Application of Companies Act,2013

Application of companies act,2013


Those that collaborate to accomplish a shared objective are referred to as a “company.” There are actually many reasons why people could wish to associate. However, the term “company” as used in the Companies Act of 2013 often refers to partnerships created for commercial objectives, such as operating a business.


A company that has been founded or granted a licence in accordance with the “Companies Act, 2013” or any other company legislation is referred to as a “company” in legal language. In a legal context, the rule creates an artificial entity called a corporation. Its meaning is different from that of its core elements.

So this artificial legal person, like any other regular human being: has several obligations in addition to many rights.

Companies can be divided into various categories, including:

  • Private limited company
  • Public limited company
  • one person company
  • Charitable Company

The three types of corporations mentioned in the list of company categories above are all private. They are a “private corporation,” not a “public limited company,” according to this.

It is possible to modify a private corporation’s initial classification from a private company to a public company. Conversion may occur voluntarily, inadvertently, or by operation of law. A company’s conversion has no bearing on its legal status as a corporation.

Limitations on the members’ transferring their shares

A private corporation’s articles of association (AoA) must include a provision restricting shareholders’ capacity to transfer their shares. This implies that the company’s private shares are less freely transferable than its shares of a public company. This does not, however, prohibit the transfer of stock in a private corporation. Additionally, the AoA stipulates that if a private business member decides to sell their shares, they must do so by giving them to the current members at a price decided upon by the directors.

Invitations to the public are prohibited.

This means that a private limited company cannot directly or indirectly invite the public to participate in its securities or debentures through the issuance of a financial statement or any other public invitation.

Customers of the person producing the prospectus, owners of the corporation, holders of debentures, or any other group of the public could all be considered members of the public.

In plain terms, it suggests that a private corporation cannot invite the broader public to an event. It must come to a private agreement in order to collect the money.

Application of company law to banking, insurance, and other highly regulated industries

If there are no contradictions, the Companies Act of 2013 is applicable to all sorts of enterprises covered by Special Acts of Parliament, including those in the banking, insurance, and electricity-providing industries.

Although the requirements for applying company law to different sectors are covered by Section 1(4) of the Companies Act, some requirements related to financial statements, loans and investments, deposit acceptance, and other topics do not apply to certain sectors because those sectors are governed by the primary legislation that governs them.

Section 1(4) of the Companies Act of 2013 specifies that the provisions of the Act refer to:

  • Corporations created under such an Act or any prior company law
  • Insurance companies, unless these provisions conflict with the Insurance Act of 1938 or the Insurance Regulatory and Development Authority Act, 1999
  • Banking institutions, unless these regulations conflict with the Banking Regulation Act of 1949
  • Companies engaged in the production or generation of electricity, unless these provisions conflict with the electricity act,2003
  • Any other corporation governed by any special Act in force at the time, with the exception of instances in which the aforementioned provisions are at odds with those of a particular special Act
  • Any other body corporate established under any special Act in force at the time that the Central Government may determine in this regard by regulation, subject to any deviations, amendments, or adaptations specified in the confirmation.

The Companies Act of 2013 includes drawbacks for several industries.

Below are the sections of the Companies Act of 2013 that exempt those sectors from the applicability of that clause.

  • Financial assistance for purchasing shares under Section 67 (3)

According to Section 67(2), no public corporation shall directly or indirectly, by way of a loan, guarantee, the provision of security, or otherwise, provide financial assistance to any person with the intention of, or following, a purchase or arrangement made or to be made, by any person, of or for any shares in the company or its holding company.

According to Section 67, a financial institution lending money in the normal course of business is exempt from the provisions of Section 67(2).

  • Proviso to Section 73 that prohibits accepting deposits from the general public (1)

No corporation may invite, receive, or renew public deposits made pursuant to this Act “unless in the manner provided under this Chapter on and after the Commencement of this Act,” according to section 73(1).

The Reserve Bank of India Act, 1934’s definitions of banking companies and non-banking financial companies, as well as any additional companies the Central Government may name in this context after consulting the Reserve Bank of India, are not covered by Section 73(1).

  • Financial statements under Section 129’s proviso (1)

According to Section 129(1), the financial statements must meet the accounting requirements announced under Section 133, give an accurate and reasonable picture of the company or companies’ financial situation, and be in the form or forms as may be given for different groups or classes of companies in Schedule III.

Nothing in Section 129(1) shall apply in relation to any insurance or banking firm, any company engaged in the production or generation of electricity, or any other class of company for which a type of budgetary reporting has been defined in or under the Act regulating such a type of company, or to any other class of company for which a type of budgetary reporting has been defined in or under any other Act. Furthermore, the absence of such information should not be taken as evidence that the financial statements do not present an accurate and reasonable picture of the company’s state of affairs:

  1. Any matters that are not required to be reported by the Insurance Act of 1938 or the Insurance Regulatory and Development Authority Act of 1999 in the case of an insurance company
  2.  Any matters that are not anticipated to be reported by the Banking Regulation Act of 1949 in the case of a banking company
  3. Any matters not required to be reported by the Electricity Act of 2003 in the case of a business engaged in the production or supply of electricity
  4.  Any issues that are not required to be disclosed under the Banking Regulation Act of 1949 in the case of a banking company.


By implementing “vigil systems” within organisations, the current Companies Act, 2013, seeks to enhance the regulatory framework. But there are still some distinct grey areas that make implementation difficult. It is thought that the Act has significantly and ideally changed corporation law. However, it is impossible to declare this transformation to be finished. Furthermore, new areas for change will emerge once the act is fully implemented in the Indian sense.


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