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Features and New Changes of Company Act 2013
Features and New Changes of Company Act 2013/ company act 2013 notes
Background of Company Act 2013
After the industrial revolution there were fundamental changes in the structure of trade and business in the world. The production and sales work done by the earlier small scale industries and sole traders became inadequate. Industrialization led to the growth of the industrial system.
These institutions failed to provide the huge capital management skills required for this. At the same time, the local market was rapidly transformed into the national and international market. Therefore, a new type of business was started to meet the special needs of the rapidly growing factory system and capital management of the market, which is called a joint venture or company.
This type of business became very popular all over the world in a short period of time. This type of business was considered convenient for large enterprises due to limited financial responsibility and huge capital raising capacity. In India, a company is formed and established under a separate law. For this, the Companies Act 1956 was implemented in India.
After the economic reforms of 1991, the growth of the Indian economy gained momentum. Various new financial instruments were introduced. As the economy opened, Indian companies also started expanding globally to take on new challenges and attract new markets. As the 1956 Act became obsolete over time, it became necessary to have a law with a flexible policy to meet the challenges of the changing business environment and the Companies Act, 2013 is a second generation reform event.
In the wake of the recent series of assets, efforts have been made to boost the confidence of investors in the Indian corporate sector. The new law of 2013 provides for a new corporate regulatory framework in the light of new developments taking place nationally and internationally.
Features and New Changes of Company Act 2013
Features of the Companies Act 2013 / what are the features of company act 2013/ salient features of company law
The Lok Sabha passed the Companies Bill 2012 on December 18, 2012 and the Rajya Sabha passed the Bill on August 8, 2013, replacing the old Companies Act of 1956 with the Companies Act, 2013. The Companies Act, 2013 consists of 29 Chapters, 470 Sections and 7 Schedules.
The following are some of the salient features of the new 2013 Act as compared to the Companies Act, 1956.
Features and New Changes of Company Act 2013
Features of the Companies Act 2013
- Wide scope
- Less regulatory compliance
- Proper balance of interests between industry and investors
- Additional measures
- Flexibility
- System of civil and criminal law
- Legal action for fraud
- Suitable for international environment
- Protection of public funds
- Good governance
- More categories of companies
- More types of companies
- Additional duties for company management
- Class action against the consultant
- E-commerce
Features and New Changes of Company Act 2013
1) Wide range
The scope of the new law is wide. It is not limited to companies incorporated under this Act or the old Act but includes companies, bodies corporate, scientific institutes incorporated under other Acts. For example, the State Road Transport Corporation was created under the State Road Transport Corporation Act.
2) Low regulatory compliance
Under the Act, central government interference in the corporate process appears to be diminishing and stakeholder democracy is promoted. This law emphasizes self-regulation. The law provides for new concepts such as ‘single company’, ‘small company’ and ‘dormant company’. The Act empowers the government to reduce the burden on compliance mechanisms through certain exemptions for companies.
Features and New Changes of Company Act 2013
3) Proper balance of interests between industry and investors
The new law seeks to strike a fair balance between the interests of industry and investors. It provides flexibility to companies, and also includes provisions to protect the interests of investors. The new law, like the old law, has provisions for penalties for creation, penalties for improper cases or for disclosure of balance sheets or for-profit accounts, etc. But according to the old law, there was a fine of up to Rs 5,000. However, under Section 134 (8) of the new Act, such an offense carries a fine of Rs 50,000 to Rs 25 lakh and an officer who commits such offense is liable to imprisonment for up to three years and a fine of Rs 50,000 to Rs 5 lakh or both. The new law increases the amount of fines. Also, in many cases, the offender is liable to imprisonment.
4) Additional measures
The new law provides a variety of measures for stakeholders to avoid a situation where Indian investors have lost money due to incidents like the Satyam Computers case.
For example: Depositors and shareholders can take action by filing a class action suit for the benefit of a particular class together. Anyone can go to the tribunal to inquire into the affairs of the company.
5) Flexibility
The law has been adapted to suit the changing needs of the business world. Clauses 416 of the Act give ample power to the executive to exercise rule-making power by permitting the making of rules.
