder Democracy Recognized-Central Govt. Power given to Share Holder’s • BIFR Roll Transferred to NCLT • All Powers of High Court Transferred to Proposed NCLT • Director General Registration-Central Registry

Purpose • To modernize the structure for Corporate Regulation in India and represents a Major Reform statement by the Government to promote the development of the Indian Corporate Sector through Enlightened Regulation • To enable Corporate Regulation in an effective and efficient manner with Reasonable Costs of Compliance so that Indian Companies are competitive in attracting Investment for growth.

Contd.. • To enable the Corporate sector in India to operate in a Regulatory Environment of Best International Practices that foster Entrepreneurship, Investment and Growth • To amend and consolidate the law relating to Companies and certain other associations

New Concept’s • Introduction of One Person Company • Incorporation Procedure modified-Standardized MOA, Declaration on Affidavit Reg. Conviction for fraud • Companies can be struck off if Business not Commenced within 180 Days of Incorporation.

Contd.. • Class-Action Suit by Group of Share Holders Permitted for Misstatement in Prospectus • Certified (Registered) Valuer Introduced • Electronic Mode Recognized for Meetings, Maintenance of accounts etc.

Contd.. • The Concept of Non-Banking, Non-Finance Company Abolished • Existing NBNFC given one Year Time to Repay all Public Deposits • Registration of charge Mandatory for priority in Liquidation

Contd.. • Secretarial Standards Made Mandatory • IEPF Administrator also to Consider Refund of Unclaimed Dividends, Application money etc. • Audit Services Defined –Auditor liable for Damages for Misleading or Incorrect Statements in his Reports

Contd.. • One Resident Director Mandatory • Duties of Directors Defined • Procedure for Resignation of Director Defined • Stakeholders Relationship Committee Mandatory if More than 1000 Members

Contd.. • Insider Trading Punishable • CEO,CFO Introduced • Sec 560 Procedure Modified – Application to be Supported by S/R and NOC from Regulatory Authority to be Attached

Contd.. • Company Liquidator to be appointed from panel of Professionals maintained by Central Govt. • Value Added Services to be Provided by Central Govt. on Payment of Fee • Constitution of Special Courts-Orders Appealable to High Court

Contd.. • Appointment of Adjudicating officers (ROC) for Adjudging Penalty under the Act – Procedural Noncompliance-Appealable to RD • Concept of Dormant Company Introduced-Not Carrying on Business or No Significant accounting Transactions in Last Two Years-Register of Dormant Company to be maintained by ROC Based upon Application by Company on Annual Fee

Contd.. • Concept of Small Company Introduced-PUC less than Rs. 5 Crores total Turn Over Less than 20 Crores-Such Companies Exempted from Provisions of the Act as may be Notified • Director can himself file details of his Resignation to ROC • Matter Pending with CLB will be Transferred to NCLT

Contd.. • A Company may issue Depository Receipt to be dealt with in a depository mode in any foreign country • Where a Company fails to register the Charge, the Person in whose Favor the Charge is Created may apply to the Registrar for Registration of Charge.

Contd.. • Every Listed Company shall prepare a report on each AGM and A Copy of Report shall be Filed with the Registrar. • Contracts entered by One Person Companies and its Sole members shall be informed to Registrar. • Power of Compounding offences will be with Central Govt. Concurrently with Court

Contd.. • A Whole-Time Director, as prescribed by Central Govt., shall not hold office in more than One Company except when Company Permits. • Freezing of Assets on an Inquiry and Investigation of a Company and No Suit or Proceeding till Submission of Final Report

Contd.. • Provision for Inquiry or Investigation to be applied on Foreign Companies • The Merger or Amalgamation scheme is to be approved by the members at a General Meeting by Passing a Special Resolution and by 3/4th in value of the Creditors • Liability of Officer of Transferor Company in respect of offences committed prior to the Amalgamation, Transfers etc.

Contd.. • Appointment of Committee of Experts by Central Govt. • Penalty in Case of Fraudulent Applications for Removal of Name of the Company • Appointment of Interim Administrator for Revival & Rehabilitation of Sick Companies

Contd.. • Punishment in case of Repeated Defaults • Protection of Action taken in Good Faith • Central Govt. may by notification exempt the compliance of certain provisions in case of One Person Company or Small Company

Contd.. • Repeal of certain Enactments and Savings • Central Govt. may remove any difficulty which may arise in giving effects to the provisions within three years of Commencement of the Act by publishing it in the Official Gazette and laying before each House of Parliament

Contd.. • Appeal against order of NCLT will be with National Company Law Appellate Tribunal (NCLAT) • Appeal against order of NCLAT to Supreme court • Firm of Professionals or Body Corporate formed by Professionals can be appointed as Official Liquidator

Contd.. • Change of registered office outside city only by Special Resolution. However, Changes outside state will require approval of Central Govt. • In Certain cases, Power of CLB and Composition of Offences to be Transferred to Central Govt.

