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590 views131 pagesCompany Law (Taxman)
DU
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anshitasingh2007Copyright
© © All Rights Reserved
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SYllabu:
COMPANY LAW
BCH: DSC-2.2 AND BC: DSC-2.2
Learning Outcomes: After completion of the course, learners will be able to:
L analyse the regulatory aspects and the’ broader proceduralaspectsinvolved
if ee types of companies covering the Companies Act, 2013 and
ules,
. recognize the basiclegal documentsand their usage essential for formation
of a company.
n
. analyse the process and documents required for raising capital for the
company.
evaluate the process of company meetingsand corporate decision making,
know the framework of dividend distribution and develop understanding
ofthe winding up process including Insolvency Resolution
aS
iT 1: INTRODUCTION
Meaning and characteristics of a company; Lifting of corporate veil; Overview
of administration of Company Law; Types of companies including private and
public company, government company, foreign company, one person company,
‘small company, associate company, dormant company, ‘and producer company;
Association not for profit; Illegal association.
UNIT 2: FORMATION AND INCORPORATION DOCUMENTS
Formation of company, promoters, their legal position and pre-incorporation
contracts; Online registration of a company. Memorandum of Association and
its alteration, Articles of Association and its alteration, Doctrine of constructive
notice, Doctrine of ultra vires and indoor management.
17 SyUABUS
18
unr 3: SHARE CAPITAL
pects shat and Red herring Prospects, misstatement in prospecy,
ing Allotment and Forfeiture of share, Sweat Equity, ESOPs, Hoy,
bul further isue of shares, buyback, split of sharers and Provision’
isn gba: Transfer and transmission of shares; Demat system, .
UNIT 4: MANAGEMENT AND MEETINGS
prectrs: Legal position, Disquaifictions, Director Identification Numbe,
{Din Cssiteaion of directors-Additional, Alternate and Casual director
Women directors, Independent director, small shareholder's director,
Jopointment, Removal of directors; Powers and Duties; Key Managerial
Shareholders’ meetings: AGM and EGM,
Personnel (KMP); Board Meetings;
Convening and conduct of meetings: Requisites ofa valid meeting; Resolutions
(Virtual meetings); Postal ballot; e-voting,
UNIT S: DIVIDENDS, AUDIT AND WINDING UP
Provisions relating to payment of Dividend. Company Audit: auditor's
qualification and disqualifications, Auditor’s appointment, rotation and
removal, Secretarial Audit. Winding Up: Concept and Modes of Winding Up;
Provisions of winding up under Insolvency and Bankruptcy Code, 2016.
Practical Exercises:
The learners are required to:
1. identify the type of company based on information available on NSE/BSE
website
2, fill dummy SPICe+ form for incorporation of a company.
3. write about the timeline and details of the book building process of an
actual [PO/FPO through SEBI website.
4. identify the actual composition of the Board of Directors in listed compa-
5. find outabout the top few audit firms and thelt rotation in different listed
‘companies.
race
preface to Fourth ation 2
‘gitabus 4
Contents a
u
(DUCTION
CHAPTER 1 ‘THE COMPANY AND ITS CHARACTERISTICS 3
‘CHAPTER 2 —_OVERVIEWOF ADMINISTRATION OF COMPANY LAW 2%
GHAPTER3 —_TYPESOF COMPANIES *
UNIT.
