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1 THE COMPANIES BILL, 2009 Presentation on the salient features Of new Bill September 26, 2009.

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Presentation on theme: "1 THE COMPANIES BILL, 2009 Presentation on the salient features Of new Bill September 26, 2009."— Presentation transcript:

1 1 THE COMPANIES BILL, 2009 Presentation on the salient features Of new Bill September 26, 2009

2 2 MANAGEMENT AND ADMINISTRATION (Notice, AGM, Boards’ Report, Annual Return)

3 3 Section 78 - Register of Members, etc.  Registers to be kept and maintained by every company : Register of members containing details of both equity and preference shares held by each member – residing in India and outsideRegister of members containing details of both equity and preference shares held by each member – residing in India and outside Register of debenture holdersRegister of debenture holders Register of other security holdersRegister of other security holders  Registers to be in such form and manner as may be prescribed

4 4 Section 78 - Register of Members, etc. (Cont…)  Index of members and debenture-holders to be part of the Registers  Foreign Register - If authorized by articles, a part of the above registers, containing names and particulars of members, debenture holders, other security holders and beneficial owners residing outside India can be maintained in any country outside India

5 5 Section 78 - Register of Members, etc. (Cont…)  Particulars of the place where the Register of members, Register of debenture holders, Register of other security holders and foreign registers is kept and the fact of change or discontinuance of the same shall be filed with the Registrar within thirty days (this is presently required only for foreign registers)

6 6 Section 81 - Power to close Register of Members, etc.  A company may after giving seven days notice close the Register of Members, Register of debenture holders or Register of other security holders  The extant provision of section 154 provides only for Register of members and Register of debenture holders

7 7 Section 82 -Annual Return  Number of new requirements introduced  Annual Return to contain particulars as they stood on the close of the financial year (Presently particulars as on date of AGM required)

8 8 Section 82 -Annual Return (Cont…)  Following additional information shall be required : Principal business activities of the company Principal business activities of the company Particulars of the holding company, subsidiary and associate companies Particulars of the holding company, subsidiary and associate companies Particulars of other securities (other than shares and debentures) Particulars of other securities (other than shares and debentures)

9 9 Section 82 -Annual Return (Cont…) Particulars of members and debenture holders along with changes therein since the close of the last financial year (Once in 5 years provision deleted) Particulars of members and debenture holders along with changes therein since the close of the last financial year (Once in 5 years provision deleted) Particulars of promoters, directors and key managerial personnel along with changes therein since the close of the last financial year (particulars of directors, manager and company secretary required presently) Particulars of promoters, directors and key managerial personnel along with changes therein since the close of the last financial year (particulars of directors, manager and company secretary required presently)

10 10 Section 82 -Annual Return (Cont…) Meetings of members or a class of members, Board and its various committees along with attendance details Meetings of members or a class of members, Board and its various committees along with attendance details Remuneration of directors and key managerial personnel Remuneration of directors and key managerial personnel Penalties imposed on the company, its directors or officers and details of compounding of offences Penalties imposed on the company, its directors or officers and details of compounding of offences

11 11 Section 82 -Annual Return (Cont…) Matters related to certification of compliances, disclosuresMatters related to certification of compliances, disclosures Such other matters as may be prescribed (leaving flexibility for the Government to add on to the list of information already provided) Such other matters as may be prescribed (leaving flexibility for the Government to add on to the list of information already provided)

12 12 Section 82 - Annual Return (Cont…)  Annual Return to be signed by a director and company secretary and where there is no company secretary, by a company secretary in practice (No requirement for managing director to sign)  In case of OPC and Small Company, annual return to be signed by the Company Secretary and where there is no Company Secretary, by one director of the company

13 13 Section 82 -Annual Return (Cont…)  In case of a listed company and/or a company having such paid up share capital and turnover as may be prescribed, the annual return shall also be signed by a company secretary in whole time practice certifying that the annual return states the facts correctly and adequately and the company has complied with all the provisions of the Act (very high responsibility cast on PCS)

