Dr.

Shakuntala Misra
National Rehabilitation
University

Under the Supervision of – “Dr. Shail Shakya”

Academic Session – 2022 – 2023

Topic – “Comparative study of companies act 1956, and Companies act 2013

Submitted To Submitted By
Dr. Shail Shakya Khushbu Kumari

Faculty of Law B. Com LL. B (Hons) 5th Sem ster

DSMNRU, Lucknow. Roll no:- 214140026
Corporate Law [LLB–(Subject Code)]

Table of Content
Cover Page I
Acknowledgement III
Matter 1
Conclusion IV
Bibliography V

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Corporate Law [LLB–(Subject Code)]

Acknowledgement
I would like to acknowledge and give my warmest thanks to my supervisor (“Dr. Shail Shakya
“) who made this work possible. Her guidance and advice carried me through all the stages of
writing my project. I would also like to thank my classmates for letting my defense be an
enjoyable moment, and for your brilliant comments and suggestions, thanks to you.

I would also like to give special thanks to my family for their continuous support and
understanding when undertaking my research and writing my project. Your prayer for me was
what sustained my this far.

Finally, I would like to thank God, for letting me through all the difficulties. I have experienced
your guidance day by day. You are the one who will let me finish my degree. I will keep on
busting you for my future.

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study
Corporate Law [LLB–(Subject Code)]

Comparative
Study of
Companies
Act, 1956 and
companies
Act , 2013

Companies Act 1956 and 2013: A company is a collection of people who come together,
create a unique legal organization, and work toward that goal. Indian companies were
previously governed by the Companies Act of 1956; however, following a significant
modification made in 2013, they are now governed by the Companies Act of 2013.

It is important to remember that even though the 2013 Act is now in effect, businesses
registered under the previous Act are still considered. The Companies Act of
2013 comprises 7 schedules and 464 sections. The old Companies Act of 1956 comprises
15 schedules and 658 sections.

In this article, we’ll brief you on the difference between the Companies Act 1956 and 2013,
which will help you to understand the concept better.

The fundamental difference between the Companies Act of 1956 and the Companies Act of
2013 is that while one may establish a company under the latest, one may not do so under
the previous.

There are several points of difference, which include the following points.

1. Charge

Previously, the Act of 1965 did not define charge. According to the Act of 2013, a charge is an
interest or lien registered against any corporation’s assets, operations, or both. Mortgages are
included in this definition. The interest and lien absent from the earlier Act are once more
present.

2. Listed Company

The Act of 2013 specifies in section 2 (52) that a listed company is one whose securities are
listed on any recognized stock exchange, as opposed to the Act of 1956, which defined a

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Corporate Law [LLB–(Subject Code)]
listed public company as one that has any of its securities listed in any recognized stock
exchange. Therefore, the current Act covers all companies, not just public ones.

3. Officer Who Is In Default

Section 2 of the present Act and Section 2 of the prior Act contained descriptions of this (31).
(60). It is important to note that the policy now covers merchant bankers and transfer
agents.The Directors who are aware of the standard for attendance at board meetings or
concerning the minutes will also be included with the CFO in this category, even if the
company has a managing director or other senior managerial professional.

4. One-Person Company

This concept did not know the prior Act. However, section 2 (62) of the current Act specifies
that a business is referred to as a one-person company if it only has one member on the
board of directors.

5. Articles Of Association

The existing Act contains provisions relating to entrenchment, and the provisions of the
Articles may be altered or amended subject to the satisfaction of the applicable requirements.
According to the existing Act, corporations may obtain sample articles from the Central
Government upon request.Along with that Notice of the Entrenchment must be given to the
Registrar. The proper forms, Schedule 1’s tables F, G, H, I, and J, should be used while
constructing the Articles.

6. Financial Year

Companies were free to choose the completion of their fiscal year within the terms of the Act
of 1956. However, according to the current Act, a company’s fiscal year ends on March 31.

7. Financial Statement

The format of the financial statement under the Act of 1956 was specified in Schedule VI,
whereas Schedule III of the current Act specifies the same.

8. Number Of Partners

Following the previous Act, there might be a maximum of 10 partners in the banking industry
and 20 partners overall. The current Act of 2013 sets a limit of 100.

9. Maximum Shareholders

Apart from former and current workers, a Private Limited Company had 50 shareholders
before the new Act. There are currently 200 shareholders (excluding past and present
employees).

10. Issue Of Share At Discount

The current Act forbids the issuance of shares at a discount, whereas the prior Act permitted
it. However, ESOPs are provided to the employees at a discount under section 54.

11. Interest On Calls In Arrears

The interest rate that might be applied to a call in arrears under the previous Act in the
absence of a provision in the Articles was 5% per year. At the same time, the rate is 10% per
year under the current Act.

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Corporate Law [LLB–(Subject Code)]

12. Interest On Calls In Advance

In the absence of a clause in the Articles, the interest could only be paid at a rate of 6% per
year under the former Act, which is now 10% per year under the current Act.
13. Minimum Subscription

In terms of the existing Act, it only applied to the shares. However, under the current Act,
securities won’t be issued unless the required minimum subscription has been met.