FORMATION AND INCORPORATION DOCUMENTS
CHAPTERS FORMATION OF COMPANY ¢
CHAPTERS MEMORANDUM OF ASSOCIATION Z
CHAPTER 6 ARTICLES OF ASSOCIATION
UNIT I
SHARE CAPITAL
”
CHAPTER7 — PROSPECTUS we
SHARES
CHAPTERS ISSUE ANDALLOTMENT OF: op
CHAPTER ® CALLS FORFEITURE AND TRANSFER OF SHARES
19 CCHAPTER-NEADS
40
UNIT IV
MANAGEMENT AND MEETINGS
quarrer 10° COMPANY MANAGEMENT
GRAPTER 11, MEETINGS AND REQUISITES OF VALID MEETING
UNIT V
DIVIDENDS, AUDIT AND WINDING UP
CHAPTER 12 DIVIDEND
CHAPTER 13 AUDIT AND AUDITORS
CHAPTER 14 WINDING UP
ANNEXURES
ANNEXURE1: List of Abbreviations
ANNEXURE2: Practical Exercises
BIBLIOGRAPHY
B.COM. (H) (UGCF) - 2023, SEMESTER
B.COM. (P) (UGCF) - 2023, SEMESTER'I
B.COM. (H) (UGCF) - 2024, SEMESTERIL
[B.COM. (P) (UGCF) - 2024, SEMESTER
Phog
4s
78
203
2
220
237
239
243
245
247
249
252
preface to Fourth Edltion
sitabus
chapter heads
UNI
INTRODUCTION
cH. 1
‘THE COMP, TTS CHARACTERISTICS
¢ Definition of a Company
‘@ Registration and the Effect of Registration
© Characteristics ofa Company
¢ Journey of the Companies Act so far
© Concept of Corporate Veil or Doctrine of Separate Legal Entity
‘ Lifting up (or Piercing) the Corporate Veil
‘@ Meaning of Body Corporate
‘ Public Financial Institution
‘@ Illegal Association (Sec. 464)
‘@ Improper use of term Limited’ or ‘Private Limited’ as part of Name
‘or Title (See. 453)
‘ Applicability f the provisions ofthe Companies Act
‘questions
‘PRACTICAL PROBLEMS
mit
PAGE
1s
“7
1
3
4
4
9
15
15
19
19
9
20 12
CHABPER 2
OVERVIEW OF ‘TION OF COMPANY LAW
set-up for the Company Law
instrative
(sss ‘Mechanisms in the Functioning of the Companies
¢ Some Important
‘a 2013
‘¢ ational Company Law Tribunal and its Constitution (Sec. 408)
Ca cempany Uw Appeate Tribal and es Cnsuton
(Sec. 410)
4 Spec Cour
3 Sena anal Reporting ory (NERA)
J Sion d irestgton ofc (S10)
$id eo operate As (1A)
$ Tiron Edun and Protection Fd (EPP), nsovency and
et ate 8), 2016 ave een xlinedin Chapters 2
reece
est
faowace ro
CHAP PER 3
‘COMPANIES
¢ Classification on the basis of liability
¢ Classification on the basis of specifications in Articles of Association
‘¢ Difference between private company and public company
‘ Classification on the basis of size
¢ lassinaton onthe bess of extent of control in terms of Vong
‘ Company on the basis of Government Shareholding.
‘ Classification on the basis of Place of Incorporation
‘ Classification on the basis of Activity Status of Company
‘ Classification onthe basis of mode of formation
‘© Companies on the basis of objective
‘ Difference between producer company and private company
Classification on the basis of listing status
Dip You Kwow?
‘quesTions
PRACTICAL PROBLEM
Pace
25
26
26
28
au
3
R
ge
35
35
38
a
45
a
53
58
RVR2g
UNIT
FORMATION AND INCORPORATION DOCUMENTS.
CHAPTER 4
FORMATION OF COMPANY
‘¢ Promotion
‘@ Process of Formation or Incorporation of Company (Sec-7)
4 Online Registration of company
‘# Commencement of Busines, etc (Se. 108)
‘questions
PRACTICAL PROBLEMS
CHAPTER 5.
MEMORANDUM OF ASSOCIATION
‘@ Memorandum of Association (Sec. 2(56)]
4 Doctrine of Ultra Vires
‘ Alteration of Memorandum of Association
© Difference Between Diminution of Capital & Reduction of Capital
QUESTIONS.
