CHAPTER XII
MEETINGS OF BOARD AND ITS POWERS
OF
THE COMPANIES ACT, 2013
MEETINGS OF BOARD AND ITS POWERS
OF
THE COMPANIES ACT, 2013
In the series of Comparative Analysis on the Companies Act, 2013 with the Companies Act, 1956 second chapter in the series is Chapter XII : MEETINGS OF BOARD AND ITS POWERS.
Section 173, the Companies Act, 2013: Meetings of Board
Corresponding sections of the Companies Act, 1956: section 285 & 286.
Ø The new section clearly mentions that within 30 days of incorporation of the Company first board meeting shall be held earlier the first meeting was hold within 30 days of incorporation to comply with the provision of appointment of first auditor of the Company.
Ø In line with the provisions of listing agreement the new section says that in a year at least 4 meetings shall be held and the maximum gap between two board meetings can be 120 days. This section is applicable on both public (listed and unlisted) and private companies. Central Government may exempt prescribed class of companies from applicability of this section.
Ø The presence of director shall be counted for the purpose of quorum in video conferencing and other audio visual modes.
Ø At least 7 days notice shall be given for each board meeting.
Ø One Person Company/Dormant Company/Small Company shall have at least one board meeting in each half of a calendar year and gap between two such board meetings shall be not less than 90 days.
Ø Officers defaulting in compliance of the provisions for sending notice of the board meeting shall be liable for a penalty of Rs. 25,000.
Section 174, the Companies Act, 2013: Quorum for Meetings of Board
Corresponding sections of the Companies Act, 1956: section 287 & 288.
Ø The great difficulty of the Companies has been resolved in the new section which says that where the number of directors reduced below the minimum of quorum fixed for the meeting of the board by the act, the remaining director(s) shall act to increase the number of director or summoning general meeting.
Ø The new act has replaced the word “public holiday” with “national holiday”.
Section 175, the Companies Act, 2013: Passing of resolution by circulation
Corresponding sections of the Companies Act, 1956: section 289.
Ø As per new section if the resolution placed for passing by circulation does not receive 1/3rd of the vote than the Chairperson shall put the resolution before the Board in next meeting. The resolution passed by circulation shall be noted at subsequent board meeting.
Section 176, the Companies Act, 2013: Defects in appointment of directors not to invalidate actions taken
Corresponding sections of the Companies Act, 1956: section 290.
Ø Same provisions.
Section 177, the Companies Act, 2013: Audit Committee
Corresponding sections of the Companies Act, 1956: section 292A.
Ø The class of companies other than listed companies which shall have audit committee is yet to be prescribed.
Ø The section requires appointment of 3 directors with majority of independent director.
Ø The new section has specified a list of acts to be done by the audit committee.
Section 178, the Companies Act, 2013: Nomination and Remuneration and Stakeholders Relationship Committee:
Corresponding sections of the Companies Act, 1956: None.
Ø This section introduces constitution of nomination and remuneration committee in listed and other specified class of companies. Having at least 3 non-executive directors half of which shall be independent directors. The committee shall formulate the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy relating to the remuneration for the directors, KMP and other employees.
Ø A company more than 1000 stakeholders (shareholders/debenture-holders/deposit-holders etc) shall constitute a stakeholders relationship committee. The stakeholders committee shall be responsible for resolving grievances of security-holders.
Ø Chairperson of each of the committee or the member authorised on behalf of the chairperson shall attend the general meeting of the company.
Ø Penalty described for default in provisions of this section on the Company is from Rs. 100,000 to 500,000 and for each officer in default imprisonment upto 1 year or penalty upto Rs. 25,000.
Section 179, the Companies Act, 2013: Power of Board
Corresponding sections of the Companies Act, 1956: section 291 & 292.
Ø In addition to the powers mentioned in section 292 of the Companies Act, 1956 the new section includes powers to approve financial statement and board report, diversify business of the company, approve amalgamation merger or reconstruction, takeover. This powers were given to the Board in the respective sections in the old act. The new section also leave scope for new powers of Board to be prescribed afterwards.
Section 180, the Companies Act, 2013: Restrictions on the powers of Board
Corresponding sections of the Companies Act, 1956: section 293.
Ø The new section has removed the exemption given to the private companies and it is applicable on all the companies and the new section requires passing of special resolution whereas the old section only mentioned consent to be obtained in general meeting.
Ø The new section also explains the meaning of “undertaking” and “substantially the whole of the undertaking”.
Section 181, the Companies Act, 2013: Company to contribute to bona fide and charitable funds, etc.
Corresponding sections of the Companies Act, 1956: section 293(1)(e).
Ø The new section has specified the limit of 5% of the average net profit of the 3 immediately preceding financial years.
Section 182, the Companies Act, 2013: Prohibition and restrictions regarding political contributions
Corresponding sections of the Companies Act, 1956: section 293A.
Ø The new section has increased the limit from 5% to 7.5% of the average net profit of the 3 immediately preceding financial years, for political contribution.
Ø The penalty has been increased from 3 times to 5 times of the amount so contributed. The punishment for officers in default has been decreased from 3 year of imprisonment to 6 months imprisonment but the unspecified fine has been specified as 5 times of the amount of contribution.
Section 183, the Companies Act, 2013: Power of Board and other persons to make contributions to national defense fund etc.
