The company bill set to replace Indian Companies Act 1956 has been passed by Lok Sabha on 18th December 2012.
The new law is investor friendly and took care of public concern over corporate responsibility and accountability.
Few of the major highlights are:
Preliminary- Chapter I
The provisions of the Act at different points of time will be notified by the Government of India as empowered. The bill contains 33 new definitions which include, Associate Company, Small Company, Employee Stock Option, Promoter, Related Party, Turnover, Chief Executive Officer, Chief Financial Officer, Global Depository Receipt etc.
The financial year will be uniform i.e. from April to March for all companies. For exception the approval of National Law Tribunal is necessary by complying certain conditions. There is no such restriction in the Indian Companies Act, 1956.
The Maximum number of members of a Private Limited Company is increased from 50 to 200.
Responsibility of officers widened by increasing the scope of Officer in Default. Now Officer in Default include Share Transfer Agents, Registrars and Merchant Bankers to transfer or issue of Shares, Chief Financial Officer, Directors who are aware of the default by way of Participation in the Board Meeting or receiving minutes without objecting to the same. Status of Managing Director, Whole Time Director and other key Managerial personnel remain same.
Incorporation of Company and Matters Incidental Thereto -Chapter II
One Person Company
Much awaited concept of One Person Company has been introduced. Now a Private Limited company can be formed by single person.
Object Clause of Memorandum of Association of Company
Only the objects for which the company is incorporated along with matters considered necessary for its furtherance to be mentioned in the Memorandum of Association. The company cannot provide for other object clause. Objects clause of a company not required to be divided into main, ancillary and other objects.
Articles of Association of the Company
The Articles of Association of the company may contain provisions for entrenchment. Specified provisions of the Articles can be altered only if conditions or procedures that are more restrictive than those applicable in case of special resolution have been met with.
Commencement of Business of Public or Private Company
To start business of a Public Limited or Private Company, the following documents needs to file with the Registrar of Companies:
A declaration by a director in prescribed form stating that the subscribers to the memorandum have paid the value of shares agreed to be taken by them, and
A confirmation that the company has filed a verification of its registered office with the Registrar
All those companies which raised money from public through prospectus and have not fully utilized the money so raised need to follow the following procedure to change the objects.
Pass Special Resolution and publish the proposal by way of advertisement
Provide an exit opportunity to dissenting shareholders.
This requirement is not there under the Companies Act, 1956.
Prospectus and Allotment of Securities - Chapter III
The Bill governs the issue of all types of securities, as opposed to only shares and debentures in the Companies Act, 1956.
Manner in which securities can be issued by both Public and Private Company is provided in the bill.
A public company can issue securities through a public offer or a private placement or by way of bonus or rights issue.
A private company may issue securities on rights basis or by way of bonus issue or by way of private placement in accordance with part II of this Chapter related to Private Placement.
SEBI's Power to administer the sections of the Companies Act related to a listed company and a company intending to get itself listed, extended to include the provisions related to share capital, which is not provided in the Companies Act, 1956.
The prospectus of the company needs to present in detailed format.
The terms of contract referred to in the Prospectus or objects for which it is issued without approval of shareholders by way of special resolution and providing exit opportunity to the dissenting shareholders. The company shall not use the amount raised by way of issue of Prospectus for buying, trading or otherwise dealing in Equity shares of any other listed Company. The provision is also not there under the Companies Act 1956.
Offer sale by existing shareholders will also be under some terms and conditions prescribed.
The class or classes of company that can file shelf prospectus with the Registrar will be prescribed by SEBI. Companies Act, 1956 allows only public financial institutions, public sector banks and scheduled banks to issue shelf prospectus.
Filing Suit against Criminal Liability of Misstatement in Prospectus - Clause 34, Civil Liability for Misstatement Prospectus - Clause 35, Punishment for fraudulently inducing person to invest money -Clause 36
Any person, group or association affected by any misleading statement or inclusion or omission of any matter in the prospectus can file any suit or take any action under clause 34 Criminal liability for misstatement in prospectus, clause 35 Civil liability for misstatement in prospectus and clause 36 Punishment for fraudulently inducing persons to invest money.
Person making of applications under fictitious names, different names or different combinations of names and surnames for acquiring or subscribing to the securities of the company will face action.
Return of Share allotment needs to file for all type of securities also like return of allotment of shares.
Global Depository Receipts can be issued by companies by passing Special Resolution and subject to such conditions as may be prescribed.
The company can make an offer or invitation of securities to a section of the public otherwise than issue of a prospectus, by way of private placement basis is 50 or such higher number as may be prescribed.
For Calculating persons offered under Private Placement, Qualified Institutional Buyers (QIB) will not be counted.
Any offer of allotment or invitation for subscription or allotment or entering into agreement to allot securities to 50 or such higher number whether the payment for the securities has been received or not or whether the Company intends to list its securities or not on any recognized stock exchange in or outside India, the same shall be deemed to be an offer to the public and shall accordingly be governed by the provisions provided in this regard by the Securities And Exchange Board of India(SEBI).
Securities of Private Placement shall be allotted within 60 days of receipt of application money.
Penalty under Income Tax Act 1961: Sections 158BFA(2)221(1), 271(1)(b), 271(1)(c), 271(1)(d), 271(4), 271A, 271AA, 271AAA, 271B, 271C, 271CA, 271D, 271E, 271F, 271FA, 271FB, 271G, 272A(1), 272A(2), 272AA, 272B, 272BB