ICAI Notes: Preliminary | Corporate & Other Laws for CA Intermediate PDF Download

 Page 1


 
LEARNING OUTCOMES 
a
    
 
CHAPTER 
1 
 
 
PRELIMINARY 
 
 
At the end of this chapter, you will be able to: 
?
To know about the extent and commencement of the 
Companies Act, 2013. 
?
Identify about the application of the Act. 
?
Gain familiarity with the definition clause given in the Act. 
 
  
© The Institute of Chartered Accountants of India
Page 2


 
LEARNING OUTCOMES 
a
    
 
CHAPTER 
1 
 
 
PRELIMINARY 
 
 
At the end of this chapter, you will be able to: 
?
To know about the extent and commencement of the 
Companies Act, 2013. 
?
Identify about the application of the Act. 
?
Gain familiarity with the definition clause given in the Act. 
 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 1.2 
  
 
1. INTRODUCTION 
The Companies Act, 2013 is an Act to consolidate and amend the law relating to 
companies. The legislation was necessitated to meet changes in the national and 
international economic environment and for expansion and growth of economy 
of our country.  
The Companies Act, 2013 received the assent of the Hon’ble President of India on 
29
th
 August 2013 and was notified in the Official Gazette on 30
th
 August 2013 for 
public information stating that different dates may be appointed for enforcement 
of different provisions of the Companies Act, 2013, through notifications. 
Section 1 came into force on 30
th
 August 2013; 98 sections came into force on 
12
th
 September 2013; 143 sections were enforced from 1
st
 April 2014 and so on. 
The Companies Act, 2013 is rule based legislation with 470 sections and seven 
schedules. The entire Act has been divided into 29 chapters. Each chapter has at 
least one set of Rules. The Companies Act, 2013 aims to improve corporate 
governance, simplify regulations and strengthen the interests of investors. Thus, 
this enactment makes our corporate regulations more contemporary. 
2. SHORT TITLE, EXTENT, COMMENCEMENT 
AND APPLICATION 
Section 1 of the Companies Act, 2013 deals with the title of the Act according to 
which this Act may be called as the Companies Act, 2013. 
Preliminary chapter of the Act covers
Short title, extent and 
commencement 
Application Definitions
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
Page 3


 
LEARNING OUTCOMES 
a
    
 
CHAPTER 
1 
 
 
PRELIMINARY 
 
 
At the end of this chapter, you will be able to: 
?
To know about the extent and commencement of the 
Companies Act, 2013. 
?
Identify about the application of the Act. 
?
Gain familiarity with the definition clause given in the Act. 
 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 1.2 
  
 
1. INTRODUCTION 
The Companies Act, 2013 is an Act to consolidate and amend the law relating to 
companies. The legislation was necessitated to meet changes in the national and 
international economic environment and for expansion and growth of economy 
of our country.  
The Companies Act, 2013 received the assent of the Hon’ble President of India on 
29
th
 August 2013 and was notified in the Official Gazette on 30
th
 August 2013 for 
public information stating that different dates may be appointed for enforcement 
of different provisions of the Companies Act, 2013, through notifications. 
Section 1 came into force on 30
th
 August 2013; 98 sections came into force on 
12
th
 September 2013; 143 sections were enforced from 1
st
 April 2014 and so on. 
The Companies Act, 2013 is rule based legislation with 470 sections and seven 
schedules. The entire Act has been divided into 29 chapters. Each chapter has at 
least one set of Rules. The Companies Act, 2013 aims to improve corporate 
governance, simplify regulations and strengthen the interests of investors. Thus, 
this enactment makes our corporate regulations more contemporary. 
2. SHORT TITLE, EXTENT, COMMENCEMENT 
AND APPLICATION 
Section 1 of the Companies Act, 2013 deals with the title of the Act according to 
which this Act may be called as the Companies Act, 2013. 
Preliminary chapter of the Act covers
Short title, extent and 
commencement 
Application Definitions
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
a
    
