Top 100 Highlights of Companies Act 2013

With the notification of 282 sections of the Companies Act 2013 along with rules , more than 50% of the new law has become operational w.e.f 1st April 2014. The rules notified are very exhaustive and therefore it will take time to acquaint with its nitty-gritties. In order to provide you an overall understanding of the new law taking in account the notified rules , we have created a list of top 100 highlights of the law. The same is outlined below under various topics, hope you will find the same useful.

INCORPORATION

1. A private company can have a maximum of 200 members, up from 50 in the Companies Act, 1956.(Section 2(68): Definitions)

2. The concept of One Person Company (OPC) introduced. It can be formed as a private limited Company. Only a natural person who is an Indian citizen and resident in India shall be eligible to incorporate a One Person Company or be appointed as a nominee for the sole member of a One Person Company. The term "resident in India" means a person who has stayed in India for a period of not less than 182 days during the immediately preceding 1 calendar year. (Section 3: Formation of Company read with Rule No 3(1))

3. No person shall be eligible to incorporate more than a One Person Company or become nominee in more than one such company (Section 3: Formation of Company read with Rule No 3(2)))

4. Where the paid up share capital of a One Person Company exceeds Rs. 50 lakh rupees or its average annual turnover during the relevant period exceeds Rs. 2 crore rupees, it shall cease to be entitled to continue as a One Person Company. (Section 3: Formation of Company read with Rule No 6(1)) One Person Company can get itself converted into a Private or Public company after increasing the minimum number of members and directors.(Section 3: Formation of Company read with Rule No 6(6))

5. Where the company has changed its activities which are not reflected in its name, it has to change its name in line with its activities within a period of 6 months from the change of activities. (Section 4(): Memorandum read with Rule No 8(3))

6. Objects Section in the Memorandum of Association of a company not required to be divided into Main, Ancillary and Other Objects. The company cannot provide for Other Objects.(Section 4: Memorandum)

7. The Articles of Association of the company may contain provisions for entrenchment whereby specified provisions of the Articles can be altered only if conditions or procedures that are more restrictive than those applicable in case of special resolution have been met with.(Section 5: Articles).

8. To commence business, a public/private company needs to file the following with the Registrar of Companies:

• A declaration by a director in prescribed form stating that the subscribers to the memorandum have paid the value of shares agreed to be taken by them, and
• A confirmation that the company has filed a verification of its registered office with the Registrar 
• In the case of a company requiring registration from sectoral regulators such as RBI, SEBI etc, approval from such regulator shall be required. (Section 11: Commencement of Business read with Rule No 24)

9. Where the company has raised money from public through prospectus and has any unutilised amount out of the money so raised, it shall not change the objects unless a special resolution is passed through postal ballot and also the dissenting members shall be given an exit opportunity by the Promoters as per the regulations of SEBI. The rules provide for various disclosures in the notice for such general meeting and which include disclosures like justification for the alteration or change in the objects; amount proposed to be utilized for the new objects; estimated financial impact of the proposed alteration on the earnings and cash flow of the company etc (Section 13: Alteration of Memorandum read with Rule No 32).

FOREIGN COMPANY

10. For the purposes definition of Foreign Company, the phrase ‘electronic mode’ has been defined, which primarily shall include carrying any business electronically through mobile device, website, email, social media, cloud computing etc. whether main server is installed in India or not. (Section 2: (42) Foreign Company read with Rule No 2(h))

CORPORATE STRUCTURE

11. For purpose of definition of Associate Company and Subsidiary Company or Subsidiaries the term “Total Share Capital”, is defined to be aggregate of the paid-up equity share capital and convertible preference share capital. (Section 2(87): Definition of Subsidiary Company or Subsidiary read with Rule No 2(r))

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