Companies Bill gets Parliamentary nod, finally

The Bill, which replaces 57-year old regulations, aims to protect interest of employees and small investors while encouraging firms to undertake social welfare voluntarily instead of imposing that through “inspector raj”

Two years after it was introduced in parliament, the Companies Bill, that enhances corporate accountability, introduces the concept of corporate social responsibility and encourages e-governance, was finally cleared by the Rajya Sabha on Thursday.


In December 2011, the Bill was introduced in the Lok Sabha by the then corporate affairs minister Veerappa Moily after he withdrew a similar legislation of 2009 on the ground that the revised measure incorporating several recommendations and suggestions made by the Parliamentary Standing Committee on Finance and various stakeholders.


For the first time, the Bill makes it mandatory for firms to maintain their documents in electronic format, introduces the concept of e-governance, makes provision for encouraging ethical corporate behaviour and rewards employees for their integrity.


Among the measures proposed in the fresh bill to enhance accountability are those, which provide for additional disclosure norms, facilitate raising of capital, mergers and acquisition and protection of investors and minority shareholders, the Statement on Objects and Reasons of the Bill said.


The original Companies Act was enacted way back in 1956 and has been in operation ever since.


In view of changes in the national and international economic environment and growth in the economy, the need was felt to enact a new law, it said.


The Companies Bill 2009 was then introduced in Parliament and sent to the Standing Committee, which presented its report in August 2010. A large number of recommendations were made by it and suggestions came in from several stakeholders.


Many of these were accepted by the government, which then decided to withdraw the 2009 measure and introduce a fresh legislation incorporating the recommendations.


The Companies Bill, 2013, is organized as 29 chapters, 470 clauses and 7 scheduled. Here’s a look at some of its key highlights. (Courtesy: Corporate Professionals (India) Pvt Ltd)


  1. A private company can have a maximum of 200 members, up from 50 in the Companies Act, 1956.
  2. The concept of One Person Company introduced. It will be a private limited company.
  3. Concept of dormant companies introduced. It can be formed for a future project or to hold an asset or intellectual property.
  4. All companies to follow uniform financial year, running from April to March. Exceptions to be made only for certain companies with the approval of NCLT.
  5. All types of securities to be governed by the Bill.
  6. The Prospectus has to be more detailed.
  7. Money raised through a prospectus cannot be used for dealing in equity shares of another company. If a company changes terms of the prospectus or objects for which money is raised, it shall provide dissenting shareholders an exit opportunity.
  8. ‘Private placement‘ defined, with detailed provisions for such placement.
  9. Apart from existing shareholders, if the Company having share capital at any time proposes to increase its subscribed capital by issue of further shares, such shares may also be offered to employees by way of ESOP, subject to the approval of shareholders by way of Special Resolution.
  10. NBFCs not covered by the provisions relating to acceptance of deposits. They will be governed by Reserve Bank of India Rules.
  11. Companies can accept deposits only from its members, that too after obtaining shareholders approval. Acceptance of deposit also subject to compliance with certain conditions.
  12. Public companies can accept deposit from public on complying certain conditions like credit rating.


  1. Listed companies required to file a return in a prescribed form with the Registrar regarding any change in the number of shares held by promoters and top 10 shareholders of such company, within 15 days of such change.
  2. Postal Ballot to be applicable to all the companies, whether listed or unlisted.
  3. Interim dividend in a current financial cannot exceed the average rate of dividend of the preceding three years if a company has incurred loss up to the end of the quarter immediately preceding the declaration of such dividend.
  4. Financial statements include Balance Sheet, Profit & Loss Account and cash flow statements.
  5. Provisions for re-opening or re-casting of the books of accounts of a company provided.
  6. The National Advisory Committee on Accounting Standards renamed as The National Financial Reporting Authority.
  7. The authority to advise on Auditing Standards and Accounting Standards.


  1. Every company is required at its first annual general meeting (AGM) to appoint an individual or a firm as an auditor. The auditor shall hold office from the conclusion of that meeting till the conclusion of its sixth AGM and thereafter till the conclusion of every sixth meeting. The appointment of the auditor is to be ratified at every AGM.
  2. Individual auditors are to be compulsorily rotated every 5 years and audit firm every 10 years in listed companies & certain other classes of companies, as may be prescribed.
  3. Auditors have to comply with Auditing Standards.
  4. A company’s auditor shall not provide, directly or indirectly, the specified services to the company, its holding and subsidiary company.
  5. A partner or partners of the audit firm and the firm shall be jointly and severally responsible for the liability, whether civil or criminal, as provided in this Bill or in any other law for the time being in force. If it is proved that the partner or partners of the audit firm has or have acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or its directors or officers, then such partner or partners of the firm shall also be punishable in the manner provided in clause 447.


  1. Prescribed class or classes of companies are required to appoint at least one woman director.
  2. At least one director should be a person who has stayed in India for a total period of not less than 182 days in the previous calendar year.
  3. At least one-third of the total number of directors of a listed public company should be independent directors. Existing companies to get a transition period of one year to comply.
  4. Liability of independent directors and non-executive directors not being promoter or key managerial personnel to be limited.
  5. A person can hold directorship of up to 20 companies, of which not more than 10 can be public companies.


