#companies act 2013

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The Companies Act 2013 is one of the most significant pieces of legislation in India’s corporate sector, replacing the outdated Companies Act of 1956. The act introduced several reforms aimed at improving corporate governance, ensuring transparency, protecting minority shareholders, and making business operations smoother. The act is extensive and touches upon various critical aspects of a company’s functioning. In this blog, we will explore the 25 key provisions of the Companies Act 2013, delving into each with its subpoints and detailed explanations. Each provision brings clarity to an aspect of corporate operations, ensuring that companies adhere to the best practices of transparency and accountability.

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After Companies Act, 2013 and the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 came into force

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Significance of Meetings in the Effective Governance of the Companies with Special Reference to AGM & EGM under the Companies Act," 2013

This Article is written by Ravi Kumar, an LLM student at Hidayatullah National Law University, Raipur. The purpose of this article is to know and understand the Significance of Meetings in the Effective Governance of Companies with Special Reference to AGM & EGM under the Companies Act,” 2013 ABSTRACT The EGM (Extraordinary General Meeting) and AGM (Annual General Meeting) are crucial corporate…

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General Circular No. 06/2015: Clarification under sub-section 7 of Section 186 of the Companies Act 2013

Attention of this Ministry has been drawn to General Circular No 06/2013 dated 14.03.2013 vide which it was clarified that in cases where the effective yield (effective rate of return) on tax-free bonds is greater than theyield on prevailing bank rate, there was no violation of Section 372A(3) of Companies Act, 1956. Stakeholders have requested for similar clarification w.r.t. corresponding…

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Here's that scene that @paulgadzikowski mentioned in this post

Where, in Shakespeare's day, the female love interest would have been played by a boy. That boy is playing a woman who is pretending to be a man, telling the man she's in love with that she will pretend to be the woman he's in love with (who is actually herself).

This is a "modernized" version from the Royal Shakespeare Company, from 2013. One of the major themes of the play (if not the theme) is escaping the artificially of The Court to run away to the forest and discover your true nature (which is ironic, since the main protagonist has to disguise her true nature in order to avoid the dangers of assault outside the walls of the royal palace, noting that she's running away because it's even more dangerous inside the palace). The original is an homage to the Robin Hood stories, and here, they've gone full "Bohemian"/hippie, and are smoking pot.

Some (incidental) eye contact. Proper closed captions.

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Effective governance is essential for sustainable growth in today's corporate environment, with directors playing a critical role in directing organizations toward their objectives. The Act guarantees directors are fairly compensated without jeopardizing the company's financial stability by laying out precise rules and limitations. This article examines the complex provisions of the Act, emphasizing the procedures, specifications, and effects on Indian companies.

THE IMPORTANCE OF DIRECTOR REMUNERATION

Beyond just paying directors a salary, director remuneration is a strategic tool that helps match their interests with the long-term objectives of the company and the expectations of shareholders. Talented leaders are essential to guiding the organization toward expansion and success, and they can be drawn to and kept in place by an attractive compensation plan. These benefits packages, which guarantee that directors are incentivized to increase company value, frequently combine fixed salaries, bonuses, stock options, and performance-linked incentives. Companies incentivize directors to make decisions that are advantageous to the organization and its stakeholders by tying compensation to performance metrics. This alignment promotes an excellence and accountability-focused culture while reducing risks. Transparent compensation policies also enhance the company's reputation by fostering investor trust.

STATUTES AND SECTIONS THAT APPLY

The Companies Act, 2013, sets forth detailed guidelines to ensure director remuneration is fair, reasonable, and aligned with the company’s financial performance.

Key Sections

Section 197: Overall Ceiling on Remuneration

Section 197 outlines the limits on managerial remuneration for public companies, ensuring that excessive payments do not compromise a company’s financial stability.

