Significant highlights include:
The financial year for companies now has to compulsorily be from 1 April to 31 March.
* Where a holding company or a subsidiary of a company incorporated outside India is required to follow a different financial year for consolidation of its accounts outside India, the approval of the tribunal could be obtained for not following the April to March year.
* Existing companies have up to two years to align their financial year with the one prescribed above.
All the companies are now required to have at least one resident director on the board (Resident Director is defined as a person who has stayed in India for a total period of not less than 182 days in the previous calendar year).
Commencement of business -Concerning the set-up of new subsidiaries in India, a company having a share capital shall not commence business unless a declaration is filled with Registrar of Companies stating that:
* Every subscriber/member to the memorandum has paid the value of shares agreed to be taken.
* The share capital of the company is not less than INR 1,00,000, in case of a private company, on the date of declaration.
* The company has filed with the Registrar the verification of its registered office.
For the first time, duties of directors have been defined in section 166 of the Indian Companies Act. If a director of the company contravenes the provisions of this section, such director shall be punishable with fine.
New definitions are introduced which include Accounting Standards, Auditing Standards, Books Of Accounts, Deposits, Financial Year, Foreign Company, One Person Company, Small Company, etc.
As per the Companies Act, 2013 the Annual General Meetings of a company shall be held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situated.
The concept of “Small Companies” have been introduced which shall be subject to a less stringent regulatory framework.
The concept of One Person Company (OPC limited) has been introduced. Such companies can only be set up by resident Indian citizens.
All companies are now required to observe secretarial standards with respect to general and Board meetings. They are required to report to the Board about compliance.
A director may resign from his office by giving notice in writing. The resigning director is also required to forward a copy of the resignation, along with detailed reasons for the resignation, to the Registrar within 30 days of resignation.
An auditors’ term of appointment may extend up to one term of five years in case of an individual auditor and up to two terms of five years for an audit firm.
The new Act could entail revision of Existing Memorandum and Articles of Associations of companies, to bring them in line with the new provisions.
Cash Flow Statements have been formally recognized to be a part of financial statements.
The format of the Annual Return has been substantially modified. The new Annual Return seeks more information and includes extensive disclosures.
Board’s Report has been made more informative and includes extensive disclosures.
The new law is aimed at easing the process of doing business in the country and improving corporate governance. Companies with operations in India are advised to carry out a thorough analysis of the new provisions and ensure total compliance (e.g. requirements of aligning their financial year, having a resident director, paying up minimum capital, etc.)
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