Project Report on GST

Study of newly enacted Company Act, Act, 2013

INTRODUCTION The recently enacted Companies Act 2013 (the ‘2013 Act’ is a landmar! le"islation and is li!ely to ha#e far$reachin" conse%uences on all companies operatin" in &ndia' hile a part of  the 2013 Act has already )ecome effecti#e'

2 0 2 0 2 0 2 0 2 0 2 0 An attempt has )een made to reduce the content of the su)stanti#e portion of the related law in the Companies Act, 2013 as compared to the Companies Act, 1*+ (1*+ Act' &n the process, much of the aforesaid content has )een left, ‘to )e prescri)ed’, in the -ules (3.0/ which are

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Study of newly enacted Company Act, Act, 2013

yet to )e finalised and notified' notified' As of the date of this pu)lication, pu)lication, 22 sections sections and 3 -ules ( which includes recently notified rule on 03'11'201. ha#e )een notified and a few circulars ha#e )een )een issued clarifyin" clarifyin" the the applica)ility applica)ility of of these'

otification otification of -ule -ule is still continue continued d

e#en after passin" the Act in Au"ust Au"ust 2013' This important le"islation, that has )een in the ma!in" for o#er 10 years, started off as an effort in 200. )y the then "o#ernment "o#ernment to ma!e chan"es chan"es in &ndian corporate corporate law in the contet contet of the chan"in" economic and )usiness en#ironment and to ma!e &ndian corporate en#ironment more transparent, transparent, simple simple and and "lo)ally "lo)ally accepta)l accepta)le' e'

Since then, then, as this this le"islation le"islation has has ta!en final

shape, it has )een influenced si"nificantly )y other recent de#elopments in the corporate sector, especia especially lly thos thosee where where sta!e sta!ehol holder der inte interest restss seemed seemed to )e )e compro compromi mised' sed'

The The erstwh erstwhile ile

Compan Companies ies Act 1*+ 1*+ (the (the ‘1*+ ‘1*+ Act’, Act’, which which had )een in eisten eistence ce for o#er o#er fifty fifty years, years, appeared to )e somewhat ineffecti#e at handlin" some of these present day challen"es of a "rowin" industry and the interests of an increasin" class of sophisticated sta!eholders'

earnin" from these eperiences, the 2013 Act promises to su)stanti#ely ‘raise the )ar on "o#ernance’ and in a comprehensi#e form purports to deal with rele#ant themes such as in#estor   protection and fraud miti"ation, inclusi#e a"enda, auditor accounta)ility, reportin" framewor!, director responsi)ility and efficient restructurin"'

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Study of newly enacted Company Act, Act, 2013

yet to )e finalised and notified' notified' As of the date of this pu)lication, pu)lication, 22 sections sections and 3 -ules ( which includes recently notified rule on 03'11'201. ha#e )een notified and a few circulars ha#e )een )een issued clarifyin" clarifyin" the the applica)ility applica)ility of of these'

otification otification of -ule -ule is still continue continued d

e#en after passin" the Act in Au"ust Au"ust 2013' This important le"islation, that has )een in the ma!in" for o#er 10 years, started off as an effort in 200. )y the then "o#ernment "o#ernment to ma!e chan"es chan"es in &ndian corporate corporate law in the contet contet of the chan"in" economic and )usiness en#ironment and to ma!e &ndian corporate en#ironment more transparent, transparent, simple simple and and "lo)ally "lo)ally accepta)l accepta)le' e'

Since then, then, as this this le"islation le"islation has has ta!en final

shape, it has )een influenced si"nificantly )y other recent de#elopments in the corporate sector, especia especially lly thos thosee where where sta!e sta!ehol holder der inte interest restss seemed seemed to )e )e compro compromi mised' sed'

The The erstwh erstwhile ile

Compan Companies ies Act 1*+ 1*+ (the (the ‘1*+ ‘1*+ Act’, Act’, which which had )een in eisten eistence ce for o#er o#er fifty fifty years, years, appeared to )e somewhat ineffecti#e at handlin" some of these present day challen"es of a "rowin" industry and the interests of an increasin" class of sophisticated sta!eholders'

earnin" from these eperiences, the 2013 Act promises to su)stanti#ely ‘raise the )ar on "o#ernance’ and in a comprehensi#e form purports to deal with rele#ant themes such as in#estor   protection and fraud miti"ation, inclusi#e a"enda, auditor accounta)ility, reportin" framewor!, director responsi)ility and efficient restructurin"'

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Study of newly enacted Company Act, Act, 2013

OBJECTIVES •

To understand understand the new 4ro#isions of Company Act 2013

•

To understand understand the difference difference )etween pro#isions pro#isions of Company Company Act 1*+ and Company Company Act 2013'

•

To understand how new Company can )e formed for med and its operation' To understand the )enefits of Companies Act and its Cons' To understand understand effect of Company Act on 5usiness en#ironment

RESEARCH METHODOLOGY The study focuses on etensi#e study of Secondary data collected from #arious )oo!s, ational 6ournals (&CA& 7 &CS&, "o#ernment reports, pu)lications from #arious we)sites which focused on #arious aspects of Company Act, Act, 2013'

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Study of newly enacted Company Act, 2013

NEW CONCEPTS One-person compn!"

