Chapter III- Prospectus and Allotment of Securities
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- The Bill governs the issue of all types of securities, as opposed to only shares and debentures in the Companies Act, 1956.
- The Bill clearly provides the manner in which securities can be issued by both public and private company .
- 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.
- The power of SEBI 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 has to be more detailed.
- A Company shall not vary the terms of contract referred to in
Prospectus or objects for which it is issued without the approval of
shareholders by way of special resolution and providing exit opportunity
to the dissenting shareholders. Moreover it 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 said
requirement is not there under the Companies Act 1956.
- Terms and conditions for offer sale by existing shareholders prescribed.
- SEBI to prescribe class/classes of
companies that can file shelf prospectus with the Registrar. The
Companies Act, 1956 allows only public financial institutions, public
sector banks and scheduled banks to issue shelf prospectus.
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Any person (including 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).
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Action to be taken against any person making
or abetting making of applications under fictitious names, different
names or in different combinations of names and surnames for acquiring
or subscribing to the securities of the company.
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In addition to shares, return of allotment is required to be filed for all type of securities.
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Companies may now issue Global Depository Receipts by passing a Special
Resolution and subject to such conditions as may be prescribed.
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The number of persons to which a company
may make an offer or invitation of securities to a section of the public
otherwise than through issue of a prospectus, by way of private
placement basis is 50 or such higher number as may be prescribed. Under
the Companies Act, 1956 the maximum number of persons prescribed is 50.
- Qualified Institutional Buyers (QIB) not
be counted for the purpose of calculating number of persons offered
underprivate placement
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If a Company, listed or unlisted, makes an offer to allot or invites
subscription, or allots, or enters into an agreement to allot,
securities to 50 or such higher number as may be prescribed, 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).
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Companies making private placement have to allot the securities
within 60 days of receipt of the application money.
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| Chapter IV- Share Capital and Debentures |
- Voting rights of preference
shareholders on resolutions placed at a shareholders meeting modified.
Now where dividend are in arrears for 2 years or more, preference
shareholders can vote on all resolutions of the company.
- Shares, other than sweat equity, cannot
be issued at a discount.. No provision has been provided for issue of
share at discount after approval as compared to the Companies Act 1956.
- Preference shares have to be redeemed
within 20 years of issue. However, for companies to be allowed to issue
preference shares redeemable after 20 years for prescribed
infrastructure projects,, provided a certain percentage of shares are
redeemed annually at the option of the shareholder. Infrastructure
projects is defined in Schedule VI.
- The scope of section related to transfer and transmission of securities widened to deal with all types of securities.
- The provisions of clause related to further issue of capital will now be applicable to all type of companies.
- Apart from existing shareholders, if
the Company having share capital at any time proposes to increase its
subscribed capital by issue of further shares, such shares may also be
offered to employees by way of ESOP, subject to the approval of
shareholders by way of Special Resolution.
- The provisions relating to further
issue of shares shall now be applicable to Companies whenever it plan to
increase the subscribed paid up capital.
The requirement of application of such provision only after 2 years
from the date of allotment or 1 year from the allotment of shares for
first time under the Companies Act 1956 has been discontinued.
- The Companies Act, 1956 provides for
issue of bonus shares but the Bill provides more detailed provisions to
deal with bonus issue.
- No reduction of capital to be allowed
if a company is in arrears for payment of deposits, accepted either
before or after this Bill is enacted. No such condition under the
Companies Act, 1956.
- Buyback provisions eased. Companies
can buy back its shares even if it has defaulted in repayment of deposit
or interest payable thereon, redemption of debentures or preference
shares or payment of dividend to any shareholder or repayment of any
term loan or interest payable thereon to any financial institution or
bank, provided that such default has been remedied and three years have
lapsed after such default ceased to subsist. This was not the case in
the Companies Act, 1956.
- Debenture trustee to be appointed only
when a company issues prospectus or makes an offer or invitation to the
public or to its members exceeding five hundred for subscription to its
debentures.
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| Chapter V- Acceptance of Deposit by Companies |
- NBFCs not to be covered by the
provisions relating to acceptance of deposits. They will be governed by
the Reserve Bank of India rules on acceptance of deposits.
- Companies cannot accept deposit from
public. It can do so only from its members after seeking permission of
its shareholders at a general meeting. No such approval was required
under the Companies Act, 1956. Such deposit can only be accepted subject
to complying with necessary conditions.