14 14 Section 82 -Annual Return (Cont…)  Extract of Annual Return in prescribed form shall form part of Boards’ Report  Annual return to be filed within 30 days from the date of AGM (presently 60 days )  New penal provisions : Company punishable with fine Company punishable with fine Officer in default is punishable with imprisonment (new) or fine or with both Officer in default is punishable with imprisonment (new) or fine or with both PCS punishable with fine PCS punishable with fine

15 15 Section 83 - Place of keeping and inspection of registers, returns etc. (Cont…)  Registers and Returns to be kept at registered office  With approval of shareholders by special resolution, they may also be kept at any other place in India in which more than 1/10th of the total members of the Company reside  Copy of such proposed special resolution should be given to the Registrar in advance

16 16 Section 83 - Place of keeping and inspection of registers, returns etc. (Cont…)  Registers, Indices and copies of returns shall be open for inspection for members, debenture holders, other securities holder, or any beneficial owner and not to any other person as is presently allowed

17 17 Section 85 - Annual General Meeting (AGM)  First AGM to be held within nine months from the close of the first financial year (Present provision is that first annual general meeting shall be held within 18 months from the date of incorporation)  The first financial year of a company incorporated on or after the first day of January of any year shall be the 31st day of March of the following year. (Hence a period of more than 18 months is available for first AGM)

18 18 Section 85 - Annual General Meeting (AGM) (Cont…)  Subsequent AGM shall be held within 6 months from the close of the financial year and not more than 15 months gap between two AGM’s  OPC need not hold AGM  AGM can now be held on a public holiday, but not a National Holiday  The business hours during which AGM to be held is now specified as between 9.00 a.m. and 6.00 p.m.

19 19 Section 89 - Calling of Extraordinary General Meeting  Meeting of members called by the Board on its own shall also be now considered as an extraordinary general meeting (presently called general meeting)

20 20 Section 90 - Notice of general meeting  Notice for general meeting – Not less than 21 clear days  Notice of every meeting of the company - To be given to every director of the company  Notice to be given to every member of the company ( member now includes preference shareholder )  Notice may be given in electronic mode; if sent by post it shall be registered post

21 21 Section 91- Explanatory Statement to be annexed to Notice  Additional Information required to be disclosed in the statement of special business : Nature of concern or interest, if any, of every key managerial personnel in addition to every director and manager for items to be transacted at a meeting Nature of concern or interest, if any, of every key managerial personnel in addition to every director and manager for items to be transacted at a meeting Extent of shareholding of every director, manager or other key managerial personnel holding more than 2 % of the paid up share capital in any other company, if the special business includes any item to be transacted at the meeting relates to or affects such other company. As per the extant provisions the limit is 20 %. Extent of shareholding of every director, manager or other key managerial personnel holding more than 2 % of the paid up share capital in any other company, if the special business includes any item to be transacted at the meeting relates to or affects such other company. As per the extant provisions the limit is 20 %.

22 22 Section 91- Explanatory Statement to be annexed to Notice (Cont…) Any benefit accruing to any director, manager, key managerial persons or his relatives as a result of non-disclosure or insufficient disclosure shall be held in trust for the company and shall be compensated to the company Any benefit accruing to any director, manager, key managerial persons or his relatives as a result of non-disclosure or insufficient disclosure shall be held in trust for the company and shall be compensated to the company Default in compliance could result in a fine of 5 times the amount of the benefit accruing Default in compliance could result in a fine of 5 times the amount of the benefit accruing

23 23 Section 91- Explanatory Statement to be annexed to Notice (Cont…)  Relative defined as the spouse, brother, sister and all lineal ascendants and descendants of such individual related to him either by marriage or adoption.  Lineal ascendants or descendants should only include blood relatives – in direct line – For eg. – children, grand children, parent, grand parents

24 24 Section 92 -Quorum for Meetings  Meetings called by requisitionists shall stand cancelled for lack of quorum  Any other meeting shall stand adjourned to the same day, same time and same place in the next week  Such adjourned meeting shall require not less than 3 days notice  Notice to be given individually or by press announcement  At such adjourned meeting if quorum is not present within half an hour, members present shall be the quorum

