23 June 2021
sir as we know according to section 1(4)(f) that company law applies to any body corporate incorporated by any special act which central govt. by notification, specify in this behalf, subject to such exceptions, modifications or adaptation, as may be specified in the notification". so here does company law applies on LIC as it is incorporated under LIC Act and is a Public Financial Institution. morever, what are PFI, whcih are shown in books as type of companies. so are they companies or not or what. plz explain in details. thank you!!!
06 July 2024
The applicability of company law provisions to entities like LIC (Life Insurance Corporation of India) and understanding Public Financial Institutions (PFIs) involves specific considerations under Indian corporate law:
### Applicability of Company Law to LIC:
1. **LIC Incorporation:** - LIC is incorporated under the Life Insurance Corporation Act, 1956, which is a special act passed by the Parliament of India. - Section 1(4)(f) of the Companies Act, 2013 states that company law provisions apply to any body corporate incorporated by any special act unless exempted or modified by notification. - Since LIC is incorporated by a special act (LIC Act), it falls under the purview of company law, subject to any exceptions or modifications notified by the central government.
2. **Applicability of Company Law:** - As per the Companies Act, provisions related to corporate governance, accounting, auditing, shareholder rights, and other corporate matters generally apply to LIC. - However, specific provisions may be modified or exempted for LIC or other PFIs through notifications issued by the central government.
### Public Financial Institutions (PFIs):
1. **Definition and Characteristics:** - PFIs are entities primarily engaged in financial activities that are of public importance or significance. - They include institutions like LIC, State Bank of India (SBI), Housing Development Finance Corporation (HDFC), etc., which are instrumental in providing financial services and managing public funds. - PFIs are typically established under specific acts of Parliament or state legislatures, defining their scope, functions, and governance.
2. **Legal Status:** - PFIs are not termed "companies" in the strict sense under the Companies Act, as they are governed by their respective founding acts (e.g., LIC Act, SBI Act). - However, they operate under similar principles of governance and accountability as companies, ensuring transparency, regulatory compliance, and protection of stakeholders' interests.
3. **Regulation and Oversight:** - PFIs are subject to oversight by regulatory bodies such as the Insurance Regulatory and Development Authority of India (IRDAI) in the case of LIC, and the Reserve Bank of India (RBI) for banking PFIs like SBI. - They are required to comply with regulatory frameworks specific to their sector, alongside relevant provisions of company law that apply to them.
### Conclusion:
- **LIC and other PFIs** are entities incorporated under special acts and are vital institutions in the financial sector. While they are not strictly "companies" under the Companies Act, they are subject to similar principles of corporate governance and regulatory oversight. - The applicability of company law provisions to LIC is ensured through specific provisions and notifications under the Companies Act, 2013, recognizing the unique regulatory framework governing PFIs.
In summary, while LIC and PFIs are not conventional companies under the Companies Act, they are subject to governance and compliance requirements that align with corporate law principles, ensuring accountability and transparency in their operations.
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