Key Aspects of Companies Act,2013 J. Sagar Associates advocates & solicitors Delhi | Gurgaon | Mumbai | Bangalore | Hyderabad

Outline Classification & Company Incorporation Share Capital & Debentures Company Management & Corporate Governance Related Party, Investments & Loans CSR Auditors & Accounts NCLT and Special Courts M & A Rehabilitation & Revival of Sick Companies Fraud & Class Actions Winding up Miscellaneous / Others

Classification of Company Private company – can have up to 200 members (Section 2(68) -already notified) Public Company (subsidiary of public company will be a public company even if it continues to be a private company in its articles) (Section 2(71) - already notified) Small Companies – not applicable to holding or subsidiary company, non-profit companies, companies governed by special Acts (Section 2(85) – already notified) A new concept Private Company Paid-up share capital not exceeding Rs. 50 lacs or such higher amount as may be prescribed (not exceeding Rs.5 crores); or Turnover as per last profit and loss account not exceeding Rs.2 crores or higher amount as may be prescribed (not exceeding Rs.20 crores)

Classification of Company Dormant Companies (Section 455 - already notified) A new concept Formed for future project or to hold an asset or intellectual property And has no “significant accounting transaction” “inactive company” for last 2 financial years RoC on application shall allow status of dormant company and issue a certificate in this regard Risk of name being removed if status of dormant company is not given Dormant company to maintain minimum director, file documents and pay annual fee to retain the dormant status may become an active company on an application made

Classification of Company One Person Company (Section 2 (62) - already notified) A new concept Only one person (individual) as a member “One Person Company” to be affixed with the name A lot of exemptions including sections 100 to 111 Concept of layer of subsidiary and investment company introduced – there are two exceptions (Section 2(87) proviso and Section 2(87)(d) and 186 - already notified) Holding, Subsidiary and Associates companies – subsidiary test now on basis of 50% of total capital, not only equity (Section 2(87) - already notified) Concept of Section 4(7) not specifically provided (already notified) “Holding company” to include foreign holding company (Section 2(46) – already notified)

Share Capital & Debentures Public Offer (Section 23 – already notified) Clear definition and concept of ‘Private Placement’ (Section 42 - already notified) Equity Share Capital (Section 43 - already notified) With voting rights With differential rights as to dividend, voting or otherwise Preference Share Capital (Section 43 - already notified) Redeemable Preference Shares can exceed 20 years and upto 30 years for specified infrastructure projects (Refer Schedule VI) (Section 55 - already notified)

Share Capital & Debentures Voting rights in respect of preference shares – no distinction between cumulative and non-cumulative preference shares (Section 47 - already notified) Bonus issuance specifically provided – certain conditions imposed – cannot be issued from revaluation reserve and in lieu of dividend (Section 63 - already notified) – Offer once made cannot be withdrawn Prohibition of issue of shares at discount - issue at discount to be void (Section 53 - already notified) Issue of sweat equity shares permitted (Section 54 - already notified) Preferential issue value to be determined by registered valuer (Section 62 - already notified) Specific mention of issue of convertible debentures subject to shareholders’ resolution (Section 71 - already notified)

(Section 73, 74(1) & 76 - notified) Deposits (Section 73, 74(1) & 76 - notified) Allows acceptance of deposits from members and public Private company can accept only from members Resolution of shareholders required Issuance of circular to members with statement of financial position, credit rating obtained, outstanding amount of previous deposits Deposit Repayment Reserve Account in a separate bank account– 15% of the amount of deposits maturing during a financial year and financial year next following Such public companies are required to obtain a rating from a recognised credit rating agency at the time of invitation of deposits from the public for every year during the tenure of deposits. Other companies can accept deposits only from their members by passing a resolution in general meeting and subject to rules and conditions including the following: obtaining Credit rating; providing Deposit insurance as prescribed; Depositing in scheduled bank in deposit repayment reserve account a sum amounting to 15% of amount of its deposits maturing during the current and next financial year. Any deposit accepted before the commencement of 2012 Act or any interest due thereon to be repaid within 1 year from the commencement of 2012 Act or from the date on which such payments are due, whichever is earlier.