25 25 Section 94 -Proxies  Proxies can be in electronic mode Section 97 - Voting  Electronic mode of voting acceptable in such manner as may be prescribed

26 26 Section 98 -Demand for Poll  Limits for demanding poll enhanced from 50,000 to 5,00,000 (Paid up)  Chairman can appoint such number of persons as he deems necessary as scrutinisers (presently minimum two persons )

27 27 Section 99 -Postal Ballot  Ordinary business items and items in respect of which directors or auditors have a right to be heard cannot be taken by postal ballot  Approval for merger can also be taken by postal ballot

28 28 Section Circulation of Member’s Resolution  No restriction on number of words to be contained in the statement to be circulated to the members upon requisition (presently restricted to 1000 words)  Number of members who can requisition increased to 1/10th of the total paid up share capital or 1/10th of the total voting power (presently it is not less than 1/20th of the total voting power or 100 members holding not less than Rs. 1 lakh paid-up share capital)

29 29 Section Circulation of Member’s Resolution (Cont…)  Central Government may direct the requisitionists to reimburse the cost incurred by the Company

30 30 Section Resolutions requiring special notice  New provision to the effect that notice of intention to move such resolution shall be given by such number of persons as may be prescribed. (Presently even one person holding one share can give such notice)  This would prevent frivolous notices

31 31 Section Minutes  Minutes of meetings of class of shareholders or creditors and every resolution passed by postal ballot to be kept  Whether minutes of meetings of shareholders/creditors approving scheme of arrangement/ amalgamation should be kept?  All appointments of officers made at any of the meetings to be included in the minutes.- ‘Officer’ not defined  Secretarial Standards as may be prescribed to be observed for Board and General Meetings

32 32 Section Report on general meeting  New requirement  Every listed company to prepare a report of each AGM confirming that the meeting was convened, held and conducted as per the provisions of the Act and the rules made thereunder  Such report to be filed with RoC within 30 days of the conclusion of AGM

33 33 DECLARATIONAND PAYMENT OF DIVIDEND PAYMENT OF DIVIDEND

34 34 Section Declaration of Dividend  Transfer to reserves before declaring dividend now optional  Even in case of inadequacy or absence in profits in any financial year – dividend can be declared with unanimous consent of all directorswith unanimous consent of all directors approval of financial institutions whose term loans are subsistingapproval of financial institutions whose term loans are subsisting approval of shareholders by special resolution at AGMapproval of shareholders by special resolution at AGM Central Government approval no longer requiredCentral Government approval no longer required

35 35 Section Declaration of Dividend (Cont…)  Board may declare interim dividend during any financial year only out of the profits of the company for part of the year (Presently interim dividend can be declared out of accumulated profits kept in profit and loss account)  No dividend can be declared by a company contravening the provisions relating to repayment of deposits

36 36 Section Declaration of Dividend (Cont…)  Transfer to IEPF required after 7 years from the date of transfer to unpaid dividend account (Date of declaration + 30 days + 7 days + 7 years )  Dividend warrant / ECS intimation will have to be sent by registered post

37 37 Section IEPF  Central Government to establish a separate IEPF subject to CAG Audit  IEPF will also be credited with the following Unclaimed/Unpaid amount in the General Revenue Account of the Central Government - Extant section 205A transfers. Unclaimed/Unpaid amount in the General Revenue Account of the Central Government - Extant section 205A transfers. Unclaimed/unpaid amount lying to the credit of IEPF under extant Section 205C Unclaimed/unpaid amount lying to the credit of IEPF under extant Section 205C Amount received for penalties imposed for disgorgement of securities acquired by impersonation and by making multiple applications in an IPO Amount received for penalties imposed for disgorgement of securities acquired by impersonation and by making multiple applications in an IPO

