Company’s legislation in India owes its origin to The English Company’s law. The First law regulating the companies took its birth in 1850 as The Joint Stock Companies Act modeled on the British Companies Act of 1844.
The principle of limited liability was not incorporated in this act, though the concept of separate legal entity for a company was introduced. However, it was only in the year 1857 the Joint stock companies act for the first time in India introduced the principle of Limited Liability.
Between 1850 and 1882, the Companies act was amended many times and the act of 1882 repealed all the previous laws and remained in force till 1912, though amended many times.
Then came the Indian Company’s act 1913, passed with the object of consolidating & amending the law relating to trading companies and other associations. The Indian Companies act of 1913 was the result of concerted effort for a consolidated and comprehensive law and was based on the British Companies act of 1908. However, even the act of 1913 proved to be inadequate and therefore the 1913 Act was amended several times. World War II witnesses many changes in the organization & management of the Joint Stock Company.
The Companies Act, 1956
After the independence, it was found that the existing companies act should be amended to suit the changed conditions in the country. In line with Cohen Committee of England, the central government appointed a 12-member company law committee in October 1950 under the chairmanship of Mr. C. H. Bhabha (known as Bhabha Committee) and submitted their report in April 1952.
The central government brought a bill in parliament on 2nd September, 1953. The parliament appointed a joint parliamentary committee in May 1954 to go into the recommendations of the Bhabha committee and to suggest any modifications or changes. On the basis of the recommendations of the joint parliamentary committee, the parliament passed the new act in November, 1955 which received the president’s assents on 18th January, 1956, this act came into force with effect from April, 1956.
Inspite of great care and caution in passing of the Companies act 1956, the number of defects and loopholes remained in this act and therefore several amendments were made from time to time by the amendments act 1960. There were further amendments in which amendment of 1988, 1990, 1996, 2000 and 2011 are notable.
The Companies Act, 2013
The Companies Act, 2013 was enacted on 29 August 2013 on accord of Honorable President’s assent and has the potential to be a historic milestone, as it aims to improve corporate governance, simplify regulations, enhance the interests of minority investors and for the first time legislates the role of whistle-blowers.
The 2013 Act replaces the nearly 60-year old Companies Act, 1956. The 2013 Act provides an opportunity to make our corporate regulations more contemporary, and also potentially to make our corporate regulatory framework a model to emulate for other economics with similar characteristics. The 2013 Act is more a rule-based legislation containing only 470 sections, which means that the substantial part of the legislation will be in the form of rules.