- Certain public companies, as
prescribed, can accept deposits from persons other than its members,
subject to conditions such as credit rating.
- No provision for suo-moto action by the
Tribunal to issue directions for repayment of the deposits or interest
thereon in case of default in such repayments, though such provision
exists under the Companies Act, 1956.
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| Chapter VI- Registration of Charges |
- All types of charges would be required
to be registered. Companies Act, 1956 provided a specific list of cases
in which it is necessary to register the charge.
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| Chapter VII- Management and Administration |
- Companies required to disclose
additional information in its Annual Return. These include particulars
of its holding, subsidiary and associate companies; certification of
compliances, remuneration of directors and key managerial personnel etc.
- Certification of Annual Return by
practicing company secretary mandatory in case of companies with
prescribed paid up capital and turnover.
- Annual Return to provide information
up to the date of closure of financial year and not up to the Annual
General Meeting as required under the Companies Act, 1956.
- Listed companies required to file a
Return in the prescribed form with the Registrar regarding change in the
number of shares held by promoters and top ten shareholders of the
company, within 15 days of such change.
- First annual general meeting of a
company shall be held within nine months from the closure of its first
financial year instead of 18 months from the date of the incorporation,
as provided in the Companies Act, 1956.
- Quorum of general meeting for a
public company will now depend upon the number of members of the
Company. For companies with more than 5,000 members, at least 30 should
be present personally. The Companies Act, 1956 prescribes a fixed
quorum of 5 persons.
- The Central Government may prescribe
the class or classes of companies and the manner in which a member may
exercise his right to vote electronically.
- Eligibility for demand of poll by the members in the general meeting changed from what provided in the Companies Act, 1956.
- Provisions of the postal ballot shall be applicable to all the Companies, whether listed or unlisted.
- Eligibility for making requisition for circulation of resolution modified.
- Special notice to move a resolution
can be moved by such number of members holding not less than 1% of total
voting power or holding shares on which such aggregate sum of not less
than Rs 5 lakh has been paid-up. This is not required under the
Companies Act, 1956.
- Every company has to follow the Secretarial Standards while preparing the minutes of board and general meeting.
- Listed public companies to prepare a
report, in the manner as may be prescribed, on each annual general
meeting including the confirmation that meeting was convened, held and
conducted as per the Act and the Rules made thereunder.
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| Chapter VIII- Declaration and Payment of Dividend |
- The Board of Directors may declare
interim dividend during any financial year out of the surplus in the
Profit and Loss Account and out of profits of the financial year in
which such interim dividend is sought to be declared.
- A company cannot declare interim
dividend at a rate higher than the average dividends declared by it
during the immediately preceding three financial years, if it has
incurred loss during the current financial year up to the end of the
quarter immediately preceding the date of declaration of interim
dividend. No such requirement is there under the Companies Act, 1956.
- Instead of transferring a fixed
percentage of profits to reserve before declaring dividend every year as
required under the Companies Act, 1956, a company can transfer such
percentage of profit to the reserve before declaring dividend as it
deems necessary. Such transfer is also not mandatory.
- Alongwith unpaid or unclaimed
dividend, companies wil also have to transfer all the shares on which
dividend has remained unpaid or unclaimed to the Investor Education and
Protection Fund (IEPF) along with a statement containing such details as
may be prescribed.
- Funds in IEPF can be utilised for
distribution of any disgorged amount among eligible and identifiable
applicants for shares or debentures, shareholders, debenture-holders or
depositors who suffered losses due to wrong actions by any person, in
accordance with the orders made by the Court which had ordered
disgorgement.
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| Chapter IX- Accounts of Companies |
- The books of accounts may be kept in electronic form.
- The Balance Sheet, the Profit &
Loss Account and the cash flow statement have been collectively defined
as the financial statements.
- Along with the financial statement,
consolidated financial statements of all subsidiaries and the company
are to be prepared and laid before the annual general meeting.
Subsidiary for the purpose of this requirement shall include associate
company and joint venture.
- The Bill does not state whether a financial year can be extended.
- The requirement of attaching the
Balance Sheet, the Profit & Loss account, the Directors’ Report, the
Auditors’ Report, a statement of the holding company’s interest in the
subsidiary and other reports as required by section 212 of the Companies
Act, 1956 has been dispensed with.
- The Bill provides for provisions
relating to re-opening or re-casting of the books of accounts of a
Company pursuant to order of Court or Tribunal.
