This article has been written by Ascharya Katoch, a student of Delhi Metropolitan Education, Guru Gobind Singh Indraprastha University, New Delhi.

INTRODUCTION 

A company may be described as an association of persons for common object or objects. It may also be defined as a voluntary association of person who have come together for carrying on some business and sharing the profits there of.  A legal person or a legal entity that has special features specified under the Law. In legal terms a Company is defined as per Section 2 (20) of The Companies Act 2013 as A company incorporated under this Act or under any previous Company law. Prof. Haney defined it as A Company is an artificial person created by law, having separate entity, with a perpetual succession and common seal. Lord Justice Lindley defined it as A Company is an association of many persons who contribute money or monies worth to a common stock and employed in some trade or business and who share the profit and loss arising the form. The common stock so contributed is denoted in money and is capital of the Company. The person who contributes to it or to whom it pertains are members. The shares are always transferable although the right to transfer is more or less restricted.

BACKGROUND AND HISTORY OF COMPANY LEGISLATION

The history of Company legislation started with the registration of the Joint Stock Companies and enactment was passed in the year 1850.It was solely based on England Corporation Law,1844. It led to the incorporation of Companies. But unfortunately, there was one hindrance it failed to introduced Limited Liability not extending to banking companies. In order to overcome the limited liability later on Companies Act, 1857 was introduced following England Companies Act, 1856.After several possible attempts Companies Act, 1866 was passed which led to incorporation and regulation of the Companies based on English Companies Act, 1862.The above act was replaced by Companies Act,1913. Every one of us is well versed with the fact that our legislation is adopted from England and so is the Companies Act. The Companies Act,1913 led to a lot of amendments and changes. One of the major factors that played a great role in the changes were the second world war and post war years which led to large developments mainly industrial and Commercial. Earlier, Sole proprietorship was more common among the individuals but later due to the technological advancements and change in the technology, changing economic environment, Economic reforms of 1990s,1993 and 1997 led to the shift in the dynamics. A need for fresh legislation was felt by many. One of the main objectives for introducing changes were to consolidate the existing corporate laws and to provide a new basis for corporate operation in independent India. With enactment of the legislation in 1956, the Companies Act,1913 was repealed. A committee composed of 12 members under the chairmanship of CH Bhabha. They submitted the report on March 1952 introducing changes in Company Act,1913 Chambers of Commerce, Trade Association, Shareholders and professional bodies. A bill was firstly initiated for Companies Act,1956 introduced in the parliament on 2nd September 1953.Some major changes and amendments made to the bill on November 1955 and finally Companies Act,1956 was introduced on 1st April 1956.Sachar Committee led to the Companies Amendment Act, 1988. Several other latest amendments made in the bill was Companies Amendment Bill,2003. The changes made to the law were previously reactive in character. For instance, the most significant changes were made in response to the global phenomena of the colonisation era, the post-World War II era, and the opening up of Indian markets in 1990. But the most recent amendments are more proactive in nature and aim to improve the effectiveness of the law in light of social dynamics.

INDIA’S CURRENT SCENARIO ON COMPANY LEGISLATION

These are some of the changes that were made in the context of present scenario in the Companies (Amendment ) Act, 2019.

Reclassification of offences that fall under the category of compoundable offences to a framework for internal adjudication. However, none of the non-compoundable offences have undergone any changes. Ensuring that the default is adhered to and imposing deterrent penalties in the event of repetitive defaults.By Delegating and clearing the NCLT.By raising the financial thresholds at which offences under Section 441 of the Act may be compounded, the Regional Director’s (“RD”) authority is expanded and by giving the Central Government the authority to change a company’s financial year in accordance with Section 2(41).To ease the burden on the government and advance development, giving the Central Government the authority to approve cases of public companies’ conversion to private companiesReintroduction of the declaration of commencement of business provision; increased responsibility for filing documents related to the creation, modification, and satisfaction of charges; de-registration process triggered by non-maintenance of registered office; disqualification of such directors if they hold more directorships than are permitted. 

CASE LAWS ON COMPANY LEGISLATION

1.Salomon v Salomon &Co. Ltd

Salomon’s business was organized into a company in 1892 along with his wife, daughter and four sons. Salomon was the shareholder himself, the company’s managing director. He sold the company rupees 39,000 and took a debt of 10,000 out of it. A sum of rupees 5000 advance was given by Edmund Broderip as security of the debentures. Due to the drop in sales which was followed by strike action as a result of which there was a sudden downfall in the business. Edward sued Mr. Salomon to enforce security. The Judgement was given clearly stated that Mr. Salomon was protected from personal obligation. One of the reasons for the protection was the company was a separate legal entity from its member. Creditors of bankrupt firm cannot sue the company’s shareholder for payment of debts.

2.Tata Consultancy Services Limited v Cyrus Investments Pvt Ltd.

Cyrus Mistry headed the Sapoorji Pallonji Group which owned 18.37 percent of total paid up share capital. Board of Directors named Cyrus as Chairman of Tata Sons came into effect on 29 December 2012.Cyrus was dismissed. A company petition was filed under section 241,242 and 244 of Companies Act, 2013.A shift from public to private company was challenged. NCLAT order was delayed and Supreme Court ruled out Tata Son’s conduct and did not amount to minority shareholder or mismanagement

CONCLUSION

India requires more legislative reforms by providing transparency through better disclosures and greater responsibility on the part of corporate owners and Consultative process. An independent expert committee needs to be formed for Modern Company Law for better functioning of the law regulating the affairs of companies leading to its smooth functioning. Providing a framework for responsible self -regulation through determination of corporate matters through decision by shareholder, in the background of clear accountability for such decisions, obviating the need for a regime on government approvals. Need for taking into account the stock market scams of 1990s and various recommendations to be made by the Stock market scam. A good corporative governance to protect the interests of stakeholders and investors. One of the main tasks being making recommendations to enable easy and unambiguous interpretation. 

REFERENCES

1.https://www.legalserviceindia.com/legal/article-7931-origin-and-development-of-company-law-in-india.html

2. https://www.mca.gov.in/MinistryV2/background.html
3. https://blog.ipleaders.in/history-of-the-company-legislations/

4.https://thecolumnofcurae.wordpress.com/2020/05/13/history-of-company-legislation-in-india/

5. https://lawcorner.in/history-of-company-law-in-india/
6. The English Companies Act, 1944

8.Bhabha Committee Report, 1952

9.The Companies (Amendment) Act, 2019

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