A brief introduction on Companies Act 2013

1. COMPANIES ACT, 2013
-- NEETU SHARMA

2. INTRODUCTION
 The Companies Act 2013 is an Act of the Parliament of India on Indian company
law which regulates incorporation of a company, responsibilities of a company,
directors, dissolution of a company.
 The 2013 Act is divided into 29 chapters containing 470 sections as against 658
Sections in the Companies Act, 1956 and has 7 schedules.
 The Act has replaced The Companies Act, 1956 after receiving the assent of
the President of India on 29 August 2013. The Act came into force on 12
September 2013

3. Definition of Company
As per sub-section 20 of section 2 of Companies Act, 2013 company means,
“A company incorporated under Companies Act 2013 or under any previous company
law.”

4. Formation of Company
 Formation of company is process of registering business with Registrar of
Companies.
 With registration business becomes distinct legal entity.
 The process is also referred as Incorporstion of Company.

5. Nature of Company
 Seperate legal entity
 Artifical person
 Perpetual existence
 Common seal
 Limited liabilty
 Capacity to sue or to be sued
 Transferability of shares

6. Advantages of Company.
 Liabilty for shareholders is limited.
 It is easy to transfer ownership by selling shares to another person.
 Taxation rates are different for companies.
 Experts at top level management can be placed.
 Wide level of capital and investment.

7. Disadvantages of company
 Registration, maintainance and winding up of company can be expensive.
 Reporting compliance is very high and complex.
 If directors fail to meet obligations or compliance then they are personally liable
for debt of the company.
 Profit distributed to shareholders are taxable.

8. Promoters
According to section 2(69) of Companies Act, 2013 promoter means,
 Who has been named as such in prospectus or is identified by company in annual
return referred to section 92; or
 Who has control over the affairs of company, directly or indirectly whether as a
shareholder, director or otherwise; or
 In accordance whose advice, direction or instructions the board of directors
accustomed to act.

9. Preliminary Contract
 Contract entered into by promoters on behalf of the company before its
incorporation with third parties such contracts are legally not binding upon the
company even after it comes into existence unless special resolution is passed by
shareholders in general meeting.