New important provisions in Indian Companies Act, 2013
The Companies Act, 2013 (18 of 2013) was notified in the Official Gazette of India on 30th August 2013 and is made effective from 1st April 2014. The Companies Act, 1956 had 13 Parts, 658 Sections and 15 Schedules however the new Companies Act, 2013 has 29 Chapters, 470 Sections and 7 Schedules.
| Provision | Details |
| One Person Company (OPC) | Now a single person can incorporate a company with only one Director. Under such OPC it is not a compulsion to hold an AGM. Infact an existing Pvt. Ltd. Company can convert itself into an OPC if its paid-up capital is Rs. 50,00,000/- and turnover is upto Rs. 2,00,00,000/-. |
| Dormant Company | A Company can be incorporated for a future project or can hold any asset or intellectual property with no significant accounting transaction by classifying it as Dormant Company. Under the new Company law it is easy to maintain and apply for dormant status without compliance of various legal requirements. The new law also provides procedure for merger and/or amalgamation of a dormant company. |
| Resident Director | One of the Director of every company should be a person who stayed in India for a total period of 182 days or more in a previous calendar year. |
| Woman Director | It is compulsory for every listed company whose paid-up capital is Rs.100 Crores or more and public company whose paid-up capital is Rs.300 Crores or more to appoint atleast one Woman as its Director. |
| Accounting Year | Standard accounting year i.e. 1st April to 31st March has to be maintained by every company and companies which have different accounting year have 2 years time to re-adjust their existing accounting year in terms of the present law. |
| Articles of Association | As per new law now every company in its next general meeting is required to adopt Table F with relevant changes as per the requirements of the Company. |
| Loan to Directors | The Company cannot advance loan/guarantee/security to the following: a. Director; b. Director of a Holding Company or Pvt. Ltd. Company or any body corporate whose 25% or more voting rights are under his control; c. His relative; d. Firm in which he or his relative is a partner. |
| Corporate Social Responsibilities | It is compulsory for all companies having net worth of Rs. 500 crore, or a turnover of Rs. 1000 crore, or a net profit of Rs. 5 crore to spend 2% of the net profit as part of Corporate Social Responsibility. |
| Penal provisions for non-compliance | Every director of Company will be prohibited to become director for a period of five years in any other company if the company fails to: a. File its returns for consecutive three years; and/or b. Fail to pay dividend Furthermore the Directors of such defaulting company cannot exit from their position as Director until the returns are not filed. |
The Company Act, 2013 has many more changes in it that will benefit the public at large in the coming years. The said Act is very liberal and progressive and will enhance transparency and disclosures. In view of many frauds conducted in previous years by various companies against their investors the new company law as its paramount object has protected the interest of the investors particularly small and minority investors. However the paramount object of new law is strict enforcement of compliance by laid down in the various provisions of the new Company Act, 2013.
*The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
