Companies Act,2013

The new Companies Act (hereinafter referred as CA2013) is replacing old Companies Act, 1956 (hereinafter referred as CA1956). The CA2013 makes comprehensive provisions to govern all listed and unlisted companies in the country. The CA2013 is partially made effective w.e.f. 12^th September, 2013, by way of implementing 98 Sections and repealing the relevant sections corresponded with CA1956. Some of the Salient features of the CA2013 are as under:

1. Democracy of Shareholders: The CA2013 has introduced new concept of class action suits with a view of making shareholders and other stakeholders, more informed and knowledgeable about their rights.
2. Supremacy of Shareholders: The CA2013 focused and provide major aspect on approvals from shareholders on various significant transactions. The Government has rightly reduced the need for the companies to seek approvals to managerial remuneration and the shareholders have been vested with the power to sanction the limit.
3. Strengthening Women Contributions through Board Room:The CA2013 stipulates appointment of at least one woman Director on the Board of the prescribed class of Companies so as to widen the talent pool enabling big Corporates to benefit from diversified backgrounds with different viewpoints.
4. Corporate Social Responsibility: The CA2013 stipulates certain class of Companies to spend a certain amount of money every year on activities/initiatives reflecting Corporate Social Responsibility.  There may be difficulties in implementing in the initial years but this measure would help in improving the Under-privileged & backward sections of Society and the Corporate would in fact gain in terms of their reputation and image in the Society.
5. National Company Law Tribunal: The CA2013 introduced National Company Law Tribunal and the National Company Law Appellate Tribunal to replace the Company Law Board and Board for Industrial and Financial Reconstruction. They would relieve the Courts of their burden while simultaneously providing specialized justice.
6. Fast Track Mergers: The CA2013 proposes a fast track and simplified procedure for mergers and amalgamations of certain class of companies such as holding and subsidiary, and small companies after obtaining approval of the Indian government.
7. Cross Border Mergers:The CA2013 permits cross border mergers, both ways; a foreign company merging with an India Company and vice versa but with prior permission of RBI.
8. Prohibition on forward dealings and insider trading: The CA2013 prohibits directors and key managerial personnel from purchasing call and put options of shares of the company, its holding company and its subsidiary and associate companies as if such person is reasonably expected to have access to price-sensitive information (being information which, if published, is likely to affect the price of the company's securities).  Earlier these provisions were contained in regulations framed by SEBI, as the capital market regulator. Now, it has also been informed that SEBI is expected to discuss changes in certain norms for listed firms so as to make them in line with the rules in the new Act.
9. Increase in number of Shareholders: The CA 2013 increased the number of maximum shareholders in a private company from 50 to 200.
10. Limit on Maximum Partners: The maximum number of persons/partners in any association/partnership may be upto such number as may be prescribed but not exceeding one hundred. This restriction will not apply to an association or partnership, constituted by professionals like lawyer, chartered accountants, company secretaries, etc. who are governed by their special laws. Under the CA1956, there was a limit of maximum 20 persons/partners and there was no exemption granted to the professionals.
11. One Person Company: The CA2013 provides new form of private company, i.e., one person company is introduced that may have only one director and one shareholder. The CA1956 requires minimum two shareholders and two directors in case of a private company.
12. Entrenchment in Articles of Association: The CA2013 provides for entrenchment of articles of association have been introduced.
13. Electronic Mode: The CA2013 proposed E-Governance for various company processes like maintenance and inspection of documents in electronic form, option of keeping of books of accounts in electronic form, financial statements to be placed on company's website, etc.
14. Restriction on Composition: Every company shall have at least one director who has stayed in India for a total period of not less than 182 (one hundred and eighty two) days in the previous calendar year.
15. Independent Directors: The CA2013 provides that all listed companies should have at least one-third of the Board as independent directors. Such other class or classes of public companies as may be prescribed by the Central Government shall also be required to appoint independent directors. No independent director shall hold office for more than two consecutive terms of five years.
16. Serving Notice of Board Meeting: The CA2013 requires at least seven days' notice to call a board meeting. The notice may be sent by electronic means to every director at his address registered with the company. The CA1956 did not prescribe any notice period to call the board meeting of a company.
17. Duties of Director defined: Under the CA1956, a director had fiduciary duties towards a company. However, the CA2013 has NOW defined the duties of a director.
18. Liability on Directors and Officers: The CA2013 does not restrict an Indian company from indemnifying its directors and officers like the CA1956.
19. Rotation of Auditors: The CA2013 provides for rotation of auditors and audit firms in case of publicly traded companies.
20. Auditors performing Non-Audit Services: The CA2013 prohibits Auditors from performing non-audit services to the company where they are auditor to ensure independence and accountability of auditor.  
21. Financial Year: Every company's financial year will be the period ending on 31 March every year.
22. Rehabilitation and Liquidation Process: The entire rehabilitation and liquidation process of the companies in financial crisis has been made time bound under CA2013.