 
1.3 PRELIMINARY 
 
Further, section deals with the extent to the applicability of the Act. It says that 
the Act shall extend to the whole of India.  
This section also specifies the date of commencement of this Act. Accordingly, 
this section shall come into force at once and the remaining provisions of this Act 
shall come into force on such date as the Central Government may, by 
notification in the Official Gazette, appoint and different dates may be appointed 
for different provisions of this Act and any reference in any provision to the 
commencement of this Act shall be construed as a reference to the coming into 
force of that provision. 
This Section furthermore states of the applicability of the Act. The provisions of 
this Act shall apply to- 
(a) companies incorporated under this Act or under any previous company law; 
Example 1: ABC Ltd. was incorporated on 1.1.1972 under the Companies Act, 
1956. So, the Companies Act, 2013 shall also be applicable on ABC Ltd. 
(b) insurance companies, except in so far as the said provisions are inconsistent 
with the provisions of the Insurance Act, 1938 or the Insurance Regulatory 
and Development Authority Act, 1999; 
(c) banking companies, except in so far as the said provisions are inconsistent 
with the provisions of the Banking Regulation Act, 1949; 
(d) companies engaged in the generation or supply of electricity, except in so 
far as the said provisions are inconsistent with the provisions of the 
Electricity Act, 2003; 
(e) any other company governed by any special Act for the time being in force, 
except in so far as the said provisions are inconsistent with the provisions of 
such special Act, and 
(f) such body corporate, incorporated by any Act for the time being in force, as 
the Central Government may, by notification, specify in this behalf, subject 
to such exceptions, modifications or adaptation, as may be specified in the 
notification.  
Example 2: Food Corporation of India (FCI), National Highway Authority of India 
(NHAI) etc. 
© The Institute of Chartered Accountants of India
Page 4


 
LEARNING OUTCOMES 
a
    
 
CHAPTER 
1 
 
 
PRELIMINARY 
 
 
At the end of this chapter, you will be able to: 
?
To know about the extent and commencement of the 
Companies Act, 2013. 
?
Identify about the application of the Act. 
?
Gain familiarity with the definition clause given in the Act. 
 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 1.2 
  
 
1. INTRODUCTION 
The Companies Act, 2013 is an Act to consolidate and amend the law relating to 
companies. The legislation was necessitated to meet changes in the national and 
international economic environment and for expansion and growth of economy 
of our country.  
The Companies Act, 2013 received the assent of the Hon’ble President of India on 
29
th
 August 2013 and was notified in the Official Gazette on 30
th
 August 2013 for 
public information stating that different dates may be appointed for enforcement 
of different provisions of the Companies Act, 2013, through notifications. 
Section 1 came into force on 30
th
 August 2013; 98 sections came into force on 
12
th
 September 2013; 143 sections were enforced from 1
st
 April 2014 and so on. 
The Companies Act, 2013 is rule based legislation with 470 sections and seven 
schedules. The entire Act has been divided into 29 chapters. Each chapter has at 
least one set of Rules. The Companies Act, 2013 aims to improve corporate 
governance, simplify regulations and strengthen the interests of investors. Thus, 
this enactment makes our corporate regulations more contemporary. 
2. SHORT TITLE, EXTENT, COMMENCEMENT 
AND APPLICATION 
Section 1 of the Companies Act, 2013 deals with the title of the Act according to 
which this Act may be called as the Companies Act, 2013. 
Preliminary chapter of the Act covers
Short title, extent and 
commencement 
Application Definitions
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
a
    
 
1.3 PRELIMINARY 
 
Further, section deals with the extent to the applicability of the Act. It says that 
the Act shall extend to the whole of India.  
This section also specifies the date of commencement of this Act. Accordingly, 
this section shall come into force at once and the remaining provisions of this Act 
shall come into force on such date as the Central Government may, by 
notification in the Official Gazette, appoint and different dates may be appointed 
for different provisions of this Act and any reference in any provision to the 
commencement of this Act shall be construed as a reference to the coming into 
force of that provision. 
This Section furthermore states of the applicability of the Act. The provisions of 
this Act shall apply to- 
(a) companies incorporated under this Act or under any previous company law; 
Example 1: ABC Ltd. was incorporated on 1.1.1972 under the Companies Act, 
1956. So, the Companies Act, 2013 shall also be applicable on ABC Ltd. 
(b) insurance companies, except in so far as the said provisions are inconsistent 
with the provisions of the Insurance Act, 1938 or the Insurance Regulatory 
and Development Authority Act, 1999; 
(c) banking companies, except in so far as the said provisions are inconsistent 
with the provisions of the Banking Regulation Act, 1949; 
(d) companies engaged in the generation or supply of electricity, except in so 
far as the said provisions are inconsistent with the provisions of the 
Electricity Act, 2003; 
(e) any other company governed by any special Act for the time being in force, 
except in so far as the said provisions are inconsistent with the provisions of 
such special Act, and 
(f) such body corporate, incorporated by any Act for the time being in force, as 
the Central Government may, by notification, specify in this behalf, subject 
to such exceptions, modifications or adaptation, as may be specified in the 
notification.  
Example 2: Food Corporation of India (FCI), National Highway Authority of India 
(NHAI) etc. 
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 1.4 
Note: The term “except in so far as” shall mean excluding to the extent of i.e. if 
any provision of the Companies Act is inconsistent with any of the provisions of 
other Act (Insurance Act, Banking Regulation Act, Electricity Act, etc.) to which the 
company is regulated than that company shall comply with the provisions of 
respective Act/Acts to which it is governed and regulated by. 
 