PRACTICAL PROBLEMS
CHAPTER 6
ARTICLES OF ASSOCIATION
4 Articles of Association [Sec. 2(5)]
‘© Contents of Articles (Sec. 5)
‘© Alteration of Articles of Association (Sec. 14)
‘ Doctrine of Indoor Management (Turquand Rule)
¢ Difference between Memorandum of Association & Articles of
Association
(quesTions,
PRACTICAL PROBLEMS
143
PAGE
9
70
”
76
76
eeey
85
85
86
87
a
9
92 ‘ UNIT OT
SHARE CAPITAL
CHAPTER7
PROSPECTUS
4 rsp. 2070)
‘¢ Meaning of Mis-statement in Prospectus
‘¢ Remedies for Misstatement in Prospectus
‘questions
PRACTICAL PROBLEMS
CHAPTER 8
ISSUE AND ALLOTMENT OF SHARES
‘¢ Meaning of Share :
‘ Meaning of Allotment
‘© General Principles as to Allotment
‘¢ Statutory Provisions with Regard to Allotment
‘ Further Issue of Share capital (Sec. 62)
¢ Diflerence between Right Shares and Bonus Shares
‘@ Buy-Back of Shares (Sec. 68)
‘© Demat System
questions
‘PRACTICAL PROBLEM.
CHAPTER 9
CALLS, FORFEITURE AND TRANSFER OF SHARES
# Requists of Valid Call
*¢ Provisions Regarding Calls on Shares
* Forfeiture of shares (Regulations 28 to 32 of Table F)
¢ Transfer of Shares (sec. 56)
$ Transmission of Shares (Regulations 23 to 26 of Table F)
# Diferenc between Transfer and Transmission of Shares
‘questions
PAGE,
7
101
102
106
106
108
14
14
14
JZ
122
122
126
132
132
133
134
135
136
138
140
142
‘conrevers
UNIT IV
MANAGEMENT ‘AND MEETINGS
CHAPTER 10
COMPANY MANAGEMENT.
¢ Introduction
Director
‘@ Woman Director
‘@ The Concept and Number of independent Directors
¢ Director Identification Number O1N)
4 Appotntiment of Directors (Sec. 152)
‘# Duties of Directors (Se. 166)
+ Meetings of the Board (Sec. 173)
+ Powers of Directors (Se. 179)
Key Managerial Personnel
‘questions
PRACTICAL PROBLEM
CHAPTER 11
‘MEETINGS AND REQUISITES OF VALID MEETING
¢ Introduction
‘# Annual General Meeting (Sec. 96)
* Difference between ordinary business and special business
Extraordinary General Meeting
‘ Requisites/ssential Conditions of Valid Meeting
Difference between ordinary resolution and special resolution
¢ Postal Ballot
‘© Voting through Electronic Means (E-Voting)
‘ Virtual Meeting (Online Meeting)
‘quesTions,
PRACTICAL PROBLEMS
las
PAGE
45
45
148
149
153
154
157
163
166
im
174
v7
7
178
178
181
182
18
190
191
193
197
199
199 146
UNITV
DIVIDENDS, AUDIT AND WINDING UP
CHAPTER 12
DIVIDEND
‘@ Meaning of Dividend
« Provisions regarding Declaration and Payment of Dividend
‘ Investor Education and Protection Fund (Sec. 125)
‘© Concept of interim Dividend
‘@ Punishment for Failure to Distribute Dividend (Sec. 127)
‘quesTions
PRACTICAL PROBLEMS.
CHAPTER 13
AUDIT AND AUDITORS
© Introduction
‘© Appointment
‘© Qualifications of Auditors (See. 141)
‘© Disqualifications of Auditors (Sec. 141)
‘© Rotation of Auditor and Audit Firm [Sec. 139(2)]
‘© Removal of Auditors
© Secretarial Audit
‘quesTions,
CHAPTER 14
WINDING UP
‘© Meaning of Winding up
‘@ Modes of Winding up
‘© Winding up by Tribunal (Sec. 270)
‘@ Winding up under Insolvency and Bankruptcy Code, 2016
PAGE
203
208
206
208
209
210
210
21
2
213
24
216
217
217
219
220
220
221
225
conrenrs
18 UP (under Sec.
Regulations, 2017 amended up ino 0) ad Process a per
4 Pre-Packaged insolvency Resolution Pine
(QUESTIONS. Plan for Mss
[PRACTICAL PROBLEM
ANNEXURES
ANNEXURE 1: List of Abbreviations
ANNEXURE 2: Practical Exercises
¢ Bibliography
‘# B.Com. (H) (UGCF) -2023, Semester-it
+¢ B.Com. (P) (UGC) - 2023, Semester.
