Evolution of Company Law in India

AUTHOR: S A Malavika, Christ Academy Institute of Law

Abstract

The discussion in this research paper is focused on the evolution of Companies Law in India. This research paper focuses on how Company Law came into force and the evolution of Company Law over a period of time.

Keywords

The Companies Act 1882, The Companies Act 2013, Evolution

Introduction

A legal entity that is formed by one or more individuals for the purpose of engaging and operating a business. A company’s business line can be often determined with the structure it chooses, such as a partnership, a corporation or a sole proprietorship.

Generally, companies are organised in order to earn profits from the business activities, but some may also be structured as non–profit charities.

A company has the same legal rights and responsibilities as a person does, such as to enter into a contract, pay taxes, own taxes, to sue or be sued and also to hire employees. There are Two main categories of companies namely Public company and Private company. Public Companies are the companies that have strict reporting and regulatory requirements in order to prevent any kind of fraudulent activity.

On the other hand, Private Companies are held under the control of private ownership, mostly held by a single person or a family.

Methodology

This research is done through the Doctrinal method of research. In this method of research secondary sources such as various books, journals and online articles written by various authors have been referred to.

Literature Review

1), Adam Hayes, www.investopedia.com

In this particular online article, the author tries to interpret what is the meaning or definition of a company and also if the non-profit organisation can be included as a company. The author tries to interpret if the company is only for the sole purpose of income earning or not.

2) Chanchal Agarwal, www.shiksha.com

According to this online article the author provides for the evolution of the Companies Act, 2013. It provides for the origin of the Companies Act from the period of the British till the present period.

Evolution of Company Law in India

In the year 1600 the East India Company was founded by the Royal Charter. Initially the Joint Stock Companies Act was passed in the year 1844 in England. A separate provision for the company registration was included in this particular statute.

In the year 1850 a provision to register a joint stock company in India was created. In the year 1857 India had established the Joint Stock Companies Act. Following that in the year 1866 the Companies Act was established.

The Companies Act 1866 had combined and modified the laws relating to the foundation, management and dissolution of the organisation.

The Indian Companies Act of 1913 had eventually taken the place of the Joint Stock Companies Act of 1950. But once after the independence in the year of 1950 the Government formed a Committee in order to review the Indian Companies Act, 1913 with Shri H. C Bhaba serving as its chairman. In the year 1952, the committee was formed and its report was submitted.

The Indian Companies Act, 1956 was replaced by the Indian Companies Act, 2013. All the companies and public firms are governed by the provisions of the Companies Act, 2013.

The Companies Act of 2013 was sanctioned by the President of India which was approved by the Parliament on August 29, 2013.

Practices of a company under Indian Companies Act, 2013

The directors of the company hold the administration of the firm. The directors act for the success of the company and provide reward for its shareholders. The Panel of directors known as the Board of Directors (BOD) aims for establishing proper direction of the company.

The BOD is the main head of the company who leads the company. The BOD has obligations towards their partners and the company’s employees and also the board meetings conducted by the companies for the development of the business and for the growth of their business strategies.

Features of a Company

a) Separate Legal Entity

A company shall exist as a separate legal entity which shall be different from the members and shareholders of the company.

b) Corporate Body

A company needs to be registered as a corporate body under the Companies Act, 2013 to be considered as a company.

c) Transferability of shares

A public limited company’s shareholders can transfer their shares according to the rules mentioned in the Articles of Association (AOA), whereas in a private limited company there may be some restrictions on the transfer of the shares.

d) Limited Liability

As the company is a separate legal entity the members are not liable for the debts of the company and therefore the company has a limited liability.

e) Common seal

As the company is an artificial person and cannot sign the name by itself and therefore the necessity of the common seal arises for the purpose of representing the decisions made on the behalf of the company.

f) Number of members

Minimum number of members in order to start a Public Company is 7 and a maximum can be unlimited, whereas for a Private Company the minimum number is 2 members and a maximum of 200 members according to the Companies Act, 2013.

Conclusion

Company Law is an important regulatory law which helps in overseeing the operation, establishments and dissolution of companies in India. Its evolution till the Companies Act, 2013 provides for the changes for financial and societal needs.

The Companies Act, 2013, provides for and explains for the roles and responsibilities of the various posts and members of the particular company.