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History of the

company act

,1956

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HISTORY OF

THE COMPANIES ACT, 1956

An Act to consolidate and

amend the law relating to

companies and certain otherassociations

Citation Act No. 1 of 1956

Territorial extent Whole of

India

Enacted by Parliament of

India

Date enacted 18 January

1956

Date commenced 1 April

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BRIEF HISTORY UNTIL INDEPENDENCE

The history of Indian company law beganwith the companies act of 1850 impelled onBritish companies act of 1844.

The principle of limited liability was applied inthe new joint stock companies act 1857.

Between 1850 -1882, the companys act was

amended many a times and the act of 1882,repeated all the previous laws and remainedin force till 1912 though with theamendations.

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the Indian companies act of 1913 was the

result of concerted effort for a consolidatedand comprehensive law and was based

upon British companys act 1908

Subsequently amendments were in 1914,

1915, 1920, 1926, 1930, 1932, 1936. The

amendment in 1936, was based on the

times of the British companies act of 1929

and become operative from 15 Jan 1937.

After independence it was founded that

the company law should again be

amended.

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THE ENGLISH CONNECTION

All Company legislations in India are more orless a close re-enactment of the English acts,extensively adopting the very language.

This was firstly in account of the Britishoccupation of India and secondly theirintroduction into India both the British co. andpartnership firm modes of business by the actsof 1850 and 1932,respectively on their familiar

models together with big chunks of their AngloSaxon jurisprudence as well as the officiallanguage. therefore the English connection inour company law is obvious.

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THE COMPANIES ACT 1956

After the independence it was found that the existingcompanies act should be amended to suit thechanged conditions in the country.

In line with Cohen Committee of England, the

central government appointed a 12 membercompany law committee in October 1950 under thechairmanship of Mr. C H Habra and submitted theirreport in April 1952.

On the basis of the joint recommendations of the

parliamentary committee, the parliament passed thenew act in November, 1955 which received thepresidents assent on 18th January 1956 and this actcame into force with effect from april,1956

It consists of 658 sections and 14 schedules

It also helps in the growth of the companies on

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THE MAIN OBJECTIVES OF THE ACT

To protect the interest of large number of

shareholders as there exists separation of

ownership from management in a company

To safeguard the interest of creditors, to helpthe development of companys in India on

healthy lines, because corporate sector

constitutes a very important segment ofeconomy

To help the attainment of ultimate ends of social,

economic policies of the government.

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To equip the government with adequate

powers to intervene in the affairs of the

company in the public interest and as per

the procedure prescribed the law so thatthe interest of prescribed the law so that

the interest of all the stakeholders may be

protected from unscrupulousmanagement.

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THE COMPANIES AMENDMENT ACT 1988

New sec 2 (45) defining company secretary wasinserted to recognize company secretary inpractices to transfer such judicial and quasi-

judicial functions which are being exercisedpresently by the court or by the centralgovernment to company law board inindependent company law board has been

setup. To provide for intervention by the company law

board against the non-payment of public depositby the company.

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For requiring companys to disclose reasonsfor refusal to register transferor shares.

For compulsory listing of all public issues withstock exchange.

Measures for minimizing unnecessary burdenand costs on the companys in respect ofprocedural matters such as holding polls ingeneral meeting, filing of annual returns.

Prohibits the issue of irredeemable shares

Revise the structure of the managerialremuneration as per schedule.

Depreciation rates de-linked from income taxand schedule-14 is made applicable fordepreciation rates.

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Inter-corporate loans,sec370 and inter-corporate investment, sec372 have been

amended significantly.

In regard to appointment of companys

secretary under sec 383 (A) the central

government is empowered to prescribe thepaid up share capital limits for the

appointment of whole time secretary.

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CHANGES MADE BY THE COMPANYS

(AMENDMENT) ORDINANCE,1999

Following changes were cited in: Facilitates for nomination

Buy back of shares sec(77) (A)

Sweat equity shares sec (79) (A) Investor education and protection fund

National advisory committee on account

standards (S.210 A) Inter corporate loans and investments (S.

372-A)

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