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Company Act 1956 Vs Company Act 2013
Company Act 1956 Vs Company Act 2013
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INDEX
Sr. No. TOPIC Page No.
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1. Journey of the Companies Act so far
The company legislation in India relates back to nineteenth century. Since then, it has been
amended several times. The Companies Act, 1956 remained in force for a long time, though
amended from time to time. Major amendments were made in year 2000 (postal ballot, audit
committee, shelf prospectus, etc. introduced with emphasis on Corporate Governance).
Amendments in 2002 introduced the concept of NCLT, NCLAT (which faced impediments in
form of Court cases questioning their constitutional validity). In 2006 Project MCA21 providing
for DIN and online filing of documents was launched.
A stage came where need was felt to replace the voluminous legislation with a new compact
Companies Act and Dr. J.J. Irani (the then Director, Tata Sons was appointed the chairman of
expert committee) Committee was appointed. The orientation initially was liberalizing the law
and making it more user friendly. However, Satyam Scam had its impact on orientation and the
focus got shifted a bit to retain certain stringencies in the Act.
The recommendations of J.J. Irani Committee finally culminated in the form of the Companies
Act, 2013. It received the assent of the President on 29th August 2013. The Companies Act,
2013, applies to the whole of India.
It needs to be emphasized here that the Companies Act, 2013 is a rule-based law. “It means that
at ‘a number of places in this Act’ by using the words “as may be prescribed”, the Government
has retained the power to amend by Ministry of Corporate Affairs itself rather than going to the
doors of the Parliament. As rules can be made by the Ministry itself and amended as and when
the need is felt.
Note: With reference to para above reader of the Companies Act, 2013 must note that wherever
it is specified in different provisions ‘as may be prescribed’ the reference shall be made to
respective rules as prescribed by the Ministry of Corporate Affairs or by SEBI Regulations
wherever it is so specified. As Sec. 24 of the Companies Act, 2013 specifies power of SEBI to
regulate issue and transfer of securities and non-payment of dividend by listed companies or
companies which intend to get their securities listed on any recognized stock exchange in India.
So, it is important to know that all the sections of the Companies Act need to be read with
corresponding Rules or Regulations as the case may be.
Each chapter in the Bare Act has a set of corresponding rules. In this book it has been made clear
by explaining the section along with the corresponding rule or regulation for better and complete
understanding.
The Companies Act, 2013
The Companies (Amendment) Act, 2015
The Companies (Amendment) Act, 2017
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The Companies (Amendment) Act, 2019
The Companies (Amendment) Act, 2020
Some major developments having a bearing on the Companies Act, 2013
15 Schedules 7 Schedules
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materiality has been introduced by specifying the amount. Frauds involving lower
amounts shall be intimated to Audit Committee, wherever company is required to
have one or the Board of Directors in other cases.
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2. Reduced the burden of NCLT by transferring certain approvals, to the Central
Government e.g., conversion of Public Company into Private, changing financial
year of a company.
3. It also substituted ‘liable to penalty’ in place of ‘fine’ in several provisions,
thereby further easing the mounting work pressure on NCLT. The Registrar of
Companies (RoC) and Regional Director (RD) can impose penalties directly after
issuing show cause notice (SCN) in place of going to judiciary for imposing fines
under several provisions.
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to voluntary winding-up) of the Companies Act, 2013 have been omitted by the
Insolvency and Bankruptcy Code, 2016 w.e.f. 15.11.2016.
2. National Company Law Tribunal (NCLT) and National Company Law
Appellate Tribunal (NCLAT) have become operational. The powers which were
earlier entrusted to the Company Law Board or Court in relation to companies are
now with NCLT. Appeal against the order of NCLT can be made to NCLAT.
3. Serious Fraud Investigation Office (SFIO) has been given Statutory
Recognition through Sec. 211. SFIO is vested with requisite legal authority to
conduct investigation.
4. Secretarial Standards (SS) have been statutorily recognized. The revised SS-1
and SS- 2 became effective from Oct. 1, 2017.
5. The Finance Act, 2017 amended Sec. 182 related to Political Contribution and
abolished limit on amount of political contribution by company.
6. Constitution of National Financial Reporting Authority (NFRA): Constitution
of NFRA has been notified on 1st October 2018. NFRA has been bestowed with
significant powers in issuing authoritative pronouncements and in regulating audit
profession.
7. On-line Compliance Monitoring and e-adjudication launched: Ministry of
Corporate Affairs (MCA) launched Compliance Monitoring System on November
6th, 2019. It works on artificial intelligence. It automatically detects the non-
compliance by company and digitally sends Show Cause Notice to the defaulter
company. The defaulting company is required to submit its reply within 15 days
digitally via MCA CMS portal (https://mcacms.gov.in/#/). In case of non-reply,
the Registrar of Companies would initiate the penal action against the
company/director as mentioned in the Show Cause Notice.
8. Test for Independent Directors: According to Companies (Creation and
Maintenance of data bank of independent Directors) Rules, 2019, independent
directors must qualify online proficiency self-assessment test conducted by the
Indian Institute of Corporate Affairs (IICA), Manesar. The new rules are effective
from December 1st, 2019.
9. Amendments in Schedule VII: Schedule VII prescribing list of activities on
which money can be spent by the companies to which Sec. 135 relating to
Corporate Social Responsibility (CSR) is applicable has been amended. By
notification dated 26/05/2020 in item (VIII) of Schedule VII of the Companies
Act, 2013 after the words “Prime Minister’s National Relief Fund” the words
“Prime Minister’s Citizen Assistance and Relief in Emergency Situation Fund”
(PM CARES FUND) have been inserted.
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10. Measures taken in the light of COVID-19 and resultant lockdown: Due to
COVID-19 and resultant lockdown, compliance timeline has been extended and
certain exemptions also given. Conduct of Annual General Meeting (AGM) and
Extraordinary General Meeting (EGM) through Video Conferencing and Other
Audio-Visual Means (OAVMs) is also allowed. It needs to be noted that these are
temporary measures to deal with problems created by pandemic.
Reference: -
http://www.legalservicesindia.com/article/2306/Distinction-between-Companies-Act-
1956-and-Companies-Act-2013.html#:~:text=Companies%20Act%201956%20was
%20separated,470%20sections%20and%207%20schedules.
https://meraskill.com/blog/difference-between-companies-act-2013-vs-companies-act-
1956
http://vassociates.in/images/pdf/Companies_Act_2013_Vs_Companies_Act_1956.pdf
https://www.mca.gov.in/Ministry/pdf/Companies_Act_1956_13jun2011.pdf
https://www.mondaq.com/india/corporate-and-company-law/624188/comparison-
between-companies-act-1956-and-the-revised-act-2013