Companies play a significant role in a country’s economy and make a special contribution to national development. The working of companies affects all facets of national life. In a mixed economy, the government’s major economic policies are implemented through corporate sector. A modern company has assumed the character of a major socio-economic institution and public at large is vitally interested in its activities. It should function not simply as an economic machine intended to churn out profits for its shareholders, but rather as an institution which has a social responsibility to a variety of interests. A company’s operation must be conducive to the economic growth of the country and for that purpose a comprehensive mechanism is provided in the form of the Companies Act, 1956 for regulating corporate affairs. The primary object of this paper is to give a general survey of the law relating to companies as contained in the Companies Act, 1956 with its various Amendments.
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The Companies Act, 1956 consolidates and amends the law relating to companies and certain other associations.1 Section 3(i) of the Act defines a “company” as one formed and registered under this Act or an existing company incorporated prior to the commencement of the Act.2 Section 3 (iii) defines a “private company”. A private company is one which has a minimum paid-up capital of one lakh rupees or such higher capitals as may be prescribed3 and by its articles (a) restricts the right to transfer its shares, if any, (b) limits the number of its members to fifty; and (c) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company. A public Company is defined as one (a) which is not a private company, (b) has a minimum paid up capital of five lakh rupees and (c) is a private company which is subsidiary of a company which is not a private
Formerly Professor of Law and Director, South Delhi Campus, University of Delhi. ** Asst. Research Professor, Indian Law Institute, New Delhi. 1. The Companies Act, 1956, the Preamble, 2. Previous legislations relating to incorporation of companies in India: The Joint Stock Companies Acts of 1850, 1857 and 1860, all repealed by the Indian Companies Act of 1866, repealed by the Indian Companies Act of 1882, repealed by the Indian Companies Act of 1913, and finally repealed by Companies Act, 1956. 3. Inserted by the Companies (Amendment Act), 2000.