Abstract:
Corporate Law is that Law which governs businesses and their day-to-day transactions in a manner that benefits the masses and maintains the discipline and know-how between the corporations and industrial units and above all the Nation for development and prosperity.
India is a developing country and India is forwarding towards success with a vision to be a global leader in good corporate governance and its promotions, to cater with the idea “The Institute of Company Secretaries” of India under the Ministry of Corporate Affairs has been incorporated to achieve the target of being a leader in the corporate world through good governance and has been given some roles and responsibilities to play and educate the concerned in this regard. Corporate Law focuses on the overall control of the business sector and allied transactions which means that no business can be operated without adhering to the rules and regulations framed by the Government for this purpose.
Keywords:
#Company Law #Development #Corporate World #Economic Backbone #Developing Countries #Development and Prosperity #Corporate Law #Analysis #Partnership #Business
Introduction:
Corporate Laws are the law which is regulating the overall pattern and functioning of Corporations, especially big and large companies, due to the growing emphasis on following established principles of proper business management, Company Law has gained additional significance within the legal framework governing corporations. This is because it specifically addresses the organization’s framework, leadership, operation, and behavior.
In India there are about 23 laws directly or indirectly governing and regulating the corporate world business regulations and its smooth functioning and intend to achieve the target of being a world leader for this purpose; the main laws governing and regulating the corporate world and its functions by framing rules and regulations from time to time as per need and also as per the development in different aspects involved in the business world and the interference of new technologies and development and elaboration of different types of relations between corporations, its employees, its shareholders, its owners, its staff members, and related workers who are hard work, intelligence, research, and innovations contribute to the overall betterment of the same world which is called as Backbone of the Nations and a necessity for continuance of developed countries and also the necessity for the developing countries.
Research Methodology:
Corporate Laws are many and are established for setting forth the guiding principles and rules for corporations, companies, etc.
This research is based on an analysis of the recent developments incorporated into the corporate sector in India through:
- Brief view of applicable corporate laws in India
- Main reforms in old laws/ Statutes
- Active involvement of the Judiciary in good governance
- Announcements by the Government under different schemes for the benefit of companies and businesses and individuals
This research has been done very formally by accessing different government websites, being authentic sources of information available online, online journals, online research papers being secondary sources of information available as on date, different blogs and PowerPoint presentations during seminars and debates hence being descriptive and informative enough to understand the recent developments in applicable corporate laws in India.
Review of Literature:
In this topic, I will try to provide a bird’s eye view list of corporate laws involved in regulating companies and businesses, especially are registered with the Ministry of Corporate Affairs (GOI) and the allied rules and regulations thereof.
- Brief view of applicable corporate laws in India:
The laws involved in the development of the nation, governing the corporate world, and the rules regulating the overall functioning of the companies, corporations, etc with a brief introduction that has been established to cater to the needs of different sects of businesses are:
- To carry a business between different individuals called partners of the business needs to be regulated through some rules and regulations for the overall functioning and a business need was seen for a law which shall regulate the partnership businesses and shall assign its functions and roles and responsibilities to be carried out by different partners or a way said functions has to be done, an act has been established in the year 1932 called as The Partnership Act, 1932 which governs the partnership businesses and define and amend the rules related thereof.
- In the year 1949, an act to make provisions and to regulate the professional character and functioning of Chartered Accountants has been established herein called as Chartered Accountants Act, 1949.
- A law has been created to prohibit unwanted transactions involving securities by controlling the business of trading them and addressing various related matters. This law is commonly referred to as the Securities Contracts (Regulation) Amendment Act, of 1956.
- A new independent entity known as Cost was adopted by Industrial circles throughout the world during earlier times of world war 2nd and in India a new revolution was also seen after the enactment and establishment of an act for Costs and Works in the year 1959, same has been named as Cost and Works Accountants Act, 1959, under which act a Statutory Body called as “The Institute of Cost Accountants of India” has been established and is a contribution towards Nation building and development of the corporate sector and industrial revolution.
- In the year 1980 an act for making the provisions and rules thereof for Secretaries in Corporations and registered companies has also been established, same is called as Company Secretaries Act,1980.
- In 1992, a law was put in place to enable the growth and control of foreign trade by making it easier to import goods into India and promote exports from the country. This law is commonly referred to as The Foreign Trade (Development and Regulation) Act, of 1992.
- An act was established to create a Board (SEBI) with the purpose of safeguarding the rights of investors, fostering advancement, and controlling the securities market, as well as addressing related issues. This act is commonly known as The Securities and Exchange Board of India Act, of 1992.