‘¢ B.Com. (1) (UGCF) -2024, semester-1
‘¢ B.Com. (P) (UGCF) -2024, Semester-11
hy
PAGE
232
24
27
28
m5
207
249
252 INTRODUCTION THE COMPANY AND ITS
CHARACTERISTICS
el
‘The Companies Act is the basic Statute providing for incorporation, management,
administration, declaration and payment of dividend etc. applicable to Company
form of organisation.
DEFINITION OF A COMPANY
According to Sec. 2(20) of the Companies Act, 2013, “Company” means a company
incorporated under this Act or under any previous company law.
This definition does not throw any light on the characteristics of company form of
organization. Therefore, reference is madeto some popular definitions by renowned
Judges and authors.
@ Lord Justice Lindley
“A company is an association of many persons who contribute money or
monies worth to a common stock and employed in some trade or business
and who share the profit and loss arising therefrom. The common stock so
contributed is denoted in money andisthe capital ofthe company. The persons
who contribute to it or to whom it pertains are members. The proportion of
capital to which each member is entitled is his share. The shares are always
transferable although the right to transfer is often more or less restricted.”
Note: ‘An association of many persons’ part of the definition does not
hold valid now with new concept of ‘One Person Company’ under the
Companies Act, 2013. Rest of the definition holds valid though there may
be companies limited by guarantee not having share capital and shares
of a public company are transferable without any restrictions.
@ Prof. Haney
“Acompany isan artificial person created by law, having separate entity, With
a perpetual succession and common seal.” LUNET 1 INTRODUCTION
4
to: ‘Common Seal’ part
he ‘common seal has been made oF
‘het, 2015, Rest ofthe definition
to justice
* uth College v. Woodward)
"a corporation 1 an
’A corpoviion ofthe law. Being a mere creation of law, It possess;
valld till date.
properti
gras incidental to its very existence.”
The word
panis (Le.
mattersan
the Compani
‘company acquires separate entity and perpetu
law having perpetual succession.
REGISTRATION AND THE EFFECT OF REGISTRATION
‘ofthe above definition does not hold valid now,
iptional by the Companies (Amendmeny)
‘artificial being, invisible, intangible, existing only jy
‘which the Charter of its creation confers upon It, either expressly
‘company’ ts derived from Latin words, com (Le. with or together) ang
bread), Itreferred to merchants or an association of persons discussing
.d having food together. Such association of personson registration under
ies Act becomes a separate legal entity. As pointed out by Prof. Haney
al succession being creation of law,
Justice Marshall emphasizes on the charter ofits creation being supreme, While
Justice Lindley emphasizes on the concept of shares and thelr transferability,
‘Thus to conclude it can be said that the company is an artificial person created by
‘Marshall (Supreme Court of US In Trustees of Dart,
Company comes into existence through registration under the Companies Act |
‘and becomes a separate legal entity. While elaborating the effect of registration,
‘Sec.9 explains that on registration, the company shall be a body corporate by the
‘name contained in the memorandum, capable of exercising all the functions of the
incorporated company under this Act and having perpetual succession with power
to acquire, hold and dispose of property, both movable and immovable, tangible
and intangible, to contract or to sue and to be sued, by the said name.
CHARACTERISTICS OF A COMPANY
The basic Characteristic of the company is Incorporation or Registration. As other
féatures such as separate legal entity and perpetual succession emanate from it
being registered under the Companies Act.
