CA INTERMEDIATE

PAPER 2
CORPORATE AND OTHER LAWS

CHART
BOOK
BY CS SAI
 INDEX
CHAPTERS PAGE NUMBERS
MODULE - 1
2. Incorporation of Company and Matters Incidental thereto 1–6
3. Prospectus and Allotment of Securities 7 – 15
4. Share Capital and Debentures 16 – 22
5. Acceptance of Deposits by Companies 23 – 26
6. Registration of Charges 27 – 30
7. Management and Administration 31 – 38
8. Declaration and payment of Dividend 39 – 43
9. Accounts of Companies 44 – 49
10.Audit and Auditors 50 – 55
MODULE - 2
1. The Indian Contract Act, 1872
Unit – 1: Contract of Indemnity and Guarantee 56 – 58
Unit – 2: Bailment and Pledge 59 – 61
Unit – 3: Agency 62 – 64
2. The Negotiable Instruments Act, 1881 65 – 72
3. The General Clauses Act, 1897 73 – 76
4. Interpretation of Statutes 77 – 81
 MODULE – 1
Chapter-2: Incorporation of Company and Matters Incidental thereto

I. Types of Company based on Formation (Sec 3)

Private Limited Company 2(68) Public Company 2(71) OPC 2(62)

A company which by its articles: A company which is not a private company; provided, subsidiary
1. Restricts the right to transfer its shares. of public company, which is a private company shall be deemed
2. Limits number of members to 200 except in case of OPC; provided: to be public company.
a) Joint Shareholders to be treated as one
b) Past and Present employees being members are to be excluded.
3. Prohibits invitation to public to subscribe.

II. Definitions

Small Company [Sec 2(85)] Subsidiary Company [Sec 2(87)]

A company other than Public Company having A company in which holding company

Paid up share capital not and Turnover of preceding (i) Controls (OR) (ii) Controls more (OR) Deemed Subsidiary
exceeding Rs. 50 lakh or financial year does not composition of BOD than one-half of
such higher amount as may exceed Rs. 2 crore or such total voting power When (i) or (ii) is of
be prescribed Rs. 10 crore higher amount as may be Power to appoint or another subsidiary of
prescribed Rs. 100 crore remove majority of (Singly or together holding company
directors with its substitutes)

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 III. Memorandum of Association (Sec 4)
It consists 6 clauses

Name Clause Registered Office Clause Object Clause Liability Clause Capital Clause Subscription Clause

Indicates ltd. The state where Indicates if company is The total authorized capital The number of shares
(or) pvt. ltd. registered office is - Limited by share & number of shares & face subscribed by initial
- Sec 8 exception situated - Limited by guarantee value of shares shareholders & their
- Unlimited company signatures

Doctrines

Ultra Vires Constructive Notice Indoor Management

- A company cannot depart from its MOA. - If a person fails to read the public - Outsiders need not enquire whether internal
- Such departure is called as ultra vires transaction. documents, the law assumes he is proceedings are followed correctly.
- It is void & hence not enforceable. aware of it. - It protects outsiders from the company.
- Cannot be ratified. - It protects company against outsiders Exceptions
Case – Law: Ashbury Railway Carriage and Iron Case – Law: Kotla Venkataswamy vs C
Company Limited vs Riche Rammurthi Knowledge of Negligence Forgery
Irregularity

IV. Articles of Association (Sec 5)

It contains regulation The company may adopt all This section shall not apply to Entrenchment
for management of clauses or modify the clauses company registered under previous Making the law more stricter
the company of Model article company law, unless amended
Procedure

Private Company Public Company

All members should agree Special Resolution

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 V. Effect of Registered MOA & AOA (Sec 10)

Company is liable to members Members are liable to company Members not liable to each other Money payable by any member
under MOA/AOA shall be a debt
due to company

VI. Commencement of Business [Sec 10(A)]

Declaration to be filed by director within 180 days of incorporation, that Failure to file may lead to
- Penalty
every subscriber of share has paid the company has file with ROC its registered - Removal of name from Register of Companies by ROC
value agreed by him office address

To be certified by PCA / PCS / PCMA

VII. Incorporation of Company (Sec 7)

Stage – I Stage – II
Reservation of Name
Care to be taken while
choosing name of company Application to
Rule 8, 8A, 8B
Reserve name of proposed company (OR) Change of Name

