Introduction to company and nature of company

1. 2021
Companies Act, 2013
(Definitions & Characteristcs)
Classroom Deliberations
CA (Dr) Prithvi Ranjan Parhi
1
CA (Dr) Prithvi R Parhi

2. What’s law ?
• Collection of rules imposed by authority.
• Body of rules of conduct inherent in human nature and
essential to or binding upon human society .
• What’s Corpotate law ?
• Constitution is the prime law.
• Bill Vs Act.
• Act is the law
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3. • Companies Act 2013
• The Companies Act, 1956
was passed and it came into
force on 1st April 1956
• Indian Companies Act 1913
• Companies Act of 1850,
modeled on
British Companies Act of
1844.
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4. Background
• The Companies Act, 2013 is an Act to consolidate and amend
the law relating to companies.
• The legislation was necessitated to meet changes in the national
and international economic environment and for expansion and
growth of economy of our country.
• The Companies Act, 2013 received the assent of the Hon’ble
President of India on 29th August 2013 and was notified in the
Official Gazette on 30th August 2013 for public information
stating that different dates may be appointed for enforcement of
different provisions of the Companies Act, 2013, through
notifications.
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5. About the Act
• Section 1 came into force on 30th August 2013;
• 98 sections came into force on 12th September 2013;
• 143 sections were enforced from 1st April 2014 and so on.
• The Companies Act, 2013 is rule based legislation with 470
sections and seven schedules.
• The entire Act has been divided into 29 chapters.
• Each chapter has at least one set of Rules.
• The Companies Act, 2013 aims to improve corporate governance,
simplify regulations and strengthen the interests of investors.
• Thus, this enactment makes our corporate regulations more
contemporary.
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6. CA (Dr) Prithvi R Parhi 6

7. Short Title, Extent, Commencement and Application.
1. (1) This Act may be called the Companies Act, 2013.
(2) It extends to the whole of India.
(3) This section shall come into force at once and the remaining
provisions of this Act shall come into force on such date as the
Central Government may, by notification in the Official Gazette,
appoint and different dates may be appointed for different
provisions of this Act and any reference in any provision to the
commencement of this Act shall be construed as a reference to
the coming into force of that provision.
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8. Short Title, Extent, Commencement and Application.
• (4) The provisions of this Act shall apply to—
– (a) companies incorporated under this Act or under any previous company law;
– (b) insurance companies, except in so far as the said provisions are inconsistent
with the provisions of the Insurance Act, 1938 (4 of 1938) or the Insurance
Regulatory and Development Authority Act, 1999 (41 of 1999);
– (c) banking companies, except in so far as the said provisions are inconsistent
with the provisions of the Banking Regulation Act, 1949 (10 of 1949);
– (d) companies engaged in the generation or supply of electricity, except in so far
as the said provisions are inconsistent with the provisions of the Electricity Act,
2003 (36 of 2003);
– (e) any other company governed by any special Act for the time being in force,
except in so far as the said provisions are inconsistent with the provisions of
such special Act; and
– (f) such body corporate, incorporated by any Act for the time being in force, as
the Central Government may, by notification, specify in this behalf, subject to
such exceptions, modifications or adaptation, as may be specified in the
notification.
CA (Dr) Prithvi R Parhi 8

9. CA (Dr) Prithvi R Parhi 9
Title :
Companies
Act, 2013
Extent:
Whole of
India
Commencement:
Section 1 came
into force at once
and the
remaining
provisions on
different dates
through
Notifications.
Application :
1.Companies
2. Insurance
companies
3. Banking
companies
4. Companies
producing
/supplying
electricity
6. Company
regulated by
special Act
6. Entities as
notified by Central
Government

10. Basic Concepts
&
Definitions
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11. Companies Act, 2013
• Sec 2(20) “company”
• means a company incorporated under this Act
or under any previous company law;
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12. Nature of Company
• An artificial person
• Created by process of law
• Hence only can be destroyed by law
• Can sue
• Can be sued in its own name
• Can hold, acquire, sell, lease, mortgage, gift,
transfer property in its own name.
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13. Characteristics of a Company
1. Voluntary association: It’s a personal choice. No one can compel to become
or not to become member.
2. Incorporated association ~A company is created when it is registered under
the Companies Act. It comes into being from the date mentioned in the
certificate of incorporation.
3. Artificial legal person. A company is an artificial person. ~ it is not a natural
person. It exists in the eyes of the law and cannot act on its own
4. Separate Legal Entity : A company has a legal distinct entity and is
independent of its members.
5. Perpetual Existence. A company is a stable form of business organization. Its
life does not depend upon the death, insolvency or retirement of any or all
shareholder (s) or director (s). Law creates it and law alone can dissolve it.
6. Common Seal : (Optional - Companies Amendment Act 2015)
7. Limited Liability : A company may be company limited by shares or a
company limited by guarantee.
8. Transferable Shares.
9. Separate Property :it is capable of owning, enjoying and disposing of
property in its own name.
10. Delegated Management
11. Governance : Subject to the discipline of regulatory provisions, MoA &
AoA CA (Dr) Prithvi R Parhi 13

