What Are the Provisions of Companies Act 2013?

by Jacky Chou
Updated on

Provisions of companies Act, 2013 regarding Share Capital.

Checkout this video:

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 and dissolution of a company. It is the latest in the line of Company Acts passed in 1860, 1913 and 1956. salient features The companies Act 2013 is divided into 29 chapters comprising 470 sections. The new act also has 7 schedules.

The act replaces the previous companies act 1956. The new act was expected to be notified in January 2014, but got delayed and was finally notified on 12 September 2013. Before this act came into play, there used to be 5 kinds of company structures in India namely-One Person Company (OPC), Private Limited Company(Pvt Ltd), Public Limited Company (plc), Unlimited Liability Partnership (LLP) and Nidhi Company.

As stated by the government, this companies act brings more transparency and stops corruption while dealing with businesses and Companies

Company types under companies Act 2013

Under the Companies Act 2013, there are seven types of companies that can be formed-
1. One Person Company (OPC)
2. Private Limited Company
3. Public Limited Company
4. Limited Liability Partnership (LLP)
5. Section 8 company
6. Producer Company
7. Nidhi Company

Formation of a company

The Companies Act 2013 is an act of the Parliament of India on Indian business law. It regulates incorporation of a company, responsibilities of a company, directors, dissolution of a company and reconsideration and appeal. The act replaces the Companies Act, 1956 enacted by the parliament during that time. Under the new companies act, there are drastic changes in the rules and regulations related to filings by companies with the Registrar of Companies making it more stringent than before.

Incorporation of a company: The minimum number of persons required for incorporating a private limited company is two and public limited company is seven. In case of One Person Company (OPC), only one person is required.
Also, for forming a section 8 company minimum number of seven persons are required who are willing to pursue any object mentioned under section 8 of the companies act 2013.

The concept of minimum subscription has been done away with under the new companies act. Now, it is not mandatory for every subscriber to take at least one share each. Directors: A director means a person occupying the position of director by whatever name called. Sub-section (4) provides that any reference in this Act to ‘director’ in relation to—
(i) a firm means a partner in the firm;
(ii) a body corporate includes any person occupying the position similar to that which is occupied by managing director; or (iii) an unincorporated body includes any member thereof occupying such position as has been decided by such body or under its rules:
Provided that nothing contained in this clause shall apply—    (A) in relation to any matter relating to disqualifications on account of contravention referred to in sub-section (2); or    (B) to any provision contained in sections 162 or 163; or    (C) to any provision contained in Chapter VIIIA; or    (D) To any provision contained in Chapter XIIA;

Dissolution: Voluntary dissolution: A company may be dissolved voluntarily—    (a) by passing a special resolution at a general meeting; or    (b) by getting an approval from National Company Law Tribunal ; However, no application shall be made to National Company Law Tribunal for voluntary dissolution of—    i. One Person Company; ii. small company as defined under clause (m) iii. start-up companies as defined under clause (q).

Share capital

I. SHARE CAPITAL

1. Number of shares and classes
(1) The authorised share capital of a public company shall not exceed such number of shares as may be determined by its memorandum, and the nominal value of each share shall not be less than five rupees:

Provided that—

(a) the authorised share capital of a company limited by guarantee shall not exceed five lakh rupees; and (b) the authorised share capital of a Nidhi company shall not exceed ten crore rupees. [(2) The authorised share capital of a private company or Producer Company shall not exceed fifty lakh rupees or such higher amount as may be prescribed: Provided that nothing contained in this clause shall apply to a producer company which is a subsidiary of any other body corporate.] (3) Subject to the provisions contained in this Act,— (i) a public company may, if so authorised by its articles, increase its authorised share capital by passing a special resolution; (ii) [***] every other company may increase its authorised share capital by passing an ordinary resolution, if no objection to such increase has been received by the Registrar in writing within thirty days from the date on which such copy was so filed: Provided that no such objection shall be entertained by the Registrar after the expiry of such period unless it is proved to his satisfaction that the creditor had suppressed or concealed any material information from the company at the time when he consented or approved of such mutation; ]

Explanation.—For the purposes of this clause,— (A) “passing”, with reference to an ordinary resolution or special resolution, means that such resolution has been passed by members entitled to vote thereon, voting in person or where proxies are permitted, by proxy determine before passing any such amendment whether it would require confirmation at an extraordinary general meeting. If in accordance with rule 9A extraordinary general meeting is required for confirmation, then only amendment which has been confirmed at an extraordinary general meeting held for this purpose shall have effect;] ((B)) “private company” means a private company as defined in section 2(68);” [“Share” means a unit into which the proprietary right in a company is divided and includes stock; “Stock” means movable property including actionable claims but does not include money.]

