Comparative Analysis of Companies Act, 1956 and Companies Act, 2013

Sibani Panda, Research Associate

The new Companies Bill has received the President’s assent on August 29, 2013 and the Companies Act, 1956 which was replaced by the recent companies act has brought about some drastic changes in several areas of company administration and management.

OVERVIEW OF THE COMPANIES ACT, 1956 AND THE COMPANIES ACT, 2013

DetailsCompanies Act, 1956Companies Act, 2013
Chapters1329
Sections 658470
Schedules 157
No. of clauses in
Section 2
6795

HIGHLIGHTS OF THE COMPANIES ACT, 2013

  • The Act, of 2013 has 470 sections as against 658 Sections in the Companies Act, 1956.
  • The entire Act has been divided into 29 chapters.
  • Many new chapters have been introduced such as Registered Valuers (ch.17); Government companies (ch. 23); Companies to furnish information or statistics (ch. 25); Nidhis (ch. 26); National Company Law Tribunal & Appellate Tribunal (ch. 27); Special Courts (ch. 28).
  • The Act is forward looking in its approach which empowers the Central Government to make rules, etc. through delegated legislation (section 469 and others).
  • The Companies Act, 2013 is the result of detailed consultative process adopted by the Government.

COMPARATIVE ANALYSIS

Basis of comparison Companies act, 1956Companies act, 2013
Maximum number of
members in a private
company
In the companies act, 1956, the maximum number of members allowed in a private company was 50.Here the maximum number of members allowed in a private company is 200.
Minimum Number of
members
The minimum number of members allowed in a Public Company is 7 and in case of Private Company is 2In the new act, there is no particular change for the minimum number of members in private and
Public companies but a new concept of One Person
Company has been introduced which can have a single member in a company
Statutory Meeting For a Public company, it is
mandatory to hold a statutory meeting after 1
Month of its commencement of business but before 6 months of its commencement.
But in the new act, there is no specific provision for statutory meeting in case of public company.
Object Clause of
Memorandum Of Association
Here the Object clause of Memorandum of association consists of the Main Objects, Incidental or Ancillary Objects and Other
Objects.
The new act describes that the Memorandum Of Association should contain the objects for which the company is proposed
to be incorporated and it should also contain any other matter which is considered to be necessary in furtherance thereof.
Maximum period for holding the first Annual General Meeting.Here the maximum period for holding the 1st annual general meeting is 18 months from the date of its
incorporation or 9 months
from the date of the closure of accounts, whichever is earlier
Here the maximum period for holding the 1st Annual general meeting is only 9 Months from the date of the closure of accounts.
Mode of Notice for
holding AGM
For holding an Annual general meeting, a written Notice is mandatory and it is mandatory to inform about the notice to all the members in a written formHere the notice about the Annual general meeting can be either served in written form or in electronic form.
Time and day for holding AGMThe AGM can be held on the date mentioned in the notice during the business hours but the AGM should not be held on a public
Holiday
In the new act, the AGM can be held during the business hours i.e. between
9 A.M. and 6 P.M. on
the day mentioned in the notice but that day should not be a National
Holiday.
Consent for shorter notice for holding AGMThe consent for holding the meeting should be given by all the members who are entitled to vote at the meetingThe consent should be given by not less than 95% of the
members who are entitled to vote at the meeting.
First Board Meeting No specific time is specified for holding the first board meetingIn the new act, the first board meeting should be held within 30 days from the date of its incorporation
Time Gap between
two board meetings
Here it is required that at least a meeting should be held once in every 4 monthsBut in the new act, it is required that not more than 120 days gap should be there between two consecutive board meetings
Time period for issuing notice for Board MeetingsIn this act, there is no specific time period mentioned for issuing the notice for the board meetingsIn the new act, it is required that not less than seven days
Notice should be served before the meeting
Composition of Board of DirectorsThe composition of the Board of directors is as follows:
Public Company - 3
Private Company - 2

Here the composition of the Board of directors is as follows:
Public Company - 3
Private Company - 2

