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History Of Company Legislation

With the establishment of the East India Company, legislations regarding company law also paved a way in India. The company legislation in India is built on English companies act, 1844. The first legislation regarding the companies act for Joint stock companies were established in 1850, granting companies the status of distinct legal entities.

The Joint Stock Companies Act of 1850 was repealed and replaced by the Joint Stock Companies Act of 1851, which introduced the principle of limited liability for the first time for the private companies. The liability for the banking companies was unlimited until the act of 1860, which amended the act of 1857 making the liability of the banking companies also limited.

Thereafter, for unification and amendment of the laws which related to incorporating, winding up and regulating the trading companies and its associations, the Companies Act of 1866 was passed which no less based on the British companies act of 1862.

Indian Company Law in 1882, was brought in compliance with various amendments made to British companies act, 1862. Subsequently, the Indian Compaies Act, 1867 was replaced by Indian companies act, 1913, which was passes following the British companies act, 1906.

The Act of 1913 was amended in the years 1914, 1915, 1920, 1926, 1930, 1932, and 1936 in accordance with the English Companies Act of 1929, and it ceased to exist in 1956. This Act of 1913 governed business corporations in India.

The Indian government in the year 1950 appointed a Committee which was chaired by Shri H.C. Bhaba. The primary goal was to recast the Indian Companies Act so that the growth of trade and industry in India could br aligned to it. The report, by the committee was submitted in March 1952, following which the Companies Act of 1956 was enacted and the Companies Act of 1913 was repealed. The Companies Act of 1952 was largely in accordance with the British Companies Act.

The major changes which were introduced by Companies Act, 1956 that are over are above companies act, 1913 are:
  • The promotion and formation of companies
  • Companies capital structure
  • Companies meetings and procedure
  • The presentation of companies accounts, their audits, and the powers and duties of auditors.
  • The inspection and affairs of the affairs of the company
  • The constitution of Board of Directors and the powers and duties of Directors, Managing directors and Managers.
  • The administration of company law.
There have been major amendments in company law since then.

The major's amendments includes the amendment introduced in the years:
  • 1960
  • 1962
  • 1963
  • 1964
  • 1965
  • 1966
  • 1967
  • 1969
  • 1974
  • 1977
  • 1985
  • 1988
  • 1991
  • 2001
  • 2002
  • 2006
  • 2013
  • 2015
  • 2017

In the context of the economic reform process that began in July 1991, the government finally recognized that many of the provisions of the Companies Act were out-of-date and detrimental to the expansion of the Indian corporate sector. As a result, an attempt was made to reformat the act, which was reflected in the Companies Bill of 1993. However, the aforementioned measure was later repealed.

A working group was formed in 1996 to rewrite the Companies Act. The committee was formed in response to an announcement made by the then-Union Minister of Finance in his budget speech. The main goal of the committee was to make amendments and rewrite the act in order to support the healthy development of the Indian corporate sector in a liberalized, rapidly evolving, and fiercely competitive business environment.

The Companies Act, 1956 was repealed on August 14, 1997, by the Companies Bill, 1997, which was introduced in the Rajya Sabha after taking into account changes in the business sector, administration, and regulatory framework and based on the findings of the working committee.

The Companies Amendment Act has brought about a variety of modifications, including:

Companies (Amendment) Act, 2001

It changed Section 77A's share-buyback provisions and gave the BOD permission to repurchase shares for up to 10% of the paid capital and free reserves.
Such a buyback was only completed if there was just one such buyback during the course of a 365-day period.

Companies (Amendment) Act, 2002

In December 2002, the Companies (amendment) Act of 2002 and the Companies (Second Amendment) Act of 2002 were both passed.

Companies (amendment) act, 2002
Made provisions for the formation and administration of cooperatives as a legal entity under the Companies Act of 1956 to be known as the "Producers Company."

Companies (second amendment) act, 2002
Goals were to:
  • Quicken the corporations' insolvency procedures
  • Aid in the recovery of failing businesses and the safeguarding of workers' rights.
  • It is concerned with streamlining the closing process so that resources that would otherwise be blocked can be used for better ones, easing the burden on employees and other interested parties.
  • Made provisions for SICA and BIFR abolition.
  • It aimed to create a National Company Law Tribunal with the authority to speed up the winding-up process.

Companies (Amendment) Act, 2006

Put into effect from 1st November, 2006
It introduced provisions relating to:
  • Directors identification number
  • The electronic filing of different forms and returns.

Companies (Amendment) Act, 2013

The Companies Act of 1956 was repealed by the Companies (Amendment) Act of 2013, a more modern, streamlined, and rationalized piece of legislation. The primary objective of the modification was to align Indian business law with the most advanced international standards. The Ideas like class actions, corporate social responsibility, and a fixed term for independent directors have all been introduced under the Companies Act of 2013.

Additionally, it strengthens the regulation governing public fundraising by outlawing insider trading by corporate directors or other senior managerial staff and designating such behaviour as a crime. Additionally, it allowed shareholders agreements granting first-to-offer or first-refusal rights even in the case of public corporations, although previously it was only possible for private companies.

Companies (Amendment) Act, 2015

On May 25, 2015, the Company Amendment Act of 2015 obtained presidential assent. The amendment days' primary goal was to address concerns that stakeholders, including Chartered Accountants and other professionals, had raised.

The amendments' features include:
  • The minimum paid-up share capital requirement and any related adjustments were left out.
  • It made common seal as optional.
  • In order to satisfy business demand, it forbade police examination of board resolutions entered in the registration.
  • The rules incorporated a mechanism for writing off prior losses and depreciation before declaring dividends for the year because the legislation did not include this.
  • It empowered the audit committee to give omnibus approvals on annual basis relating to party transactions.
  • It replaced special resolution with ordinary Resolution by non-related shareholders for approval of related party transactions.
  • Special courts were established to hear cases with sentences of two years or longer in jail.
  • Winding up cases is now to be heard buy bench of 2 members instead of bench of 3 members.

Companies (Amendment) Act. 2017

A number of changes were brought by company's amendment act 2017 for making our corporate sector at par with the best global practices. The amendment brought changes such as reduction in minimum membership, issue of shares at discount, issue of sweat equity shares, amendment in the private placement process, amendment regarding number of Directorships, the amendment broaden the definition of subsidiary companies and holding companies and many more. These amendments helped a lot the Indian corporate sector to go with the global sectors and compete with them at international platform.

Companies (Amendment) Act, 2019

On July 25, 2019 the Finance Minister of India, Ms. Nirmala Sitaraman introduced the Companies (amendment) act, 2019 in the Lok, which amended the Companies Act, 2019. It included various amendments such as:

Issuing of dematerialized shares were allowed to other classes of unlisted companies also.

There was re categorization of offenses which were contained in the Companies act, 2013. The 81 offense given under company's act 2013 were categorized.

This act tell regarding the commencements of the business, the procedures required for the same like number of days required, procedure required etc. and many such amendments were made under the companies act, 2019

In the coming year also if the Ministry of finance requires so will made such amendments for making our corporate sector best at the international level.

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