The existing Indian Companies Act, which has been in force for almost 57 years, is being replaced by New Companies Act, 2013, with many new concepts & material changes, as compared to the prevailing Act. The Act makes comprehensive provisions to govern all listed and unlisted companies in the country. The New Act is partially made effective w.e.f. 12th September, 2013, by implementing 98 Sections and repealing the corresponded sections with the existing Act. The Act has been enacted with a view to modernize legislation, governance initiatives, business friendly regulations, Corporate Social Responsibility, detailed disclosure norms, more transparency & accountability with strict enforcement, for a better regulatory framework.
The key highlights of the New Act are as under:
1. Maximum number of members in a private company increased from 50 to 200.
2. A new concept for One Person Company with Limited Liability.
3. Government has rightly condensed the need for the companies to seek approvals and the shareholders have been vested with the power to sanction the limit.
4. The efforts for a uniform financial year – ending 31 March each year, have been made.
5. Loan to directors has been prohibited except in case of MD or a whole time director (WTD) and if such loan is in accordance with the terms of services extended to all employees or is approved by shareholders by special resolution. Further, Provision for loan to directors applicable to private companies.
6. The new Act provides for rotation of auditors and audit firms in case of publicly traded companies.
7. The fast track and simplified procedure for mergers and amalgamations has been introduced for certain class of companies such as holding and subsidiary, and small companies after obtaining approval of the Indian government.
8. The new Act also permitted cross border mergers, both ways; a foreign company merging with an India Company and vice versa but with prior permission of RBI.
9. The duties of Directors have now been defined in the new Act.
10. The appointment of at least one woman Director on the Board of the prescribed class of Companies has been mandated so as to widen the talent pool from diversified backgrounds with different viewpoints.