COMPARISON OF THE NEW & OLD

COMPANY LAW
By: Saugata Palit
 BACKGROUND
• The Companies Act, 2013 (2013 Act) was
assented by the President of India on 29 August
2013 and published in the Official Gazette on 30
August 2013.

• The 2013 Act has been developed with a view to

enhance self–regulation, encourage corporate
democracy and reduce the number of required
Government approvals.
 PRIVATE COMPANY [Sec 2(68)ii]
Old Company law New Company Law

• Minimum number of members • Muinimum number of

required is 2 and maximum
restricted to 50.
members required remains
unchanged but the maximum
number increased to
200(excluding the employees
of the company).
 ONE PERSON COMPANY[Sec 2(62)]
Old Company law New Company Law

• No such company existed • One Person Company means a

earlier. company which has only one
member
• An OPC can be formed under
any of below categories :
▫ Company limited by
guarantee.
▫ Company limited by shares
 SMALL COMPANY [Sec 2(85)]
Old Company law New Company Law

• No such provision existed • paid up share capital of which

earlier. does not exceed fifty lakh
rupees or such higher amount as
may be prescribed which shall
not be more than five crores
rupees
• turnover of which as per its last
profit and loss account does
not exceed two crore rupees or
such higher amount as may be
prescribed which shall not be
more than twenty crore rupees
 DORMANT COMPANY[Sec 455]
Old Company law
• There was no relaxation under
the law to treat them at a
different footing than the
active Companies of the same
class. They were required to
file forms as usual, hold board
meetings at prescribed
intervals and so on so forth.
New Company Law
• Dormant status does not come
automatically. An application
for the same has to be made as
stated herein for obtaining the
status of Dormant Company.
• Maximum Period to continue
with status of Dormant
Company is 5 years.
 DIRECTORS OF THE COMPANY
• A director of a company can be resident or non-resident

• Where no provision is made in the AOA of the company for

the appointment of the first director, the subscribers to the
MOA who are individuals are deemed to be the first directors
of the company and in case of OPC an individual being
member is deemed to be its first director

• No person shall be appointed as a director of a Company

unless he has been allotted DIN
 NUMBER OF DIRECTORS IN A COMPANY
Old Company law New Company Law

• Minimum number of directors • Minimum number for both

for a public company is 3 and public and private companies
for a private company 2. remains the same and for an
OPC is 1.
• Maximum number 12
• Maximum number is 15.
 NUMBER OF DIRECTORSHIPS A PERSON
CAN HOLD
Old Company law New Company Law

• Maximum number was 15. • Maximum number is 20.

• The maximum number of

public companies (including
private companies that are
either holding or subsidiary of
a public company) in which a
person can be appointed as a
director cannot exceed 10.
 RESIDENT DIRECTOR
Old Company law New Company Law

• No such requirement was • 1 of the directors who is

there. resident in India i.e. a person
who has stayed in India for at
least 182 days or more in the
previous calendar year.
 WOMAN DIRECTOR
Old Company law New Company Law

• No such provision existed. • Such prescribed class of

companies as mentioned to
have at least 1 woman director.
 INDEPENDENT DIRECTORS
[clause 149(5)]
Old Company law New Company Law

• No such clause existed. • Every listed public company to

have at least one-third of the
total directors as independent
directors.
PROSPECTUS AND
ALLOTMENT OF SECURITIES
PROSPECTUS AND ALLOTMENT OF
SECURITIES
Old Company law
This is a new provision and no
corresponding section could be
found
New Company Law
• It provide the way in which
public or private co may issue
securities
• It is to be noted that section
23(a) and 23(b) are not yet
specified
 23(a)- private placement of
shares by public companies
 23(b)- issue of shares by
private companies
POWER OF SEBI