The 2013 Act introduces a new type of entity to the eistin" list i'e' apart from formin" a pu)lic or pri#ate limited company, the 2013 Act ena)les the formation of a new entity a ‘one$person company’ (84C' An 84C means a company with only one person as its mem)er 9section 3(1 of 2013 Act:' Pr#$%e compn!"

The 2013 Act introduces a chan"e in the definition for a pri#ate company, inter$alia, the new re%uirement increases the limit of the num)er of mem)ers from +0 to 200' 9section 2( of  2013 Act:' Sm&& compn!

 A small company has )een defined as a company, other than a pu)lic company' (i 4aid$up share capital of which does not eceed +0 la!h &- or such hi"her amount as may )e prescri)ed which shall not )e more than fi#e crore &- (ii Turno#er of which as per its last profit$and$loss account does not eceed two crore &- or such hi"her amount as may )e prescri)ed which shall not )e more than 20 crore &-; Dormn% compn!"

The 2013 Act states that a company can )e classified as dormant when it is formed and re"istered under this 2013 Act for a future pro and Sin"apore )ut has till now, not eisted in the &ndian aw' The  pro#ision of class suit "i#es sta!eholders an ed"e in retrenchin" their ri"hts' Mer(ers n) c*'#s#%#ons

The 2013 Act has streamlined as well as introduced concepts such as re#erse mer"ers (mer"er of  forei"n companies with &ndian companies and s%uee?e$out pro#isions, which are si"nificant' The 2013 Act has also introduced the re%uirement for #aluations in se#eral cases, includin" mer"ers and ac%uisitions, )y re"istered #aluers' Corpor%e soc#& respons#+#&#%!

The 2013 Act ma!es an effort to introduce the culture of corporate social responsi)ility (CS- in &ndian corporates )y re%uirin" companies to formulate a corporate social responsi)ility policy and at least incur a "i#en minimum ependiture on social acti#ities' O,,#cer

The definition of officer has )een etended to include promoters and !ey mana"erial personnel 9section 2(+* of 2013 Act:'

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Study of newly enacted Company Act, 2013

e! mn(er#& personne&

The term ‘!ey mana"erial personnel’ has )een defined in the 2013 Act and has )een used in se#eral sections, thus epandin" the scope of persons co#ered )y such sections 9section 2(+1 of  2013 Act:' Promo%er

The term ‘promoter’ has )een defined in the followin" ways;@ A person who has )een named as such in a prospectus or is identified )y the company in the annual return referred to in Section *2 of 2013 Act that deals with annual return or @ who has control o#er the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise or @ in accordance with whose ad#ice, directions or instructions the 5oard of Birectors of the company is accustomed to act' The pro#iso to this section states that su)$section (c would not apply to a person who is actin" merely in a professional capacity' 9section 2(* of 2013 Act: In)epen)en% D#rec%or

So far only listed pu)lic companies were re%uired to appoint independent directors under the listin" A"reement'

Companies Act, 2013 etend such re%uirement to co#er )i" pu)lic

companies also' The term’ &ndependent Birector’ has now )een defined in the 2013 Act, alon" with se#eral new re%uirements relatin" to their appointment, role and responsi)ilities' urther  some of these re%uirements are not in line with the correspondin" re%uirements under the e%uity listin" a"reement 9section 2(.D, 1.*(+ of 2013 Act:'

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Study of newly enacted Company Act, 2013

Secre%r#& A')#%

The companies Act 2013 pro#ides for compulsory Secretarial Audit )y Certain class of  companies and annein" the same with the 5oard -eport' ith the introduction of Secretarial Audit, the scope of already eistin" compliance certificate stands widened'

The 5oard of 

Birectors also has to eplain in its 5oard report to e#ery %ualification, reser#ation or ad#erse remar! or disclaimer made )y the Company Secretary in his Secretarial Audit -eport'

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Study of newly enacted Company Act, 2013

IMPORTANT CHANGES .HIGHLIGHTS O/ COMPANY ACT0 1234 ollowin" are some of important chan"es E hi"hli"hts of Company Act, 2013' 1' Settin" up of a company 2' Share capital and de)entures 3' -eportin" ramewor! (Annual Accounts .' Fi"her Auditor’s -esponsi)ility +' ider Birector and Gana"ement -esponsi)ility ' Corporate social responsi)ility D' &n#estor 4rotection ' Compromises, arran"ements and amal"amations *' -e#i#al and reha)ilitation of sic! companies

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Study of newly enacted Company Act, 2013

Settin" up of a company •

The 2013 Act specifies the mandatory content for the memorandum of association which is similar to the eistin" pro#isions of the 1*+ Act'

Fowe#er, as a"ainst the eistin"

re%uirement of the 1*+ Act, the 2013 Act does not re%uire the o)