- The National Advisory Committee on Accounting Standards renamed as The National Financial Reporting Authority.
- The authority to advise on Auditing Standards in addition to Accounting Standards.
- The Central Government may prescribe
standards of accounting or any addendum thereto, as recommended by the
Institute of Chartered Accountants of India (ICAI) in consultation with
and after examination of the recommendations made by the National
Financial Reporting Authority.
- The Director's Report for every company
except for one person company, shall provide additional information
such as number of meetings of the board, company's policy on directors'
appointment and remuneration; explanations or comments by the board on
every qualification, reservation or adverse remark or disclaimer made by
the company secretary in his secretarial audit report, particulars of
loans, guarantees or investments etc.
- The Directors Responsibility Statement
shall include additional statement on compliance with all applicable
laws and, in case of listed companies, it shall also include statement
that adequate internal finance control were in place.
- The Bill provides provisions related to Corporate Social Responsibility (CSR).
- Every Company with net worth of Rs
500 crore or more, or turnover of Rs 1,000 crore or more or a net
profit of Rs 5 crore or more during any financial year to constitute a
Corporate Social Responsibility Committee of the board consisting of
three or more Directors, including at least one independent director.
The committee shall recommend the policy for CSR to the board.
- The board of every company to
ensure that the company spends, in every financial year, at least 2% of
the average net profits it made during the three immediately preceding
financial years, in pursuance of its Corporate Social Responsibility
Policy. The board in its report to explain reasons for faiure to spend
such amount..
- Companies to give preference to local area of operation for CSR spendings.
- Private Companies will not be allowed to file their Balance Sheet & Profit and Loss account separately.
- The Bill provides for conduct of internal audit of prescribed class or classes of companies.
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| Chapter X- Audit and Auditors |
- Every Company shall, at the first
annual general meeting (AGM), appoint an individual or a firm as an
auditor who shall hold office from the conclusion of that meeting till
the conclusion of its sixth AGM and thereafter till the conclusion of
every sixth meeting. However the Company shall place the matter relating
to such appointment for ratification by members at every AGM.
- The Bill provides provision for
compulsory rotation of individual Auditors in every 5 years and of audit
firm in every 10 years in listed Companies & certain other classes
of Companies, as may be prescribed.
- A transition period of three years from
the commencement of the Act has been prescribed for existing companies
to comply with the provision of the rotation of auditors.
- A company can resolve for the annual rotation of auditing partners and his team within the audit firm appointed by it.
- The Bill provides for certain new disqualifications for the Auditors.
- An Auditor shall also comply with
auditing standards. The Central Government will prescribe the standards
of auditing or any addendum thereto, as recommended by the ICAI, in
consultation with and after examination of the recommendations made by
the National Financial Reporting Authority.
- Auditors, during the course of
performance of its duties, are required to immediately report to the
Central Government, any offence involving fraud that is being or has
been committed against the company by its officers or employees.
- The duties, which have been cast on
an Auditor under clause 143, shall apply mutatis mutandis to both Cost
Accountants for Cost Audit and Company Secretary in Practice for
Secretarial Audit.
- The Auditor of the Company shall
not provide directly or indirectly certain specified services to the
company, its holding and subsidiary company.
- An auditor contravening the
provisions related to his appointment (including powers & duties,
services that he cannot render and signing and reading of Auditor's
Report at the general meeting), then in addition to punishment provided
in the Act, has to refund the remuneration received from the company and
also be liable to pay damages to the company or to any person for the
loss arising out of misleading or incorrect information.
- A partner or partners of the audit
firm and the firm also to be jointly and severally responsible for the
liability, whether civil or criminal as provided in the Bill or in any
other law for the time being in force. If proved that the partner or
partners of the audit firm has or have acted in a fraudulent manner or
abetted or colluded in any fraud by, or in relation to, the company or
its directors or officers, then such partner or partners of the firm
shall also be punishable in the manner provided in clause 447.
- Now, instead of Company pertaining
to any class of Companies engaged in production, processing,
manufacturing or mining activities which are required to have cost audit
under the Companies Act 1956, under the Bill the Central Government can
only direct Cost Audit to be conducted in such class of Companies
engaged in the production of such goods or providing such services,
which have the prescribed networth or turnover and has been directed to
include the particulars relating to the utilization of material or
labour or to other items of cost as may be prescribed in their books of
account.
