A

PROJECT REPORT

ON

506 FM : Legal Aspects of Finance & Security Laws

Title: Companies Act 1956 / 2013

SUBMITTED TO

Maharashtra Education Society’s

MES Senior College, Kothrud, Pune

(Affiliated to Savitribai Phule Pune University)

In Partial Fulfilment Of
BACHELORS IN BUSINESS ADMINISTRATION
(2023-24)

SUBMITTED BY

Ms. Samiksha Chitkesiwar

(Roll Number - 2131013, TY BBA)

Ms. Pranali Sanas
(Roll Number – 2131070, TY BBA)

UNDER THE GUIDANCE OF

Mrs. Ankita Deshpande

 CERTIFICATE

This is to certify that Mr./ Ms______________________________________ of TY

BBA, Roll Number________________, having specialization in

_____________________________________has successfully completed his/ her

Project titled ________________________________________________________

___________________________________________________________________ for

the Course 506 C: Human Resources Management as per the norms of Savitribai

Phule Pune University, Pune under the guidance of

Dr./Prof.___________________________________________ for the academic year

2023-2024.

Project Guide BBA Coordinator Principal

Internal Examiner External Examiner

 Table of Contents

S. No Content Page No

1 Introduction

2 Need for new companies act

3 Objectives of companies act

4 Methodology

5 Incorporation & Registeration

6 Corporate Goverance

7 Shareholders right & projections

8 Compliance & Regulartory Provision

9 Conclusion
 Introduction
1) Background of companies act 1956

The Companies Act, 1956 constitutes the Company Law in India. It came into force with effect from 1st
April, 1956. It is a consolidating Act which presents the whole body of the company law in a complete form
and repeals earlier Companies Act and subsequent amendments. It contains 658 sections and XV schedules
and numerous forms. Company Law is fast developing in order to protect joint stock companies. Company
Law is not a field of legislation in which finality is to be expected, as the law falls to be applied to a growing
and changing subject matter and growing uses of the company system as an instrument of business and
finance and the possibilities of abuse inherent in that system.

The latest amendment in Companies Act came into force in 2006 and the Act was renamed as “The
Companies (Amendment) Act, 2006. This Amendment Act received the assent of the President of India on
29th May, 2006 and was notified in the Gazette of India Extraordinary dated 30th May, 2006. The amending
Act is being brought into effect by stages. The provisions of newly inserted sections 610B to 610E relating to
filling of various returns and statutory documents through electronic mode have been made effective from
16th September, 2006. The provisions of newly inserted sections 266A to 266G relating to Director’s
identification Number (DIN) have been made effective from 1st November, 2006.

The Company Bill, 2011 has been introduced in Parliament on 14th December, 2011. The Bill seeks to
replace the present Companies Act, 1956. It proposes comprehensive revision of the existing Act with a view
to make it simpler, clearer, and leaner and user friendly by reducing number of sections. The main emphasis
of Bill is on adequate disclosures and accountability to ensure that management and auditors do not take
shareholders and other investors for a ride. The bill provides for greater shareholder democracy and less
government intervention in the affairs of a company by removing controls and approvals.

Main objectives of Company law are:

1. To protect the interest of shareholders.

2. To safeguard interest of creditors.

3. To help the development of companies in India on healthy lines.

4. To help the attainment of ultimate ends of the social and economic policy of the government.

5. To equip the government with necessary powers to intervene directly into affairs of a company in
public interest.
Special features of Companies Act are:

1. It provides more stringent provisions relating to the company promoters and company management.

2. It provides elaborate provisions relating to the form and contents of a prospectus, maintenance of accounts
by companies, reduction of share capital, etc.

3. This Act recognizes the institution of ‘Government Companies’ (in which government holds at least 51%
share capital) and makes special provisions for them.

4. The Act also provides measures calculated to disintegrate the concentration of economic power and
wealth which affect the public interest adversely.

5. It gives extensive powers to the Central Government and the Company Law Board to intervene directly in
affairs of a company in public interest, in recognition of the fact that a public company should be regarded as
a national asset and not as something of exclusive concern to the shareholders or the directors.

Company Law Board (CLB)

With a view to ensuring greater efficiency, cohesion and despatch in the day-to-day administration of the
Companies Act, an administrative authority, namely, the Board of Company Law Administration (popularly
known as the Company Law Board) was set up in February 1964, by Central Government, in accordance with
Section 10F. The CLB is to exercise and discharge such powers and functions of the Central Government
under this Act or any other law as may be conferred on it by the Central Government, by notification in the
Official Gazette under the provisions of this Act or that other law. Under the provision of Companies
(Amendment) Act, 1988, the powers and functions of CLB have been enlarged. The new Board is quasi-
judicial body. It has been vested with considerable powers and functions. Some of these are judicial while
others are administrative in nature. The Board has the power to regulate its own procedure and act in its own
discretion. The Board would be guided by the principles of natural justice in the conduct of its business. The
new CLB, as reconstituted on 31st May, 1991, has framed the CLB Regulations, 1991, for regulating the
proceedings before it. The government has also prescribed the fee making an application to the Company
Law Board vide CLB (Fees on Application and Petitions) Rules, 1991. The CLB is to consist of such
number of members, not exceeding 9, as the Central Government may appoint by notification in the Official
Gazette, and one of such member shall be appointed as its Chairman. The members of the CLB shall possess
such qualifications and experience as may be prescribed. They may be appointed for such period, not
exceeding 3 years, as may be specified in the notification.
Appeal against the orders of the CLB

Section 10F, provides that an aggrieved person may file an appeal against any decision or order of the CLB
before the High Court, within 60 days from the date of communication thereof, on any question of law. The
said period of 60 days may be extended by the Court to a further period upto 60 days on justifiable grounds.
The order or decision of the Board on any question of fact will be final and will not be appealable. The High
Court to which an appeal against the decision of CLB would lie.

Background of Companies Act 2013

Companies Act, 2013 got President’s Assent on 29th August 2013. The Act consists of 29 chapters, 470
sections, 7 Schedules. The Act was implemented in phases, in first phase, 98 sections were made effective
from 12th September 2013. However now most of the sections (283 sections) became effective from 1st
April 2014. Most Rules (covering 19 Chapters) are also notified to be effective from 1st April 2014. New E-
forms were made available on MCA Portal on 28th April 2014. Provisions relating to formation of NCLT
became operational w.e.f. 1st June 2016. The Act was amended by Companies Amendment Act, 2015 and
further amended by Companies Amendment Act, 2017

The Companies Bill, 2012 was passed in Rajya Sabha on 8th

August, 2013, and became Companies Act, 2013 finally replacing the decades old Companies Act, 1956
which was a very much outdated legislation guiding companies in India. The statute contains 29 chapters, 470
sections and 7 schedules, which is comparatively more streamlined than the Companies Act, 1956 which
contained 658 sections and 14 schedules .The phrase “as may be prescribed” has been used around 336 times
in the 2013 Act which gives the Central Government ample power to fine-tune the workings of the Act to the
continuous economic changes that plague the present world. However, probably the main aim of the
Companies Act, 2013 has been to reduce the bureaucratic red tape and bring down the continuous hurdles that
businesses and start-ups face when and after incorporating themselves into a company. The Companies Act,
2013 aims at lessening Government approvals and boosting self-regulations by companies so as to provide
for speedy workings by companies and to enable them be competitive players in the world economy.
Although it has been the golden aim of the Government, it can be said that the Companies Act, 2013 has
brought in a mixed basket of results with some successes and some failures. The following pages shall
traverse all the fundamental aspects of the two Acts so as to compare and analyse them in different respects.
2) Need for a new Companies Act

There were a number of reasons why a new Companies Act was needed in India to replace the Companies
Act, 1956. Some of the key reasons include:

 The global business landscape had changed significantly since 1956. The Indian economy had also
become more integrated with the global economy. As a result, Indian companies were facing new
challenges and opportunities. The Companies Act, 1956 was not adequately equipped to address these
challenges and opportunities.

