Disclosures Under Corporate Law

Corporate or Corporation is derived from a Latin term “corpus” which indicates a “body”. Governance indicates directing the procedures and frameworks put for fulfilling partner wish. As the change of nature, with the ever-changing business environment, the way in which business firms are supposed to work also changes rapidly. India’s corporate governance structure contains ambits of measures that advance responsibility and liability of governance and straightforwardness of money related. The administrative part of the corporate governance on the other side has attempted an arrangement of changes to enhance revelation standards of money related data and to refresh bookkeeping rules by the government. The new Company Act of 2013 replaces the Companies Act, 1956 and expects to enhance corporate governance norms streamline directions and grace the interests of minority investors. With these changing circumstances, it is in the best interest of the nation to keep on incorporating various governance aspects arising in terms of challenges due to changes taking place in the corporate arena. This paper is, therefore, an attempt to understand such changing corporate laws in India by comparing the two major company’s Act which is Companies Act, 1956 & the recently introduced Companies Act 2013.


The annals of corporate laws are ageing extremely old in India & date back to the period of Chola & Patliputra (now Patna) who were patrons of trade in the ancient time. The paper attempts to explain the development of corporate laws over time in India & then to bring about the major differences between the 60 years old Companies Act, 1956 & the recently introduced Companies Act, 2013 with almost 6 years. India has got the independence from British control in the year 1947 but the process of making & strengthening corporate laws had already begun before it. With the advent of various enactments in England, various laws were also getting enacted in India that resulted in acts such as Joint Stock Companies Act, 1850 of India, Joint Stock Companies Act, 1857 of India, Companies Act, 1956 of India, which is now replaced by the Companies Act, 2013.

“Corporate governance is the framework by which companies are coordinated and controlled. The sheets of executives are in charge of the governance of their companies under Corporate Governance. The investor’s part in governance is to delegate the executives and the reviewers to fulfil themselves that a proper governance structure is set up. The onus and the obligations of the board to incorporate setting the organization’s key points, giving the authority to place them into impact, directing the administration of the business and answering to investors on their stewardship. The board’s activities are liable to laws, directions and the investors all in all gathering. Corporate Governance is the preface as well as an acknowledgement by the administration of the unavoidable privileges of investors as the genuine proprietors of the partnership and of their own part as trustees for the benefit of the investors. It is about oath or pledge to values, about moral business lead and about making a qualification amongst individual and corporate finances in the administration of an organization.

The Company Act, 1956 has also been in need of a substantial revamp for quite some time now, to make it more contemporary and relevant to regulators, corporate and other stakeholders in India.

While many unsuccessful makes an attempt is created within the past to revise the prevailing 1956 Act, there have been quite a few changes in the administrative portion of the 1956 Act.

The Companies Act, 1956 was based on the recommendations of H.C. Bhaba Committee. The most recent attempt to revise the 1956 Act was the Companies Bill of 2009 which was introduced on 3 August 2009 in the House of the People (Lok Sabha).

On thirty-first August 2010, this firms Bill of 2009 was noted the Parliamentary Committee on Finance, that submitted its report and was withdrawn once the introduction of the Companies Bill of 2011. The Companies Bill of 2011 was also considered by the Parliamentary Standing Committee (PSC) on Finance which submitted its report on 26th June 2012. Subsequently, the Bill was considered, accepted and approved by the Lok Sabha on 18th December 2012 as the Companies Bill, 2012. The Bill was then considered, accepted and approved by the Rajya Sabha too on 8 August 2013. It received the assent of President on 29th August 2013 and has now become the Companies Act, 2013 and is based on the recommendations of J. J. Irani committee. The changes in the Companies Act of 2013 have far-reaching implications that are set to significantly change the manner in which corporate operates in India. The Companies Act, 2013 does not only repealed the Companies Act 1956 but also provides for so many unheard concepts like OPC and Disclosure Concept. The Act comprises of 29 chapters, 470 clauses and 7 schedules and has introduced few new concepts. The Ministry of Corporate Affairs (MCA) has time to time amended and implemented new norms or has regularized the given norms, rules and regulations under this Act.


