Top 20 Highlights of Companies Bill 2011 passed in Lok Sabha on 18th Dec. 2012

Lok Sabha (Lower House of Indian Parliament) passed a very important Companies Bill, 2011 on 18th December 2012. Once passed by Rajya Sabha (Upper House) and signed by the President, it will replace Companies Act 1956. Following is the summary of TOP 20 important changes included in the passed Companies Bill 2011.

  1. All companies to follow uniform financial year, from April to March except for subsidiary and holding company of a company incorporated outside the 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. company’s auditor shall not provide, directly or indirectly, the specified servicesto 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. 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 he 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. 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.

- Chintan Patel

About Chintan Patel FCA, CPA(USA), Cert.IFRS(ICAI), CISA (USA), DISA, DIRM

CA Chintan Patel is a partner of Naresh J. Patel & Co. Chartered Accountants ( Key Professional Contributions: Immediate Past Chairman of Ahmedabad Branch of WIRC of ICAI, Co-author of book on Ind AS & ICDS published by Taxmann, Trainer/Faculty at more than 300 seminars/conferences. He has over 15 years of post qualification experience working with SMCs, MNCs on International GAAP, Companies Act, 2013, GST and other advisory.
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One Response to Top 20 Highlights of Companies Bill 2011 passed in Lok Sabha on 18th Dec. 2012

  1. Miluska says:

    I find the article very inteserting and am surprised that despite the fact that the United States are slowly shifting from GAAP to IFRS, the first one is still predominant. Unification of the accounting standards would be beneficial to global economy and could effectively increase transparency. As of now, GAAP may be interpreted differently by various parties therefore could cause many discrepancies and hidden facts. A main difference between the two accounting standards is the fact that the US GAAP leaves much room for interpretation in terms of the capital and capital maintenance during the recession while IFRS includes more variables for justification within similar global scenario. If collided with IFRS it could be difficult for the companies investing in foreign markets to remain transparent, or simply credible. The SEC should accelerate the shift as the major US trade partners, such as the EU, China, and Brazil, have already shifted or are during its process.

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