 The Companies Act, 1956 was seen as being outdated and complex. It was also criticized for being
ineffective in preventing corporate fraud and abuse. The new Companies Act, 2013 was designed to be
more modern, streamlined, and effective.

 The Companies Act, 1956 did not adequately address the needs of small and medium-sized enterprises
(SMEs). The new Companies Act, 2013 includes a number of provisions that are designed to make it
easier and less expensive for SMEs to do business.

 The Companies Act, 1956 did not adequately promote corporate social responsibility (CSR). The new
Companies Act, 2013 makes CSR mandatory for certain companies.

Here are some specific examples of how the Companies Act, 2013 addresses the shortcomings of the
Companies Act, 1956:

 The Companies Act, 2013 introduces a number of new corporate governance measures, such as the
requirement for independent directors and the creation of audit and nomination and remuneration
committees. These measures are designed to increase transparency and accountability in Indian
companies.

 The Companies Act, 2013 makes it easier for SMEs to do business by reducing the minimum paid-up
capital requirement and simplifying the process of incorporation.

 The Companies Act, 2013 makes CSR mandatory for certain companies. This is a significant step towards
promoting sustainable business practices in India.

Overall, the Companies Act, 2013 is a significant improvement over the Companies Act, 1956. It is a more
modern, streamlined, and effective law that is designed to promote good corporate governance, protect the
interests of investors, and facilitate the growth of Indian businesses.
The transition from the Companies Act of 1956 to the Companies Act of 2013 in India was a significant and
necessary step to modernize and reform company law to keep pace with the changing business environment
and global economic trends. Here are some of the key reasons for the need for the new Companies Act:

1. Globalization and Economic Growth: India's economy had significantly evolved since the enactment of
the Companies Act in 1956. The old Act was not aligned with the demands of a rapidly growing and
globalizing economy. The new Act was designed to facilitate economic growth, attract foreign investments,
and align with international best practices.

2. Complex Business Structures: The business landscape had become more complex, with various forms of
corporate entities, including public and private companies, limited liability partnerships (LLPs), and one-
person companies (OPCs). The new Act provided a comprehensive regulatory framework for these diverse
business structures.

3. Corporate Governance : The 2013 Companies Act placed a stronger emphasis on corporate governance
and transparency. It introduced several provisions related to board structure, independent directors, audit
committees, and related-party transactions to enhance accountability and integrity within companies.

4. Shareholder Rights: The Act sought to strengthen the rights and protection of shareholders, particularly
minority shareholders, by introducing provisions related to class action suits, proxy advisory services, and e-
voting in shareholder meetings.

5. Improved Compliance and Enforcement: The new Act aimed to streamline regulatory compliance and
enforcement mechanisms by introducing e-filing and digitization of records, making it more efficient and
transparent.

6. Simplification and Ease of Doing Business: It aimed to simplify various administrative and procedural
aspects of company law, making it easier for companies to do business in India. The Act reduced the
number of forms and filings required, thus reducing the administrative burden on businesses.
7. Enhanced Transparency: The Act required enhanced disclosures, both financial and non-financial, to
provide stakeholders with a clearer picture of a company's operations. This was seen as crucial for investor
confidence.

8. Promotion of Responsible Business Practices: It encouraged corporate social responsibility (CSR)

initiatives by mandating companies meeting certain criteria to spend a percentage of their profits on CSR
activities.

9. Winding Up and Insolvency Provisions: The 2013 Act introduced modern insolvency and bankruptcy
provisions, making it easier to resolve cases of corporate insolvency and to protect the interests of creditors
and stakeholders.

10. Alignment with International Standards: The Act was designed to align Indian corporate law with
international standards and best practices, particularly in areas like accounting standards and auditing
practices.

11. Environment and Sustainability: It introduced provisions for the integration of environmental and
sustainability reporting into annual financial statements, recognizing the growing importance of responsible
and sustainable business practices.

12. Stricter Regulation of Related-Party Transactions: The Act introduced more stringent regulation of
related-party transactions to prevent conflicts of interest and protect the interests of minority shareholders.

13. Revised Penalties and Accountability: It enhanced penalties and introduced more robust mechanisms for
holding company officers and directors accountable for their actions or inactions.

The transition from the Companies Act of 1956 to the Companies Act of 2013 aimed to provide a more
contemporary and robust legal framework for businesses in India, reflecting the evolving economic and
business landscape and enhancing corporate governance and transparency. It was a response to the changing
needs and expectations of the business community, investors, and society at large.
3) Objectives of Companies Act

The Companies Act, which varies from country to country, is a piece of legislation that governs the
formation, operation, and regulation of companies. The specific objectives of a Companies Act may differ
depending on the country and its legal system, but generally, the Companies Act seeks to achieve the
following objectives:

1. Incorporation and Legal Existence: The Companies Act provides a legal framework for the incorporation
of companies, granting them a separate legal identity from their owners. This means that companies can
own property, enter into contracts, and sue or be sued in their own name.

2. Shareholder Protection: Companies Acts typically include provisions to protect the rights and interests of
shareholders. This may involve requirements for issuing shares, disclosure of financial information, and
rules for shareholder meetings and voting.

3. Corporate Governance :These laws establish rules and principles for the management and governance of
companies. They define the roles and responsibilities of directors and officers, as well as the duties they owe
to the company and its shareholders.

4. Financial Reporting and Transparency: Companies Acts often require companies to maintain accurate
financial records and publish financial statements on a regular basis. This promotes transparency and helps
investors and creditors make informed decisions.

5. Capital Structure and Fundraising: These laws regulate the issuance of shares, debentures, and other
financial instruments. They also set out the rules for raising capital and financing business operations.

6. Mergers and Acquisitions: Companies Acts provide a framework for mergers, acquisitions, and takeovers.
They outline the procedures that companies must follow when engaging in such activities, including the
rights of minority shareholders.
7. Winding Up and Insolvency: Companies Acts contain provisions for the orderly winding up and
liquidation of companies that can no longer meet their financial obligations. They establish rules for the
distribution of assets to creditors and shareholders.