1. Incorporation or Registration: The company comesintoexistence only after
registration under the Companies Act, by following a legal process for regis-
tration. Registration is mandatory for company to come into existence. The
process of registration has been simplified. With introduction of web-service
, SPICe plus (Simplified Proforma for Incorporating Companies Electronically
+), registering a company is a matter of days,
2. Separate Legal Entity: On registration the company acquire
ferent from the whole word Reiterating Sec Shee one may cone ne
‘separate legal entity gets reflected in following factors:
|
|
|
|
|
(O1COMPAMY ANOS CHARACTERISTICS s
(2) Company can sue and be sued in its own name;
(b) Company can hold and, ‘movable and immov
Alspose of property,
‘able, tangible and intangible; bal
ne Company can enter into contracts in Its own name.
'e concept of separate legal entity got established and strengthened
certain | ks
certain landmark judgments also popularly known as Salomon case and
Case Laws:
Salomon vs. Salomon & Company Ltd, (1897)
Salomon formed a company alon
18 with his family members. Company had
tobe wound up later, When secured creditors were being paid-up in priority
tounsecured ones, it was contended that Salomon though a secured creditor
should notbe paid in priority tounsecured reditorsas Salomon andSalomon
& Company Ltd are one and te same. Judge opined otherwise and held once
thecompanysformeditattainsan entity ofits own different from everybody
else, therefore, irrespective of the fact that Salomon was major shareholder,
the company would be considered a separate entity and secured creditors be
pald before other creditors.
Lee vs. Lee's Ar Farming Ltd. (1961)
Lee was a pilot in a company formed by him along with his wife. He died
during plane crash. His wife demanded compensation under the Workers’
Compensation Act. She alleged that the death was an accident arising out of
and in he course ofhisemploymentby the company. he also claimed funeral
expenses. Thedisputearose thathowcan Lee beanemployee and employer at
the same time Itwas held that though Lee owned all the shares ofa company
except one yet company was different from him. Therefore, company was an
‘employerand Lee wasan employee andhis wife was entitledto compensation
for his death.
In Abdul Haque
¥. Das Mal, where a suit was filed by an employee, whose
salary was due for many months against the Managing Director of the com.
pany, it was held that the remedy lies against the company and not against
the directors or members of the company”. Rule of separate legal entity of
the company again got reinforced here.
“Another case of Bacha FGuzdar . CIT, Bombay hed that 60% of company's
anne being agricultural income so exempted from tax shall not mean at
aaceyend income from shares held in company in the hands of shareholdst
ares treated party as agricultural income. Shareholder ofcourse wos Pot
entitled to uchexempion Ascompary/sentiysdferet romshareho St
‘ullnotbe outt place tomention berethat on registration compan) 2S
Hee rates characteristics (or Implications of Separate Entity Doctrine}: nr 1: 1NTRODUCTION
(i) Company's money and property belongs othe company and not mem.
(0 ers Members Ae ee nay insurable interest inthe Property ov the
company. Meaning, thereby, members cannot 6! the property of the
Company Insured in their own name: The above [20 pt ubstnaiee
by Macaura's case. In Macaura v. Assurance Co.Ltd (1928),
M got the simber of the company insured in his own 19 ‘Timber got!
Jecroyed in fire. The insurance company relected the-claim. It was
fhald that timber was the property of company and lit required it to
beinsured in che name ofthe company only. As members do not have
any insurable interest inthe property ofthe company:
(ii) Company's debts and liabilities are company’s OW Members cannot
cer abe for company's debts and Halt. This potnt further
Ulaborated under the heading of limited liailfy of members. |
of incorporation
(iti) Company comes into existence through le °
coarany sues to exist 30 (further elaboration in point of perpetual
succession). j
3, Perpetual Succession: Perpetual successio
any'slife snot in any manner affected by the
Beye ivena hydrogen bomb cannotbringendtothelifeofcompany (Re Meat
‘Suppliers Ltd). Even if all the members leave ordi, company continues 2
‘exit unless brought to end through a legal process of Winding-uP.
4 Limited Liability: On the basis of lability companies cn be classified into: |
(0 “Companylimited by shares” [Sec.2(22)]:Companylimitedby shares |
means a company having the liability ofits members limited by the |
means 2 “jum to the amount, any, unpaid onthe shares respectively |
held by them.