- No approval is required of the Central Government for the appointment of a cost auditor to conduct the cost audit.
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| Chapter XI- Appointment and Qualification of Directors |
- Prescribed class or classes of companies to have atleast one woman director.
- Atleast one director on the board
to be a person who has stayed in India for not less than 182 days in the
previous calendar year.
- At least one-third of the board of
every listed public company to consist of independent directors.
Existing companies to be provided a transition period of one year from
the date of commencement of the Act to comply.
- The Central Government to prescribe the number of Independent Directors for certain class or classes of Public Company.
- The Bill provides provision for
limiting the liability of Independent Director and Non Executive
Director not being promoter or key Managerial Personnel.
- Independent Directors not entitled
to any stock option. They may receive remuneration by way of fees and
profit related commission as approved by the members.
- The Schedule to the Bill provides the following in respect of an Independent Director
- Professional Conduct
- Role & Functions
- Duties
- Manner of Appointment
- Removal & Resignation etc
- Companies can have maximum of 15
directors, up from 12 allowed in the Companies Act, 1956. More can be
appointed after passing a special resolution..
- Certain new disqualification for the directors given in the Bill.
- A person cannot become Director in
more than 20 Companies instead of 15 as provided under the Companies
Act, 1956 and out of this 20, he cannot be the Director of more than 10
public Companies. The limit of 20 companies includes private Company
whereas under the Companies Act 1956 , there is no limit on the number
of private companies in which a person can become a Director.
- Persons acting as directors to be
allowed a transition period of one year from the commencement of the Act
to comply with the provisions on maximum number of directorships. Each
company where the person intends to continue as a director as well as
the Registrar needs to be informed of the choice.
- Duties of the directors towards a company prescribed.Not provided in the Companies Act, 1956.
- For the purpose of the calculation of the directors retiring by rotation, the independent directors shall be out of the ambit.
- Directors are also required to
mandatorily forward their resignation along with detailed reasons for
resignation to the Registrar within 30 days of resignation in prescribed
manner. There is no such requirement under the Companies Act, 1956.
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| Chapter XII- Meeting of Board and its Powers |
- A director can participate in a board meeting through video conferencing or other audio visual mode as may be prescribed.
- A notice of not less than 7 days in
writing is required to call a board meeting. The notice of meeting to be
given to all directors, whether he is in India or outside India by hand
delivery post or electronic means.
- At least four meetings to be held
every year, and not more than 120 days to elapse between two consecutive
meetings. No requirement to hold the meeting every quarter as provided
under the Companies Act, 1956.
- Every listed company and such other company as may be prescribed to have an audit committee.
- Audit committees to have a minimum of
three directors, with majority of the independent directors and
majority of members of committee should have the ability to read and
understand the financial statements.
- A vigil mechanism in the prescribed
manner to be established by every listed company or such class or
classes of companies, as may be prescribed.
- Every listed company and prescribed
class or classes of companies shall constitute a nomination and
remuneration committee consisting of three or more non-executive
directors, of which not less than one half shall be independent
directors.
- Every company with more than 1,000
shareholders, debenture-holders, deposit-holders and any other security
holders at any time during a financial year shall constitute a
Stakeholders Relationship Committee consisting of a chairperson who is a
non-executive director and such other members as may be decided by the
board.
- The Bill provides certain new matters that are required to be transacted by the board of directors at their meeting only.
- Certain powers which earlier can be
exercised by the Board with the approval of general meeting by way of
ordinary resolution under section 293 of the Companies Act 1956,, shall
now to be passed by special resolution.
- The limits for political contribution
by a company changed. Now instead of 5% that was allowed under the
Companies Act, 1956, contribution cannot exceed 7.5% of the average net
profits of the company during the three immediately preceding financial
years.
- In a private company, an interested
director cannot vote or take part in the discussion relating to any
matter in which he is interested, whereas under the Companies Act, 1956,
he can.
- The Companies Act, 1956 requirement
of seeking permission of the central government for giving loan to
director has been dispensed with.
- The provisions related to
inter-corporate loans and investments (section 372A of Companies Act,
1956) has been extended to include loans and investments to any person.
- While considering the limits for
making investments, providing loan, providing guarantee or security ,
the amount for which the investment has been made or the loan, guarantee
or security already provided, will not be considered, as opposed to
what is provided in the Companies Act, 1956.