Public company can accept deposits from public Deposit Repayment Reserve Account shall be used only for repayment of deposit, no other purpose Public company can accept deposits from public Provided it has prescribed “net worth” or “turnover” Banking company and NBFCs exempted Stringent penalties provided - Unlimited liability of officers responsible of accepting deposit with intent to defraud Such public companies are required to obtain a rating from a recognised credit rating agency at the time of invitation of deposits from the public for every year during the tenure of deposits. Other companies can accept deposits only from their members by passing a resolution in general meeting and subject to rules and conditions including the following: obtaining Credit rating; providing Deposit insurance as prescribed; Depositing in scheduled bank in deposit repayment reserve account a sum amounting to 15% of amount of its deposits maturing during the current and next financial year. Any deposit accepted before the commencement of 2012 Act or any interest due thereon to be repaid within 1 year from the commencement of 2012 Act or from the date on which such payments are due, whichever is earlier.

Private companies subject to greater control & regulations Restriction on transferability of shares (Section 2(68)(i) - already notified) Two members to form quorum of shareholders’ meeting (Section 103 - already notified) Two directors are required (as against 3 in case of a public company) (Section 149 - already notified) May provide additional grounds of disqualifications for directors in its articles of association; (Section 164 - already notified) Additional grounds for vacation of directors in its articles of association (Section 167 - already notified) No requirement to keep the contract of employment with MD and WTD at its registered office (Section 190 - already notified) Can provide financial assistance to persons for the purchase of its own shares by giving loans for such purchases (Section 67 - already notified)

Private companies subject to greater control & regulations No retirement of directors by rotation (Section 152 - already notified) No restriction on the limits of managerial remuneration (Section 197 - already notified) Exemption regarding disclosure in board of directors’ report of formal annual evaluation of board’s own performance and that of its committee and individual directors (Exempted through draft Rules) Appointment of Woman Director, Independent Director (Exempted through draft Rules) Appointment of Audit committee and Nomination and Remuneration Committee (Exempted through draft Rules) Watch out for exemptions under Section 462 and the Final Rules!

Company Management – Board of Directors Minimum Directors–2 in a private Company and 3 in a public company (Section 149 - already notified) Maximum number of directors increased to 15 – can be increased with special resolution of shareholders (Section 149 - already notified) Number of directorships per director increased to 20 (with not more than 10 in a public company) (Section 165 - already notified) At least one woman director in certain companies  - doesn’t apply to private companies (Section 149 - already notified) At least one director to be resident in India for 182 days (Section 149 - already notified)

Company Management – Board of Directors Same concept – Additional Director, Alternate Director and Casual Vacancy (Section 161 - already notified) Appointment by Board of Directors and Shareholders – Additional director cannot be appointed by Board if the director fails to be appointed by shareholders (Section 161 - already notified) Disqualification of Directors (Section 164 - already notified) Duties of directors specifically provided – to act in accordance with the articles of association (Section 166 - already notified) Minutes of meetings prepared and signed in the manner prescribed in the Rules (Section 118 - already notified) Disclosure of interest by director or KMP within 30 days of his appointment, relinquishment of office (Section 184 - already notified)

Company Management – Board of Directors Participation in the board meeting through prescribed video conferencing or other audio visual permitted (Section 173 - already notified) Gap between two board meetings cannot exceed 120 days (Section 173 - already notified) Minimum notice period of 7 days for board meeting – shorter notice possible if at least 1 independent director, if any, present (Section 173 - already notified) Circular resolution - One third directors may require a board meeting – (Section 175 - already notified)

Company Management – Board of Directors Director may resign from office by giving notice in writing  - Board to intimate RoC and place before next general meeting (Section 168 - already notified) Director to provide reason for resignation to RoC (Section 168 - already notified) Date of resignation - effective from date specified or date letter is received, whichever is later (Section 168 - already notified) Restriction on board of directors powers (Section 180 - already notified) Directors’ Remuneration – Same Concept as in Companies Act, 1956 (Section 197- already notified)

