This article has been written by Ms. Ankita Bharti, a 2nd year LL.B student from Faculty Of Law, Delhi University.
A company is a legal entity which has been created by a group of individuals to conduct business. The company is an artificial person that can own its property, enter into different types of contracts, and can sue or be sued. The company is formed by complying with the legal requirements that has been laid down in the Companies Act, and it is governed by the laws of the lands. This article will basically discuss the various aspects of a company, including its definition, types, case laws, amendments, and data.
Definition of Company
A company is a legal entity that is separate and different from its owners. It is created by a group of individuals to conduct one or various business activities. The company can own property, enter into different types of contracts, and can sue or be sued. The company is governed by the laws of the land and is required to comply with the legal requirements that has been laid down in the Companies Act.
Types of Companies
There are different types of companies, and each type is governed by different laws and regulations. Some of the most common types of companies include:
Private Limited Company: This type of company basically has a minimum of two and a maximum of 200 members. The liability of the members is limited to the amount of their own share capital.
Public Limited Company: This type of company may have an unlimited number of members and minimum of 7 members, and its shares are freely transferable. The liability of the members is limited to the amount of their own share capital.
One Person Company: This type of company is a new concept introduced in the Companies Act, 2013. It allows a single person to form and run a company.
Non-Profit Organization: This type of company is formed for the purpose of promoting a charitable or social cause. The members do not receive any profits, and the income is used for the welfare of the society.
Case Laws
There have been several important case laws that have shaped the way companies are governed in India. Some of the most important case laws are:
Salomon v Salomon & Co Ltd: This case is considered to be the foundation of the concept of corporate personality. The case established that a company is a separate legal entity from its members.
Ashbury Railway Carriage and Iron Co Ltd v Riche: This case established the concept of ultra vires. It stated that a company could only carry out activities that are specified in its memorandum of association.
State of UP v Renusagar Power Co Ltd: This case established the doctrine of lifting the corporate veil. It stated that the court could look beyond the corporate veil to ascertain the true nature of the company.
Amendments
The Companies Act has undergone several amendments over the years to keep up with the changing business environment. Some of the most important amendments are:
Companies Act, 2013: This Act replaced the Companies Act, 1956, and introduced several new concepts, such as One Person Company, Corporate Social Responsibility, and Class Action Suit.
Insolvency and Bankruptcy Code, 2016: This Act provides for a time-bound resolution process for insolvency and bankruptcy cases.
Companies (Amendment) Act, 2019: This Act introduced several changes, such as decriminalization of several offences, mandatory corporate social responsibility spending, and increased penalties for non-compliance.
Data
The Ministry of Corporate Affairs is responsible for maintaining data on companies in India. Some of the most important data related to companies are:
Total number of companies: As of March 2021, there were over 1.3 million registered companies in India.
Industry-wise distribution: The majority of the companies in India are in the services sector, followed by the manufacturing sector.
State-wise distribution: Maharashtra has the highest number of registered companies, followed by Delhi and Tamil Nadu.
Conclusion
In conclusion, it can be seen that Companies law is a branch of law that governs the creation, management, and dissolution of companies. It is an important area of law as companies play a vital role in the economy by providing goods and services, creating jobs, and generating revenue for the government. In this article, we will discuss the key features of companies law, including the formation of a company, the duties of directors and shareholders, and the procedures for winding up a company.
Formation of a Company
The formation of a company involves several steps, including the selection of a suitable name, drafting of the memorandum and articles of association, and the registration of the company with the Registrar of Companies. The memorandum of association sets out the objects for which the company is formed, while the articles of association lay down the rules for the internal management of the company.
A company can be formed as a private limited company or a public limited company. A private limited company has a minimum of two and a maximum of 200 members, while a public limited company can have an unlimited number of members. The liability of the members of a company is limited to the amount of their share capital.
Duties of Directors and Shareholders
Directors are appointed by the shareholders to manage the affairs of the company. They have a duty to act in the best interests of the company and to exercise their powers for a proper purpose. They are also required to exercise reasonable care, skill, and diligence in the performance of their duties.
Shareholders are the owners of the company and have a right to participate in the management of the company by attending and voting at general meetings. They also have a right to receive dividends declared by the company and to participate in the distribution of the assets of the company in the event of its winding up.
Procedures for Winding Up a Company
A company may be wound up voluntarily by the members or compulsorily by an order of the court. In a voluntary winding up, the members pass a resolution to wind up the company and appoint a liquidator to sell the assets of the company and distribute the proceeds among the creditors and members.
In a compulsory winding up, a petition is filed with the court, and if the court is satisfied that the company is unable to pay its debts, it may order the winding up of the company. The court may also appoint a provisional liquidator to manage the affairs of the company pending the hearing of the petition.
Companies law is a complex area of law that governs the formation, management, and dissolution of companies. It is essential to comply with the legal requirements laid down in the Companies Act, as failure to do so can lead to penalties and legal action. Companies play a vital role in the economy, and it is essential to ensure that they are governed by transparent and efficient rules that promote growth and prosperity.
REFERENCES:
- www.cs.mcgill.ca
- www.icsi.edu
- www.taxmann.com
- Salomon v Salomon & Co Ltd
- Ashbury Railway Carriage and Iron Co Ltd v Riche
- State of U.P. v Renusagar Power Co Ltd