(i) “Company limited by guarantee” [Sec. 2(21)] : Company limited by |
guarantee means a company having the liability ofits memberslimited
By the memorandum to such amount as the members may respectively |
tordertake to contribute to the assets ofthe company in the event of ts
being wound up.
(1) “Unlimited company” (Sec. 2(92)] : Unlimited company means a
company not having any limit on the lability of ts members
that the liability of company is always unlimited and it
is the liability of members which may be limited or unlimited depending on
the type of company. As stated above the liability of members i limited to
tinpaldamountonsharesin Company limitedby sharesandlimitedtoamount
guaranteed by a member to be contributed to assets ofthe company at th
time of winding-up in company limited by guarantee, .
mn means continuous life. Comp: |
‘death or insolvency ofits mem-
Itneeds to be noted
5.
(11 COMPANY AND Ts CHARACTERISTICS 7
In case of unlimited Company’ the lat
¢ liability of company as well as members
{s unlimited, However, this form of oe
d ‘com sr one. Therefore,
isgenerlysldthatmenbershmelmtesieoige
Shares and thelr Transferability: Justice Lindley in his definition of
‘company explains the concept of shares and their transferability AS per
Set 4 the share of ny member in a company sal be movable propery
transferable in the manner provided by the articles ofthe company.
‘The shares are freely transferable (without any restriction) in case of public
companies while the right to transfer the shares is restricted (not prohibited)
in case of private companies. Restrictions are uswally in terms of transfer to
whom or for what consideration and need to be prescribed by Articles of
Association.
Company isnota Citizen: Company isnotacitizenbuthasanationality (‘State
Trading Corporation of India v. Commercial Tax Officer, SC, 1963). Company's
nationality depends on the place ofits registration.
7. Common Seal:
‘Common Seal (Le. rubber stamp on which name of the company is affixed) is
the offical signature of the company. The Board of Directors (BoD) provides
forthe safe custody of Common Seal. Common seal has been made optional
by the Companies (Amendment) Act, 2015.
Exceptas otherwise provided under the Companies Act, 2013, document or
proceeding requiring company’s authentication or contracts made by or on
behalf of a company, are to be signed by KMP (Key Managerial Personnel) oF
an officer or employee of the company authorized by the Board of Directors
(Gee. 21),
In case the company has a Comt
company’s attorney to execute dé
‘Common Seal [Sec. 22(2)]-
‘Where the company opts not to have a common seal: In case a company
does nothave a common seal, the authorization of any person as company’s
sttomey to execute deeds shall be made by two directors or by director and
the Company Secretary, wherever the company has appointed a Company
Secretary [As per proviso to Sec. 22(2)]-
STABLE 1.1
mon Seal, the authorization of any person as
ieeds shall be by writing under Company's
Partners/members (1.1 COMPANY AND TS CHARACTERISTICS 9
Publi Company :
rae rT irn-2erbers Maran | Private Company
ee -Nosuchimitonthemenbers | Minimum -2 members
Maximum Provided in the Act. Marin - 200 members
Governing Act___| The Partnership Act, 1932 ‘The Companies Act, 2013 Public Company :
ogaraion [Registration le opdonal | Company comes Oo) ener imum No suit onthe
through repsration. members.
Separate legal | Partnership Firm does not ‘Company is separate legal entity ‘One Person Company (OPC
entity have separate legal entity = fone member ony
Perpetual Partarhip Firm does not| Company enjoys perpetual] [6 | Mtiy Liability of @ partner Ts | Lnbiityofsmemberistiitedto
jaca fave perpetial succesion | succession Le. continuous Iie partners/ members | imitedothe extent of agreed | the amount unpaid onthe shares
Ts life is not affected by death conrion etn cast | hy em
ieee | ma — ca
anagem iPisman- |The affairs of the company
ability Tabliy of Parmer is | Lablty ofmembersis limited to ace came | os uannged oy" Board
unlimited, Its joint as well | unpaid amount on share In a5 ity the dextpated partners | Drees ae |
as individual. ofeopay ited saresand suthoried bythe agreement
to ammnt of ura 6%] [a Pai TLP canst be formed for | an be ened fr pro |
ol charitable purpose. charitable purpose.