Corresponding sections of the Companies Act, 1956: section 293B.
Ø Same provisions.
Section 184, the Companies Act, 2013: Disclosure of interest by directors
Corresponding sections of the Companies Act, 1956: section 299 & 305.
Ø In the new section the director shall also be considered interested in the contract or arrangement if he is a promoter/manager/CEO of that other body corporate.
Section 185, the Companies Act, 2013: Loan to directors etc
Corresponding sections of the Companies Act, 1956: section 295 & 296.
Ø The new section has removed the exemptions given to the private companies, holding – subsidiary company. Now the provisions relating to loan to directors are applicable on both public as well as private companies.
Ø As per new section for granting such a loan prior approval of members by passing a special resolution shall be required, earlier it was central government’s permission. Loan given to managing director or whole time director as part of conditions of service shall be exempted.
Ø Loan shall be subject to an interest rate based on the prevailing bank rate.
Ø Punishment and penalty for defaulting provisions of this section has also been increased.
Section 186, the Companies Act, 2013: Loan and investment by company
Corresponding sections of the Companies Act, 1956: section 372A.
Ø The new section has removed the exemptions given to private company and holding-subsidiary Company.
Ø The authority given to Board to give guarantee without taking previous authority without being previously authorised by a special resolution as per section 372A of the Companies Act, 1956 has been removed in new act.
Ø The rate of interest as per the new provisions shall not be lower than the prevailing yield of one year, three year, five year or ten year government security closest to the term of loan, unlike the old provisions where it shall not be less than the prevailing bank rate.
Ø New section in addition provides exemption to investment companies and companies providing infrastructural facilities.
Ø Penalty and punishment for default in provisions has been increased.
Section 187, the Companies Act, 2013: Investments of company to be held in its own name
Corresponding sections of the Companies Act, 1956: section 49.
Ø Same provisions except increase in penalties.
Section 188, the Companies Act, 2013: Related Party Transaction
Corresponding sections of the Companies Act, 1956: section 297 & 314.
Ø The new section in addition to the existing provisions also includes selling/disposing/buying of property of any kind, leasing of property of any kind, appointment of agent for purchase or sale of goods/materials/services or property, appointed of related party to hold office in the company/subsidiary Company/associate company, to be termed as related party transaction.
Ø Unlike the old provision irrespective of the paid-up capital of the Company, only passing of special resolution will be applicable.
Ø The new provision says that any member who is interested in passing of the resolution shall not vote on this resolution.
Ø The limit of Rs. 5000 as per old act is now not mentioned in new section and the new section allows transactions between related parties at arm’s length price.
Ø The new section has the provision for indemnification of loss incurred to the Company by the respective director.
Ø The new section provides for punishment imprisonment of upto 1 year or fine between Rs. 25,000 to Rs. 500,000 for listed companies, in case of other company’s fine between Rs. 25,000 to Rs. 500,000 could be imposed.
Section 189, the Companies Act, 2013: Register of contracts or arrangements in which directors are interested
Corresponding sections of the Companies Act, 1956: section 301.
Ø Every director and KMP shall within 30 days of appointment or relinquishment of office disclose it to the Company.
Ø The provisions of the new act are similar to the old provisions with a part remaining to be prescribed by the awaiting rules and increase in penalty of Rs. 25,000 as against of earlier penalty of Rs. 5000.
Section 190, the Companies Act, 2013: Contract of employment with managing or whole-time directors
Corresponding sections of the Companies Act, 1956: section 299 & 305.
Ø Same provisions except the increase in amount of penalty.
Section 192, the Companies Act, 2013: Restriction on non-cash transactions involving directors
Corresponding sections of the Companies Act, 1956: None.
Ø This is a newly introduced section, which prohibits the acquisition of assets for consideration other than cash by a director of the company or its holding subsidiary or associate company and also by the company from such director without prior approval of members received in general meeting.
Ø Any such transaction entered into without the prior approval shall be voidable at the option of the Company and the Company shall be indemnified for the loss caused.
Section 193, the Companies Act, 2013: Contract by one person company
Corresponding sections of the Companies Act, 1956: None.
Ø This is a newly introduced section which reads that in case of one person company every contract entered by the director or sole member of the company shall be recorded in the minutes of the first board meeting held after entering into such contract and shall be registered with the ROC within 15 days of the date of approval by Board. This provision shall not be applicable in case of contracts entered in normal course of business.
Section 194, the Companies Act, 2013: Prohibition on forward dealings in securities of company by director or KMP
Corresponding sections of the Companies Act, 1956: None.
Ø This is a newly introduced section incorporating forward dealing restrictive provisions in the companies act. Restricting directors and KMP from dealing in forward market of securities of the Company/holding/subsidiary/associate company.
Section 195, the Companies Act, 2013: Prohibition on insider trading of securities
Corresponding sections of the Companies Act, 1956: None.
Ø This is a newly introduced section incorporating insider trading provisions in the companies act.
~ By Nikita Singh~
The information given in this blog is the personal understanding of the writer and shall not be used as a conclusive material. The content stated/mentioned here is subject to changes by respective government/authorities in the applicable laws. The writer shall not be liable for any direct or indirect damages caused to any person acting solely on/based upon the information provided herein.
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