Why this matters now
Companies Act 2013 is tested for Section 135 CSR (the world’s first mandatory CSR law), the OPC concept, NCLT/NCLAT replacement of CLB, women director mandate, Class Action Suits (post-Satyam), and the various Amendment Acts (2015, 2017, 2019, 2020).
Section 135 — Mandatory Corporate Social Responsibility
Section 135 makes India the first country in the world to mandate CSR by law. Companies meeting any of these thresholds:
- Net worth ≥ Rs 500 crore, OR
- Turnover ≥ Rs 1,000 crore, OR
- Net profit ≥ Rs 5 crore (in any of preceding 3 financial years)
must spend at least 2% of average net profit of preceding 3 years on CSR activities listed in Schedule VII (education, healthcare, sanitation, rural development, environment, gender equality, etc.). A CSR Committee of 3+ directors (at least 1 Independent Director) must be constituted. From 2019 Amendment, unspent CSR funds must be transferred to a govt fund within 6 months.
Other key innovations
| Provision | Detail |
|---|---|
| One Person Company (OPC) | § 2(62) & 3 — single member can incorporate a private limited company; allows individual entrepreneurs limited liability without partner requirement. |
| Independent Directors | § 149(4) — every listed company must have at least 1/3 of directors as Independent Directors. Duties under § 166. |
| Woman Director | § 149(1) — at least one woman director on Board of every listed company (later extended to certain unlisted public cos). |
| Class Action Suits | § 245 — minority shareholders/depositors can collectively sue the company, directors and auditors. A direct response to the 2009 Satyam fraud. |
| NCLT & NCLAT | § 408 & 410 — replaced Company Law Board (CLB), Board for Industrial & Financial Reconstruction (BIFR) and the Appellate Authority. NCLT also adjudicates IBC matters. |
| Serious Fraud Investigation Office (SFIO) | § 211-229 — statutory backing for SFIO (was earlier executive). Investigates corporate fraud above Rs 50 crore. |
| Rotation of Auditors | § 139(2) — mandatory rotation every 5 years (individual) / 10 years (firm) for listed and certain other companies. |
Major Amendments
- 2015 Amendment — common seal optional; restored authorised capital ceiling.
- 2017 Amendment — 81 sections amended; eased CSR reporting; clarified Independent Director.
- 2019 Amendment — jailable CSR violation (later watered down by 2020 amendment); 16 offences re-classified as civil.
- 2020 Amendment — decriminalisation of 46 compoundable offences; CSR fines without imprisonment; permits listing of Indian companies on overseas exchanges.
UPSC angle
Know Companies Act 2013 — replaced 1956 Act on 29 Aug 2013; Section 135 mandatory CSR (world’s first) for cos with net worth ≥500 cr OR turnover ≥1000 cr OR net profit ≥5 cr, spend 2% of avg net profit of preceding 3 yrs on Schedule VII activities; One Person Company (OPC); Independent Directors (1/3 of board) + Woman Director on Board (§149); Class Action Suits (§245, post-Satyam); NCLT & NCLAT replaced CLB/BIFR; Serious Fraud Investigation Office (SFIO) statutory backing; Auditor rotation §139(2); 2019 amendment criminalised CSR violation (later decriminalised by 2020).
Frequently asked questions
Which Act did the Companies Act 2013 replace?
The Companies Act 1956, which was India’s longest-running independent-India statute.
What is Section 135?
Mandatory CSR — companies meeting net worth, turnover or profit thresholds must spend 2% of their average 3-year net profit on Schedule VII activities.
What is an OPC?
One Person Company — a private limited company that may be incorporated by a single member, introduced for individual entrepreneurs.
What replaced the CLB and BIFR?
The National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), constituted under Section 408 and 410.