contents · 2016-07-05 · 4.2-1d preparation of other documents 76 4.2-1e filing of application...

About the authors I-5

Preface to the Nineteenth Edition I-7

Preface to the First Edition I-9

Chapter-heads I-11

Section-wise Index I-51

Key Highlights of Companies (Amendment) Bill, 2016 I-59

1HISTORY OF COMPANY LEGISLATION

1.1 History of company legislation in India 1

2MEANING AND NATURE OF A COMPANY

2.1 What is a company ? 62.2 Definition of a company 72.3 Characteristic features of a company 7

2.3-1 Incorporated association 72.3-2 Legal entity distinct from its members 72.3-3 Artificial person 102.3-4 Limited liability 102.3-5 Separate property 102.3-6 Transferability of shares 112.3-7 Perpetual succession 112.3-8 Common seal 12

CONTENTS

PAGE

I-13

2.4 Lifting the corporate veil 12

2.4-1 Under statutory provisions 13

2.4-1a Mis-statements in prospectus [Sections 34& 35] 13

2.4-1b Failure to return application money[Sec. 39] 13

2.4-1c Misdescription of Name [Sec. 12] 14

2.4-1d Punishment for contravention of section 73or section 76 [Sec. 76A] 14

2.4-1e For facilitating the task of an inspector ap-pointed under section 210 or 212 or 213 toinvestigate the affairs of the company [Sec.219] 14

2.4-1f For investigation of ownership of company[Sec. 216] 15

2.4-1g Fraudulent conduct [Sec. 339] 15

2.4-1h Liability for ultra vires Acts 15

2.4-1i Liability under other statutes 16

2.4-2 Under Judicial Interpretations 16

2.4-2a Protection of revenue 16

2.4-2b Prevention of fraud or improper conduct 16

2.4-2c Determination of the enemy character of acompany 17

2.4-2d Formation of subsidiaries to act as an agent 18

2.4-2e Where a company acts as an agent for itsshareholders 18

2.4-2f In case of economic offences 19

2.4-2g Where company is used to avoid welfarelegislation 19

2.4-2h Where company is used for some illegal orimproper purpose 19

2.4-2i To punish for contempt of Court 20

2.4-2j For determination of technical competenceof the company 20

2.4-2k Where Company is a mere Sham or cloak 20

2.5 Advantages of Incorporation 20

2.5-1 Independent legal entity 20

2.5-2 Limited liability 21

PAGE

CONTENTS I-14

2.5-3 Perpetual succession 21

2.5-4 Transferability of shares 21

2.5-5 Infinite membership 21

2.5-6 Mobilisation of huge resources 21

2.5-7 Separate property 22

2.5-8 Ease in control and management 22

2.6 Disadvantages of Incorporation 22

2.6-1 Formality and expense 22

2.6-2 Loss of privacy 22

2.6-3 Divorce of control from ownership 22

2.6-4 Detailed winding-up procedure 23

2.6-5 Control by few 23

2.6-6 Greater public accountability 23

2.6-7 Possibility of frauds 23

2.7 Company vis-a-vis Body corporate 23

2.7-1 Is a society registered under the Societies Registra-tion Act, a body corporate ? 24

2.7-2 Corporation sole 24

2.8 Is company a citizen ? 24

2.9 Illegal association [Sec. 464] 25

2.9-1 Exceptions 26

2.9-1a Stock Exchange 26

2.9-1b Associations ‘Not for Profit-making’ 26

2.9-1c Joint Hindu Family 26

2.9-2 Effects of an illegal association 26

2.10 Distinction between a company and a partnership 27

2.10-1 Mode of creation 27

2.10-2 Membership 27

2.10-3 Legal status 27

2.10-4 Liability of members 28

2.10-5 Transfer of shares 28

2.10-6 Agency of members 28

2.10-7 Management 28

2.10-8 Perpetual succession 28

2.10-9 Powers 28

2.10-10 Dissolution 29

2.10-11 Legal obligations 29

PAGE

I-15 CONTENTS

2.11 Difference between a company and limited liability partnership 29

2.12 Can a company become partner in a partnership firm ? 30

TEST YOUR KNOWLEDGE 30

3KINDS OF COMPANIES

3.0 Introduction 32

3.1 Private company 32

3.1-1 Restrictions on transferability of shares 33

3.1-2 Limitation on number of members 33

3.1-2a Number of debenture holders mayexceed 200 33

3.1-3 Restriction on inviting public to subscribe for securi-ties 34

3.1-4 Other requirements relating to a private company 34

3.1-4a Minimum number of members 34

3.1-4b Use of words ‘Private Limited’ 34

3.1A One Person Company 34

3.1B Small Company 37

3.2 Public company 37

3.3 Distinction between private and public company 37

3.4 Special privileges and exemptions available to privatecompanies 39

3.5 Conversion of a private company into a public company 41

3.6 Conversion of a public company into a private company 42

3.7 Statutory company 42

3.8 Registered companies 42

3.9 Limited liability companies 43

3.9-1 Companies limited by shares 43

3.9-2 Companies limited by guarantee 43

3.9-3 Companies limited by guarantee having share capital 43

3.10 Unlimited liability company 43

3.11 Association not for profit 44

3.12 Memorandum and Articles of Association 45

3.12-1 Alteration of Memorandum and Articles of Associa-tion 45

3.12-2 Partnership Firm may become Member 45

PAGE

CONTENTS I-16

3.12-3 Conversion of a company formed under section 8 intoany other kind 46

3.12.4 Exemptions to section 8 companies 46

3.13 Government companies 46

3.13-1 Legal status of a Government company 47

3.13-2 A Government company - Whether a private or pub-lic company 47

3.13-3 Exemptions to a Government company 48

3.14 Foreign company 49

3.14-1 Special provisions relating to foreign companies 49

3.14-2 Other obligations of a foreign company [Section 382] 50

3.14-2a Display of its name and country of incorpo-ration 50

3.14-2b Publication of name 50

3.14-2c Liability of members 50

3.14-2d Obligations regarding accounts [Sec. 381] 51

3.14-2e Books of account and other records [Sec.384] 51

3.14-2f Requirements as to Prospectus [Secs. 387 to389] 51

3.14-2g Foreign companies in which not less than50% of the paid-up share capital is in Indianhands 51

