Companies Act 2013

The Companies Act 2013 is an Act of the Parliament of India on Indian

Companies Act 2013
company law which regulates incorporation of a company, responsibilities
of a company, directors, dissolution of a company. The 2013 Act is divided
into 29 chapters containing 470 sections as against 658 Sections in the
Companies Act, 1956 and has 7 schedules. However, currently there are
only 484 (470-43+57) sections in this Act.[1] The Act has replaced The
Companies Act, 1956 (in a partial manner) after receiving the assent of the
President of India on 29 August 2013.The section 1 of the companies Act
2013 came into force on 30 August 2013 . 98 different sections of the
companies Act came into force on 12 September 2013 with few changes
like earlier private companies maximum number of members were 50 and
now it will be 200. A new term of "one-person company" is included in
this act that will be a private company and with only 98 sections of the Act
notified.[2][3] A total of another 183 sections came into force from 1 April
2014.[4] Parliament of India
The Ministry of Corporate Affairs thereafter published a notification for Long title
exempting private companies from the ambit of various sections under the An Act to consolidate and amend
Companies Act.[5] the law relating to companies.

The 2013 legislation has stipulations for increased responsibilities of Territorial India
corporate executives in the IT sector, increasing India's safeguards against extent
organised cyber crime by allowing CEO's and CTO's to be prosecuted in Enacted by Parliament of India
cases of IT failure.
Assented to 29 August 2013
Minister of Corporate Affairs, and introduced The Companies Signed 29 August 2013
(Amendment) Bill, 2020. It was passed by the parliament in 2020.
Commenced 12 September 2013
(98 sections)
1 April 2014 (184
Contents sections)
History Legislative history

Type of Companies Bill The Companies Bill,

Public Limited Companies 2012
Private Companies Bill citation Bill No. 121-C of
One Person Company (OPC) 2011 (http://www.mc
Section 8 Companies a.gov.in/Ministry/pdf/
Producer Companies The_Companies_Bill
Mandatory CSR contributions _2012.pdf)

Company Secretary Repeals

Major changes in Companies Act 2013 The Companies Act 1956

Authorities established Amended by

Directors The Companies (Amendment) Bill,

Types of Directors 2020
Changes in Directors Status: In force
1. Appointment of a Director
 2. Resignation of Director
3. Re-designation of director
4. Alternate Director
5. Removal of Director
One Person Company (OPC)
Nominee
Documents required for Change in Nominee in OPC
For e-form INC-4, attachments required are as follows
See also
Notes
External links

History
Indian Companies Act 1956 was an Act of the Parliament of India, enacted in 1956, which enabled companies to be
formed by registration, set out responsibilities of the companies, their executive director and secretaries and also
provides for the procedures for its winding.[6]

Type of Companies
Following are the general type of Companies which can be formed under the Companies Act, 2013.

1. Public Limited Companies or Limited Companies ( Section 2 (71). Its usually defined as a Company
which is not a private Company. [7]
2. Private Limited Companies ( Defined under Section 2 (68) ) [7]
3. One Person Company
4. Section 8 Companies
5. Producer Companies

Public Limited Companies

Public Limited Companies can have more than 200 shareholders. Shares are freely transferable. However
compliance requirements are lot greater than private Companies. Public Companies can be Listed (on stock
exchanges) or Unlisted. For Unlisted public Companies, the Corporate Identification number (CIN) starts with 'C'
and for Listed Companies, it starts with 'L'.

Private Companies

Private Companies are defined (under Section 2 (68)[7] as

having restricts the right to transfer shares

not more than 200 members (with some exceptions for employees and former employees)
Prohibits invitation to public to subscribe to securities.

MCA Compliance for a private Company[8] is lower than private company and more than One Person Company. It
usually includes

Annual forms - DPT-3 (Deposit Forms)

MSME (ministry of small & medium enterprises) Forms
 Form AOC-4 ( Balance Sheet and Profit and Loss)
Form MGT -7 ( Annual Return for information like Directors, shareholders and changes thereon)
DIR -3 KYC (for individual KYC of Directors)

One Person Company (OPC)

One Person Company (OPC) (Section 2 (62) [7] is defined as a company which has a member. Its more like a
private company but with only one shareholder and requires a minimum of only 1 Director. One significant
difference is that OPC can have only natural Indian shareholders. It means other Companies or LLPs cannot be
shareholders. Also foreign passport holders cannot be citizens. Only Indian citizens can be shareholders. Further
earlier only resident Indians could be shareholders but with amendment in 2020, even non-residents can be
shareholders. Check Companies (Incorporation) Second Amendment Rules, 2021 [9]

Section 8 Companies

Section 8 Companies are basically for non-profit companies. They are regulated under Section 8 of the Companies
Act, 2013.[7] Under the Old Companies Act, 1956, they were regulated under Section 25. These are Non-
Governmental organizations but with non-profit motives. They have certain restrictions like they cannot distribute
dividend. They are given freedom to remove the words 'limited' after that name.

