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Is company law complicated?

Durga Rao 
on 26 March 2009

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As everybody know, the formation and functioning of companies in India are governed by the Companies Act, 1956, the rules framed by the Central Government, the SEBI regulations and RBI guidelines and regulations on certain issues like inter-country transfer of shares. If we look at as to what is  company, the characteristics of company under law, the formation of company, the set-up, the meetings, the filing and annual accounts, one may say that the company law is not complicated, but, one must observe various rules and regulations. But, its not true. Not only following the rules and regulations, certain settled concepts are developed by the Courts from time to time as to how the provisions of company law are to be interpreted. I would say that the normal rules of interpretation may not have application logically while deciding company matters which are very very complicated. For example, we read winding up provisions under the Companies Act, 1956. If a company fails to meet the demand of some debt, then, under law, the debtor can file an application to the High Court seeking winding up of the comapny on the assumption that the company is not able to pay its debt. But, there exist many complications in this. The company may be really very very big and may have many shareholders. The company may be financially sound. When the company is financially sound, but, failed to pay the debt even after the demand, merely becaue the provision says that an winding up application can be filed and pursued, the courts may not order winding-up of the company. Its logical. Because, a person who has acted on behalf of the comapny might have neglected or there may be other reasons for not meeting the demand of debt. Just because of ones fault, all the shareholders of the company are not allowed to suffer and the Court will consider the interests of the shareholders primarily. Its a concept developed by the Court. There are many examples to say that the company is not that much simple as many think. The Company Law Board, when an application filed under section 397/398 of the Companies Act, will strive to settle the issue amicably considering the future of the company and the interests of the shareholders. There exist many issues to be seen while dealing with the company matters. As such, I would say that merely observing the rules and regulations governing companies may not be enough and one must study all the settled concepts of law. Seen from this angle, I would say and agree with the argument that the Company Law is complicated.




Category Corporate Law
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Durga Rao 

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