Study Notes

Companies Act, 2013

Introduction
&
Chapter I -Preliminary
Companies Act, Introduction & Chapter I - Preliminary

INTRODUCTION

 The Companies Act 2013-

 an Act of the Parliament of India
 enacted with a view to consolidate and amend the law relating to companies-
regulates incorporation of a company, responsibilities of a company, directors,
dissolution of a company, etc.
 replaced the erstwhile Companies Act, 1956
 got its assent in the Lok Sabha on December 18, 2012 and in the Rajya Sabha
on August 08, 2013
 obtained the assent of the President of India on August 29, 2013
 came into force on September 12, 2013 with only 98 provisions of the Act
notified. A total of another 184 sections came into force from 1 April 2014
 consists of 29 chapters containing 470 sections and has 7 schedules.

Companies Act, 1956 Companies Act, 2013

13 Parts 29 Chapters
658 Sections 470 Sections
16 Schedules 7 Schedules

NEW CONCEPTS INTRODUCED IN COMPANIES ACT 2013

1. For the first time introduced the concept of One Person Company [Section 2(62)]
2. Expert [Section 2(38)]
3. Inclusive definition of Financial Statement [Section 2(40)]
4. Entrenchment Provisions in Articles of Association (Section 5)
5. Public Offer and Private Placement deals with issue of securities by a public and a
private company (Section 23)
6. Class Action Suits (Section 37)
7. E-governance in all company processes (Section 120)
8. Corporate Social Responsibility - 2% of average net profits of the company made
during the three immediately preceding financial year or where the company has
not completed the period of three financial years since its incorporation, during
such immediately preceding financial years (Section 135)
9. Mandatory Internal Audit for prescribed classes of companies (Section 138)
10. Mandatory Rotation of auditors for listed companies and other prescribed classes of
companies after 1 term of 5 consecutive years in case of individual auditor and after

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Companies Act, Introduction & Chapter I - Preliminary

2 terms of 5 consecutive years for audit firm (Section 139)

11. 5-year tenure for auditor appointed at AGM of company (other than Government
Company/ Government controlled Company) instead of annual appointment/
reappointment
12. Limited Liability Partnership eligible to be appointed as Auditor of Company (Section 141)
13. Auditor not to render certain services (Section 144)
14. Independent Directors [Section 149] 1/3rd of the total number of directors as independent
directors- listed public companies
15. Inclusion of at least one-woman director on board (Section 149)
16. Every company shall have at least one director who has stayed in India for a total
period of not less than one hundred and eighty-two days during the financial year
(Section149 (3))- if newly incorporated company it shall apply proportionately at the
end of the financial year in which it is incorporated
17. Nomination and Remuneration committee [Section 178(1)]
18. Stakeholders’ relationship committee [Section 178(5)]

19. Key Managerial Personnel [Section 2(51) and Section 203] Key managerial personnel
(KMP) to include Manager or Managing Director (MD) or Chief Executive Officer
(CEO), Whole time director, Chief Financial Officer (CFO) and Company Secretary
(CS).
20. Insider Trading of Securities Prohibited (Section 195)
21. Statutory Status to the Serious Fraud Investigation Office (SFIO) (Section 211)
22. Specific framework for Merger and Acquisitions of companies. Single forum for
approval of mergers and acquisitions (Section 233)
23. Merger or Amalgamation of a Company with Foreign Company (Section 234)
24. Protection to minority shareholders, Class Action Suits for prevention of oppression
Definition of a company and mismanagement [Section 245]
25. Registered Valuers (Section 247)
26. Interim administrators or Company administrators [Section 259]
27. Mediation and Conciliation Panel (Section 442)
28. Punishment for Fraud (Section 447)

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Companies Act, Introduction & Chapter I - Preliminary

DEFINITION OF A COMPANY

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Companies Act, Introduction & Chapter I - Preliminary

CHARACTERISTIC FEATURES OF A COMPANY (Section 9)

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Companies Act, Introduction & Chapter I - Preliminary

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Companies Act, Introduction & Chapter I - Preliminary

LIFTING OR PIERCING OF THE CORPORATE VEIL

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Companies Act, Introduction & Chapter I - Preliminary

LIFTING OF CORPORATE VEIL UNDER JUDICIAL PRONOUNCEMENTS

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Companies Act, Introduction & Chapter I - Preliminary

COMPANY IS A CITIZEN OR NOT?

 Although company is considered to be an artificial legal person, it is not considered to be

a citizen under the citizenship legislation or constitution.
 According to the citizenship act citizenship recognition is only available to natural
biological persons and not to juristic persons i.e., citizenship can only be given to an
individual, and therefore, a company cannot become a citizen of India.
 Fundamental rights mentioned in Article 15,16,19,29 & 30 are available only to citizens
and hence, not available to a company.
 Fundamental rights mentioned in Art. 14,20, 21, 21A, 22, 23, 24, 25, 26, 27 and 28 are
available to every person (Natural/Artificial/foreigner) hence, available to a company
also.

COMPANY & BODY CORPORATE

 The term company has been defined under section 2 (20) of the Act whereas body
corporate has been defined under section 2 (11).
 Company means a company incorporated under the Companies Act, 2013 or under any
previous company law. While on the other hand a Body corporate means a corporate
entity which has a legal presence and includes one person company, private company,
public company, company incorporated outside India. But, body corporate does not
include—
 co-operative societies and
 other body corporate announced by the Central Government
 Hence, the companies incorporated under the Companies Act, 2013, like Bharti Airtel
Limited, Infosys Limited etc., can be called as a Company or as a Body Corporate since
they are registered in India. Whereas, the entities incorporated outside India like IBM,
Microsoft Corporation etc. can only be termed as Body Corporate but not companies.