On 30th August 2013 (Bhadrapada 8, 1935 Saka), Ministry of Law and Justice issued a notification regarding the Companies Act, 2013 immediately after it received assent of President of India. Only section 1 of the Act of 2013 came into effect from that day. Section 1 as usual deals with short title, Extent, commencement and application.
Earlier Act of 1956 was applicable to whole of India with some modification related to Indian State of Nagaland, but not applicable Indian state of Sikkim. Act of 2013 is applicable to whole of India including Sikkim and without any exception to any state. Sub – section 4 of Section 1 of Act of 2013 lists out some exception regarding particular classes of companies. However, Act of 2013 is not made effective to Sikkim as on 12th September 2013.
The notification of 12th September 2013 is issued by Ministry of Corporate Affairs, under power conferred by sub – section (3) of Section 1 of the Act of 2013. With this notification, we effectively have two Companies Acts in effect. Caution is Provision of Act of 1956 shall be applicable from this appointed date of 12th September 2013 subject to the provisions of Act of 2013 as made applicable.
Where, there is any inconsistency among both Acts, provision notified under Act of 2013 shall have effect. (See Comments for clear understanding)
Whole Section 2 dealing with Definitions become applicable except few. The only definitions not notified are with respect to Accounting Standards (Cl. 2), Auditing Standards (Cl. 7), Books of Account (Cl. 13), company liquidator (Cl. 23), Special Court (Cl. 29(iv)), deposits (Cl. 31), financial year (Cl. 41), foreign company (Cl. 42), independent director (Cl. 47), Indian Depository Receipt (Cl. 48), One person company (Cl. 62), the Registration of Companies (Sikkim) Act, 1961 as previous companies Acts (Cl. 67(ix), Serious Fraud Investigation Office (Cl. 83), Small Company (Cl. 85) and Layer of Subsidiary Companies (Cl. 87 Proviso and Explanation(d)).
In Chapter II Section 19, 21 and 22 has been made effective. Section 19 provides that subsidiary company shall not hold shares in its holding company. While 21 deals with Authentication of documents, proceedings and contracts and 22 with Execution of bills of exchange, etc. I have discussed these Section in my blog post Minor Provision in Chapter II here.
In Chapter III, Sections 24, 29, 30, 31, 32, 34, 36, 37, and 38 become effective. However, only parts of Section 23, 25, 33, 35, 39, and 40 become effective.
In Section 23, Clause (b) of Sub – section (1) as well Sub – section (2) is not effective. These provisions are related to Private placement by private as well as public companies under Section 42. Practically for Public offer of companies, Act of 2013 is effective. All enabling provision has been made applicable. Regarding Matters to be stated in prospectus provisions of old Act of 1956 is still applicable. (Sections 26 and 27 of Act of 2013 not made effective.) Offer for sale shall still be made under old Act of 1956 (Section 28 of Act of 2013 not made effective.) Private placement shall also be govern by provision old Act.
In Chapter IV, Section 44, 45, 49, 50, 51, 57, 58, 59, 60, 61, 65, 69, and part of 70 has been made applicable. With a word of caution, these are simple provisions mostly similar to provision of Act of 1956.
Acceptance of Deposit (Chapter V) and Registration of Charges (Chapter VI) shall still be applicable as under old Act of 1956 but interestingly punishment for contravention for any provision of Chapter VI has been made applicable. I am not sure, whether it will be effective for any contravention of provisions of old Act of 1956 related to charges. I invite views from reader.
Chapter VII is related to Management and Administration of companies. Sections 91, 100 (part), 102, 102, 103, 104, 105 (part), 106, 107, 111, 112, 113 (part), 114, and 116 has been made effective. Effectively, provisions related to General Meetings come to in force. With a word of caution, these provisions are mostly similar to provision of Act of 1956.
Chapter VIII related to declaration and payment of dividend has not been made effective except penal provision to this chapter under Section 127.
Chapter IX deals with Account and is subject to discussion everywhere. Only Sections 133 which give powers to Central Government to prescribe accounting standard come into effect, hence not much change.
Chapter X deals with Audit and Auditors has not been made effective.
Chapter XI deals with appointment and qualification of directors is also not made effective except Section 161 and 162 which are related to manner for appointment of director, additional director, Alternate director and nominee director.
Chapter XII deals with meeting of boards and its power. Section 176, 180, 181, 182, 183, 185, 192, 194 and 195 come into force. Contribution to charitable funds, political parties, and national defence fund has been made applicable. Further, provision related to Loan to directors, non – cash transaction of directors forward dealing and insider trading has been made applicable.
Provision related to Compensation for loss of office of managing or whole-time director or manager under Section 202 become effective.
Some provision related to foreign companies which are not much different from provisions under old Act of 1956, are effective now. These are Application of Act to foreign companies (S. 379), Display of name, etc., of foreign company (s. 382) Service on foreign company (s. 383) and Interpretation (S. 186 in part).
Section 405 constituting Chapter XXV dealing with Power of Central Government to direct companies to furnish information or statistics become effective.
Chapter XXVII deals with National Company Law Tribunal and Appellate Tribunal. Section 407 to section 414 (both inclusive) become effective. These provisions enable government to constitute these tribunal. This may be good news for company law professionals.
In other effective Section 439 (offence to be non – cognizable), Section 443 (Power of Central Government to appoint company prosecutors) Section 444 (Appeal against acquittal), Section 445 (Compensation for accusation without reasonable cause) are also related to penal provisions related to companies law.
Section 456 – 463 and Section 467 – 470 are some enabling provisions relating to central government.
This is my preliminary view on the notification issued on 12th September 2013. Views of readers are most welcome. I welcome all of us to new era of Companies Act 2013.
Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.