It shall be reserved for 20 days It shall be reserved for 60 days

If it is found that name was reserved by giving wrong information; then

If company is not Incorporated If company is Incorporated

a) Reserved name shall be cancelled a) Direct for change of name; (or)

b) Penalty of Rs. 1 lakh b) Action for strike off; (or)
c) Winding up

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 Stage – III Stage – IV Stage – V

Documents & Information to be prepared If all the information is correct, Order of Tribunal
(Documents to be preserved until Dissolution) the ROC shall issue
1) MOA & AOA duly signed by all subscribers. If company is incorporated by furnishing false
2) Declaration by subscribers & 1st Directors; that Certificate of Incorporationinformation, an application made to Tribunal in this
- not convicted of any offence in formation of company regard, Tribunal may pass such order
- not found guilty of any fraud during last 5 years It shall have a) For regulation of management of company
- All documents filed is correct & complete a) CIN b) Changes in MOA & AOA
3) Certificate from a professional (Advocate / PCS / CA / CMA) b) Date of Incorporation c) Liability is unlimited
4) Subscriber & Director details d) Removal of name from register
5) Correspondence Address of the office The name of the company shall e) Order for winding up
be entered in Register of
All the information is filed with ROC in Form SPICE (+) Companies

VIII. Alteration of Name of Company

Suo – Moto Rectification of Name of Company (Sec 16)

[Sec 13(2)] If the name of registered company is identical or nearly resembles the name of already existing company

Central Government Application by proprietor of Trade Mark

(Suo – Moto)
He should approach Central Government within 3 years of incorporation /
It shall direct the company to rectify its name within change of name of such company
3 months of such direction by passing ordinary
resolution If Central Government is satisfied, then it may direct to change the name in 3
months [#Amended]
Note: If company obtains new name → Intimate ROC within 15 days
If company fails to comply with Central Government (#Amended)

The Central Government shall allot a new name to company & ROC shall enter the new name in Register of Companies in place of old
name & issue fresh Certificate of Incorporation
Note: A company shall change its name at its discretion

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 IX. Incorporation of One Person Company

Who can Incorporate? Nominee One Person MISC

- MOA to indicate nominee’s name can be - It cannot be converted to Sec 8
Natural & Indian & Resident - He shall become member on death of company
Person Citizen in India subscriber Member & Nominee - It cannot carry NBFC or Invest in
or - He shall give his written consent & has a Body Corporate
otherwise right to withdraw his consent of not more than 1 OPC - It can convert at its discretion
(Person stayed for 120 days in - Member may anytime change the nominee (#Amended)
previous financial year) - Minor cannot be a nominee If he does not meet
(#Amended) above criteria, he shall
Shall be eligible to form OPC (or) be satisfy the same in 180
nominee of OPC days
X. Section 8 Company

OBJECTS LICENSE ALTERATION of EXCEPTIONS

- Incorporate for promoting MOA & AOA a) 14 days notice for general
a) Commerce - Central Government Revoke with approval of meeting
b) Education issues to carry on such 1) Central Government shall revoke license Central b) Requirement of minimum
c) Charity activities for conducting affairs fraudulently (or) Government directors / independent
- It shall apply profits in - A Section – 8 company violating the objects of company (or) directors does not apply
promoting its objects need not add words contravenes any section of this act c) Need not constitute NRC
- Prohibits payment of ‘pvt.ltd’ or ‘ltd’ to its 2) On revocation Central Government may & SRC (committee)
dividend name direct to

Convert to Wind Amalgamate with

other firm up company having
similar objects
On winding up after paying liabilities
Assets remaining shall be transferred to

Another company registered (OR) Sold & proceeds to be

under this section & having credited to Insolvency &
similar objects Bankruptcy fund

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 XI. Registered Office of Company (Sec 12)
Company shall have registered office within 30 days of Incorporation
Shifting of Registered Office

Within the local limit of city / Outside the city / town / village Within same state from Jurisdiction of one From one state to another
town / village (CTV) but within the state ROC to another (Involve alteration of MOA)

