Company Law Series Chapter 1- Applicability of Companies Act, 2013 & New Concepts

Applicability of Companies Act, 2013

♠ According to section 1 of the Companies Act, 2013, the Act extends to whole of India and the provisions of the Companies Act shall apply to the following:-

♠ Companies incorporated under this Act or under any previous company law;

♠ Banking companies, except in so far as the said provisions are inconsistent with the provisions of the Banking Regulation Act, 1949 (10 of 1949);

♠ Companies engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of the Electricity Act, 2003 (36 of 2003);

♠ Insurance companies, except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938 (4 of 1938) or the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);

♠ Any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; and

♠ Such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification, specify in this behalf, subject to such exceptions, modifications or adaptation, as may be specified in the Section 3(1) states that a company may be formed for any lawful purpose by—

• seven or more persons, where the company to be formed is to be a public company;
• two or more persons, where the company to be formed is to be a private company; or
• one person, where the company to be formed is to be One Person Company that is to say, a private company by subscribing their names or his name to a memorandum and complying with the requirements of this Act in respect of A company formed under Section 3(1) may be either—

1. A company limited by shares; or

2. A company limited by guarantee; or

3. An unlimited

New Concepts Introduce Under the Companies Act, 2013

Companies Act, 2013 has introduced several new concepts. Some of the concepts are discussed here in brief.

Companies

Nidhi company: Nidhi Company means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with such rules as are prescribed by the Central Government for regulation of such class of companies.(section 406)

Private company: Companies Act, 2013 introduces a change in the definition for a private company, inter-alia, the new requirement increases the limit of the number of members from 50 to 200. [section 2(68).

Small company: A small company has been defined as a company, other than a public company paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees; and turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees:

Provided that nothing in this clause shall apply to—

1. a holding company or a subsidiary company;
2. a company registered under section 8; or
3. a company or body corporate governed by any special Act; (section 2(85)).

Dormant company: A company formed and registered under this 2013 for a future project or to hold an asset or intellectual property and has no significant accounting transaction such a company or an inactive company may make an application to the Registrar for obtaining the status of a dormant company.(Section 455)

One-person company: The 2013 Act introduces a new type of entity to the existing list i.e. apart from forming a public or private limited company, the Act enables the formation of a new entity a ‘one-person company’ (OPC). An OPC means a company with only one person as its member (section 3(1)).

A company incorporated under the companies Act possess a corporate  legal personality ,it bears its own name,has a seal of its own and its assets are separate and distinct from those of its members. It is considered as distinct ‘person’ from the members who compose it. Therefore it is capable to own property, incurring debts, borrowing money, having a bank account, employing people, entering into contracts and suing or being sued in the same manner as an individual. Its members are its owners however they can be its creditors simultaneously. A shareholder cannot be held liable for the acts of the company even if he holds virtually the entire share capital.

The author is a fellow member of the Institute of Company Secretaries of India. She worked as a practicing company secretary for a period of about 10 years since 2009, having hand in all type of corporate-legal-matters inter alia having professional excellence in matters of company incorporation / corporate frauds / amalgamation / Mergers/ re-structuring / Joint Ventures / Corporate Governance / Winding up / Capital Markets / SEBI / FEMA/ RBI. The author can be reached at vinayak.charu@gmail.com and @ 6283643738, 9915509611