In any given fiscal year, the total compensation paid to managers cannot surpass 11% of the company's net profits. The net profits will be calculated using the formula specified in section 198 for the purposes of this section. The total compensation for a managing director, full-time director, or manager cannot exceed 5% of the company's net profits; if there are multiple such directors, the total compensation for all such directors and managers cannot exceed 10% of the net profits.

The compensation that is payable to directors who are neither managing directors nor full-time directors may not exceed, unless authorized by the company at a general meeting.

— 1% of the business's net profits, in the event that a managing or full-time director or manager is present.

— In all other cases, 3% of net profits. The aforementioned percentages do not include any fees that directors may be required to pay in order to attend board or committee meetings or for other purposes that the board may determine.

Section 198: Computation of Net Profits

Section 198 of the Companies Act, 2013, outlines the methodology for calculating net profits, which serves as the basis for determining the ceiling on managerial remuneration. It specifies inclusions and exclusions for profit computation, ensuring accurate and fair assessment. This section excludes certain incomes, such as capital receipts and revaluation gains, while allowing deductions for normal business expenses. The calculated net profits ensure that director remuneration aligns with the company’s financial performance and legal requirements.

Schedule V: Conditions for Payment without Government Approval

Schedule V specifies conditions under which remuneration can be paid without the central government’s approval, provided the company complies with certain criteria.

He hadn't been found guilty of a crime and given a lengthy prison sentence or a fine greater than a thousand rupees.

The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974) had not resulted in his detention at any point.

He is twenty-one years old now and has not reached the age of seventy:

He must be a resident of India.

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Section 54 of Companies Act 2013. Issue of sweat equity shares

Overview: “(1) Notwithstanding anything contained in section 53, a company may issue sweat equity shares of a class of shares already issued, if the following conditions are fulfilled, namely: —

(a) the issue is authorised by a special resolution passed by the company;

(b) the resolution specifies the number of shares, the current market price, consideration, if any, and the class or classes of  directors or employees to whom such equity shares are to be issued;

(c)  ***

(d) where the equity shares of the company are listed on a  recognised stock exchange , the sweat equity shares are issued in accordance with the regulations made by the  Securities and Exchange Board in this behalf and if they are not so listed, the sweat equity shares are issued in accordance with such rules as may be prescribed.

(2) The rights, limitations, restrictions and provisions as are for the time being applicable to equity shares shall be applicable to the sweat equity shares issued under this section and the holders of such shares shall rank pari passu with other equity shareholders.”

Read More- Section 54 of Companies Act 2013

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How to Appoint and Remove Directors under the Companies Act 2013

The blog post outlines the procedures for appointing and removing directors under the Companies Act 2013, emphasizing directors' crucial roles, duties, and responsibilities in corporate governance. It also discusses eligibility criteria, appointment processes, and director compensation.

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Private Companies Exemptions Under the Companies Act, 2013

Discover the myriad exemptions available to private limited companies under the Companies Act, 2013, from related party transactions to board resolutions, making it an appealing option for startups and existing firms alike.

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Section 33 Of Companies Act 2013: Understanding Directorship Provisions

Section 33 of the Companies Act 2013 outlines the provisions related to the appointment, resignation, and removal of directors in Indian companies. It sets forth the requirements and procedures for the appointment of directors, ensuring transparency, accountability, and good governance within corporate entities.

Purpose and Scope of Section 33

The primary purpose of Section 33 is to regulate the composition of the board of directors and establish guidelines for the appointment, resignation, and removal of directors. It aims to ensure that qualified individuals are appointed to key leadership positions within companies and that the interests of shareholders and stakeholders are protected.

Requirements for Appointment of Directors

Minimum and Maximum Number of Directors

Every company is required to have a minimum number of directors based on its type and structure. Private limited companies must have a minimum of two directors, while public limited companies must have at least three directors. There is also a maximum limit on the number of directors that can be appointed, as prescribed by the Articles of Association.

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The Right to Information Act, 2005 (RTI Act) is a landmark piece of legislation in India designed to promote transparency and accountability in the functioning of public authorities. Enacted by the Indian Parliament, the Act empowers Indian citizens to request information from public authorities, thus fostering an environment of openness in governance and administration.

