BACKGROUND
The enactment of the Companies Act, 2013 (the “Companies Act, 2013” or the “Act”) was one of the most significant legal reforms in India in the recent past, aimed at bringing Indian company law in tune with global standards. The Act incorporated recommendations made by various committees, such as the Naresh Chandra Committee, Dr. J J Irani Committee, Vepa Kamesan Committee, etc. It also went through a rigorous review process in the Parliament after being first tabled as a Bill in 2009. The Parliamentary Standing Committee on Finance examined the Bill twice, during which extensive public consultations were also held.
The notification of the provisions of the Companies Act, 2013 was done in a phased manner, with 283 of the 470 provisions enforced by 1st April, 2014. Most of the remaining provisions were dependent on the establishment of the National Company Law Tribunal (Tribunal), which were enforced subsequently.
ABOUT THE ACT
The Companies Act, 2013 received the assent of the President on August 29, 2013 and was notified in the Gazette of India on 30th August, 2013.
The changes in the existing company law was indispensable due to change in the national and international economic environment and for expansion and growth of our economy.
The Companies Act, 2013 aims to improve corporate governance, simplify regulations, strengthen the interests of minority investors and legislate the role of whistle-blowers thus making our corporate regulations more contemporary.
The Ministry issued several circulars, notifications, Orders and various amendment rules to facilitate smooth implementation of the Act.
Notable additions include associate company, one person company, small company, dormant company, independent director, women director, resident director, special court, secretarial standards, secretarial audit, class action, registered valuers, rotation of auditors, vigil mechanism, corporate social responsibility, E-voting etc.
READING METHODOLOGY AND ITS LEGAL AURA
The Companies Law should be read collectively and comprehensive as described below:
The entire Act has been divided into 29 chapters and 7 Schedules. There are a total of 470 Sections and each chapter has at least one set of Rules.
- Companies Act, 2013 is not a standalone piece of legislation but a complete ecosystem as it contains Orders, Rules, Notifications and Circulars. One should read each section of the Act, with relevant Rule, Notification and Circular
- The Act is a superior authority in law passed by the Legislature. Notifications and Rules are notified by the Executive under the powers derived from the Act itself.
- The Central Government may amend schedules of the Act using power given under Section 467. Schedules must be read with the main Section.
- Wherever a Section of the Companies Act, 2013 use words “as may be prescribed” it is an indication the Legislature has delegated powers to the Executive on that particular point. Section 469 empowers the Central Government to make rules for Sections which do not delegate such powers to the Central Government
- The Circulars are issued by the Department interpreting a particular provision of the Act or the Rule in certain circumstances. The Companies Act, 2013 does not empower the Department to issue circular.
- Secretarial Standards are standards prepared by Institute of Company Secretaries of India to standardise secretarial practices under the Companies Act and other areas related to Secretarial Practices.
- By virtue of Explanation to Section 205(1), secretarial standards issued by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 and approved by the Central Government are part of law itself. Further Section 118(10) mandates that every company shall observe secretarial standards with respect to general and Board meetings.
MEANING AND DEFINITION OF A COMPANY
The word ‘company’ is derived from the Latin word (Com=with or together; panis =bread), and it originally referred to an association of persons who took their meals together. In the leisurely past, merchants took advantage of festive gatherings, to discuss business matters. Nowadays, the company form of organization has assumed great importance. When they firms their business relations they form a company.
A company under law is a corporate body and a legal person having status and personality distinct and separate from the members constituting it.
As per Section 2(20) of the Companies Act, 2013 “Company” means a company incorporated under this Act or under any previous company law.
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