3.14-2h Penalty 52

3.14-2i Winding-up 52

3.14A Offer of Indian Depository Receipts [Sec. 390] 52

3.15 Holding and subsidiary companies 52

3.16 Public financial institutions [Sec. 2(72)] 54

3.17 Unregistered Companies [Section 375] 55

3.18 Producer Companies [Secs. 581A to 581ZT of the CompaniesAct, 1956] 55


4FORMATION AND INCORPORATION

OF A COMPANY

4.1 Promotion 68

4.1-1 Who is a promoter 68

PAGE

I-17 CONTENTS

4.1-2 When promotion begins and ends 69

4.1-3 Legal position of a promoter 70

4.1-4 Duties of promoters 71

4.1-5 Liabilities of promoters 71

4.1-5a For non-disclosure 71

4.1-5b Under Companies Act 72

4.1-6 Remuneration of promoters 72

4.1-7 Pre-incorporation contracts 73

4.1-8 Liability of promoters vis-a-vis pre-incorporation con-tracts 74

4.2 Registration/Incorporation of a company 75

4.2-1 Procedure for registration/incorporation of a com-pany : Important steps 75

4.2-1a Type of Company 75

4.2-1b Application for availability/reservation ofname 75

4.2-1c Preparation of Memorandum and Articlesof Association 76

4.2-1d Preparation of other documents 76

4.2-1e Filing of application and documents forregistration 78

4.3 Integrated Process for Incorporation 78

4.3A Certificate of incorporation 79

4.3B Effect of certificate of incorporation 80

4.3C Conclusiveness of certificate of incorporation 80

4.3C-1 Consequences of incorporating a company by filingfalse information/suppression of information 81

4.4 Commencement of business 81


5MEMORANDUM OF ASSOCIATION

5.1 Meaning and importance 83

5.2 Memorandum of Association - Whether an unalterable charter 83

PAGE

CONTENTS I-18

5.3 Form and contents 84

5.3-1 The name clause [Sec. 4(1)(a)] 85

5.3-1a Undesirable Names 86

5.3-1b Too similar name 88

5.3-1c Publication of name [Sec. 12] 89

5.3-2 The registered office clause [Sec. 4(1)(b)] 90

5.3-3 The objects clause [Section 4(1)(c)] 91

5.3-4 Doctrine of ultra vires 91

5.3-4a Implied powers 92

5.3-4b Powers which are not implied 93

5.3-4c Effects of ultra vires transactions 93

5.3-5 Liability clause [Sec. 4(1)(d)] 94

5.3-6 The capital clause [Sec. 4(1)(e)] 95

5.3-7 Name of a nominee in case of ‘One Person Company’[Sec. 4(1)(f)] 95

5.3-8 The association or subscription clause [Sec. 4(1)(e)] 95

5.3-8a The statutory requirements regarding sub-scription of memorandum 96

5.4 Alteration of memorandum 97

5.4-1 Change of name 97

5.4-1a Change of name at the instance of the com-pany 97

5.4-1b Change of name on a direction from theCentral Government 98

5.4-1c Effect of change of name 99

5.4-2 Change of registered office 100

5.4-2a Change of registered office from one pre-mises to another premises in the same city,town or village [Sec. 12] 100

5.4-2b Change of Registered Office from one townor city or village to another town or city orvillage in the same State [Section 12] 100

5.4-2c Change of Registered Office from one Stateto another State 100

5.4-3 Change in Objects Clause 102

5.4-4 Change in Liability Clause 103

5.4-5 Change in Capital Clause 103

PAGE

I-19 CONTENTS

5.4-5a Increase of authorised share capital 104

5.4-5b Consolidation and sub-division of shares 104

5.4-5c Conversion of shares into stock and viceversa 104

5.4-5d Diminution of share capital 105


6ARTICLES OF ASSOCIATION

6.1 Introduction 107

6.2 Memorandum and Articles - Their Relationship 107

6.3 Distinction between memorandum of association and articlesof association 109

6.4 Contents 109

6.4-1 Provisions for Entrenchment 109

6.4-2 Regulations required in case of unlimited company,company limited by guarantee and private companylimited by shares 111

