Evolution Of The Companies Act, 2013

Author- Rose, Bharati Vidyapeeth University, New Law College, Pune

Introduction
The section where the firms are considered has a significant influence on the subrogation of a framework that governs the rules that each company must adhere to in order to have a place in this corporate world. One well-known law that governs how businesses operate is the Companies Act of 2013, which also gives ample leeway and limits on the company’s operational module. Only the evolution of a company’s section in the corporate world is controlled by the Companies Act of 2013, an amendment to the Companies Act of 1956. In order to provide a more comprehensive and modern framework for business law in India, the primary goal of consolidation is to address the shortcomings of the previous act and incorporate international best practices.
By ensuring accountability and transparency and conducting all of their operations within the legal parameters, companies play a vital role in enterprises. As is to be expected, Indian company law was historically developed during British colonial rule and, more significantly, evolved throughout time in response to the country’s changing socioeconomic needs. By explaining the causes of its occurrence and its ability to impact the contemporary business environment, this article sheds light on the origins, evolution, and history of Indian company law. The Companies Act is the key to build the prominent framework of the companies in this era of corporate world stabilization and diversity.

Origin
The current system of corporate regulation evolved in England, despite the fact that the concept of a business originated in Roman law. The companies were able to register with the government and become separate legal entities thanks to the Joint Stock Companies Act of 1844. A lot of investment was subsequently stimulated by the Limited liability Act of 1855, which rewarded shareholders by relieving them of personal liability. This legislative idea was introduced to India by the British colonial authority.

Meaning of Company
Simply put, a company is an individual’s incorporated association. In this usage, the term “person” refers to two distinct types of people: natural persons, like humans, are created by nature. Examples of artificial or legal people created by legislation include firms, businesses, trusts, limited liability partnerships, and other legal entities.

Definition
The definition of company is significantly regulated under Section 2(20) of The Companies Act, 2013. “Company” is a group of individuals established or registered under current company laws, such as the Companies Act of 2013, or under earlier company laws, such as the Indian Companies Act of 1956, 1913, 1882, etc. In the case, Association of Persons (AOP) fall into two categories:
Incorporated AOP:
It was formed by a single individual who was not one of the members. possessing the legal authority to enter into agreements and buy any kind of property, etc. It may be created by a special act of Parliament known as a statutory corporation.
Unincorporated AOP:
Simply assembling or merging individuals, as in partnership firms, signifies that they are not legally recognized and are not registered under the law.

History of Companies Law in India
The following significant periods can be used to categorize the history of Indian corporation law-
1. The Pre-Independence Period (1850-1947)
The development of company law in India was gradually seen developing from the British colonizing period. The Companies Act of 1850, which was based on the English Companies Act of 1844, created India’s first body of corporate regulation. Companies were allowed to register and acquire legal personality under the aforementioned laws, but limited liability was not granted.
The Era
In order to draw in investors, the Companies Act of 1857 regulated the entire idea of limited liability. A prior enactment was consolidated into the Companies Act of 1866, which was redesigned to provide consistency and clarity. Since it took full responsibility for the establishment, management, and winding up of the business, the Companies Act of 1913 became a significant piece of law. It was amended several times and remained in use for many years.

2. The Post-Independence Era (1947-1956)
A new corporate structure was necessary to modernize the rapidly growing economy in the post-independence era, which peaked in India in 1947. The 1956 Indian Companies Act, which replaced the 1913 law, highlighted India’s socialistic economic pattern. It shows up as regulating business operations, safeguarding shareholders, and preventing corporate malfeasance.

3. Liberalization and Reforms (1991-2013)
India opened its markets to the globe and attracted international investment after liberalizing its economy in 1991. This resulted in some significant amendments to the Companies Act of 1956. Promoting corporate governance, transparency, and investor protection became the new ethos.
The following changes were implemented:
2000 Amendments: Corporate governance regulations were reinforced in accordance with global considerations
SEBI created all of the rules intended to effectively promote moral trading behavior and safeguard investors’ primary interests.

4. The Companies Act, 2013
The Act of 2013 became a landmark statute pertaining to the Development and proper regulation of the companies in order to achieve proper success. The establishment, regulation, and dissolution of businesses in India are governed by the comprehensive businesses Act, 2013. In order to improve corporate governance, financial transparency, and investor protection, it superseded the Companies Act of 1956. The Act includes 7 schedules and is broken up into 29 chapters with 470 sections.
Salient Features of Companies Act, 2013
The Act prime focus is on enhancing the corporate governance,
Provide transparency and infrastructural stability to the companies,
Mandate the Corporate Social Responsibility (CSR),
Regulate the opening and closing of the company,
Maintain the mandatory suits in case of action required.

Landmark Cases
1. Satyam Scandal
Satyam Scandal (Satyam Computer Services Limited) was one of the most well-known cases under the 2013 Companies Act. A huge business scandal erupted in 2009 after it was discovered that Satyam Computer Services’ management had committed accounting fraud. The case brought to light the significance of auditing, corporate governance, and the necessity of more stringent laws to stop these kinds of scams. The case was investigated in large part by the Serious Fraud Investigation Office (SFIO).
2. Cyrus Mistry v. Tata Sons Limited (The Tata-Ministry Dispute)
In 2016, Cyrus Mistry was ousted as Chairman, sparking a controversy over claims of poor management and corporate governance. The case raised awareness of boardroom conflicts, corporate governance procedures, and directors’ fiduciary responsibilities.
3. The Sahara Group Case
The case concerned with the claims of non-adherence to laws pertaining to public fundraising. In its ruling, the Indian Supreme Court emphasized the value of investor protection, openness, and rigorous compliance with the Companies Act of 2013’s regulatory requirements.
4. Infrastructure Leasing & Financial Services Limited, or IL&FS Case
In 2018, IL&FS, a significant infrastructure development and financing firm, encountered financial challenges. The case clarified regulatory supervision, poor management, and corporate governance shortcomings. The case brought attention to the need for improved regulation and oversight, and the government stepped in to bring about reforms in the infrastructure financing industry.
5. SEBI- Sahara Case
A dispute between the Securities and Exchange Board of India (SEBI) and the Sahara Group over the return of investor funds was the subject of the SEBI-Sahara Case. The Supreme Court was instrumental in the case’s resolution and underlined the significance of investor protection, regulatory compliance, and SEBI’s role in overseeing securities markets of India.

Conclusion
The Act of 2013, was evolved in order to regulate the proper functioning and development of the corporate world in order to guide the sector accordingly and also elevate the diversity in a way that the companies are regulated and flourished in all the parts of the corporate entity. The Companies Act, 2013 became the mainframe of the all the laws governing the proper amalgamation of the companies in a distinct way that the mere regulating authorly propounded several actions which are need to be taken in order to constitute the companies should be regulated under the Act for proper betterment of the corporate world.

FAQs
1. What is a company?
A company is a legally recognized organization created by people to carry out business, frequently with the intention of making money. It can enter into contracts, own property, and be held accountable for its deeds because it is a distinct legal entity from its owners.

2. Why is the Companies Act of 2013 necessary to regulate the Indian corporate sector?
The Companies Act, 2013 is needed, because it establishes a framework for company formation, management, and governance and fosters accountability, transparency, and investor confidence. It guarantees adherence to the law, safeguards shareholders, and harmonizes Indian corporate law with international norms.

3. Which stage saw the advancement of Indian company regulation?
The growth was seen form the early post-independence scene in accordance with the companies in India. The Liberalization and Reforms (1991-2013) was the point which gradually started recognizing the end points of the Companies and finally in the year 2013, The Companies Act, was re-built in order to shape the corporate entity.