6) System of civil and criminal law
The new law provides for a separate civil and criminal law mechanism to deal with and expeditiously decide various types of corporate commercial and criminal matters.
Features and New Changes of Company Act 2013
7) Legal action for fraud
A lot of importance has been given in this Act to protect the rights of shareholders and other stakeholders. Certain provisions of the Companies Act have been made for effective detection and prevention of fraud. According to this act, the duty has been imposed on the businessmen to report the cases of fraud. Penalties are provided to the Chief Executive Officer, Chief Financial Officer and other professionals and others who are part of the fraudulent act. Under the new law, fraud can be punishable by up to ten years. The Act provides for compensation to the victims.
8) Useful law for international environment
Provides appropriate regulatory mechanism for cross-border mergers, redressal of grievances of foreign investors, provision for foreign courts, investigations and investigations in foreign states.
9) Protection of public funds
There are some provisions to protect public funds. Public funds include funds of public financial institutions as well as funds collected from the public. Under the new law, cases of cheating borrowers, partners and depositors are dealt with strictly.
10) Good governance
It is expected to create good corporate governance in companies through this Act due to improved transparency and accountability. E.g., additional disclosures in reports of board of directors’ meetings, unnecessary disclosures on the company’s website, rotation of audits, etc. create transparency.
Features and New Changes of Company Act 2013
11) More categories of companies
Considering the diversity of companies, it is not enough to categorize such companies as private and public. The Act empowers the Central Government to determine and classify various classes of companies and select as necessary.
12) More types of companies
New concepts and types of companies such as One Person, Small Company, Big Companies, Active Companies have been introduced in this Act.
13) Additional duties for company management
The new law has placed additional administrative burdens, duties and responsibilities on company management to protect the interests of shareholders.
14) Class Against Consultants
Under this law, shareholders have the right to take actions such as class actions against the adviser.
15) E-commerce
An attempt has been made to include e-commerce in this Act. Video conferencing and electronic voting are now possible in company administration.
Features and New Changes of Company Act 2013
Review of new changes made under the Companies Act 2013/ recent amendments in companies act, 2013 in 2022
The Companies Act 2013 is divided into 29 cases, which have 470 sections. In the previous Companies Act 1956, it was 658. They have now been reduced, with 39 clauses being reduced to 7 new clauses.
Features and New Changes of Company Act 2013
The following new changes have been made in the Companies Act 2013.
1. Stakeholder democracy
2. Dominance of shareholders
3. Strengthening the contribution of women through Mahila Mandal
4. Professional Social Responsibility
5. National Company Law Tribunal
6. Merge faster
7. Cross border merger
8. Prohibition on forward transactions and internal trade
9. Increase in the number of shareholders
10. Limit the maximum number of partners
11. A one person company
12. Trends in Association Articles
13. Electronic mode
14. Restrictions on structure
15. Independent Director
16. Notifying the Board of Directors meeting
17. Duties of Director
18. Liability of Directors and Officers
19. Rotation of Auditors
20. Financial Year Unaudited Audit Services
21. Rehabilitation and liquidation process
Features and New Changes of Company Act 2013
1. Stakeholder democracy
The Companies Act 2013 introduces a new concept of Class Action Suite to provide more information and knowledge about the rights of shareholders and other stakeholders.
2. Dominance of shareholders
The Companies Act 2013 focuses on the approval of stakeholders on various important transactions. The government has effectively reduced the need for companies to approve managerial remuneration and has delegated the power to approve limits to shareholders. This shows that the dominance of the shareholders has increased.
3. Strengthening the contribution of women through Mahila Mandal
The Companies Act 2013 requires the appointment of at least one woman director on the board of prescribed companies, so as to widen the horizons of knowledge. So that different corporates will benefit from different backgrounds with different perspectives.
Features and New Changes of Company Act 2013
4. Professional Social Responsibility
The Companies Act 2013 requires certain classes of companies to spend a certain amount annually on programs that reflect corporate social responsibility. For this, it is mandatory to set up a CSR committee. There may be difficulties in implementation in the initial few years, but this measure will help the disadvantaged and backward sections of the society to improve and the companies will gain prestige and image in the society.