8. Protection of Creditors: These laws often include provisions to protect the interests of creditors by
regulating the conduct of companies, particularly in financial distress or insolvency situations.

9. Corporate Social Responsibility: Some modern Companies Acts may also include provisions related to
corporate social responsibility (CSR) and sustainable business practices.

10. Economic Development: In some countries, the Companies Act may aim to promote economic
development and entrepreneurship by simplifying the process of starting and operating a business.

11. Compliance and Enforcement: The Act provides mechanisms for ensuring that companies adhere to the
rules and regulations. This may involve the establishment of regulatory bodies and penalties for non-
compliance.

12. Reduction of Fraud and Malpractice: Companies Acts are designed to reduce corporate fraud,
malpractice, and unethical behaviour through regulations and oversight.

13. Protection of Minority Shareholders: Ensuring that minority shareholders' rights are protected and that
they have a fair say in corporate decision-making.

It's important to note that the specific objectives and provisions of the Companies Act can vary significantly
from one jurisdiction to another. Therefore, the above objectives are general in nature, and the actual
content and emphasis of a particular Companies Act will depend on the legal and regulatory framework of
the specific country in which it is enacted.
4) Methodology

1. Policy Formulation: The process begins with the government and relevant regulatory authorities
identifying the need for a new Companies Act or an amendment to an existing one. This often involves
extensive consultation with stakeholders, including businesses, legal experts, industry associations, and the
general public. The objective is to define the policy goals and objectives that the new legislation should
achieve.

2. Drafting the Legislation: Legal experts, often within government departments or hired consultants, draft
the proposed Companies Act or amendments. This process involves translating the policy objectives into
specific legal language. The drafting process must be meticulous to ensure that the legislation is clear,
comprehensive, and legally sound.

3. Parliamentary or Legislative Approval: The draft legislation is then presented to the parliament or
legislative body for debate and approval. This involves a series of readings and discussions in which
lawmakers consider the content, raise questions, and propose changes. Ultimately, the legislation is voted on
and passed into law.

4. Implementation Planning: Once the Companies Act is enacted, government agencies and regulators
develop an implementation plan. This plan outlines the steps required to put the new law into practice,
including creating or updating regulations, forms, and procedures.

5. Regulations and Rules: Regulations and rules are often developed under the authority of the Companies
Act. These provide detailed guidance and specify the practical steps that companies and regulators need to
follow to comply with the law. For example, regulations might outline the procedures for company
registration, financial reporting, or corporate governance.

6. Communication and Education: To ensure that businesses and the public are aware of the changes and
requirements under the new Companies Act, government agencies often engage in extensive communication
and education efforts. This can include workshops, seminars, publications, and online resources.
7. Transition Period: There may be a transition period during which companies must adapt to the new
requirements. This can vary depending on the specific provisions of the Companies Act. During this period,
companies often have to update their governance structures, financial reporting, and compliance practices.

8. Compliance and Enforcement: Regulatory authorities, such as the Registrar of Companies, the Securities
and Exchange Board of India (SEBI), or other relevant bodies, are responsible for enforcing the Companies
Act. They ensure that businesses comply with the law by conducting audits, investigations, and imposing
penalties for non-compliance.

9. Review and Amendments: Companies Acts are not static; they evolve to address changing economic and
legal landscapes. Regular reviews of the legislation are essential to identify areas that need improvement or
adjustment. Amendments may be proposed and passed through a similar legislative process.

10. Case Law and Precedents: The legal system plays a role in interpreting and applying the Companies Act
through case law and legal precedents. Court decisions can clarify ambiguities in the law and set standards
for compliance.

Historical evaluation of Companies Act in India

The Companies Act in India has undergone several changes over the years, reflecting the evolving needs of
the country’s economy and business landscape. The first Companies Act was passed in 1866, which was
replaced by the Companies Act of 1913. The 1913 Act was in force until 1956, which was then replaced by
the Companies Act of 2013, which is currently in force. In this article, we will delve into the history of the
Companies Act in India and examine the key features of each iteration of the act. The Companies Act of
1866 was passed during the British colonial rule of India to regulate the formation and management of
companies and to ensure transparency in their dealings. It was based on the English Companies Act of 1862
and aimed to provide a framework for the registration and regulation of companies in India. The 1866 Act
laid down rules for the registration of companies and the submission of annual returns, as well as provisions
for the inspection of company records and the dissolution of companies. However, the act had several
limitations and did not provide for the concept of limited liability for shareholders. The Companies Act of
1913 was a significant improvement over the 1866 Act. It introduced the concept of limited liability for
shareholders, which meant that the liability of shareholders was limited to the amount of capital they had
invested in the company. This made it easier for entrepreneurs to raise capital and start new businesses.

The 1913 Act also laid down rules for the registration, management, and dissolution of companies. It
established the Registrar of Companies and the Indian Companies Act Board to oversee the implementation
of the act. The 1913 Act also provided for the inspection of company records and the submission of annual
returns, and it established penalties for non-compliance with the act. The Companies Act of 1956 was a
major overhaul of the 1913 Act. It introduced new provisions for the registration and regulation of public
companies, private companies, and companies limited by guarantee.

The 1956 Act also established the Central Government as the regulator of companies and laid down rules for
the management of companies, including rules for holding meetings and maintaining records. The act also
provided for the appointment of auditors, the submission of annual returns, and the inspection of company
records. The 1956 Act also established penalties for non-compliance with the act and provided for the
dissolution of companies. The Companies Act of 2013, which was passed in 2013, replaced the Companies
Act of 1956. The 2013 Act introduced several new provisions, including those related to corporate social
responsibility, independent directors, and the National Company Law Tribunal. The act also made
significant changes to the rules for the formation, management, and dissolution of companies. One of the
key features of the 2013 Act is the concept of a “One Person Company,” which is a company with only one
member. This allows for a single person to own and run a company, making it easier for entrepreneurs to
start and run their own businesses. The act also introduced the concept of corporate social responsibility
(CSR), making it mandatory for companies to spend a certain percentage of their profits on social welfare
activities.

Another important feature of the 2013 Act is the introduction of independent directors. Independent
directors are appointed to a company’s board of directors to provide independent oversight and ensure that
the interests of the shareholders are protected. The act also established the National Company Law Tribunal
(NCLT), which is a quasi-judicial body responsible for resolving disputes related to companies and their
management.

The Companies Act of 1866 :

The Companies Act of 1866 was the first piece of legislation passed in India to regulate the registration and
operation of companies. It was introduced during the British colonial rule of India and was based on the
English Companies Act of 1862. The 1866 Act laid down rules for the registration of companies and the
submission of annual returns, as well as provisions for the inspection of company records and the
dissolution of companies. However, the act had several limitations and did not provide for the concept of
limited liability for shareholders. Under the 1866 Act, shareholders were fully liable for the debts of the
company, meaning that if a company was unable to pay its debts, shareholders were liable to pay them from
their personal assets. This made it difficult for entrepreneurs to raise capital and start new businesses, as
potential investors were hesitant to invest in companies where their personal assets were at risk.