Old Company law New Company law

• Powers of SEBI • It provides the provision for
administration and regulation
of SEBI in relation to:
▫ Issue and transfer of
securities
▫ Non payment of dividend
• By listed companies, or those
companies which intends to
get their stocks listed
• Scope widened
DOCUMENT CONTAINING OFFER OF SECURITIES FOR
SALE TO BE DEEMED PROSPECTUS
Old Company law
• Document containing offer of
shares or debentures for sale
to be deemed prospectus
New Company law
• Any document which the offer
for sale of securities is made to
the public, it shall, be deemed
to be a prospectus and all
sections for the same, shall be
applicable to it
• It is to be noted that section
25(3) has been notified
• This sub section brings out
additional info in the
prospectus
PUBLIC OFFER OF SEC TO BE IN DEMAT
Old Company law
• Applicable to every listed co
making an initial public offer
of any security for a sum of rs
10 crores and more
New Company law
• Applicable to every company
making public offer and such
other class of public
companies as may be
prescribed
• Other co may issue securities
in physical or demat form
ADVERTISE-MENT OF PROSPECTUS
Old Company law
• Where any prospectus is
published as a newspaper
ad, it can do away with
specification of the contents of
memorandum or signatories
thereto or the no of shares
subscribed by them
New Company law
• Ad of prospectus published in
any manner shall specify the
contents of its MOA : and
▫ Objects
▫ Liability of members
▫ Share capital
▫ Subscriber details
▫ Capital structure
SHELF PROSPECTUS
Old Company law
• Only public financial
institutions public sector or
scheduled banks whose main
object is financung is allowed
to issue SP
New Company law
• Any class of companies
prescribed by SEBI may file SP
with ROC
▫ At the stage of 1 year of
securities
▫ Period of validity of 1 year
▫ Date of opening becomes
commencing date
• Prior to any subsequent offer
under which SP, co to file with
ROC
• Option to refund money
RED HERRING PROSPECTUS

Old Company law New Company law

• Information Memorandom • IM now RHP
(IM) • Co proposing to make an offer
of securities
• Rhp may be issued prior to
issue of prospectus
• RHP to be filled with roc
atleast 3 days prior to opening
of subscription of list and offer
• Upon closing of the offer the
details of information to be
lied with ROC and SEBI
ISSUE OF APPLICATION FORMS FOR SECURITIES.

Old Company law New Company law

• Matters to be stated and • Every form of application
reports to be set out in issued for purchase of any
prospectus securities shall be
• New section corresponds to accomplished by an abridged
sec56(3) prospectus
• Form was required to be • Talks about abridged
accompanied by memorandum prospectus
containing such salient • Section 33(a) has been notified
features of prospectus was ▫ This sub case brings out the
prescribed provision for penalties in
case of default
CRIMINAL LIABILITY FOR MIS STATEMENT IN
PROSPECTUS
Old Company law
• Earlier Penal provision was
only for untrue statements
only
New Company law
• Any statement which is untrue
or misleading in form of context
or inclusion or omission likely to
mislead
• Section 447 (punishment for
fraud) invoked
• Persons who have authorized
the issue of such prospectus
shall also be criminally liable
• Escape mechanism if the person
can prove that such statement or
omission was
▫ Immaterial
▫ Had reasonable ground to
believe
CIVIL LIABILITY FOR MIS STATEMENT IN
PROSPECTUS
Old Company law
• The option to withdraw on
becoming aware of any untrue
statement after issue of
prospectus and before
allotment has been dispensed
with-Sec 62(3)(b)
New Company law
• Civil liability in case of
prospectus issued for all types of
securities
• Where prospectus issued with
an intention to defraud every
person liable under this section
shall be personally liable
without any limitation for the
loses incurred for the loses
incurred by any person who has
subscribed
• It is to be noted that section
35(1)(e) which deals with
inclusion of experts in the gamut
has not been notified
ALLOTMENT OF SECURITIES BY
COMPANIES
Old Company law
• Prohibition of Allotment
unless Minimum Subscription
Recd (Sec 69)
• Return as to Allotments (Sec
75)
• Only pertaining to Shares
New Company law
• Where no minimum amount has
been subscribed and money
received the amount needs to be
refunded to all applicants within
30 days from date of issue of
prospectus
• Co. having a share capital on
allotment of securities (earlier
only shares) file a return of
allotment with ROC
• Rs 1000/- penalty for each day
of continuing default
• It is to be noted that section
39(4) relating to Return of
Allotment has not been notified.
AUDITING STANDARD IN INDIA
 AUDITING STANDARDS IN INDIA

