Indian company law
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Indian company law regulates corporations formed under Section 2(20) of the Indian Companies Act of 2013, superseding the Companies Act of 1956.
History
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The 2013 Companies Act superseded the Companies Act of 1956, under whose provisions Indian corporations previously operated. In addition to the Companies Act, corporations are subject to other regulations administered by the Ministry of Corporate Affairs (MCA),[1] which has two branches: the Regional Director (RD) and the Registrar of Companies (ROC). At present, India has seven RDs and 22 ROCs.[when?] These two branches are also called in-house sources of adjudication.[citation needed]
Recent changes in Indian Company law
- Companies Act 2013
- Companies (1st Amendment) Act, 2015
- Companies (2nd Amendment) Act 2017
- Companies (3rd Amendment) Act 2019
- Companies (Amendment) Bill 2020
- Companies Fresh Start Scheme 2020
- Companies (Amendment) Ordinance 2018
- Companies (1st Amendment) Ordinance 2019
- Companies (2nd Amendment) Ordinance 2019
2015 amendment act
The Amendment Act (21 of 2015), passed to consolidate and amend the 2013 Companies Act, received assent from the President of India on 25 May 2015, and contained 23 sections. Official notice was published in the Gazette of India,[2] specifying 29 May as the date on which sections 1–13 and 15–23 of the act would come into force.[2]
Indian companies may be
2017 amendment act
The Ministry of Corporate Affairs promulgated a new Act on 26 January 2018, constituting 93 sections; of them, approximately 90 were announced by the Ministry through a series of eleven notifications (with the latest issued on 19 September 2018).[needs update] Several modifications were made to the original Act by this amendment, mostly to improve its clarity and concision; among other changes, section 134 of the 2013 act was modified to require financial statements to carry the signatures of CEOs.[citation needed]
2019 amendment act
2020 amendment bill
A bill (88 of 2020) to amend the Companies Act was introduced in the
2020 Companies Fresh Start Scheme
Under this scheme introduced by the MCA, between 1 April 2020 and 30 September 2020, defaulting companies were provided a one-time opportunity to perform a "fresh start" and make their defaults good by filing belated documents (including annual returns and financial statements) without payment of any fee other than the normal statutory fee. Companies were, furthermore, provided some immunity to prosecution.[clarification needed] Inactive companies were also permitted to obtain the status of a "dormant company" under section 455 of the Companies Act 2013.
The Companies (Amendment) Ordinance 2018
On 13 July 2018, the MCA assembled a committee to review specific terms of reference for the offenses under the Indian Companies Act 2013. The committee was directed by the authority to make its report public within 30 days of its first meeting; accordingly, the committee furnished the report on 14 August 2018. Some amendments recommended for immediate implementation included:
- Enlarging the jurisdictions of the two branches of the MCA (the Registrar of Companies and Regional Directors, also called the "in-house adjudications mechanism").
- Shifting the approvals process from tribunals to the in-house adjudication mechanism.
- Recategorizing the offenses punishable by imprisonment to be resolved through civil liabilities.
- Implementing 33 provisions of the original Act.
Unlike previous amendments to Acts, which went before houses of the
Incorporation
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Incorporating a company in India requires preparation of several documents. Requirements vary based on type of company.[4] Historically, there have been various types of corporations incorporated under different regulations:
- Companies incorporated under Royal Charter, a practice employed by the British government. For example, the British East India Companycame under Royal Charter, which means it was granted Charter by the King or the Queen of Britain, and was controlled by the Charter. This type of incorporation is no longer performed.
- Companies incorporated by special legislature, such as the Indian Parliament or State Legislature. Examples of this include the Reserve Bank of India or State Bank of India.
- Companies incorporated under the Indian Companies Act of 1956, which come under the memorandum of association and articles of association.
Modern companies, however, fall into the following categories.
- Sole proprietorship: also known as a trader firm or proprietorship exclusively owned by one person, a sole proprietor may use a trading name or business name other than his or her name.
- Unregistered: some business activities do not require formal incorporation, and registration is not compulsory; this is sometimes an appealing option due to the ease of setting up operations and lack of required compliance activities. However, the main disadvantage is unlimited liability.
