The Companies Act, 2013 | Provisions of The Companies Act, 2013

THE COMPANIES ACT, 2013

The Companies Act, 2013 is an Act of the Parliament of India which regulates the incorporation and responsibilities of the companies, their executive directors, and secretaries and also provides the procedure of winding up. The Companies Act, 2013 is the replacement of the Indian Companies Act, 1956.

DEFINITION — SECTION 2(20) -

A company is an association registered under the provisions of The Companies Act, 2013 or any other previous company law.

PROVISIONS OF THE COMPANIES ACT, 2013

The MCA (Ministry of Corporate Affairs) notified 98 sections of The Companies Act, 2013 on 12th September 2013. Important provisions are mentioned below:-

1. Compliances — The company requires to adhere to several statutory compliances such as preparation of statutory registers and records, auditing, the passing of resolutions, and filing of returns with the Registrar of Companies.
2. Restriction on Borrowing level — Section 180 states that a company is not allowed to borrow over its paid-up capital and free reserves unless approved by the special resolution.
3. Provision on Liability — The liability of the members is limited to the extent of their capital contribution (Sec 2(22)) OR the extent of the amount given inside MOA (Sec 2(21)). Members are not liable for any act or omission on part of the company.
4. Provision on Free Reserves — Sec 2(43) defines the free reserves (excluding revaluation reserves) as the amount available for distribution as per the audited balance sheet, by way of dividend.
5. Net-Worth — Sec 2(57), includes security premium reserves except for written-off depreciation amount.
6. Rotation of Auditors — The Act directs the rotation of auditors in public companies. It also prohibits auditors from performing non-audit services.
7. Preliminary requirements on composition — Every company must have a minimum of 1 director whose stay in India in the previous calendar year is not less than 182 days.
8. Incorporation — It’s ILLEGAL if the company is not incorporated as per Sec. 7.
9. Mandatory CSR contributions — Section 135 mandates CSR (Corporate social responsibility) contributions for large companies, i.e., contribute at least 2% of their annual profits.
10. Common seal — The company can be sued and be sued in its own name.

PAID-UP CAPITAL — SEC. 2(64)

Paid-up capital is the aggregate amount of money the company received in respect of shares issued to the shareholders, through an IPO (Initial Public Offer).

COMPANY SECRETARY (CS)

Section 203 of the Companies Act 2013 deals with the appointment of CS as Key-Managerial-Personnel of the Company. Law makes it mandatory for every Indian listed entity having more than Rs.10 crore paid-up capital, to have a whole-time CS.

CONCLUSION

The company is an artificial legal person, with perpetual succession, having the composition of transferable shares and limited liability, and a common seal for its signature.

It acts as a separate legal entity where a group of individuals (i.e., Investors) come together and invest a huge amount of money (i.e., Capital), such money flows into the hands of the Management of the company (i.e., the Board of Directors). This leads to the chance of fraud, scam, and misappropriation of funds. Rules and regulations are required to regulate such activities. Hence, It gives The Companies Act.

The company can sue and be sued in its own name. Members are not liable for any act or omission on part of the company.

In comparison with the Companies Act 1956, the Companies Act 2013 is much more progressive, which targets to withstand the national, international, and economic environment and accelerate the expansion and growth of the Indian Economy.