The article is written by Dev Agarwal, a 3rd year law student of Heritage Law College, Kolkata.
HISTORY OF THE LEGISLATION
Company Law in India, like most of the legislation has its root in the English Law. In England, Joint Stock Company was passed in 1844 and subsequently in India, the Companies Act of 1850 was also enacted. The main feature of this Act was to allow the registration of companies and provide for the transferability of shares. The Companies (Amendment) Act was passed 1857 which provided for right of registration of a company with or without limited liability, In 1860, another amendment was brought which granted the right to of registration with or without limited liability to banking and insurance companies.
The Act of 1856 repealed all other previous legislations and it covered ambits like incorporation, regulation and winding up of companies. This Act was again amended in 1882 to add on the various amendments which were done in the Company Law of England. In England a comprehensive Company Law was passed in 1948, in 1951 the Indian Government enacted the the Indian Companies (Amendment) Ordinance which gave power to both the Union Government and Court to intervene in the matters pertaining to company. The Ordinance was replaced by the Amending Act of 1951
The Companies Act of 1956 and Bhabha Committee
By the end of 1950, the Government of India appointed a Committee under Cooverji Hormusji Bhabha for revising the entire Indian Act with special reference to the development of Indian Commerce and Trade. This Committee submitted its report on March 1952. Basedon the recommendation of the Committee, The Companies Act of 1956 was introduced in the Parliament, many provisions of the Act were identical with the English Companies Act, 1948.
The Companies Act, 1956 was legislated with the aim to consolidated and amend earlier laws relating to Companies and other associations. The Act came into force from 1st April 1956, this Act was largely influenced by the Committee appointed by the Government under the chairmanship of C.H Bhabha. The Companies Act 1956 consisted of a total of 658 Sections and 15 Schedules, making it one of the longest legislations passed in the Parliament.
The main objectives of the aforementioned Act of 1956 included :-
- Full and fair disclosure in the prospectus
- Detailed information of the financial information of the company to be disclosed in its accounts
- Provision for the intervention of the Government in the matters of company for the sake of investigation and inspection
- Restrictions on the power of managerial persons (E.g. – Managing Director, Chairman etc.)
- Enforcement of proper performance of the duties by company management
- Protection of minority shareholders
The aforementioned Act of 1956 had undergone a total of 24 amendments since inception. The major amendments of the Act happened in the year- 1960, 1962, 1963, 1964, 1965, 1966, 1967, 1969, 1971, 1977, 1985, 1988, 1996, 1999, 2000, 2002, and 2006. The Companies Act of 1956 was later replaced in 2013 by The Companies Act, 2013
COMPANIES BILL 2012 AND COMPANIES ACT 2013
A comprehensively revised Bill, the Companies Bill, 2008 was prepared in consultation with Ministry of Law and was introduced in the Lok Sabha on 23rd October, 2008 in the 14th Lok Sabha and was subsequently referred to the Parliamentary Standing Committee on Finance for examination and report. However, before the said Committee could present its report, 14th Lok Sabha was dissolved and the Companies Bill, 2008 lapsed as per clause (5) of article 107 of the Constitution of India.
The Government of India considered the recommendations of the Irani Committee and also had a detailed discussion with various Industry Chambers, Professional Institutes, Lawyers etc. Thereafter, the Companies Bill 2009 was tabled in the Lok Sabha. The Bill laid greater emphasis on self regulation and minimized the regulatory approvals in managing affairs of the company, the Bill also promised greater shareholder democracy
The Companies Bill 2009 was referred to the Parliamentary Standing Committee on Finance for examination, the Standing Committee submitted its report on 31st August 2010. Certain amendments were done to the Bill and a revised Companies Bill, 2011 was introduced , this was once again referred to the Standing Committee which made further changes to it. The Amended Bill was passed in the Lok Sabha on 2012 and in the Rajya Sabha on 8th August 2013. The Bill was retitled as Companies Bill 2012
The Companies Bill 2012, finally became the Act in 2013 when it received the assent of Hon’ble President of India on 29th August 2013 and was notified in the Gazette of India.
The Companies Act, 2013 has undergone five major amendments so far. The Companies (Amendment) Act of 2015 and 2017 aimed at enhancing the efficiency and promote ease of doing business. The Companies Act 2013 was also amended by The Insolvency and Bankruptcy Code of 2016 and Finance Act of 2017. The Insolvency and Bankruptcy Code, 2016 omitted various sections in the Act 2013 like Section 253 to Section 269, Section 289, Section 304 to Section 323 and Section 325. The Finance Act 2017 amended Section 182 which provides for the prohibitions and restrictions regarding political donations. The most recent amendment was done by the Finance Act 2020 which aimed to ease the listing of Indian companies in foreign recognized stock exchanges.
- Historical Preview of new Act, Companies Act.; https://www.companiesact.in/Companies-Act-2013/Historical-Preview-of-New-Act