- No stock broker, sub-broker,
share transfer agent, banker to issue, registrar to an issue, merchant
banker, underwriter, portfolio manager, investment advisor or any
intermediary associated with capital market shall take inter-corporate
loans and deposits exceeding the limits that will be prescribed.
- A company, unless otherwise
prescribed, cannot make investment through more than two layers of
investment companies subject to certain exemptions.
- Apart from the existing
transactions, certain new related party transactions are also provided
for which approval of board will be required.
- No approval of the central
government required for entering into any related party transactions.
Under the Companies Act, 1956 approval is required under section 297.
- No approval of the central
government required for appointment of any director or any other person
to any office or place of profit in the company or its subsidiary. Under
the Companies Act, 1956 approval is required under section 297.
- A company shall not enter
into any arrangement by which a director of the company or of its
holding company or any person connected with him can acquire assets for
the consideration other than cash from the company & vice versa
without the approval of company in general meeting.
- The Bill prohibits forward
dealings in securities of company by any director or key managerial
personnel. Under the Companies Act, 1956 there is no such provision.
- The Bill prohibits insider trading in the company. Under the Companies Act, 1956 there is no such provision.
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| Chapter XIII- Appointment and Remuneration of Managerial Personnel |
- Provisions relating to the appointment of managing director/whole time director/manger to apply to a private company.
- The appointment of managing
director/whole time director /manager to be approved by general meeting
by special resolution and if the appointment is not in accordance with
schedule V (Schedule XIII in the Companies Act, 1956), then the approval
of central government is also required.
- Where a company is required to re-state
its financial statements due to fraud or non-compliance with any
requirement under this Act and the rules made thereunder, the company
shall recover from any past or present managing director or whole-time
director or manager who, during the period for which the financial
statements are required to be re-stated, the remuneration received
(including stock option) arisen due to such statement or non-compliance
in excess of what would have been paid to the managing director,
whole-time director or manager under such re-stated financial
statements.
- Every company belonging to such class
or description of companies as may be prescribed, to have managing
director, or chief executive officer or manager and in their absence, a
whole-time director, company secretary and chief financial officer.
- The Bill provides for provision related to secretarial audit in certain prescribed class or classes of companies.
- The Bill prescribes the functions of a company secretary.
- The Schedule to the Bill provides the
conditions under which a company can pay remuneration to its managerial
personnel in excess of the limits prescribed therein, without the
government approval.
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| Chapter XIV- Inspection, Inquiry and Investigation |
- In case of inspection or inquiry,,
now the Registrar shall possess powers as are vested in a Civil Court
under the Code of Civil Procedure, 1908, while trying a suit in respect
of certain specified matters.
- The search and seizure powers of the
Registrar /Inspector extended to cover places where documents pertaining
to key managerial personnel, auditors and company secretary in practice
are kept.
- For search or seizure of documents,
the Registrar need to take permission from the special court instead of
Magistrate of first class or Presidency Magistrate.
- The Serious Fraud Investigation
Office (SFIO) to investigate frauds relating to a company to be set up
through a notification. Till it is established, the SFIO set up by
central government through an administrative resolution to be used for
the purpose of this clause.
- The central government may,under the prescribed situation, refer any matter for investigation to the SFIO.
- No provision for inspection or investigation by SEBI.
- The affairs of related company may
also be investigated while the inspector is making an investigation as
to the ownership of a company. This is not provided under the Companies
Act, 1956.
- As per the Bill, the Tribunal may by
order, direct that a transfer, removal or disposal of funds, assets or
properties of a company shall not take place during such period not
exceeding three years as may be specified in the order or may take place
subject to such conditions and restrictions as the Tribunal may deem
fit, where it appears to it, on a reference made to it by the Central
Government or in connection with any inquiry or investigation into the
affairs of a company under this Chapter or on any complaint made by such
number of members as specified under sub-clause(1) of Clause 244 or a
creditor having an amount of Rs 1 lakh outstanding against the company
or any other person having a reasonable ground to believe that the
removal, transfer or disposal of funds, assets, properties of the
company is likely to take place in a manner that is prejudicial to the
interests of the company or its shareholders or creditors or in public
interestWhere pursuant to transfer of shares under the Companies Act
1956, the Tribunal is of the opinion that such change is prejudicial to
the public interest, then its power to put restrictions on exercise of
voting rights in respect of such shares or to prevent the resolution for
change in composition of board of directors from being put into effect
has been dispensed with.
