BASICS OF COMPANY LAW
Author : Monalisha Singh
Company in India is governed by the Statuary “Companies Act 1956”, “Companies Act 2013”, Limited Liability Partnership Act, 2008 , etc & other allied Acts and rules & regulations. By invoking the present and other allied laws, In India corporate affairs of companies are administered by Ministry of Corporate Affairs (MCA). MCA works with his subsidiary called “In-house source of adjudication.” This adjudication has two branches i.e. 1) Regional Director (RD) 2) Registrar of Companies (ROC). At present the numbers of Regional office & Registrar of companies are 7 & 12 respectively. The Companies Act 2013 which is divided into 29 chapters, 470 Sections & Schedule 7 regulates the incorporation & dissolution of company and responsibilities and dissolution of company and its directors.
By, Indian Company Act of 1956 a company can be formed by registration, manage the responsibilities of companies, their directors and secretaries and can make the procedure for its winding.
Except the State corporative societies all others can be administered by Ministry Of Corporate Affairs (MCA). Besides these MCA supervises three other professional bodies constituted through three separate legislative act of parliament i.e. Institute of Chartered Accountants of India(ICAI), Institute of Company Secretaries of India (ICSI) and the Institute of Cost Accountants of India (ICAI). MCA is also administer the Competition Act of 2002 to preclude adverse affects on competition, to promote and sustain competition in markets, to protect the interests of consumers through the commission set up under the Act.
Classification & Types Of Corporation And It’s Features:
The term Corporation can be elaborated as group of recognized people or a company legalized to a single legal entity for any specific purposes. Earlier it was incorporated by charter i.e. ad-hoc act granted by monarch or legislation but now it can be incorporated through registration.
Based on the incorporation the corporation is classified into three types:
- By Royal Charter: Which was incorporated and regulated by the Charter of Monarch, King Queen etc. for example East India Company.
- By the Special Act Of Parliament: The companies which are established by the special act by the Parliament through legislation examples RBI, Railways, SBI etc.
- Incorporated Under Indian Company act 1956 : The companies which incorporated or come under the Memorandum association and articles of association.
Further, based on the features and functioning the companies are divided into many types for instance Sole Partnership (Which proprietorship is exclusively owned by one person and business is run by one individual), Registration not required (quacked formed with having low compliance with unlimited liability), Partnership (Joint and unlimited liability, where no registration is compulsory), Hindu Undivided Family, Limited Liability Partnership, Corporative , Family Owned and many more.
Important provisions ,Authorities and it’s features under the Company laws in India:
A) Authorities Established:
National Company Law Tribunal (NCLT): It is established on the recommendation of V. Balakrishna Eradi committee under the Section: 408 of the Companies act of 2003 for law of insolvency and winding of the committee. It is a quasi- judicial body. This tribunal has 16 benches in various cities among which 6 benches of Delhi are principal benches. In include the proceeding related to arbitration, compromise, arrangement, disposal of the reconstruction and winding of the companies.
It is the adjudicating authority for the insolvency resolution process of companies and limited liability partnerships under the Insolvency and Bankruptcy Code, 2016.
Under Companies act NCLT has power to adjudicate the proceeding initiated before Company Law Board under Company Act 1956, Unsettled issues of Board for Industrial and Financial Reconstruction, including the unsettled issues related to Sick Industrial Companies (Special Provisions) Act, 1985, Unsettled issues of Appellate Authority for Industrial and Financial Reconstruction and claims related to the oppression , mismanagement winding up of companies and all other powers prescribed under the Companies Act.
Decision of National Company Law Tribunal can be challenged by the way of appeal at National Company Law Appellate Tribunal (NCLAT) and further it can be challenged at the Apex Court Of India i.e. Supreme Court.
ii) National Financial Reporting Authority (NFRA):
NFRA constituted under Section 132 (1) of Companies Act 2013. NFRA is an independent regulator to watch the auditing profession and accounting standards in India under Companies Act 2013.
Functions of NFRA are mentioned under Section 132 (2) of Indian Companies Act as following:
Recommend accounting and auditing policies and standards to be adopted by companies for approval by the Central Government;
Monitor and enforce compliance with accounting standards and auditing standards;
Oversee the quality of service of the professions associated with ensuring compliance with such standards and suggest measures for improvement in the quality of service;
Perform such other functions and duties as may be necessary or incidental to the aforesaid functions and duties.
NFRA protect the public interest and the interests of investors, creditors and others associated with the companies or bodies corporate governed under Rule 3 of NFRA 2018.
(B)Corporate Social Responsibility:
According to section 135 of Company Act 2013 , the companies whose turnover is above Rs: 1000 crore , or Net Worth is above Rs 500 crore or Net Profit is above 5 crore all of the preceding years then it is mandatory for those companies to spend 2% of their net profit on Social Responsible project mentioned in Schedule VIII which involve community development. It requires all businesses affected establish a CSR committee to oversee the spending. Prior to this law’s passage, CSR laws applied to public sector companies only. Other terms used for corporate social responsibility (CSR) is corporate sustainability, responsible business , conscious capitalism sustainable business, corporate conscience, corporate citizenship.
Way of appointment of Company Secretary is mentioned under Section 203 of Company Act 2013. It is the first law in history which mentioned the key managerial personnel role of the Secretary in the company. The entity having more than ten crore paid up capital & every Indian listed Company must have a whole time company Secretary. This is a leading position in any private company or public sector. Company secretaries are company appointed representatives in legal documents, and are responsible for ensuring that the company and its directors act in accordance with the law. It must also register and communicate with shareholders, provide dividend payments and maintain company records, such as lists of directors and shareholders and annual reports. The company secretary is responsible for the powerful management of the company, particularly with regard to ensuring compliance with legal and regulatory requirements and ensuring compliance with the decisions of the board of directors. and inform board members of their legal obligations.
Ministry of Corporate Affairs; Government of India; Retrived on 22th/July/2020 at 17:15 (http://www.mca.gov.in/).
Introduction of Companies Act2013.
Ministry of Corporate Affairs; Government of India; Retrived on 22th/July/2020 at 17:35 (http://www.mca.gov.in/MinistryV2/about_mca.html).
Tyagi, Madhu; Madhu, Arun (2003). Company Law. Under Classification of Companies: Atlantic Publishers & Distributors (P) Limited. p.42.
Section 408 of Companies Act2003.
“NCLT – new perspectives for dispute resolution”. Khaitan & Co. Accessed on 22nd/July/2020 at16:00.
National Company Law Tribunal(NCLT) , Accessed on 22nd/July/2020 At 19:15 (https://nclt.gov.in/content/national-company-law-tribunal).
Section 132 (1), Companies Act2013
NFRA ; Accessed on 22nd/July/2020 at 17:00 ,(https://nfra.gov.in/about-us).
Rule 4 (I) , NFRA Rules,2018.
Section 135 of Company Act2013.
BASICS OF COMPANY LAW BASICS OF COMPANY LAW BASICS OF COMPANY LAW