- To increase the liquidity of securities and to avoid the delay caused by the transfer of securities, to remove the occurrences of forgery, duplicate share certificates, or bad deliveries an act called as Securities and Exchange Board of India, Depositories Act, 1996 has been established by the parliament.
- An act that defines the procedures, formalities, dealings of all foreign exchange transactions and helps orderly development and maintenance of the foreign exchange market and to facilitate external trade and payments in India commonly called FEMA or The Foreign Exchange Management Act, 1999
- In 2002 an act for regulating market instability and curbing the anti-competitive agreements and mistreating of market Competition and market domination situations, competition is regarded as a healthy practice for fostering chances and acting as a motivator in any profession under the legal framework a Central Act was established known as The Competition Act, 2002
- In the year 2002 an act was established with only the aim and objective of curbing money laundering and also to confiscate, money involved in or the property derived from that money or any connected matters, the same act is called as Prevention of Money Laundering Act, 2002
- To enable banks and other financial institutions to recover unpaid loans by auctioning off the residential or commercial properties of defaulters, an act was introduced and implemented, commonly referred to as the SARFESI Act, 2002. This act is officially called as “Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002”.
- After the creation of the Special Economic Zones Act, of 2005, the Central Government launched a program through the Ministry of Commerce and Industry to generate more economic activity, support the export of goods and services, attract investment from both domestic and foreign investors, create job opportunities, and improve infrastructure development.
- An act has been established in 2008 when the Companies Act, of 1956 was in force, and as per sec-11 of the Companies Act provided it was prescribed that a partnership business may have a maximum of 20 partners, a new act was bought into force with a primary objective of to dilute the upper limit of 20 partners in a partnership, herein referred to as Limited Liability Partnership Act, 2008
- The Foreign Contribution (Regulation) Act, of 2010 is a law aimed at unifying the regulations concerning the acceptance and use of foreign contributions or foreign hospitality by particular individuals, associations, or companies. Its objective is to prevent the acceptance and use of foreign contributions or foreign hospitality for activities that harm the national interest.
- The person who is involved in money laundering shall be accused of money laundering as a stand-alone crime under Section 3 of PMLA who is directly or indirectly involved in the proceeds of the crime, an amendment has been sought and an act has been established known as Prevention of Money Laundering (Amendment) Act, 2012
- To “improve the quality of corporate governance and protect investors from fraud”, promote competition in the marketplace and increase corporate transparency government introduced an act replacing the companies act 1956 to regulate the functioning of companies in India called as Companies Act, 2013
- An amendment act that provided the securities market regulator Securities and Exchange Board of India (SEBI) with new powers to effectively pursue fraudulent investment schemes, especially Ponzi schemes after the Saradha Group financial Scandal was established by the legislatures known as Securities Laws (Amendment) Act, 2014.
- In 2015, the Indian Parliament introduced an act aimed at preventing the accumulation of undisclosed foreign assets and income, as well as imposing taxes and penalties on such property and income. This law was passed by both houses of Parliament and is commonly known as the “Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015”.
- The government of India to rescue corporate debtors in distress within a specified and time-bound insolvency resolution process, including any litigation, which must be completed within 330 days, an act has been established in the year 2016 called Insolvency and Bankruptcy Code, 2016
- Parliament in August 2016 passed a law that came into force in November 2016 which act has amended the Benami Transactions Act, 1988 to curb black money, the amendment act strengthens the parent Act in terms of legal and administrative procedure and same is called The Benami Transactions (Prohibition) Amendment Act, 2016.
- In 2017, an amendment was made to The Finance Act, granting the Union government the authority to manage appointments and adjust the terms and conditions of tribunal members through executive action
- To “regulate and promote the real estate sector and to ensure sales” of plots, apartments, buildings, or sale of real estate projects efficiently and transparently and to protect the interests of consumers in the real estate sector through Real Estate Regulatory Authority established by an act called as The Real Estate (Regulation and Development) Act, 2016
- Main reforms in old laws/ Statutes:
There has been significant change and amendment in corporate laws from time to time for the betterment of the corporate world and to cater to the upcoming challenges in this fast-growing technological era.
- Some of the major reforms and amendments have been done to the Companies Act, The main reforms bought in the Companies Act 2013 are:
- Cross Border Merger: Section 234 allows any Indian company can merge or demerge with any foreign company which has been notified “by the Government of India” with prior approval from “the Reserve Bank of India” to finalize the deals.
- Short Form merger or Fast Track merger: These types of mergers can be done without prior approval from NCLT and according to this merger can take place between “two or more two small companies or between a parent company and an owned subsidiary company” but approval from the Registrar of Company is mandatory.
- Reverse Merger: In this type “of merger a well-to-do company merges with a financially weak company to avail certain exemptions is known as a reverse merger.”