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What is Information Memorandum (IM)?

To Section 31 of Companies Act 2013, companies that use a shelf prospectus for multiple securities issuances are mandatory to file an Information Memorandum (Form PAS-2) under specific circumstances. This needs to be done when there are material changes in the company’s financial position between the first prospectus filing and subsequent offerings under the same shelf prospectus.

Here, an Information Memorandum is required in the shelf prospectus when the second, third, and fourth issuances are made. The filing deadline for it shall be one month before the subsequent securities offering. The Information Memorandum must be attested by the Registrar of Companies (ROC), the Securities and Exchange Board of India (SEBI), and either the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE) To ensure compliance procedure. The applicable fee for filing the IM is currently set at ₹200,  as per relevant MCA Notifications. The Information Memorandum serves as a critical legal compliance to ensure transparency and investor protection when utilizing a shelf prospectus for multiple securities offerings.

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Different Types of Companies Under Companies Act 2013?

Explore the diverse landscape of business entities under India's Companies Act 2013. From liability-based distinctions to incorporation methods and membership criteria, this comprehensive guide navigates through 18 different types of companies, offering insights for entrepreneurs and investors.

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General Circular No. 04/2015:Clarification with regard to sections 185 and 186 of the Companies Act 2013

General Circular No. 04/2015:loans and advances to employees This Ministry has received a number of references seeking clarification on the applicability of provisions of section 186 of the Companies Act, 2013 relating to grant of loans and advances by Companies to their employees. The issue has been examined and it is hereby clarified that loans and/or advances made by the companies to thelr…

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Allotment Of Shares – Under Companies Act, 2013

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Section 91 of Companies Act 2013

Section 91 of Companies Act. Power to close the register of members, debenture holders, or other security holders.

“S91: (1) A company may close the register of members, the register of debenture holders, or the register of other security holders for any period or periods not exceeding in aggregate forty-five days in each year but not exceeding thirty days at any one time, subject to giving previous notice of at least seven days or such lesser period as may be specified by the Securities and Exchange Board for listed companies or the companies that intend to get their securities listed, in such manner as may be prescribed.

(2) If the register of members or of debenture holders or of other security holders is closed without giving the notice as provided in sub-section (1), or after giving shorter notice than that so provided, or for a continuous or aggregate period in excess of the limits specified in that sub-section, the company and every officer of the company who is in default shall be liable to a penalty of five thousand rupees for every day subject to a maximum of one lakh rupees during which the register is kept closed.”

Scope of Section 91 of Companies Act

The power for cancelling the transfer of the shares can be unseen by the closure of the register. An alternative to closing the registers is a record date. Closing the register serves to update the registers and set a deadline for the payment of dividends or the issuance of bonus shares and rights.

When to close the register of members?

When a company serving a prior notice not less than 7 days, or and if it’s listed company or such company intent to list their securities, a lower period may be specified by the Security & Exchange Board, close to member, debentures, or any other security holder register for any such period or periods not exceeding the 45 days in year, but not more than 3o times at a time.

Rule 10 of Companies (Management & Administration), 2014

When a company listing their securities or closing the membership, debentures, or other security register, it must give at least7 days’ notice & follows the procedure set forth by the Securities & Exchange Board of India. This procedure may include publishing and advertisement at least once in a local newspaper that is widely read in the company’s registered office location and its written in the primary vernacular the language of the district. 

And at least once in English in a newspaper published in that district that is widely read in the area where the company has its registered office. Additionally, the notice would be posted online as soon as the central government notifies it to be done. So, as well as on the company’s holder Additionally, the notice should be posted online as soon as the Central Government notifies it to be done so, as well as on the company’s website, if any.

A private corporation is exempt from the provisions of subrule (1) if notice has been given to all of its members at least seven days before the register of members, holders of debentures, and holders of other securities is closed.

To know more, Visit on: Section 91 Of Companies Act 2013 |

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