The 1866 Act also did not provide for the concept of a public company, which meant that companies could
not raise capital from the public by issuing shares. Instead, companies could only raise capital from a small
group of private investors. This limited the growth potential of companies and made it difficult for them to
expand their operations. In addition, the 1866 Act did not provide for any regulatory oversight of
companies. The only way to ensure compliance with the act was through the submission of annual returns,
which were rarely audited or enforced. This lack of oversight made it easy for companies to evade their
legal responsibilities and operate in a manner detrimental to the public interest. Despite these limitations, the
Companies Act of 1866 was an important step in the evolution of the Indian business landscape. It laid the
foundation for future legislation and paved the way for the introduction of more comprehensive and
effective laws to regulate the registration and operation of companies in India. The act was replaced by the
Companies Act of 1913, which introduced the concept of limited liability for shareholders and improved the
regulatory framework for companies in India.

The Companies Act of 1913 :

The Companies Act of 1913 was a significant improvement over the previous Companies Act of 1866,
which was passed during the British colonial rule of India and based on the English Companies Act of 1862.
The 1913 Act was the first major overhaul of the Indian Companies Act and introduced several important
changes to the way companies were registered, managed, and dissolved in India. One of the key features of
the 1913 Act was the introduction of the concept of limited liability for shareholders. Under the 1866 Act,
shareholders were fully liable for the debts of the company, which made it difficult for entrepreneurs to
raise capital and start new businesses. The 1913 Act limited the liability of shareholders to the amount of
capital they had invested in the company, which made it easier for companies to raise capital and
encouraged the growth of new businesses in India. The 1913 Act also established the Registrar of
Companies and the Indian Companies Act Board to oversee the implementation of the act. The Registrar of
Companies was responsible for registering companies and maintaining records of their activities, while the
Indian Companies Act Board was responsible for interpreting the act and providing guidance to companies
on how to comply with its provisions. The 1913 Act also laid down rules for the registration, management,
and dissolution of companies. It established the process for registering a company, which included
submitting articles of association, a memorandum of association, and a list of shareholders to the Registrar
of Companies. It also laid down rules for the management of companies, including rules for holding
meetings and maintaining records. The act also provided for the appointment of auditors, the submission of
annual returns, and the inspection of company records. In addition, the 1913 Act introduced provisions for
the dissolution of companies.

It established the process for dissolving a company, which included submitting a notice of dissolution to the
Registrar of Companies and obtaining the approval of the Indian Companies Act Board.

It also laid down rules for the distribution of assets among shareholders in the event of dissolution. The
Companies Act of 1913 was in force until 1956 and played a major role in the growth and development of
the Indian economy and business landscape. It introduced the concept of limited liability for shareholders,
which made it easier for entrepreneurs to raise capital and start new businesses. It also established the
Registrar of Companies and the Indian Companies Act Board to oversee the implementation of the act and
provided a framework for the registration, management, and dissolution of companies in India.

The Companies Act of 1956 :

The Companies Act of 1956 was a significant overhaul of the previous Companies Act of 1913 in India. It
was passed by the Indian parliament in 1956 and came into effect on April 1, 1957. The act aimed to
streamline the regulation of companies in India and provide a comprehensive framework for the registration,
management, and dissolution of companies. One of the key features of the 1956 Act was the introduction of
new provisions for the registration and regulation of public companies, private companies, and companies
limited by guarantee. The act provided for the registration of companies with the Registrar of Companies
and laid down rules for the management of companies, including rules for holding meetings and
maintaining records. The 1956 Act also established the Central Government as the regulator of companies
in India. It provided for the appointment of auditors and the submission of annual returns, and also
established the inspection of company records to ensure compliance with the act. The act also provided for
the appointment of a company secretary, who is responsible for ensuring that the company complies with
the legal and statutory requirements. Another important feature of the 1956 Act was the introduction of the
concept of a “depositary receipt.” This allowed foreign companies to list their shares on Indian stock
exchanges through depositary receipts, which are issued by a domestic depository in lieu of the underlying
shares. This provision was aimed at attracting foreign investment into India and promoting the development
of the Indian capital market. The 1956 Act also introduced provisions for the winding up and dissolution of
companies. It provided for the appointment of a liquidator to manage the winding-up process and distribute
 the assets of the company among the shareholders. The act also provided for the appointment of an official
liquidator, who is responsible for overseeing the winding-up process and ensuring that the interests of the
shareholders and creditors are protected. The Companies Act of 1956 was in force until 2013 when it was
replaced by the Companies Act of 2013. The 2013 Act introduced several new provisions, including those
related to corporate social responsibility, independent directors, and the National Company Law Tribunal
(NCLT). The 2013 Act aimed to further improve the regulatory framework for companies in India and
promote greater transparency and accountability in the management of companies.

The Companies Act of 2013:

The Companies Act of 2013 is the latest iteration of the Companies Act in India. It was passed by the Indian
parliament in 2013 and replaced the Companies Act of 1956. The 2013 Act is aimed at improving corporate
governance and making it easier to do business in India. One of the key features of the 2013 Act is the
concept of an “OPC,” which stands for “One Person Company.” This allows for a single person to own and
run a company, making it easier for entrepreneurs to start and run their own businesses. This is a significant
change from the previous Companies Act, which required at least two members to form a company.
Another important feature of the 2013 Act is the introduction of corporate social responsibility (CSR)
provisions. Companies with a net worth of at least 500 crores, or a turnover of at least 1000 crores, or a net
profit of at least 5 crores are required to spend at least 2% of their average net profit for the immediately
preceding 3 financial years on CSR activities. The 2013 Act also introduced the concept of independent
directors. Independent directors are appointed to a company’s board of directors to provide independent
oversight and ensure that the interests of the shareholders are protected. They are not associated with the
management or control of the company and are expected to bring an objective and independent perspective
to the board’s decision-making process. The 2013 Act also established the National Company Law Tribunal
(NCLT) as a quasi-judicial body responsible for resolving disputes related to companies and their
management. The NCLT is empowered to hear and decide on matters related to mergers and acquisitions,
the winding up of companies, and other disputes arising under the Companies Act.

In addition to these major changes, the 2013 Act also introduced several other provisions aimed at
improving corporate governance and making it easier to do business in India.

These include:

 Simplified procedures for company incorporation and management

 Increased transparency and accountability for companies
 Enhanced penalties for non-compliance with the Act
 Greater protection for minority shareholders
 Streamlined procedures for mergers and acquisitions
The Companies Act of 2013 is a significant improvement over the previous Companies Act and is aimed at
promoting a more efficient and transparent business environment in India. The act has been widely welcomed
by the business community and is seen as a positive step towards making India a more attractive destination for
investment. Overall, the Companies Act of 2013 is a comprehensive piece of legislation that seeks to balance
the interests of the companies, shareholders, and society.

