Difference Between Companies Act 1956 and 2013

A company is a collection of people who come together, create a unique legal organization, and work toward that goal. Indian companies were previously governed by the Companies Act of 1956; however, following a significant modification made in 2013, they are now governed by the Companies Act of 2013. It is important to remember that even though the 2013 Act is now in effect, businesses registered under the previous Act are still considered. The Companies Act of 2013 comprises 7 schedules and 464 sections. The old Companies Act of 1956 comprises 15 schedules and 658 sections.

In this article we’ll brief you the difference between the companies act 1956 and 2013 that’ll help you to understand the concept better.

Difference Between Companies Act 1956 and 2013

What is the difference between the Companies Act 1956 and 2013?

The fundamental difference between the Companies Act of 1956 and the Companies Act of 2013 is that while one may establish a company under the latest, one may not do so under the previous.

There are several points of difference, which include the following points.

  1. Charge

Previously, the Act of 1965 did not define charge. According to the Act of 2013, a charge is an interest or lien registered against any corporation's assets, operations, or both. Mortgages are included in this definition. The interest and lien absent from the earlier Act are once more present.

  1. Listed Company

The Act of 2013 specifies in section 2 (52) that a listed company is one whose securities are listed on any recognized stock exchange, as opposed to the Act of 1956, which defined a listed public company as one that has any of its securities listed in any recognized stock exchange. Therefore, the current Act covers all companies, not just public ones.

  1. Officer Who Is In Default

Section 2 of the present Act and Section 2 of the prior Act contained descriptions of this (31). (60). It is important to note that the policy now covers merchant bankers and transfer agents.

The Directors who are aware of the standard for attendance at board meetings or concerning the minutes will also be included with the CFO in this category, even if the company has a managing director or other senior managerial professional.

  1. One-Person Company

This concept did not know the prior Act. However, section 2 (62) of the current Act specifies that a business is referred to as a one-person company if it only has one member on the board of directors.

  1. Articles Of Association

The existing Act contains provisions relating to entrenchment, and the provisions of the Articles may be altered or amended subject to the satisfaction of the applicable requirements. According to the existing Act, corporations may obtain sample articles from the Central Government upon request. Along with that Notice of the Entrenchment must be given to the Registrar. The proper forms, Schedule 1's tables F, G, H, I, and J, should be used while constructing the Articles.

  1. Financial Year

Companies were free to choose the completion of their fiscal year within the terms of the Act of 1956. However, according to the current Act, a company's fiscal year ends on March 31.

  1. Financial Statement

The format of the financial statement under the Act of 1956 was specified in Schedule VI, whereas Schedule III of the current Act specifies the same.

  1. Number Of Partners

Following the previous Act, there might be a maximum of 10 partners in the banking industry and 20 partners overall. The current Act of 2013 sets a limit of 100.

  1. Maximum Shareholders

Apart from former and current workers, a Private Limited Company had 50 shareholders before the new Act. There are currently 200 shareholders (excluding past and present employees).

  1. Issue Of Share At Discount

The current Act forbids the issuance of shares at a discount, whereas the prior Act permitted it. However, ESOPs are provided to the employees at a discount under section 54.

  1. Interest On Calls In Arrears

The interest rate that might be applied to a call in arrears under the previous Act in the absence of a provision in the Articles was 5% per year. At the same time, the rate is 10% per year under the current Act.

  1. Interest On Calls In Advance

In the absence of a clause in the Articles, the interest could only be paid at a rate of 6% per year under the former Act, which is now 10% per year under the current Act.

  1. Minimum Subscription

In terms of the existing Act, it only applied to the shares. However, under the current Act, securities won't be issued unless the required minimum subscription has been met.

Top 7 features of the Companies Act 1956

  1. Independent Legal Entity

A new company has a legal structure that is distinct and clear from the individuals that make up its core. It is a self-regulating, independent, and self-governing body. It has the right to distribute any form of property for which it is the owner in any manner it chooses. Additionally, it has the authority to open a bank account, engage in business transactions, enter into shareholder agreements, and file lawsuits against itself or its shareholders.

  1. Incorporated Association

The Companies Act of 1956 mandates that all Indian corporations be registered. For the incorporation of a company, formal paperwork must be registered with the Registrar of the Companies. The Memorandum of Association outlines the purposes for which a company is established.

  1. Limited Liability

Since a business has its own legal identity and cannot be claimed by its members, it cannot use the private assets of its shareholders to pay off its debts.

  1. Common Seal

An industry's common seal serves as the legal representation for any choices taken on its behalf that the firm is unable to make on its own. Directors are the company's artificially created personas; they serve as the organization's spokesmen.

  1. Perpetual Existence

A firm is an artificial entity that is free from age-related limitations and other status-unaffecting variables like death, insolvency, retirement, etc. Perpetual existence has an infinite lifespan. Only laws have the power to terminate a company's existence.

  1. Transferability of Shares

Due to limitations, shareholders of a private company are unable to transfer their shares in the same manner as those of a public limited company. Because the company's shares are transferable, the owner can sell his interest in the business to a potential buyer. Shares of publicly traded firms can be transferred easily.

  1. Separations of management and ownership

The Act explains the steps involved in forming a company, including its name, procedure, fees, constitution, and members, as well as the goal of the organization and all other factors involving the company, its directors, who make decisions, and its HOD, who handles the primary responsibility and makes decisions in line with the planning process and other tasks and liability related to the company matters most. It also discusses the closing down and liquidation of the company during that time.

Top 7 Features of companies Act 2013

  1. Class action suits for Shareholders

The Companies Act of 2013 introduced a brand-new idea of class action lawsuits to raise awareness of shareholders' and other stakeholders' rights.

  1. More power for Shareholders

The Companies Act of 2013 mandates shareholder approval for a number of big transactions.

  1. Women empowerment in the corporate sector

At least one female director must be appointed to the board of directors, according to the 2013 Companies Act (for certain classes of companies).

  1. Corporate Social Responsibility

According to the Companies Act of 2013, several classes of Companies are required to invest a specific sum of money each year in projects and activities that demonstrate their commitment to CSR.

  1. National Company Law Tribunal

The National Company Law Tribunal and the National Company Law Appellate Tribunal were established by the Companies Act of 2013 to take the position of the Company Law Board and the Board for Industrial and Financial Reconstruction. They would deliver specialized justice while relieving the Courts of their burden.

  1. Fast Track Mergers

After receiving the Indian government's consent, the Companies Act of 2013 suggests a streamlined and expedited process for mergers and amalgamations of certain classes of companies, such as holding and subsidiary companies and small businesses.

  1. Cross Border Mergers

According to the Companies Act of 2013, a foreign business may combine with an Indian firm and vice versa, but only with the prior consent of the RBI.


The Companies Act of 1956 and the Companies Act of 2013 differ in a few ways as a result. The current Act includes measures for the effective management of the enterprises and more closely monitors their operations.

The Companies Act of 2013 makes the merger process more effective. Still, it also has some ambiguities that need to be changed to lessen or avoid any complication in the process, which can be found after the relevant parts are announced. The chance for globalization is created by the outward mergers that are currently permitted (when notified).

Frequently Asked Questions (FAQs)

Q1. What are the major differences between companies act 1956 and 2013?

Ans. You can get all the necessary information mentioned in the above blog.

Q2. Are there any changes after companies act 2013?

Ans. No, there are no changes happening after companies act 2013.

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