And in the new act, there is a condition that every company is required to have
at least one director who has
stayed for at least 182 days in India in previous Calendar year. It is also required that the Listed Companies should have at
least 1/3rd independent
Directors.
Some certain classes of
companies are also required to have at least 1 women director.
Disclosures in
Board’s Report
Section 217 of the 1956 act contains disclosure requirements of Board’s reportIn the new act, some additional disclosures are also required to be made such as:
 Extract of Annual Return,
 Number of board meetings,
 CSR initiatives and policy,
 particulars of loans
 guarantees, investments etc
Restrictions on Commencement of
Business
Here the provision of restrictions on commencement of business is only applicable to public companies.Here this provision is applicable to all the companies who are
having share capital, so it is also applicable to Public Company, Private
Company and One Person
Company having share capital.
Alteration of Article
for Conversion of
company to public or
Private company.
In order to alter its article for conversion, a special Resolution needs to be
filed within 30 days from the date of general meeting.
Here a special resolution needs to be filed within 15 days of the date of the general meeting.
Quorum of General
Meeting for Private
and Public Companies
The quorum of general meeting for both the companies are specified as follows:
Private co. - 2 Members
Public co -5 Members
In the new act, the quorum of general meeting is specified as follows:
Private co. - 2 Members
Public co. -
 5 members( if total no. of members are less than 1000)
 15 members ( if total no. of
members are more than 1000 but less than 5000)
 30 members (if total no. of members are less than 5000)
Registered Office of
New Company
Details of the Registered
office is to be filed in e-Form 18 at the time of
incorporation of the business.
It is required that the Company shall have a registered office within 15 days.
Also there is a pre- requisite condition that verification of registered
office should be furnished within thirty days of its
incorporation.
Notice of Change in
Registered Office of
Existing Company to
Registrar Of Companies
The notice should be given to ROC within 30 days of the
Change of the registered office
The notice should be given to the ROC within 15 days of the change of the registered office
Issue of Preference
Shares for more than
20 years
In this act, the issue of preference shares for more than 20 years was prohibited Here, the issue of preference shares for more than 20 years is permitted, only for infrastructure projects.
Certification of Financial StatementsThe financial statements are required to be certified and authenticated by Manager or Secretary, if any, and by not less than 2 directors one of whom shall be the MD where there is one.The financial statements can be certified by the Chairman alone if the permission is given by the Board.
Issue of Shares at
Discount
The shares are permitted to be issued at discount subject to
compliance with certain conditions
But here the issue of shares at discount is prohibited except in the case of
sweat equity shares.
Consolidation and
Division of Shares
This act permits to consolidate and divide share by passing resolution in general meetingIn this act, changes in the voting percentage of shareholders and consolidation and division of shares require the approval of the Tribunal.
Service of Documents
by company or an
officer
The documents should be served by post under a certificate
posting or by registered post
Here the documents can be served by registered post, speed post and courier also
Maximum Tenure of AuditorsNo Specific Provision is mentioned about the tenure of the auditorsFor listed companies and other prescribed companies:
 individual auditors to be rotated after 5 years
In case of audit firm, the auditors should be changed after every 10 years.
Cross Border Mergers No Specific Provision is mentioned about the cross border mergers.In the new act, the merger of Indian Companies with foreign companies is
permitted and the rules to be followed during the merging of companies is to be notified by the Central Government
Financial Year and
Extension
Here the Financial year should not exceed 15 months and the Financial year can end on a date other than 31st MarchHere the Financial Year can be extended up to 18 months by Registrar Of Companies and the Financial year should end on 31st March every year for all companies.
In the new act, no explicit
provision regarding extension of financial year is given
Compulsory Consolidation of
Accounts
Here the Consolidation of accounts is not compulsory but the balance Sheet of
subsidiary needs to be attached by the holding company while filing return to ROC
Here the Consolidation of accounts is mandatory in addition to the other important statements
Corporate Social
Responsibility
initiatives
There is no provision for Corporate Social Responsibility in this actIn this act , CSR is compulsory and the constitution of Corporate
Social Responsibility (CSR) Committee of the Board is compulsory for companies:
 having net worth of rupees
500 crore or more,

 having turnover of rupees 1000 crore
or more or
 a net profit of rupees 5 crore
or more during any financial
year.
It is also required that at least 2% of the average net profits of last 3 years of the company should be spent on CSR activities, otherwise reason for not spending is to be given in
Board's Report.
Restrictions on step
down subsidiary
No restrictions are imposed on step down subsidiary.Here the Class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed
Grounds for winding upIn this act, the grounds for winding up are:
 By Special
Resolution
 If Company is
unable to pay its
debt.
 Business not
commenced within
one year of its
incorporation or
suspends its
business for the
whole year
 Minimum number
of member goes
below than as
prescribed i.e. 2 and
7 in case of Pvt. and
Public limited Company
In the new act, the requirement of minimum
number of members has been removed and some of the following additional grounds has been
added:
 Management of company
affairs in fraudulent manner
 Formation of Company for
fraudulent and unlawful
purpose
 Persons involved/ in the formation of Company
guilty of fraud, misfeasance or
misconduct in connection therewith.

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