Companies Act 2013-Introduction & Features.pdf

notes

1. Indian Companies Act,
2013
Dr.NidhiKhurana
Subject–Indian
CompaniesAct,2013
Unit-1Introduction&
Features

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 maintainenceof 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 and Articles of Association of Company
To compute Depreciation
Preparation of Balance sheet and profit & loss account
Code for Independent Director
Conditions to be fulfilled for the Appoitmentof Managing or
Whole-time director or Manager without the approval of Central
Government.
Infrastructural projects or facilities
Activities which may be included by companies in their Corporate
Social Responsibility policies

7. Introduction to Companies Act,2013
Companies Bill
passed by Rajya
Sabha on 8th
August 2013
H’blePresident
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 12
th
September,2013

8. Definition of Company
AccordingtoSection2(20)-“ACompanyisacompanyformedunder
CompaniesAct,2013orunderanypreviouslawrelatingto
companies(CompaniesAct,1956or1913)”
Thus,forthepurposeofCompaniesAct,2013noteveryassociationof
personsisa‘Company',onlysuchassociationofpersonsisa
‘Company’whichisregisteredunderCompaniesAct,2013orunder
anypreviouslaw.
AccordingtoHaney-”Acompanyisanincorporatedassociation,whichis
anartificialpersoncreatedbythelawhavingaseparateentitywitha
perpetualsuccessionandacommonseal”.

9. Features of Company
1.IncorporatedAssociation-Acompanyisaninstitutionincorporated
undertheCompaniesAct2013orunderanypreviouscompanylaw.
Withoutincorporation,acompanyisnotacompanyintheeyesof
law.Acompanyisformedandregisteredbycomplyingwiththe
prescribedformalitiesprescribedundertheAct.
2.Artificiallegalperson–Acompanyisanartificialpersonasitis
invisible,intangibleandexistingonlyintheeyesoflaw.Itisdevoid
(lackofphysique)anditisoperatedthroughahumanagencyknown
asthedirectorsofthecompany.
3.Separatelegalentity–Acompanyisaseparateandhasdistinct
legalentityfromitsmembersandboardofdirectors.Ithasitsown
legalexistence.Afterregistration,theliabilityofthecompanyisnot
theliabilityofitsmembersandtheliabilityofthemembersisnotthe
company’sliability.Acompanyisaseparatepersonhavingitsown
rightsandobligations.

10. Features of Company
Case Study :-Salomon Versus Salomon, 1897
Salomonwasasoleproprietorofaleatherbusiness.Hesoldhis
businessandincorporatedacompanyinthename“Salomonand
companylimited.”Hehimselfandhistwosonsconstitutedthe
boardofdirectors.Salomonhadanabsolutecontroloverthe
company.Afteroneyearthecompanysufferedfromfinancial
crisis.ThecreditorsofthecompanyheldSalomonresponsiblefor
thedebtsonthegroundthatthecompanyandSalomonwereone,
andSalomonwasliabletoindemnifythecompanyagainstits
debts.
TheHouseofLords(judges)heldthatthecompanyhasaseparate
legalentityandafteritsincorporation,distinctfromitsmembers
andthatthecompany’sassetmustberealizedinpaymentofdebts.

11. Features of Company
4.Perpetualsuccession–Sinceacompanyisanartificialpersoncreated
bylaw,lawonlycanbringanendtoitslife.Thus,itenjoysperpetual
succession.Membersmaycomeandgo,butthecompanygoeson
forever.Thusacompanyneverdies.
5.Separateproperty–ACompanyafteritsregistrationcanownand
enjoypropertyinitsownname.Membersarenotownersorco-ownerof
thecompany’spropertyandhavenoinsurableinterestinthepropertyof
thecompany.
Case Study :-MacauraV. Northern Assurance Co. Ltd
Macaurawastheholderofallthesharesexceptoneofthetimber
company.Heinsuredthecompanyinhisownname.Thetimberwas
destroyedbyfire.Macuraclaimedthelossfromtheinsurancecompany
butitwasheldthattheinsurancecompanywasnotliabletopayhim
becauseitwasthepropertyofthecompanyandnothispersonal
property.

12. Features of Company
6.Limitedliability–Forthedebtsofthecompany,itscreditorscansueit
andnotitsmemberswhoseliabilityislimitedtotheunpaidamountonshares
heldbythemortheguaranteesprovidedbythemtocontributeonthe
windingupofthecompany,dependingonthetypeofcompany.
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 contribute to the assets of
the company until all the debts of the company are
paid in full.

13. Features of Company
7.Commonseal–Commonsealistheofficialsignatureofthe
Company.Anydocument,onwhichthecommonsealisaffixed,is
deemedtobesignedbytheCompany.Itismandatoryforevery
companytohaveacommonsealwithitsnameengravedonit.Incasea
companydoesnothaveacommonseal,theauthorizationshallbemade
bytwodirectorsorbyadirectorandtheCompanySecretary,wherever
thecompanyhasappointedaCompanySecretary.
8.Capacitytosueandbesued–Afterincorporationofacompany,it
cansueothersandbesuedinitsownname.
9.Transferabilityofshares–Sharesaremovablepropertyofthe
company(Sec.44ofthecompaniesAct,2013).Theyaretransferablein
themannerprovidedintheArticles(Sec.44oftheCompaniesAct,
2013).InaPrivatecompany,therighttotransferthesharesis
restrictedandPubliccompanysharesarefreelytransferable.

14. Features of Company
10.Provisionofrelieffromoppressionandmismanagement–
CompaniesAct,2013haslaiddownprovisionsofrelieffromOppression
whichmeansilltreatmentorharmtothemembersofthecompanyand
‘Mismanagement’thatisconductingtheaffairsofthecompany
prejudicialtotheinterestofthecompany.
11.Ownershipseparatefrommanagement-Themembersdonot
participateintheday-to-dayaffairsoftheCompany.Themanagementof
thecompanyliesinthehandsofelectedrepresentativesofmembers,
commonlycalledasBoardofDirectorsordirectors.

15. THANK YOU