Indian company law


Indian company law regulates the corporations formed under the Section 2 Indian Companies Act 2013.
"Company means a company incorporated under this Act or under any previous Company Law"

History

Companies in India are regulated through the Companies Act, 1956, Companies Act 2013 and related laws & regulations, which are administered by the Ministry of Corporate Affairs.
The MCA works through two branches i.e., Regional Director and Registrar of Companies. At present, India has seven such Directors and 22 ROCs. These two branches are also called In-house source of adjudication.

Recent changes in Indian Company law

The amendment Act has received an assent of president of India on 25th May 2015 and published through an official notification in The Gazette of India on 26th May 2015. The amendment act contained 23 sections and issued one notification on 29th May 2015 to implement 1 to 13, and 15 to 23 sections of the said act. The act was passed to further amend and consolidate the Companies Act 2013.
In the country a company may be incorporated either private or public. A creator of the company needs to comply with various conditions includes prescribed amount of the paid up capital - private company to have minimum of rupees 1 lac, and a public company rupees 5 lac during the life its life time. However, the amendment act was proved as one of the source of relief among all the business doers since the strict criteria of capital was removed. The amendment act was passed to serve many objectives with a common instrument includes Ease of doing business, to substitute common seal of a company with human way of signing any document.

Companies (2nd Amendment) Act 2017

The MCA in India has given way to a new Act with effect from 26 January 2018. It includes 93 sections and out of that 90 sections has been notified by the Ministry through 11 notifications including the latest issued on 19 September 2018. The new Act has given rise to the number of new concepts and also have made the principal act simplified and comprehensive.
However, the amendment in the principal act is still under process. In the recent amendment, the MCA has also notified changes in section 134 of the principal act to get mandatory sign the financial statements from the CEO of the Company, if any.

Companies (3rd Amendment) Act 2019

Companies (Amendment) Bill 2020

The bill was introduced in the lok sabha on 17th March 2020 by the Finance minister Ms Nirmala Sitharaman.
The bill seeks to amend the Companies Act 2013, and yet to become full law. It gives rise to following concepts:
1) Direct listing of the Indian companies in the permitted foreign jurisdictions.
2) Exemption from setting up of CSR committee, and carry forward mechanism under section 135 of the Companies Act 2013.
3) A new chapter to be added in producer companies.
4) Exemption to registered NBFCs from filing resolutions with ROC under section 117 of the Companies Act 2013.
5) Exclusion of the listed company from the definition of Listed entity.

Companies Fresh Start Scheme, 2020

Ministry of Corporate Affairs has introduced this scheme to enable all the defaulting companies to make their defaults good by filing all the pending E-forms, includes Financial statements and Annual return, without payment of any fee other than the normal statutory fee to be applicable pursuant to Company Rules 2014. The scheme also provide an immunity from prosecution to the extent the default is related to filing of any e-form.
The scheme serves a motive of "Fresh Start as a fully compliant entity"
The scheme acts as a one time opportunity for all defaulting companies. All such companies may avail such scheme from 1st April 2020 to 30th September 2020. The scheme covers 76 e-forms.
The scheme also gives an opportunity to inactive company to get the status of a dormant company under section 455 of the Companies Act 2013.