Section 90 of the Company Act, 2013 requires that every individual who, either by himself or with others (including a trust and persons resident outside India), qualifies as a significant beneficial owner (SBO) of a company to make a declaration to that company specifying the nature of his beneficial interest of at least 10% in shares of a company or has the right to exercise significant influence or control (as explained in Section 2(27) of the Act) over a company.
Section 90 of the Act requires every company to do the following, inter alia:

1. Maintain a register of the interest declared by individuals along with the prescribed particulars of such individuals and keep the register open for inspection by shareholders;

2. file a return of SBOs of the company with the Registrar, containing the prescribed particulars;

3. give notice to any person whom the company believes to be an SBO of the company or to have been an SBO of the company during the preceding three years and United Nations agency isn’t registered as an SBO; and

4. if a person fails to provide the information sought by a company, the company is required to apply to the National Company Law Tribunal (NCLT) for an order directing that the shares in question be subject to prescribed restrictions including those with respect to transfer of shares and suspension of rights attached to the shares, amongst others.

Who qualifies as an SBO?

  • An individual who is holding the ultimate beneficial interest of not less than 10% in a company but whose name is not entered in the register of members of a company as the holder of such shares;
    • In the case where the company or a partnership firm itself is a shareholder, the SBO is the natural person who, whether acting alone or together with others, holds not

less than 100 % of the share capital of the corporate or is entitled to 100 % of the profits of the partnership firm or United Nations agency exercises vital influence or management in

the company or partnership firm through other means;

  • For a trust (who is acting through its trustee), the SBO shall include the settlor, trustee or beneficiaries of the trust with not less than 10% interest in the trust and alternative  persons physical exertion effective management over the trust; and
  • Where no natural person is remarkable in case the member is a partnership firm or a company whatever it may be, the SBO would be the relevant natural person who holds the position of senior managing official in that company or partnership firm.

The new company law states that the primary obligation of disclosure of significant beneficial interest has been cast and given on all natural persons who hold such interest indirectly or directly or both regardless of their domicile or residential status. Natural persons United Nations agency, either directly or along with others, hold 10% or more shareholding of a company, or who exercise ‘significant influence’ or ‘control’ in a company, are required to make a declaration of the character of their interests to the corporate beside particulars of instruments embodying the transfer or acquisition of useful interest. Failure to adjust to this demand or suppression of any material data would attract each financial and penal consequences.

A director’s report is meant to clarify to shareholders, the overall financial position of the Company and its operation & Business Scope. In Companies Act, 2013, lots of sections make it mandatory to make disclosure in Boards report contrary to the previous Act, where only section 217, talks about the Boards Report. There are series of advantages of this disclosure as like it took Good Governance, Transparency, Control on Fraudulent Activities, Proper Knowledge, Stable Relationship, Investment Secure or trusted etc. Company shall disclose/publish its name, address of its registered office, the Corporate Identity Number (CIN), Telephone number, fax number if any, email and the name of the person who may be contacted just in case of any queries or grievances on the landing/home page of the aforesaid website. The company should also disclose its website address on its Letter Head business letters, billheads, letter papers and in all its notices and other official publications.

On a concluding note, the researcher can say that with the passes of time and the corporate sector becomes more and more integrated and developed with the society so there is a need to incorporate necessary changes in corporate laws, governing this sector and the companies or partnership firm in some cases. No doubt the introduction of a very comprehensive Companies Act, 2013 is a milestone now but the concern is about its implementation and changes with reference to time. No act is helpful if it is not implemented in its spirit with some core objectives similarly there is also a need to have unified laws for corporate sectors to remove ambiguities and clashes due the existence of multiple Acts and Statutes. The Companies Act, 2013 overcomes some of the major loopholes of Companies Act, 1956 and has introduced various new concepts in it but there might be some loopholes with the companies Act 2013 as well especially when in the areas where it does not provide for punitive or penal actions or disclosure concepts like in the case of Section 135. So there is a need to have a re-look at some integral as well as statutory parts of the newly introduced Act, i.e.; The Company Act, 2013.

In the recent move, the introduction of Insolvency and Bankruptcy Code – 2016 has added a new dilemma in the corporate sector which can be an emerging part with reference to companies registered under The Companies Act, 2013.

Adarsh Ranjan

Adarsh Ranjan, Content Writer, Law Corner B.Sc. LL.B. (Hons.), 5th year, Central University of South Bihar, Gaya

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