What You Need To Know About The Company Act 2013

The Companies Act, 2013 is an Act of the Parliament of India which regulates incorporation of a company, responsibilities of a company, directors, and dissolution of a company.

The Companies Act 2013 came in to force on 12th September, 2013 to replace the Companies Act, 1956. It is the most significant law that governs the functioning of companies in India.

The Companies Act 2013 is divided into 29 chapters (and 470 sections) which covers all aspects of companies.

The major objectives of the Act are to –

  1. Ensure better corporate governance and legal compliance by the companies
  2. Regulate the formation, function and dissolution of companies in India
  3. Frame rules and regulations pertaining to the accounting and audit of companies
  4. Provide a mechanism to redress the grievances of shareholders and creditors
  5. Ensure that companies do not use public funds for fraudulent activities and to prevent unfair manipulation of the share market.

The Companies Act, 2013 encompasses the rules and regulations for the formation of the companies, their functioning and its dissolution.

Companies that are formed under the Act are governed by the provisions of the Companies Act.

Companies are classified into private and public companies. Private companies are required to have a minimum of two and a maximum of fifty shareholders and its shares are not openly traded.

On the other hand, public companies have at least seven shareholders and its shares are openly traded.

The Companies Act 2013 consists of various sections which cover various aspects of company law.

Some of the provisions of the Act include –

  1. Establishment of Boards of Directors
  2. Appointment of auditors
  3. Preparation of balance sheets and annual reports
  4. Prohibition of insider trading and the protection of investors.

The Companies Act 2013 also seeks to curb the activities of shell companies.

The regulatory authority vested with enforcing the Companies Act is the Ministry of Corporate Affairs.

It is responsible for monitoring the compliance of the Companies Laws, issuing notifications and guidelines, and imposing fines and penalties upon any company which is in violation of the law.

The ministry also keeps a record of all the companies registered in India and takes action against non-compliant companies.

The Companies Act 2013 and the Rules framed thereunder provide for several avenues for dispute resolution.

Section 138 of the Act deals with offences by companies and directors.

The section provides for the initiation of criminal proceedings against those companies and their directors who have failed to comply with the Act or have committed a fraudulent activity.

Section 144 of the Act deals with the powers of the central government to prosecute a company or its officers for breach of any of its provisions.

Similarly, Section 128 of the Act deals with appeals and Section 156 provides for Special Courts for speedy disposal of cases.

The Companies Act 2013 also covers aspects such as –

  1. Contributions to charitable and religious organizations
  2. Dividend payments
  3. Loans and advances to companies
  4. Registration and issue of securities
  5. Pension schemes

The Act also introduces provisions regarding corporate social responsibility.

Under Section 135, companies having a certain threshold of net worth, turnover or profit are required to spend a certain percentage of profits towards social activities such as environment protection, education, health services, etc.

The Act also provides for Digital Signatures, E-verification, E-stamp duty and E-voting. These provisions facilitate the efficient functioning of companies in India and save resources and time.

Moreover, the Act also includes the establishment of the National Company Law Tribunal and the National Company Law Appellate Tribunal to address issues and disputes related to corporate.

The Companies Act 2013 and the Rules framed thereunder have significantly contributed to the growth and development of the corporate sector in India.

It strives to protect the interests of consumers and investors and provides for efficient enforcement of the law.

The Act seeks to create a harmonious balance between the interests of the company, investors and other stakeholders.

The Act also seeks to improve corporate governance and provide for a fairer and more efficient regulation of Indian companies.