Company Management – Board of Directors Additional matters only in board meeting (Section 179 – already notified) to issue securities, including debentures, whether in or outside India to give guarantee or provide security in respect of loans - to approve financial statement and the Board’s report - to diversify the business of the company - to approve amalgamation, merger or reconstruction - to take over a company or acquire a controlling or substantial stake in another company

Company Management – Board of Directors Key Managerial Personnel (Section 2 (51) and Section 203 already notified) CEO or Managing Director or Manager Whole-time Director CFO Company Secretary - Such other officer as may be prescribed

Company Management – Board of Directors Key Managerial Personnel Appointment in certain companies – private companies included (Section 203 (1) – already notified) Appointment by board of directors (Section 203 (2) – already notified) Whole-time KMP cannot hold office in more than one company except the subsidiary (Section 203 (3) – already notified) Separation of office of chairman and managing director or CEO (Section 203 – already notified) Casual vacancy to be filled in 6 months (Section 203 (4) – already notified) Is an “officer in default” (Section 2(60) –already notified)

Company Management – Board of Directors Key Managerial Personnel Is a “related party” (Section 2(76) and 188 already notified) Right to be heard (but not vote) in audit committee meeting when auditor’s report is considered (Section 177(7) – already notified) - Disclosure of interest (Section 189(2)– already notified) - Prohibition on forward dealing in securities (Section 194– already notified) - Prohibition on insider trading of securities (Section 195– already notified)

Company Management & Corporate Governance Independent Directors (Section 149 read with Schedule IV – already notified) Applicable to listed companies and classes of public companies which are prescribed Clear concept and definition of independent directors introduced – does not include MD, WTD and Nominee Directors Declaration to be provided by Independent Director that he / she meets the criteria in the definition Selection of independent directors from data bank maintained Qualifications for independent directors more stringent than Clause 49 of the listing agreement Appointment to be approved by shareholders and formalised through a letter of appointment

Company Management & Corporate Governance Term of appointment of Independent directors provided – upto 5 consecutive years but not more than 2 consecutive terms unless there is a cooling period of 3 years Code for Professional Conduct for Independent Directors introduced– Schedule IV – includes Roles, Functions & Duties Exclusion of independent directors from retirement by rotation No stock option to independent directors – sitting fees, re-imbursement of expenses and profit related commission permitted Liability of Independent Directors clearly provided

Disclosures in Board of Directors’ Report Disclosure in respect of voting rights not exercised directly by employees for shares to the ESOP scheme (Section 67(3)(C) proviso - already notified) Reasons for not spending on CSR activities (Section 135 – already notified) Additional disclosures in Board’s report (Section 134 – already notified) Extract of the annual return Composition of CSR Committee, CSR policy, its contents and Annual Report on CSR activities Company’s policy of appointment and remuneration for directors, KMP and other employees including criteria for determining qualifications, positive attributes, director’s independence Explanation to qualification, explanation or adverse marks by the auditor and secretarial auditor Particulars of loans, guarantees or investments

Disclosures in Board of Directors’ Report Statement indicating development and implementation of a risk management policy including identification of the elements of risk which threaten the existence of the company Related party transactions alongwith justification for entering into such transactions – notice of Board meeting to provide certain specified information Detailed reasons for revision of financial statements - board’s duty to send revised financial statements to shareholders Re-appointment of independent director after 5 years (Section 149 – already notified) Establishment of Vigil Mechanism (Section 177(9) – already notified) List all elements of remuneration package of all directors, stock options, details of fixed component and performance linked incentives along with performance criteria, service contracts, notice period, severance fees

Disclosures in Board of Directors’ Report Receipt of commission by a director from the holding company or subsidiary company Financial summary/highlights, change in business, details of directors, KMP, names of subsidiaries, joint ventures or associate companies, details relating to deposits, details of significant and material orders passed by regulators or Court of NCLT impacting the going concern status and company’s operation in future Additional information in Directors’ Responsibility Statement Statement that the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively

