Highlights of Companies Bill, 2012

[By Anish Shah (CS), A. Shah & Associates]

On 18th December, 2012 the Companies Bill, 2011 had been passed by the Lok Sabha. However, it was passed with certain modifications as recommended by the Parliamentary Standing Committee on Finance.

The Bill seeks to consolidate and amend the law relating to the companies and intends to improve corporate governance and to further strengthen regulations for corporates. The Bill is divided into 29 chapters, 470 clauses and 7 schedules.

Some of the amendments to the Companies Bill (as passed by the Lok Sabha) are as under:

1. All companies to follow uniform financial year, from April to March except for subsidiary and holding company of a company incorporated outside India by an application in this regard to Tribunal. Provided further that a company or body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause;
2. At least one woman director in prescribed class of companies.
3. Every company shall have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year.
4. Individual auditors are to be compulsorily rotated every 5 years and audit firm every 10 years in listed companies & certain other classes of companies
5. A company’s auditor shall not provide, directly or indirectly, the specified services to the company, its holding and subsidiary company
6. A person can hold directorship of up to 20 companies, of which not more than 10 can be public companies.
7. Annual Return to provide information up to the date of closure of financial year and not up to the Annual General Meeting.
8. First annual general meeting of a company shall be held within nine months from the closure of its first financial year instead of 18 months.
9. At least four board meetings to be held every year and not more than 120 days to elapse between two consecutive meetings. No requirement to hold the meeting every quarter.
10. A notice of not less than 7 days in writing is required to call a board meeting. The notice of meeting to be given to all directors, whether he is in India or outside India
11. Quorum of general meeting for a public company will now depend upon the number of members of the Company. For companies with more than 5,000 members, at least 30 should be present personally. The Companies Act, 1956 prescribes a fixed quorum of 5 persons.
12. For the purpose of the calculation of the directors retiring by rotation, the independent directors shall be out of the ambit.
13. The provisions on inter-corporate loans and investment (372A of Companies Act 1956) extended to include loan and investment to any person
14. The concept of One Person private limited Company introduced.
15. Companies can have maximum of 15 directors, instead of 12 earlier.
16. No permission of central government required to give a loan to a director, for entering into any related party transactions, for appointment of any director or any other person to any office or place of profit in the company or its subsidiary and for the appointment of a cost auditor to conduct the cost audit.
17. Objects clause in the Memorandum of Association of a company not required to be divided into main, ancillary and other objects.
18. Transfer to reserve before declaring dividend is also not mandatory.
19. A private company can have a maximum of 200 members from 50 in the Companies Act, 1956
20. Preference shares have to be redeemed within 20 years of issue except for Infrastructure projects with certain conditions.

The Bill will be enacted into a law after passing by the Rajya Sabha & assented by the President.

Download Companies Bill, 2012 as passed by Lok Sabha on 18th December, 2012