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The Companies Act,1956

Title : The Companies Act,1956

Year : 1956



(1) In this Act, unless the context otherwise requires, the expressions "company",    "existing company", "private company" and "public  company" shall, subject to the provisions of sub-section (2), have the meanings specified below:-

(i) "Company" means a company formed and registered under this Act or an existing company as defined in clause (ii);

(ii) "Existing company" means a company formed and registered under any of the previous companies laws specified below:

(a) Any Act or Acts relating to companies in force before the Indian Companies Act, 1866 (10 of 1866) and repealed by the Act;

(b) The Indian Companies Act, 1866 (10 of 1866);

(c) The Indian Companies Act, 1882 (6 of 1882);

(d) The Indian Companies Act, 1913 (7 of 1933);

(e) The Registration of Transferred Companies Ordinance 1942 (54 of 1942); and

1*[(f) Any law corresponding to any of the Acts or the Ordinance aforesaid and in force-

(1) In the merged territories or in a Part B State (other than the State of Jammu and Kashmir), or any part thereof, before the extension thereto of the Indian Companies Act, 1913 (7 of 1913); or

(2) In the State of Jammu and Kashmir, or any part thereof, before the commencement of the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956),2[in so far as banking, insurance and financial corporations are concerned, and before the commencement of the Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968) insofar as other corporations are concerned];]

3*[(g) The Portugese Commercial Code4[***], in so far as it relates to "sociedades anonimas";]

(iii) "Private company"5*[means a company which has a minimum paid-up capital of one lakh rupees or such higher paid-up capital as may be prescribed, and by its articles,-]

(a) Restricts the right to transfer its shares, if any;

(b) Limits the number of its members to fifty not including-

(i) Persons who are in the employment of the company, and

(ii) Persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased; and

(c) Prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company:

6*[(d) Prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives:]

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member.

7*[(iv) "public company" means a company which-

(a) Is not a private company;

(b) Has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed.

(c) Is a private company which is a subsidiary of a company which is not a private company;]

(2) Unless the context otherwise requires, the following companies shall not be included within the scope of any of the expressions defined in clauses (i) to (iv) of sub-section (1), and such companies shall be deemed, for the purposes of this Act, to have been formed and registered outside India:-

(a) A company the registered office whereof is in Burma, Aden or Pakistan and which immediately before the separation of that country from India was a company as defined in clause (i) of sub-section (1);

8[***]

6*(3)Every private company, existing on the commencement of Act 53 of 2000, with a paid-up capital of less than one lakh rupees, shall, within a period of two years from such commencement, enhance its paid-up capital to one lakh rupees.

(4) Every public company, existing on the commencement of Act 53 of 2000, with a paid-up capital of less than five lakh rupees, shall within a period of two years from such commencement, enhance its paid-up capital to five lakh rupees.

(5) Where a private company or a public company fails to enhance its paid-up capital in the manner specified in sub-section (3) or sub-section (4), such company shall be deemed to be a defunct company within the meaning of section 560 and its name shall be struck off from the register by the Registrar.

(6) A company registered under section 25 before or after the commencement of Companies (Amendment) Act, 2000 shall not be required to have minimum paid-up capital specified in this section.]

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1. Substituted by Act 62 of 1956, Section 2 and Schedule, for clause (f) w.e.f. 1-11-1956.

2. Inserted by Act 25 of 1968 Section 2 and Schedule w.e.f. 15-8-1968.

3. Inserted by Goa, Daman and Diu (Laws) No. 2 Regulation, 1963.

4. The words "Carta Lei of the 11th April, 1901" omitted by Act 52 of 1964, Section 3 and Schedule II (w.e.f. 29-12-1964).

5. Substituted by Act 53 of 2000, Section 3, for "means a company which, by its articles, -" (.w.e.f. 13-12-2000).

6. Inserted by the Companies (Amandment) Act,  2000, Section 3, for "means a company which, by its articles,

7. Substituted by the Companies (Amandment) Act,  2000, Section 3.

8. Clause (b) omitted by Act 62 of 1956, Section 2 and Schedule (w.e.f. 1-11-1956).

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(1) For the purposes of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if,-
 
(a) That other controls the composition of its Board of directors; or

1*[(b) that other-

(i) Where the first-mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company;

(ii) Where the first-mentioned company is any other company, holds more than half in nominal value of its equity share capital; or]

(c) The first-mentioned company is a subsidiary of any company which is that other 's subsidiary.