Company Management & Corporate Governance New Committees introduced ● Nomination and Remuneration Committee (Section 178 – already notified) ● Stakeholders Relationship Committee (Section 178 – already notified) ● Additional powers to audit committee (Section 177 – already notified) Compulsory Secretarial Audit Report in listed companies to be annexed to the Board’s report (Section 204 – already notified) Related Party Transactions defined and regulated – Government approval exempted - Restriction on interested member voting (Section 188 – already notified) Restrictions on non-cash transactions involving directors (Section 192 – already notified) Vigil Mechanism (Section 177 (9) – already notified) A company cannot issue bonus shares unless – it is authorised by its articles; it has, on the recommendation of the Board, been authorised in the general meeting of the company; it has not defaulted in payment of interest or principal in respect of fixed deposits or debt securities issued by it; it has not defaulted in respect of the payment of statutory dues of the employees, such as, contribution to provident fund, gratuity and bonus; the partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up.

Related Party Transactions Clear definition of “Related Party” (Section 2 (76) - with reference to a company, means: (i) a director or his relative; (ii) a KMP or his relative; (iii) a firm, in which a director, manager or his relative is a partner; (iv) a private company in which a director or manager is a member director;

Related Party Transactions (v) a public company in which a director or manager is a director and holds along with his relatives, more than 2% of its paid-up share capital; (vi) any body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager;

Related Party Transactions (vii) any person on whose advice, directions or instructions a director or manager is accustomed to act; (viii) any company which is a holding, subsidiary or an associate company; a subsidiary of a holding company to which it is also a subsidiary; (ix) director or KMP of the holding company or his relative

Related Party Transactions Clear List of Related Party Transactions clearly provided (Section 188) (a) sale, purchase or supply of any goods or materials; (b) selling or otherwise disposing of, or buying, property of any kind; (c) leasing of property of any kind; (d) availing or rendering of any services;

Related Party Transactions (e) appointment of any agent for purchase or sale of goods, materials, service or property; (f) such related party's appointment to any office or place of profit in the company, its subsidiary company or associate company; (g) underwriting the subscription of any securities or derivatives thereof, of the company

Related Party Transactions Agenda of the Board Meeting should disclose matters prescribed under Rule 15 (1) of Companies (Meeting of Board and its Power) Rules, 2014 Interested director to absent from meeting (Rule 15 (2)) Central Government approval Exempted Only Special Resolution of Shareholders required only in the following cases:

Related Party Transactions Company having a paid-up share capital of Rs. 10 crores or more; or (ii) Contracts or arrangements exceeding certain value: sale, purchase or supply of any goods or materials directly or through appointment of agents exceeding 25% of the annual turnover as mentioned in clause (a) and clause (e) respectively of sub-section (1) of section 188;

Related Party Transactions selling or otherwise disposing of, or buying, property of any kind directly or through appointment of agents exceeding 10% of net worth as mentioned in clause (b) and clause (e) respectively of sub-section (1) of section 188; leasing of property of any kind exceeding 10% of the net worth or exceeding 10% of turnover as mentioned in clause (c) of sub-section (1) of section 188;

Related Party Transactions availing or rendering of any services directly or through appointment of agents exceeding 10% of the net worth as mentioned in clause (d) and clause (e) of sub-section (1) of section 188; appointment to any office or place of profit in the company, its subsidiary company or associate company at a monthly remuneration exceeding Rs. 2,50,000 as mentioned in clause (f) of sub-section (1) of section 188; or

Related Party Transactions remuneration for underwriting the subscription of any securities or derivatives thereof of the company exceeding 1% of the net worth as mentioned in clause (g) of sub-section (1) of section 188 “Turnover” or “Net Worth” shall be on the basis of the audited financial statement of the preceding financial year What happens to existing contracts?

