Companies Act, 2013 had received the assent of the President of India and is technically on the statute book for two years. Technically because all provisions had not been enforced. Now most of the Act is in force. After the Amendment Act of 2015 and numerous (15) clarificatory amendments Companies Act is on the roll. A fully amended kindle ebook of Bare Act is here for sale on Amazon.
Short Review of companies Act.
This is a bird-eye view type of review and not a hair splitting exercise. Not now. If the corporate lawyers in Delaware were having any sleepless night, they be rest assured that this Act is as nocturnal (or moonshine if you prefer that) as its predecessor and is merely an exercise to legalise the actions already underway by way of executive and regulatory acts.
One person company.
To begin with there is a new type of company called One Person Company. As the name suggests, only a single person with a nominee to succeed, can form the company. But underneath the name of company it has to be mentioned as ‘one person company’. There are going to be very few morons who would form this kind of company for public dealing. Besides requirement is illogical. Why not suffix the company name with ‘OPC Ltd.’. It may be used for investment or holding purposes but it is more likely to be as flop as its predecessor LLP or limited liability partnership, which also failed due to non simplification of procedures. The format of annual return is same of all the companies as per section 92. An OPC also requires a legal heir. So why not for a private company? Not sure why state insisted on nominee heir. It could easily provide for escheat if no one comes forward to claim legal right through law of succession. Babus (bureaucrats) could have more jobs in escheat proceedings.
Tribunal in, High Court out.
Apart from impending failure of OPC there is a two tier Tribunal. High Court is out. No revamp in office of Official Liquidator. Though many new time bound obligations have been imposed but over all everything remains same. A number of guidelines of Security Regulator have been adopted as part of the statute.
Provision of mandatory independent directors for listed companies is a new norm. It was something which is again being insisted by Securities Regulator SEBI and therefore is no rabbit out of hat but mere acceptance of reality in corporate world. The creation of database of independent directors is a welcome step but too much has been left to the rules to be framed. A good beginning which need to work its way up. So I hope.
No more common seal
Amendment of 2015, dispenses with the provision of common seal, at all the places. Company may have a common seal or not. It is optional. Absence of common seal would not be a ground for testing the validity of any document any more.
Serious Fraud Office.
Serious Fraud Office was working for many years, now has statutory status. Key personnel, over stating or manipulating accounts are liable to pay personally for loss. At least some lessons learned from Satyam fiasco.
Debt and philanthropy:
Now all debts are to be registered as charge on company. There is a Schedule on permissible expenses for corporate responsibility. So now philanthropy is not ultra vires the Memorandum.
Variable voting rights:
Shares with differential voting rights can be issued by company. The Act does not limit this right in any manner. The shares can be issued with zero of multiple voting rights i.e. weighted voting rights. However shares once issued, their voting right can not be changed without the consent of that class of shareholders,