38 38 Section 112 – IEPF (Cont..)  Only unclaimed/unpaid dividend to be transferred to IEPF  No reference to the following items presently required to be credited to IEPF Unclaimed matured debentures Unclaimed matured debentures Unclaimed interest on debentures Unclaimed interest on debentures Unclaimed application money received on any securities Unclaimed application money received on any securities

39 39 Section 112 – IEPF (Cont..)  Any person claiming to be entitled to the dividend transferred to IEPF may apply to the authority prescribed  The amount transferred to IEPF can be utilized for refund of unclaimed dividends, application money due for refunds and interest thereon

40 40 BOARD’S REPORT

41 41 Section Board’s Report  New requirements set out for Board’s Report to include – Extract of the Annual Return in such form as may be prescribedExtract of the Annual Return in such form as may be prescribed Number of Board Meetings heldNumber of Board Meetings held Directors’ Responsibility StatementDirectors’ Responsibility Statement Declaration by independent directors required to be appointed for listed companies and other public companies as may be prescribedDeclaration by independent directors required to be appointed for listed companies and other public companies as may be prescribed

42 42 Section 120 – Board’s Report (Cont..) Report of the Remuneration Committee of directors Report of the Remuneration Committee of directors Explanations or comments by the Board on every qualification, reservation or adverse remark made by the auditor in his report Explanations or comments by the Board on every qualification, reservation or adverse remark made by the auditor in his report Particulars of loans, guarantees or investments exceeding the prescribed limits and has been approved by shareholders by a special resolution Particulars of loans, guarantees or investments exceeding the prescribed limits and has been approved by shareholders by a special resolution Particulars of contracts or arrangements (related party contracts) Particulars of contracts or arrangements (related party contracts)

43 43 Section 120 – Board’s Report (Cont..)  In case of a listed company, the Directors’ Responsibility Statement, shall also state that ‘the directors had laid down internal financial controls to be followed by the company and that such internal financial controls have been complied with’ The statement should be reworded to confirm the adequacy or otherwise of the internal financial controls and their operating effectiveness.

44 44 Section 120 – Board’s Report (Cont..)  The following information presently being provided in / along with the Board’s Report would not be required : Information on the state of company’s affairs Information on the state of company’s affairs Details of amounts proposed to be transferred to reserves (probably because the requirement to transfer to reserves before declaring dividend is done away with) Details of amounts proposed to be transferred to reserves (probably because the requirement to transfer to reserves before declaring dividend is done away with) Amount recommended for dividend Amount recommended for dividend Material changes and commitments which have occurred between the end of the financial year and the date of report affecting the financial position of the company Material changes and commitments which have occurred between the end of the financial year and the date of report affecting the financial position of the company

45 45 Section 120 – Board’s Report (Cont..) Particulars relating to conservation of energy, technology, absorption, foreign exchange earnings and outgoParticulars relating to conservation of energy, technology, absorption, foreign exchange earnings and outgo Particulars of employees drawing remuneration in excess of a prescribed limitParticulars of employees drawing remuneration in excess of a prescribed limit Reasons for failure to complete the buyback within stipulated timeReasons for failure to complete the buyback within stipulated time

46 46 Section 120 – Board’s Report (Cont..)  Board’s Report and any annexures thereto shall be signed by its Chairman, if he is authorised by the Board or shall be signed by at least two directors, one of whom shall be a managing director  In case of OPC the Report shall be signed by one director  Board’s Report along with the financial statements and notice for the AGM should be sent to members by registered post or by such electronic mode as may be prescribed

47 47 REGISTERED VALUERS

48 48 Sections 218 to Registered Valuers Sections 218 to Registered Valuers  New concept  Valuation of any property, stocks, shares, debentures, securities, goodwill, net worth or assets of a company required under the Act, shall be carried by a registered valuer  Registered valuer to be appointed by the Audit Committee or in its absence by the Board of Directors

49 49 Sections 218 to Registered Valuers (Cont..)  Valuer should be registered with the Central Government  Persons qualified to be registered as valuers: Chartered Accountant Chartered Accountant Cost and Works Accountant Cost and Works Accountant Company Secretary Company Secretary Any other person possessing such qualifications as may be prescribed Any other person possessing such qualifications as may be prescribed