3. DEFINITIONS 
Section 2 of the Companies Act, 2013 is a definition section. It provides various 
terminologies used in the Act. Definitional Sections or Clauses, are known as 
‘internal aids to construction’ and can be of immense help in interpreting or 
construing the enactment or any of its parts.  
Also, according to clause 95 of section 2, words and expressions used and not 
defined in this Act but defined in the Securities Contracts (Regulation) Act, 1956 
or the Securities and Exchange Board of India Act, 1992 or the Depositories Act, 
1996 shall have the meanings respectively assigned to them in those Acts.   
When a word or phrase is defined as having a particular meaning in the 
enactment, it is that meaning alone which must be given to it while interpreting a 
Title Title
Companies 
Act, 2013
Extent Extent
Whole of India
Commencement Commencement
Section 1
came into
force at once
and the
remaining
provisions on
different dates
through
Notifications.
Application Application
1. Companies
2. Insurance 
companies
3. Banking 
companies
4. Companies 
producing / 
supplying 
electricity
5. Company 
regulated by 
special Act
6. Entities as 
notified by 
Central 
Government
© The Institute of Chartered Accountants of India
Page 5


 
LEARNING OUTCOMES 
a
    
 
CHAPTER 
1 
 
 
PRELIMINARY 
 
 
At the end of this chapter, you will be able to: 
?
To know about the extent and commencement of the 
Companies Act, 2013. 
?
Identify about the application of the Act. 
?
Gain familiarity with the definition clause given in the Act. 
 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 1.2 
  
 
1. INTRODUCTION 
The Companies Act, 2013 is an Act to consolidate and amend the law relating to 
companies. The legislation was necessitated to meet changes in the national and 
international economic environment and for expansion and growth of economy 
of our country.  
The Companies Act, 2013 received the assent of the Hon’ble President of India on 
29
th
 August 2013 and was notified in the Official Gazette on 30
th
 August 2013 for 
public information stating that different dates may be appointed for enforcement 
of different provisions of the Companies Act, 2013, through notifications. 
Section 1 came into force on 30
th
 August 2013; 98 sections came into force on 
12
th
 September 2013; 143 sections were enforced from 1
st
 April 2014 and so on. 
The Companies Act, 2013 is rule based legislation with 470 sections and seven 
schedules. The entire Act has been divided into 29 chapters. Each chapter has at 
least one set of Rules. The Companies Act, 2013 aims to improve corporate 
governance, simplify regulations and strengthen the interests of investors. Thus, 
this enactment makes our corporate regulations more contemporary. 
2. SHORT TITLE, EXTENT, COMMENCEMENT 
AND APPLICATION 
Section 1 of the Companies Act, 2013 deals with the title of the Act according to 
which this Act may be called as the Companies Act, 2013. 
Preliminary chapter of the Act covers
Short title, extent and 
commencement 
Application Definitions
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
a
    
