A Note on the Companies Bill 2012

Though a substantial part of the Act will be in the form of rules which will be issued separately, the important parts of the bill are discussed here.

I. The bill prescribes 33 new definitions, the important ones    includes definitions for

• One Person Company   2(62)
• Private Company   2(68)
• Small Company   2(85)
• Dormant Company   455
• Inactive Company etc.

II. Share Allotment and Capital

• The bill governs the issue of all types of securities, not only shares and debentures.
• The contents of prospectus have been made more detail.
• Public companies can make issue only through public issue/private placement/rights issue/bonus issue.
• Return of allotment to be filed for all kinds of securities.
• Companies cannot issue shares at discount other than for sweat equity.
• Apart from existing shareholders, if the company having share capital at any time, proposes to increase its subscribed capital by issue of further shares, such shares may also be issued by way of ESOP subject to approval of shareholders by special resolution.

III. Maintenance of Accounts.

• Maintenance of accounts in electronic form is permitted.
• Financial statements to include Balance sheet, Profit & Loss and Cash Flow statement.
• No provision for extension of financial year. Financial year to end on 31st March for all companies.
• Consolidation of financial statements mandatory for all companies having subsidiaries, associates and joint ventures.
• Financial statements can be signed by the chairman alone if so authorised by the board.

IV. Filing of Reports and Returns.

• Disclosures required in the board’s report have been made more comprehensive. Board’s report to include extract of annual return, number of board meetings etc.
• Annual return to be made up to the end of the financial year and not up to the end of the AGM.
• All Annual returns to be certified either by the company secretary of the company or a Company secretary in practice.
• Annual returns to be filed within 30 days of holding of AGM
• Every listed company to file return to ROC regarding changes in the shares held by promoters and the top 10 Shareholders.

V. Annual General Meeting (AGM)

•  Business hours for holding AG specified as 9:00 am to 6:00 pm. Word public holiday replaced with national holiday.
•  First AGM to be held within 9 months of closure of first financial year& subsequent AGMs within 6 months. Earlier options of 18 months from incorporation or 9 months of closure of first financial year removed.
• Quorum for General body meetings of public companies will depend upon the number of shareholders.
• Notice in e-form permitted.
• Secretarial standards issued by ICSI to be observed.

VI. Audit and Auditors.

• Listed companies to appoint new auditors every five years(in case of individuals) and ten years(in case of audit firms)
• For other companies auditor to be appointed for a period of five years in each appointment.
• Members may pass resolution to make mandatory rotation of audit partner and his team every year or requiring audit by more than one auditor.
• Members by ordinary resolution can specify the number of companies beyond which the auditor or audit firm shall not be auditor.
• First auditor to be appointed by the board within 30 days of incorporation, otherwise by members in EGM within 90 days of incorporation.
• Company to file intimation of appointment of auditor with the registrar within 15 days of meeting in which appointed.
• On resignation, auditor to file statement with company and registrar within 30 days.
• Auditors to attend all general meetings unless specifically exempted by the company.

VII. Key Managerial Personnel & their Remuneration.

• No company can have both Managing Director and Manager at the same time.
• Provisions relating to the limits on remuneration remain unchanged.
• Every company belonging to such class or description of companies as may be prescribed, to have Managing Director, or CEO, or Manager & in their absence, a whole-time director, Company Secretary & CFO.

VIII. Directors – Appointment, Qualifications and Meetings.

Maximum number of Directors.

• Increased from 12 to 15
• More than 15 can be appointed by passing special resolution

Composition of Board

• Certain class of companies to have at least one woman director.
• Every company to have at least one director who has stayed for at least 182 days in India in the previous calendar year.
• Listed companies to have at least one third independent directors.

Maximum number of Directorships

• Increased from 15 to 20
• Includes alternate directorships
• Maximum number of public companies in which a person can hold directorships limited to 10 including private companies which are holding or subsidiary company.
• Members by special resolution can limit the number of companies in which a person can act as director.

Resignation of Director

• Director to end copy of resignation letter & detailed reasons for resignation to registrar within 30 days of resignation.
• The resignation of director shall take effect from the date on which the notice is received by the company or the date if any specified by the director in the notice whichever is later.

Meetings

• First meeting to be held within 30 days of incorporation
• Not more than 120 days between two meetings
• Meetings through video conferencing & other audio visual modes permitted.
• Presence of independent director mandatory in case of meetings called at shorter notice.

   **The End**
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