9, [Transfer ofinteest [A partner can transfer is n= | A member of a puiie company
Tegal compliance | Lesser Tegal formalities as| Plethora of legal formalities in ee ce arerne |b eeenetenaricenee
compared to companies. | case of compar | ofthe LLP agreement. | freely without any restriction.
"cess wo nancial | Pd ratsing eapacty sles. Fund raising capacity is more as) yo, | Conversion LP canbe converted intent | Usted public company cannotbe
resourees compared to partnership firm. Stock company. converte into LP
‘Separation of ‘No separation is there. Part | Company is owned by members| 41. | Meetings ‘Meetings can be held as per | Itis mandatory to hold meetings
‘vnership and | ners own the firm and they | but managed by Board of therecaiementefbusness | ofmenbers as wel ste board
management | also manage the firm. | Directors. So there s separation) 2," jude Requirementofauditdepends | Compulsory audit respective f|
of ownership and management. con limits of turnover or con-| turnover oF share capital
arom ‘ebution.
iar ae Ee
Regulating Act | The LLP Act, 2008 The Companies Ac, 2013, :
Partners/Members |The persons who contibute |The persons who invest the 658 Sections 470 Sections
{toLLPare known a partners | money inthe shares are known, 15 Schedules 7 Schedules
ofthe LLP. a shareholders ofthe company. il Parts 29 Chapters
inveral [The internal governance |The internal governance struc
governance strucureof aLLP is governed ture of «company is regulated
sucure Berea ctat aprcment| by setts fare ceeuated|| JOURNEY OF THE COMPANIES ACT SO FAR
becren the pero. 2013) ‘The company legislation in India relates back to nineteenth century. Since then it
Name Tame ofthe LLP to contain
the words “Limited labilty
partnership'or°LLP"assufix,
Name of te public compan
{canals the word “liked,
and PVt.Co.to contain the word
“pit mie ra
hasbeen amended a number of times. The Companies Act, 1956 remained in force
foralongtime, though amended from time to time. Major amendments were made
{inyear 2000 (postal ballot, audit committee, shelf prospectus, etc. introduced with
‘emphasison CorporateGovernance) Amendments in 2002introduced the concept
‘ofNCLT.NCLAT (which faced impediments in form of Court cases questioning their UNIT! : INTRODUCTION
vali) In 2006 Project MCA21" providing for DIN** and onjn
its was launched.
weed was feltto replace the voluminous legislation with a,
'dr.JJ.Irani (the then Director, TataSons was appoint
ittee) Committee was appointed. The orientation |
ind making itmoreuser friendly. However, Satyan,|
the Focus got shifted abit so as to ret
10
constitutional
fling of document
came where
Aeipact companies Actand Dr]
the chairman of expert commit
intially was liberalizing the law ar
‘Scam had its impact on orientation an
certain stringencies in the Act. |
smmendations of Irani Commitee finally culminated inthe form ofthe
Reperacy ‘2013. Itreceived the assent of the President on 29th August, 2013 |
The Companies Act, 2013, applies to the whole of India. |
It needs to be emphasized here that the Companies Act, 2013 is a rule-baseq
law). “It means that at'a number of places in this Act’ by using the words “as may
be prescribed’ the Government has retained the power to amend by Ministry of
Corporate Affairs itself rather than going to the doors of the Parliament. As rules |
can be made by the Ministry itself and amended as and when the need is felt. |
Note: With reference to para above reader of the Companies Act, 2013 must |
note that wherever it is specified in different provisions ‘as may be prescribed
the reference shall be made to respective rules as prescribed by the Ministry of
Corporate Affairs or by SEBI Regulations wherever itis so specified. As Sec. 24 of
the Companies Act, 2013 specifies power of SEBI to regulate issue and transfer of.
securities and non-payment of dividend by listed companies or companies which
intend to get their securities listed on any recognised stock exchange in India. So |
it is important to know that all the sections of the Companies Act need to be read
‘with corresponding Rules or Regulations as the case may be. Each chapter in the |
Bare Act has a set of corresponding rules. n this book it has been made clear by |
‘explaining the section along with the corresponding rule or regulation for better |
and complete understanding.
