The Companies Bill 2012 had been much anticipated as it was approved in the Lower House on 18 December 2012 and after many months was passed in the Upper House on 8 August 2013, has now received Presidential assent and has been notified by the government on the 30 August 2013 and is now hereby to be known as the Companies Bill 2013. This bill will bring much improvement to the Indian Companies Act 1956, which it now replaces. Notification for commencement was issued on September 12, although some remaining sections will be notified in a phased manner.
There are many improvements and new concepts as India seeks to keep abreast of national and international changes in the economic environment. Please see below for some of the more significant changes;
• One Person Company – it will now be possible to have companies with a single member.
• Dormant Company – this have been introduced for future projects or to hold an asset or Intellectual Property.
• Resident Director – it is now compulsory for Indian companies to have at least one resident director having stayed in India for not less than 182 days in the previous calendar year.
• Outbound Mergers – under the new Bill mergers of Indian companies with foreign companies of a specified jurisdiction are permitted.
• The National Company Law Tribunal – this will be an exclusive forum to decide on related mergers/demergers. This should drastically reduce the delays involved with going through Indian courts.
• Insider Trading – a new clause has been introduced that prohibits insider trading of securities by a Director or a Key Managerial Person. To do so may constitute a criminal offence.
• Private Company – The limit on the maximum number of members has been increased from 50 to 200.
• Foreign Company – this term has been further defined to include any company or corporate body incorporated outside India which has a place of business in India, whether this be actual, through an agent or electronically.
• Directors – there has been substantial change to the role and duties. The law has also incorporated numerous new concepts in regards to directors such as ‘Key Managerial Personnel’, ‘Independent Directors’, ‘Whole Time Director’, ‘Woman Director’, ‘Resident Director’ and ‘Non-Executive Director’.
• Video Conferencing – Board meeting by video conference are now permitted.
• Auditors – listed and prescribed companies must rotate these every 5 years. Approval of the appointment of auditors by the shareholders at every annual meeting is now mandatory.
The reforms were a much needed necessity to replace an Act that is now almost six decades long, in order to compete in today’s environment. However, this is still in a testing area as there is still drafting to be done to many of the rules and problems ironed out as these go through the transition from paper to practical implementation.