The Companies Act, 2013, is a landmark legislation that regulates the formation and functioning of companies in India. Replacing the Companies Act of 1956, this Act introduced significant reforms aimed at enhancing corporate governance, increasing transparency, and promoting social responsibility among corporations. Here, we delve into the key features and differences between the Companies Act of 2013 and its predecessor, alongside other pertinent details.
To better understand the scope and structure of the two Acts, here’s a detailed comparison:
1.Maximum Shareholders in Private Companies
1956 Act: Cap at 50 shareholders.
2013 Act: Cap increased to 200 shareholders.
2.One-Person Company (OPC)
Introduced the concept of a one-person company, allowing a single individual to incorporate a company.
3.Corporate Social Responsibility (CSR)
Section 135: India became the first country to mandate CSR spending by law. Companies meeting certain criteria must spend at least 2% of their average net profits on CSR activities.
4.Tribunals for Dispute Resolution
Establishment of the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) to resolve company law disputes efficiently.
1.Independent Directors: Requirement for certain companies to have independent directors to ensure unbiased decision-making.
2.Auditor Rotation: Mandatory rotation of auditors to prevent malpractices and ensure transparency in financial reporting.
3.Enhanced Disclosure Requirements: Increased focus on disclosure of financial and non-financial information, related party transactions, and director remuneration.
1.Single Incorporation Form: Introduction of a single form (INC-29) for company incorporation to streamline the process and reduce bureaucratic hurdles.
2.Stringent Penalties: Imposition of stricter penalties for non-compliance to foster a culture of adherence to corporate laws.
These changes aim to improve corporate governance, transparency, and accountability in Indian companies.
