The upper house of the Parliament passed the Companies Bill on August 8, 2013 after much delay. The bill replaces Companies Act, 1956, and had been passed by the Lok Sabha in December last year. Key highlights of the new Companies Bill are as under:
1. Incorporation of a One Person Company has been permitted.
2. Numbers of permissible members in private company has been raised to 200 as against existing limit of 50 members.
3. Listed companies shall have at least 1/3 rd of the total number of directors as Independent Directors and the Central Government may prescribe the minimum number of Independent Directors for any class of public companies.
4. Nominee director cannot be regarded as Independent Director.
5. Maximum term of Independent Director has been restricted to five years at once subject to a maximum of two such terms.
6. Appointment of at least one woman director on the board of prescribed classes of companies has been made mandatory.
7. Appointment of at least one director resident in India, i.e. a director who has stayed in India for at least 182 days in the previous calendar year, is made mandatory for all companies.
8. Maximum number of directors has been increased from twelve (12) to fifteen (15) directors, Further no Central Government approval is required to increase the maximum no. of directors beyond fifteen(15). Shareholders of companies may do so by passing a special resolution.
9. A person can hold directorship of up to 20 companies, of which not more than 10 can be public companies.
10. No listed companies shall appoint-
i. an individual as auditor for more than one term of five consecutive years, and
ii. an audit firm as auditor for more than two terms of five consecutive years.
11. Shareholders are at liberty to decide by passing resolution that audit partner and the audit team, be rotated every year.
12. CSR has been made mandatory for a company having net worth of Rs. 500 crore or more, or turnover of Rs.1,000 crore or more or net profit of Rs. 5 crore or more during any financial year. Under the new bill, companies are required to spend at least 2 per cent of their average net profits for the three immediately preceeding financial years on CSR
13. The new bill bans holding ‘Treasury Stock’, which is often used by companies to increase shareholding or future monetisation after consolidation.
14. Financial Year of any company can end only on March 31 and only exception is for companies, which are holding / subsidiary of a foreign entity requiring consolidation outside India, can have a different financial year with the approval of Tribunal.
CA. Simarpreet Singh Gulati