Business Setup

Companies Act 2013

April 9, 2026
4 mins
11.5K Views

Passed on 29 August 2013 and coming into effect on 1 April 2014, the Companies Act 2013 brought a major shift in how businesses operate in India. It replaced the old Companies Act, 1956. Additionally, introduced modern corporate governance, accountability, and transparency standards aligned with global best practices.

Further, the Companies Act 2013 also focuses on protecting the interests of all stakeholders and promoting better corporate governance. Also, it makes doing business in India simple and focuses on ethical conduct, investor protection, and sustainable practices. Apart from this, the act has been updated over time to meet evolving global standards and business needs.

Want to know more about the Companies Act 2013 in detail? Read the blog and get all the information.

Key Takeaways

The Companies Act, 2013, was passed on 29 August 2013 by the Indian Parliament, and came into effect from 1 April 2014.
The aim of introducing the act was to improve corporate governance and transparency.
It also simplifies the company formation process, protects the interests of employees and investors, and promotes ethical business practices.
The Companies Act, 2013, also introduced the concept of a one-person company and, for certain companies, made CSR mandatory.
Introduce mandatory auditor rotations for public companies and establish the NCLT for quick dispute resolution.

What is the Companies Act 2013?

The Companies Act 2013 is a comprehensive legislation passed by the Indian Parliament. The act was introduced to govern and regulate the incorporation, functioning, and dissolution of companies in India. It replaced the Companies Act of 1956. Additionally, it aims to ensure accountability and enhance transparency within the Indian corporate sector.

It also establishes a legal structure and guidelines on several aspects, such as the rights and duties of shareholders and directors, the incorporation process, mergers and acquisitions, and more. To match modern business practices, it also introduced new concepts like corporate social responsibility (CSR), one-person company (OPC), and stricter compliance requirements.

This was all about the Companies Act 2013. Moving ahead, let's know the key highlights of the act.

Highlights of the Companies Act 2013

Key Highlights of the Companies Act 2013

The key highlights of the Companies Act 2013 are as follows:

The number of shareholders in a private company increased to 200. Previously, it was 50.
Establishment of the Company Law Appellate Tribunal and the Company Law Tribunal.
Introducing the concept of a one-person company.
For certain companies, made corporate social responsibility (CSR) mandatory.

Moreover, under section 135 of the Companies Act 2013, India is among the first major economies to mandate CSR spending under law.

These are the key highlights of the 2013 Act. Moving further, let's know the salient features of the Companies Act 2013.

Salient Features of the Companies Act 2013

The salient features of the Companies Act 2013 are as follows:

Dormant companies refer to entities with no significant accounting transactions over a period, as defined under the Act.
Set up the National Company Law Tribunal (NCLT) by replacing the Company Law Board. It is a quasi-judicial body to identify several issues associated with the company.
Mandated to maintain documents electronically and e-file company documents.
With a focus on transparency and less government approval, it promotes self-regulation.
The Companies Act, 2013, also led to faster amalgamations and mergers. Further, with the permission of the RBI, it also allows cross-border mergers, i.e., mergers of Indian companies with foreign firms.
For public companies, it made independent directors a statutory requirement.
Additionally, for a certain class of companies, the act has made it mandatory to have women directors.
To call board meetings, the Companies Act, 2013 mandates sending a notice at least seven days before.
The act also defined the duties of the director, promoter, and key managerial personnel.
It also saves auditors from performing non-audit services for any company.
Apart from this, the act provides more powers to shareholders by taking their approval in major transactions.
To oversee audits and accounting, the National Financial Reporting Authority (NFRA) was established.
The act also establish Serious Fraud Investigation Office (SFIO).
Every company should have at least one director resident in India, i.e., 182 days in the previous calendar year.
Listed companies should have a director representing small shareholders. Additionally, public companies should rotate auditors as they are not permitted to do non-audit work.

These are some of the key features of the act. Moving forward, let's know the types of companies under this act.

Types of Companies Under this Act

Types of Companies under the Companies Act 2013 are as follows:

Type of Company	Key Characteristics	Minimum Requirements
Private Limited Company	Transfer of shares is restricted, cannot invite public subscription, and is limited to 200 members.	2 Directors and shareholders
Public Limited Company	Allow transfer of shares freely, and can also invite the public to subscribe.	3 Directors and 7 shareholders
One Person Company (OPC)	It is a single-member company with a nominee. Additionally, provide limited liability benefits.	1 Director and member
Producer Company	This company is established for primary producers like artisans and farmers. It engaged in activities such as production, livestock, or associated activities.	5 Directors, 10 members, or 2 producer institutions
Section 8 Company	Formed for non-profit or charitable objectives. Additionally, it reinvests the profits to fulfill its objectives,	2 Directors (private)/ 3 directors (public)
Dormant Company	An inactive company that holds intellectual property and assets.	According to the original classification.

These are the different types of companies stated under the Companies Act 2013. Moving ahead, let's know the difference between the Companies Act 2013 vs. Companies Act 1956.

Companies Act 2013 vs. Companies Act 1956

The table below covers the key differences between the Companies Act 2013 and the Companies Act 1956:

Companies Act 2013	Companies Act 1956
The Companies Act 2013 consists of 29 chapters, 470 sections, and 7 schedules.	The Companies Act 1956 consists of 13 parts, 26 chapters, 658 sections, and 15 schedules.
Under this, the maximum number of shareholders in a private company is 200.	Previously, under this act, the maximum number of shareholders in a private company was stated at 50.
This act allows a subsidiary in the holding company to hold shares as a trustee.	This act does not allow a subsidiary to hold shares of a holding company.
This act introduced the concept of a one-person company.	It does not mention one person company.
Under this act, the Indian government can state the types of companies that can issue a shelf prospectus.	Only scheduled banks, public financial institutions, or public sector banks were allowed to issue the shelf prospectus.

