The Indian Companies Act of 2013 replaced the Companies Act of 1956, which further brought a transformation in corporate governance and regulatory compliance in India. To align with international standards, this legislation by the government introduced measures to increase corporate accountability, promote investor protection, and facilitate ease of doing business. By getting to know the key facets of this pivotal legislation, we can better appreciate India’s corporate governance landscape.
Companies Act 2013 Highlights
While the Act covers many aspects, let’s highlight some of its major highlights. It mandates that one-third of the Board comprise independent directors to ensure impartiality in decision-making. It also introduces the concept of ‘One Person Company’ (OPC), facilitating entrepreneurship without needing a second person. The Act’s approach to CSR, a first for statutory laws, requires companies of a specific size to spend 2% of their 3 average net profit on CSR activities. Lastly, this legislation promotes electronic filing and transparency, emphasizing the need for greater disclosure and accountability in corporate operations.
Companies Act 2013 And Companies Act 1956 Comparison Chart
| Details | Companies Act 1956 | Companies Act 2013 |
| Parts | 13 | NA |
| Chapters | 26 | 29 |
| Sections | 658 | 470 |
| Schedules | 15 | 7 |
Chapter List Of Companies Act, 2013
Chapter 1. Preliminary (Sections 1 To 2)
Chapter 2. Incorporation Of Company And Matters Incidental Thereto (Section 3 To 22)
Chapter 3. Prospectus And Allotment Of Securities (Sections 23 To 42)
Chapter 4. Share Capital And Debentures (Sections 43 To 72)
Chapter 5. Acceptance Of Deposits By Companies (Sections 73 To 76)
Chapter 6. Registration Of Charges (Sections 77 To 87)
Chapter 7. Management And Administration (Sections 88 To 122)
Chapter 8. Declaration And Payment Of Dividend (Sections 123 To 127)
Chapter 9. Accounts Of Companies (Sections 128 To 138)
Chapter 10. Audit And Auditors (Sections 139 To 148)
Chapter 11. Appointment And Qualifications Of Directors (Sections 149 To 172)
Chapter 12. Meetings Of Board And Its Powers (Section 173 To 195)
Chapter 13. Appointment And Remuneration Of Managerial Personnel (Section 196 To 205)
Chapter 14. Inspection, Inquiry And Investigation (Sections 206 To 229)
Chapter 15. Compromises, Arrangements And Amalgamations (Section 230 To 240)
Chapter 16. Prevention Of Oppression And Mismanagement (Sections 241 To 246)
Chapter 17. Registered Valuers (Section 247)
Chapter 18. Removal Of Names Of Companies From The Register Of Companies (Sections 248 To 252)
Chapter 19. Revival And Rehabilitation Of Sick Companies (Section 253 To 269)
Chapter 20. Winding Up (Section 270 To 365)
Chapter 21. Companies Authorized To Register Under This Act (Sections 366 To 378)
Chapter 21a. Producer Companies (Section 378a To 378)
Chapter 22. Companies Incorporated Outside India (Section 379 To 393)
Chapter 23. Government Companies (Section 394 To 395)
Chapter 24. Registration Offices And Fees (Section 396 To 404)
Chapter 25. Companies To Furnish Information Or Statistics (Section 405)
Chapter 26. Nidhis (Section 406)
Chapter 27. National Company Law Tribunal And Appellate Tribunal (Section 407 To 434)
Chapter 28. Special Courts (Section 435 To 446)
Chapter 29. Miscellaneous (Section 447 To 470)
Overview And Features of the Companies Act 2013
Let’s explore some significant features of the Act.
First, the concept of ‘One Person Company’ (OPC) under the Act has paved the way for individual entrepreneurs to create a single-person economic entity. This provision allows them to start a company without finding a second party.
Second, the Act’s strict norms on corporate social responsibility (CSR) make it stand out. Companies meeting certain financial thresholds must form a CSR committee and ensure that a minimum of 2% of average net profits over the previous three years is spent on CSR activities. This directive, designed to push businesses towards socially responsible behaviour, is unique to the Indian context.
Third, the Act offers a more robust framework for protecting investor interests. It mandates stricter compliance and disclosure requirements and heavier penalties for defaults, thereby fostering greater corporate transparency.
Companies (Amendment) Act, 2019 Details
The Companies (Amendment) Act of 2019 refined the original 2013 Act. This amendment’s key objective was to remove complexities in compliance and enhance the ease of doing business. Among the changes, it introduced a new section that provided for the re-categorization of certain offences as civil defaults, where the adjudication mechanism was also streamlined. It also transferred some approval powers from the courts or tribunals to the central government.
Furthermore, it allowed companies to issue shares at a discount to creditors in instances of conversion of debt into shares. Additionally, the amendment aimed to tighten CSR compliance by introducing a specific penal provision for non-compliance. Companies unable to spend the stipulated amount must provide the reasons for not doing so in their financial statements.
Summing Up
The Indian Companies Act of 2013, along with its subsequent amendment in 2019, has revolutionized the corporate setting in India. They reflect the country’s action to promote corporate transparency, accountability, and responsible business practices while encouraging entrepreneurship and easing compliance. By learning about this Act, we can better understand India’s corporate environment and the measures in place to safeguard stakeholder interests. Further, for anyone who is starting their own business or is already on the path to registering a startup, learning about the Companies Act 2013 will be eye-opening in terms of laws and compliance.
