Page |1

Topic: “COMPANY LAW REFORMS IN

INDIA”

TABLE OF CONTENT

1. ABSTRACT……………………………………………………………3
2. INTRODUCTION……………………………………………………..4
3. MEANING: COMPANY………………………………………………4
4. RESEARCH METHODOLOGY……………………………………..5
5. RESEARCH OBJECTIVE…………………………………………….5
6. ANALYSIS
 EVOLUSION OF COMPANY LAW IN INDIA………………5.
 THECOMPANIES ACT 1956…………………………………...6
7. MAJOR COMMITTEES ON COMPANY LAW REFORMS
 BHABHA COMMITTEE……………………………………………………6
 SHASTRI COMMITTEE……………………………………………………7
 VIVIAN BOSE COMMISSIONS……………………………………………7
 SANCHAR COMMITTEE REPORT……………………………………….7
 IRANI EXPERT REPORT…………………………………………………..8
8. COMPANIES ACT, 2013: RECENT DEVELOPMENTS IN THIS

PANDEMIC……………………………………………………………….9
9. CONCLUSION…………………………………………………………..10
 Page |2

ABSTRACT

The term "Company Law" refers to a branch of law that governs corporations. The Companies
Act of 1956 is the foundational piece of legislation that governs businesses in India. Companies
in our country have played and continue to play an important role in our country's industrial and
economic development. In response to the changing business environment, the Companies Act of
1956 has been amended on several occasions to provide greater transparency in corporate
governance and to protect the interests of small investors, depositors, and debenture holders,
among others. As a result of deregulation and procedural simplification of Company Law, post-
reforms corporate India has seen tremendous growth and expansion.

Key words: Company, Reforms, Corporate Governance etc

 Page |3

INTRODUCTION

One of the most noteworthy economic legislations passed in India recently is the Companies Act
of 2013. This Act was passed with the dual goals of enhancing Indian corporations' corporate
governance standards and aligning company law with worldwide best practises. It covers all
aspects of companies, including company formation, allotment of shares and share capital,
membership in firms, company borrowings, company management and administration, and
company winding up. As a result, corporation law is the branch of law that exclusively deals with
all concerns concerning businesses.

However, after implementing the program in 2014, the government received a number of
complaints about the industry's practical issues. Companies were primarily regulated under the
Companies Act of 1956 before it was enacted. While the 2013 Act made some substantial changes
to Indian company law, it also produced severe implementation challenges that hampered the ease
of conducting business and provided possibilities for wrongdoers to arbitrate.

Company law is not a new notion. In fact, it was founded in the year 4 B.C. With the passage of
time, this thought evolved. The British Parliament sent this act to India. Indians were hesitant to
embrace this because they believed it would have a negative impact on their economy, but it was
established since the people were dominated by English rule1. In this paper, I will discuss the
evolution of Indian business law as well as key company law amendments. Furthermore, what are
the changes that have occurred since 1850.

MEANING: COMPANY

1
 https://taxguru.in/company-law/company-law-evolution-development.html
 Page |4

The Indian Company Act of 2013 defines a company as "a legal person or a legal entity with
particular qualities prescribed by law."2 It primarily assists the state in achieving its economic
objectives, and it can be considered a state's social, economic, and legal entity. It is essentially an
organisation that is extremely important in India's current economic system.

RESEARCH METHODOLOGY AND OBJECTIVE

The methodology adopted in this project work is based on Doctrinal research.The main objective
of this paper is to investigate the Company Law Reforms and their impact on corporations and
their accountability in order to ensure proper management of corporate affairs and increase
investor protection.

ANALYSIS

EVOLUSION OF COMPANY LAW IN INDIA

The Companies Act of 1850 was enacted in 1850, following the Joint Stock Company Act of
1844. Because there was so much dispute over its execution in India, the Company Law was
revised several times between 1852 and 1883. The main cause of this conflict was the disparity
in viewpoints among the residents of this town, as well as their negative perceptions of English
laws. At the period, India's inhabitants were not technologically advanced, and their standard of
living was inferior to that of the English. This Joint Stock Companies Act of 1844 was the first to
establish that an organisation might be formed by registering without first getting a charter or the
approval of the registrar of this act, but it also denied the registrar the power of financial
obligation3. However, in 1955, the British Parliament established the indebtedness act, which
imposes certain duties on the members of a company who are registered, and the previous statute
of 1844 is suspended when the new act of 1856 takes effect. 4 This act aided many businesses in
expanding their economic base. Many businesses were founded during the time period, and there
2
THE COMPANIES ACT, 2013
3
https://www.worldwidejournals.com/international-journal-of-scientific-research-(IJSR)/article/company-law-
reforms-in-indiaandndash-an-overview
4
https://ilps.in/major-reforms-legal-developments-in-india-year-2020-at-a-glance/
 Page |5

was a lot of economic progress, resulting in England's economic strength. Essentially, this statute
offered a smart method of forming company memorandums by bringing together a large number
of businesses.

THE COMPANIES ACT 1956

The Companies Act of 1956 is the foundational piece of legislation that governs businesses in
India. The Companies Act of 1956, which is 150 years old, is India's largest Act, with 658
Sections and 15 Schedules. In addition, the Government has notified various Rules and
Regulations under the Act.5 The Act includes provisions to protect the interests of investors,
creditors, and the general public, while also allowing management to use its resources to achieve
the best possible results and prosperity.

