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Concept Paper on Company Law

Following the recommendations of the Company Law Committee known as the Bhaba Committee set up in 1950 the Companies Act, 1956, was enacted with the object to amend and consolidate the law relating to companies and certain other associations by repealing the Companies Act, 1913. The Companies Act, 1956, has been amended as many as 24 times since 1956. The major amendment to the Companies Act, 1956, was made after considering the recommendations of the Sachar Committee by enacting the Companies Amendment Act, 1988. The next major amendment was made by the Companies Amendment Act, 2002, consequent to the report of the high powered Eradi Committee. Looking at the proliferation and diversity of amendments which have been made to the Act, an attempt to recodify the law appears inevitable.

The previous two attempts at making a comprehensive review of the existing law by introducing Companies Amendment Bill 1993 and 1997 failed as the assent of the Parliament could not be received. The Ministry introduced the Companies (Amendment) Bill, 2003, containing important provisions in the arena of independence of auditors, relationship of auditors with the management of the company, independent directors with a view to improve the corporate governance practices in the corporate sector. Department examined the concerns expressed and the suggestions made by the industry associations, organizations and professionals and sought to introduce an amendment to the Amendment Bill. In the meanwhile, a decision was taken by the Government for preparation of a concept paper containing a model codified company law which would consolidate the existing provisions of the law. The following broad approach has been adopted while drafting the concept paper :-

  1. To bring the Corporate Law in consonance with the changes that have occurred in the economic development
  2. To delete the redundant provisions and to regroup the scattered provisions relating to specific subjects
  3. To condense, simplify and rationalize the provisions of company law.
  4. To delink the procedural aspects from the substantive law.
  5. To give an overview of the form of the re-codified Companies Bill containing only 289 sections and a few schedules,in place of existing 781 sections and 15 schedules

The concept paper contains XXV chapters. The chapters deal with the following

  1. Chapter I-VII deal with formation of company and other organizational matters.
  2. Chapter VIII-IX deal with Accounts and Audit
  3. Chapter X-XII deal with management of the company
  4. Chapter XIII contains powers of Central Government to carry out inspection and investigation of companies
  5. Chapter XIV-XV relates to reorganization of companies by merger, amalgamation, etc.
  6. Chapter XVI-XVIII deal with winding up the company
  7. Chapter XIX deals with other register able entities.
  8. Chapter XX deals with Producer Companies, a separate clause of companies
  9. Chapter XXI to XXV deal with foreign companies,constitution of the Offices of the Registry of Companies and other miscellaneous provisions.
It is reiterated that the concept paper is only an approach to the introduction of a recodified bill in the Parliament. The concept paper has not been vetted by the Legislative Department, Ministry of Law. The aim of this concept paper is only to provoke critical examination of the provisions contained in this concept paper by all chambers of commerce, business organizations, professional bodies, academicians and persons connected with corporate sector, directly or indirectly. The Ministry will feel rewarded if it stimulates widest possible public debate so that the bill as and when introduced in the Parliament will duly take into account the various points of view.

Click here to download the concept paper

*Excerpts from Concept paper