- If the inspector reports of a fraud
has taken place in a company and as a result undue advantage is derived
by any director, key managerial personnel or an officer or other person,
in the form of any asset, property or cash or in any other manner, the
central government can file an application to the Tribunal for
appropriate orders of disgorgement of such assets, property or cash and
for holding of such director, key managerial personnel, officer or
other person liable personally without any limitation of liability.
- An investigation under this chapter
may nevertheless be initiated and shall neither be stopped nor be
suspended even where winding up is approved by the shareholders or any
proceeding for winding up is pending before the Tribunal.
- Provisions for inspection and
investigations of a foreign company is provided in this chapter. In the
Companies Act, 1956, these provisions are in the chapter related to
foreign company.
- During the process of the investigation, inquiry or inspection if any person:
- destroys,
mutilates or falsifies or conceals or tampers or unauthorizedly removes
or is a party to destruction, mutilation or falsification or
concealment or tampering or unauthorized removal of any document
relating to the property, assets or affairs of the company or body
corporate, or
- makes or is a party to the making of any false entry in the document concerning the company or body corporate, or
- provides any false information which he knows to be false,
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| Chapter XV- Compromise, Arrangement and Amalgamations |
- Only persons holding not less than 10%
of the shareholding or having outstanding debt amounting to not less
than 5% of the total outstanding debt, as per the latest audited
financial statements, are eligible to raise any opposition to an
arrangement or compromise.
- The Tribunal may dispense with calling
of a meeting of creditors or class of creditors where such creditors or
class of creditors, having at least 90% value, agree and confirm, by way
of affidavit, to the scheme of compromise or arrangement.
- Any provision of buyback in any compromise or arrangement shall be in compliance with the provisions of the buyback.
- Any takeover offer of listed company under compromise or arrangement shall comply with SEBI guidelines.
- In case of a merger of a listed
company with an unlisted company, the Tribunal can order that the
unlisted company i.e., transferee company continue to be unlisted.
- No compromise or arrangement shall be
sanctioned by the Tribunal unless a certificate by the company’s auditor
has been filed with the Tribunal stating that the accounting treatment,
if any, proposed in the scheme of compromise or arrangement is in
conformity with the accounting standards prescribed under Clause 133.
- The Bill prohibits creation of treasury stock/trust shares.
- Separate provisions have been provided
for the merger or amalgamation between two small companies or between a
holding company and a wholly-owned subsidiary company.
- The Bill makes provision for cross
border amalgamations between Indian companies and companies incorporated
in the jurisdictions of such countries as may be notified from time to
time by the central government
- The Bill provides for purchase of
minority shares in case an acquirer or person acting in concert with the
acquirer becomes holder of 90% or more of the issued capital of the
company, either directly or by virtue of any amalgamation, share
exchange, conversion of securities or any other reason.
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| Chapter XVI- Prevention of Oppression and Mismanagement |
- Application against oppression or
mismanagement to be filed before the National Company Law Tribunal
instead of the Company Law Board.
- Provisions for relief from oppression and mismanagement combined under one provision, as opposed to Companies Act, 1956.
- The Bill provides for class action
suit by specified number of members or depositors against the company
except the banking companies, which is prevalent in developed countries.
No such provision in the Companies Act, 1956.
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| Chapter XVII- Registered Valuer |
- Where any valuation is required to
be made of any property, stocks, shares, debentures, securities or
goodwill or any other assets (herein referred to as the assets) or net
worth of a company or its liabilities under the provision of this Act ,
it shall be valued by a person having such qualifications and experience
and registered as a Valuer in such manner, on such terms and conditions
as may be prescribed and appointed by the audit committee or in its
absence by the board of directors of that company.
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| Chapter XVIII- Removal of Name of Companies from Register of Companies |
- The conditions under which the Registrar can remove the name of a company from his record have been changed.
- The Registrar of Companies has been
empowered to file an application with the Tribunal for restoration of
the name of a company where the company was struck off inadvertently or
on the basis of the incorrect information.
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| Chapter XIX- Revival and Rehabilitation of Sick Companies |
- The manner of declaring a company sick and process of its revival and rehabilitation has been completely rationalized.
- Any company, and not just industrial company as provided under the Companies Act, 1956, can be declared as sick company.
