This article is written by Shubham Kaurav of LLOYD law college, an intern under Legal Vidhiya
HISTORY OF COMPANY
Trade has been in India since the time of the East India Company. The term “company” was originally used in English to refer to a trade business called “merchant adventures.” The word “company” is derived from the Latin “Com,” which means “with or together,” and “panis,” which means “bread,” and originally referred to a group of people who shared a meal. As a result, the idea of trading was initially distinct for each member, who had their own stocks .After that, though, they began to run on a joint account with a shared stock. This method was observed and applied in the formation of the renowned East India Company, which was granted a trade monopoly with the Indies in 1600 after receiving its first charter. As of the present, the days where gone when partnerships and sole proprietorships were the most popular business structures where people invested and solely kept their own profits. Several business models developed over time. The types of businesses under the Companies Act, 2013, which distinguishes on the basis of the quantity of members, size, liability, and many other factors, are covered in this article. So lets get started. The Companies Act of 2013 addresses the creation, oversight, obligations, and dissolution of corporations. To make the act more in line with the modern corporate environment, it was introduced to replace its predecessor. By making the process of establishing and sustaining an organisation simpler, this act also intends to promote economic growth and development. To this purpose, many of the laws and norms stated in the Companies Act of 1965 have been updated and modernised. As a result, the Companies Act 2013 only has 29 chapters and 470 sections, whereas the Companies Act 1956 had 658 sections and 7 schedules. According to the Companies Act of 2013, a company is any entity that was created in accordance with this Act or another business Statute
TYPES OF COMPNAIES;
The following fundamental categories of businesses can be registered under the Act:
Public company, private company, and one-person business .
These basic types of companies can further be classified into the following heads:
On the basis of Incorporation
On the basis of Liability
Other forms of Companies
On the basis of Incorporation
1.1 Statutory Companies:
1.2Registered company
According to liability
2.1. Limited Company:
2.2 Unlimited Company:
Other Company Structures
3.1. Government Company:
3.2. Foreign Company:
3.3 Holding, Subsidiary, and Associate Company:
3.4. Dormant Company:
3.5 Producer Companies: .
Now lets have a brief look on One Person Company and Foreign Company
ONE PERSON COMPANY:
One Person Companies (OPCs) are a sort of business structure where the owner and operator are the same individual. In order to promote entrepreneurship and accelerate the expansion of small firms, it was implemented in India under the Companies Act, 2013, in 2013.
There is only one shareholder who also serves as the company’s director in an OPC. Yet, because the company and the owner are independent legal entities, any financial liability or loss suffered by the company does not put the owner’s personal assets at danger.
OPCs have a number of benefits, including less liability protection, simpler access to capital and credit, and fewer regulatory mandates. But they also come with some limits, such caps on the number of workers and the amount of cash that can be raised.
OPCs are appropriate for small firms and startups that want to function as separate legal entities and are searching for limited liability protection.
One Person Companies (OPCs) are a form of business that can be incorporated in India. They are created so that a single individual can own and control them. Under the Companies Act of 2013, this type of company was created to offer a new business organisation that combines the advantages of a sole proprietorship and a company.
The main characteristics of a one-person business are:
Single owner: A One Person Business may be established with a single owner who also serves as the company’s director.
Limited liability: The owner’s responsibility is capped to the sum of money invested in the business. As a result, in the event that the business experiences losses, the owner’s personal assets are not at risk.
Legal status: A one-person business has its own identity that is separate from that of its owner because it is a separate legal entity.
A one-person firm has perpetual succession, which means that it will continue to operate even if the owner passes away or becomes disabled.
Required conversion: The One Person Company must be converted into a private limited company or a public limited company if its paid-up share capital exceeds Rs. 50 lakhs or if its average annual turnover surpasses Rs. 2 crores.
Entrepreneurs who want to launch a firm without the trouble of enlisting other shareholders or partners are increasingly turning to one person companies.
A one-person company (OPC) is a business structure created to give a sole proprietor the advantages of limited liability and a distinct legal entity while still enabling them to exercise complete control over the business.
There is only one shareholder who also serves as the company’s director in an OPC. As a result, the owner has total control over the business’s activities but is not personally responsible for its liabilities. The Companies Act of 2013 is in effect for the OPC, which is registered as a private limited company.
Limited liability protection, ease of establishment, and eternal life are a few benefits of an OPC. But there are certain drawbacks as well, including a limited ability to acquire money, limitations on the number of directors, and prohibitions on specific commercial activity.