  1. Companies with more than 1,000 shareholders, debenture-holders, deposit-holders and any other security holders at any time during a financial year to constitute a Stakeholders Relationship Committee, with a non-executive director as a chairperson and such other members as may be decided by the board.
  2. No permission of central government required to give a loan to a director.
  3. The provisions on inter-corporate loans and investment (372A of Companies Act 1956) extended to include loan and investment to any person.
  4. A company cannot, unless otherwise prescribed, make investment through more than 2 layers of investment companies.
  5. No central government approval required for entering into any related party transactions.
  6. No central government approval required for appointment of any director or any other person to any office or place of profit in the company or its subsidiary.
  7. Prohibition on forward dealings in securities of company by any director or key managerial personnel.
  8. Prohibiting insider trading in the company.
  9. No compromise or arrangement shall be sanctioned by the Tribunal unless a certificate by the Company’s Auditor has been filed with the Tribunal to the effect that the accounting treatment, if any, proposed in the scheme of compromise or arrangement is in conformity with the accounting standards prescribed under clause 133.
  10. Creation of treasury stock/trust shares is prohibited.
  11. Every listed company or such class or classes of companies, as may be prescribed, to establish a vigil mechanism.
  12. The Bill makes provision for cross border amalgamations between Indian Companies and companies incorporated in the jurisdictions of such countries as may be notified from time to time by the Central Government.


  1. The Bill provides provisions related to Corporate Social Responsibility (CSR).
  2. The Bill provides for class action suit by specified number of members or depositors against the company except the banking company, which is prevalent in developed countries.
  3. The Bill provides for specific provisions related to any act of fraud.
  4. The process for declaring a company sick and its revival and rehabilitation has been rationalized.
  5. The National Company Law Appellate Tribunal shall now consist of a combination of technical and judicial members not exceeding 11, instead of 2 as provided in the Companies Act 1956.
  6. The Central Government may establish as many special courts as may be necessary to provide speedy trial of offences.
  7. The Central Government may establish a mediation and conciliation panel.
  8. The Bill makes provision for cross border amalgamations between Indian companies and companies incorporated in the jurisdictions of such countries as may be notified from time to time by the central government.
  9. Where any valuation is required to be made of any property, stocks, shares, debentures, securities or goodwill or any other assets or net worth of a company or its liabilities under the Act, it shall be valued by a registered valuer.




nagesh kini

3 years ago

Thank God! It's through at last.
It was deliberately delayed by the business and audit professions because of the stringent provisions that were going to affect them.
When will the next long awaited DTC see the light of the day?

Govt to introduce new bill to amend SEBI Act

Just last month, the government had promulgated an ordinance amending the securities law that would provide more powers to SEBI and plans to introduce a new bill to replace the ordinance in the ongoing Monsoon session

The Indian government on Thursday withdrew a bill to amend the Securities and Exchange Board of India (SEBI) Act ahead of introduction of a new bill that would give more powers to the market regulator.


Finance minister P Chidambaram proposed in the Lok Sabha to withdraw the bill, which was introduced in March this year, to amend the SEBI Act. The proposal was passed by the House.


The withdrawn bill was passed by the Rajya Sabha on 11th March and was tabled in the Lok Sabha the next day.


In July, President Pranab Mukherjee had promulgated an ordinance amending the securities law that would provide more powers to the capital market watchdog.


The government plans to introduce a new bill replacing the ordinance in the ongoing Monsoon session.


With amendments, SEBI would have more powers to crack down on ponzi schemes, access phone call records to check insider trading and carry out search and seizure operations.


Last month, the government had said promulgation of the ordinance demonstrated its firm commitment and resolve to act with speed and alacrity to curb irregularities and frauds in securities market.


Tata Motors: Why is JLR success not being replicated in India?

Tata Motors unit Jaguar Land Rover is outperforming luxury brands like BMW, Audi and Mercedes overseas. However, on domestic front the Tata group company continues to report dwindling sales. Is it because the automaker is not experimenting with different, fresh designs?

Tata Motors, the country's largest vehicle maker, continued reporting disappointing sales performance. During July 2013, its overall sales fell 30% to 51,468 units. Its domestic medium and heavy commercial vehicle (MHCV) sales fell 28.5% to 9,758 units, while light commercial vehicle (LCV) declined 19% to 26,609 units. Tata Motor's domestic car sales fell 31%, while utility vehicle (UV) sales tumbled 56% taking its domestic passenger vehicle (PV) sales 60% down to 11,522 units from 26,908 units a year ago.


“The business was affected by a weak operating environment in the standalone business, but it was offset by strong demand, growth in volumes, richer product mix and favourable foreign exchange at Jaguar Land Rover (JLR),” the company said in a release.