The Companies (Amendment) Ordinance 2018

The Ministry of Corporate Affairs has constituted a committee on 13 July 2018 to review the offenses under the Indian Companies Act 2013 with specific terms of reference. The said committee to be tasked with the responsibility to declogging the Corporate judiciary system in India. The committee has further directed by the authority to make its report public within 30 days of its first meeting, accordingly, the committee has furnished the report on 14 August 2018. In turn, the committee has recommended some amendments needs to be implemented immediately. Such recommendations include:
1) To enlarge the jurisdictions of the two branches of the Ministry in India i.e., Registrar of Companies and Regional Directors
2) To shifting the approvals from Tribunals to In-House adjudication mechanism
3) To also re-categorize the 'Acts/Offences' which is currently punishable to be compounded to the 'Acts' merely resolved through civil liabilities etc.
4) The said committee has also recommended 33 provisions of the principal Act to be implemented immediately.
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The Ministry has also felt the needs to make it happen such recommendations effective at the earliest from the Corporate Governance point of view. In India, if any Act needs to be amended, the proposed changes shall be placed before the houses of the parliament into session to make it a part of the Law. However, this is the very first time that the Ministry has felt to bring any immediate changes and such amendments become an act of urgency to be rollout through an "Ordinance"
Companies can be incorporated through the rules of the Indian Companies Act 2013. Whereby the new SPICe form helps the companies to get incorporated in one day. However, one-day company registration in India is not possible as there required certain documents, preparation of which takes time.
Classification of the Companies on the basis of Incorporation
Companies incorporated under Royal Charter This was practiced by the British Government. For example, East India Company came under Royal Charter, which means it was granted Charter by the King or the Queen of British and was controlled by the Charter. However, this is not much in practice now.
Companies that are incorporated by the special Act of Parliament These Companies are incorporated under specified act of Parliament or State Legislature. These companies are formed with the fulfillment of some specified objects at the National level. These Companies are also called as Corporations. For example, Reserve Bank of India or State Bank of India.
Companies incorporated under Indian Companies Act of 1956 These companies come under the memorandum of association and articles of association.

Types of companies

FI
INCORPORATON
1)Memorandum of association
Duly stamped signed by directors. in the case of public company should signed by 7 members. In the case of private company signed by 2 person sufficient
2)Articles of association
It is the rules of internal management.pvt company can adopt table a.this is model of articles of association
3)Consent of preposed director
The consent of preposed director act as director and purchase of share

Corporate governance

Company constitutions

Governance of the board

Under CA 2013 section 149, the provision mandate that every company shall have board of directors.
Under CA 2013 section 169, the basic rule is that any company director may be removed by the general meeting with a simple majority vote, after giving "special notice" of 28 days. In companies which elect the board by proportional representation according to section 163, there is an exception so that directors appointed by one particular group of members cannot be ousted by the majority. Those directors can only be removed by the members that appointed them, so as to protect the system of proportional voting.

Employee rights

It was the view of many in the Indian Independence Movement, including Mahatma Gandhi, that workers had as much of a right to participate in management of firms as shareholders or other property owners. Article 43A of the Constitution, inserted by the Forty-second Amendment of the Constitution of India in 1976, created a right to codetermination by requiring the state to legislate to "secure the participation of workers in the management of undertakings". However, like other rights in Part IV, this article is not directly enforceable but instead creates a duty upon state organs to implement its principles through legislation. In 1978 the Sachar Report recommended legislation for inclusion of workers on boards, however this has not yet been implemented.
The Industrial Disputes Act 1947 section 3 created a right of participation in joint work councils to "provide measures for securing amity and good relations between the employer and workmen and, to that end to comment upon matters of their common interest or concern and endeavour to compose any material difference of opinion in respect of such matters". However, trade unions had not taken up these options on a large scale. In National Textile Workers Union v Ramakrishnan the Supreme Court, Bhagwati J giving the leading judgment, held that employees had a right to be heard in a winding up petition of a company because their interests were directly affected and their standing was not excluded by the wording of the Companies Act 1956 section 398.
Directors' owe a range of duties to the company, which primarily involve acting within the constitution, avoiding conflicts of interest and performing their role to a desired standard of competence. The Companies Act 2013 section 166 lists directors' duties in seven simple sections, which reflect the existing principles developed by the case law in the courts around most Commonwealth countries, in common law and equity. Part of the reason for codification of directors' duties was to provide a transparent statement of the duties directors owe, and therefore to publicise principles of best practice. However, because of their generality, the case of law of the courts matters to interpret how duties will apply in specific situations.

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 rupees 500 crore, or a turnover of over rupees 1,000 crore, or a net profit over rupees 5 crore. Socially responsible projects are defined in Schedule VIII, and mainly involve community development.

Enforcement