50 50 Sections 218 to Registered Valuers (Cont..)  Company and body corporate not eligible to apply for being registered as valuer  Central Government to maintain a Register of Valuers which shall contain the names and addresses of persons registered as valuer

51 51 Sections 218 to Registered Valuers (Cont..)  Central Government to have the power to remove and restore the names of valuers from the Register  Central Government to review the performance of the registered valuers once in 3 years and may remove the name of any person from the Register of Valuers if it thinks that the performance of the valuer is such that its name should not remain on the Register of Valuers

52 52 Sections 218 to Registered Valuers (Cont..)  No person either alone or as a partner of another person, can practice, describe or project himself as a registered valuer or permit himself to be so described or projected, unless he or all his partners are registered under the Act  Rates to be charged by Registered valuer not to exceed prescribed rates

53 53 COMPROMISES, ARRANGEMENTS AND ANDAMALGAMATIONS

54 54 Section Power to compromise or make arrangements with creditors and members  Provisions revamped to provide flexibility  Proposals for corporate debt restructuring and /or takeover offers of companies other than listed companies also covered  Takeover offer means offer to acquire all or part of shares of another company  Takeover offer of listed companies to comply with SEBI guidelines

55 55 Section Power to compromise or make arrangements with creditors and members (Cont…)  Arrangements for reorganization of company’s share capital by consolidation or division of shares or both the methods, also included  Reduction of share capital can be included in the scheme and specific provisions in section 59 for reduction of capital shall not apply  Authority to Tribunal to deal with such matter  Time bound approval / deemed approval

56 56 Section Power to compromise or make arrangements with creditors and members (Cont…)  Notice can be by advertisement  Persons who can object - to hold 10% shareholding or 5% outstanding debt  Valuation report required  Approval of majority representing three-fourths in value required (not number any longer)  Approval may be sought by postal ballot

57 57 Section Power to compromise or make arrangements with creditors and members (Cont…)  The Application to Tribunal to disclose the following by an affidavit : all material facts relating to the company, such as the latest financial position of the company, the latest auditors’ report on the accounts of the company and the pendency of any investigation or proceedings against the company all material facts relating to the company, such as the latest financial position of the company, the latest auditors’ report on the accounts of the company and the pendency of any investigation or proceedings against the company Reduction of share capital of the company, if any, included in the scheme Reduction of share capital of the company, if any, included in the scheme

58 58 Section Power to compromise or make arrangements with creditors and members (Cont…)  In case of a scheme of Corporate Debt Restructuring (CDR) with approval of 75% of secured creditors in value: A creditor’s responsibility statement A creditor’s responsibility statement Safeguards for the protection of other secured and unsecured creditors Safeguards for the protection of other secured and unsecured creditors Report by auditor that the fund requirements of the company after the CDR will conform to the liquidity test based on estimates provided by the Board Report by auditor that the fund requirements of the company after the CDR will conform to the liquidity test based on estimates provided by the Board

59 59 Section Power to compromise or make arrangements with creditors and members (Cont…) Where CDR is as per RBI guidelines, a statement to that effect Where CDR is as per RBI guidelines, a statement to that effect A valuation report in respect of the shares and the property and all assets, tangible and intangible, movable and immovable, by registered valuer A valuation report in respect of the shares and the property and all assets, tangible and intangible, movable and immovable, by registered valuer  Tribunal may order for a meeting to be held for the purpose of considering the compromise or arrangement

60 60 Section Power to compromise or make arrangements with creditors and members (Cont…)  The notice for the meeting can be served either individually or by an advertisement, along with a statement disclosing : The details of the scheme The details of the scheme The valuation report, if any The valuation report, if any The effects thereof the creditors, members and debenture holders The effects thereof the creditors, members and debenture holders The effect of the scheme on any material interests of the directors of the company or the debenture trustees The effect of the scheme on any material interests of the directors of the company or the debenture trustees Such other matters as may be prescribed Such other matters as may be prescribed