The act has been hailed as a major step forward in the evolution of India’s corporate laws and is expected to
play a key role in the development of the Indian economy in the years to come.

5) Incorporation and Registration

Incorporating and registering a company involves a series of legal and administrative steps to establish a
business entity as a separate legal entity from its owners. The specific requirements and processes can vary
from one country to another, but here is a general overview of the steps involved in the incorporation and
registration of a company:

1. Choose a Business Structure: - Decide on the type of business entity you want to establish. Common
options include a sole proprietorship, partnership, limited liability company (LLC), or corporation.

2. Business Name Reservation: - Select a unique name for your company that complies with the naming rules
and regulations of your jurisdiction. You may need to check the availability of the name and, in some cases,
reserve it in advance.

3. Draft the Articles of Incorporation or Formation: - Prepare the legal documents that outline the structure and
purpose of your company. The specific document and its requirements may vary depending on the business
structure you choose (e.g., articles of incorporation for a corporation, articles of organization for an LLC).

4. Registered Agent: - Appoint a registered agent who will serve as the company's official point of contact for
legal and administrative matters. This agent should have a physical address in the jurisdiction where you are
incorporating.

5. Filing Documents: - Submit the necessary documents to the appropriate government agency responsible for
business registration. This could be the state or provincial business registry, the corporate affairs commission,
or a similar authority. These documents typically include the articles of incorporation or formation and any
other required forms.

6. Pay Fees: - Pay the required registration and filing fees, which can vary based on the jurisdiction and
business structure.
7. Obtain an Employer Identification Number (EIN): - In many countries, including the United States, you
need to obtain an Employer Identification Number (EIN) or a similar tax identification number. This number
is essential for tax purposes and may be required to open a business bank account.

8. Draft and Adopt Bylaws or Operating Agreement: - For corporations, you'll need to draft and adopt
corporate bylaws, which outline the internal rules and procedures for the company. For an LLC, you would
create an operating agreement. These documents govern how the company will be managed.

9. Business Permits and Licenses: - Determine whether your business requires specific permits or licenses to
operate legally. This can include local, state, or industry-specific permits.

10. Open a Business Bank Account: - Establish a separate business bank account to manage the company's
finances. This is important for financial transparency and legal compliance.

11. Comply with Ongoing Filing and Reporting Requirements :- After the initial registration, companies are
typically required to file periodic reports and renewals to maintain their legal status.

The specific steps and requirements for incorporation and registration can vary significantly depending on
the country, state, or jurisdiction in which you are establishing your company. It's advisable to consult with
legal counsel or use the services of a registered agent to ensure that you follow all the legal and regulatory
requirements correctly.

6) Incorporation and registration

Following are the common types of business structures prevalent in India and their notable features to help
decide the best legal structure for your proposed entity.
Types of Business Structures in India
Each type of business structure has its own legal and financial implications, and choosing the right one can
greatly impact the success and growth of a business in India.
The types of business structures in India include sole proprietorship, partnership, limited liability
partnership, private limited company, public limited company among others.

Find the complete list below:

 Sole Proprietorship
 Partnership
 Limited Liability Partnership
 Private Limited Companies
 Public Limited Companies
  One-Person Companies
 Section 8 Company
 Joint-Venture Company
 Non-Government Organization (NGO)

Sole Proprietorships
A Sole Proprietorship is an enterprise that is wholly controlled by one person. Many entrepreneurs start
small businesses in their names and continue as sole proprietors. Such an establishment and its owner are
not considered separate entities. There is no formal registration required to start a business in India under
Sole Proprietorship.
While it is easy to register this entity, the proprietor must bear responsibility for all liabilities. The practical
implication of such an agreement is that the entire profit made by sole proprietor is in the hands of the
owner.
For example, there are no separate tax returns that are to be filed and the income incurred by the proprietor
must be disclosed in the personal income tax returns itself.
Many small businesses are recommended to and opt for this legal structure for the following benefits that
it provides:
 Cost-Effective: This kind of legal structure barely involves any cost; however conducting a business in a
separate area would require certain specific registrations like Shops and Establishment Registration and
others.
 Flexibility in decision making: The decisions are solely dependent on the Proprietor, therefore they are
easy to make and implement.
 Workplace Relationship: It is essential to maintain relationships with employees and customers in Sole
Proprietorship; the proprietor is capable of ensuring strong one on one relations with both, respectively.
Facts: Flipkart and Snapdeal started their business as sole proprietorship companies in India

Partnerships
In a partnership firm, two or more people come together to work and earn profits. There is a partnership
deed that specifies the invested interest of each partner and their profit sharing ratios along with other
terms of business functioning and operations.
 The partners are responsible for all liabilities and there is no limit to it. When it comes to the registration
of a partnership it is not mandatory but suitable to get it registered. This type of business structure provides
the following benefits:
 Fund Raising: It is easier to raise funds in a partnership as financial institutions consider them safer than
sole proprietorships.
 Shared Responsibility: This structure provides for better accountability of the partners and enjoys a
shared responsibility amongst them.
 Mutual trust: There is a sense of trust and faith among the partners in the Partnership setup. All partners
can act collectively or any one of the partners and act on behalf of others.

Facts: Hindustan Petroleum, Mahindra and Mahindra, Maruti Suzuki, Renault India are registered under
the 1932 act of Indian Partnership Act.

Limited Liability Partnerships

A Limited Liability Partnership is incorporated under the Limited Liability Partnership Act 2009. As
opposed to partnership firms, partners in an LLP are not burdened with unlimited liabilities caused by the
business.
Their responsibility towards losses or debts is limited to investments made by them. A limited liability
partnership and its partners are considered separate legal entities.
Further, no partner is liable on account of the independent actions of other partners, thus individual
partners are safe and shielded from joint liabilities upon commission of another partner’s misconduct.
 No Minimum Capital Requirement: An LLP can be started with no minimum amount of capital
contribution.
 Suitability: It is an easy process to start an LLP as compared to a private company, along with lesser legal
requirements.
 No limitation on the number of business owners: There can be two or more partners in this form of
legal structure.
 Less Registration Cost: The cost of registration is lesser as compared to a private limited company or
public limited company.
 Less Compliance: LLP’s are obligated to submit only two statements i.e. Annual Return Statements and
Statements of Accounts. Therefore, the compliance requirements are comparatively less than in Private
Limited Companies.
Facts: There are more than one lakh LLP company registrations in India
 Private Limited Companies
As per Section 2(68) of the companies Act 2013, A private company is defined as a ‘private company
means a company having a minimum paid-up share capital as may be prescribed, and which by its
articles,
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred:
(iii) prohibits any invitation to the public to subscribe for any securities of the company.’