- “The merger of a listed company into an unlisted company: it has been provided that as per the tribunal’s order, the merger of a listed company into an unlisted company will not in itself result in the listing of an unlisted company” for that company has to comply with SEBI guidelines for allotment of share to the public.
- Corporate Social Responsibility: CSR which was a voluntary guideline introduced “by the Ministry of Corporate Affairs in the year 2009 under section 135 of the Act” has now become a mandatory part and parcel of the 2013 Act with legal sanctity.
- Decision-Making Power of the Board: Under this Act, private companies are also required to use special resolutions, which may have certain conditions attached, to borrow money exceeding a certain limit or to sell a significant portion of the company.
- Conversion Of Public Company Into Private Company: To convert a public company to a private company under the 2013 Act, approval from the Tribunal is mandatory, as opposed to the 1956 Act which required approval from the central government.
- One Person Company: This provision of one person company under section 2(62) has been bought in favor of young and budding entrepreneurs so that they can enjoy all the benefits of a private limited company, such companies under section 3 are treated as private companies for all the legal requirements, it is also one of latest and important change which has been bought through 2013 Act to encourage youngsters to take business as their profession which will contribute into the overall development of a nation and also decrease, rather increase the employment generation possibilities.
- Dormant Company: This idea has been adopted from UK’s company law and is very innovative, as per Section 455 “a dormant company may be a company that has been formed for a future project or to hold any property either physical or intellectual without there being a need of the existence of any active company”.
2.2. CSR Spending: As per the circular dated 23, March 2020 Ministry of Corporate Affairs Government of India has allowed certain companies to “utilize their Corporate Social responsibility measures to fight Covid-19”.
2.3 Major Relief for MSME Sector: Announcements like the following were done o by the government:
2.3.1 Under this scheme, Micro, Small, and Medium Enterprises (MSMEs) will receive loans that are guaranteed by the central government and do not require collateral security.
2.3.2 Interest Capped 12-month moratorium period for repayment of the principal amount.
2.3.3 For MSMEs with a turnover of up to 100 Crore and with an outstanding credit of up to 25 Crore will be provided loans up to 20% of their outstanding credit on 29/02/2020 and the same will be for 4 years.
2.4 Suspension of Insolvency and Bankruptcy Code: A major relief to MSMEs by increasing the de minims amount from Rs. 1 Lac to Rs. 1 Crore which curbs the filing of Corporate Insolvency Resolution Process (CIRP) thereby giving headache and also causing prejudice to corporate debtors but a relief to MSMEs.
2.5 Income Tax Relief Measures: Implementing these measuresbenefitted the citizens by extending the deadline to file ITR and reduction in TDS and TCS.
- Active involvement of the Judiciary in good governance:
As the guardian of fundamental rights, the Supreme Court has to protect citizens from any exploitation of their rights. Recently, the Supreme Court declared certain changes brought about by the Finance (Amendment) Act to be null and void, as they were found to violate citizens’ rights.
- A panel of judges from the Supreme Court of India (Constitution Bench), led by the Chief Justice of India, invalidated the regulations set by the government under the Finance Act of 2017, which aimed to modify the appointments to 19 significant judicial tribunals.
- The Supreme Court found the changes made by the Finance Act of 2017 to be in opposition to the parent law and the principles outlined in the Constitution. As a result, the court invalidated the changes in their entirety.
- The Central Government created regulations for various Administrative Authorities, Tribunals, and Appellate Tribunals under Section 184 of the Finance Act of 2017.
- The Supreme Court has raised doubts about whether the Finance Act of 2017 should have been passed as a money bill. This matter has been referred to a larger panel of seven judges.
- Announcements by the Government under different schemes for the benefit of companies and businesses and individuals:
4.1 Rashtriya Krishi Vikas Yojana: Launched in 2007, this program aims to promote comprehensive development in agriculture and related services by motivating individuals to establish agricultural businesses or pursue entrepreneurship in this field.
4.2 ASPIRE The launch of the Scheme for Promotion of Innovation, Rural Industries and Entrepreneurship (ASPIRE) aimed to establish a network of technology centers and incubation centers to promote entrepreneurship and accelerate startup growth in the agro-industry through innovation.
4.3 MUDRA Bank: MUDRA Bank (“Micro Units Development and Refinance Agency Bank”) or Mudra Loan is a recent “financial institution” established by the Indian government.
4.3.1 Small manufacturers, entrepreneurs, farmers, start-ups, individuals, shopkeepers, vendors, restaurants, bakeries, and other similar entities are eligible to receive Mudra loans.