6.5 Model form of articles 111

6.6 Signing of Articles 111

6.7 Alteration of articles 112

6.7-1 Limitation on power to alter Articles 113

6.7-2 Effect of Altered Articles 115

6.8 Binding Effect of memorandum and articles 116

6.8-1 Members bound to the company 116

6.8-2 Company bound to members 117

6.8-3 Members bound to members 118

6.8-4 Whether company or members bound to outsiders 118

6.8-5 Whether Directors are bound by whatever is con-tained in the articles 120

6.9 Doctrine of constructive notice 120

6.10 Doctrine of indoor management 121

6.10-1 Exceptions to the doctrine of indoor management 122

6.10-1a Where the outsider had knowledge ofirregularity 122

6.10-1b No knowledge of articles 122

6.10-1c Forgery 123

PAGE

CONTENTS I-20

6.10-1d Negligence 123

6.10-1e Others 124


7PROSPECTUS

7.1 Meaning and definition of a prospectus 128

7.2 Contents of a prospectus 130

7.2-1 Information to be given in a Prospectus 131

7.2-2 Reports to be set out in the Prospectus 132

7.2-3 Declaration 133

7.2-4 Other Matters 133

7.2-5 Statement of an Expert included in a Prospectus 133

7.2-6 Penalty for non-compliance 134

7.2-7 Exemptions 134

7.2-8 Variation in terms of contract or objects in prospec-tus [Section 27] 134

7.2-9 Offer of sale of shares by certain members of com-pany [Section 28] 134

7.3 Draft Prospectus to be made public 135

7.3A Abridged Prospectus 135

7.4 Is issue of prospectus compulsory/When prospectus is notrequired to be issued? 136

7.5 Statutory requirements in relation to a prospectus 137

7.5-1 Dating of prospectus 137

7.5-2 Registration of prospectus 137

7.5-3 When Registrar shall refuse registration of a prospec-tus 137

7.5-4 Penalty 138

7.6 Prospectus by implication/Deemed prospectus [Sec. 25] 138

7.6-1 Additional requirements relating to deemed prospec-tus 138

7.7 Shelf Prospectus and Information Memorandum [Section 31] 139

7.8 Red-herring prospectus [Section 32] 140

7.9 Mis-statements in a prospectus and their consequences 140

7.9-1 What is an untrue statement/mis-statement ? 140

7.9-2 Remedies for mis-statement in a prospectus 142

PAGE

I-21 CONTENTS

7.10 Golden Rule for framing of Prospectus 144

7.11 Allotment of shares in fictitious names prohibited [Sec. 38] 145

7.12 Announcement regarding proposed issue of capital [Section 30] 145


8ACCEPTANCE OF PUBLIC DEPOSITS

8.1 Meaning of deposits 149

8.2 Acceptance of deposits 151

8.2-1 Acceptance of Deposits from Members 151

8.2-2 Acceptance of Deposits from Public 153

8.2-3 Rescheduling repayment of deposit - Whetherallowed 156

8.2-4 Deposits accepted before commencement of the Com-panies Act, 2013 156


9SHARE AND SHARE CAPITAL

9.1 Meaning and nature of a share 158

9.1-1 Meaning 158

9.1-2 Nature of a share 158

9.2 Share v. Share certificate 160

9.3 Share v. Stock 160

9.4 Kinds of Shares 161

9.4-1 Preference Shares or Preference Share Capital 162

9.4-1a Types of Preference Shares 163

9.4-1b Conditions for issue and redemption ofRedeemable Preference shares 163

9.4-2 Equity Shares [Section 43] 165

9.4-3 Preference shares compared with equity shares 165

9.4-4 Non-voting shares 166

9.5 Par Value of Shares 166

9.6 Raising of capital/Issue of shares 166

9.6-1 Private placement of shares 166

PAGE

CONTENTS I-22

9.6-2 By an offer for sale 167

9.6-3 By inviting public through prospectus 167

9.6-4 Issue of shares to existing shareholders 167

9.7 Public issue of shares 168

9.7-1 Book Building 168

9.7-2 SEBI Regulations for Issue of Shares to the Public 168

9.7-3 Green Shoe Option 181

9.8 Employees’ Benefits Schemes 183

9.8A Employees Stock Option Scheme [ESOS] 183

9.8B Employee Stock Purchase Scheme [ESPS] 185

9.8C Stock Appreciation Rights Scheme (SARS) 185

9.9 Allotment of shares 186

9.9-1 Meaning of allotment 186

9.9-2 General principles regarding allotment 186

9.9-2a Proper authority 186

9.9-2b Allotment against application only 187

9.9-2c Allotment not to be in contravention of anyother law 187

9.9-2d Reasonable time 187

9.9-2e Communication 188

9.9-2f Absolute and unconditional 188

9.9-3 Statutory provisions regarding allotment 189

9.9-3a Registration of prospectus [Section 26(4)] 189

9.9-3b Application money [Sec. 39(2)] 189

9.9-3c Minimum subscription [Section 39(1) & (3)] 189

9.9-3d Closing of the subscription list 190

9.9-3e Permission to deal on a stock exchange [Sec.40] 190

9.9-3f Basis of allotment 191

9.9-3g Over-subscription 191

9.9-3h Allotment of shares for consideration otherthan cash 191

9.9-3i Return as to allotment 191

9.9-3j Underwriting 192

9.9-3k Brokerage 193

PAGE

I-23 CONTENTS

9.10 Purchase of its own shares by a company/Buy-back of sharesby a company 193

9.10-1 Sources to Buy-Back 194

9.10-2 Conditions for Buy-Back 194

9.10-3 Penalty 196

9.10-4 Prohibition for Buy-Back in Certain Circumstances[Section 70] 196

9.11 Financial Assistance for Purchase of its Own Shares 197

9.11-1 Penalty 198

9.11-2 Financial Assistance in contravention of section67(2) - Whether unlawful 198

9.12 Issue of securities at a premium 198

9.13 Issue of shares at a discount [Section 53] 199

9.14 Issue of sweat equity shares [Section 54] 199

9.15 Share certificate 200

9.15-1 Time of issue of share certificate [Sec. 56] 200

9.15-2 Object and effect of share certificate [Sec. 46] 201

9.15-2a Estoppel as to title 201

9.15-2b Estoppel as to payment 202

9.15-3 Issue of duplicate share certificate 202

9.16 Rights shares/Further issue of capital [Section 62] 203

9.16-1 Further allotment out of unsubscribed portion of capi-tal 205

9.16-2 Allotment to renouncee 205

9.17 Conversion of loans or debentures into shares 205

9.18 Bonus shares [Section 63] 206

9.18-1 SEBI Regulations, 2009 for issue of bonus shares 206

9.19 Distinction between bonus shares and rights shares 208

9.20 Reduction of share capital 209

9.20-1 Procedure for reduction of capital 210

9.20-2 Reduction of share capital without the sanction of theTribunal 211

9.20-3 Reduction of capital v. Diminution of capital 212

9.21 Calls on shares 212

9.21-1 Requisites of a valid call 212

9.21-2 Payment of calls otherwise than in cash 214

PAGE

CONTENTS I-24

9.21-3 Payment of calls in advance 214

9.21-4 Interest on calls due but not paid 214

9.22 Forfeiture of shares 214

9.22-1 Forfeiture of fully paid shares 217

9.22-2 Effect of forfeiture 217

9.22-3 Re-issue of forfeited shares 217

9.22-4 Annulment of forfeiture 218

9.23 Surrender of shares 219

9.24 Transfer of shares 219

9.24-1 Procedure for effecting transfer of shares 221

9.24-1a Blank Transfer 222

9.24-1b Transfer of Partly-Paid Shares 223

9.24-1c Transfer of Shares Held in Joint Names 223

9.24-1d Refusal of registration and Appeal againstrefusal 223

9.24-2 Right of transferees pending registration of transfer[Sec. 126] 226

9.24-3 Transfer of Shares under Depository System 227

9.25 Forged transfer 228

9.25-1 Consequences of forged transfer 228

9.26 Priority between transferees 229

9.27 Transmission of shares and debentures 229

9.28 Distinction between transfer and transmission 230

9.29 Nomination of shares and debentures [Section 72] 231

9.30 Lien on shares 231

9.31 Lien and forfeiture compared 232

9.32 Variation of shareholders’ rights 232


10MEMBERSHIP

10.1 Definition of a member 240

10.2 Member v. Shareholder 241

10.3 Modes of acquiring membership 242

10.3-1 By subscribing to the memorandum of association 242

10.3-2 By agreement and registration 242

PAGE

I-25 CONTENTS

10.4 Who may become a member 243

10.4-1 Minor 243

10.4-2 Company 245

10.4-3 A partnership firm 245

10.4-4 A foreigner 245

10.4-5 Can a public office be registered as a member 245

10.4-6 Can shares be held in the name of a Trade Union 246

10.4-7 Joint membership 246

10.4-8 Hindu undivided family 247

10.5 Termination of membership 247

10.6 Impersonation as a shareholder 247

10.7 Rights of a member/shareholder 248

10.7-1 Contractual and other rights 248

10.7-2 Statutory Rights 248

10.7-3 Other Rights 249

10.8 Duties and Liability of members 249

10.9 Member v. Contributory 250

10.10 Expulsion of a member 251


11REGISTERS AND RETURNS

11.1 Introduction 253

11.2 Statutory books to be kept by a company 253

11.3 Optional books 253

11.4 Register of Charges [Section 85] 254

11.5 Register of Members/Debenture-holders 255

11.5-1 Register of Members/Debenture-holders and Indexof Members/Debenture-holders, etc. [Sec. 88] 255

