When you change your current job then you have to reboot yourself so as to satisfy the new job requirements. Similarly, in the year of 2013, new companies act, 2013, replacing the old companies act, 1956 has been introduced by the ministry and every year there are certain changes will be introduced in the act or rules. In the legal language, we call these changes as amendments. In this article, we will discuss the key amendments in the companies act, made in the last 1 year. Although I’ll try to explain the amendments in most simpler manner but this article will be more beneficial for the persons who have the knowledge of the Companies Act, 2013.
Chapter: Audit and Auditors
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Section 139(2): Terms of Auditor
If an individual person has appointed as an auditor then he shall hold the office for 1 term of 5 years and if an Auditors firm has been appointed as an auditor of the company then they shall hold the office for 2 terms of 5 years i.e. total 10 years.
This provision is the same, so what’s the change.
The limit under which the company shall apply these provisions has been changed. Following company shall have to apply the above provisions:
- Listed company
- Unlisted companies having paid-up share capital of Rs.10 Crore or more
- A private limited company having paid-up share capital of Rs.50 Crore or more (Earlier the limit was Rs.20 Crore)
- All other companies having paid-up share capital having borrowing of Rs.50 Crore or more.
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Section 143(3): Matters to be stated in the Audit Report
Under this section, there is one of the points in which the auditor has to report whether the company has an adequate internal financial control system in place and the operating effectiveness of such controls.
Now the above point shall not be applicable to
- One person company;
- Small Company;
- A private company having a turnover of Exceeding Rs.50 Crore and Borrowing of exceeding Rs.25 Crore.
Note: Turnover is to be checked as per the latest audited financial statements and borrowing at any time during the period.
Chapter: Appointment and Qualification of Directors
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Section 149: Minimum and maximum number of directors in a company
This section provides that there should be a minimum number of 2 directors be appointed in case of a private company and 3 directors in case of a public company. The maximum number of directors should not exceed 15 directors at any time. However, if the company wants to exceeds the number of directors then the company shall have to pass the special resolution.
The amendment part is that the said section shall not apply to the Government Company and Section 8 Company.
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Section 149: Independent Director, Section 177 and Section 178
Since the limit for the applicability of all these 3 sections is the same, hence the same amendment has been introduced in these sections. Which are:
As per these sections, unlisted public companies shall have to comply with the requirement of these sections if it satisfies the prescribed conditions as mentioned under rules.
However, for the purpose of these 3 sections, unlisted public companies do not include:
- Joint Venture
- Wholly owned subsidiary
- Dormant Company
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Section 152(6) and Section 152(7)
These subsections do not apply to Government Company and section 8 company.
Chapter: Inspection, Inquiry, and Investigation
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Section 212: Investigation of the affairs of the company by the Serious Fraud Investigation Office (SFIO)
Under this section, the provisions related to SFIO has been defined which includes the power of SFIO. In this power, one new power has been inserted, which is:
After the investigation of SFIO, if any person is found to be guilty of any offense punishable under this section, then such person shall be liable to get arrested.
Chapter: Meeting of the Board of Directors and its Powers
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Section 174: Quorum of the Board Meeting
There was a provision in this sections which states that at any time during the meeting the interested directors is equal to or more than the two-thirds of the total number of board of directors present at the meeting, then at least 2 not interested directors present at the meeting shall be deemed as a quorum of the meeting.
The amendment is that now, the interested directors can be counted for the purpose of quorum, after disclosing their interest.
Chapter: Accounts and Audit
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Section 135: Corporate Social Responsibility
As per section 135, if the company falls in the limit as specified in this section, then the company shall have to contribute in CSR of at least 2% of their average net profit for the last 3 preceding financial year.
If the company fails to contribute such amount, then the company shall have to explain the reason for not contributing such amount in their Board Report.
As per the amendment, Now on financial statements on 31.03.2020, if the company fails to contribute the specified amount in CSR then the company shall also have to pay the penalty.