Right signals to investors from new company law – Dr P. T. Giridharan, Jt Director, Institute of Chartered Accountants of India

Monday November 11, 2013 , 2 min Read

The new law is out for companies, in the form of the Companies Act, 2013. It is a compact and condensed edition, coming for the first time, nearly after 10 decades, that is from 1903 to 2013, says Dr P. T. Giridharan, Joint Director, The Institute of Chartered Accountants of India. He adds that the country is witnessing, in the new company law regime, a major overhaul in the formation and growth of companies.One of the important features of the 2013 Act is the most sought-after development of entrepreneurship, notes Giridharan. “The Act has made a specific provision for the formation of One Person Company (OPC), on the lines of the UK and Singapore, and also entrepreneurs can go in for a small company.”

OPC and small company

‘One Person Company’ means a company which has only one person as a member, defines Section 2(62). The other common types of companies are ‘public,’ with seven or more persons, and ‘private,’ with two or more persons. Minimum number of directors required in OPC is one, compared to two in private companies, and three in public companies.

‘Small company’ means a company, other than a public company, where paid-up share capital does not exceed Rs 50 lakh or such higher amount as may be prescribed which shall not be more than Rs 5 crore; or turnover of which as per its last profit and loss account does not exceed Rs 2 crore or such higher amount as may be prescribed which shall not be more than Rs 20 crore. (Section 2(85))

The procedures for starting up one person company and small company are very less and the government intervention and regulatory oversight is not burdensome, observes Giridharan. “This is the time for all the venture capitalists, angel investors, and private equity players to come to India and start up small companies that will come under less of regimentation control,” he highlights. “These are the new features that the government has introduced for the very first time. And it is a signal to the world economy that India is definitely a place for not only for investment but also for the capitalists to come and sow the seeds in India.”