07,Feb 2024
Company Law is said to be a set of several legal factors that control the formation, operation, and dissolution of a company. With regard to the Senior Management of the Company and Board of Directors, their responsibilities, roles, and accountability; stakeholder rights and equitable treatment; transparency; timely disclosures; legal and regulatory compliances; and appropriate risk management measures to safeguard and advance the interests of all stakeholders, the Companies Act of 2013 aims to improve corporate governance.
A Brief History of Companies Act in India
Certain commercial guilds in England are referred as Regulated Companies. In 1600, the East India Company was founded by Royal Charter. The Joint Stock Companies Act was initially passed in England in 1844. A provision for company registration was included in this statute.
A provision to register a joint stock company in India was created in the year 1850, using the English Joint Stock Companies Act 1844 as a foundation. Following this, India established the Joint Stock Companies Act in 1857. Following that, in 1866, the Companies Act was established. The Act combined and modified the laws pertaining to the foundation, management, and dissolution of organizations and trading enterprises.
The Indian Companies Act 1913 eventually took the place of the Act. But after independence, in 1950, the Government formed a Committee to review the Indian Companies Act of 1913, with Shri H.C. Bhaba serving as its chairman. In 1952, the committee formed and submitted its report. The English Companies Act 1948 and the committee's suggestion led to the implementation of the Companies Act 1956 on April 1st, 1956.The 1956 Indian Companies Act was superseded by the 2013 Indian Companies Act. All public and unlisted firms in India are governed by extensive provisions set forth in the firms Act of 2013.
The President of India sanctioned the Companies Act, 2013, which was approved by Parliament on August 29, 2013. The Act unifies and modifies company-related laws. On August 30, 2013, the Companies Act, 2013 was published in the Official Gazette.
Company Administration and Meetings – Law and Practices
Company directors hold the administration of a firm. They act for company's success and reward its shareholders. The panel of directors aims for establishing strategic direction of the corporation and overseeing corporate governance. A talented and best BOD may provide an organization with specialized knowledge and experience in important areas of the business, like technology, finance, and management.
They also owe obligations to the state, the company's trade partners, and its employees. Board meetings are used by businesses to develop and enhance vital business strategies. Therefore, from the perspective of the business secretary, preparing for meetings is essential. This includes organizing the appropriate paperwork, sending out the meeting materials ahead of time, and offering a variety of supplemental materials.
As per the Companies Act, the company secretary serves as the chief governance officer of the business and has several duties alongside the directors. The following roles and responsibilities are mentioned in Section 205 of the Companies Act, 2013;
- To provide an update, changes, and compliance to the Board about the observance of this Act's requirements
- To guarantee that the business adheres to the relevant secretarial requirements
- To offer the company's directors the necessary direction in carrying out their roles, responsibilities, and authority
- To assist in organizing meetings, participate in committee, board, general meetings, and keep track of meeting minutes
- To get authorizations from the Board, the general meeting, the government, and other concerned authorities as mandated by the Act's requirements.
- To support the Board in managing the company's operations
- To support and counsel the Board in maintaining appropriate corporate governance and adhering to best practices and regulations in this area
Legal Framework of Company Law
A Detailed Overview of Company Law: Origin, Meaning, Definition
Company law is a broader idea derived from commercial law. It describes the relationships, legal rights, and commercial activity of individuals, corporations, organizations, and enterprises as well as its financing, establishment, management, and dissolution of corporations.
Origin:
The term "company" includes two Latin words, i.e. "com" & "panis" where com stands for "together" and panis stands for "bread". Hence, it can be clearly said that a company acts as a person who take their food together.
Meaning:
- A company is an incorporated association of an individual
- Here, person refers to one of two categories; Natural Person: An example of anything formed by nature is a person and Artificial or Legal Person: An entity constituted by law includes trusts, corporations, partnerships, and so forth.
Definition:
The Clause 20 of Section 2 of the Companies Act 2013 defines a ‘Company’ as involvement of an individual formed or registered under any of the following - Companies Act 2013/Indian Companies Act, 1956/1913/1882 etc. Let’s understand the Association of Person (AOP) types, i.e. Incorporated AOP and unincorporated AOP.