61 61 Section Power to compromise or make arrangements with creditors and members (Cont…)  If an advertisement is issued it should indicate the time when the copies of the scheme will be available to concerned persons free of charge from the registered office of the company  Notice to also provide that written consent for the scheme can be sent by the persons within one month from the date of receipt of the notice  Objection can be made only by persons holding not less than 10% of the shareholding or having not less than 5% outstanding debt as per latest audited financial statement

62 62 Section Power to compromise or make arrangements with creditors and members (Cont…)  Notice along with all the accompanying documents should also be sent to: Central Government Central Government RBI RBI SEBI SEBI Registrar Registrar respective stock exchanges respective stock exchanges Official Liquidator Official Liquidator Competition Commission of India Competition Commission of India Such authorities who may require to represent in the matter Such authorities who may require to represent in the matter  The above authorities to make representations within one month from the date of receipt of such notice, else deemed to be approved

63 63 Section Power to compromise or make arrangements with creditors and members (Cont…)  The order of Tribunal shall also provide for the following : Conversion of preference shares into equity shares – with option to receive arrears of dividend in cash or equity sharesConversion of preference shares into equity shares – with option to receive arrears of dividend in cash or equity shares Protection of any class of creditorsProtection of any class of creditors If scheme is agreed by creditors, any proceedings pending before BIFR shall abateIf scheme is agreed by creditors, any proceedings pending before BIFR shall abate Variation of shareholders’ rights in compliance with applicable provisions of the ActVariation of shareholders’ rights in compliance with applicable provisions of the Act

64 64 Section 203 – Merger and Amalgamation of companies  Provides for both merger and demerger (division of undertaking)  Merging companies – for a merger by absorption means both transferor and transferee companies andfor a merger by absorption means both transferor and transferee companies and for a merger by formation of a new company, the transferor companiesfor a merger by formation of a new company, the transferor companies

65 65 Section 203 – Merger and Amalgamation of companies (Cont…)  Where a meeting is required to be held pursuant to the Order of the Tribunal, the following documents / information shall be circulated : Draft scheme approved by the Board of the merging companyDraft scheme approved by the Board of the merging company Confirmation that a copy of the draft scheme has been filed with the RegistrarConfirmation that a copy of the draft scheme has been filed with the Registrar

66 66 Section 203 – Merger and Amalgamation of companies (Cont…) Report adopted by the directors of the merging companies explaining the effect of the compromise on each class of shareholders, the share exchange ratio and specifying valuation difficulties, if anyReport adopted by the directors of the merging companies explaining the effect of the compromise on each class of shareholders, the share exchange ratio and specifying valuation difficulties, if any Report of expert with regard to valuation, if anyReport of expert with regard to valuation, if any Supplementary accounting statement if the last annual accounts of any of the merging company relate to a financial year ending more than six months before the first meeting of the company summoned for approving the schemeSupplementary accounting statement if the last annual accounts of any of the merging company relate to a financial year ending more than six months before the first meeting of the company summoned for approving the scheme

67 67 Section 203 – Merger and Amalgamation of companies (Cont…)  In case of a merger by formation of a new company, in addition to all the above, copy of the ordinary resolution approving the draft scheme, passed by each of the transferor companies would be required to be circulated  The order of the Tribunal approving the arrangement shall also include: Foreign direct investment if any, to be allocated to the transferor and transferee company Foreign direct investment if any, to be allocated to the transferor and transferee company Transfer of employees of the transferor company to the transferee company Transfer of employees of the transferor company to the transferee company

68 68 Section 203 – Merger and Amalgamation of companies (Cont…) Where the transferor is a listed company and the transferee is an unlisted company – Where the transferor is a listed company and the transferee is an unlisted company – the transferee company shall continue to be an unlisted company (not favourable in case of a demerger) the transferee company shall continue to be an unlisted company (not favourable in case of a demerger) shareholders of transferor company desiring to opt out of the transferee company should be paid at a pre-determined price or as per valuation made and as provided by the Tribunal shareholders of transferor company desiring to opt out of the transferee company should be paid at a pre-determined price or as per valuation made and as provided by the Tribunal