During the June quarter, the Tata group company said its sales, including exports, fell 19% to 1.54 lakh units as weak macro-economic environment and competitive pressures on pricing, continued to affect the operations during the quarter.


Interestingly, while the Tata group company has taken a beating on the domestic front, its unit continued to report strong sales. During July 2013, JLR's US retail volume grew 31% to 5,663 units, outperforming other luxury OEMs like BMW, Audi and Mercedes. Jaguar volumes have increased by 59%, helped by the launch of new Jaguar F-Type and strong growth in XF and XJ models. Land Rover volumes have increased by 22%, led by strong improvement in Range Rover volumes, up 111% to 1,420 units.


Following strong response to its new products and powertrain options, Jaguar’s wholesale and retail volumes grew 57.8% and 28% to 18,577 units and 17,459 units, respectively during the first quarter.


The robust performance from JLR only shows that unless you keep introducing new models and not just keep adding variants, you would not be able to sell vehicles. And this applies to all automakers across the world. So the question is why Tata Motors is unable to replicate its JLR success story at its home ground?


It must be noted that after launching Nano, the world's cheapest small car, in 2009 the Tata group company has not launched any new, noteworthy model. Since the launch of the Indica in 1998, the company brought out variants like Indica V2, Indica V2 Turbo Diesel, Indica V2 Xeta and Indica Vista, but all these models have failed to maintain steady sales.


Passenger car sales at domestic front for Tata Motors have been lacklustre primarily due to softening of euphoria, as products like Indigo Manza and Vista are getting older. The company has not yet announced any new variant for the Indigo Manza launched in October 2009 or Indigo eCS launched in 2010, whereas the Indica Vista, though a low-cost car, is facing stiff competition from other players.


After receiving lacklustre response for its Aria, the high-end SUV, the company preferred to play safe. Instead of coming out with a new offering in SUV space, it stuck with its Safari range (launched in 1998) and launched new variants with few modifications. However, in an environment with stiff competition, over-dependence on its Safari model, which was never a top selling SUV in any case, is not going to help Tata Motors for too long. The company is even too reluctant to replace its old warhorse, the Sumo (launched in 1994) with a new model. Instead, it is coming out with new variants based on the same, old Sumo. By the way, do you remember Tata Sierra, a multi-utility vehicle with which Tata entered in passenger vehicle market in 1991 or Tata Estate, a station wagon launched in 1992?

While other carmakers are experimenting with different and fresh designs, Tata Motors is not ready to leave the 'bean shape' of the Indica. In fact, the company is so smitten by the 'bean theme' that it has expanded the bean shape in its other high-end models as well, including its SUV variant Aria. Even the Nano comes in a modified bean shape.


This is in contrast with other prominent players like Maruti Suzuki, the leader in PV segment and Mahindra & Mahindra (M&M), the leader in UV market. Maruti Suzuki, the unit of Japanese Suzuki Motor Corp, has at least one model in every segment based on price and design. It offers 15 models, Maruti 800, Alto, Maruti Alto 800, Wagon R, Estilo, A-star, Ritz, Swift, Swift DZire, SX4, Omni, Eeco, Gypsy, Grand Vitara, Kizashi and the newly launched Ertiga.


On the other hand, M&M, after tasting success with its Marshal, Commander, Armada and Bolero models, shifted gear with Scorpio, its SUV model. Even after the grand success of Scorpio, the company moved ahead and launched its high-end model XUV500, which is based on a completely new platform. At present, M&M sells over 20 types of vehicles, including SUV, cars, tractors, three and two wheelers.


On the other hand, Tata Motors continues to churn out products based on the same, old platform. For a company like Tata Motors this is surprising, especially, when it has majority stake in Italian design and engineering firm Trilix SRL.


After sticking to the bean shape for over 15 years (remember Indica was launched in 1998), it is high time for the Tata group company to move to other fresh designs, before someone starts comparing Tata cars with the everlasting (and unchanging but lovable) Ambassador from Hindustan Motors.




3 years ago

I agree in toto - the Tata car service network was out to fleece the Indica owners - and I really suffered at their hands.

My left front tyre would regularly get punctured and the dealer refused to anything - I asked him if they had escalated it to the company, still no response. When I ran into a company guy at the dealer network, he refused to give me his card or personal email ID !

Naturally, when I upgraded, I chose Swift Dzire instead of an Indigo Manza - which should have been the natural choice.


3 years ago

Their service sucks and marketing sucks. What do you expect?

Abhijit Gosavi

3 years ago

By how much has the Tata's share in the domestic market for cars shrunk?


3 years ago

The Indian car buyer has been bitten too often by Tata Motors' pathetic after sales service. This effect is probably rubbing off on JLR in India too. I see no hope for TML in the passenger car segment. They will continue to be cross-subsidized by the commercial vehicle business, and hopefully, Cyrus Mistry, the new Tata group chairman, will give the passenger car division a quiet mercy killing after Ratan Tata s gone.



In Reply to jaykayess 3 years ago

It will be sad death for an Indian brand. :(

We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)