Procedure to incorporate a Section 8 Company has been made a bit easier since 2019 but remains more complicated
than any other Company. [10]

Producer Companies

Producer Companies are formed for agricultural purposes. The only members can be farmers. They are governed by
Section 378A to Section 378ZT of the Companies Act, 2013. [7]

Mandatory CSR contributions

Section 135 of the Companies Act introduces mandatory Corporate social responsibility (CSR) contributions for
large companies, making it the only mandatory CSR law in the world. According to the bill, all firms with net worth
above 5 billion rupees or ₹5 billion (approx. $75 million), turnover over 10 billion rupees or ₹10 billion (approx.
$150 million), or net profit over 50 million rupees or ₹50 million (approx. $750,000) are required to spend at least
2% of their annual profits of the preceding year. The law requires that all businesses affected establish a CSR
committee to oversee the spending. Prior to this law's passage, CSR laws applied to public sector companies
only.[11] Governments have notified India's incubators as eligible for spending under CSR.

Company Secretary
Section 203 of the Companies Act 2013 deals with the appointment of a company secretary. The act was the first
time in the history of Indian company law has defined company secretary as a Key managerial personnel of the
Company.

Indian company law make it mandatory for every Indian listed, and every other entity having more than rupees ten
crore (100 million) paid up capital, to have a whole time company secretary.

Major changes in Companies Act 2013

Companies (1st amendment) Act 2015
Companies (2nd amendment) Act 2017
 Companies (3rd amendment) Act 2019
Companies (4th amendment) Bill 2020

Authorities established
National Company Law Tribunal (NCLT) is established under the Companies Act 2013 and was
constituted on 1 June 2016 by the government of India & is based on the recommendation of the
Justice Eradi committee on law relating to insolvency and winding up of companies.[12]
National Financial Reporting Authority (NFRA) is established in March 2018 as an oversight body to
investigate matters of professional misconduct by Chartered accountants or CA firms .[13]

Directors
The Directors are one of the most important pivot under the Companies Act. Directors are appointed by the
shareholders for managing the Company and are responsible for all compliance under the Companies Act. The
Directors are collectively called as the Board.

Types of Directors

Different types of directors under the Companies Act, 2013 are:

Managing Director
Whole Time Director
Director Simplicitor
Executive Director
Non-Executive Director
Small shareholders Director
Nominee Director
Additional Director
Alternate Director
Independent Director

Some of the above may be overlapping. For example- Whole Time Director is always an Executive director but the
reverse may not be true.

Additional Director may be executive or non-executive director.

Changes in Directors

Chapter XI of the Companies Act,2013 contains the provisions for change in Directors i.e. their appointment,
resignation and removal.

1. Appointment of a Director

Wherever the Articles of Association permit, the existing Board of Directors can appoint other ‘Additional directors‘
who can hold office till their confirmation at the next meeting of shareholders. However, in all other cases,
shareholders have the sole authority to appoint Directors in general meeting. Further, there are some categories of
directors like nominee directors/ regulatory directors who are not appointed by shareholders.
The director, proposed to be appointed, should declare that he or she is free of all disqualifications which are
mentioned under Section 164. Further, he should give his consent in forms DIR -2 and DIR -8 and disclosure of
interest in MBP-1.

Before appointment, a director should obtain a Director Identification Number (DIN).

Company shall file Form DIR -12 with the Registrar of Companies within 30 days of the director’s appointment.
Form DIR-12 is the general form to be filed for all change in directors.

2. Resignation of Director

Section 169 of the Act governs a situation of the resignation of a Director. On receipt of the notice/letter of
resignation, Company has to file DIR-12 within 30 days.

Also, the resigning director may, at his option, submit DIR -11 also.

3. Re-designation of director

Re-designation of a Director can happen when:

1. When a Director is re-designated from an executive/whole time to non- executive director or vice -
versa OR
2. shareholders confirm the additional director’s appointment in a general meeting.

Re-designation is not actually a change in Director but its more a change in post. But even In such cases, Company
has to file DIR -12 within 30 days of such re-designation.

4. Alternate Director

In case of a foreign director not visiting India for a year, he/she has to appoint an ‘Alternate Director’ as a proxy
director for receiving notices, attending meetings and voting.

