The long awaited new Companies Act, 2013, after a lot of
expectations and speculations, was finally notified in the Gazette
of India on August 30, 2013. The new law, which is more
comprehensive than its predecessor with 470 sections spread over 29
chapters and 7 schedules, replaces the six decade old Companies
Act, 1956. The 2013 Act intends to promote self-regulation and
introduces novel concepts including one-person company, small
company and dormant company. It also promotes investor protection
and transparency by including concepts of insider trading, class
action suits, creation of a National Financial Reporting Authority
and establishment of Serious Fraud Investigation Office for
investigation of fraud. Further, a mammoth section 2 containing 94
definitions has been added for better clarity. There are 37 new
definitions in the new Act when compared to the 1956
In the first phase of implementation, Government has notified 98
sections on September 12, 2013. There appears to be little
coherency in selection of the notified sections i.e. the basis of
picking them versus others. The sections were notified in a haste
and it was unclear if these provisions will operate in addition to
the corresponding provisions of the 1956 Act. On September 18,
2013, Ministry of Corporate Affairs, through its General circular
No.16/2013 has clarified that the sections of the old Act that
correspond to the 98 provisions notified on September 12, will
cease to have effect. But it is worth noting that the Ministry has
left it to the companies and their advisors to identify these
corresponding provisions, as it is not specified in the
Below is a selective overview of the new notified
Definitions: Most of the 94 definitions are
notified barring 12 definitions relating to accounting and auditing
standards as well as other fiscal matters.
Formation: It is interesting to note that the
provisions with respect to the incorporation of a company and
corresponding provisions relating to charter documents etc. are yet
to be implemented.
Governance of Board: Some sections covering
the Board, like general restrictions on powers as well as a few
specific restrictions on its contributory powers have been
notified. Some other sections dealing with appointment of directors
including those of additional, alternate and nominee directors as
well as the right of managing or whole time directors for
compensation in the event of loss of office are covered under the
notification. However core matters concerning directors that cover
their qualification/disqualification, duties, vacation of office,
and removal are not in force yet. The sections pertaining to the
appointment and remuneration of managerial personal are also yet to
Governance by shareholders: Some basic
provisions regarding mode of conduct of general meetings
including statement to be annexed to the notice, special business,
quorum, chairman of the meeting, voting, etc. have been
implemented, so also the criteria for distinguishing ordinary and
special resolutions. But sections specific to the annual general
meeting are yet to be notified.
Share capital: Some provisions regarding share
capital, debentures, numbering of shares, provision for
proportional payment of dividend and certain penal provisions
including failure to distribute dividends, remedies for refusal of
registration of share, prohibitory provisions with respect to buy
back have also found place in the current notification.
A few sections on the applicability of the Act to foreign
companies, some basic compliance by the foreign companies like
display of name, country of incorporation etc. outside its office
premises, in its business letters and bill heads are in force now.
The provisions with respect to service on foreign companies have
also been covered by the new notification.
New regulatory authorities: The notification
has covered a few provisions like constitution pertaining to the
two regulatory authorities National Company Law Tribunal and
Appellate Tribunal. But a large number of the sections with respect
to special courts are yet to be implemented. So the regulatory
system envisaged under the new legislature is yet to receive full
Penal provisions: The Ministry has further
included a majority of the penal provisions contained in Chapter
XXIX of the new Act such as punishments for fraud, false statement,
false evidence and withholding of property. It has also included
the sections dealing with the condonation of delay, powers of the
Central Government to exempt certain companies from the provision
of the 2013 Act and to make rules etc. in the current
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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