ASSENTED BY PRESIDENT OF INDIA ON 29 TH AUGUST 2013

SALIENT FEATURES

  • The new Act has 29 chapters, 470 sections and 7 Schedules;
  • A substantial part of the new act will be in the form of rules, which will be prescribed separately;
  • Concept of 'One Person Company' introduced;
  • No central government approval required under most actions by Company which require such approval under the existing law;
  • Compulsory rotation of auditors;
  • Liability of advisors of Company under Class action suits;
  • Concept of 'Independent Directors' recognised and detailed;
  • Compulsory woman director in prescribed class of companies;
  • The new act has tried to bring private companies at par with public companies from the compliance perspective;
  • Cross border mergers and amalgamations possible;
  • NCLT to be operational finally.

OUR TRANSACTIONS TO WHICH CHANGES WILL BE RELEVANT

  • PRIVATE EQUITY
  • BANKING TRANSACTIONS
  • NCD TRANSACTIONS
  • DUE DILIGENCE

Private Equity Transactions

  • Definition of Listed Company – Section 2(52)
    • "listed company" means a company which has any of its securities listed on any recognised stock exchange.
      Would this mean that a company (including a private company), which has only its debentures listed, should comply with all the provisions applicable to listed companies? e.g. having 1/3rd independent directors and compliances to be made by a listed company including constitution of committees.
  • Section 42 – Private Placement
    • Provisions relating to private placement of all securities
    • Invitation to be given by a private placement offer letter
    • Private placement to be made to such persons whose names are recorded by the company prior to the invitation and offer shall be made by name
    • Terms and conditions to be prescribed under rules

Issues

This does not seem to be in tune with the definition of privatecompanies which allows 200 members in a private company.

Name of entities will have to be decided to whom securities shall be issued.

  • Section 62 – Further Issue of Capital
    • Applicability to all types of Companies;
    • Applicability of the provisions from day 1 (section 81 of the companies act, 1956 after 2 years from the date of formation of the company);
    • Further issue of capital can be to employees under ESOP if special resolution passed by shareholders (terms and conditions to be prescribed);
    • Issue to other persons shall be approved by a special resolution and at a price determined by a registered valuer;
    • Issue of convertible loan and debentures shall be on terms and conditions approved by shareholders and no need to comply with any rules prescribed in relation to the same.

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