 
1.3 PRELIMINARY 
 
Further, section deals with the extent to the applicability of the Act. It says that 
the Act shall extend to the whole of India.  
This section also specifies the date of commencement of this Act. Accordingly, 
this section shall come into force at once and the remaining provisions of this Act 
shall come into force on such date as the Central Government may, by 
notification in the Official Gazette, appoint and different dates may be appointed 
for different provisions of this Act and any reference in any provision to the 
commencement of this Act shall be construed as a reference to the coming into 
force of that provision. 
This Section furthermore states of the applicability of the Act. The provisions of 
this Act shall apply to- 
(a) companies incorporated under this Act or under any previous company law; 
Example 1: ABC Ltd. was incorporated on 1.1.1972 under the Companies Act, 
1956. So, the Companies Act, 2013 shall also be applicable on ABC Ltd. 
(b) insurance companies, except in so far as the said provisions are inconsistent 
with the provisions of the Insurance Act, 1938 or the Insurance Regulatory 
and Development Authority Act, 1999; 
(c) banking companies, except in so far as the said provisions are inconsistent 
with the provisions of the Banking Regulation Act, 1949; 
(d) companies engaged in the generation or supply of electricity, except in so 
far as the said provisions are inconsistent with the provisions of the 
Electricity Act, 2003; 
(e) any other company governed by any special Act for the time being in force, 
except in so far as the said provisions are inconsistent with the provisions of 
such special Act, and 
(f) such body corporate, incorporated by any Act for the time being in force, as 
the Central Government may, by notification, specify in this behalf, subject 
to such exceptions, modifications or adaptation, as may be specified in the 
notification.  
Example 2: Food Corporation of India (FCI), National Highway Authority of India 
(NHAI) etc. 
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 1.4 
Note: The term “except in so far as” shall mean excluding to the extent of i.e. if 
any provision of the Companies Act is inconsistent with any of the provisions of 
other Act (Insurance Act, Banking Regulation Act, Electricity Act, etc.) to which the 
company is regulated than that company shall comply with the provisions of 
respective Act/Acts to which it is governed and regulated by. 
 
3. DEFINITIONS 
Section 2 of the Companies Act, 2013 is a definition section. It provides various 
terminologies used in the Act. Definitional Sections or Clauses, are known as 
‘internal aids to construction’ and can be of immense help in interpreting or 
construing the enactment or any of its parts.  
Also, according to clause 95 of section 2, words and expressions used and not 
defined in this Act but defined in the Securities Contracts (Regulation) Act, 1956 
or the Securities and Exchange Board of India Act, 1992 or the Depositories Act, 
1996 shall have the meanings respectively assigned to them in those Acts.   
When a word or phrase is defined as having a particular meaning in the 
enactment, it is that meaning alone which must be given to it while interpreting a 
Title Title
Companies 
Act, 2013
Extent Extent
Whole of India
Commencement Commencement
Section 1
came into
force at once
and the
remaining
provisions on
different dates
through
Notifications.
Application Application
1. Companies
2. Insurance 
companies
3. Banking 
companies
4. Companies 
producing / 
supplying 
electricity
5. Company 
regulated by 
special Act
6. Entities as 
notified by 
Central 
Government
© The Institute of Chartered Accountants of India
 
 
a
    
 
1.5 PRELIMINARY 
 
Section of the Act unless there be anything repugnant in the context. 
Section 2
1
 states that- In this Act, unless the context otherwise requires, — 
(1) Abridged prospectus means a memorandum containing 
such salient features of a prospectus as may be 
specified by the Securities and Exchange Board by making 
regulations in this behalf; 
(2) Accounting standards means the standards of accounting or any 
addendum thereto for companies or class of companies referred to in 
section 133; 
 Section 133 of the Act deals with the Central Government to Prescribe 
Accounting Standards. As per the section, the Central Government may 
prescribe the standards of accounting or any addendum thereto, as 
recommended by the Institute of Chartered Accountants of India, 
constituted under section 3 of the Chartered Accountants Act, 1949, in 
consultation with and after examination of the recommendations made by 
the National Financial Reporting Authority. 
 Section 133 is to be read with Rule 7 of the Companies (Accounts) Rules, 
2014. Accordingly, 
(i) The standards of accounting as specified under the Companies Act, 
1956 shall be deemed to be the accounting standards until accounting 
standards are specified by the Central Government under section 133. 
(ii) Till the National Financial Reporting Authority* is constituted under 
section 132 of the Act, the Central Government may prescribe the 
standards of accounting or any addendum thereto, as recommended 
by the Institute of Chartered Accountants of India in consultation with 
and after examination of the recommendations made by the National 
Advisory Committee on Accounting Standards constituted under 
section 210A of the Companies Act, 1956. 
 Further, in exercise of the powers conferred by section 133, the Central 
Government in consultation with the National Advisory Committee on 
Accounting Standards prescribed that Companies (Accounting Standards) 
 
1
 The number given in brackets i.e. ( ) at the start of definition, denotes the clauses to section 2. 
© The Institute of Chartered Accountants of India