What is Companies Act, 2013?
Historical Background
Key Points
9 points- 1.
Mandatory CSR: Section 135 makes it obligatory for eligible companies to spend 2% of their average net profits on specified CSR activities.
- 2.
Corporate Governance: Strengthened provisions for independent directors, women directors on boards, audit committees, and stakeholder relationship committees.
- 3.
Shareholder Protection: Enhanced rights for minority shareholders, provisions for class action suits, and stricter norms for related party transactions.
- 4.
New Concepts: Introduced One Person Company (OPC), Small Company, and provisions for Associate Companies and dormant companies.
- 5.
E-governance: Facilitates electronic filing of documents with the Registrar of Companies (RoC) and promotes digital interaction.
- 6.
Financial Reporting: Mandates stricter accounting standards and auditor responsibilities, including provisions for rotation of auditors.
- 7.
Winding Up: Streamlined processes for winding up of companies, including fast-track exits for certain entities.
- 8.
Penalties: Contains provisions for penalties and fines for non-compliance with various sections of the Act, including those related to CSR.
- 9.
Schedule VII: Specifies the list of activities that qualify as CSR activities, covering areas like education, health, environment, and poverty alleviation.
Visual Insights
Key Differences: Companies Act, 1956 vs. 2013
Comparison table highlighting the key differences between the Companies Act, 1956 and the Companies Act, 2013.
| Feature | Companies Act, 1956 | Companies Act, 2013 |
|---|---|---|
| Corporate Social Responsibility (CSR) | No specific provision | Mandatory for certain companies (2% of average net profits) |
| National Company Law Tribunal (NCLT) | No NCLT | Established NCLT for corporate dispute resolution |
| One Person Company (OPC) | Not recognized | Introduced concept of OPC |
| Fraud Reporting | Limited provisions | Stricter penalties and whistleblower protection |
Recent Developments
5 developmentsAmendments in 2020 and 2021 decriminalized several offenses under the Act, converting them into civil defaults to reduce the burden on the criminal justice system.
Clarifications and amendments to CSR rules, including provisions for unspent CSR funds and allowing R&D activities for new vaccines/drugs as eligible CSR.
Ongoing efforts by the Ministry of Corporate Affairs (MCA) to simplify compliance requirements and promote ease of doing business.
Increased scrutiny on the effectiveness and transparency of CSR spending and reporting by companies.
Introduction of the Limited Liability Partnership (Amendment) Act, 2021, further streamlining corporate structures.