- Secured creditors representing 50%
or more of the debt of a company and whose debt the company has failed
to pay within 30 days of service notice, can apply to the Tribunal for
declaring the company as sick. A company that fails to repay the debt of
secured creditors representing 50% or more of its debt may also apply
to the Tribunal to be declared sick.
- Erosion of 50% of the networth no longer the criteria for declaring the company as sick.
- Where the financial assets of a sick
company have been acquired by any securitization company or
reconstruction company under sub-section (1) of section 5 of the
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002, any application for revival or
rehabilitation shall not be made without the consent of securitization
company or reconstruction company, which has acquired such assets.
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| Chapter XXIV- Registration Offices and Fees |
- Any document or returns required to be
filed under this Bill, if not filed within prescribed time, have to be
filed within a period of 270 days on payment of such additional fees as
may be prescribed.
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| Chapter XXVI- Nidhi Companies |
- New definition of Nidhi Company prescribed.
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| Chapter XXVII- National Company Law Tribunal and Appellate Tribunal |
- The person to be appointed as President
of the Tribunal shall be the judge of the High Court for atleast 5
years, as opposed to the Companies Act 1956, where no term has been
prescribed for High Court Judge to be appointed as President; the only
condition was that the person should be qualified for being a judge of
high court.
- Eligibility critieria for appointment of a judicial member or technical member has also changed.
- The National Company Law Appellate
Tribunal shall now consist of combination of technical and judicial
members not exceeding 11, instead of 2 as provided in the Companies Act,
1956.
- A serving judge of the Supreme Court or
a chief justice of a High Court can be appointed as the Chairman of the
National Company Law Appellate Tribunal. The Companies Act, 1956
provided that only past judges of the Supreme Court or chief justice of
high courts can be appointed.
- The President of the Tribunal and the
Chairperson and the Judicial Members of the Appellate Tribunal to be
appointed after consultation with the Chief Justice of India, instead of
the selection committee as provided in the Companies Act, 1956.
- Every proceeding before the Tribunal to
be dealt with and disposed of as expeditiously as possible. The
Tribunal has toendeavour to dispose the proceedings within 3 months from
the date of commencement of the proceeding before it.
- On such date as may be notified by the central government:
- All matters, proceedings or cases
pending before the Board of Company Law Administration (hereinafter in
this section referred to as the Company Law Board) constituted under
sub-section (1) of section 10E of the Companies Act, 1956, immediately
before such date shall stand transferred to the Tribunal and the
Tribunal shall dispose of such matters, proceedings or cases in
accordance with the provisions of this Act.
- All proceedings under the Companies
Act, 1956, including proceedings relating to arbitration, compromise,
arrangements and reconstruction and winding up of companies, pending
immediately before such date before any district court or high court,
shall stand transferred to the Tribunal and the Tribunal may proceed to
deal with such proceedings either de novo or from the stage before their
transfer:
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| Chapter XXVIII- Special Courts |
- The central government may, for the
purpose of providing speedy trial of offences under this Bill, by
notification, establish as many Special Courts as may be necessary.
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| Chapter XXIX- Miscellaneous |
- Only offences punishable with fines are
compoundable under the Bill. Any offence punishable with fine or
imprisonment or with both will be compoundable with the permission of
Special Court.
- The Bill makes provision for
establishment of Mediation and Conciliation panel by central government.
Under the Companies Act, 1956 there is no such provision.
- The Bill provides for specific provisions related to any act of fraud. Under the Companies Act, 1956 there is no such provision.
- “Fraud” in relation to affairs of a
company or any body corporate includes any act, omission, concealment of
any fact or abuse of position committed by any person or any other
person with the connivance in any manner, with intent to deceive, to
gain undue advantage from, or to injure the interests of, the company or
its shareholders or its creditors or any other person, whether or not
there is any wrongful gain or wrongful loss.
- Where a company is formed and
registered under this Bill 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.
- A dormant company will have such
minimum number of directors and have to file such documents and pay such
fees, as may be prescribed, to retain its dormant company status.
- The maximum number of persons who can
carry on businesses for profitable purpose through an association or
partnership will be prescribed by rules, but the number will not exceed
100, instead of 12 as provided in the Companies Act, 1956.
- The government by Rules will prescribe Sections that will not be applicable to private companies & one person companies..
- The Bill provides that producer
companies shall continue to be governed by Chapter IXA of the Companies
Act, 1956 until the enactment of Special Act for Producer Companies.
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