11.5-2 Foreign Register 256

11.5-3 Penalty 256

11.5-4 Shares held in Trust 256

11.5-5 Inspection of Register of Members, etc. [Section 94] 256

11.6 Register of investments not held in company’s name [Section187] 257

11.7 Register of fixed deposits [Sec. 73] 257

PAGE

CONTENTS I-26

11.8 Books of account 257

11.8-1 Place of maintenance of books of account 257

11.8-2 Inspection of books of account, etc. of companies 258

11.8-3 Period for which books of account to be preserved 258

11.9 Register of contracts or arrangements in which directors areinterested [Sec. 189] 258

11.9-1 Entries in the register 259

11.9-2 Place of keeping and inspection of the register 259

11.9-3 Period for which register to be preserved 259

11.9-4 Filing of particulars 259

11.9-5 To be produced at general meeting 259

11.9-6 Exemptions 259

11.9-7 Penalty 259

11.10 Register of Directors 260

11.10-1 Register of Directors and Key Managerial Personneland their shareholding [Sec. 170] 260

11.10-2 Filing of Return with the Registrar 260

11.10-3 Can the register be kept in loose-leaf form ? 261

11.11 Register of Loans and Investments by company [Section 186] 261

11.12 Minutes book 261

11.12-1 Inspection of minute-books of general meeting [Sec-tion 119] 263

11.12-2 Signing of minutes of board meetings 263

11.12-3 Minutes kept in a loose-leaf form 264

11.13 Annual return [Section 92] 264

11.13-1 Signing of the Annual Return 265

11.13-2 Place of keeping 265

11.14 Return of allotment [Section 39] 265

11.15 Place of keeping and inspection of registers, returns, etc.[Section 94] 266

11.15-1 Period for which the registers, returns and recordsare required to be kept 266

11.15-2 Inspection of registers and returns [Section 94] 267

11.15-3 Penalty 267

11.15-4 Power of the Central Government to order inspection 267

11.15-5 Registers, etc., to be evidence 267


PAGE

I-27 CONTENTS

12INVESTMENTS, LOANS, BORROWINGS

AND DEBENTURES

12.1 Investments 269

12.1-1 Meaning of ‘investments’ 269

12.1-2 Investments to be held in company’s own name 269

12.1-2a Exemptions [Section 187(2)] 269

12.1-2b Register of investments not held incompany’s own name 270

12.1-2c Penalty 271

12.2 Investments in other companies and bodies corporate/Inter-corporate loans and investments [Section 186] 271

12.3 Borrowings 273

12.3-1 Exercise of borrowing powers 274

12.3-2 Temporary loans 274

12.3-3 Ultra vires borrowings 274

12.3-4 Charges under the Companies Act, 2013 276

12.3-5 Registration of charges [Sec. 77] 278

12.3-6 Register of charges to be kept by Registrar [Sec. 81] 280

12.3-7 The memorandum of satisfaction [Secs. 82 and 83] 280

12.3-8 Rectification by Central Government in register ofcharges [Sec. 87] 281

12.3-9 Company’s register of charges [Sec. 85] 281

12.3-10 Modification of charges 282

12.4 Debentures 282

12.4-1 Meaning and definition 282

12.4-2 Characteristic features of a debenture 283

12.4-3 Debenture stock 283

12.4-4 Distinction between ‘shareholder’ and ‘debenture-holder’ 283

12.4-5 Issue of debentures 284

12.4-6 Kinds of debentures 288

12.4-7 Debenture trust deed 290

12.4-8 Rights/Remedies of debenture-holders 293


PAGE

CONTENTS I-28

13DIVISIBLE PROFITS AND DIVIDEND

13.1/2 Meaning of Dividend 296

13.3 Concept of Profit 296

13.3-1 Profits v. Divisible Profits 297

13.3-2 ‘Profits available for Distribution’ v. ‘Profits availablefor dividend’ 297

13.4 Sources out of which dividends may be paid 297

13.4-1 Out of current profits 298

13.4-2 Out of past reserves 298

13.4-3 Monies provided by Government 299

13.5 Declaration of dividend on preference and equity shares 299

13.5-1 Dividend on preference shares 299

13.5-2 Dividend on equity shares 300

13.6 Interim dividend 301

13.7 Payment of dividend 302

13.7-1 Dividend payable to whom 302

13.7-2 Dividend is to be paid in cash 303

13.7-3 Time within which dividends to be paid 303

13.8 Dividend warrants 304

13.9 Unpaid and unclaimed dividends 305

13.9-1 Unpaid dividends 305

13.9-2 Transfer of unpaid dividend to Investor Education andProtection Fund [Fund] 305

13.10 Establishment of Investor Education and Protection Fund[Sec. 125] 306

13.11 Can dividends be paid out of capital ? 308

13.12 Payment of dividend out of capital profits 309


14COMPANY MANAGEMENT

14.1 Meaning of a Director 311

14.2 Who may be appointed as a Director? 311

14.3 Qualifications for Directors 312

PAGE

I-29 CONTENTS

14.4 Disqualifications of a Director 312

14.5 Legal position of directors 313

14.5-1 Directors as agents 313

14.5-2 Directors as trustees 314

14.5-3 Directors as managing partners 314

14.5-4 Are directors employees of the company? 315

14.6 Appointment of Directors 315

14.6-1 Appointment of first directors [Section 152] 315

14.6-2 Appointment of directors at general meeting 316

14.6-3 Deemed re-appointment of a retiring director[Sec. 152] 317

14.6-4 Rotational and non-rotational directors vis-a-vis pri-vate company 318

14.6-5 Appointment of a director other than a retiring direc-tor [Sec. 160] 318

14.6-6 Appointment by Board of directors [Section 161] 319

14.6-6a Appointment of Additional Director 319

14.6-6b Filling up Casual Vacancy 320

14.6-6c Alternate Director 321

14.7 Resident Director 322

14.8 Independent Director 322

14.8-1 Who is an Independent Director 323

14.8-2 Selection of Independent Director 324

14.8-3 Manner of Appointment 324

14.8-4 Re-appointment 325

14.8-5 Remuneration 325

14.8-6 Resignation or Removal 325

14.8-7 Separate Meetings 325

14.8-8 Evaluation Mechanism 326

14.8-9 Term of office 326

14.8-10 Liability of Independent Directors 326

14.8-11 Compliance with the Company’s Code of Conduct 326

14.9 Appointment of directors by proportional representation [Sec-tion 163] 328

14.9-1 Single transferable vote 329

14.9-2 Cumulative voting 329

PAGE

CONTENTS I-30

14.10 Assignment of office by Director [Section 166] 329

14.11 Minimum and maximum number of directors 330

14.12 Appointment of woman director on the Board 330

14.13 Appointment of director elected by small shareholders[Section 151] 331

14.14 Number of directorships 332

14.15 Vacation of office of a director [Section 167] 333

14.16 Removal of a director 333

14.16-1 Removal by shareholders 334

14.16-2 Removal by Tribunal [Section 242] 336

14.17 Resignation by a Director 336

14.18 Validity of the acts of a director where his appointment isinvalid [Section 176] 339

14.19 Powers of the Board of Directors 339

14.19-1 Restrictions on powers of directors 342

14.20 Political contributions by Directors [Section 182] 344

14.21 Related party transactions [Section 188] 345

14.21-1 Meaning and Definition of related party [Section2(76)] 345

14.21-2 Meaning of Relative 346

14.21-3 Legal Provisions 346

14.22 Interested Director 34914.23 Duties of Directors 350

14.23-1 Statutory duties 35014.23-2 General duties 352

14.24 Liabilities of Directors 35314.24-1 Liability to the company 35314.24-2 Liability to third parties 35514.24-3 Liability for breach of statutory duties 35614.24-4 Liability for acts of co-directors 35614.24-5 Criminal liability 356

