6th June - COMPANIES ACT 2013

It is the primary legislation relating to the incorporation, composition, functioning, and compliance requirements of companies in India. The previous Companies Act of 1956 had to undergo numerous amendments over the past several decades, especially after the post-liberalization era that came after the 1990s. The Central Govt subsequently enacted the new Companies Act in 2013, to replace the old one and with an object to consolidate and amend the relating to companies. It is the primary legislation that you have to refer to, if you are planning to incorporate a company in India.


  • The Act has 29 Chapters, divided into 464 Sections, and 7 Schedules.
  • A company comes into being by way of its incorporation, and it has to follow the requirements and mandates under the Act, such as the application to be made to the Registrar of Companies (RoC), the creation of the Memorandum of Association and Articles of Association, the issue of certificate of Incorporation by the RoC, setting up of a Registered Office, etc. before it can commence its business.
  • Once it is all set to commence business, the company now has to raise capital, and the Act provides for this to be done by offering its securities either to the public, or through private placements. The general public are entitled to purchase shares of a Public Ltd Co. only, and a Pvt Ltd Co. cannot offer its securities to the public. The Act lays down strict provisions regarding the manner and eligibility to make an offer to the public, such as a number of detailed disclosure to be made in the Prospectus, the regulatory requirements to be satisfied to make such issue, etc. (also refer ICDR Regulations, 2009). On the other hand, a Private Placement is an offer of securities to certain specified persons only, without making it open for the general public, and the regulatory controls are less stringent here.
  • The raising of capital can be done by issuing either Shares or Debentures of the company. A Share in a company gives a certain membership status to the purchasers, and they pay money in return for the Shares. Shares are further divided into Equity Shares and Preference Shares, and the equity shareholders get dividends out of the profits made by the company, and not any fixed amount of payment; while preference shareholders get a fixed dividend from time to time. Debentures are instruments wherein a creditor lends money to the company, and receives in return, a Certificate acknowledging the debt, and on the stipulated time, the debt will be paid back with interest. The Act provides for the different requirements and procedures under each of these.
  • The Company may also accept deposits from its members, or take a loan from a credit by creating a charge on the assets of the company, in accordance with the provisions of the Act.
  • The mode of management of the company, including the requirement to file Annual Returns, need to file declaration of any beneficial interest of any member in any Shares, maintenance of Records, Voting Rights and its procedure, kinds of Resolutions passed in meetings, etc. are also enumerated in the Act.
  • The manner in which dividends are to be declared and paid to the shareholders.
  • The mandates regarding maintenance of accounts of the company; and the appointment of auditors and manner of audit are given in the Act.
  • The company must have a Board of Directors, and their appointment, qualifications, duties, and prohibitions are enumerated in the Act. The Board of Directors must hold meetings from time to time, and pass resolutions on certain matters; the Cat provides for the powers of Directors, Related Party Transactions, etc. The appointment and remuneration of managerial personnel is also provided in the Act.
  • A company is liable to be under an inspection of document or an inquiry/investigation by the authorities.
  • After having dealt with the manner of functioning of companies too, the Act lays down detailed Chapters on the winding up (voluntary or by Tribunal); compromise/arrangement/amalgamation with another company; revival and rehabilitation of sick companies, etc.
  • Special provisions regarding Govt companies and Companies incorporated outside India. The Act also provides for the setting up of NCLT, Appellate Tribunal, and Special Courts.



  • Maintenance of documents in electric form allowed
  • Corporate Social Responsibility made mandatory
  • One Person Company allowed
  • Independent Directors and Women Directors made mandatory in some cases
  • Whistle-Blower policy facilitated; ethical corporate behaviour promoted
  • Better protection to minority shareholders – Exit option made available
  • NCLT established to hear company related matters; replaced the Company Law Board


  • ICDR, 2009 by SEBI
  • LODR by SEBI
  • SCRA
  • Depositories Act
  • SAST Regulations, 2011 by SEBI

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