Features of the Companies Act 1956

1. Independent Legal Entity

A new company has a legal structure that is distinct and clear from the individuals that make
up its core. It is a self-regulating, independent, and self-governing body. It has the right to
distribute any form of property for which it is the owner in any manner it chooses.Additionally,
it has the authority to open a bank account, engage in business transactions, enter into
shareholder agreements, and file lawsuits against itself or its shareholders.

2. Incorporated Association

The Companies Act of 1956 mandates that all Indian corporations be registered. For the
incorporation of a company, formal paperwork must be registered with the Registrar of the
Companies. The Memorandum of Association outlines the purposes for which a company is
established.

3. Limited Liability

Since a business has its own legal identity and cannot be claimed by its members, it cannot
use the private assets of its shareholders to pay off its debts.

4. Common Seal

An industry’s common seal serves as the legal representation for any choices taken on its
behalf that the firm is unable to make on its own. Directors are the company’s artificially
created personas; they serve as the organization’s spokesmen.

5. Perpetual Existence

A firm is an artificial entity that is free from age-related limitations and other status-unaffecting
variables like death, insolvency, retirement, etc. Perpetual existence has an infinite lifespan.
Only laws have the power to terminate a company’s existence.

6. Transferability of Shares

Due to limitations, shareholders of a private company are unable to transfer their shares in the
same manner as those of a public limited company. Because the company’s shares are
transferable, the owner can sell his interest in the business to a potential buyer. Shares of
publicly traded firms can be transferred easily.

7. Separations of management and ownership

The Act explains the steps involved in forming a company, including its name, procedure,
fees, constitution, and members, as well as the goal of the organization and all other factors
involving the company, its directors, who make decisions, and its HOD, who handles the

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 Corporate Law [LLB–(Subject Code)]
primary responsibility and makes decisions in line with the planning process and other tasks
and liability related to the company matters most.It also discusses the closing down and
liquidation of the company during that time.

Features of Companies Act 2013

1. Class action suits for Shareholders

The Companies Act of 2013 introduced a brand-new idea of class action lawsuits to raise
awareness of shareholders’ and other stakeholders’ rights.

2. More power for Shareholders

The Companies Act of 2013 mandates shareholder approval for a number of big transactions.

3. Women empowerment in the corporate sector

At least one female director must be appointed to the board of directors, according to the 2013
Companies Act (for certain classes of companies).

4. Corporate Social Responsibility

According to the Companies Act of 2013, several classes of Companies are required to invest
a specific sum of money each year in projects and activities that demonstrate their
commitment to CSR.

5. National Company Law Tribunal

The National Company Law Tribunal and the National Company Law Appellate Tribunal were
established by the Companies Act of 2013 to take the position of the Company Law Board
and the Board for Industrial and Financial Reconstruction. They would deliver specialized
justice while relieving the Courts of their burden.

7. Fast Track Mergers

After receiving the Indian government’s consent, the Companies Act of 2013 suggests a
streamlined and expedited process for mergers and amalgamations of certain classes of
companies, such as holding and subsidiary companies and small businesses.

8. Cross Border Mergers

According to the Companies Act of 2013, a foreign business may combine with an Indian firm
and vice versa, but only with the prior consent of the RBI.

The Companies Act of 1956 and the Companies Act of 2013 differ in a few ways as a result. The
current Act includes measures for the effective management of the enterprises and more closely
monitors their operations.

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 Corporate Law [LLB–(Subject Code)]
The Companies Act of 2013 makes the merger process more effective. Still, it also has some
ambiguities that need to be changed to lessen or avoid any complication in the process, which can be
found after the relevant parts are announced. The chance for globalization is created by the outward
mergers that are currently permitted

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Corporate Law [LLB–(Subject Code)]

Conclusion

The Doctrine of Indoor Management, also known as the Turquand Rule, is a legal principle
under the Companies Act, 2013, and it provides protection to outsiders who enter into
transactions with a company. The doctrine essentially states that outsiders dealing with a
company are entitled to assume that the internal proceedings of the company have been
regularly carried out. In other words, individuals dealing with a company are not required to
inquire into the regularity of internal proceedings.

The Doctrine of Indoor Management acts as a safeguard for third parties who may not be aware
of the internal procedures of a company. It emphasizes the importance of protecting the
interests of innocent third parties who may rely on the apparent authority of officers and assume
that the necessary internal procedures have been followed.

However, it's crucial to note that the doctrine has its limitations and does not provide absolute
protection. If a person dealing with the company has knowledge of irregularities or if the
transaction is ultra vires (beyond the legal powers of the company), the doctrine may not apply.

In conclusion, the Doctrine of Indoor Management serves as a balance between the need to
protect third parties dealing with a company and the importance of maintaining the integrity of
internal corporate procedures. It reinforces the principle that outsiders can rely on the external
authority of a company's officers, but it does not absolve individuals from liability if they have
knowledge of irregularities or if the transaction is legally impermissible.

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Corporate Law [LLB–(Subject Code)]

Bibliography
Primary Sources 
Books
Name of the Book Used

Bare Act
Name of the Bare Act Used

Secondary Sources 
 Paste the link of the Research Paper/Articles Used

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