14. Types of Company : Defined in Companies Act,2013
1. Company Limited by Shares
2. Company Limited by Guarantee
3. Small Company
4. One Person Company
5. Government Company
6. Private Company
7. Public Company
8. Foreign Company
9. Holding Company
10. Subsidiary Company
11. Associate Company
12. Unlimited Company
13. Banking Company
14. Listed Company
CA (Dr) Prithvi R Parhi 14

15. CA (Dr) Prithvi R Parhi 15
Types of Company
Incorporation Liability Control
Chartered Co
Statutory Co
Registered Co
Unlimited
Co
Limited
Co
By
Guarantee
By
Shares
Private Public
Govt. Co
Holding Co
Subsidiary Co
Associate Co
One Person
Co
Small Co
Listed Co
Nature
Banking
Insurance
Electricity
Foreign Co
Indian Co
Not for
Profit Co.
(Sec 8 Co.)
Restricts Share transfer
Members < 200
Prohibits Public to
subscribe securities
Other Types of
Companies

16. Features of Company
• A registered association
• which is an artificial legal person,
• having an independent legal entity,
• with a perpetual succession,
• a common seal for its signatures,
• a common capital
• comprised of transferable shares and
• carrying limited liability of its shareholders.
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17. Common Seal (Sec 9)
• There is no definition prescribed under the Companies
Act, 2013
• As per the Secretarial Standards issued by Institute
of Company Secretaries of India, Common Seal means, the
metallic seal of a company which can be affixed only with the
approval of the Board of Directors of the Company
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18. The concept of Corporate Veil
(Separate Legal Entity)
• A legal concept that separates the personality of
a company from the personalities of its
shareholders, and protects them from being
personally liable for the company’s debts and
other obligations.
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19. Highlights of Companies Act, 2013
• Introduction of One Person Company (OPC)
• What is a small Company
• Members for private company ( 50 to 200)
• Immediate changes in stationery (Name, Address, CIN)
• Commencement of business
• Eligibility age to become Managing Director or whole time Director (21
years)
• Maximum 15 directors
• Resident Director
• Format of Statement of Profit & Loss
• Auditors Appointment (5 years/ 10 years)
• CSR (2% of past 3 years profit)
• Definition of Financial Statement
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20. Highlights of Companies Act, 2013
• The concept of “dormant companies” introduced (companies not
engaged in business for two consecutive years can be declared a s
dormant).
• National Company Law Tribunal introduced.
• Provision of self regulation with disclosures/transparency instead of
government approval based regime.
• Companies are required to go for maintenance of documents in
electronic form.
• Faster merger and acquisitions including short mergers and cross
border mergers.
• For companies which have net assets of 1 cr. or less, then official
liquidators are empowered with adjudicatory powers.
• Concept of independent directors included as a statutory requirement.
• Women director for prescribed class of companies.
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21. Highlights of Companies Act, 2013
• The term “Key Managerial Personnel” and “Promoter” has been defined to affix
the responsibility on main functionaries of the company.
• Duties of director to shareholders, employees, the community and the
environment defined.
• Listed companies are required to have one director representing small
shareholders.
• Companies Act, 2013 has put a cap on the number of directorship up to 20
companies of which 10 can be public companies.
• Search and seizure of documents, during investigation, without an order from a
magistrate.
• Freezing assets or disgorgement of illegal gains of company under investigation.
• Stringent norms made for the accepting the deposits from the public.
• Internal audit for bigger companies and auditor is not authorized to perform
specified non audit services.
• Substantial civil and criminal liability for an auditor in case of non compliance.
• National Financial Reporting Authority (NFRA) to be constituted.
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22. 22
Thank you
CA (Dr) Prithvi Ranjan Parhi
CA (Dr) Prithvi R Parhi