Contd.. • Auditing Standards will be mandatory • Cost Auditor will be appointed by Board of Directors but Remuneration to be fixed by the Members. Approval of Central Govt. is not required • Listed Company with paid up capital above prescribed limit to have at least 1/3rd Independent Director

Contd.. • Board Meeting to require seven days notice except for urgent business if at least one Independent Director is present • Prior approval in General Meeting is Required if there is arrangement between Company and Director in respect to Acquisition of Assets

Contd.. • Approval of General meeting for disposal of undertaking only if Investment in such Undertaking is more than 20% of the Net Worth of the Company • Summary Procedure for liquidation where book value of Assets of Company are less than Rs. 1 crore

Contd.. • Foreign Company to comply with prescribed provisions only if not less than 50% of the capital of the Foreign Company is held by Indian Citizen or Companies incorporated in India. • Auditor can do such Services as approved by the Board or Audit Committee but Auditor cannot perform certain services as Internal Audit, Actuarial Services etc.

Contd.. • Independent Director will not be entitled to any Remuneration except Sitting fees and Reimbursement of expenses. He will be entitled to Profit related commission and Stock options as approved by members. • Alternate Directors appointed to Independent Directors should also be Independent Directors.

Contd.. • An Extensive Insolvency Code based on the latest principles recommended by the United Nations Commission on International Trade Law (UNCITRAL) • Companies not to be allowed to raise deposits from the public except on the basis of permission available to them through other Special Acts.

Contd.. • It proposes to bar the issue of shares at a discount to owners of a company except in case of sweat equity shares. • Levy of cess on all companies within a range of 0.005% and 0.1% on the value of gross turnover or annual gross receipt, whichever is higher

Contd.. • Company Secretary in the Key Managerial Personnel • The scope of Annual return has been widened. • Annual Return is required to be signed by Company Secretaries in Employment and in practice.

Contd.. • Insurance for Company Secretaries but the premium paid on such insurance shall not be treated as part of the remuneration. • Tribunal appoints a provisional liquidator or the Company Liquidator as the case may be. • Qualifications of President and Members of Tribunal

Contd.. • No limit has been prescribed on payment of sitting fees to the directors • Issue and transfer of securities and non-payment of dividend by listed companies, has to be administered by SEBI • A company limited by shares can not issue any preference shares which are irredeemable exceeding period of 20 years exclusive of infrastructural projects.

Contd.. • Every company shall deliver Debenture Certificate issued by the company within six months of allotment. • The method of depreciation prescribed in section 205 have been revamped to remove the option to depreciate 95% of the original cost of the asset over the specified period. Accordingly depreciation is now required to be provided at prescribed rates and where no rates has been prescribed, on the basis as may be approved by central govt.

Contd.. • Central Govt. has been given additional power to require companies to keep books of accounts for a period longer than eight years, where an investigation has been ordered. • If financial statement is not adopted at AGM or adjourned meeting then such un-adopted statement to be filed with Registrar within 30 days of the AGM and such statement would be considered as provisional till the submission of the final Statement.

Differential Voting Rights-Equity Shares Abolished It is divided in 426 Clauses. Maximum number of partners to 100 Differential Voting Rights-Equity Shares Allowed It is divided in 658 Sections and XV Schedule. Maximum number of partners to 20 Comparative Analysis Companies Bill, 2008 Companies Act, 1956

Restriction on Non-Cash Transaction involving Directors Prohibition on Forward dealing in Securities of Company by a Key Managerial Personnel All Restriction on Managerial Remuneration Removed Non-Cash Transaction involving Directors allowed Forward dealing in Securities of Company by a Key Managerial Personnel allowed Limitation on Managerial Remuneration Comparative Analysis Companies Bill, 2008 Companies Act, 1956

Provisions relating to minimum capital of Private and Public Companies dispensed with Provision relating to Certificate of Commencement of business dispensed with. Only declarations required by public Company Provisions relating to minimum capital of Private and Public Companies Provision relating to Certificate of Commencement of business Comparative Analysis Companies Bill, 2008 Companies Act, 1956

Provision of Printing of Memorandum and Article dispensed with Unpaid Dividend can be claimed any time One subscriber to form the company (One Person Company) Provision of Printing of Memorandum and Article Unpaid Dividend can be claimed within a period of seven years At least two subscriber to form the company Comparative Analysis Companies Bill, 2008 Companies Act, 1956

Board meeting to require seven days notice The notice may be sent by electronic means The company law does not prescribe any length of notice for calling a meeting either. The secretarial standard prescribes at least 15 days notice Comparative Analysis Companies Bill, 2008 Companies Act, 1956

A Director can be disqualified for the Non-Attendance only if he remains absent for all meetings of Board for a period of Twelve months without Obtaining leave from Board A Director can be disqualified for the Non-Attendance if he remains absent from consecutive three meetings of Board for without Obtaining leave from Board Comparative Analysis Companies Bill, 2008 Companies Act, 1956

Time interval between two Board Meetings to be 120 days Postal Ballot proposed to be made applicable to all companies Minimum shareholding criterion of members in absolute terms for demanding a poll is INR 5,00,000 Time interval between two Board Meetings to be 90 days Postal Ballot applicable to only Listed company Minimum shareholding criterion of members in absolute terms for demanding a poll is INR 50,000 Comparative Analysis Companies Bill, 2008 Companies Act, 1956

Time limit for filing the Annual Return to be 30 days from the date of AGM Auditors are required to attend the General Meeting unless exempted by the company Time limit for filing the Annual Return is 60 days from the date of AGM Auditors had a right but not the duty to attend the General Meeting of the company Comparative Analysis Companies Bill, 2008 Companies Act, 1956

Thank you

COMPANY’S BILL 2008