Indian company law governs the formation, management, and regulation of companies in India. Today, companies are regulated mainly under Section 2(20) of the Companies Act, 2013, which replaced the earlier Companies Act, 1956. The 2013 Act modernized company rules, introduced stricter compliance standards, and focused on better corporate governance.

History and Administration

Before 2013, Indian companies operated under the Companies Act of 1956. With changing business needs, a modern law was required. Therefore, the Companies Act, 2013 was introduced.

Company law in India is administered by the Ministry of Corporate Affairs (MCA). MCA supervises company matters through two key offices:

Registrar of Companies (ROC) – Handles company incorporation, filings, and compliance
Regional Directors (RD) – Handle appeals and higher-level approvals

India currently has 7 Regional Directors and 22 Registrar of Companies (ROCs). These bodies also act as “in-house adjudication authorities,” meaning they can decide certain compliance matters without sending everything to the courts.

Recent Changes in Indian Company Law

Over the years, several amendments have been made to simplify company operations and improve the ease of doing business.

Major reforms include:

Companies Act, 2013
Amendment Acts of 2015, 2017, 2019
Companies Amendment Bill, 2020
Companies Fresh Start Scheme (CFSS) 2020
Ordinances in 2018 and 2019

2015 Amendment Act

The 2015 Amendment Act (Act 21 of 2015) was approved on 25 May 2015. It changed 23 sections of the Companies Act, 2013. Key changes included:

Removing the requirement of minimum paid-up capital
- Earlier:
  - Private company needed ₹1 lakh
  - Public company needed ₹5 lakh
- After amendment: No minimum capital required
Replacing the requirement of a company seal with authorized signatures, making documentation easier.

2017 Amendment Act

This amendment introduced many clarity-based changes. Around 93 sections were modified.

Important changes included:

Simplifying compliance
Changing Section 134, making it mandatory for CEOs to sign financial statements

2019 Amendment Act & 2020 Bill

The 2019 Amendment and Companies (Amendment) Bill, 2020 were major reforms aimed at promoting business growth.

Key features:

Decriminalized many minor offences — No jail for more than 46 minor violations
Allowed direct listing of Indian companies in certain foreign stock exchanges
Introduced a new chapter for Producer Companies
Relaxed CSR rules and allowed unspent CSR to be carried forward
Provided exemptions for filing resolutions by NBFCs
Allowed the government to decide which companies will be treated as “listed companies”

Companies Fresh Start Scheme (CFSS) 2020

Due to COVID-19, MCA launched this one-time scheme between 1 April and 30 September 2020.

It allowed defaulting companies to:

File all pending annual returns and financial statements
Without paying any penalty
And offered immunity from prosecution for past defaults

Inactive companies were allowed to apply for the status of “Dormant Company”, which reduces compliance workload.

Companies (Amendment) Ordinance 2018

In 2018, MCA formed a committee to review offenses under the Companies Act. The committee recommended several urgent changes, including:

Increasing the power of ROCs and Regional Directors
Moving some matters from tribunals (NCLT) to in-house adjudication
Changing some criminal offenses into civil penalties
Implementing 33 important provisions immediately

Because of urgency, these changes were introduced by ordinance, instead of waiting for Parliament.

Incorporation of Companies in India

To incorporate a company, several documents and approvals are required. Different types of companies have different requirements.

Historically, Indian companies could be formed:

By Royal Charter (e.g., East India Company) – No longer used
By Special Act of Parliament, e.g., RBI, SBI
Under Companies Act 1956 or 2013 – Most modern companies

Today, the main types of business entities include:

Sole Proprietorship
Partnership Firm
Limited Liability Partnership (LLP)
Hindu Undivided Family (HUF)
Co-operatives and Joint Ventures
Private Limited Company (2–200 members)
Small Company (lower capital and turnover limits)
Public Limited Company
Public Sector Undertaking (PSU)
Dormant Company
Unlimited Company

Corporate Governance under Companies Act, 2013

Section 149 requires every company to have a Board of Directors.

Section 169 explains removal of directors:

Directors can be removed by a simple majority vote in the general meeting
A 28-day special notice is required
Directors appointed under proportional representation cannot be removed by majority shareholders

Employee Rights in Company Law

Indian workers’ participation in company management has been discussed for decades.

Key points:

Article 43A of the Constitution encourages worker participation in management
The Industrial Disputes Act, 1947, created joint work councils
In the case National Textile Workers Union vs Ramakrishnan, the Supreme Court allowed workers to participate in winding-up proceedings of companies, because their livelihood is affected

Directors’ Duties (Section 166 of Companies Act, 2013)

Directors must:

Act according to the company’s articles
Act in good faith for the benefit of the company, shareholders, employees, environment, and community
Exercise reasonable care, skill, and diligence
Avoid conflict of interest
Not misuse their position for personal gain
Not assign their office
Follow the law or face fines between ₹1 lakh to ₹5 lakh

Corporate Social Responsibility (CSR)

Under Section 135, CSR is mandatory for companies with:

Net worth of ₹500 crore+, or
Turnover of ₹1000 crore+, or
Net profit of ₹5 crore+

Such companies must:

Spend 2% of their average net profit (last 3 years) on CSR
As per Schedule VII (mainly community development)

India is the first country in the world to make CSR spending legally mandatory.