Key Highlights
1. Changes in types of companies
- Maximum number of members in a private company increased from 50 to 200
- Limit of number of members in an association or partnership (without incorporation) to be increased up to 100
- One Person Company (OPC) - a new vehicle for individuals for carrying on business with limited liability
2. Changes in the provisions for Share capital
- Infra projects get a breather, preference shares can be issued for a period exceeding 20 years
- Further issue of capital provisions made applicable to all companies
- No Shares cannot be issued at a discount except for sweat equity shares
- Time gap between 2 buy-backs to be minimum 1 year.
3. Deposits
- Stringent norms provided for acceptance of fresh deposits from members and public.
- Any deposit accepted before the commencement of 2013 Act or any interest due thereon to be repaid within 1 year from the commencement of 2013 Act or from the date on which such payments are due, whichever is earlier.
- Credit rating mandatory for acceptance of public deposits
4. Corporate Social Responsibility (CSR)
- 2% of average net profits of last 3 years to be mandatorily spent on CSR by companies having
– turnover of ` 10 billion or more; or
– net profit of ` 50 million or more
5. Audit and Accounting
- To align with the provisions of the Income tax Act, companies to have a uniform financial year - ending on 31 March each year
- Consolidation of financials
- National Financial Reporting Authority (NFRA) to be constituted
- Mandatory audit rotation
- Restriction placed on non-audit services
- Mandatory internal audit
6. Management, administration and corporate governance
- At least 1 director of a company shall be a person who has stayed in India for 182 days or more in the previous calendar year. Existing companies to comply with this provision within 1 year from the date of commencement of the 2013 Act.
- Listed and prescribed class of companies to have at least 1 woman director. Existing companies to comply with this provision within 1 year from the date of commencement of the 2013 Act.
- Prescribed class of companies to have whole-time Key Managerial Personnel (KMP)
– Whole time Director included in definition of KMP
– Stakeholder relationship committee
– Nomination and Remuneration committee
– Corporate Social Responsibility committee
- Electronic voting for Board and shareholders meetings introduced
- Following committees of the Board made mandatory for listed and prescribed classes of companies:
– Stakeholder relationship committee
– Nomination and Remuneration committee
– Corporate Social Responsibility committee
- Director to vacate office on remaining absent from all the meetings of the Board of Directors held during 12 months with or without obtaining leave of absence
- Contents of Directors’ Report elaborated. Directors to annually report on the existence and effective operations of systems on compliance with all applicable laws
- Secretarial audit mandatory for listed and prescribed classes of companies
- Approval of Central Government required for certain managerial remuneration
7. Related Party Transactions
- Requirement of obtaining Central Government approval removed
- Approval by Board of Directors made mandatory
- Related party transactions to also require prior shareholder’s approval by special resolution for
companies having prescribed paid up capital or transactions exceeding prescribed amounts. - Related party transactions to be disclosed in the Director’s Report along with justification thereof
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