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Functioning & Management of Companies The Companies Act, 2013

Functioning & Management of Companies The Companies Act, 2013. Dr PT Giridharan Joint Director & Regional Head (SRO), Chennai The Institute of Chartered Accountants of India. Introduction.

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Functioning & Management of Companies The Companies Act, 2013

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  1. Functioning & Management of CompaniesTheCompanies Act,2013 Dr PT Giridharan Joint Director & Regional Head (SRO), Chennai The Institute of Chartered Accountants of India

  2. Introduction Companies Bill 2012 passed by LokSabha on 18th December, 2012 and was passed by the RajyaSabha on 8th August, 2013. 1 The Act comprised of 29 chapters, 470 Sections with 7 Schedules as against 658 sections and 14 Schedules in the Companies Act, 1956 2 Substantively a law based on Rules (as may be prescribed). 1st Phase & 2nd Set of Rules for comments and 98 sections notified 3 In 470 Sections the word “as may be prescribed” has been used at around 336 places.

  3. Why a new Law was needed? The changing national and international economic environment • Exponential growth of the Indian economy • Changes in the stakeholders’ expectations • Manifold Increase in Number of Companies • The need of a legal framework was felt to enable the Indian corporate sector to adopt the best international practices in a globally competitive manner, fostering a positive environment for investment and growth.

  4. New Dimensions • Accounts of companies to be maintained in electronic mode – not to be disposed off unless permitted by law • File Financial Statements in XbRL • Ensure CSR - not endeavour • Video conferencing of Board Meetings • Establish vigil mechanism • Code for Independent Directors • Avoid Related Party Transactions

  5. Changing Dimensions • Restrictions on layers of subsidiaries. (Section 2 (87)) • The Financial Year of any Company can be only from April-March. Existing companies has to align within 2 years of the commencement of the Act. (Section 2 (41)) • Memorandum not to have ‘other objects’. (Clause 4 (1)) • A person cannot become director in more than 20 companies (instead of 15 as provided in the Companies Act 1956) and out of this 20, he cannot be director of more than 10 public companies. (Section 165) • Shareholders to have exit option if money raised has not been utilized. (Section 27) • Concept of CSR introduced. (Section 135) • Definition of independent Directors introduced. (Section 149 (5))

  6. New Companies & New Structures A B SMALL COMPANY OPC Companies D C DORMANT COMPANY PRIVATE 200

  7. A B 1 Director to stay for 182 days in calendar year ONE woman director Key changes D C 1/3rd of BOD to be independent Within 1 year Key Changes to be done by the Company

  8. Responsibility Revisited Revision of Accounts 130 & 131 CSR Spending (135) Directors’ Responsibility Statement (134(6) Audit Committee (177)

  9. Board Committees Audit Committee Nomination Committee Remuneration Committee Stakeholders Relationship Committee

  10. Internal Audit CSR Audit Registered Valuers Professional Liquidators Opportunities at the End

  11. Thank You !

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