By: Anamitra Roy
Non-technically speaking, the Indian Companies Act is that act which deals with the formation and functioning of companies.
According to Section 2(20) of the Indian Companies Act, 2013, “Company means a company incorporated under this act or any other previous act”. The journey of this act started in the year 1956. Then this act was amended in 2013. It is administered by the Ministry of Corporate Affairs, Government of India. In this act for the first time a new concept was introduced which came to be known as Corporate Social Responsibility. According to Section 135 of this act, a company needs to spend 2% of its profits on socially responsible projects. But this is applicable on the company only when it has a net worth of Rupees 500 crores, or a turnover of Rupees 1,000 crores or more, or a net profit of over Rupees 5 crores. A socially responsible project means a project that aims at social development or community development. A new act has been passed by the ministry. This is called Companies 1st Amendment Act 2015. Subsequently came Companies 2nd Amendment Act 2017. This came into effect from 22 January, 2018. This act covered 93 sections which put an effect to make changes in 107 sections of the Companies Act, 2013. After this arrived the Companies 3rd Amendment Act, 2019.
There are broadly two branches through which the ministry works. These are the regional Directors and the Registrar of Companies. At present in India there are 7 such Directors and 22 Registrars of Companies.
The types of companies included in this act are as follows:
- Sole Proprietorship
A sole proprietorship has been formed and is run by one individual. No other person has anything to do in the decision making process of this type of an organization.
2. Partnership
In a partnership, the liability is to be taken jointly by the partners. There may be two types of partners in this type of an unit. The active partners invest and take part in the daily operations of the unit. On the other hand, the inactive partners only invest and do not take part in the daily operations of the unit. Such inactive partners are also known as sleeping partners.
3. Limited Liability Partnership
In this type of a company the liability of the partners is limited.
4. Hindu Undivided Family (HUF)
These are businesses owned by family members jointly and these families follow Hinduism as their religion. But there are also exceptions to this law. Even though Jains and Sikhs are not considered as Hindus, yet they can come under the heading of Hindu Undivided Families.
5. Cooperative
Cooperatives may be defined as union of individuals who have been united because of some common social, economic and cultural needs and aspirations. Cooperatives are jointly owned by the members. They have a democratic set up.
6. Dormant Company
A dormant company is a company which is dormant now but has been formed with the objective of participating in some future projects.
7. Family Owned Business
A family business is a business whose ownership and control lies with the family members. Such businesses are passed on to the future generations of the family.
8. Private Limited Company
A private limited company is a company that has a minimum of 2 shareholders and a maximum of 2,000 shareholders. But these shares have been offered to the insiders. No outsiders can be allowed a share of this company.
9. Small Company
A company other than a public company whose paid up share capital is not more than 50 lakhs may be considered as a small company.
10. Limited Company
11. Public Sector Undertakings
Major shares of such an organization are owned by the government, any state or central government of India. Most of such business units are formed by special ligislations passed by the governments.
12. One Person Company
It is a private company which can have only one director or member.
13. Unlimited Company
A company where the liability of the shareholders is not limited is an unlimited company.
14. Incorporated Company
Section 166 of the Companies Act lists the duties of the directors of the companies. There have been many debates and arguments in the field of law for mentioning specifically the duties of the directors. A group of experts have argued that there may be conflict of interests hampering the directors from rendering their duties. That is why there was a need to specifically write about their duties.
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