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A Look at Different Company Laws

How much do you know about the Indian company laws and how much do you know about their differences from other company laws in other countries. While comparing any combination of countries is possible lets try to compare with 2 other countries that we have the most similarities in considering many of our laws has taken inspiration from one of these country. So the countries that are going to be used are the united kingdom and Australia.

Origins
Let us start with origins of the UK company laws as our own country modeled our laws after the UK. The first act that was to be called the first step towards a modern company’s act for the UK was the Joint Stock Company’s Act of 1844 the act made it so that for the first time a company could be made and incorporated by registration without obtaining a Royal Charter or sanction by a special Act of Parliament , this act was overtaken or replaced by a comprehensive act of 1855 due to the formers drawbacks of not providing the the facility of limited liability to the members of the company, the latter act was the true stepping stone for modern company laws.

Now the first act to bear the name of company law was the company’s act 1862 which laid most of the modern provisions as like :two documents, namely, (a) the memorandum of association, and (b) articles of association formed the integral part for the formation of a limited liability company. Secondly, a company could be formed with liability limited by guarantee. Thirdly, any alteration in the object clause of the memorandum of association was prohibited.

As things progressed several new acts were added like the memorandum association act of 1890, the directors liability act of 1890 and the new company’s act of 1900 which enforced the compulsory audit of a company’s accounts . the company’s act 1908 established the concept of private company’s which was consolidated by later acts. Now the UK Company Law has undergone a major reform in 2006. A new Company Law was enacted in UK as UK Company’s Act, 2006. The UK was one of the first nations to establish rules for the operation of the company’s .The Company’s Act 2006 is an Act of the Parliament of the United Kingdom which forms the primary source of UK Company Law.

The Act provides a comprehensive code of company law for the United Kingdom, and made changes to almost every facet of the law in relation to company’s. Implementation of the Act is the responsibility of the Department for Business, Innovation and Skills. The key provisions includes that the Act codifies certain existing common law principles, such as those relating to director's duties, implements the European Union's Takeover and Transparency Obligations Directives, introduces various new provisions for private and public company’s applies a single company law across The United Kingdom.

Next lets move to the origins of the Australian law

The Australian company law or the Australian corporation law has taken an amount of their laws from the UK company law.

In 1901 the Australian constitution had given limited powers in relation to corporations to the Australian Parliament. In which each State has a residual power in relation to anything not within the Commonwealth power. And even though they took many of their laws from the UK laws there was significant differences in the laws by each state and during the second world war the legislative differences between different states started to create unnecessary costs for companies that worked outside of just one state so the states and so The states and the Commonwealth co- operated in the formation of uniform national companies code which was legislated in each jurisdiction by 1962 but this co operation ultimately failed because fo the lack of uniformity in legislations as when governments changed the state also went back into making their own laws.

A second co-operation between the states and the commonwealth was agreed to in 1978 and implemented in 1982 to overcome the defects in the first scheme. All laws and amendments would be agreed to by a Ministerial Council and automatically applied in each jurisdiction. This second scheme led to the creation of the National Companies and Securities Commission (NCSC), the forerunner to the Australian Securities and Investment Commission. But even this act was proven to be at a defect as the NCSC started delegating their administrative functions to state commissions but retaining control of takeovers and policy this created ineffencieny as a single process has been over complicated who let funding difficulties and inefficient regulations.

After the second attempt the Commonwealth then sought to take sole responsibility for corporation’s law in Australia which resulted in the current arrangement made in 2001 after the states referred their power in respect of corporations to the Commonwealth. Under Australian Corporations Act, 2001 companies are not formally required to hold a meeting, but usually a meeting is held at least once a year. All public companies are required to hold a AGM once every financial year. Private companies do not have any legal requirement to hold AGM.

Now moving onto Indian laws
Our laws were made and developed in the time in which we were under the authority of great Britain as such our laws are very similar to theirs while the joint stock company’s act was enacted in the UK 1844 it was also implemented in india in 1850 and it recognizes companies as legal entities . and also the company’s act 1857 was made in response to the company’s act 1856 of the UK it also tried to introduce the concept of limited liability but there was unlimited liability of the members of the banking companies, and it was only in 1858 the concept of limited liability was extended to banking companies. Thereafter the Companies Act, 1866 was passed, based on the English Companies Act, 1862, for consolidating and amending the law re lating to incorporation, regulation and winding- up of trading companies and other associations. Later on the act of 1866 was replaced by the act of 1913 which was mad on the basis of English company

consolidation act 1908. The act of 1913 was subjected to numerous amendments until it was erased in the year 1956 after India had its independence and appointed a Committee under the Chairmanship of Shri H.C. Bhaba to revise Indian Companies Act to bring it in line with the development of trade and industry in India in 1950. In 1956 a new bill to enact company law being passed on the basis of the UK 1948 company’s act. The 1956 act was amended numerous times as well as it had drawbacks and features not matching up with the Indian economy and its development rate and eventually replaced by the company’s act 2013 a more contemporary, simplified and rationalized legislation which brought our company law at par with the best global practices by including practices like Corporate Social Responsibility The Companies Act, 2013 is more of a rule-based legislation containing only 470 sections, which means that the substantial part of the legislation will be in the form of rules. The Companies Act of 2013 intends to promote self- regulation and has also introduced some progressive concepts like One-Person Company, Small Company, Dormant Company, E-governance etc. The concept of Corporate Social Responsibility has also been introduced by companies.

Comparative Analysis On The Basis Of:

Incorporation:

Incorporation is the process by which a new or existing users registers as a limited company.