14.25 Loans to Directors 35614.26 Remuneration of Directors (Managerial Remuneration) 35814.27 Managing Director and other Key Managerial Personnel 364

14.27-1 Meaning of Managing director 36414.27-2 Appointment of managing director 365

PAGE

I-31 CONTENTS

14.27-3 Number of companies of which one person may beappointed Managing Director/Key Managerial Per-sonnel 367

14.27-4 Filling of vacancy in the office of whole-time keymanagerial personnel 367

14.27-5 Tenure of appointment 36714.27-6 Remuneration 36814.27-7 Disqualifications 368

14.28 Manager 369

14.28-1 Meaning 369

14.28-2 Disqualifications of a manager 369

14.28-3 Number of companies a person can be appointedmanager 369

14.28-4 Remuneration of manager [Section 197] 370

14.29 Prohibition of simultaneous appointment of different catego-ries of managerial personnel [Section 196] 370

14.30 Distinction between managing director and manager 370

14.31 Whole time director 370


15COMPANY SECRETARY AND PRACTISING

COMPANY SECRETARY

15.1 Definition of company secretary/secretary 377

15.2 Appointment of whole-time company secretary 377

15.2-1 Compulsory appointment of a whole-time companysecretary 377

15.2-2 Manner of appointment of whole-time company sec-retary 378

15.2-3 Whole-time company secretary not hold office in morethan one company 378

15.2-4 Vacation of office of the whole-time company secre-tary 378

15.2-5 Penalty 378

15.3 Duties of secretary 378

15.3-1 General duties 378

15.3-2 Statutory duties 379

PAGE

CONTENTS I-32

15.4 Liabilities of company secretary 379

15.4-1 Statutory liabilities 379

15.4-2 Contractual liabilities 382

15.5 Company secretary in practice 383

15.6 Functions of company secretary [Section 205] 383

15.7 Secretarial audit [Section 204] 383


16COMPANY MEETINGS-I - GENERAL

16.1 Meaning of ‘Meeting’ 38516.2 Kinds of Meetings 38516.3 Requisites of a valid meeting 38516.4 Meeting to be properly convened 386

16.4-1 Proper authority 38616.4-2 Proper and adequate notice 386

16.5 Meeting to be legally constituted 39216.5-1 Chairman of a meeting 39216.5-2 Quorum 39416.5-3 Presence of Directors and Auditors 396

16.6 Meeting to be properly conducted 39716.6-1 Ascertaining the sense of the general meeting 39716.6-2 Rules in respect of voting 39816.6-3 Passing of resolutions by postal ballot [Section 110

read along with Rule 22 of the Companies (Manage-ment and Administration) Rules, 2014] 400

16.6-4 Proxy [Section 105] 40116.6-5 Motion, amendment, point of order 403

16.7 Resolutions 40516.7-1 Ordinary resolution [Section 114(1)] 40516.7-2 Special resolution 40616.7-3 Resolutions requiring special notice 406

16.7A Validity of votes 40716.8 Circulation of members’ resolutions [Section 111] 40716.9 Registration of certain resolutions and agreements [Section

117] 408

16.10 Minutes 409


PAGE

I-33 CONTENTS

17COMPANY MEETINGS-II -

GENERAL BODY MEETINGS

17.1 Need for meetings 414

17.2 Annual General Meeting (AGM) 414

17.2-1 Which companies to hold ? 414

17.2-2 Gap between two AGMs [Section 96] 414

17.2-3 What about a situation where Annual Accounts arenot ready 415

17.2-4 Meeting beyond Statutory Time 415

17.2-5 Cancelling or postponing of convened meeting 416

17.2-6 Day, hour and place of AGM 416

17.2-7 Business to be transacted [Section 102] 416

17.2-8 Notice of the meeting [Section 101] 417

17.3 Default in holding AGM 418

17.3-1 Tribunal to call or direct the calling of AGM 418

17.4 Extraordinary General Meeting (EGM) 419

17.5 Class meetings 421


18COMPANY MEETINGS-III - BOARD MEETINGS

18.1 Need for Board Meetings 425

18.2 When to hold ? 425

18.2-1 First Meeting 425

18.2-2 Subsequent Meetings 425

18.3 Participation of directors through video conferencing or otheraudio visual means [Section 173(2)] 426

18.4 Board meeting 428

18.4-1 Notice of Board Meeting 428

18.4-2 Proper authority to call meeting of Board of Direc-tors 429

18.4-3 Notice - Whom to be given ? 429

18.4-4 Notice to interested directors 429

18.4-5 Notice of adjourned meeting 430

PAGE

CONTENTS I-34

18.5 Contents and Agenda of Board Meeting 430

18.6 Time and place of Board meeting 431

18.7 Quorum 431

18.8 Adjournment for want of quorum 432

18.9 Passing of Resolutions by Circulation [Section 175] 433

18.10 Minutes of the Board meeting 433


19ACCOUNTS AND AUDIT

ACCOUNTS

19.1 Books of account required to be kept 436

19.2 Inspection of Books of Account 438

19.3 Persons responsible for keeping proper books of account [videsub-section (6) of section 128] 438

19.4 Financial Statements 439

19.4-1 Preparation and presentation of financial statements 440

19.5 Authentication of Accounts 442

19.6 Board’s Report 442

19.6-1 Directors’ Responsibility Statement 444

19.6-2 Additional information under the Companies(Accounts) Rules, 2014 444

19.6-3 Corporate Social Responsibility Report 445

19.6-4 Composition of Audit Committee 445

19.6-5 Report to be signed by the Chairman of the Board 445

19.7 Circulation of Financial Statements 445

19.8 Adoption and filing of Financial Statements 446

19.8-1 Filing of financial statements with the Registrar 447

19.8-2 Filing of financial statements in XBRL format 448

19.8-3 Reporting on revised annual statements of accounts 448

19.8-4 Re-opening of accounts on court’s or Tribunal’s or-ders 448

19.8-5 Voluntary revision of Financial Statements or Board’sReport 448

PAGE

I-35 CONTENTS

19.9 Accounting Standards 449

19.9-1 Convergence of Accounting Standards in India withInternational Financial Reporting System (IFRS) 449