- Partnership: liability is joint and unlimited.
- Active partners take part in day-to-day operations of the business, in addition to investing in it; they are entitled to a share of profits.
- Sleeping partners[clarification needed] invest in the business and are entitled to a share of its profits, but do not participate in day-to-day operations.
- liability is limited.
- Sikhfamilies (while not governed by the Hindu law) can still form a HUF.
- Cooperative
- Family Owned Business
- Dormant company: a company created either for use in a future project or for holding assets (including intellectual property).
- offered to the public.
- Small Company: a non-public company whose turnover does not exceed ₹10,000,000 (one crore).
- Public Limited Company: a category analogous to the category of the same name in other systems of corporate law.
- Public Sector Undertaking (PSU): alternatively known as a Public Sector Enterprise (PSE). A PSU may be a public limited company (listed on stock exchanges) or unlisted entity, with majority ownership by a government body. Some of these entities are formed as business entities through special legislation, where these entities are governed by the statutes of these legislation and may or may not be governed by company laws like a typical business entity.
- Unlimited Company- A company, similar to its limited counterpart, but where the liability of the members or shareholders is not limited.
Corporate governance
The provisions of
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Employee rights
It was the view of many in the
The
- Excel Wearv. Union of India A.I.R. 1979 S.C. 25, 36
Directors' duties
Duties of directors.
- 166. (1) Subject to the provisions of this Act, a director of a company shall act in accordance with the articles of the company.
- (2) A director of a company shall act in
shareholders, the community and for the protection of environment.- (3) A director of a company shall exercise his/her duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
- (4) A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
- (5) A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.
- (6) A director of a company shall not assign his office and any assignment so made shall be void.
- (7) If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
Companies Act 2013 section 166
Directors owe a range of duties to the company, which primarily involve acting within its constitution, avoiding
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Corporate social responsibility
In a new with the Companies Act 2013, section 135 requires companies to spend 2% of their net profit on socially responsible projects, if they have a net worth of over ₹5,000,000,000 (500 crore), or a turnover of over ₹10,000,000,000 (1000 crore), or a net profit over ₹50,000,000 (5 crore). Socially responsible projects are defined in Schedule VIII, and mainly involve community development.[9]
Enforcement
- Company Law Board and Board for Industrial and Financial Reconstruction.
- Indian Corporate Law Service
See also
- UK company law
- European company law
- US corporate law
Notes
- ^ "Ministry of Corporate Affairs". Government of India. Retrieved 16 December 2017.
- ^ a b "Archived copy" (PDF). Archived from the original (PDF) on 23 December 2019. Retrieved 29 April 2020.
{{cite web}}
: CS1 maint: archived copy as title (link) - ^ a b Mukherjee, Sunando; Sundararajan, Shruti (30 October 2020). "10 Key Takeaways From Companies (Amendment) Act, 2020". Mondaq.
- ISBN 9788126902118.
- ^ As Gandhi said, "my advice to the employers would be that they should willingly regard the workers as the real owners of the concerns which they fancy they have created" in 'Harijan' (31 March 1946) reproduced in R Iyer (ed), The Moral and Political Writing of Mahatma Gandhi (1987) vol 3, 197-199
- Constitution (Forty-second Amendment) Act 1976s 9
- ^ Ministry of Law, Justice and Company Affairs, Report of the High-Powered Expert Committee on Companies and Maintenance of Restrictive Trade Practices Acts (1978)
- ^ 1983 AIR 75, 1983 SCR (1) 9. Noted by J Cottrell, 'Indian Judicial Activism, the Company and the Worker: A Note on National Textile Workers Union v Ramakrishnan' (1990) 39(2) The International and Comparative Law Quarterly 433
- ^ "Companies bill would require firms to spend 2 percent profits on poor". reuters.com. 13 August 2013. Retrieved 6 May 2014.
References
- HK Saharay, Company Law (5th edn 2008)
External links
- Companies Act 2013 on the Ministry for Corporate Affairs website
- Singh, Avtar (2015). Company Law (16th ed.). Lucknow: Eastern Book Company. ISBN 978-93-5145-330-7.