Most Startups and businesses in India with higher ambitions choose Private Limited Company as a suitable
business structure. A Private Limited company enjoys the following benefits:
 Separate Legal Entity: A private limited company is said to be a separate legal entity. An entity means
something which has a legal existence; therefore the company can sue and can also be sued under its
name.
 Borrowing capacity: A private limited company enjoys the privileges of borrowing more funds than
LLPs as it has more options for taking on debt. Not only are bank loans easy to obtain (relative to OPCs
and LLPs), the option of issuing debentures and convertible debentures are always available. Even banks
and other financial institutions welcome private limited companies better than partnership entities.
 Easy Exit: Private limited companies can be sold or transferred, either partially or in full, to another
individual or entity without any disruption to the current business.
 Ability to sue and can be sued: To sue means to carry legal proceedings against a person, similarly just
as one person can bring legal proceedings in its name against another in that person’s name, a company
being a separate legal entity can sue and be sued in its name.
 Continuous Existence: The company’s existence remains unaffected by the death or resignation of any
member.
 Complete Possession of Property: The shareholders cannot claim to be owners of the property of the
company. The company itself is the owner.
 Dual relationship: A person in a Private Limited Company can be a shareholder/employee/director at the
same time.
Facts: Anand Automotive Pvt. Ltd. and Parle Products Pvt. Ltd. are examples of famous private limited
companies in India.
 Public Limited Companies
As per Section 2(71) of the Companies Act, a public company means “a company which is not a private
company”.
A public limited is formed by a minimum of 7 (seven) persons with a minimum paid-up capital.
The company may get listed in the stock exchange and thereafter shares of the same are traded openly.
There are more legal restrictions on this type of establishment than a Private Limited Company.
A public limited company enjoys the following benefits:
 Limited Liability: The liability of the shareholders is limited to their stake only. The business can be sued
by not involving any shareholders.
 Number of Members: There is a minimum requirement of seven shareholders and can exceed any
limitless number of members as its share capital can occupy.

 Continuous existence: The life span of the public limited company is not affected by the death of any
member or shareholder.
 Huge Capital: Public Limited Company can relish an increased ability to raise capital through the stock
market by issuing debentures and bonds from the public.
Facts: Reliance Industries and Bharti Airtel are examples of top Public Limited Companies.

One-Person Companies
As per Section 2(62) of the Companies Act 2013, “one person company” means a company that has only
one person as a member. This is a recent invention to facilitate entrepreneurs to own and manage
companies alone.
All the shares can be owned by one person but there must be a nominee for the sole member to register
this form of business.
The introduction of this concept of a company under the legal system is believed to not only cater to
economic growth but also create a good amount of employment opportunities. Some benefits of choosing
this structure are as follow:
 Payment of Interest on any delay in payment: One Person Company can avail all benefits under the
Micro, Small and Medium Enterprises Development Act 2006. One Person Company is either a small or
medium entity, therefore in case of any delay of payment (receives payment after a specific period) to the
buyer or the receiver they are entitled to receive interest thrice as much as the bank rate.
 Sole Owner: Only the owner is entitled to make business decisions and control the business without
complying with the long processes and measures as adopted by few other companies.
 Additional opportunities: Through this structure, an individual can take a higher amount of risks in
business without causing damage to personal assets.
Facts: Truffle House and Akhan Diary are examples of OPCs.
 Section 8 Company
A Section 8 Company or we may also call it a Non-profit Company, can be incorporated under the
provisions of the Companies Act, 2013 having the status of limited company without the addition to its
name of the word “Limited” or “Private Limited” for the purpose of promoting commerce, art, science,
sports, education, research, social welfare, religion, charity, protection of environment or any such other
object and the Company shall use its profits or other income in promoting its objects only and prohibit the
payment of any dividend to its members as well.
Section 8 company shall enjoy all the privileges and be subject to all the obligations of limited companies.
A firm may also be a member of section 8 company.

Eligibility to apply for Section 8 Company License

An individual or an association of individuals are eligible to be registered as Section 8 Company if it has
below-mentioned objectives. The objectives must be confirmed to the satisfaction of the Central
Government.
 When the company intends to promote science, commerce, education, art, sports, research, religion,
charity, social welfare, protection of the environment or alike other objectives;
 When the company holds an intention to invest all the profits (if any) or any other income generated after
incorporation in the promotion of such objects only;
 When the company does not intend to pay any dividend to its members.
Any failure to meet the prescribed norms formulated by the Central Government may lead to the closure
of the Company on the orders of the Central Government.
The Companies registered under the Section 8 of Companies Act, 2013 enjoy the following advantages:
 Access to Tax benefits: Since Section 8 companies are charitable institutions, they have access to the
various exemptions available under the Income Tax Act. Section 80G of the Income Tax Act renders plenty
of tax-related benefits to these companies.
 Zero Stamp Duty: The Section 8 Companies are not liable to pay stamp duty on the Memorandum of
Association (MOA) and Articles of Association (AOA), unlike other entities incorporated under the
Companies Act, 2013.
 Minimal share capital: Unlike private limited, public limited, or OPC, a Section 8 company can be set up
without the requirement of having minimum paid-up share capital of the Company.
 Exempted from any name: Section 8 companies do not have the compulsion to affix the term like
Limited or Private Limited in their name. These entities are registered with limited liability.
 Separate legal entity: Section 8 company possesses a distinct legal status which implies that entity’s
existence is independent of its members. The section 8 entity has perpetual existence.
 Improved Credibility: The flexible and transparent constitutional framework of Section 8 companies
allows them to garner better credibility than other types of NGOs such as Society and trust.
Reliance Foundation, Infosys Foundation, TATA Foundation, Reliance Research Institute are some
commendable examples of successful Section 8 companies registered in India.

Joint Venture Company

Joint Venture (“JV”) under the Companies Act 2013, means a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net assets of the arrangement.
In other words, a joint venture may be defined as any arrangement whereby two or more parties co-operate
in order to run a business or to achieve a commercial objective. This co-operation may take various forms,
such as equity-based or contractual JVs. It may be on a long-term basis involving the running of a business
in perpetuity or on a limited basis involving the realization of a particular project. It may involve an
entirely new business, or an existing business that is expected to significantly benefit from the introduction
of the new participant. A JV is, therefore, a highly flexible concept. The nature of any particular JV will
depend to a great extent on its own underlying facts and characteristics and on the resources and wishes of
the involved parties. Overall, a JV may be summarized as a symbiotic business alliance between two or
more companies whereby the complimentary resources of the partners are mutually shared and put to use.
Formation of joint venture is an effective business strategy for enhancing marketing, positioning and client
acquisition which has stood the test of time. The alliance can be a formal contractual agreement or an
informal understanding between the parties.

Joint ventures in India are used across sectors; however, they are more prevalent in high-technology, high-
capital or high-technical skills sectors. For example, joint ventures are very prevalent in insurance, asset
management, oil and gas, and infrastructure sectors, and following the liberalisation of the defence sector,
we are also seeing some movement in defence sector joint ventures. In addition to joint venture parties
working together to increase synergy, some of these joint ventures are governed by the rules prescribed
under a particular statute and generally, as prescribed by exchange-control laws.