Company shall file DIR-12 for appointment and removal of an Alternate Director within 30 days of such an event.

5. Removal of Director

Section 169 governs removal of a Director.

A company may, by ordinary resolution, remove a director, after giving him a reasonable opportunity
of being heard,
Such resolution, to remove a director under this section, or to appoint somebody in place of a
director so removed, at the meeting at which he is removed shall have an attachment as a Special
Notice which shall lay down the reasons for removal and any written representations made by the
Director.
The Board/ shareholders calling the meeting shall provide the Director, proposed to be removed, an
opportunity to be heard on the matter.

One Person Company (OPC)

One Person Company (OPC) is a new Concept introduced under the Companies Act, 2013. Its actually a subset of
a private limited Company but has only one shareholder and requires only one Director instead of minimum two
directors and shareholders required for a traditional private limited Company.
The concept opens up possibilities for sole proprietors who can take the advantages of Limited liability and
corporatisation but were held back in doing so because of the requirements of finding a second director or second
shareholder.

Nominee

'Nominee' concept is a very important concept. As per Section 3 [14] of the Companies Act, 2013 Shareholder
owning the One Person Company has to nominate a Nominee with his written consent. Such a nominee, in the
event of death or inability to contract of the owner of the OPC, shall come forward and take over the reins of the
OPC. Further, if the person so nominated becomes the member of such a One Person Company and is already a
member of another such OPC, at the same time, then, by virtue of the Company Rules, he has to decide within 6
months which one person company he has to continue.

Another point, the member can change the nominee at any point of time.

Nominee shall given his prior written consent in prescribed form (INC-3) and same shall be filed with ROC.
However, nominee also holds the right to withdraw his consent.

Also, the sole member of OPC may, at any time, change the nominee by giving notice to company and company
shall intimate same to the registrar. (INC-4 Change in member/ nominee).

Only a natural person who is an Indian citizen and resident in India, shall be eligible to be a nominee for the sole
member of a OPC. No minor shall become a nominee of the OPC.

Documents required for Change in Nominee in OPC

The sole owner and the nominee shall execute two forms – INC-3 and INC-4 for the entire process of change in
nominee. INC-3 is the witness consent form. Its an internal form. Its not an e-form but a physically form. The new
nominee shall sign the form INC-3 along with the following attachments:

Proof of Identity:- Voters Identity card/Passport/ Driving License/ Aadhar Number

Residential Proof:- Bank Statement/ Electricity Bill/Telephone Bill/Mobile bill

The Nominee shall manually sign INC-3.

For e-form INC-4, attachments required are as follows

Consent of the nominee in signed Form INC-3 along with all the enclosures. (Mandatory)
Certified copy of PAN card of the new nominee and/or new member. (Mandatory)
Proof of identity of the new nominee and/or new member. (Mandatory)
Residential proof of the new nominee and/or new member. (Mandatory)
It is mandatory to attach notice of withdrawal of consent in case withdrawal is by nominee.
Proof of change in name in case intimation is about change in the name of the nominee.
It is mandatory to attach proof of cessation of member in case of intimation of cessation of member.

INC-4 is processed in STP mode. Once the member files the INC-4 form, the process of change in nominee in
OPC (One Person Company) is complete.

See also
Indian company law
UK company law
European company law
 US corporate law

