Companies Act, 2013
Also called: Companies Act 2013 · Topic: Market Structures, Market Failure and Competition · NCERT: Beyond NCERT
Meaning
The Companies Act, 2013 is India's main company law today. It replaced the Companies Act, 1956. It sets the rules for forming a company (incorporation), for the duties of directors and for holding meetings. It also sets the penalties when these rules are broken. One example is the Annual General Meeting (AGM), the yearly meeting where shareholders can question the directors. Section 96(1) says no more than 15 months may pass between two AGMs. The Act also brought in independent directors and audit committees, which help shareholders keep a check on managers. Bodies such as the NCLT (National Company Law Tribunal, a special court for company disputes) and the SFIO (Serious Fraud Investigation Office) work under this Act. The Companies (Amendment) Act, 2020 changed many small procedural lapses from crimes into civil penalties. A government factsheet says 50 of the 81 compoundable offences under the Act have now been decriminalised. A compoundable offence is one that can be settled by paying an amount, without a full trial.
Example
In 1926, seven TISCO directors were convicted in a Bombay court and fined Rs. 5 each. Their offence was failing to hold the AGM within 15 months of the last one. Section 96(1) of the 2013 Act keeps the same 15-month limit. Today, though, a lapse like this is dealt with mainly through a penalty, not a criminal trial.
Don't confuse with
- Competition Act, 2002: it controls how firms behave in the market, such as cartels, abuse of dominance and mergers. The Companies Act controls how a company is set up and run inside.
- Companies Act, 1956: this is the older law that the 2013 Act replaced.