The following are the main advantages for a foreign investor choosing a JV structure while entering India:
 Access to the established distribution and marketing channels of the Indian partner;
 Access to the available financial resources of the Indian partners; and,
 Access to the established contacts of the Indian partners, which will help ease the process of setting up
operations in India.
Some examples of successful JVs in India are Bharti-AXA General Insurance Co. Ltd. (Joint Venture
between Bharti Enterprises and insurance major from France, AXA), Mahindra-Renault Ltd. (Joint
Venture between Mahindra & Mahindra and world-renowned vehicle maker, Renault SA of France), Tata
Starbucks Pvt. Ltd (Joint Venture between Tata Global Beverages, a division of Tata Sons and Starbucks
Corporation, USA) and Tata SIA Airlines Ltd (With the brand name Vistara), a JV between Tata Sons and
Singapore Airlines (SIA).

Non-Governmental Organizations
Non-Governmental Organizations or NGO are the organizations which are formed with the objective of
managing different types of activities which aim to benefit the society at large especially for the
underprivileged people. NGOs could be formed in various forms of organizations and every form of
organization has a different kind of requirements for its formation. NGOs can be in the form of Trust,
registered under Trust Act 1882, Society to be registered under Societies Registration Act, 1860, or Section
8 Company to be registered under Companies Act, 2013. Apart from the big manufacturing units and
Multi-National Companies, NGOs are also contributing to the social development of India. Therefore, the
Role and Functions of NGOs in India are very important for the growth of the country as a whole.

Roles and Functions of NGO

NGOs are Non-Governmental Organizations that are involved in carrying out a wide range of activities for
the benefit of underprivileged people and the society at large. They work for the welfare of society at
large. Following are some of the functions of an NGO:
 Eradication of Poverty
 Promote Education
 Protection of Environment
 Environment Conservation
 Wildlife Conservation
 Awareness about human rights
 Providing Health and Nutrition
 Providing Food and Shelter
 Old Age homes
 Adoption homes
 Homes for Women
 Sanitation and Hygiene
 Animal Rights
 Disease Control and Others
 Women Empowerment
The members of NGOs work with the objective of charitable motive only, there is no self-interest
involved, as the main aim of NGOs in India is to serve the underprivileged people. However, these
organizations have to comply with the rules and regulations as are framed by the Government of India.
The functions of non-governmental organizations (NGOs) play an important role in advancing our
country’s socio-economic development. However, due to its enormous democracy, there are still a number
of challenges and millions of individuals that require access to exercise their rights.

Benefits of establishing a NGO are as follows:

 Tax waiver from tax authorities.
 Status of autonomous legal identity.
 Access to government funding as well as funds of private avenues.
 No minimum capital requirements.
 Ease of transferring ownership or title.
 Serves long service life.
 National and Cross border collaborations.
CRY (Child Rights and You), Smile Foundation, Goonj and Hel page India are examples of some
prominent NGOs working for social welfare in India.

7) Corporate Governance
Corporate governance is a mechanism for governing a company that is based on certain systems and
principles. Governance ensures that a company is directed and controlled in such a way that it achieves its
goals and objectives, which include providing long-term benefits to stakeholders such as shareholders,
employees, suppliers, customers, and society, as well as adding value to the company. It is actually run by
the board of directors and the relevant committees for the benefit of the company’s stakeholders.’
Corporate governance is all about striking a balance between individual and societal goals, as well as
economic and social objectives.
Corporate Governance is essentially about leadership; leadership for efficiency in order for companies to
compete effectively in the global economy, and thus create jobs; leadership for probity in order for
investors to have confidence and assurance that a company’s management will act honestly and with
integrity in regard to their shareholders and others. Leadership with responsibility, as companies are
increasingly being called upon to address legitimate social concerns related to their activities; and,
 leadership that is both transparent and accountable, as otherwise business leaders cannot be trusted,
resulting in the decline of companies and, ultimately, the demise of a country’s economy.

Meaning of Corporate Governance

The term “Governance” refers to the process of governing, whether by government, market, or network,
over a family, tribe, formal or informal organisation, or territory, and whether through general laws, norms,
or power. It entails the interaction and decision-making process. When applied to a business organisation,
the term “Governance” is defined as a combination of processes established and executed by the Board of
Directors, which are reflected in the organisation structure and how it is managed and led toward
achieving goals. The term “Corporate Governance” gained prominence in the business world after
accounting fraud of high-profile companies was discovered, which was caused by a lack of adequate

governance mechanisms.
To apply the term Governance to the corporate world, the relationship between the company’s
management, its Board of Directors, shareholders, auditors, and other stakeholders is ideally addressed. If
we want to define corporate governance, we can say that it refers to the rules, processes, or laws that
govern how businesses are run, regulated, and controlled. Transparency of corporate structures and
operations; accountability of managers and the Board of Directors to shareholders; and corporate
responsibility to stakeholders are key aspects of good corporate governance.

Why any company needs Corporate Governance?

The need for corporate governance has arisen as a result of growing concerns about noncompliance with
financial reporting standards and accountability by boards of directors and company management, which has
resulted in significant losses for investors. The following are India’s corporate governance requirements:

1. Changing the Structure of Ownership:

A corporate firm has many stakeholders, each with a different attitude toward corporate affairs; corporate
governance protects the stakeholders’ rights by enforcing them through its code of conduct. Today, a
company has a large number of stakeholders spread across the country and even the world, and the
majority of shareholders act unaware and with a disinterest in corporate affairs. Maintaining a proper
corporate structure necessitates the practical application of rules and regulations via a corporate
governance code of conduct.

2. Social responsibility:

Society has higher expectations of corporations; they expect corporations to care about the environment,
pollution, the quality of goods and services, sustainable development, and so on. All of these expectations
can only be met with good corporate governance.
3. Takeover and Mergers:

In the past, corporate takeovers and mergers caused a slew of issues. It affects the rights of various
stakeholders in the company and creates a problem of chaos; this factor also pushes the country’s need for
corporate governance.

4. Confidence booster:

In recent years, corporate scams or frauds have shaken public trust in corporate management. The need for
corporate governance is then critical for reviving investors’ confidence in the corporate sector as a means
of contributing to societal economic development.

5. Mismanagement and corruption:

There has been a significant increase in the monetary payments and packages of top level corporate
executives in both developing and developed economies. There is no justification for exorbitant payments
to top-level executives from corporate funds that are the property of shareholders and society. This factor
necessitates corporate governance in order to limit the ill-practices of top management in businesses.

8) Shareholders rights and protections

A shareholder, commonly referred to as a stockholder, is any person, company, or institution that owns at
least one share of a company’s stock. Because shareholders are a company’s owners, they reap the benefits
of the company’s successes in the form of increased stock valuation. Shareholders play an important role
in the framing and profits of the company. Shareholders are the owner of the company. They are the main
stakeholders in the company. There are two types of shareholders

 Equity Shareholders

Equity shareholders are the main stakeholders in a company and when the time of dividend distribution
comes the preference shareholders would get the first.

