The Companies Act


The Companies Act, 2013 passed by the parliament has received the assent of the president of India on 29th August 2013.This Act was amended and the law was passed relating to companies. The Companies act, 2013 has been notified in the Gazette in 2013. Some of the other provisions has been passed and published on 12th September 2013. The First companies act passed after independence was passed in 1956, which governed business entities in the country. The 1956 act was based on the recommendations of the Bhabha Committee. This act was amended multiple times, and in 2013 major changes changes were introduced. A registered company can function of that company along with certain guidelines given by the Government and work appropriately. Also, the company has perpetual succession with power to acquire, hold and dispose of property of all forms. Also it can sue and be sued by the said name. The registration under the companies act gives an immense of benefit to the holder for the tax benefit and so on. The companies act, 1956 broadly classifies the companies into private and public companies as well. Earlier Government had passed the act 1956, after the amendment and commencement of Companies Act on 2013 there was found many changes in the rules and regulation, that was imposed by the government to run the companies without having any loophole.

The companies act 1956 has replaced into 2013 act: Comparison of companies act 2013 and companies act 1956:In Companies  Act 1956 there are( 13 parts )and (26 Chapters) and in Companies act 2013( 29 Chapters) and companies act 1956 there is (658 )section and in companies act 2016 (470) section.& in companies act 1956 there is (15 )schedules and in 2013 (7) schedules.   

Companies Act 2013 Highlights.

The major highlights of the 2013 Act are given below:

  • The maximum number of shareholders for a private company is 200 (the previous cap was at 50)
  • There should be only a one-person company.
  • The company law appellate tribunal & company law tribunal
  • CSR made mandatory

Sailent features of the companies act 2013

  • It provides for self-regulation concerning disclosures and transparency rather than having a government-approval based regime.
  • Documents have to be maintained in the electric form.
  • The procedure for mergers and amalgamations has been made faster and simpler.
  • Cross-border mergers are allowed by this act but with the permission of the Reserve Bank of India
  • For a prescribed class of companies, women directors are mandatory.
  • All the Companies Should has at least one director who has been a resident of India for not less than 182 days in the last calendar year.
  • The Act mandates at least 7 days of notice for calling board meetings.
  • The act offers more power to shareholders in that provides for shareholders’ approval for many major transactions for approval by the shareholders.

Companies (Amendment) Act 2019

This amendment was passed by the parliament in the month of July 2019.The changes recommended under the latest recommended under the latest amendment to the companies act are as follows:

  • Companies will have to keep an unspent amount into a special account for the purchase of CSR.
  • This amount, if left unspent after a period of 3 years, will be moved into a fund specified in schedule VII of the act.
  • Under this act, the registrar of companies can initiate action for the removal of the companies name from the registrar of the companies if it is not conducting business or operation as per the company law.
  • 16 Minor offences mentioned in the act have been decriminalized.

Section 34-Effect of Registration Under companies act, 1956:

On the Registration of the memorandum of the company, the registrar shall certified under the hand of those person company is being incorporated and in case of limited company, From the date of incorporation mentioned in the certificate of incorporation, such of the subscribers of the memorandum and other persons, as may from time to time be the members of the company, shall be a body corporate by the name contained in the memorandum, and also having common seal, but with such liability on the part of the members to contribute to the assets of the company in the event of it’s being wound up as is mentioned in this act.

Effects of Registration under the companies act 2013:

Once the owner of the company has done registration as per the guidelines given by the government. The holder will receive a certificate of incorporation, a memorandum of association and articles of association onces the registration was done what benefits company holder will receive.

  • Company owner will get a certificate by the registrar.
  • He will also receive an Memorandum of Association
  • He will get an Article of Association.
  • Company owner will  receive an share certificate (Where the company is limited by shares)

What are the benefits of certificate of Incorporation?

The certificate of incorporation is evidence that all the requirement of the companies act for the registration of the company have been completed successfully and has been fulfilled the all requirements as per the guidelines given in the companies act. The certificate will bear the official seal of the registrar of companies at companies’ house. This authorized certificate indicates and confirms that the company is legally exist and states as below:

  • The company name
  • The company registration number\
  • The date of formation
  • The type of company(eg.Limited)
  • The company’s country of registration(e.g India,Switchzerland)
  • The Issuing registrar

What is the Memorandum of Association under section 9 of the companies’ act 2013

A memorandum of association is a statement signed by all initial company shareholders. Confirming their intention to form a company and become a member of that particular company upon the formation and also provides you the evidence of the members’ agreement to take at least one share each in the company.

