Understanding company and business laws is important for one willing to be part of a company either by way of formation or running or pertaining to investment. Living by the spirit and letter of the Companies Act 2013 is important for doing business in India that revolves around the registration, management, and dissolution of companies. Together, this act, and stipulated additional laws formulate an order under which businesses carry on their business on justice, basis of transparency, and responsibility. Let us comprehend the subject.
Scope of Company Law
A company is brought into the net under the Companies Act, 1956 (now Companies Act, 2013) is like it is knit under a shawl, allowing the company to own property, enter into contracts, and be liable for its actions. This legal form of organization lays the ground for minimizing business liability, for the company vis-a-vis shareholders, who in turn benefit significantly: they are absolved from company obligations, provided that their investment is conceptually equal to the separate legal entity ‘the Company Limited.’
India’s economic maturity, fed by changes in communication, transport, commerce, banking, and international trade remain, indoctrinates the need the government had to update their laws, along with those of the Companies Act, so as to propose an environment conducive to a competitive business-cum-growth-oriented culture. This right of way is more emphasized within the reform to ensure ease in entering business in India.
Key Provisions of Company Law in India
The Companies Act, 2013 aids in the creation structure and working of companies in India. The Act is regulated through the following provisions:
In India, the Companies Act 2013 establish the incorporation and winding up of corporations. To the Societies Registration Act, 1860, the registration of societies and the non-profit organizations is a subject. So does the law of partnership, which pertains to that associating and the partner’s obligations by virtue of the Indian Partnership Act of 1932. This Act has brought about so many changes in the operation of the business today; on sites of the record of ownership, the Companies Amendment Act, 2006 has altered the whole picture. The Limited Liability Partnership Act, 2008 has enabled the constitution of a firm with a limited liability partnership This following structure is best seen as retaining several features of companies and partnerships.. This will help the Ministry of Corporate Affairs achieve its primary objective of fostering fair competition for all companies that operate with compliance with the rules and regulations that stem from these laws.
The Unique Features of a Company under Indian Business Law
The following are various benefits that appoint formation of a company in India in thesis:
Separate Legal Existence: A company is a distinct entity from its members in the eyes of the law. The concept of a capacity as a facially separate entity was in Salomon vs Salomon & Co. Ltd.
Very importantly, a limited or private limited company, as distinct from a partnership, means the following:
Limited Liability: Companies always have limited liability as well. The concept on which these organizations are based is personal protection: in the case of brokering or bankruptcy, the shareholders would not be adversely out more than they put into their company.
Perpetual Succession The company has unbroken existence and being; it continues, despite its members’ lives changing. Consequently, it is an ever-lasting and unaltering unit dispatching long-term operations.
Transferability of Shares The transferability of shares is another feature under the company’s foreign direct investment act. The shareholder is at liberty to sell his shares in the market if he wants to without disturbing the continuity of the company.
Property in Its Own Name: The company is the owner of the property held by it, and nothing else is held in shared ownership. This helps differentiate the company’s property from that of its members.
Corporate Personality and Financial Accountability: In general, the private company enjoys the legal personality, and consequently, it is an effective means of reducing legal submarine expenses and enforcing contracts or presen-ing the frustrated rights.
Professionalism: Corporate operators are usually overly laden with commerce and at times, lack the managerial pertinacity to critically judge where lies the best path. endif
Easy Money Market Access: Whether it is through the issue of shares or loans, companies have relatively easier access to funds to enable growth and expansion.
Cons of Company Law in India
While the positives are quite evident in forming a company under Indian business law, there are also certain cons:
Lifting the Veil: Despite the company being a separate legal entity itself, the corporate veil may be disregarded, if there is any misrepresentation, defrauding of creditors, etc.
Formality and High Expense: The formal procedure to mediate a company in India is governed by a thick bundle of papers and formalities and all of these have to be complied with in conjunction with the payment of fees, thus making the process very expensive and time-consuming.
Innumerable legal formalities are involved in the incorporation process, which also includes drafting of Memorandum of Association (MOA) and Articles of Association (AOA) and obtaining the approval of the Registrar of Companies.
Companies Under the Companies Act, 2013
The companies act of India categorizes many types of companies, each type with various characteristics such as:
Unlimited Company: Shareholders are then liable for the company debts.
Guarantee Company: Liability of the Members stands in respect of a specified sum, either by shares or guarantees.
Private Company: Restricted membership company (up to 50 members) and also limits its power to invite the public for investment.
Foreign Company: A company which is incorporated outside India and operates in India.
Government Company: This company is held by the Government of India in 51% of its shares.
Winding Up of a Company
When a company ceases operation, the process is known as winding up. A company can be wound up in several manners as set out in the law, including:
Winding Up by the Court: Instigation by an order of the court.
Voluntary Winding Up: Instigation by the members.
Creditors’ Voluntary Winding Up: When creditors decide to wind up the company because of its insolvency.
Conclusion
Anyone who wishes to operate a company in this country should be competent with business and company laws in India. The Companies Act, 2013 provides a great legal framework for growth in a way that ensures transparency, accountability, and fair competition. However, delving into corporate law can be piling, and, hence, setting aside legal advice from professionals is a practice to stay on the right sides of the law.
For any expert legal advice or any other help on company formation, restructuring, restructuring or any other corporate matter, please contact MyAdvo. We will advise you with plenty of legal services like helping you find the right lawyer, work out clear pricing from the beginning, and empower you with our updates on your case.