Illustration

Company B is a subsidiary of Company A, and Company C is a subsidiary of Company B.Company C is a subsidiary of Company A, by virtue of clause (c) above. If Company is a subsidiary of Company C, Company D will be a subsidiary of Company B and consequently also of Company A, by virtue of clause (c) above; and so on.

(2) For the purposes of sub-section (1), the composition of a company's Board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it at its discretion without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships; but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to which any of the following conditions is satisfied, that is to say:-

(a) That a person cannot be appointed thereto without the exercise in his favour by that other company of such a power as aforesaid;

(b) That a person's appointment thereto follows necessarily from his appointment as director2[***] or manager of, or to any other office or employment in, that other company; or

3*[(c) That the directorship is held by an individual nominated by that other company or a subsidiary thereof.]

(3) In determining whether one company is a subsidiary of another,-

(a) Any shares held or power exercisable by that other company in a fiduciary capacity shall be treated as not held or exercisable by it;

(b) Subject to the provisions of clauses (c) and (d), any shares held or power exercisable-

(i) By any person as a nominee for that other company (except where that other is concerned only in a fiduciary capacity); or

(ii) By, or by a nominee for, a subsidiary of that other company, not being a subsidiary which is concerned only in a fiduciary capacity,
shall be treated as held or exercisable by that other company;

(c) Any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first-mentioned company or of a trust deed for securing any issue of such debentures shall be disregarded;

(d) Any shares held or power exercisable by, or by a nominee for, that other or its subsidiary [not being held or exercisable as mentioned in clause (c)] shall be treated as not held, or exercisable by that other, if the ordinary business of that other or its subsidiary as the case may be, includes the lending of money and the shares are held or the power is exercisable as aforesaid by way of security only for the purposes of a transaction entered into in the ordinary course of that business.

(4) For the purposes of this Act, a company shall be deemed to be the holding company of another if, but only if, that other is its subsidiary.

(5) In this section, the expression "company" includes any body corporate, and the expression "equity share capital" has the same meaning as in sub-section (2) of section 85.

(6) In the case of a body corporate which is incorporated in a country outside India, a subsidiary or holding company of the body corporate under the law of such country shall be deemed to be a subsidiary or holding company of the body corporate within the meaning and for the purposes of this Act also, whether the requirements of this section are fulfilled or not.

4*[(7) A private company, being a subsidiary of a body corporate incorporated outside India, which, if incorporated in India, would be a public company within the meaning of this Act, shall be deemed for the purposes of this Act to be a subsidiary of a public company if the entire share capital in that private company is not held by that body corporate whether alone or together with one or more other bodies corporate incorporated outside India.]

4A - 5* Public financial institutions

(1) Each of the financial institutions specified in this sub-section shall be regarded, for the purposes of this Act, as a public financial institution, namely:-

(i) The Industrial Credit and Investment Corporation of India Limited, a company formed and registered under the Indian Companies Act, 1913 (7 of 1913);

(ii) The Industrial Finance Corporation of India, established under section 3 of the Industrial Finance Corporation Act, 1948 (7 of 1948);

(iii) The Industrial Development Bank of India, established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964);

(iv) The Life Insurance Corporation of India, established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956);

(v) The Unit Trust of India, established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963);

6*[(vi) The Infrastructure Development Finance Company Limited, a company formed and registered under this Act.]

7[* * *]

(2) Subject to the provisions of sub-section (1) the Central Government may, by notification in the Official Gazette, specify such other institution as it may think fit to be a public financial institution:

Provided
that no institution shall be so specified unless-

(i) It has been established or constituted by or under any Central Act, or

(ii) Not less than fifty-one per cent of the paid-up share capital of such institution is held or controlled by the Central Government.]

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1. Substituted by Act 65 of 1960, Section 3, for clause (b) (w.e.f. 28-12-1960).

2. The words ",managing agent, secretaries and treasurers" omitted by the Companies (Amandment) Act,  2000, Section 4.

3. Substituted by Act 65 of 1960, Section 3, for clause (c) (w.e.f. 28-12-1960).

4. Inserted by Act 65 of 1960, Section 3 (w.e.f. 28-12-1960).

5. Inserted by Act 41 of 1974, Section 2 w.e.f. 1-2-1975.

6. Inserted by Act 21 of 1999, Section 2 w.r.e.f. 31-10-1998.

7. Omitted by The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act 2004.

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Last updated on September, 2016

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