(Primarily governed by the Companies Act, 2013)
Contents
Introduction
The Companies Act is the principal legislation that governs the formation, management, regulation, and dissolution of companies in India. It provides a legal framework for corporate governance and compliance.
The Companies Act, 2013 replaced the earlier Companies Act, 1956, and aims to enhance corporate accountability, investor protection, and ease of doing business.
Objectives
- Regulate the incorporation, structure, and functioning of companies.
- Ensure transparency, disclosure, and corporate governance.
- Protect the interests of shareholders and creditors.
- Promote ease of doing business and entrepreneurship.
Applicability
Applies to:
- All companies incorporated under this Act or under previous company laws.
- Includes private companies, public companies, One Person Companies (OPCs), Section 8 companies, and foreign companies operating in India.
Key Concepts
| Term | Description |
|---|---|
| Company | A legal person formed by registration under the Act |
| Corporate Veil | Company has a separate legal identity from its members |
| Limited Liability | Shareholders’ liability limited to unpaid share capital |
| Share Capital | Capital raised by issue of shares |
| Board of Directors | Governing body responsible for strategic decisions |
| Memorandum of Association (MOA) | Charter document of the company |
| Articles of Association (AOA) | Internal rules and regulations of the company |
Types of Companies
- Private Company
- Minimum 2 members, maximum 200
- Restricts transfer of shares
- Cannot invite public to subscribe
- Public Company
- Minimum 7 members, no upper limit
- Shares freely transferable
- Can invite public subscription
- One Person Company (OPC)
- Single member company with limited liability
- Section 8 Company
- Non-profit organization (e.g., for education, charity)
Incorporation of a Company
- Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN)
- Reserve name via SPICe+ Part A
- File SPICe+ Part B with MoA, AoA, and other documents
- Certificate of Incorporation issued by Registrar of Companies (RoC)
Key Authorities
- Ministry of Corporate Affairs (MCA)
- Registrar of Companies (RoC)
- National Company Law Tribunal (NCLT)
- Serious Fraud Investigation Office (SFIO)
Important Provisions of the Act
| Area | Key Provisions |
|---|---|
| Incorporation | Sections 3 to 22 |
| Share Capital & Debentures | Sections 43 to 72 |
| Management & Administration | Sections 88 to 122 |
| Board of Directors | Sections 149 to 172 |
| Accounts & Audit | Sections 128 to 148 |
| Dividends | Section 123 |
| Compromise & Amalgamation | Sections 230 to 240 |
| Prevention of Oppression & Mismanagement | Sections 241 to 246 |
| Winding Up | Sections 270 to 365 |
| Corporate Social Responsibility (CSR) | Section 135 |
Corporate Social Responsibility (CSR)
- Applicable to companies meeting specified thresholds of net worth, turnover, or profit
- Requires spending at least 2% of average net profits on CSR activities
Penalties and Enforcement
- The Act provides for civil and criminal liability
- Compounding of offences, adjudication, and NCLT proceedings are available
- Emphasis on compliance over punishment