 Preference shareholders

Preference shareholders generally have no voting rights because of their preferred status. They receive
fixed dividends, generally larger than those paid to common stockholders, and their dividends are paid
before common shareholders.

The number of shareholders in a company depends upon the type of company which they are opening.
 For a one-person company, one person is required.

 For a private limited company, two persons are needed.

 For a public limited company, a minimum of seven persons are required.

Shareholders’ Rights

There are various rights available to a shareholder. Different type of rights has been discussed below:

1. Appointment of directors

Shareholders play an important role in the appointment of directors. An ordinary resolution is required to be
passed by the shareholders for the appointment. Apart from this, shareholders can also appoint various types
of directors. They are:

 An additional director who will hold the office until the next general body meeting;

 An alternate director who will act as an alternate director for a period of 3 months;

 A nominee director;

 Director appointed in the case of a casual vacancy in the office of any director appointed in a general
meeting in a public company.

Apart from this shareholder also can challenge any resolution passed for the appointment of a director in
the general body meeting.

2. Legal action against directors

Shareholders also can bring legal action against director by the rules laid down in the Companies Act
2013. They are:

 Any act done by the director in any manner which is prejudicial against the affairs of the company.

 Any act done which is beyond the law or against the constitution.

 Fraud.

 When the assets of the company are being transferred at an undervalued rate

 When there is a diversion of funds of the company.

 Any act done in a mala fide manner.

3. Appointment of company auditors

 Shareholders also have a right to appoint the company auditors. Under Companies Act 2013, the first
auditor of the company is to be appointed by the board of directors. Further the shareholders at the annual
general body meeting at the recommendation of directors and audit committee. The appointment is
generally done for five years and further can be ratified by passing a resolution in the annual general body
meeting.

4. Voting rights

Shareholders also have the right to attend and vote at the annual general body meeting. Every company
registered in India should comply with the provisions of the Companies Act 2013. It is mandatory for every
Indian company to hold an annual general meeting once in every year. The meeting can be held anywhere at
the head office of the company or any other place as given by the company. At the meeting, there are
various mandatory agendas which are to be discussed. These include the adoption of financial statements,
appointment or ratification of directors and auditors etc.

When a resolution is brought by members of a company then according to companies act 2013 it can be
passed only by the means of voting by the shareholders. Companies Act 2013 recognizes following types of
voting:

 Voting by the showing of hands – Every member present in the meeting has one vote. So, in this type of
voting shareholders vote just by showing of hands.

 Voting done by polling – In this type of voting the chairman or the shareholders’ demand for a poll.
However, in case of differential rights as to voting, a particular class of equity shares may also have
weighted voting rights.

 Voting done by electronic means– every company who has more than 1000 shareholders has to put up a
facility of voting through online means. Every member should be provided with the means of voting of
online.

 Voting by means of postal ballot– any resolution in the meeting can also be passed by means of a postal
ballot.

A shareholder also has a right to appoint proxy on his behalf when he is unable to attend the meeting.
Though the proxy is not allowed to be included in the quorum of the meeting in case of voting, it is
allowed by following a procedure mentioned in the Companies Act 2013.

5. Right to call for general meetings

 Shareholders have the right to call a general meeting. They have a right to direct the director of a
company to can all extraordinary general meeting. They also can approach the Company Law Board for
the conduction of general body meeting, if it is not done according to the statutory requirements.

6. Right to inspect registers and books

As shareholders are the main stakeholders in a company, they have the right to inspect the accounts
register and also the books of the firm and can ask questions about the same if they feel so.

7. Right to get copies of financial statements

Shareholders have the right to get copies of financial statements. It is the duty of the company to send the
financial statements of the company to all its shareholders either in a quarterly or annual statement.

8. Winding up of the company

Before the company is wound up the company has to inform all the shareholders about the same and also
all the credit has to be given to all the shareholders.

Other Shareholders’ Rights

 When the sale of any material of any company is done then the shareholders should get the amount which
they are entitled to receive;

 When a company is converted into another company then it requires prior approval of shareholders. Also,
all the appointment has to be done according to all the procedures and also auditors and directors have to
be done;

 Right to approach the court in case of insolvency.

Shareholders’ Duties

There are also responsibilities and duties of shareholders which they should perform. Besides several
rights which they have, there exists several duties. They are:

 Shareholders should participate in the general body meetings so that they can see and also can advise on
the matters which they feel is not going good.

 Shareholders should consult on the matters of finance and other topics.

 Shareholders should be in touch with other members of the company so that they can see the work
progress of the company.

9) Compliance and regulatory Provision

 Regulatory compliance is a set of rules, such as a specification, policies or law which ensures an
organization is following the standards set for the industry or institution by the respective authority. The rules
which govern the organizations are usually set by government or parliamentary legislation or via government
regulatory authorities for organizational, social, environmental and economic betterment. The norms and rules
are related to various issues such as economic, public interest, and environmental.

Due to the increasing number of regulations and need for operational transparency, organizations are
desirous to achieve in their effort to ensure that they are aware of and are taking measures to comply with
relevant policies, laws and regulations. Since laws have been evolving, regulations have always been a
political debater’s hot topic. Some say that regulations are downgrading the work of organizations and there
should be a free and liberalized economy where as some economists and political thinkers say that regulatory
compliance plays a vital role in promoting assessment of risk. However, since governments have formulated
regulatory compliances, the organizations must cohere to the regulatory compliances and toe the line or else
will have to face the consequences.

10) Conclusion
While we touched at several key factors that have marked a great change between the 2013 Act and the
1956 one, we need to understand that the main aim behind the overhaul in the Company Law was
fundamentally to provide against several lacunas that existed in the previous law. Simple and repeated
amendments failed to address the issue in the way that was expected. The new Act was aimed at ushering in
corporate democracy wherein the companies concerned would be given much more leeway in managing
their own affairs without Government approval or permissions. However, with this several unforeseen
circumstances arose such as corporate fraud, one example being the famous INX Media case. Corporations
also cry out that they do not have the requisite freedom to operate competitively in a globalised environment
and require substantial changes, one of them being the removal of the objects’ clause requirement in the
memorandum of association. The Government on its passed has had passed several amendments and a new
2020 Companies Amendment Bill is on the corner. On these issues, it can be said that the Companies Act,
2013 has been a mixed bag of success and failure as compared to the Companies Act, 2013.

After the privatisation drive, the Indian Government felt that corporate liberalisation is the need of the day
and undertook the initiative by introducing the new statute. Finally, it has been passing numerous
amendments to make operation of companies smoother with lesser Government interference while making
companies more accountable for their actions.
Footnotes

1. yet to be notified

2. Section 391, 393 and 394 A of Companies Act, 1956

3. Section 230(5) of Companies Act, 2013

4. Section 234 of Companies Act, 2013

5. Small companies is defined in section 2(85) of Companies Act, 2013

6. Section 233 of Companies Act, 2013

7. Section 232(3)(h) of Companies ct, 2013