Source: .http://www.mondaq.com/india/x/270182/Corporate+Commercial+Law/Indian+Companies+Act+2013+A+New+Beginning

Formal Contract before starting new business

Starting a new venture is exciting and once an entrepreneur makes some headway, he is so overjoyed at the prospect of doing business for the first time that he often makes one cardinal error - failure to get into a binding contract with his clients. Sure, initial clients usually come from past networking relationships or as referrals. But that's' no reason to skirt formalities.

The absence of a contract can delay payments and lead to even bigger problems, where a bigger client may not pay up at all! There have been instances where small business owners have had to shut shop because they could neither recover payments from clients nor afford an expensive legal battle.

"Failure of clients to pay up on time or not at all is one of the main reasons for the failure of start-ups in India." The threat of legal action often does the trick with errant clients but this needs the backing of a formal contract."

Here are the whys and wherefores of a formal contract.

1. FIRST, DETERMINE THE TERMS

A business contract must clearly spell out details such as the nature of services provided; the benchmark against which work will be evaluated; and, most importantly, the mode, manner and time of payment. There is no place for vague terms such as 'reasonable time frame' or 'subject to satisfaction'. Other critical details are terms of dispute resolution and termination of the contract. Start-ups tend to ignore the latter two terms as they want to turn a blind eye to the possibility of unpleasant developments or are naïve enough to believe that things will not go awry.

2. SEEK LEGAL COUNSEL

While all this sounds simple enough, one needs a thorough grounding in the Indian judicial system to actually draw up a contract. And, no, the Internet is no substitute for hiring legal counsel. Unfortunately, the Indian legal system does not have separate legislation for start-ups and treats all businesses alike. This is why a bigger company with more experience can stamp out a smaller, first-time entrepreneur if there are loopholes in the contract or, worse still, if there is no formal contract at all!

3. SAFEGUARD INTELLECTUAL PROPERTY

An entrepreneur is unlikely to know about the Indian Contract Act, which must be adhered to while drawing up any contract. Laws pertaining to Intellectual Property (IP) must always be kept in mind, especially if your start-up is in the creative field or any other IP-sensitive business.

4. HIRE AFFORDABLE LEGAL COUNSEL

A formal contract is the very basis of a business agreement. "These documents should be considered the core of the relationship between a start-up and its client, an advisor, employee or investor,". Therefore, it is mandatory to seek legal advice, which should be budgeted for at the planning stage.

So, regardless of how small your business is, make sure you enter into a formal contract before you shake on a deal. At the very least, your professional approach from day one will win you brownie points with angel investors and venture capitalists at a later stage!

Source: Gargi Banerjee, Moneycontrol

Guide to Incorporate Company in India

For setting up a business establishment in India, first step is to incorporate a company whether a private limited or a public limited, which includes:

ü      obtaining director identification number (DIN),

ü      obtaining digital signature certificate,

ü      reserving the company name with the Registrar of Companies (ROC),

ü      paying stamp duties

ü      filing all incorporation forms and documents  and

ü      obtaining the certificate of incorporation.

Thereafter, it is required to get the other necessary formalities done such as:

ü      Company seal

ü      Permanent Account Number (PAN).

Based on the nature of business, it may further be required to obtain a

Tax Account Number (TAN) come taxes deducted at source (TDS).

Subsequently, depending upon the nature of business additional requirements may include

ü      registration for Value Added tax (VAT),

ü      registration with Employees' Provident Fund Organization,

ü      registration for medical insurance (ESIC)

For incorporating a company in India, there is a series of steps required for incorporating a private or public limited company in India. These steps work according to the guidelines provided by The Company’s Act, 1956.

1. The very first step of formation for incorporating a company is to get the name of the company registered at the Registered of Companies (ROC) in the territory of the company’s registered office. The company’s name should not match any existing name. ROC at least takes a week from the date of registration of the name to assure that the name does not exist before.

2. After the completion of this process, the company has to file a Memorandum of Association and Articles of Association with ROC itself. For a public company, the company’s name should end up with “Limited” and for a private company; the company’s name should end up with “Private Ltd”.

3. After submitting the Memorandum of Association and Articles of Association, ROC issues an incorporated certificate only after receiving a mandatory registration fees.

4. After these steps, the next main step is to get the address of the registered office. It is not mandatory for the registered office to be the same building from where all the work is being carried out.

5. Foreign companies need to fill up a FNV-5 form with the Reserve Bank of India to get the permission to start the manufacturing and trading activities in India without an Indian partner. Any Indian or foreigner can be the director of a company in India. Any person whether he/she is Indian or foreigner and any Indian company or foreign company can be shareholder of an Indian company.

6. For incorporating a Public Company, a minimum of three directors and seven shareholders are required and for incorporating Private Company, a minimum of two directors and two shareholders are required.

7. After the registration and certification, each company needs to designate an Auditor. He has a very important duty to perform in the company. All the balance sheets, company’s documents and company’s meetings are scrutinized by him.

8. Every company should have an account book and written records of all the directors, shareholders and the employees. Account book takes care of all income, including profits and losses and the records register takes care of all the past and present work of the people associated with the company.

9. At last, each company should have a different logo, and a stamp of that logo which is imprinted on each written record and each written document of the company. 

Agarwal and Company Law Offices LLP.