Incorporated AOP: Incorporated AOP refers to a particular person who is different from the members constituted an incorporated AOP. Possessing the legal ability to enter into contracts and buy any kind of property, etc. It may be established by statutory corporations such as GIC, LIC, ICSI, SIDBI, ICAI, or by company legislations like RIL, TCS, SAIL, TATA, etc.)
Unincorporated AOP: Only assembly of people like partnership businesses denotes something that lacks a legal identity and is not registered under the laws. Haney states that a corporation is a legal creation of an artificial person having different eternal succession, legal identity, and common seal.
Features of a Company under Company Law
Separate Legal Entity: It refers to a person who has assumed human rights and abilities. All businesses and organization, including public and/or private limited, must register and have a unique legal identity, and erect a barrier between the firm's members from one another.
Incorporated Association: In accordance with several regulations, an organization that is established is needed to be registered under the Companies Act 2013 or the previous Indian Companies Act of 1956.
Perpetual Succession: As we know that the perpetual means "forever." Hence, when a firm is established by legal means then it can only be terminated through legal means. A company's members may transfer their shares, and the name of the transferee is recorded in the register. In case, a member is deceased, his successor takes over, and the same goes in the case of insolvency. Perpetual succession is the name given to this aspect of the business.
Company Seal: It is nothing more than a company's official signature, similar to a stamp. The company seal is attached to the document. It is admissible in court as proof of an action.
Limited Liability: Members of a firm are only liable to their shares. In this context, liability is said as a duty or obligation under the law to act or not.
Separate Property: A company can sell, purchase, lease, hold, transfer, mortgage, or even gift a property under its name as it has its own legal identity. In simple words, it can be said that a company may act as a transferee or transferor of a property.
Company, a legal entity that can be sued or can sue: A firm is a legal entity that has the ability to sue others and itself in his own name. Both the firm and others may file a lawsuit against it.
What are the different kinds of company?
The Company Act 2013’s section 2 states the different Companies and their categorization depend on liabilities, control, number of members, incorporation, shares transferability, etc.
The Indian market offers a wide range of businesses that might support the country's development and economic progress. The Companies Act of 2013's Section 2 lists a set of companies and classifies them according to liabilities, incorporation, membership count, share transferability, and control.
Company’s lists based on liabilities
- Unlimited Liability Companies
- Companies Limited by Shares
- Companies Limited by Guarantee
Companies based on incorporation
- Statutory Companies
- Registered Companies
- Royal Charter Company
Companies on the basis of domicile
- Indian Company
- Foreign Company
List of companies as per the number of members
- One Person Company
- Private Company
- Public Company
Depending on other new kinds, companies are listed below
- Government Company
- Section 8 Company
- Associate Company
- Subsidiary Company
- Small Company
- Producer Company
- Holding Company
- Dormant Company
Conclusion
Company Law is an important regulatory force overseeing the operation, establishment, and dissolution of organizations in India. Its evolution, spanning from previous commercial guilds to the Companies Act, 2013, mirrors changes to financial and societal needs. Crucially, corporation management, driven through the board of directors and company secretary, steers company method and ensures compliance with legal requirements. The Companies Act, 2013, explains the essential roles and responsibilities of the company secretary, emphasizing their role in governance and assistance in decision-making.
The legal framework offers a detailed account of a company’s foundation, traits, and classifications primarily based on elements like incorporation and legal responsibility. Such features, such as perpetual succession and restricted legal responsibility, distinguish corporations in the business enterprise panorama. The various classifications, encompassing public, non-public, and one-person companies, accommodate diverse commercial enterprise structures. Ultimately, India's Company Law adapts to a dynamic business environment, furnishing a strong legal basis that harmonizes stakeholder interests, fosters governance, and propels commercial enterprise growth across sectors.
References
- https://www.taxmann.com/post/blog/what-is-a-company-definition-characteristics-and-latest-case-laws/
- https://umeschandracollege.ac.in/pdf/study-material/company-law/Introduction%20to%20Company.pdf
- https://www.toppr.com/guides/principles-and-practices-of-accounting/intro-to-company-accounts/types-of-companies/
- https://www.legalserviceindia.com/legal/article-7931-origin-and-development-of-company-law-in-india.html
- https://www.toppr.com/guides/accountancy/accounting-for-share-capital/features-company-kinds-company-share-capital-company/
- https://www.coceducation.com/blog/accounts/salient-features-of-a-company/215