Related Party Transactions Explanatory of the Board Meeting should disclose matters prescribed under Rule 15 (3) of Companies (Meeting of Board and its Power) Rules, 2014 Interested members not allowed to vote General Exemption - Arm’s length transactions in ordinary course of business Details of Related Party Transactions in Board Report including certain Arm’s Length transactions Justification for entering the transactions to be provided in Board’s report

Related Party Transactions Particulars of contracts or arrangement with related party to be entered in the Register of contracts or arrangement in which directors are interested Penalty – if contract or arrangement not ratified within 3 months, such contract voidable at the option of the board; the director concerned liable to indemnify Public Co – Public Co. transactions not exempted now Violation of related party transactions – ground for disqualification of a director

Investments & Loans Private companies also covered now Applicable to lending, giving of guarantee and providing security to any “person” and not only “body corporate” Approval in board meeting with the consent of all directors present and with prior approval of public financial institution Special resolution of shareholders if the limits prescribed for lending, guarantee, security and investment are exceeded – resolution should specify the total amount upto which the Board is authorised to give such loan or guarantee to provide such security or make such acquisition Disclosure in the financial statement full particulars of loans given, investment made or guarantee or security provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the borrower

Investments & Loans Exemptions – Rate of interest on a loan cannot be lower than the prevailing yield of one year, three year, five year or ten year Government Security closest to the tenor of the loan Investment company only upto two layers permitted – there are two exceptions Exemptions – Loans, guarantees given, security provided by banking company or insurance company or housing finance company or company providing infrastructure facilities NBFC whose principal business is acquisition of securities Rights issue of shares Loan, guarantee, security provided by holding company to wholly owned subsidiary or a joint venture company or acquisition of shares of wholly owned subsidiary - from seeking shareholders approval – provided details disclosed in financial statement (Rule 11 of Companies (Meeting of Board and its Power) Rules, 2014 Register to be maintained

Loans to Directors Applicable to all kinds of companies Loan to directors or “to any other person in whom director is interested” (a) any director of the lending company, or of a company which is its holding company or any partner or relative of any such director; (b) any firm in which any such director or relative is a partner; (c) any private company of which any such director is a director or member; (d) any body corporate at a general meeting of which not less than 25% of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; or (e) any body corporate, the Board of directors, managing director or manager, whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company

CSR Mandatory for companies with (i) net worth Rs.500 crores; or (ii) turnover Rs.1,000 crores; or (iii) net profit Rs.5 crores (Section 135 - already notified) Companies to constitute CSR Committee Private companies do not require 3 directors and no independent directors The board of directors’ report will have to disclose the composition of the CSR committee CSR committee to frame a CSR policy recommending the amount to be incurred on CSR activities

CSR The CSR policy to be approved by the board of directors Contents of such policy have to be disclosed in the board of directors’ report in the format as prescribed in annexure to the CSR Rules and on company’s website, if any Expenditure incurred in India will only qualify Preference to be given to local areas of operation

CSR While calculating the profit for the purposes of CSR contribution, neither the profits earned from overseas branch of an Indian company nor the dividend received from other Indian companies be included provided those Indian companies are covered and comply with Section 135 Expenditure incurred exclusively for the benefit of employees of the company and their families is excluded Failure to spend - report reasons in directors’ report – “Comply or explain” concept

CSR Not only the Indian companies but even foreign companies having a branch office or project office in India will need to comply with the CSR requirements if they fall within any of the criteria under section 135 The CSR activities to be undertaken by the companies have to be within the purview of Schedule VII, which lists all the permitted CSR activities Companies to spend 2% of the average net profits for preceding 3 years to one or more of the listed CSR activities

CSR CSR activities may be undertaken through a registered trust or a registered society or a non-profit company established by the company or its holding or subsidiary or associate company. However, trust, society or company not established by the company or its holding or subsidiary or associate company should have a minimum track record of 3 years in undertaking CSR programs Political contribution shall not be considered as CSR activity

CSR Collaboration on CSR activities with other companies is permitted provided the CSR committees of respective companies separately report their CSR projects or programs Companies can build CSR capacities of their own personnel provided the expenditure shall not exceed 5% of the total CSR expenditure of the company in a financial year   Tax treatment not clear yet

Auditors & Accounts Auditors to be appointed for 5 years with yearly ratification (Section 139 - already notified) Individual auditors - 1 term of 5 years (Section 139 - already notified) Audit firm - 2 terms of 5 years (Section 139 - already notified) Cooling–off period of 5 years (Section 139 - already notified)

