Everything You Need to Know About the Companies Act, 2013

Introduction

The Companies Act, 2013 is the main law that governs companies in India. It explains how companies are formed, managed, and closed. This Act replaced the old Companies Act, 1956 and came into force to bring more transparency, accountability, and better corporate governance.

Simply put, agar aap company start karna chahte ho ya already company chala rahe ho, then this Act is very important for you.

Objectives of the Companies Act, 2013

The Act was introduced to:

1. Improve corporate governance
2. Protect shareholders and investors
3. Increase transparency in company operations
4. Ensure ethical business practices
5. Simplify company compliance through digital processes

Types of Companies Under Companies Act, 2013

1. Private Limited Company

• Minimum 2 members, maximum 200 members
• Cannot invite public to buy shares
• Most common type for startups and SMEs

2. Public Limited Company

• Minimum of 7 members
• Can raise funds from the public
• Shares are freely transferable

3. One Person Company (OPC)

• Only one owner
• Suitable for solo entrepreneurs
• Limited liability protection

4. Section 8 Company

• Non-profit organizations
• Works for charity, education, social welfare
• Profits are not distributed to members

Company Incorporation Process

To register a company in India, you need:

1. Digital Signature Certificate (DSC)
2. Director Identification Number (DIN)
3. Company name approval
4. Memorandum of Association (MOA)
5. Articles of Association (AOA)

Registration is done online through the Ministry of Corporate Affairs (MCA) portal.

Directors Under Companies Act, 2013

Appointment of Directors

• Minimum 2 directors for private company
• Minimum 3 directors for public company
• Maximum 15 directors (can increase with approval)

Duties of Directors

• Act in good faith
• Protect company and shareholders’ interest
• Avoid conflict of interest
• Ensure legal compliance

Share Capital & Shareholders

• Companies can issue equity shares and preference shares
• Shareholders are the owners of the company
• Their liability is limited to unpaid share value

Meetings & Compliance Requirements

Board Meetings

• Minimum 4 board meetings every year
• Gap between meetings should not exceed 120 days

Annual General Meeting (AGM)

• Must be held once every year
• Shareholders review company performance

Annual Filings

• Financial statements
• Shareholders are the owners of the company
• Their liability is limited to unpaid share value

Audit & Financial Statements

• Mandatory appointment of statutory auditor
• Auditor ensures accuracy and transparency
• Audited financial statements must be prepared

Corporate Social Responsibility (CSR)

Applicable if company:

• Net worth ≥ ₹500 crore
• Turnover ≥ ₹1000 crore
• Net profit ≥ ₹5 crore

Such companies must spend 2% of average net profits on CSR activities like education, health, environment, etc.

Penalties & Offences

• Heavy penalties for non-compliance
• Directors can be fined or disqualified
• Serious fraud cases handled by Serious Fraud Investigation Office (SFIO)

Company Closure (Winding Up)

A company can be closed by:

• Voluntary winding up
• Strike off by ROC
• Tribunal order in case of default or fraud

Advantages of Companies Act, 2013

• Better investor protection
• Stronger governance framework
• Digital and simplified compliance
• Clear rules for startups and small companies