4.3.2 The interest rates for Mudra loans are typically in the range of 8.40% to 12.45% for loan periods ranging from 1 to 5 years respectively.
4.4 Multiplier Grants Scheme: The Department of Electronics and Information Technology is responsible for implementing this initiative. Under this scheme, if an industry supports R&D efforts to create a product that can be marketed at an institutional level, the government will provide financial assistance to that product. The program has a total allocation of Rs.36 Crore, with the Department of Electronics and Information Technology contributing Rs.24 Crore.
4.5 “Support for International Patent Protection in Electronics & Information Technology (SIP-EIT):” The Department of Electronics & Information Technology in the Indian government has launched an initiative to support MSMEs and Technology Startup units in filing international patents by providing them with financial assistance. This program aims to help these entities seize growth opportunities in the Information Communication Technology & Electronics sector.
4.6 “Credit Guarantee Scheme for Startups” (CGSS): Launched with a contribution of Rs.2000 Crore, this program aims to help startups secure collateral-free loans to launch their businesses. A guarantee cover is also provided under this scheme for a pre-determined period on the credit facility, eligible beneficiaries can receive credit guarantees of up to Rs.5 Crore, which can be utilized for a variety of purposes such as working capital, debentures, term loans, venture capital, and more.
Method:
Recent developments in corporate laws in India is a vast field to study it involves almost more than 23 laws to be evaluated to extract the crust of the information and to write all the what has been done in recent times within past two decade for the betterment of the corporate world and to cater the problems faced by the corporations to sustain setbacks during market recessions or pandemics like Covid-19 which has given a setback to the corporate world through economic losses resulting in mergers and accusations’ or bankruptcy or solvency of the companies, corporations and businesses worldwide which has also effected the growth and prosperity of the companies and corporate in India, a thorough online research and comparison between different sources and research papers involving rules like topic selection, study the topic from different sources atleast 4-5 independent sources and 2-3 statutory sources, evaluate the information shared by different sources, compare the study of different sources and then analyze the information extracted from all the sources for its accuracy and authenticity and all this has been done to get the clear idea and find the proper authentic source and citations to support the analysis done to the topic for providing the crystal clear idea to the professionals even common man to understand what is need of time, what has been the procedure and rules in past and what developments has been done for the benefits of the corporate world or to regularize the loop holes and maintain a smooth process of business although new times also come with new challenges which call for the interference of the legislature or judiciary to outcome the difficulties and challenges faced and the roadblocks to the smooth functioning and maintenance of corporate sector and yield maximum benefits out of the corporate sector developments which over all development contributes to the development of economically powerful and strong Nations and provides an opportunity to compete with the developing countries to be prosperous and maintain a standard acceptable at International levels.
Suggestions:
During the study and research on the topic it has been seen and felt a need for the betterment of people and corporations that whatsoever has been the development and change in the corporate world has not benefitted common masses or the general citizens more but has only focused on safeguarding the corporations, companies, and businesses but a review has to be done also to see where the common masses are suffering, no progress, the prosperity of businesses or corporations should be on the infringement of rights of the individuals who have been part of the corporate world by investing his life savings and has lost everything during any pandemic, etc due to the policies framed by the governments to safeguard the interests of business giants ignoring the prosperity of the masses or in general the common people if interests of the general people or investors are not safeguarded then the developments become an abuse of process under the guise of statutory provisions.
It is the need of the hour to safeguard the interests of individuals, investors, and companies at a time so that their interests are always taken care of by the legislature and judiciary during the setbacks of businesses due to any market recession or pandemic, etc and to cater the needs of the international markets in demand from time to time to compete with prescribed standards and values thereof.
Conclusion:
Under given situations, circumstances, certainties, uncertainties, and majors taken by the government from time to time what has been discussed herein above and also the active role of the Supreme Court of India in the protection of rights of citizens and also the directions passed to maintain the doctrine of separation of powers which defines the functioning of Legislature, Judiciary, and Administration and also distinguishes between their role, responsibility, and duties; also defines one organ should not interfere with responsibilities of other organ and maintain the supremacy of Law beyond personal reasons or thoughts, we as citizens of India have to perform the duties envisaged upon us by the Constitution of India and every individual has performed its part whether its individual, any entity, administration or judiciary.
India is an Independent developing country that competes with developed countries to be a leader of good governance and accordingly amendments in the law, reforms in government schemes, adoption of new technologies, and especially youths are being given a chance to come forward and play an active role in the development of Nation through innovative ideas and beneficial schemes from time to time.
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Written by:
Adil Rashid Bhat
Student of: Diploma in Corporate Litigation and Arbitration at LawSikho
Email: advaadil79@gmail.com
Cell: 7006601376