It is the primary legislation relating to the
incorporation, composition, functioning, and compliance requirements of
companies in India. The previous Companies Act of 1956 had to undergo numerous
amendments over the past several decades, especially after the
post-liberalization era that came after the 1990s. The Central Govt
subsequently enacted the new Companies Act in 2013, to replace the old one and
with an object to consolidate and amend the relating to companies. It is the
primary legislation that you have to refer to, if you are planning to
incorporate a company in India.
A SUMMARY OF THE KEY PROVISIONS
Ø The
Act has 29 Chapters, divided into 464 Sections, and 7 Schedules.
Ø A
company comes into being by way of its incorporation, and it has to follow the
requirements and mandates under the Act, such as the application to be made to
the Registrar of Companies (RoC),
the creation of the Memorandum of Association and Articles of Association, the
issue of certificate of Incorporation by the RoC, setting up of a Registered
Office, etc. before it can commence its business.
Ø Once
it is all set to commence business, the company now has to raise capital, and
the Act provides for this to be done by offering its securities either to the
public, or through private placements. The general public are entitled to
purchase shares of a Public Ltd Co. only, and a Pvt Ltd Co. cannot offer its
securities to the public. The Act lays down strict provisions regarding the
manner and eligibility to make an offer to the public, such as a number of
detailed disclosure to be made in the Prospectus, the regulatory requirements
to be satisfied to make such issue, etc. (also refer ICDR Regulations, 2009).
On the other hand, a Private Placement is an offer of securities to certain
specified persons only, without making it open for the general public, and the
regulatory controls are less stringent here.
Ø The
raising of capital can be done by issuing either Shares or Debentures of the
company. A Share in a company gives a certain membership status to the
purchasers, and they pay money in return for the Shares. Shares are further
divided into Equity Shares and Preference Shares, and the equity shareholders
get dividends out of the profits made by the company, and not any fixed amount
of payment; while preference shareholders get a fixed dividend from time to
time. Debentures are instruments wherein a creditor lends money to the company,
and receives in return, a Certificate acknowledging the debt, and on the
stipulated time, the debt will be paid back with interest. The Act provides for
the different requirements and procedures under each of these.
Ø The
Company may also accept deposits from its members, or take a loan from a credit
by creating a charge on the assets of the company, in accordance with the
provisions of the Act.
Ø The
mode of management of the company, including the requirement to file Annual
Returns, need to file declaration of any beneficial interest of any member in
any Shares, maintenance of Records, Voting Rights and its procedure, kinds of
Resolutions passed in meetings, etc. are also enumerated in the Act.
Ø The
manner in which dividends are to be declared and paid to the shareholders.
Ø The
mandates regarding maintenance of accounts of the company; and the appointment
of auditors and manner of audit are given in the Act.
Ø The
company must have a Board of Directors, and their appointment, qualifications,
duties, and prohibitions are enumerated in the Act. The Board of Directors must
hold meetings from time to time, and pass resolutions on certain matters; the
Cat provides for the powers of Directors, Related Party Transactions, etc. The
appointment and remuneration of managerial personnel is also provided in the
Act.
Ø A
company is liable to be under an inspection of document or an inquiry/investigation
by the authorities.
Ø After
having dealt with the manner of functioning of companies too, the Act lays down
detailed Chapters on the winding up (voluntary or by Tribunal);
compromise/arrangement/amalgamation with another company; revival and
rehabilitation of sick companies, etc.
Ø Special
provisions regarding Govt companies and Companies incorporated outside India.
The Act also provides for the setting up of NCLT, Appellate Tribunal, and Special
Courts.
HIGHLIGHTS OF
THE 2013 ACT
·
Maintenance of
documents in electric form allowed
·
Corporate Social
Responsibility made mandatory
·
One Person Company
allowed
·
Independent Directors
and Women Directors made mandatory in some cases
·
Whistle-Blower policy
facilitated; ethical corporate behaviour promoted
·
Better protection to
minority shareholders – Exit option made available
·
NCLT established to
hear company related matters; replaced the Company Law Board
RELATED STATUTORY REFERENCES (for company
compliances) (INDIAN KANOON)
·
ICDR, 2009 by SEBI
·
SEBI ACT
·
LODR by SEBI
·
SCRA
·
SAST Regulations, 2011
by SEBI
No comments:
Post a Comment