Top 10 points to note about Companies Act 2013
New Companies Act 2013 has been introduced with two basic objectives.The Ease of Doing Business has been facilitated and preference has been set on improving Corporate Governance, through this improved enactment.This article will try to sum up the 10 important points introduced by the Companies.
1. Introduction of OPC (One Person Company)
OPC refers to private company which would have only one member and minimum one director. Conditions to be satisfied for opening OPC is as follows.
- Only natural born citizens of India can incorporate OPC
- Minimum paid up capital shall be Rs 1 lakh.
- However, there is no restriction on minimum number of AGM (Annual General Meetings) to be held.
2. Membership for Private company
Companies Act 2013 has increased the membership requirement for a private company from 50 to 200 members.
3. Amendments with respect to financial year and information
- Companies Act does not provide the discretion in choosing the financial year.It would be mandatory for any company that financial year shall end on 31st March.
- Also Financial statements are defined for the first time.All companies except OPC, small company and dormant company , are required to maintain the same.These mandatory statements include Balance sheet , Profit and Loss Account, Cash Flow statement , statement for changes in equity and any other explanatory note.
4. Amendment with respect to incorporation and Article of the company
- Company shall accept Table F as standard AA (Articles of Association), by incorporating necessary changes as suited to the company.
- For proceeding with commencement of business, every company is required to file following documents
a. Director’s declaration stating that promoters have paid for the value of shares agreed to be subscribed by them.
b. Company’s confirmation that it has filed verification of its registered office with ROC (Registrar of Companies).
c. Where the regulators like SEBI or RBI are required to provide approval , then such approval shall also form part of required documents for submission.
5. Loans to directors
The company can’t advance loan or guarantee or security to following.
- Director of holding company
- Director’s partners
- Director’s relatives
- Firms in which director or his relatives are partner
- Private company in which he holds directorship or membership
- Where director holds 25% or more of voting power or board of directors , in any body corporate.
6. Key Managerial Person (KMP)
Companies Act 2013 provides for appointment of KMP, which includes
- CEO (Chief Executive Officer)
- Managing Director (MD)
- Company secretary
- Whole time director
- CFO (Chief Financial Officer)
- Any other officer as prescribed in case of public company.
However private companies are exempted from appointment of KMP requirement.
7. Services which cant be rendered by the Statutory Auditor of the company
Statutory Auditor wont be able to render following services to the company
- Accounting and Book keeping services
- Internal Audit
- Design and Implementation of any financial information system
- Acturial Services
- Investment Advisory services
- Investment banking services
- Outsourced Financial services
- Managerial or other services
8. Corporate Social Responsibility (CSR)
Companies Act 2013 specifies that an Indian company which has ,
- Net worth of 500 crores or more or,
- Turnover of 1000 crores or more or ,
- Net profit of 5 crores or more.
Has to constitute CSR committee.The new Companies Act 2013 also mandates that minimum 2% of average net profits for preceding 3 years to be spent on CSR activities.
One more amendment would be that contributing to Incubators would be eligible as CSR activity spending.
9. Small company definition
Companies Act 2013 exempts the small company from mandatory requirements of following .
- Board meeting requirement
- Presentation of cash flow statement
- Merger conditions etc.
10. Requirements with respect to Directors
- The Companies Act 2013 mandates that a prescribed class of company shall have at least one woman director
- The Act is amended to require that company should have at least one resident director.
- All the directors must have DIN number as issued by Government.
- Independent Director should occupy at least one third of Board of Directors in case of listed companies.
- The amended Act extends the age limit for appointment of KMP.Hence even an individual above 70 years
of age can be appointed.However the special resolution has to be passed to that effect.
- Every director must attend at least one board meeting in an year.Non compliance of this constraint can lead to automatic vacation of the directors office.
- Companies Act 2013 requires that there should be minimum 4 board meetings in an year.These meetings should not have interval period of more than 120 days in between.
- Any person shall not hold directorship in more than 20 companies , which includes 10 public companies.
This article has tried to sum up important points to be noted from Companies Act 2013.However, if one is curious about whole text of amendments and all amendments , then you may refer to Actual Companies Act 2013.This is available on MCA website.