These are the key differences between the Companies Act 2013 and the Companies Act 1956. Moving further, let's know the major amendments to the act.

Major Amendments to the Act

Since 2013, several changes have been made in the Companies Act 2013. The amendments stated in this aim to ease business, improve compliance, and reduce punishments. Further, let's know the major amendments to the act.

Companies (Amendment) Act, 2017

Simplified rules for private placements.
Decriminalized small offenses.
Provide a clear definition of fraud.
Improved CSR reporting.

Companies (Amendment) Act, 2019

For several minor defaults, jail terms were removed.
Allow unspent CSR funds to transfer to government funds.
Made beneficial ownership reporting strong.
Tightened rules on the disqualification of the director.

Companies (Amendment) Act, 2020

Made it simple to start and run a business in India.
Over punishment encourage compliance.
Faster company incorporation.
Penalties reduced for procedural lapses.

Companies (Amendment) Act, 2021

Rules changed for reporting CSR and independent directors' pay.
For mergers and demergers of a business, more time is allowed.
Eases certain compliance requirements.

Key Development (2022-2025)

DSC and Aadhaar card made compulsory for directors and signatories.
Launched MCA21 Version 3.0 for digital filings and real-time tracking.
For listed companies, alignment with the ESG reporting rules of SEBI.
Enhanced rules on Significant Beneficial Ownership (SBO).

These are some of the major amendments made to the Companies Act 2013 in recent years. Now, moving forward, let's know the rules and regulations stated under this act for company incorporation.

Incorporation of a Company Under the Companies Act 2013

The rules and regulations stated under the Companies Act 2013 for the incorporation of a company are as follows:

A company should have a unique name, with its name being. Private Limited for private companies and Limited for public companies. For instance, XYZ Pvt. Ltd. Company/ XYZ Public Ltd. Company.
Additionally, the name of the company should not be similar to any other company already registered under this act. Also, the name should not be undesirable or offensive under the law.
The name of the company also does not violate the names and emblems provision stated under the Improper Use Act of 1950. Considering this, you can check your decided company name on the website of the Ministry of Corporate Affairs.
To register your company under the Indian Companies Act, 2013, you need to fill out an application. Additionally, submit it along with the requested documents and fee to the registrar for name approval and reservation. Besides this, you need to fill out different forms for your company registration.
Draft the memorandum of association (MOA) and other related articles and verify them with the registrar. Considering this, these documents, in the presence of a witness, should also contain the stamp and signature of all members.
Apart from this, all the members should also fill out the asked details. It includes address, occupation, subscribed share and more during company registration.

Further, once you complete the mentioned information, to submit the forms, MOA, and other documents, log in to the web portal.

So, this is how you can incorporate your company under this act. Moving ahead, let's know the important sections stated under this act.

Important Sections Under Companies Act 2013

Important sections covered under the Companies Act 2013 are as follows:

Sections	Description
Section 73	Companies can accept deposits subject to prescribed conditions and compliance requirements. Exceptions include companies like financial institutions and non-banking financial companies (NBFCs).
Section 135	Companies that have a turnover of more than INR 1,000 crore need to form a CSR committee. Additionally, the committee should have at least three or more directors.
Section 139	Under this section, in the first general meeting, a company needs to appoint an auditor. Starting from the year when the auditor was appointed, he/she should hold office for five annual general meetings.
Section 180	Any company undertaking can be sold, dispose or leased by the board of directors after taking consent from the whole company.
Section 185	A company cannot provide a loan directly or indirectly to its directors or any other individual/ entity in which the directors are interested.
Section 186	Under this act, a company is not allowed to carry out more than two layers of inter-corporate investment.
Section 188	A company, whether private or public, can enter into related party transactions, including selling, leasing, or purchasing property, subject to required board and shareholder approvals under the Act
Section 189	Under this act, a company should maintain one or more registers (Form MBP-4) detailing contracts and arrangements in which the directors are interested.
Section 197	In a financial year, the remuneration of directors in a public company should be less than or equal to 11% of the earned net profits of the company.

This was all about the key sections included under the Indian Companies Act, 2013.

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Final Thoughts

Lastly, the Companies Act, 2013, plays an essential role in shaping the Indian business environment. The act certifies that companies operate with responsibility, discipline, and transparency. Additionally, with regular updates, the act continues to support and evolve business growth.

Further, if you are an NRI seeking assistance to set up a company in India, contact Savetaxs. Our experts provide end-to-end consultation on the company for NRI clients, ensuring 100% compliance with MCA, RBI, and FDI regulations. Connect with us and grow your business in India.

Glossary

Joint Venture (JV): Joint Venture, a Partnership Between the Entities to Achieve a Common Business Objective, Contributing Resources Like Capital, Technology, and Expertise.
Document Identification Number: DIN, a Unique Code Assigned to the Documents by Itd, Enhances Security and Efficiency in the Departments of Income Tax.

Disclaimer

Note: This guide is for information purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult either a CA, CS, CPA or a professional tax expert from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.

Manish Prajapat(Tax Expert)

Mr Manish is a financial professional with over 10 years of experience in strategic financial planning, performance analysis, and compliance across different sectors, including Agriculture, Pharma, Manufacturing, & Oil and Gas. Mr Prajapati has a knack for managing financial accounts, driving business growth by optimizing cost efficiency and regulatory compliance. Additionally, he has expertise in developing financial models, preparing detailed cash flow statements, and closing the balance sheets.

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