On the 29th of August in 2013, the President of India gave his approval to the Companies Act, 2013, which had been enacted by the Parliament. Consolidating and amending the laws that pertain to companies is the purpose of this Act. When it was published in the Official Gazette on August 30th, 2013, the Companies Act of 2013 was officially announced. This notification, which was released on September 12th, 2013, has been responsible for the implementation of certain provisions of the Act. A number of clauses from the Companies Act of 1956 are still in effect today.
Corporations and companies in India are subject to the regulations of the Companies Act 2013, which governs their establishment and operation. In 1956, the country’s first Companies Act, which governed corporate companies in the country, was passed after the country gained its independence. The Bhabha Committee’s suggestions served as the foundation for the Act that was passed in 1956. In 2013, significant modifications were made to this Act, which had previously been revised on many occasions. As a result of Section 135 of the Act of 2013, India became the first nation to make expenditure on corporate social responsibility (CSR) obligatory by law.
At this time, the Ministry of Corporate Affairs is responsible for the administration of the following acts passed by the Central government:
- Companies Act, 2013
- Companies Act 1956 (certain aspects of this Act are still applicable).
- The following laws apply: Competition Act of 2002, Insolvency & Bankruptcy Code of 2016, and the Chartered Accountant Act of 1949
- The Companies Act of 2013 replaced the Act of 1956.
Comparison of Companies Act 1956 & Companies Act 2013
|Companies Act 1956
|Companies Act 2013
Companies Act 2013 Highlights
The main highlights of the 2013 Act are listed below:
- A private business can have a maximum of 200 shareholders (formerly 50).
- The concept of a single-person business.
- The Company Law Appellate Tribunal and Company Law Tribunal have made CSR essential.
Important parts of the 2013 Companies Act
- It came up with the idea of “Dormant Companies.” Companies that haven’t done business for two years in a row are said to be “dormant.”
- The National Company Law Tribunal was set up. It is an almost-judicial body in India that decides business problems. It took the place of the Company Law Board.
- There is no need for government approval because it allows revelations and openness to be regulated by the people themselves.
- Electronic copies of documents must be kept.
- Official liquidators can make decisions for businesses with net worth up to Rs.1 crore.
- Incorporations and merges can now be done more quickly and easily.
- This Act lets a foreign company join with an Indian company or the other way around, but only with the Reserve Bank of India’s approval.
- It has been suggested that one person can run a business. It’s a new kind of private company that can have just one director and member. The 1956 Act said that a private company had to have at least two members and two shareholders.
- It is now required by law for public companies to have independent leaders.
- For a certain type of business, women directors are required by law.
- There must be at least one director in every company who has lived in India for at least 182 days in the last year.
- The Act allows the articles of association to be “entrenched,” which means they are protected in ways other than the law.
- The Act says that board meetings must be called with at least seven days’ warning.
- The Act spells out what a Director is supposed to do. It also says what a “Promoter” and “Key Managerial Personnel” are supposed to do.
- There should be a switch between audit groups and auditors for public companies. The Act also says that accountants can’t do work for the company that isn’t related to auditing. If someone doesn’t follow the rules, the auditor could be charged with a crime or face legal liability.
- There is a set amount of time for the whole process of getting companies back on their feet or shutting them down during a financial crisis.
- Companies are required by the Act to set up CSR groups and write CSR policies. There are some companies that have to make statements about their CSR.
- Companies that are on the stock market should have one director who also speaks for small owners.
- While the investigation is going on, it is possible to search and seize papers without a judge’s order.
- Tough rules have been put in place for taking deposits from the people.
- It has been planned for the National Financial Reporting Authority (NFRA) to be set up. It sets standards for accounting and auditing, makes sure they are followed, and keeps an eye on inspectors’ work. (India can now join the International Forum of Independent Audit Regulators (IFIAR) after the NFRA was made public.)
- Employees and directors of a company who are likely to have access to price-sensitive information are not allowed to buy call or put options on its shares under the Act.
- With the Act, owners have more power because many big deals need to be approved by shareholders.
Important Terms in the Companies Act of 2013
The following list gives you the terms that candidates should be aware of when studying the Companies Act of 2013:
- Appellate Tribunal: Concerns concerning the National Company Law Appellate Tribunal are welcome.
- Associate Company: One may wonder what constitutes an associate company.
- Called-Up Capital: There may be confusion around what constitutes called-up, approved, and nominal capital.
- Company Liquidator: It’s critical to understand what a company liquidator is.
- One may inquire about the distinctions between deposits, derivatives, and debentures.
The 2019 Companies (Amendment) Act
- In July 2019, the Parliament passed this Act. The following modifications to the Companies Act are suggested by the most recent amendment:
- Businesses will need to reserve funds for corporate social responsibility (CSR) in a dedicated account.
- If this sum is not spent within three years, it will be transferred into a fund listed in Schedule VII of the Act. The Prime Minister’s Relief Fund may even be this.
- If a company is not operating in accordance with company law, the Registrar of Companies may, in accordance with this Act, take action to have its name removed from the Register of Companies.
- The Act’s sixteen minor offenses have been decriminalized, or converted to civil defaults.