5. National Company Law Tribunal
The Companies Act 2013 introduced the National Company Law Tribunal and the National Company Law Appellate Tribunal in place of the Company Law Board and Industrial and Financial Reconstruction Board. This enabled the courts to relieve their burden while administering special justice.
6. Merge faster
The Companies Act 2013, after approval by the Government of India, proposes a speedy and simplified procedure for merger and consolidation of certain companies such as holding and subsidiary companies and small companies.
Features and New Changes of Company Act 2013
7. Cross-border merger:
The Companies Act 2013 allows for cross-border mergers on both sides. A foreign company can merge with an Indian company and vice versa an Indian company can merge with a foreign company with the prior permission of the RBI.
8. Prohibition on forward transactions and internal trade
The Companies Act 2013 prohibits directors and CEOs from purchasing calls and requires the company, its holding company and its subsidiaries and subsidiaries to have a choice of two shares. Such a person is expected to have access to price-sensitive information (the release of such information is likely to affect the value of the company’s securities). Listed companies are expected to discuss certain modified criteria with SEBI to comply with the new Act.
9. Increase in number of shareholders:
As per the Companies Act 2013, the maximum number of shareholders in a private company has been increased from 50 to 200.
Features and New Changes of Company Act 2013
10. Limit on maximum partners
The maximum number of persons / partners in any partnership and associate company may be up to the prescribed number, but not exceeding 100. This restriction does not apply to associations or partnerships run by lawyers, chartered accountants, company secretaries, etc. Under the Companies Act, 1956, there was a limit of a maximum of 20 persons / partners and no exemption was given to traders.
11. One Person Company
According to the Companies Act 2013, there is a new type of private company, which is an individual company, which can have only one director and one shareholder. The Companies Act, 1956 requires a minimum of 2 shareholders and 2 directors in the case of a private company.
12. The trend in the association’s article
A company regulation is a document that provides regulation or by-laws to manage the internal affairs of a company. As per Section 5 (3) of the Companies Act, 2013, special provisions can be made to amend the specific provisions of this article only if the rules are more restrictive than the conditions imposed.
Features and New Changes of Company Act 2013
13. Electronic Mode Company
The Act 2013 proposes e-governance for the processing of various companies such as keeping books of documents in electronic form and placing electronic financial statements on the company’s website.
14. Restrictions on structure
Each company will have at least one director who has resided in India for less than 182 days in the previous calendar year.
15. Independent Director
The Companies Act 2013 stipulates that all listed companies should have at least one-third independent directors as independent directors. Other classes as prescribed by the Central Government or classes of public companies must also appoint independent directors. No independent director shall hold office for more than two consecutive terms of five years.
Features and New Changes of Company Act 2013
16. Notifying the Board of Directors meeting
As per the Companies Act 2013, minimum 7 days notice is required for convening a meeting of the Board of Directors. The notice can be signed electronically at its address at every address registered with the company. The Companies Act 1956 did not specify the period of notice for convening a meeting of the Board of Directors of a company.
17. Duties of Directors
Under the Companies Act, 1956, the directors acted as trustees of the company. However, the Companies Act 2013 now clarifies the duties of directors.
18. Liability of Directors and Officers
The Companies Act 2013 does not prohibit an Indian company from indemnifying directors and officers of a company as in the 1956 Act.
Features and New Changes of Company Act 2013
19. Rotation of Auditors
The Companies Act 2013 provides for rotation of auditors and audit firms in the case of publicly traded companies.
20. Financial year unaudited audit services
The financial year of all types of companies starts on 1st April and ends on 31st March every year. There may be some exceptions. The Companies Act 2013 prohibits the company from conducting unaudited services to the auditor appointed to ensure the independent and audit responsibilities of the auditor.
21. Rehabilitation and liquidation process
Complete rehabilitation and liquidation of companies found in financial crisis has been extended under the Companies Act, 2013.