69 69 Section 203 – Merger and Amalgamation of companies (Cont…) the transferor company if not dissolved, will become an unlisted company and its shareholders if desiring to opt out should also be paid at a pre-determined price or as per valuation the transferor company if not dissolved, will become an unlisted company and its shareholders if desiring to opt out should also be paid at a pre-determined price or as per valuation Where transferor company is dissolved, the fee for authorized capital can be set-off against the fees payable by the transferee companyWhere transferor company is dissolved, the fee for authorized capital can be set-off against the fees payable by the transferee company  Certified copy of the order to be filed with Registrar within 30 days of making the order

70 70 Section 204 – M & A of small companies, Holding and WOS  Simplified process and easy time lines for mergers and amalgamations of small companies and holding company and wholly owned subsidiary  Small company – paid up share capital less than Rs 5 crore and turnover not over Rs. 20 crore as per latest audited profit and loss account; not a holding or subsidiary; not a charitable company; not formed under any Special Act

71 71 Section 204 – M & A of small companies, Wholly and WOS (Cont…)  Notice of scheme inviting objections from any persons affected by the scheme within 30 days, to be issued both by transferor and transferee company  Objections received, if any, to be considered in respective general meetings and scheme to be approved by a special resolution

72 72 Section 204 – M & A of small companies, Wholly and WOS (Cont…)  In case of creditors meeting – notice of 21 daysnotice of 21 days Scheme to be approved by three-fourths in value of creditors or class of creditors at a meetingScheme to be approved by three-fourths in value of creditors or class of creditors at a meeting or by approval in writingor by approval in writing  Transferee company to file copy of the approved scheme with ROC and Official Liquidator (OL)

73 73 Section 204 – M & A of small companies, Wholly and WOS (Cont…)  If ROC and OL have no objections, the scheme shall be registered and confirmation given  If OL does not communicate his objections within 30 days – no objection presumed and Registrar can register and confirm  Upon objection from OL or any other person, Registrar may apply to Tribunal within 90 days of receipt of the scheme and Tribunal may issue necessary directions

74 74 Section 204 – M & A of small companies, Wholly and WOS (Cont…)  If no comments or objection is received from the Registrar or any other person, the Tribunal may pass an order confirming the scheme  The Registrar shall register the scheme and issue confirmation to the companies  Registration of the scheme shall be deemed to have the effect of dissolution of the transferor company without winding up  Transferee company can avail set-off of fees payable on authorized capital

75 75 Section Amalgamation by mutual agreement  New concept to facilitate cross border mergers  In case of a foreign company merging with an Indian company, the scheme may provide for payment of consideration to the shareholders of the merging company in cash or in Indian Depositary Receipts or partly in cash and partly in Indian Depositary Receipts

76 76 Section Amalgamation by mutual agreement  Indian Depositary Receipts means any instrument in the form of a depositary receipt created by a domestic depositary in India and authorized by a company incorporated outside India making an issue of such depositary receipts

77 77 Section Purchase of minority shareholding  Where any acquirer or a person acting in concert with such acquirer, becomes a registered holder of 90% or more of the issued equity share capital of a company or any person or group of persons becoming 90% majority or holds 90% of the issued equity share capital by virtue of a merger, amalgamation, share exchange, conversion of securities or for any other reason, such acquirer, person or group of persons, shall make an offer to the remaining shareholders to buy their shares.