Pass Board Resolution Special Resolution Special Resolution (+) Regional Director Special Resolution (+) Central
Approval Government Approval

The approval to be given within 30 days The Central Government may after
from date of filing being satisfied that
a) Consent of creditors, debenture
Note: 12(9) : If ROC feels company within 60 days holders & other persons
not carrying any Business, he may concerned (OR)
cause a physical verification of Company to file confirmation with ROC b) Sufficient Provision / Security has
registered office if any defaults is been made for their discharge
found, he may order for removal within 30 days
of name of the company. Central Government shall approve
Registrar shall confirm the registration to the transfer within 60 days of
company through a certificate which shall application
be conclusive evidence

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 Chapter-3: Prospectus and Allotment of Securities

Laws applicable with respect to Issue of Securities

Listed Public Company Private Company

Companies Act, 2013 Companies Act, 2013

(+)
SEBI

I. Public Offer and Private Placement (Sec 23)

Issue of Securities

By Public Company 23(1) By Private Company 23(2)

May issue securities through Rights Issue Bonus Issue Private Placement

Prospectus / Public Offer Private Rights Bonus

Placement Issue Issue Note: Issue of Securities to the public without issuing prospectus is void.
IPO FPO OFS

Prospectus [Sec 2(70)]

Any document issued as prospectus Includes NOTICE / Circular / Advertisement / any other document

Shelf Prospectus Red herring prospectus Inviting offers from public

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 II. Shelf Prospectus (Sec 31)

It is a prospectus in which, Such issue can be done for not more Prior to the issue of 2nd or Information Memorandum contains
securities are issued for than 1 year, without further issue of subsequent offer of securities, all material facts relating to
subscription in one or more issues prospectus company shall file Information - New charges created
Memorandum (Form PAS-2) with - Change in financial position
It is filed with registrar at the stage ROC between 1st or previous offer &
of 1st offer of securities succeeding offer of securities
Maximum 1 year

1st offer 2nd 3rd 4th 5th …… Last offer

(File SP with ROC)
Information Memorandum (PAS – 2)

III. Deemed Prospectus (Sec 25)

Any Company

Allots Securities (OR) Agrees to Allot Securities

To a Company / Firm / Any other Person (3rd Party)

Such deemed prospectus Intention to further offer the shares to Public

shall be signed by
Through Document Then such document shall be
In case of In case of Deemed to be Prospectus
Firm Company Provided following conditions are satisfied
Then the following shall be applicable
Not less 2 Such offer of shares was (OR) On date of offer, the whole
than ½ of Directors made to public, within 6 consideration in respect of Sec 26 Sec 34, 35
the months of allotment or securities had not yet been (Matters to be (Mis-statement in
Partners agreement received by it included in prospectus) Prospectus)

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 IV. Matters to be stated in Prospectus(Sec 26)

26(1) 26(2) 26(3) 26(4) 26(5)

Property to be dated, signed & to be 26(1) shall not apply to Date indicated Prospectus shall Prospectus not to include
state in prospectus not be issued expert statement, unless
(Specified Information) Issue made to (OR) Issue of shall be until it is filed - He is a person not engaged
existing Prospectus deemed to be with ROC, signed in formation, promotion /
as specified by the SEBI in members or relating to shares date of by Director / management of company
consultation with Central debenture / debentures is publication Proposed - Gives his written consent
Government holder as a in all aspects Director / - Not withdrawn such
Right Issue uniform with Attorney consent before delivery of
until SEBI specifies, The SEBI Act, previous issue on prospectus with ROC
1992 in respect of Financial recognised stock - A statement to that effect
Information & reports on Financial exchange shall include in prospectus
Information shall apply
Note: 26(8): Prospectus shall not be valid if it is issued after 90 days from date of filing with ROC.

V. Mis – Statements in Prospectus

Any information provided in prospectus is:

a) Misleading (OR) b) Untrue (OR) c) False (OR) d) Failure to disclose material fact (omission)

Which would attract

1. Criminal Liability (Sec 34)
Every person who authorizes such issue, shall be liable under Sec 447

Exceptions:
1) If the person proves that such statement/ omission was Immaterial; (OR)
2) He had reasonable grounds to believe up to time of issue that statements was true (or) such inclusion / omission was necessary

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