19.9-2 National Financial Reporting Authority 449

19.10 Internal Audit 450

AUDIT

19.11 Who can be appointed as an Auditor (Qualifications) ? 450

19.12 Who cannot be appointed as an Auditor (Disqualifications) ? 451

19.12-1 Disqualification due to fraudulent acts 452

19.12-2 Ceiling on Audit 452

19.13 Auditor not to render certain services 452

19.14 Appointment of First Auditors 453

19.15 Appointment of subsequent Auditors 453

19.16 Tenure of appointment 454

19.17 Compulsory rotation of auditors 454

19.17-1 Period for rotation 454

19.17-2 Cooling off period 455

19.17-3 Joint Audit 455

19.18 Reappointment of retiring auditor 456

19.19 Rights of retiring auditor [Section 140(4)] 456

19.20 Casual vacancy 456

19.21 Removal and resignation of an auditor 457

19.21-1 Removal before expiry of the term 457

19.21-2 Resignation of Auditor 457

19.21-3 Removal by the Tribunal 457

19.22 Remuneration of auditors 458

19.23 Rights of the company auditor 458

19.23-1 Right of access to books and account, etc. 458

19.23-2 Right to obtain Information or Explanation 459

19.23-3 Rights with respect to Branch Accounts 459

19.23-4 Right to sign the report 460

19.23-5 Right to receive notices, etc. 460

19.23-6 Right to attend general meeting 460

19.23-7 Right to remuneration 460

PAGE

CONTENTS I-36

19.24 Duties of Company Auditor 461

19.24-1 Duty to make a report under section 143 461

19.24-2 Companies (Auditor’s Report) Order, 2016 (CARO) 462

19.24-3 Compliance with auditing standards 462

19.24-4 Duty to report fraud 462

19.24-5 Duty to attend general meeting 463

19.25 Special provisions relating to audit of Government Companies 463

19.25-1 Appointment of Auditors 463

19.25-2 Audit of Government Companies 463

19.26 Punishment for Contravention 464

19.26-1 Penalty on the company and officers in default 464

19.26-2 Penalty on the auditor 464

19.27 Audit Committee 465

19.27-1 Establishment of vigil mechanism 465

19.28 Cost audit [section 148] 466

19.28-1 Maintenance of cost records 466

19.28-2 Appointment and remuneration of cost auditor 466

19.28-3 Report of Cost Auditor 467

19.28-4 Cost Audit to be in addition to financial audit 467

19.28-5 Penalties 467

19.29 Secretarial Audit 467


20INSPECTION, INQUIRY AND INVESTIGATION

INSPECTION

20.1 Power to call for information, inspect books and conductinquiries 471

20.2 What books and papers can be inspected? 473

20.3 Place and time of inspection 473

20.4 Duties of directors, officers, employees of the company toassist in inspection 473

20.5 Powers of the inspector 474

20.6 Supply of report 475

PAGE

I-37 CONTENTS

INVESTIGATION

20.7 Investigation 475

20.8 Who can apply and the scope of investigation 475

20.8-1 On the report of Registrar or inspector 475

20.8-2 The company, by passing special resolution [Section210(1)(b)] 476

20.8-3 The Court or Tribunal, by order [Section 210(2)] 476

20.8-4 In public interest 476

20.9 Investigation into affairs of a company by Serious Fraud Inves-tigation Office 476

20.10 Investigation into company’s affairs in other cases 477

20.11 Firm, body corporate or association not to be appointed asinspector 478

20.12 Investigation of ownership of a company [Section 216] 478

20.13 Powers of inspectors 479

20.14 Report of the Inspector 481

20.15 Follow up action by the Central Government on the investiga-tion report of the inspector 481

20.16 Investigations etc. of foreign companies [Section 228] 481

20.17 Penalty for furnishing false statements, mutilation or destruc-tion of documents 482

20.18 Difference between Inspection and Investigation 482


21MAJORITY RULE AND MINORITY

PROTECTION

21.1 Rule of majority 484

21.2 Personal rights of members 486

21.3 Representative and Derivative Action 487

21.4 Exceptions to ‘the rule in Foss v. Harbottle’ 488

21.4-1 Ultra vires and illegal acts 488

21.4-2 Breach of fiduciary duties 488

21.4-3 Fraud or oppression against minority 488

21.4-4 Inadequate Notice of a resolution passed at a meet-ing of members 489

21.4-5 Qualified majority 490

PAGE

CONTENTS I-38

21.4-6 Where the personal rights of an individual memberhave been infringed 490

21.4-7 Statutory exceptions 490


22PREVENTION OF OPPRESSION

AND MISMANAGEMENT

22.1 Meaning of oppression 492

22.1-1 Oppression may be past or continuing nature 495

22.1-2 Acts held as oppressive 495

22.1-3 Acts held as not oppressive 498

22.1-4 Acts held as mismanagement 499

22.1-5 Acts not held as mismanagement 500

22.2 Application to Tribunal for relief in cases of oppression etc. 501

22.2-1 Application to the Tribunal 501

22.2-2 Who can apply [Section 241] 502

22.2-3 Who cannot apply 504

22.3 Power of Tribunal 504

22.3-1 Conditions for relief under section 242 504

22.4 Oppression of majority 505

22.4-1 Interim order 506

22.5 Appeals against the orders of the Tribunal and variation of theorder of Tribunal 506

22.6 Composite/simultaneous petition under sections 241 and 271 -Whether maintainable 506

22.7 Powers of the Tribunal [Section 242] 507

22.8 Class Action 509

22.8-1 Who may file an application 509

22.8-2 Against whom an application may be filed 510

22.8-3 Relief under a class action 510

22.8-4 Matters to be considered by Tribunal 510

22.8-5 Order of the Tribunal 511

22.8-6 Differences between application under section 241/244 and class action under section 245 511


PAGE

I-39 CONTENTS

23COMPROMISES, ARRANGEMENTS,

RECONSTRUCTION AND AMALGAMATION

23.1 Meaning of compromise 514

23.2 Meaning of arrangement 514

23.3 Statutory provisions regarding compromise or arrangement 515

23.4 Exercise of the Tribunal’s discretion 517

23.5 Powers of the Tribunal 521

23.6 Information as to compromise or arrangement [Section 230] 522

23.6-1 Matter to be addressed in the Tribunal’s order [Sec-tion 230(7)] 523

23.6-2 Buy back of shares, take-over offer and reduction ofshare capital 523

23.7 Reconstruction and amalgamation 523

23.8 Meaning of reconstruction 524

23.9 Meaning of amalgamation and merger 524

23.10 Difference between amalgamation and reconstruction 525

23.11 Take-over vs. Merger 525

23.12 Legal provisions regarding reconstruction and amalgamation 525

23.13 Reconstruction/Amalgamation by sale of undertaking [Section232] 525

23.13-1 Effect of amalgamation 527

23.13-2 Duties of the Tribunal with respect to reconstruction/amalgamation 527

23.13-3 Amalgamation with existing company only 528

23.13-4 Effect on Legal Proceedings 528

23.13-5 Effective dates in amalgamation, mergers, etc. 529

23.13-6 Valuation of shares and fairness of exchange ratio 530

23.13-7 Notice to be given to Central Government and otherauthorities [Sec. 230(5)] 530