78 78 Section Purchase of minority shareholding (Cont…) Section Purchase of minority shareholding (Cont…)  The minority shareholders may on their own make an offer to the majority shareholders to purchase their shares.  Offer price shall be as determined by a registered valuer

79 79 Section Purchase of minority shareholding (Cont…)  The majority shareholders shall deposit required amount in a separate bank account to be operated by transferor company  Transferor company responsible to receive shares and to make payment to shareholders within 60 days

80 80 Section Purchase of minority shareholding (Cont…)  In the absence of physical delivery of shares by shareholders within specified time, the share certificates shall be deemed to be cancelled and payment made  In case of an offer for full purchase by a majority shareholder the heirs, successors etc, of the minority shareholder can avail the amount up to three years from the date of acquisition of majority shareholding

81 81 Section Purchase of minority shareholding (Cont…)  Minority shareholders entitled to receive on pro rata basis such higher price, at which the majority shareholders holding at least 75% of the minority shareholding, have negotiated or have an understanding with any other person for transfer of the said shares.  ‘Acquirer’ and ‘persons acting in concert’ to have same meaning as in SEBI Takeover Regulations

82 82 Section Registration of offer of schemes involving transfer of shares  Circular containing an offer of a scheme or contract involving transfer of shares or any class of shares, shall be presented to the Registrar for registration and shall not be issued unless registered  Registrar to communicate refusal to register within 30 days of application

83 83 Section Liability of officers in respect of offences committed prior to amalgamation, transfer, etc.  Liability in respect of offences committed under the Act by officers in default of the transferor company prior to its merger, amalgamation or acquisition will continue after such merger, amalgamation or acquisition

84 84 SPECIAL COURTS

85 85 Sections 396 to Special Courts  New concept  Central Government to establish special courts for the purpose of providing speedy trial of offences under the Act.  Special Courts situated in the area where the registered office of the company is situated to have jurisdiction and if there are more than one Special Courts in an area, the one specified by the High Court concerned will have jurisdiction

86 86 Sections 396 to Special Courts (Cont..)  All offences under Companies Act to be triable only by Special Courts  Every offence under the Act shall be deemed to be non-cognizable  Special Court may based upon a police report of the facts constituting an offence or upon a complaint made, take cognizance of the offence without the accused being committed for trial

87 87 Sections 396 to Special Courts (Cont..)  Extant provisions of section 621A relating to non-cognizable offences and provisions of section 621A relating to composition of offences have been retained  Matters relating to accusation without reasonable cause shall now be dealt with by the Special Court or Court of Session in accordance with Section 250 of the Code of Criminal Procedure, 1973

88 88 Sections 396 to Special Courts (Cont..)  Special Courts may try in a Summary Way any offence under this Act which is punishable with imprisonment for a term not exceeding 3 years (like a civil suit) – in such cases punishment cannot exceed one year. If necessary the Special Court may try the matter as a regular trial  Appeals shall lie with the High Court  Transitional provisions that existing Court of Sessions will continue to exercise jurisdiction

89 89 NATIONAL COMPANY LAW TRIBUNAL (NCLT) AND AND APPELLATE TRIBUNAL

90 90 Sections 368 to NCLT and Appellate Tribunal  Provisions relating to establishment, constitution and functioning of NCLT and Appellate Tribunal laid down elaborately

91 91 Sections 368 to NCLT and Appellate Tribunal (Cont…)  Criteria/qualification/experience for Chairperson/ members of Tribunal and Appellate Tribunal clearly set out  Some matters presently dealt with by Company Law Board which shall be handled by the Tribunal Default in repayment of principal amount and interest thereon on Debentures Default in repayment of principal amount and interest thereon on Debentures Failure to repay deposits on time Failure to repay deposits on time

92 92 Sections 368 to NCLT and Appellate Tribunal (Cont…)  Some matters presently requiring approval of Central Government to go to Tribunal : Alteration of articles for conversion of a public company into a private company Alteration of articles for conversion of a public company into a private company power to call annual general meeting, power to call annual general meeting, refusal for transfer of securities, refusal for transfer of securities,

93 93 Sections 368 to NCLT and Appellate Tribunal (Cont…) to give notice in case of an application for reduction of share capital to give notice in case of an application for reduction of share capital default in repayment of principal on debentures default in repayment of principal on debentures to decide on the financial year to decide on the financial year

94 94 THANK YOU


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