- The Companies Act, 2013
= The Companies (Amendment) Act, 2015
= The Companies (Amendment) Act, 2017
= The Companies (Amendment) Act, 2019
= The Companies (Amendment) Act, 2020
+ Some major developments having a bearing on the Companies Act, 2013
j
|
|
]
i
{CAB + Ministry of Corporate Afar in 21st century
“DIN; Director Identification Number
‘Many provisions ofthe Actare explained through the Rules.
(HL COMPANY AND ITs CHARACTERISTICS "
Highlights of the Companies Act, 2013
‘Concept of Woman Director, Corporate Social Res
i sponsibility (CSR), Key Managerial
Personel{KMP) CassActonSutsEntencimentdausei tot Assocation
aren concep inroduce by the Copan 2013 ited new
es of companies ie. OPC, small Company, Associate Company. New concept of
eet etree aren rere
of vigil mechanism has been added by this Act. Term ‘Promoter’ has been there in
the earlier Act but this Act defined it. The Companies Act, 2013 has also defined
the term ‘Fraud’ in explanation attached to Sec. 447. The Companies Act, 2013
has undergone amendments in 2015, 2017, 2019 and by Amendment Act, 2020.
Highlights of Companies (Amendment) Act, 2015
Some of the important amendments made by the Companies (Amendment) Act,
2015 are:
1. Common Seal has been made optional
2. Nocompany shall declare dividend without setting off carried over previous
year or years losses and depreciation against profits forthe current year.
Reporting of fraud by the Auditor to Central Government in case amount ex-
ceeds prescribed amount (presently 1 crore or more). Thus the principle of
materiality has been introduced by specifying the amount. Frauds involving
lower amounts shall be intimated to Audit Committee, wherever company is.
required to have one or the Board of Directors in other cases.
3
‘The Companies (Amendment) Act, 2017
|
‘Some of the significant amendments made by the Companies (Amendment) Act,
2017 ai
1. Revision in concept of KMP: It now includes such other officer, not more
than one level below the directors who is in whole time employment and
designated as KMP by the Board and also such other officers as may be pre-
seribed;
. For defining Associate Company, Holding and Subsidiary Company Rela
tlonship words'totalshare capital’ were substituted by ‘total voting power’
Section 3A was inserted which relates to liability of continuing members in
case of reduction in number of members below statutory minimum;
._ New section related to ‘private placement’ was substituted using the term
‘identified persons’;
._ Amendment related to ‘issue of shares ata discount inserted that acompany
may issue shares ata discount to its creditors when ts debt is converted into
Hares in pursuance of any statutory resolution plan or debt restructuring
scheme as per directions of RBI; ayn’
[UNIT 1: INTRODUCTION
2
cept of ‘Significant Beneficial
«Anes i ne eer end}
aking» eeiicant amendments ast adds to transparency;
sc anatters which are required tobe transacted by means of Postal ayy
Z. ad by ‘E-voting’, where itis applicable to company;
ea 7
‘Committee’ of a Company which is not required to have ‘indeper
Be Secor gave oo or more dirctors init CSR Commitee 'ndg
ents made by the Companies (Amendment) Act, 2019: }
1. It added Sec.10A requiring the Company having a share capital to Mal
certain declarations; 1
2. Reduced the burden of NCLT by transferring certain approvals tothe Cent
Governmenteg conversion of Public Company into Private, changing finang,
year of a company;
3. Italso substituted ‘iable to penalty in place of ‘fine’ in a number of proy
sions, thereby further easing the mounting work pressure on NCLT. The Rey
istrar of Companies (RoC) and Regional Director (RD) can impose penaltig