Old Company law New Company Law

Section 224: • Mandatory auditor rotation and

joint auditors
• No provision related to rotation of
auditor. • Non-audit services
Section 226:
• A person shall be CA or firm of CA • . The 2013 Act now moves a step
Internal audit: forward and mandates the
appointment of an internal auditor
• No provision except reference in who shall either be a chartered
CARO. accountant or a cost accountant, or
such other professional as may be
decided by the Board to conduct
internal audit of the functions and
activities of the company
Old Company law
Section 227:
• every auditor of a company shall
have a right of access at all times to
the books of account and vouchers of
the company.
• CARO required to report on internal
control matter relating to the
inventory, fixed assets and sale of
goods and services.
• CARO required to report of any fraud
on or by the company has been
noticed or reported during the year.
New Company Law
Auditing standards:
• The Standards on Auditing have
been accorded legal sanctity in
the 2013 Act and would be
subject to notification by the
NFRA. Auditors are now
mandatorily bound by the 2013
Act to ensure compliance with
Standards on Auditing.
MERGERS & AQUSITIONS
Comparison of the Old & New Company
Law
Old Company law
• . Under the Companies Act 1956
section 230 any shareholder, creditor
or any ‘interested party’ may object to
the scheme of the arrangement before
a Court if he thinks that that the
proposed scheme is adverse to his
interests.
New Company Law
• According to the new law, a person
must hold at-least 10 % shares or at
least 5% of the total debt outstanding
to the company in order to object to a
merger.

• The new Companies Act, 2012 allows

• 2. Under the Companies Act for merger both ways as this would
1956, foreign companies could be
encourage cross border transactions.
amalgamated into an Indian
company, but the reverse is not
permissible i.e. an Indian company
cannot merge with a foreign
company.
 Old Company law
• Under Old companies law,
schemes of arrangement have to
be mandatorily approved by the
High Court which has jurisdiction
over the concerned companies
involved but this procedure was
too long.
• Under the old companies law, no
takeover can be a part of any
compromise or arrangement
involving a merger or
amalgamation.
New Company Law
• But the New law grants jurisdiction to
the National Comapny Law Tribunal
which has been established to curb
the time taken to approve the schemes
of arrangement and would lead to
greater efficiency, fairness and apt
regulation.
• But, under the new act, a scheme of
compromise or arrangement involving
a merger/amalgamation may include
a takeover offer.
 Corporate Social Responsibility
Under the companies act 1956, there was no provision for CSR initiatives but the
New companies act 2012 made CSR compulsory for the companies :-

•Having net worth of rupees 500 crore or more, or turnover of rupees 1000 crore or
more.

•A net profit of rupees 5 crore or more during any financial year.

•Every financial year atleast 2% of the average net profits of last 3 years to be spent
on CSR activities, otherwise reason for not spending to be given in Board's Report.

