Highlights of New Companies Bill

-- The limit in respect of maximum number of companies in which a person may be appointed as auditor has been proposed as 20.

-- Independent directors' shall be excluded for the purpose of computing 'one third of retiring directors'.

-- Appointment of auditors for 5 years shall be subject to ratification by members at every Annual General Meeting.

-- 'Whole-time director' has been included in the definition of the term 'key managerial personnel'.

-- The term 'private placement' has been defined to bring clarity.

-- Maximum number of directors in a private company increased from 12 to 15 which can be increased further by special resolution.

-- Financial Year of any company can end only on March 31 and only exception is for companies, which are holding / subsidiary of a foreign entity requiring consolidation outside India, can have a different financial year with the approval of Tribunal.

-- To help in curbing a major source of corporate delinquency, introduces punishment for falsely inducing a person to enter into any agreement with bank or financial institution, with a view to obtaining credit facilities.

-  Under the new bill, companies are required to spend at least 2 per cent of their average net profits for the three immediately preceeding financial years on CSR. This is applicable to companies with a networth of Rs 500 crore or more, or Rs 1,000 crore turnover or Rs 5 crore net profits, who have to set up a corporate social responsibility committee. The companies will also have to give preference to the local areas of their operation for such spending. 

- The concept of One Person Company has been introduced in the new company law.

- The bill increased the number of members of private companies from 50 to 200. This allows companies access to large pool of capital without going public.

- The new bill gives recognition to transfer restrictions on inter-se shareholders – ‘Right of First Refusal’ will be enforceable. This would clear existing ambiguity on legal enforceability on transfer restrictions under JV/shareholder agreements.

- While the old bill only permitted merger of a foreign company with an Indian company, the new bill allows merger of Indian companies into foreign companies which would aid in consolidation of cross-border businesses/assets.

- The new bill permits merger of a listed company with an unlisted one, subject to exit opportunity being offered to shareholders of the listed company.

- While the old bill depended on precedents for merger of a subsidiary with a parent (or between two small companies), the new bill provides a separate and simplified regime for this without any approval from High Court.

- The new bill also gives rights for objections to schemes to only creditors who owed over 5 per cent and minority shareholders with over 10 per cent stake against no thresholds earlier.

- The new bill also has a detailed mechanism for acquisition of shares by majority shareholder from minority shareholders.

- The bill restricts creation of multi-layered holding structures, prohibiting making investments through more than two layers of investment companies.

- The new bill bans holding ‘Treasury Stock’, which is often used by companies to increase shareholding or future monetisation after consolidation.

Source : Internet