Key Highlights/Points of the Companies Act, 2013

I.    Business Friendly Corporate Regulations/ Pro-Business Initiatives

  • Provision of self-regulation with disclosures/transparency instead of 'Government approval based regime'.
  • Automation of corporate records/meetings statutory recognition to (i) maintenance of documents by companies in electronic form, (ii) 'video-conferencing' as a mode of conducting Board meetings etc.
  • Faster mergers and acquisitions including short form of mergers and cross border mergers.
  • Summary liquidation: For companies having net assets of Rs. 1 crore or less, Official Liquidators (OLs) are empowered with adjudicatory powers.
  • Time bound approvals through National Company Law Tribunal (NCLT).
  • Concept of 'dormant companies' introduced (Companies not engaged in business for two consecutive years are declared as dormant).
  • Concept of One Person Company (OPC) introduced.

II.   Good Corporate Governance and Corporate Social Responsibility
  • Concept of Independent Directors (IDs) included as a statutory requirement u/s 149(4).
  • Provision for constitution of several Committees of the Board (Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and CSR Committee).
  • Woman Director for prescribed class of companies.
  • Mandatory provision for constitution of CSR Committee and formulation of CSR Policy, with mandatory disclosure, for prescribed class of companies.

III. Enhancing Accountability of Management
  • The term 'Officer in Default' has been reviewed to make it more relevant.
  • Terms 'Key Managerial Personnel' (KMP) and 'Promoter' defined to affix responsibility on key functionaries of the company.
  • Duties of Directors defined, including to shareholders, employees, the community and environment.
  • Cap on number of Directorships: 20 companies, of which 10 can be public companies.

IV. Strengthened Enforcement
  • The Central Government to have powers to order investigation, suo-motu, in public interest.
  • Statutory recognition of Serious Fraud Investigation Office (SFIO).
  • Provision for creation of Special Courts.
  • Search and seizure of documents, during investigation, without an order from a Magistrate.
  • Freezing of assets or disgorgement of illegal gains of company under investigation.

V. Audit Accountability
  • Recognition of accounting and auditing standards.
  • Stricter disqualification norms for auditors.
  • Auditor not to perform specified non-audit services.
  • Tenure or rotation of auditors prescribed.
  • Internal audit for bigger companies.
  • Substantial civil and criminal liability for an auditor in case of non-compliance.
  • Tribunal empowered to direct a change of auditor in case of a fraud detected.
  • Cost records and cost audit for prescribed class of companies.
  • Secretarial audit for prescribed class of companies.
  • National Financial Reporting Authority (NFRA) to be constituted.
  • Protection of Minority Shareholders
  • Exit option provided, if there is dissent to change in Object clause, or during compromises etc.
  • Valuation mandated during compromise, arrangements etc.
  • Effect of merger on minority shareholding to be disclosed.
  • Listed companies to have one Director representing small shareholders.

VI. Investor Protection
  • Stringent norms for acceptance of deposits from the public.
  • Strengthened role of Investor Education and Protection Fund (IEPF)
  • No time bar on claims of dividends from IEPF.
  • Class Action Suits recognized.
  • Enhanced powers to Tribunal for protection of minority rights.

Ref: MCA Annual Report 2015-16

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