•Every qualifying company has to appoint a CSR Committee to formulate and

recommend a CSR policy and its working also.
POWER TO REMOVE DIFFICULTIES
POWER TO REMOVE DIFFICULTIES
• The central government will have the power to
exempt or modify provisions of the 2013 Act for
a class or classes of companies in public interest.
• Relevant notification shall be required to be laid
in draft form in Parliament for a period of 30
days.
• The2013 Act further states no such order shall
be made after the expiry of a period of five years
from the date of commencement of section 1 of
the 2013 Act [section 470 of 2013 Act].
INSIDER TRADING AND PROHIBITION ON
FORWARD DEALINGS
• The 2013 Act for the first time defines
‘insider trading and price-sensitive
information and prohibits any person
including the director or key managerial
person from entering into insider trading
[section 195 of 2013 Act].
It is generally understood that insider trading includes the
following:

• Trading by insiders while in possession of unpublished

price sensitive information;

• Trading by persons other than insiders while in

possession of unpublished price sensitive information
where the information either was given in breach of an
insider’s fiduciary duty to keep it confidential ;

• Communicating or tipping material, non-public

information to others, including recommending the
purchase or sale of a security while in possession of such
information.
INFORMATION TO SEBI IN CASE OF
VIOLATION OF SEBI (PROHIBITION OF
INSIDER TRADING) REGULATIONS,
1992
• In case it is observed by the Compliance Officer
that there has been a violation of the Regulations
by any Specified Person/ an Employee, he/she
shall forthwith inform the the Board as the case
may be about the violation.
• The penal action will be initiated on
obtaining suitable directions from the
Board, as the case may be
REGULATORY
 REGULATORY

• NCLT

• NFRA

• SFIO
 NCLT
• The MCA has setup the National Company Law Tribunal
which is a single window institution for corporate justice.

• A number of quasi-judicial forums and tribunals like Debts

Recovery Tribunal (DRT), Securities Appellate Tribunal
(SAT), Company Law Board (CLB), Board for Industrial and
Financial Reconstruction (BIFR) were established to provide
speedier and specialized fora for dispensation of justice.

• Therewith including approval for merger, corporate

reorganization , capital reduction , extension of final year etc.

• NCLT was needed considering the laws on corporate

insolvency and other such provisions with regards to company
law prevailing in industrially advanced countries
 MERITS OF NCLT
•DEPTH

•SPEED
 NFRA
• Through Section 132 of the Companies Act, 2013,
the Central Government has introduced a new
regulatory authority named as National Authority
for Financial Reporting known as National Financial
Reporting Authority (NFRA) with wide powers to
recommended, enforce and monitor the compliance
of accounting and auditing standards.

• NFRA shall be responsible for monitoring and

enforcing compliance of auditing and accounting
standards and for that purpose, oversee the quality
of professions associated with ensuring such
compliances.
The Objectives of National Financial
Reporting Authority
• Make recommendations on formulation of accounting
and auditing policies and standards for adoption by
companies, class of companies or their auditors;
• Monitor and enforce the compliance with accounting
standards, monitor and enforce the compliance with
auditing standards;
• Oversee the quality of service of professionals associated
with ensuring compliance with such standards and
suggest measures required for improvement in quality of
service
• Perform such other functions as may be prescribed in
relation to aforementioned objectives.
 SFIO
The Serious Fraud Investigation Office (SFIO) is an
organization working under Ministry of Corporate
Affairs. The office was established by the
Government of India Resolution dated 2003 to
investigate corporate frauds. The SFIO is a multi-
disciplinary organization under Ministry of
Corporate Affairs, consisting of experts in the field
of accountancy, forensic auditing, law, information
technology, investigation, company law, capital
market and taxation for detecting and prosecuting
or recommending for prosecution white-collar
crimes/frauds
The SFIO will normally take up for
investigation only such cases, which
are characterized by:
The possibility of investigation
leading to or contributing towards a
clear improvement in systems, laws
or procedures. The SFIO shall
investigate serious cases of fraud
received from Department of
company Affairs.
The SFIO shall be headed by a
Director and consist of experts of
following fields
• Banking,
• Corporate Affairs,
• Taxation,
• Forensic auditing,
• Capital Market,
• Information Technology,
• Law, or (here as ‘or’ and ‘and’ both)
• Other fields.
References
• Wikipedia

• Youtube

• MCA official website

• Economic Times official website

THANK YOU