23.13-8 Compliance with the scheme 530

23.13-9 Compliance with Accounting Standard 530

23.14 Merger and Amalgamation of certain companies [Section 233] 530

23.15 Merger or Amalgamation with foreign company [Section 234] 532

23.16 Power to acquire shares of shareholders dissenting from schemeor contract approved by majority [Section 235] 533

PAGE

CONTENTS I-40

23.16-1 Purchase of Minority Shareholding [Section 236] 534

23.16-2 Registration of offer of schemes involving transfer ofshares 535

23.17 Amalgamation of companies in public interest [Section 237] 535

23.17-1 Saving of proceedings 537

23.17-2 Protection of members and creditors 537

23.17-3 Role of Tribunal 537

23.18 Preservation of Books and Papers of Amalgamated Company[Section 239] 538

23.19 Offences committed prior to merger, amalgamation[Section 240] 538


24REVIVAL AND REHABILITATION

OF SICK COMPANIES

24.1 Determination of Sickness 541

24.2 Measures for revival and rehabilitation 542

24.3 Procedure in pursuant of the application 542

24.3-1 Appointment of interim administrator 543

24.3-2 Committee of Creditors 543

24.3-3 Order for Winding up proceeding 543

24.3-4 Appointment of Company Administrator 543

24.3-5 Power and Duties of company administrator [Section260] 544

24.3-6 Scheme of revival and rehabilitation 544

24.4 Sanction of the scheme 545

24.5 Winding up if scheme not approved by creditors 545

24.6 Implementation of the scheme 546

24.6-1 Conclusive evidence 546

24.6-2 Transfer of property and liabilities 546

24.6-3 Binding nature of the scheme 546

24.6-4 Modification, enforcement etc. of contracts 546

24.6-5 Company administrator to implement the scheme 546

24.6-6 Sale Proceeds to be used as directed 546

24.7 Review of the sanctioned scheme 546

PAGE

I-41 CONTENTS

24.8 Liability for misfeasance etc. 547

24.9 Punishment for certain offences 547

24.10 Bar on jurisdiction 548

24.11 Rehabilitation and Insolvency Fund 548


25WINDING UP

25.1 Meaning 549

25.2 Modes of winding up [Section 270(1)] 549

25.3 Winding up by the Tribunal 549

25.3-1 Inability to pay its debts [Section 271(1)(a)] 550

25.3-2 Winding up by Special Resolution [Section 271(1)(b)] 558

25.3-3 Company acting against the interests of sovereigntyand integrity of India, the security of the State, thefriendly relations with foreign States, public order,decency or morality [Section 271(1)(c)] 558

25.3-4 Failure of revival or rehabilitation of a sick companyunder Chapter XIX [Section 271(1)(d)] 558

25.3-5 Company’s affairs been conducted in a fraudulent orunlawful manner etc. [Section 271(1)(e)] 559

25.3-6 Company making default in filing with the Registrarits Financial Statements or Annual returns for imme-diately preceding five consecutive financial years [Sec-tion 271(1)(f)] 559

25.3-7 Just and Equitable [Section 271(1)(g)] 56025.4 Who can make petition [Section 272] 565

25.4-1 The Company [Section 272(1)(a)] 56525.4-2 Creditor’s petition [Section 272(1)(b)] 56525.4-3 Contributory’s petition [Section 272(1)(c)] 56625.4-4 Joint petition [Section 272(1)(d)] 56725.4-5 The Registrar [Section 272(1)(e)] 56725.4-6 Person authorized by the Central Government [Sec-

tion 272(1)(f)] 567

25.4-7 Central Government’s/State Government’s petition[Section 272(1)(g)] 568

25.4-8 Can a petition be made for winding up by workers’union of a company 568

25.4-9 Right of any other person to be heard 568

PAGE

CONTENTS I-42

25.5 Commencement of winding up [Section 357] 56825.6 Procedure for winding up order 569

25.6-1 Petition 56925.6-2 Provisional liquidator 56925.6-3 Company Liquidator 56925.6-4 Removal and Replacement of liquidator [Section

276] 57025.6-5 Winding up Committee 57025.6-6 Powers of the Tribunal [Section 273] 571

25.7 Consequences of winding up order 57125.8 Submission of report by Company Liquidator [Section 281] 57425.9 Promoters, directors etc. to cooperate with the Company Liq-

uidator [Section 284] 57625.10 Advisory Committee [Section 287] 576

25.10-1 Constitution and proceedings of Advisory Committee[Section 287] 576

25.11 General Powers of Tribunal in case of winding up by Tribunal 57725.12 Dissolution of company [Section 302] 578

25.12-1 Effect of order of dissolution 57825.13 Enforcement of and appeal from orders 579

25.13-1 Enforcement of Orders [Section 424(3)] 57925.13-2 Appeals from Orders [Section 421] 579

VOLUNTARY WINDING UP

25.14 Meaning and manner of voluntary winding up 57925.15 Declaration of solvency [Section 305] 58025.16 Meeting of Creditors [Section 306] 58025.17 Commencement of voluntary winding up 58125.18 Consequences of voluntary winding up 581

25.18-1 Effect on status of company [Section 309] 58125.18-2 Board’s powers to cease [Section 313] 58125.18-3 Avoidance of transfers, etc. [Section 334] 58125.18-4 Discharge of employees 582

25.19 Appointment of Company Liquidators [Section 310(1)] 58225.19-1 Notice of appointment of Company Liquidator to be

given to ROC [Section 312] 583

25.19-2 Power and Duties of Company Liquidator in volun-tary winding up [Section 314] 583

PAGE

I-43 CONTENTS

25.19-3 Appointment of Committees [Section 315] 583

25.19-4 Power of Company Liquidator to accept shares, etc.as consideration of sale of property of the company[Section 319] 583

25.19-5 Duty of the Company Liquidator to inform theIncome-tax Officer 584

25.19-6 Duty of the Company Liquidator to report progress[Section 316] 584

25.19-7 Report to the Tribunal for examination of persons forsuspected fraud [Section 317] 584

