2. A paradigm shift for the
Corporate
The
Companies
Act ,1956
The Companies
Act ,2013
3. Objectives of the Act
To develop the economy by encouraging
entrepreneurship
Creating flexibility and simplicity in the formation
and maintainence of companies.
To encourage transparency and high standards
of corporate governance
4. Objectives of the Act
To enforce strict action against fraud
To facilitate ease of doing business and protecting
the interests of the stakeholders
legislates the role of whistle-blowers
5. Structure of Companies Act ,2013
470 Sections 29 Chapters
33 New
Definations
7 Schedules
Extends
to whole
of India
6. 7 Schedules
Format of Memorandum andArticles of Association of Company
To compute Depreciation
Preparationof Balancesheet and profit& loss account
Code for Independent Director
Conditionsto be fulfilledfor the Appoitment of Managing or
Whole-timedirectoror Manager without the approval of Central
Government.
Infrastructuralprojects or facilities
Activities which may be included by companies in their Corporate
Social Responsibilitypolicies
7. Introduction to CompaniesAct,2013
Companies Bill
passed by Rajya
Sabha on 8th
August 2013
H’ble President
of India gave
assent on August
29, 2013
Became
Companies Bill
2013
Notified in official
Gazette on 30th
August ,2013
Companies Bill
passed by Lok
Sabha on 18th
December, 2012
Act Came into
force across
India on 12th
September,2013
8. Definition of Company
According to Section 2(20)- “A Company is a company formed under
Companies Act,2013 or under any previous law relating to
companies(CompaniesAct, 1956 or 1913)”
Thus, for the purpose of Companies Act, 2013 not every association of
persons is a ‘Company', only such association of persons is a
‘Company’ which is registered under Companies Act,2013 or under
any previouslaw .
According to Haney-”A company is an incorporated association, which is
an artificial person created by the law having a separate entity with a
perpetualsuccession and a common seal”.
9. Features of Company
1. Incorporated Association -A company is an institution incorporated
under the Companies Act 2013 or under any previous company law.
Without incorporation, a company is not a company in the eyes of
law. A company is formed and registered by complying with the
prescribed formalities prescribed under theAct.
2. Artificial legal person – A company is an artificial person as it is
invisible, intangible and existing only in the eyes of law. It is devoid
(lack of physique) and it is operated through a human agency known
as the directors of the company.
3. Separate legal entity – A company is a separate and has distinct
legal entity from its members and board of directors. It has its own
legal existence. After registration, the liability of the company is not
the liability of its members and the liability of the members is not the
company’s liability. A company is a separate person having its own
rights and obligations.
10. Features of Company
Case Study :- Salomon Versus Salomon, 1897
Salomon was a sole proprietor of a leather business. He sold his
business and incorporated a company in the name “ Salomon and
company limited.” He himself and his two sons constituted the
board of directors. Salomon had an absolute control over the
company. After one year the company suffered from financial
crisis. The creditors of the company held Salomon responsible for
the debts on the ground that the company and Salomon were one,
and Salomon was liable to indemnify the company against its
debts.
The House of Lords (judges) held that the company has a separate
legal entity and after its incorporation, distinct from its members
and that the company’s asset must be realized in payment of debts.
11. Features of Company
4. Perpetual succession –Since a company is an artificial person created
by law, law only can bring an end to its life.Thus, it enjoys perpetual
succession. Members may come and go, but the company goes on
forever. Thus a company never dies.
5.Separate property –A Company after its registration can own and
enjoy property in its own name. Members are not owners or co-owner of
the company’s property and have no insurable interest in the property of
the company.
CaseStudy :-Macaura V. NorthernAssuranceCo. Ltd
Macaura was the holder of all the shares except one of the timber
company. He insured the company in his own name. The timber was
destroyed by fire. Macura claimed the loss from the insurance company
but it was held that the insurance company was not liable to pay him
because it was the property of the company and not his personal
property.
12. Features of Company
6. Limited liability –For the debts of the company, its creditors can sue it
and not its members whose liability is limited to the unpaid amount on shares
held by them or the guarantees provided by them to contribute on the
winding up of the company, dependingon the type of company.
Nature of company Extent of Liability of members
Company limited
by shares
Amount unpaid on the shares held by every member
Company limited
by Guarantee
Amount guaranteed by every member.
Company limited
by Guarantee
having share capital
Aggregate of the amount unpaid on the shares held
by a member and the amount guaranteed by him
Unlimited Company Every member is liable to contributeto the assets of
the company until all the debts of the company are
paid in full.
13. Features of Company
7. Common seal – Common seal is the official signature of the
Company. Any document, on which the common seal is affixed, is
deemed to be signed by the Company.It is mandatory for every
company to have a common seal with its name engraved on it. In case a
company does not have a common seal, the authorization shall be made
by two directors or by a director and the Company Secretary, wherever
the company has appointed a Company Secretary.
8. Capacity to sue and be sued –After incorporation of a company, it
can sue othersand be sued in its own name.
9. Transferability of shares – Shares are movable property of the
company (Sec. 44 of the companies Act, 2013) .They are transferable in
the manner provided in the Articles (Sec. 44 of the Companies Act,
2013). In a Private company , the right to transfer the shares is
restricted and Publiccompany shares are freely transferable.
14. Features of Company
10. Provision of relief from oppression and mismanagement –
Companies Act, 2013 has laid down provisions of relief from Oppression
which means ill treatment or harm to the members of the company and
‘Mismanagement’ that is conducting the affairs of the company
prejudicial to the interest of the company.
11. Ownership separate from management -The members do not
participate in the day-to-day affairs of the Company. The management of
the company lies in the hands of elected representatives of members,
commonly called as Board of Directors or directors.
