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Monday, December 24, 2012

Companies bill 2012 highlights


On 18th December, 2012 the Companies Bill, 2011 had been passed by the Lok Sabha. However, it was passed with certain modifications as recommended by the Parliamentary Standing Committee on Finance. Some of the amendments to the Companies Bill (as passed by the Lok Sabha) are as under:

1) Definition of 'key managerial personnel'(KMP) in clause 2(51) amended to include 'Whole-time director' within its realm. Further, the pre-condition of CFO’s appointment by BOD to treat him as KMP was deleted;

2) As per amended clause 3, in case of One Person Company, nominee mentioned in Memorandum of Association would become member not only on subscriber's death but also in the case of subscriber's incapacity to contract due to insanity, etc.;

3) Words 'of money' omitted from Sec. 2(64) to cover bonus shares in paid-up share capital;

4) As per amended clause 2(40), the 'statement of changes in equity' should form an integral part of the financial statements of companies governed by Ind-AS;

5) Clause 23 amended to allow a private company to make rights and bonus issues;

6)Members are empowered to offer whole of their holdings of shares to public in offer for sale; earlier this was restricted to part shareholdings only;


7) In accordance with the Supreme Court's interpretation of section 67 of the Companies Act, 1956 in Sahara India Real Estate Corpn. Ltd. v. SEBI [2012] 115 SCL 478/25 taxmann.com 18, clause 42 was amended to define 'private placement' in order to curb public issues in the garb of private placement;

8) Time-limit for filing annual return in clause 92(4) relaxed from 30 days to 60 days from the date of AGM or due date of AGM, if the AGM wasn't convened;

9) Corporate Social Responsibility spending has been made mandatory;

10) As per amended clause 139 appointment of auditors for five years needs to be ratified by members at every Annual General Meeting;

11) Clause 152(6) provides that not less than two-thirds of the total number of directors of a public company shall be liable to retire by rotation and be appointed by the company in general meeting. The independent directors are being excluded from the "total number of directors" for computing the proportion, nonetheless they are appointed under this Act or any other law;

12) As per newly inserted clause 245(2), where members or depositors seek any other suitable action from or against an audit firm, the liability shall be of the firm as well as of each partner who was involved in making any improper or misleading statement of particulars in the audit report or who acted in a fraudulent, unlawful or wrongful manner;

13) Provisions relating to voluntary rotation of auditing partner (in case of audit firm) modified to provide that members may rotate the partner at such interval as may be resolved by members instead of every year.