Lakshmi Kumaran & Sridharan AttorneysAn ISO 9001 / 27001 certified law firm

New Companies Act comes into force

6th September, 2013

The Companies Bill 2012 received Presidential assent on 29th August 2013, after scores of amendments and years of debates and discussions, particularly on points like mandatory spending on corporate social responsibility (CSR), investor protection measures and one person company. Some of the important features in the new Act which replaces the (old) Companies Act of 1956 are:  
  • Spending at least 2% of the average net profits of specified company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. The Act also provides that a Corporate Social Responsibility Committee shall be constituted with three or more directors, out of which at least one director shall be an independent director. These provisions shall apply to companies net worth of INR 500 crore or more, or turnover of INR 1000 crore or more or a net profit of INR 5 crore or more during any financial year.
  • Maximum number of directorships at a time limited to twenty, with a proviso that maximum number of public companies in which a person can be appointed as a director shall not exceed ten.
  • Definition of ‘Private Company’ as a company having a minimum paid-up share capital of INR 1 Lakh or such higher paid-up share capital as may be prescribed and which by its articles (i) restricts the right to transfer its shares;  (ii) except in case of One Person Company, limits the number of its members to 200.
  • Definition of ‘One Person Company’ has been provided which has only one person as a member and may be formed for any lawful purpose, by subscribing his name to the Memorandum and complying with other requirements for registration. The Memorandum should indicate the name of the other person, with his prior written consent in the prescribed form, who shall, in the event of the subscriber’s death or his incapacity to contract become the member of the company and the written consent of such person shall also be filed with the Registrar at the time of incorporation of the One Person Company along with its memorandum and articles.
  • Constitution of  National Company Law Tribunal And Appellate Tribunal
  • Provisions for appointment of internal auditors for certain companies as may be prescribed.
  • Quorum for meetings – the Act prescribes 5, 15 or 30 members  in case of public companies based on if the number of members as on the date of meeting being not more than 1000, more than 1000 but upto 5000 or exceeding 5000 respectively.  
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