HISTORY OF COMPANY LEGISLATION, UK.
Company Legislation in India owes its origin to the English Company Law. The Companies
Acts passed from time to time in India have been following the English Companies Acts,
with certain modifications. Even the Companies Act, 1956, it is said, closely followed the
U.K. Companies Act, 1948. In London, the earliest business associations during the 11th to
13th centuries were called the ‗merchant guilds‘. These guilds obtained charters from the
Crown mainly to secure for their members, a monopoly in respect of particular trade or
commodity. By the end of 16th century Royal Charters granted monopoly of trade to
members of the Company over a certain territory. These companies were called regulated
Companies. East India Company was one of such regulated companies established by a
Charter in 1600. It had monopoly of trade in India; its members could carry on trade
individually and had the option to subscribe to the joint fund or stock of the company.
In 1653, however, a permanent subscribed fund was introduced, called joint fund or stock of
the company. Accordingly, the term joint stock came into use. The profits were, however,
shared at the end of each voyage. By the end of 17th century all these companies or merchant
guilds any many regulated companies which the Crown had incorporated, meanwhile had
established permanent fixed capitals represented by shares which were freely saleable and
transferable. The property with which 2 the companies treated was recognised as being under
the exclusive control of their governors or directors for the purpose of carrying on these
undertakings and was not available for division between members at intervals of time.
In 1720, the British Parliament came down heavily on such companies in order to check the
orgy of speculation in shares and securities which had reached its heights. Consequently, the
Bubble Act, 1720 was passed. The Act prohibited generally the use of the form of
corporations unless a corporation was authorised to act as such by an Act of Parliament or
Royal Charter. However, it exempted all undertakings operative especially before June 24,
1978. With the passing of the Act companies disappeared like the bursting of the bubble.
In 1825, the Bubble Act was repealed. In 1834, the Trading Companies Act, 1834 was passed
empowering the Crown to confer by Letters Patent any of the privileges of incorporation
except limited liability, without actually granting a Charter. The Chartered Companies Act,
1837 re-enacted the Act of 1834 providing for the first time that personal liability of members
might be expressly limited by the Letters Patent to a specified amount per share. In 1844, the
Joint Stock Companies Act was passed for the first time. This Act provided for the
registration of Companies with more than 25 members or with shares transferable without the
consent of all the members. It also provided for incorporation by registration. The Act for the
first time created the office of the ―Registrar of Companies‖ and required particulars of the
Company‘s constitution, changes therein and annual returns to be filed with the Registrar so
that there would be full record retained officially.
In 1855, however, an Act of Parliament was passed called Limited Liability Act, 1855 by
which any company registered under the Act of 1844 might limit the liability of its members
for its debts and obligations generally to the amount unpaid of their shares. The Act was
repealed within a few months. In fact, the 4 English Companies Act, 1856 known as the Joint
Stock Companies Act, 1856 replaced both the Acts of 1844 and 1855. Under this Act, the
company legislation assumed for the first time a form which has been broadly handed down
almost to the present day, subject to various amendments which were made from time to time
to suit various exigencies. Under this Act seven or more persons could form themselves into
an incorporated company with or without limited liability by signing a memorandum of
association and complying with the requirements of the Act. The Act of 1856, in its turn, was
repealed by the Companies Act, 1862 which followed the same pattern but contained a
number of improvements. The Companies Act, 1862 was amended by 17 later Acts, the most
important of which enabled Companies to reduce their share capital to alter the objects which
they were formed to carry out, imposed liability on promoters and directors for false
statements inviting public subscription to shares and debentures, and introduced the concept
of private company, which could be incorporated with only two members. In 1908, the whole
of the existing statute law was consolidated and after further amending statutes, in 1929 and
1948, the Companies Act of those years repealed the existing law and enacted new
consolidated legislation. The Companies Act, 1948 was itself amended and supplemented by
the Companies Acts of 1967, 1976, 1980, 1981 and 1983. In 1985, the whole of the existing
statute law relating exclusively to companies was consolidated in the Companies Act, 1985
which is the present statute governing companies in England.