One-person companies (OPCs) are a particular kind of business entity where the owner and manager are the same individual. The Companies Act of 2013 introduced it in India as a cross between a sole proprietorship and a private limited company.
Key characteristics of a one-person business include:
The company can be created and run by just one person.
Due to the restricted liability of the firm, the owner’s personal assets are shielded from its debts and liabilities.
The owner is the only stakeholder in the business and, in the event of his or her decease or incapacity, may designate a nominee director.
A minimum of one director is required, and a maximum of 15 directors may serve on the board.
OPCs cannot acquire money through public offers, and in order to be able to do business legally, they need a certificate of formation from the Registrar of Companies (RoC).
The OPC is expected to keep accurate books of accounts, submit yearly returns, and have its financial statements audited.
Small enterprises and startups that desire the advantages of a private limited company with the flexibility of a sole proprietorship may consider one-person firms.
Companies that have their incorporation or registration in a nation other than their place of operation or physical presence are referred to as foreign firms. These businesses may conduct business through affiliates, partnerships, franchises, or other types of commercial agreements.
FOREIGN OWNED COMPANY
-A corporation that is entirely or partially owned by a foreign entity is said to be a foreign-owned company. This kind of business is frequently started in order to seize business opportunities or to enter new markets.
Branch office: A branch office is a division of a foreign business that conducts business abroad. It is a branch of a foreign corporation, not a distinct legal entity. Branch offices are frequently set up to help marketing, R&D, or foreign trade.
Foreign businesses must abide by the rules and laws of the nations where they conduct business. This can entail registering with local government agencies, getting business permits, and abiding by the law on taxes and labour. In other circumstances, foreign companies might also need to collaborate with regional enterprises or employ local workers to forge a strong presence in a new market.
Businesses that are registered or incorporated in a nation other than the one in which they conduct business are known as foreign firms. They are able to conduct business abroad by opening a branch or subsidiary office, as well as through agents or distributors.
These are some crucial traits of international businesses:
They are governed by the rules and laws of the nation in which they conduct business.
They might need to register with the local government and apply for operating permissions or licences.
They might be expected to pay taxes on income derived from the foreign country as well as abide by local tax laws and regulations.
Local labour rules and regulations, such as those governing the minimum wage, working hours, and health and safety requirements, may need to be complied with.
When conducting business in another country, they could encounter linguistic and cultural hurdles.
Foreign exchange risks and political risks, such as alterations in governmental policy, political unpredictability, or nationalisation of assets, could affect them.
By generating jobs, investing in infrastructure, and boosting the local economy, foreign businesses can help a nation’s economy. But, when conducting business abroad, they may also encounter difficulties and dangers.
Companies that are foreign are those that have their corporate headquarters in a nation other than their primary market. Through subsidiaries, branches, joint ventures, or partnerships, these businesses could be present abroad. The rules that apply to foreign firms varies from nation to nation, and there are frequently distinct standards and restrictions that foreign companies must adhere to in order to conduct business there.
Foreign businesses frequently have the following characteristics: They are governed by the rules and laws of the nation in which they conduct business.
They could need to apply for a business licence and register with the neighbourhood authorities.
They may be subject to different tax rates than domestic businesses and are required to abide by local tax regulations.
When conducting business in another country, they could encounter linguistic and cultural hurdles.
To create a presence in a foreign nation, they could need to cooperate with local partners or hire locals.
They could have to deal with extra expenses and challenges brought on by global trade, like tariffs and customs duties.
Generally, foreign businesses can present chances for global expansion and development, but they must be cognizant of the legal and regulatory requirements of the nations where they conduct business as well as the logistical and cultural difficulties of operating in a foreign market.
Companies that are registered and incorporated outside of a given nation yet carry out their business operations there are known as foreign corporations. These businesses are also known as foreign corporations or multinational corporations.
Foreign businesses may conduct business through a number of different channels, such as subsidiaries, joint ventures, and completely owned firms. Companies might decide to establish a local office in a nation to enhance customer service, gain access to resources or markets there, or to benefit from tax breaks or other advantages.
Local laws and rules, such as those governing taxation, employment, and trade, must be followed by businesses. Because of their possible effects on the local economy and foreign ownership, they might also be subject to more scrutiny and laws.
A host nation can gain a lot from the contributions of foreign businesses, including the creation of jobs, increased investment, and technology transfer. Yet, they could also experience difficulties like linguistic and cultural hurdles, political unrest, and trade restrictions or tariffs.
