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While incorporating the several recommendations of the Standing Committee on Finance, as also some of the suggestions/ representations received subsequent to submission of report of Committee, the provisions of the Companies Bill, 2009 were revised and a fresh Bill was formulated as Companies Bill, 2011 and introduced in Lok Sabha on 26.06.2012. A statement indicating the changes made and the new provisions introduced has been submitted by the Ministry as below : –

SN Clause No. in the Companies Bill, 2009 Clause No. in the Companies Bill, 2011 Issue Remarks
1 2(1)(zzp) 2(68) Definition of private company – Maximum number of members to be increased from 50 to 200. To allow      setting         up of          private companies with more number of members.
2 New Clause 29 Dematerialization of securities : – Mandatory for listed and such class of companies as may be prescribed; – Optional for other companies Change is of procedural nature and seeks to  synchronize the provisions of the   Bill    with   the provisions   of Depositories Act   and    SEBI  Act. (Depositories Act enables dematerialization  for     all kinds          of securities and SEBI  Regulations make it mandatory for       all public offers to be in dematerialized form.) Would result in good corporate  governance since frauds related to loss of/duplicate securities certificates      would   not  happen. Further     it would  also   be      more convenient for investors since there would  not    be      need  to  exercise safeguards  relating       to          physical
share certificates.
3 24(2) 42 Modifications in clause         relating to private placement. To      prevent        misuse        of          existing provisions on the matter, to protect interest       of investors and    to synchronize          the     provisions          with SEBI regulations / norms.
4 52 New

sub- clause

(2)      of clause 58.

While making securities    of          public companies   to       be freely transferable,
shareholders contracts/ agreements also made enforceable.
To      recognize  Shareholders Agreements/         Contracts    as          per  commercial practices.
5 112 125 Transfer of securities in      respect        of unclaimed   dividend  beyond 7 years to be also   transferred  to
IEPF
It was felt that since dividend for relevant securities has been unclaimed for seven years or more, the     underlying  securities    may be mis-used     by      vested parties          and  these should also be allowed to be transferred to IEPF. The rightful claimants can claim them back from IEPF through provisions in rules.
6 —- New Clauses

130    and

131

Re-opening of accounts     by companies after obtaining approval of Tribunal. The change proposes to provide procedural requirement in respect of revision in accounts in certain cases. The present law is silent in respect of re-opening or re-casting of accounts. In certain cases, particularly,          in      cases relating       to fraud, there may be need to re‑open/ re-cast accounts to reflect true and fair accounts. In case of Satyam case, such recasting was ordered by Court. The provisions in the Bill mandate such re-opening on the order of Court or Tribunal. In other cases the re-opening       is       being permitted, through      order of Tribunal, with
adequate safeguards.
7 —- New Clause 135 Corporate   Social
Responsibility (CSR)
CSR provisions have been included in accordance with recommendations made by HRn‘IEE Committee. Additionally, it is being proposed that companies covered under          such  provisions   shall constitute    a        CSR   Committee   of Board and the Board of such a company shall be required to make every endeavour to spend 2% amount as provided in clause. An indicative Schedule of CSR activities has also been appended to the Bill. The Schedule empowers  the     Central Government          to prescribe     new   CSR   activities          by amending    the     Schedule     as          and when such a need arises.
8 123 139 Procedure with regard to      appointment          of auditors:-   Instead          of year to year basis it can be appointment by members     in general          meeting for
five years.
The procedure has been proposed to       be      modified in  respect    of appointment  of auditors.     It       is proposed that shareholders may have the power to appoint auditors for straight five years, instead of on year to       year  basis. This   would ensure that promoter/company/management  does   not    change auditor who is doing good job pre‑ prematurely. Auditor‘s early resignation and removal have been made possible. Approval of Central Government provided in case an auditor is removed before his           tenure.
9 126 143(12) to 143(1 5) Provisions   proposed
for statutory duties on Auditors (and  other professionals) to report fraud to Central Government
Keeping       in      view   the          Satyam experience   it       was    felt     that          such auditors/professionals should be under obligation to report fraud to Central Government.
10 132 New 149(1)2nd proviso Woman Director Appointment of at least one Woman director has been proposed to be mandated in such class of companies as may be prescribed.

The    class  shall  be      prescribed through rules. This is likely to be in line    with   the     policy of       the
Government for encouraging more and    more women          participation         in
decision making at various levels.