1. BHABHA COMMITTEE POPULARLY KNOWN AS COMPANY LAW COMMITEES

During the Second World War and the post-war years, India experienced unprecedented
levels of industrial and commercial activity, with businessmen reaping large profits
through incorporated companies. Immediately following the end of the last war, the
Government of India began revising Company Law.6
In 1950, the Government of India appointed a Committee of twelve members
representing various interests, chaired by Shri H. C. Bhabha, to investigate the entire
issue of the revision of the Companies Act, with special significance to the development
of India's trade and industry. This Committee is commonly referred to as the Bhabha
Committee or the Company Law Committee.
The Bhabha Committee's report was once again the subject of discussion and comment
by Chambers of Commerce, Trade associations, professional bodies, leading
industrialists, shareholders, and labour representatives. Full and fair disclosure of various
matters in the prospectus; detailed information of the company's financial affairs to be
disclosed in its account; provision for intervention and investigation by the Government

5
https://www.icsi.edu/media/webmodules/publications/FinalCLStudy.pdf
6
https://taxguru.in/company-law/report-expert-committee-company-law.html
 Page |6

into the affairs of a company; restrictions on the powers of managerial personnel;

enforcement of proper performance of their duties by company management; and
protection of minority shareholders were some of the main features of the committee's
recommendation.7
The Companies Act of 1956 was enacted to amend and consolidate the law governing
corporations. This massive legislation established the legal basis for Indian corporate
companies. As the business sector developed in size and number of employees, the
necessity to streamline this Act became apparent, and 24 revisions have been made since
then.
2. SHASTRI COMMITTEE REPORT

The Companies (Amendment) Act, 1960, incorporated several additional rules dealing to
various aspects of business management that were ignored in the 1956 Act, based on the
recommendations of the Shastri Committee.

3. VIVIAN BOSE COMMISSIONS

The Companies (Amendment) Act, 1965, implemented some major changes based on the
Vivian Bose Commission's recommendations, such as a clear definition of a company's
main and subsidiary objects in its Memorandum of Association; strengthening the
provisions relating to investigations into the company's affairs, and so on. 8 In 1966, the
Companies Act was revised twice more.

4. SANCHAR COMMITTEE REPORT OR EXPERT COMMITEE

The "THE COMPANIES (AMENDMENT) ACT, 1988" considerably altered the

Companies Act, 1956 in order to streamline some of the existing sections of the Act and
to ensure better operating and administration of the Act, based on the Expert Committee's
suggestions.

7
https://blog.ipleaders.in/history-of-the-company-legislations/
8
https://indianlawportal.co.in/origin-and-development-of-company-law-in-india
 Page |7

The Amendment Act of 1988 made the following significant changes:

(a) The definition of Secretary was aligned with the definition of "Company Secretary" in
the Company Secretaries Act of 1980, and now covers anybody who meets the required
qualifications9.
(b) The Companies Act was the first to implement the concept of a company secretary in
practise. The Amended Act also established an independent Company Law Board to
perform judicial and quasi-judicial responsibilities that were previously performed by
either the Supreme Court or the Central government.

5. IRANI EXPERT REPORT

As a result, the government decided that the Concept Paper's recommendations, as well
as any comments submitted in response, should be subjected to merit examination by an
impartial Expert Committee.10 The current Committee was established on December 2,
2004, under the chairmanship of Dr. J J Irani, Director, Tata Sons, with the mission of
advising the Government on proposed changes to the Companies Act, 1956. The purpose
of this exercise is perceived as the government's desire to have a simplified compact law
that will be able to address changes in the national and international scenario, enable
adoption of internationally accepted best practises, and provide adequate flexibility for
timely evolution of new arrangements in response to the requirements of ever-changing
business models. It is a commendable attempt to provide India with a modern Company
Law that meets the needs of a competitive economy.

9
https://testbook.com/learn/corporate-governance-reforms/
10
https://blog.ipleaders.in/history-of-the-company-legislations/
 Page |8

COMPANIES ACT, 2013: RECENT DEVELOPMENTS IN

THIS PANDEMIC

The Ministry of Corporate Affairs is in charge of all Indian firms, which are governed by
the Companies Act of 2013. In the event of a pandemic, the Ministry of Corporate Affairs
amended the 2013 act by 2020 act by inserting a provision rule 2(1) (e) of this act, which
states that any company already engaged in research and development of vaccines
required in Covid-19 and medical devices required in their normal course of business
must disclose their research activity to CSR separately in the annual report included in
the board report.11 In this critical and challenging time, the MCA has revised this act to
assist and enable firm management to comply with its terms. Furthermore, MCA's actions
have shown to be helpful to both investors and businesses. While the MCA has
introduced board meetings as AGMs via electronic communications to ensure that people
are not harmed by the epidemic 12. We can also safely predict that such approaches of
organising meetings will become the new norms in the future.

11
https://economictimes.indiatimes.com/small-biz/legal/companies-act-reforms-amid-covid-19-a-primer/
articleshow/76781817.cms?from=mdr
12
https://blog.ipleaders.in/companies-amendment-act-2020-much-needed-reform/
 Page |9

CONCLUSION
The Companies Act satisfies a wide range of needs in the corporate sector, corporate
professionals, and other interested parties, such as investors and the general public. As a result of
deregulation and procedural simplicity of Company Law, corporate India has experienced
enormous development and expansion since the reforms. There is no such thing as a perfect act
or one that can remain static. Even if a new Companies Act is passed, it is possible that
adjustments will be required to keep up with changing times, which will be subject to
parliamentary debate and scrutiny. As a result, India's Companies Act, 1956 is always one step
ahead of other corporate and economic regulations when it comes to guaranteeing excellent
corporate governance in the global economy.

Rather than being prompted by a pandemic, these improvements were long overdue. Regardless,
it's better to be late than never! A permissible list of equities in overseas markets, for example,
can enable Indian companies raise cash and gain a competitive edge in the global market. These
are extraordinary times, and such economic measures will bolster the confidence of businesses
that are struggling with financial, human resource, supply chain, and regulatory issues.