Indian Companies Act

Indian Companies Act was first developed in 1956 for the sake of the companies. It is a set of laws and principles that should be followed by every company in India. This act helps to maintain a specific way to run a company. Starting from registering the company, and understanding the responsibility of the founder, director, secretaries, and employees are controlled by this act. Later in 2013, the government of India added some new laws and regulations in this act and called it the Indian Companies Act, 2013 where some of the laws are replaced by some new laws and some additional laws.

Indian Companies Act and its derivatives

Indian Companies Act of both 1956 and 2013 has derivatives that have a significant role in the economic sector of the country. The first derivative is this act has some laws that impose a significant burden on the shareholders. The shareholders can not take the decision as their own. They have to follow the rules before investing in a business. Secondly, in the year 1970, Taxation laws are inserted in this act, where it is mentioned that the companies have to provide a certain amount of money to the government as tax. Thirdly, if any riot takes place in the land of a company, the owner has to face some chargeable punishment.

Indian Companies Act 1956

The primary purpose of the Indian Companies Act was to regulate the formation of a company, financing of the company, and functioning and winding up of the companies. This act helps to provide stability to the organizational financial sector and managerial aspects of a company. The Indian Companies Act also helps in stabilizing the country’s economy as well. The responsibilities of the owners and the shareholders are segregated and also provide safety to the creditors. This act also helps to maintain a healthy balance between the social and economic policies of the government. This act also provides a certain power to the government of the country to intervene in the affairs of a country.

Indian companies Act 2013

The Indian Companies Act 1956 is replaced by the Indian Companies Act 2013 where some of the previous acts are replaced with new laws and some additional laws are enacted. In this act, the laws are made by remembering the importance of authentication of the documents. Nowadays, the idea of entrepreneurship is adopted by many people. However, in the Indian companies act 1956, it is stated that one person cannot run a business. This was an example of the reason behind replacing the previous act. On the other hand, in the 1956 Indian companies act, there are 658 sections and in the companies act of 2013, only 464 sections are available which is shorter than the previous one.

Significant changes in Act 2013

One of the significant changes that are done in the Companies act 2013 is the less number of sections. Other significant changes that are observed are prospectus and allotment of securities, private placement, share capitals, and debentures, acceptance of deposits by companies, registration of charges, management and administration, declaration and payment of dividends, accounts of companies, audit, and auditors, appointment and qualifications of directors, meetings of boards and its power, appointment and remuneration of managerial personnel, inspection, inquiry, and investigation, compromises, arrangements, and amalgamations, prevention op operation, and mismanagement, registration valuers, and so on.

Indian Companies Act 2019

The current Indian Companies Act 2019 was introduced in Lok Sabha on July 25, 2019, by Finance Minister Nirmala Sitharaman. In this act, some of the laws are incorporated including insurance of dematerialized shares, re-categorizations of certain offenses, incorporation of corporate social initiatives, debarring auditors, the commencement of business, registration of charges, change in approving authority, compounding, bar on holding office, and beneficial ownership.

Advantages and disadvantages of Companies Act

The Indian Companies Act has some advantageous and disadvantageous features. The advantages of having an Act for the business companies are

• Large financial resources for both the company and the country.
• Transferability of shares
• Limited liabilities of employees of each sector
• Perpetual existence
• Efficient management
• Economics on large-scale production.

On the other hand, the disadvantageous features of having Companies Act are

• Complex formation procedure
• Slow decision-making process
• Lack of secrecy
• The complexity of the winding-up procedure.

Conclusion

Indian Companies Act is essential for running the businesses by following specific rules and laws. Some changes and replacement of laws are done because of the changing demands. The importance of having the Act is to maintain the stable economic condition of the country. On the other hand, through the implementation of this Acts, the companies become able to be formed by legal registration.