11 New 151 Small Shareholders‘ elected Director -Listed companies allowed to have one Director to be elected by small/minority shareholders. Companies  Act,    1956  has    this
provision but Companies Bill, 2009 did not include these provisions. These have been proposed to be included in the new Bill.
2 204 New

sub- clause (10)    to
clause 233

A transferee (holding) company not to hold shares         in      its          own name consequent upon merger        of          a subsidiary   with   a
holding company.
Necessary    for     good  corporate
governance and to prevent market manipulation        by      companies          by indulging         in          trading        in      their  own
shares.
13 204/336 233/361 Enhanced   coverage/scope for summary merger and summary liquidation This has been proposed to ensure that the Bill is flexible and takes care of future anticipated problems for the corporate sector.
14 216 245 Class action          to          be allowed       on      the applications          of members     or depositors only. It has been felt that since creditors can    enforce        their claims   through contracts/   agreements with borrower companies, they may not be given statutory     right for class action.          On     the          other hand  since depositors do not have any contractual rights and are mainly of unsecured nature, they are being proposed to be empowered with right  to       file     class  action          petitions
before Tribunal.
15 301 326(1) (proviso) and 326(2) Wages/ Salaries payable to workmen for a period of 2 years protected     in case of winding   up     of  the  company. Such payments    have  been
proposed to have overriding effect over   all      other claims,          including those of secured creditors. This is being considered essential to protect interests of workmen in case of winding up of companies.
16 New Clauses 366 read with 374 Enabling     provisions for allowing conversion of various entities (like societies,  cooperative  societies,firms and    LLPs) into companies. Under         the     existing       Act,          mainly partnership firms are being allowed to       be      converted    into          companies subject to certain safeguards and the satisfaction of the Registrar of Companies. Keeping in view the fact that LLP Act, 2008 has been in force since 2009 and various other entities like societies, cooperative societies may also   have  need  commercial feedom for  conversion  into corporate     form, the     enabling provisions   (on     thelines  of provisions in the existing Act) have been  proposed for conversion of such  entities into   companies as well,  subject        to       adequate
safeguards.
17 370(3)

373(2)

409(3)(a)

412(2)(e)

NCLT provisions:- ICLS  officers of JS rank  proposed     to become        Technical Members  in   certain cases Selection Committee to also   have Secretary, D/o Financial Services as Member The provisions in respect of NCLT and NCLAT have been revised in view of Order of Hon‘ble Supreme Court in the NCLT matter. Minor variation on these two issues have been proposed to ensure that

(i)genuine       experienced candidates (i.e. ICLS/ILS Officers having 15 years experience with at least 3 years in the rank of JS or above) are allowed to become Technical Members.

(ii)      Secretary,    DFS   has    been proposed as Member in Selection Committee  to ensure         that candidates with adequate experience with reference to SICA cases are selected.

18 —- New Clause 442 Conciliation          and
Mediation Panel
To enable voluntary arbitration by parties and to expedite decision on applications/petitions filed under new Bill for approval.
19 357,   367
(2), 421
462 Exemption from provisions of the new legislation. Presently, the Act/ Companies Bill allows Central Government to modify  provisions   of the law for class  of  companies   e.g.
Government Companies, Producer  Companies, Nidhi Companies and in respect of e-governance initiatives.It is proposed to empower Central Government          to       have          power,         in public         interest,      to          exempt/modify provisions of the Act for a class or classes of companies. Draft notification shall be laid in draft form in both the Houses of Parliament and shall be effective only after both the Houses approve it.
20 New Clause 463 Power          of          Court to grant relief in          certain
cases.
Section 633 of existing Companies Act, 1956 was not included in the Companies Bill, 2009 and is now proposed to be included.
21 424 466 Provisions   regarding continuation         of President/   Members
of CLB with Tribunal
Existing Members/ Employees of CLB to be retained in NCLT if they qualify norms under new Bill. This has been proposed to ensure continuity in the functioning of the body.
22 174(5) 196(4) Modification         to          be made in      the requirement          for passing       of          Special resolution   before appointment         of managing director, whole-time director or manager.

The clause 196(4) of the Companies Bill, 2011 presently provides for passing of special resolution, on the lines of similar provisions provided in clause 174(5) of the Companies Bill, 2009. However in view of the recommendation made by Hon‘ble Committee to review the provisions in respect of appointment/remuneration of managerial personnel keeping in view the provisions of Companies Act, 1956 it is felt that requirement of passing of special resolution may be modified to passing of ordinary resolution as provided in the existing Act

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