The Companies Act 1956 is administered by the Government of India, there for,appointed on 25th October,1950, a committee of 12 members representing various interests under the Chairmanship of Mr. H.C Bhabha. The committee submitted a comprehensive report on all aspects of Company Law in April, 1952.
The recommendation of the Bhabha Committee culminated in the most comprehensive and the voluminous law on the subject in the companies Act of 1956. The Companies Act of 1956 which is patterned on the lines of the English Companies Act 1948 is a comprehensive piece of legislation covering the entire field of company organization and management. This Act has been amended several times since it was codified.
Objectives of Companies Act
The company Law has been enacted to consolidate and amend the law relating to companies and certain other associations. It seeks to achieve the following objective:
- To encourage investment.
- To ensure proper administration.
- To prevent malpractices, and
- To allow for investigation.
Salient Features of the Companies Act, 1956
- It has provided rigid and strict provisions relating to the manner in which companies are promoted and formed with particular reference to company promoters, underwriters prospectus, minimum subscription and allotment of shares. This will assure business morality in company promotion and management of new companies.
- Public limited companies are now regarded as socio-economic institutions and national assets and not merely organizations of shareholders for maximizing profits at any cost. The Central Government is given extensive and comprehensive powers to intervene directly in the conduct and administration of the business of a public company in order to protect public and social interests.
- Recognizing ever-increasing importance of active Government participation in economic and industrial development under the five year economic plans, the Companies Act has introduced the institution of Government Companies. There are special provisions dealing with Government Companies. Necessary exemptions are provided for the smooth working of these companies operating in the public sector as the best substitute of statutory corporations to carry on industrial and commercial activities. Most of the public enterprises are run by government companies.
- The provisions of the Companies Act contribute appreciable towards the achievement of social and economic objectives.