Notes
1. Prasad, Suresh. "Complete list of Sections of Companies Act, 2013" (https://www.aubsp.com/sectio
ns-of-companies-act-2013). AUBSP. Archived (https://web.archive.org/web/20200129092340/http://
www.aubsp.com/sections-of-companies-act-2013/) from the original on 29 January 2020. Retrieved
14 May 2020.
2. "Commencement Notification Of Companies Act 2013" (http://www.mca.gov.in/Ministry/pdf/Commen
cementNotificationOfCA2013.pdf) (PDF). Ministry of Corporate Affairs, India. Archived (https://web.a
rchive.org/web/20140111125901/http://www.mca.gov.in/Ministry/pdf/CommencementNotificationOfC
A2013.pdf) (PDF) from the original on 11 January 2014. Retrieved 11 January 2014.
3. Varma, Sindhu. "India: New Companies Act, 2013 – The Cat Is Finally Out" (http://www.mondaq.co
m/india/x/269316/Corporate+Commercial+Law/New+Companies+Act+2013+The+Cat+Is+Finally+
Out). Mondaq. Archived (https://web.archive.org/web/20140328000911/http://www.mondaq.com/indi
a/x/269316/Corporate+Commercial+Law/New+Companies+Act+2013+The+Cat+Is+Finally+Out)
from the original on 28 March 2014. Retrieved 27 March 2014.
4. "MCA notifies 183 sections of Companies Act 2013" (http://www.business-standard.com/article/com
panies/mca-notifies-183-sections-of-companies-act-2013-114032601009_1.html). Business
Standards. 26 March 2014. Archived (https://web.archive.org/web/20140327000527/http://www.busi
ness-standard.com/article/companies/mca-notifies-183-sections-of-companies-act-2013-114032601
009_1.html) from the original on 27 March 2014. Retrieved 27 March 2014.
5. "MCA lays draft notification us 462 for Private Companies in Parliament" (http://www.companiesact.i
n/Companies-Act-2013/News-Details/545/%20MCA%20lays%20draft%20notification%20us%2046
2%20for%20Private%20Companies%20in%20Parliament). Archived (https://web.archive.org/web/2
0150213155402/http://www.companiesact.in/Companies-Act-2013/News-Details/545/%20MCA%20
lays%20draft%20notification%20us%20462%20for%20Private%20Companies%20in%20Parliamen
t) from the original on 13 February 2015. Retrieved 13 February 2015.
6. "Business Portal of India : Starting a Business : Regulatory Requirements : Companies Act" (https://
web.archive.org/web/20080620000422/http://business.gov.in/starting_business/companies_act.ph
p). National Portal of India. Government of India. Archived from the original (http://business.gov.in/st
arting_business/companies_act.php) on 20 June 2008. Retrieved 17 March 2016.
7. "Companies Act, 2013" (https://www.mca.gov.in/content/mca/global/en/acts-rules/companies-act/co
mpanies-act-2013.html). www.mca.gov.in. Retrieved 7 September 2022.
8. "Annual MCA Compliance - Team Entrecap Business Services" (https://entrecap.in/service/annual-
mca-compliance/). 18 October 2021. Retrieved 7 September 2022.
9. Ministry of Corporate Affairs- Government of India, MCA e book. "MCA Amendment Rules -" (http://w
ww.mca.gov.in/Ministry/pdf/SecondAmndtRules_02022021.pdf) (PDF). mca.gov.in.
10. Ministry of corporate Affair- Government of India, MCA e book. "Companies (Incorporation) Sixth
Amendment Rules 2019" (https://www.mca.gov.in/bin/ebook/dms/getdocument?doc=MTM3MjY=&d
ocCategory=Notifications&type=open). mca.gov.in.
11. "A brief history of Indian CSR" (https://www.gatewayhouse.in/a-brief-history-of-indian-csr/). 3 July
2015. Archived (https://web.archive.org/web/20150810173258/http://www.gatewayhouse.in:80/a-bri
ef-history-of-indian-csr/) from the original on 10 August 2015.
12. "Organisation | NCLT" (https://web.archive.org/web/20180321063535/https://nclt.gov.in/content/orga
nisation). Archived from the original (https://nclt.gov.in/content/organisation) on 21 March 2018.
Retrieved 7 March 2019.
13. "Cabinet To Notify Audit Regulator NFRA, Approves Draft Rules" (https://www.bloombergquint.com/l
aw-and-policy/2018/03/01/cabinet-approves-draft-rules-for-nfra), Bloomberg Quint, 1 March 2018,
archived (https://web.archive.org/web/20180302155306/https://www.bloombergquint.com/law-and-p
olicy/2018/03/01/cabinet-approves-draft-rules-for-nfra) from the original on 2 March 2018
14. "Acts" (https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/acts.html?act=NTk2MQ==#
Formation_of_Company). www.mca.gov.in. Retrieved 26 June 2022.
External links
Notified sections of Companies Act, 2013 (http://www.mca.gov.in/Ministry/pdf/CommencementNotific
ationOfCA2013.pdf)
Act No. 1 of 1956 (http://www.mca.gov.in/Ministry/actsbills/pdf/Companies_Act_1956_Part_1.pdf)
Text of the Companies Act, 1956 (http://www.mca.gov.in/Ministry/pdf/Companies_Act_1956_13jun2
011.pdf)

Companies Act of 2013 (https://nclt.gov.in/sites/default/files/All-PDF/the_companies_act_2013.pdf)

http://www.mca.gov.in/Ministry/pdf/Companies_Cost_Records_and_Audit_%20amdt_Rules_2015.pdf
http://www.mca.gov.in/Ministry/pdf/General_Circular_8-2015.pdf
http://www.mca.gov.in/Ministry/pdf/Exemptions_to_private_companies_05062015.pdf
http://www.mca.gov.in/Ministry/pdf/Exemptions_to_Section8_companies_05062015.pdf

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