BACKGROUND OF FORMATION OF NEW INDIAN COMPANIES ACT 2013 &

WAY FORWARD

The Companies Act 1956, in existence in the statute book for more than five
and half decades, has been the mother law governing the functioning of all
companies in India. Exceeding half a century this law has been avidly
discussed, interpreted and complied by the companies and generations of
professionals. The successive Central Governments of the day have also
ensured its compliance and various courts and judicial authorities have settled
disputes arising out of this law.
Although the Companies Act 1956 went through numerous amendments in its
life time in keeping with the changing economic, legal and social scenario of
this great Country; in recent times it has been the overwhelming opinion
across the spectrum of public, professionals, business men and the
Government itself that the Law needs to be relooked and reviewed
comprehensively. The need has been felt more due to:1. Expansion and growth of the Indian economy increasing the options
and avenues for more international business opportunities and
investments, and
2. Sustaining this growth by putting in place a modern legal framework
that would enable the Indian corporate sector to operate in an
environment of best international practices in a globally competitive
manner, while promoting a positive environment for investment and
growth enhancement of a vibrant corporate sector and business
environment.
While keeping in view the said need, the Government had also kept in view the
following while proposing the new Company Legislation :1. Bringing about compactness by deleting the provisions that had
become redundant over time and by regrouping the scattered provisions
relating to specific subjects.
2. Re-writing various provisions of the Act to enable easy interpretation.
3. Delinking the procedural aspects from the substantive law and provide
greater flexibility in rule making to enable adaptation to the changing
economic and technical environment.
Reports of various expert Committees have proposed extensively in
formulation of the new law keeping in view the various provisions and best
practices across the world. Thereafter, the Bill was drawn up by the
Government and then through comprehensive consultative processes with all
relevant stakeholders, the proposals have been examined by the Standing
Committee on Finance of Parliament, twice, initially for the Companies Bill
2009 and then its replacement, the Companies Bill 2011.

The Bill of 2011 was ultimately elaborately debated and passed as the Bill of
2012 by the Lok Sabha on 18th December 2012 and after that passed by the
Rajya Sabha on 8th August 2013 which subsequently received the assent of
the President of India on 29th August 2013, and the new Companies Act
2013 is being notified in Gazette of India in phases starting from 12th
September 2013, 27th February 2014 and recently on 26th March 2014 {w.e.f.
1st April 2014} . Thus, till date out of total 470 sections of the new Act , 283
sections{fully or partly} have been notified & 187 sections are yet to be
notified. All the six Schedules have also been notified.

The drafts of the relevant rules through which many sections of the new
Law had to be implemented had been put in public domain by the
Government for public response. The same have been finalised by the
Government and notified and made effective w.e.f. 1st April 2014. Since then a
number of clarifications have also been issued by the Government. The
clarifications continue to be issued which many times alter the position of
understanding the new law.

The new Companies Act 2013 is a progressive piece of legislation having far
reaching implications and is also forward looking which promises improved
corporate governance and is in a position to significantly change the manner
in which corporate operates in India. It is anticipated to be fully implemented in
months to come.

With this new Law in the statute book, the interpretations, understandings and
the compliances by companies and others will have to start afresh with a new
outlook. Wherever possible the erstwhile law of 1956 and its interpretation
could be the guiding factor for the fresh interpretation.