Auditors & Accounts “Audit partner and his team”, may be rotated by resolution of members of the company (Section 139 - already notified) Casual vacancy to be filled within a certain time frame (30 days / 3 months) (Section 139 - already notified) Auditor (both the individual and the firm) debarred for 5 years if found guilty of abetting or colluding in any fraud (Section 140(5) - already notified) Coverage of financial statements enhanced – to include cash flow statement, statement of change in equity (Section 2(40) - already notified)

Auditors & Accounts Recommendation of Audit Committee for appointment of auditors Restriction on re-opening of books of account and recasting of financial statements except on the order of NCLT and that too in cases when accounts prepared in fraudulent manner or affairs of company mismanaged (Section 130 - not yet notified) Prohibition on providing non-audit services, such as investment advisory, management services, etc. (Section 144 - already notified) Liable to imprisonment and damages for failure of certain duties and obligations - such as in case when deceives the company or its shareholders or creditors or tax authorities (Section 147(2) - already notified)

Auditors & Accounts Compulsory consolidation of accounts (Section 129 - already notified) Financial year streamlined (April 1 to March 31) – 2 years’ time to align (Section 2(41) - already notified) Restriction on the amount of interim dividend - In case of loss in current financial year – cannot exceed the rate higher than average dividends during preceding 3 financial years (Section 123(3) - already notified) No provision for mandatory transfer of profit to reserves Books of accounts can be prepared in electronic form as may be prescribed (Section 2(12) - already notified)

Auditors & Accounts National Financial Reporting Authority introduced (Section 132 – not yet notified) Restriction on re-opening of books of account and recasting of financial statements except on the order of NCLT and that too in cases when accounts prepared in fraudulent manner or affairs of company mismanaged (Sections 130 & 131 – not yet notified) Compulsory internal audit (Section 138 – already notified)

NCLT & Special Courts Chapter XXVII and XXVIII (Some sections notified) Single forum constituted as National Company Law Tribunal (NCLT) Principal bench in New Delhi Appeals from NCLT’s orders to Appellate NCLT Appeals from Appellate NCLT to Supreme Court Special Courts (with powers of Sessions Court) to try criminal offences – summary jurisdiction for imprisonment less than 3 years Mediation and Conciliation Panel Carrying mediation between parties during any proceedings Time period to dispose matters is 3 months

M&A Chapter XV (not yet notified) Merger of listed company with unlisted company Fast track merger – between small companies and holding and wholly owned subsidiary Exit to dissenting shareholders and takeover offer Purchase of Minority Shareh Cross border merger Enhanced disclosure Representation from various authorities Difficult to raise objections to schemes Dispensation of creditors’ meeting – if 90% in value agree by affidavit Restriction on treasury stocks

Rehabilitation & Revival of Sick Companies Chapter XIX (not yet notified) Now applicable to all companies not only industrial company Test of sickness – inability to pay secured creditors and not erosion of net worth Secured creditors representing 50% or more outstanding debt can file with NCLT for sickness if not paid within 30 days of demand No such right to unsecured creditors – only right to 1/4th unsecured creditors to approve revival scheme Company can also file the application Formation of Rehabilitation and Insolvency Fund Such public companies are required to obtain a rating from a recognised credit rating agency at the time of invitation of deposits from the public for every year during the tenure of deposits. Other companies can accept deposits only from their members by passing a resolution in general meeting and subject to rules and conditions including the following: obtaining Credit rating; providing Deposit insurance as prescribed; Depositing in scheduled bank in deposit repayment reserve account a sum amounting to 15% of amount of its deposits maturing during the current and next financial year. Any deposit accepted before the commencement of 2012 Act or any interest due thereon to be repaid within 1 year from the commencement of 2012 Act or from the date on which such payments are due, whichever is earlier.