Under Companies Act,2006 ofUK, this process to incorporate a company is stated in section 7 (1).Registration is effected by delivering the relevant documentation to the Registrar of Companies.

There are three ways to file information with Companies House such as:
  • Electronic software filing
  • Paper filing
  • Web Incorporation Service.

In order to incorporate a company both memorandum of association and articles of association are required to be submitted to Companies House. The memorandum, which includes a statement of compliance, must be delivered to Companies House together with an application for registration of the company and the new company's articles of association. The articles of association sets out how the company is run, governed and owned.

In Indian Companies Act 2013, to get incorporated, apply for the name of the company to be registered by filing Form INC-1 for the same. Prepare the Memorandum of Association which has six clauses and contains tables A, B, C, D and E and Articles of Association that contains tables F, G, H, I and J. After that depending upon the proposed company type file required

incorporation forms: Form INC-7 or Form INC-2, Form INC-22 and Form DIR-12 with the Registrar of Companies.

The Government of India has notified on 1st May, 2015, a new system of incorporation of Private and Public Limited Company. It has introduced easy method of incorporating by filing e- form INC-29 (single form) with the Registrar of Companies, within whose jurisdiction the registered office of the company is proposed to be situated.

In Australia to incorporate a company under the Corporations Act, 2006, one must decide the type of company they want to incorporate, establish an internal governance structure ,gain consent from proposed directors and secretaries, select and register the company name, designate a registered address for the company ,designate a principal place of business ,establish a share structure and subit an incorporation to AISC( Australian Securities and Investment Commission).

One Person Company:

A One Person Company is a company formed with one person only.

Section 2(62) of the Companies Act, 2013 defines OPC as a company which has only one person as a member which is a new concept in India. OPC can be registered only as a private company and cannot be converted or incorporated into section 8 company (i.e. company with charitable objects, etc.) or carry out non-banking financial activities, including investment in securities of any body corporate. It must have a minimum paid-up capital of Rs.1lakh and cannot make invitation to public to subscribe for its securities.

In UK, the concept of One Person Company has been in existence for several years now. In UK, the famous case of Salomon vs. A Salomon & Co . Ltd paved the way to the idea of one man company by setting up a precedent. As per section 7 of UK Companies Act, 2006, both the private and public companies can be incorporated with a single member. The UK Act does not provide for maximum number of directors which a company can have. Under UK laws, the meeting of Board of Directors is largely guided by the Articles of Association of the Company.

Under Australian Corporations Act, 2006, a person can register for a One Person Company by applying to a ASIC. However, you can only register for a One Person Company if, the company is a Pty Ltd (private /proprietary) company. A majority of companies registered in Australia are Pty Ltd companies.

Meetings:

Meeting helps the shareholders to know about the ongoing proceedings of the company and address certain issues.

In UK , under UK Companies Act, 2006 the companies do not have any provisions which requires the companies to hold a board at fixed intervals. A meeting can be held whenever the directors see fit. Annual General Meeting (AGM) is required to be held within six months of its financial year end.

As per the Indian Companies Act,2013 , a first meeting is required to be held within the 30 days of the company’s incorporation, thereafter, hold minimum number of four board meeting is every year such that not more than one hundred and twenty days shall intervene between two consecutive board meetings.

Every company is required to hold a AGM once a year, without fail. There cannot be a gap of more than Fifteen months between AGM. However, a company could hold a AGM within the period of eighteen months after the date of its incorporation.

Under Australian Corporations Act,2001 companies are not formally required to hold a meeting,but usually a meeting is held at least once a year. All public companies are required to hold a AGM once every financial year. Private companies do not have any legal requirement to hold AGM.

Directors:

Directors are officers of the company who are responsible for managing the company and making the decisions as to its operation on a day to day basis, for the benefit of the shareholders.

As per the Schedule V of the Indian Companies Act, 2013 a person should at least be the age of 21 years to be competent for becoming a director. The minimum number of directors in a private company must be two and three in case of a public company as per section 149 (1)(a) of Indian companies Act, 2013. Maximum number of directors can be 15 under Indian Companies Act, 2013 and can increase if special resolution has been passed in General Meeting.

Section 149 (1)

  1. second provision of Indian Companies Act, 2013 requires certain ca tegories of companies incorporated to have at least one Woman Director on the board.
In UK under Companies Act, 2006 , a person must be above the age of 16 in order to be competent to be a director. A private company must have at least one director and a public company must have at least two director under section 152 of UK Companies Act, 2006. UK Companies Act, 2006, there is no maximum number of directors a company could have. There is no such clause in UK Companies Act, 2006 that requires a woman director.

Under Australian Corporations Act, 2001, a person must be above the age of 18 years to be competent for becoming a director’s proprietary company must at least have one director who resides in Australia’s public company must have at least three directors. A public company should have at least two directors residing in Australia.

Corporate Social Responsibility (CSR)

Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.

Indian Companies Act ,2013 requires companies having net of at least rupees five hundred crore or minimum turnover of rupees one thousand crore or those with at least net profit of rupees five core to spend at least 2% of their three year average annual net profit towards CSR activates. There is no penalty for not spending such amount but explanation for non compliance is sought in the Board’s report.

The UK Companies Act, 2006 introduced a mandatory requirement for a business review in the director's report and applies to all companies other than those subject to the small companies' regime. The statute included the duty to promote the company's success for the benefit of the company's shareholders as a whole, which replaces the duty to act in the best interests of the company. Linked to this is the requirement that companies, must include a business review in their annual directors' report.

Written By:
  1. Mohammed Naazim Kanz and
  2. Ayon Sen

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