Companies classified as foreign are those that have their corporate headquarters in a nation other than the one in which they carry out their daily operations. For a variety of reasons, including expanding their market reach, cutting expenses, getting access to new resources, or benefiting from hospitable regulatory frameworks, these businesses may start up operations abroad.
Cases on companies act 2013
The petition for oppression and mismanagement was submitted by the Government of India in the case of Union of India v. Delhi Gymkhana Club[9].
When the Central Government files a complaint under Section 241(2), it is required to state its opinion as to whether the company’s activities are being conducted in a way harmful to public interest, and expressing such opinion is a sine qua non for filing to the Tribunal under Section 241(2).
The Tribunal is unable to assess the sufficiency or otherwise of the material on which the government has formed its opinion, particularly when no mala fide is imputed to the Central Government.
The term ‘public interest’ cannot be interpreted to mean all Indian nationals.
It would be sufficient if the rights, security, economic well-being, health, and safety of even a small segment of society – such as candidates seeking membership in the category of common citizen – were impacted.
The NCLAT concluded in Smruti Shreyans Shah v. The Lok Prakashan Ltd. & Ors.[10] that if a prima facie case is made out, the Tribunal might make interim directions under Section 242.
It was noted that the Tribunal’s entry of an interim order under Section 242(4) presupposes that the company’s affairs have not been or are not being conducted in compliance with the provisions of law and the Articles of Association.
To establish a prima facie case, the member alleging tyranny and mismanagement must show that he has asked reasonable questions in the Company Petition that demand investigation.
In Aruna Oswal v Pankaj Oswal & Ors[11], the Supreme Court held that because questions of right, title, and interest in shares as a result of nomination were pending before a civil court, which had ordered status quo in relation to the SC matter, it would not be open to a shareholder whose title to the shares had been disputed and who was not eligible to maintain a petition under Section 244, to agitate matters relating to the disputed shares by way of a petition for oppression and mismanagement, including by seeking a waiver of the requirements under Section 244.
The NCLAT held in Dhananjay Mishra v Dynatron Services Private Limited & Ors[12]. that acts of non-service of notice of meetings, financial discrepancies, and non-appointment of directors, all of which are specifically dealt with under the Companies Act and fall within the Tribunal’s jurisdiction to consider grant of relief under Section 242 of the Companies Act, render the dispute non-arbitrable, even though it cannot be disputed as a broad proposition that the dispute arising out of breach of contractual obligations referable to the MOUs or otherwise would be arbitrable.
The NCLAT enabled the government to imprison a company’s auditors in the instance of fraud and mismanagement in Deloitte Haskins & Sells LLP v Union of India[13]. The Central Government filed a petition against Infrastructure Leasing & Financial Services (“IL&FS”) and IL&FS Financial Services (IFIN) alleging fraud, mismanagement, and conduct of affairs injurious to the public interest, among other things, under Section 241(2).
The Central Government also sought to prosecute IL&FS and IFIN’s statutory auditing companies, as well as the auditing firms’ partners (those who were still working with the firm or who had resigned).
The auditors disputed this, claiming that they were not essential parties to the proceedings and that they had resigned as auditors prior to the Central Government’s institution of the proceedings.
The NCLAT rejected the argument, holding that the Tribunal’s powers under Section 242 are broad, and that the Tribunal might hear any party, including the former auditors, before issuing an order to preserve the public interest or the company’s interests.
CONCLUSION:
From the British era till today ,the definition, creation , oversight ,obligations and dissolution of corporation or a company is amended various time to meet the demands of the fast growing world. It is evident that there is no one-size-fits-all method of corporate structuring after looking at the numerous sorts of corporations. The choice of structure will rely on the particular requirements and objectives of the business. Each type of corporation has advantages and disadvantages of its own. The simplest type of business structure, a sole proprietorship, is best suited for small enterprises with a single owner who want total control over the enterprise. For companies with numerous owners that want to share profits and decision-making, partnerships are the best option. Limited liability corporations (LLCs) are a common choice for small to medium-sized firms since they offer corporate benefits without the rigid requirements. The size and complexity of the firm, the owners’ desired level of control, the requirement for liability protection, and the tax ramifications of each structure are just a few of the variables that will influence the choice of business structure.
Source:
Companies act 2013
www.mca.gov.in
Book taxman”s company law
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