Fraud & Class Actions Section 447 and 448 (already notified) Fraud to include any act, omission, concealment of any fact or abuse of position with intent to deceive, to gain undue advantage from, or to injure the interests of the company or creditors or any other person Person guilty of fraud could face imprisonment 6 months to 10 years and fine 1 to 3 times of amount involved in fraud Minimum imprisonment 3 years if public interest is involved Right to 100 or more members or depositors to file for class action Serious Fraud Investigation (SFIO) – additional powers given Punishment for fraudulently inducing persons to invest money Unlimited liability of officers responsible of accepting deposit with intent to defraud Such public companies are required to obtain a rating from a recognised credit rating agency at the time of invitation of deposits from the public for every year during the tenure of deposits. Other companies can accept deposits only from their members by passing a resolution in general meeting and subject to rules and conditions including the following: obtaining Credit rating; providing Deposit insurance as prescribed; Depositing in scheduled bank in deposit repayment reserve account a sum amounting to 15% of amount of its deposits maturing during the current and next financial year. Any deposit accepted before the commencement of 2012 Act or any interest due thereon to be repaid within 1 year from the commencement of 2012 Act or from the date on which such payments are due, whichever is earlier.

Winding up No major changes Concept of summary procedure of liquidation introduced Liquidators from panel of professionals Creditor due for Rs. 100,000 for 21 days - ground of winding up Ambiguity if 2 years’ salary paid as compensation or paid only if outstanding to workmen Such public companies are required to obtain a rating from a recognised credit rating agency at the time of invitation of deposits from the public for every year during the tenure of deposits. Other companies can accept deposits only from their members by passing a resolution in general meeting and subject to rules and conditions including the following: obtaining Credit rating; providing Deposit insurance as prescribed; Depositing in scheduled bank in deposit repayment reserve account a sum amounting to 15% of amount of its deposits maturing during the current and next financial year. Any deposit accepted before the commencement of 2012 Act or any interest due thereon to be repaid within 1 year from the commencement of 2012 Act or from the date on which such payments are due, whichever is earlier.

Miscellaneous / Others Prohibition on forward dealing and insider trading Certain provisions affecting listed companies Exclusion of independent directors from retirement by rotation Return to be filed with the RoC with respect to the change in number of shares held by promoters and top 10 shareholders within 15 days Preparation of report for each AGM and file with the RoC in 30 days confirming the conduct of meeting in compliance of Companies Act Report of the Board of formal annual evaluation of its own performance, committees’ and individual director’s performance Financials to be placed on the website of the company Rotation of auditors Such public companies are required to obtain a rating from a recognised credit rating agency at the time of invitation of deposits from the public for every year during the tenure of deposits. Other companies can accept deposits only from their members by passing a resolution in general meeting and subject to rules and conditions including the following: obtaining Credit rating; providing Deposit insurance as prescribed; Depositing in scheduled bank in deposit repayment reserve account a sum amounting to 15% of amount of its deposits maturing during the current and next financial year. Any deposit accepted before the commencement of 2012 Act or any interest due thereon to be repaid within 1 year from the commencement of 2012 Act or from the date on which such payments are due, whichever is earlier.

Miscellaneous / Others 1/3rd directors to be independent directors One director elected by “small shareholders” (shareholding less than Rs. 20,000) Compulsory Secretarial Audit Report to be annexed to the Board’s report Disclosure in Board’s report, the ratio of remuneration of each director to the median employee’s remuneration Merger into unlisted company Concept and meaning of ‘Control’ introduced Number of partners could be 100 – HUF and professionals governed by special Acts exempted Directors’ and Officers’ Policy Transfer of Proceedings an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage Therefore pledge of movable property of the company should also be registered Section 125 requiring registration of charges with RoC applies to the following 9 types of charges : a charge for the purpose of securing any issue of debentures; a charge on uncalled share capital of the company; a charge on any immovable property, wherever situate, or any interest therein; a charge on any book debts of the company; a charge, not being a pledge, on any movable property of the company; a floating charge on the undertaking or any property of the company including stock-in-trade; a charge on calls made but not paid; a charge on a ship or any share in a ship; a charge on goodwill, on a patent or a licence.

Thank you! lalit@jsalaw.com