“Nidhi company” means a company which complies with such rules as may be prescribed under section 406: [] Provided that nothing contained in privately sub-clause (iii), clause (b) or sub-clause [(B)] clause (c), [(BB)] clause [(CCC)] ,the following companies are exempt from compliance with sections 73 to 76 relating to buy back of securities,— any non- banking financial companies registered with Reserve Bank under sub-section (1) 0fsection 45lA; any public sector undertakings; unit trust schemes specified securitisation trusts laying down conditions specified Securities and Exchange Board.] India under ; mutual funds registered mutual funds specified Securities and Exchange Board India.” International Financial Services Centres Authority;”

Directors

As per the Companies Act 2013, a director means any individual who has been appointed to the board of a company. He or she is responsible for the overall management and operation of the company. The board of directors is accountable to the shareholders of the company.

Under the Companies Act 2013, directors are classified into two categories: executive directors and non-executive directors.

Executive directors are those who are responsible for the day-to-Day management of the company. They are also known as managing directors or whole-time directors. On the other hand, non-executive directors are not involved in the day-to-day management of the company. They provide strategic guidance and direction to the company.

Appointment and removal of directors

A director of a company must be appointed by the members in a general meeting. A person who is not a member of a company may also be appointed as its director with the consent of all the members given by ordinary resolution. The maximum number of directors that can be appointed by the members of a public company is 15 and in the case of a private company is 12. The articles of association of a company may provide for a larger number of directors.

Meetings

The Companies Act, 2013 sets out the provisions relating to meetings of the Board of Directors of a company.

The Act requires that a meeting of the Board be held at least once in every three months and not more than four months. However, if the Board of Directors of a company consists of only two directors, they shall meet at least once in every two months and not more than four months.

The quorum for a meeting of the Board is two-thirds of its total number of directors (in terms of section 269), provided that at least two directors are present. If there is only one director on the Board, he shall be treated as having a quorum.

Accounts and audits

The provisions of the Companies Act, 2013 (the “Act”) relating to accounts and audits are given below.

1. Under the Act, all companies are required to maintain accounts as per the accounting standards prescribed under the Act.

2. The accounts of a company shall give a true and fair view of the state of affairs of the company, and in particular:

3. All companies whose turnover or net worth exceeds rupees one hundred crore or rupees five hundred crore, as the case may be, during any financial year shall get their accounts audited by a qualified chartered accountant.

Winding up

Winding up is the process of bringing a company to an end. It can be done by the company itself, by the shareholders, or by a court order. The purpose of winding up is to dissolve the company and distribute its assets among the shareholders.

There are two types of winding up: voluntary and involuntary. Voluntary winding up is when the shareholders decide to dissolve the company. Involuntary winding up is when a court orders the dissolution of the company.

The Companies Act 2013 contains several provisions relating to winding up. These include:
-The appointment of a liquidator
-The distribution of assets
-The payment of debts
-The rights of creditors
-The rights of employees

Miscellaneous

The Companies Act 2013 is an Act of the Parliament of India on Indian business law which regulates incorporation of a company, responsibilities of a company, directors and dissolution of a company. It is a consolidating legislation which received the assent of the President of India on 29 August 2013. It replaced the nearly six-decade old Companies Act, 1956.

1. ~~Companies may now be registered withobjects Clause~~: Only one object clause is to be stated in MOA as against unlimited objects in previous legislations.

2. Minimum paid up capital for public and private companies has been increased to INR 100,000 and INR 50,000 respectively as against INR 5,00,000 and INR 1,00,000 respectively earlier. Small companies and startups have been exempted from this increase for three years from the date of commencement of this act. They can have minimum paid up capital as specified under MSME act 2006 or rules made thereunder

3. The Fitzgerald report in 1948 had removed the need for memorandum to state objects Clause however it was restored by CLB in 2002 in Supertek Enterprises v CCE.[17] The Companies Act 2013 requires that every company shall insert its objects clause in its Memorandum

4. Deposit companies:The Reserve Bank of India may specify certain classes of companies which dealing in receipt of deposits from public can only be registered as deposit companies under this act with prior approval from RBI

Auther name

Jacky Chou is an electrical engineer turned marketer. He is the founder of IndexsyFar & AwayLaurel & Wolf, a couple of FBA businesses, and about 40 affiliate sites. He is a proud native of Vancouver, BC, who has been featured on Entrepreneur.comForbesOberlo, and GoDaddy.