What is the Article of Association under section 9 of the companies’ act 2013

The Articles of association are a company’s internal rulebook, which set out how the business will be run and decision made by the company holder to run the business by the effective way and get an profit out it.So as long as the article contains nothing illegal, a company is free to  choice which rules are included. If the holder wants the company can incorporate the company using articles and model articles with amendments.

Section 2 (69) of the companies act, 2013, actually defines Promoters as an individual who:-

  • Is named as a promoter in the prospectus or in the annual returns of the company.
  • Controls the affairs of a company, directly or indirectly.
  • Advices, directs or instructs the Board of Directors.

However, we can say that the promoters are people who originally come up with the idea of the company, form it and register it.However, solicitors; accountants who act in their professional capacity are not promoters of the company.

Section 9 Effects of Registration-Indian Companies Act-2013:

As per section 9 of the Indian companies’ act 2013 after the registration the subscribers will become members and will be capable of exercising all the functions of the incorporated company. Under this provision in the Indian companies’ act 2013 regarding Effects of Registration is as under:

From the date of incorporation mentioned in the certificate of incorporation, subscribers to the memorandum and all other persons, as may, from time to time, become members of the company, shall be a body corporate by the name exercising all the functions of an incorporated company under this Act. And the holder also get power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and to be sued by the said name.

The word “a common seal” is omitted by the companies (Amendment act,2015) vide Notification NOS.0 1440(E) dated 29th May 2015.

Classification and Registration of Companies

The companies act,1956 classifies the companies into two types that is private and public companies and provides for the regulatory companies and provides for regulatory environment on the base of such classification. However the main purpose for this regulation is for growth of the economy and to increase the profit of the business. There is need of law to take into account into consideration for the betterment of the economy and also the holder of the company to run the business efficiently. Private companies and small companies generally who do not go for public issues or deposits for financial requirements but utilize their personal or in-house resources, there generally need to be given flexibility and freedom of operation and compliance at a low cost.

Classification of the companies:

The corporate form can take many shapes in order to respond efficiently. Company law therefore recognizes with multiple classification of companies. But as per classification of the companies it shouldn’t be exhaustive.

  • On the basis of the size 2)Small companies 3)other companies
  • On the basis of number of members 2)one person company 2)private company3)Public company
  • on the basis of the control1)Holding companies)Subsidiary companies 3)Associate companies
  • On the basis of the liability 1|)It should be limited 2)by shares 3)by Guarantee
  • On the basis of Manner of access to capital 1)Listed Companies 2)Un-listed companies.

Private companies

Private companies represent a different set of relationships in terms of ownership, risk and reward as compared to public companies. Since private companies, do not access capital markets, they generally requires less rigorous protection for their shareholders. They however represent an important organizational form for conduct of business. Therefore there is lighter regulation imposed on the private companies.

Government companies

In general point of view, there is little justification for imposing the compliance over the government companies. It is even less if such companies are listed. Not only should such government companies be able to compete in the market economy with other companies on equal terms, it would not be fair to the investors or creditors of the other companies to allowed presenting their performance on the basis of dissimilar parameters. There may be situations where such companies may require special treatment, in activity related to the security of the state. A government company should be clearly defined in law. And it should be one where there is a clear majority stake held by the state. There is no rationale for the definition of Government Company being extended to companies set up by government companies in course of their commercial activities.

Case laws:

Aruna Oswal v/s Pnkaj Oswal & ORS (SC)

Provision Involved: According to section 72 of the companies act 2013 every holder of the securities has a right to nominate any person to whom –so- ever, whom his securities shall “vest” in the event of his death. Section 72(3) overrides anything contained in any other law in force or any disposition, whether testatmentatory, where a nomination is valid and important to nominate someone made in the prescribe manner. All the rights in the securities shall vest in the nominee, unless the nominee, he becomes absolute owner of the securities and can participate in the company meetings too. Those who can manage the meetings and other important activities being held by the companies ,should be manage by the nominee.

Mr.Pnakaj Kumar Mishra v/s Registrar of companies, Mumbai & ORS.(NCLAT).

As per section 252 (1) of the companies act, 2013 provides that the before passing any order or imposing any Legislation or Regulatory under this section, the tribunal shall give a reasonable opportunity of making representation and of being heard to the registrar of the company and all the concerned persons.


As per the provisions and regulation of the Act, A registered company can exercise all functions of a company incorporated under the both the acts, and also the company has perpetual succession with power to acquire, hold and dispose of property of all form whether it is movable or immovable property, Also, it can contract, sue and be sued by the said name.


Book of Companies Act 1930,

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