25.19-8 Final meeting and dissolution [Section 318] 58525.19-9 Dissolution of the company 585

25.20 Liquidation and winding up distinguished 58525.21 Arrangement when binding on company and creditors in vol-

untary winding up [Section 321] 586

25.22 Application to Tribunal to have questions determined [Section322] 586

25.23 Costs of voluntary winding-up [Section 323] 58725.24 Summary procedure for Liquidation [Section 361] 587

25.24-1 Appointment of Liquidator 58725.24-2 Report by the Official Liquidator 58725.24-3 Realization of assets and payment of liabilities by the

Official Liquidator 58725.24-4 Dissolution of the Company 588

25.25 Liquidators 58825.26 Liquidators in compulsory winding up 588

25.26-1 Provisional Liquidator 58825.26-2 Appointment, removal and resignation of Company

Liquidator 58925.26-3 Advisory Committee to act with Company Liquidator 58925.26-4 Powers and Duties of Company Liquidator in com-

pulsory winding up [Section 290] 589

25.26-5 Duties of Company Liquidator in compulsory wind-ing up 590

25.27 Liquidators in voluntary winding up 59125.27-1 Notice by Company Liquidator of his appointment

[Section 312] 591

25.28 Liquidator in Summary Procedure 591

25.28-1 Powers and Function of Official Liquidator [Section360] 592

PAGE

CONTENTS I-44

25.28-2 Official Liquidator in a summary procedure [Section361 to Section 365] 592

25.29 Provisions applicable to every mode of winding up 592

25.30 Debts of all descriptions to be admitted to proof [Section 324] 592

25.31 Application of insolvency rules in winding up of insolvent com-panies [Section 325] 592

25.32 Preferential Payments 593

25.32A Antecedent and other transactions 596

25.32A-1 Fraudulent preference [Section 328] 596

25.33 Avoidance of voluntary transfer [Section 329] 597

25.34 Transfer for benefit of all creditors [Section 330] 597

25.35 Liabilities and rights of certain fraudulently preferred person[Section 331] 597

25.36 Effect of floating charge [Section 332] 598

25.37 Disclaimer of onerous property [Section 333] 598

25.38 Avoidance of transfers, etc. after commencement of winding-up [Section 334] 599

25.39 Avoidance of certain attachments [Section 335] 600

25.40 Offences by officers of companies in liquidation [Section 336] 600

25.41 Penalty for fraud by officers [Section 337] 602

25.42 Liability for not keeping proper books [Section 338] 602

25.43 Liability for fraudulent conduct of business [Section 339] 602

25.44 Damages for misfeasance etc. [Section 340] 604

25.44-1 Misfeasance, what constitutes 605

25.44-2 Legal representatives, liability of 606

25.44-3 Liability of Partners and Directors of Body Corporate[Section 341] 606

25.45 Prosecution of Delinquent Officer and Members of the Com-pany [Section 342] 606

25.46 Miscellaneous provisions 607

25.46-1 Statement that a company is in liquidation [Section344] 607

25.46-2 Books and papers of company to be evidence [Sec-tion 345] 607

25.46-3 Inspection of books and papers by creditors andcontributories [Section 346] 607

PAGE

I-45 CONTENTS

25.46-4 Disposal of books and papers of company [Section347] 608

25.46-5 Information as to pending liquidations [Section 348] 608

25.47 Distribution of property 609

25.47-1 Distribution of property of company [Section 320] 609

25.47-2 Deposit of money by the Official Liquidator and Com-pany Liquidator [Sections 349 to 351] 609

25.47-3 Company Liquidation Dividend and UndistributedAssets Account [Section 352] 610

25.48 Default by the Company Liquidator to make returns [Section353] 610

25.49 Meetings to ascertain wishes of creditor and contributories [Sec-tion 354] 611

25.50 Contributory 61125.50-1 Meaning of contributory 61125.50-2 Contributory vis-a-vis Member 61125.50-3 Persons liable as contributories 61225.50-4 Liability of contributories [Section 285] 61325.50-5 Liability of present members 61325.50-6 Liability of past members 61425.50-7 Power of Tribunal to make calls [Section 296] 61425.50-8 Contributory’s right of set off 615

25.51 Unregistered Companies 61525.51-1 Meaning of unregistered company [Section 375] 61525.51-2 Winding-up of an unregistered company [Section

375] 61625.51-3 Procedure for winding up of unregistered company 617

25.52 Winding-up of a Foreign Company 61725.53 Removal of name of company from register of companies 617

25.53-1 Procedure for removing the name 61725.53-2 Removal of the name by special resolution by a com-

pany [Section 248(2)] 61825.53-3 Restriction on making application under section 248 61825.53-4 Effect of Restoration 62225.53-5 Position of creditors on restoration 622

25.54 Transfer of winding-up proceedings to Tribunal 622TEST YOUR KNOWLEDGE 622

PAGE

CONTENTS I-46

26SERVICE OF DOCUMENTS

26.1 Service of documents on a company 62626.2 Service of documents on R.O.C. [Section 20] 62626.3 Service of documents on members by company [Section 20] 62626.4 Electronic Service of documents 627TEST YOUR KNOWLEDGE 627

27CORPORATE GOVERNANCE

27.1 Meaning of Corporate Governance 628

27.2 Need for Corporate Governance 62827.3 Corporate Governance in India 630

27.3-1 Kumar Mangalam Birla Committee Report 63127.3-2 Voluntary Guidelines on corporate governance and

social responsibilities 63127.3-3 Listing Agreement 631

27.4 Certain Provisions of the Companies Act, 2013 vis-a-vis Corpo-rate Governance 634


28THE DEPOSITORIES ACT, 1996 : AN ANALYSIS

28.1 Objectives 63728.2 Salient features of Depositories Act, 1996 63728.3 Meaning of Depository 63828.4 Benefits of depository system 63828.5 Services to be rendered by a Depository 638

28.5-1 Who can render Depository services ? 63928.5-2 Securities eligible for depository services 63928.5-3 Are all eligible securities required to be in the deposi-

tory mode? 639

28.5-4 Who is a participant? 640

28.5-5 Responsibilities of a depository vis-a-vis participant 640

28.5-6 Status of the depository in the records of the issuer 640

28.5-7 Status of an investor who avails of depository ser-vices 640

PAGE

I-47 CONTENTS

28.6 Dematerialisation of securities 64028.6-1 Fungibility 641

28.7 How does an investor avail services of a depository? 64128.8 Free transferability of services 641

28.8-1 Types of securities freely transferable 64228.8-2 Is it required to have a transfer deed for transfer of

securities within the depository mode? 64228.9 Rematerialisation 64228.10 Powers of SEBI under the Depositories Act, 1996 64228.11 Bye-laws of a depository 643

28.11-1 Contents of the bye-laws 643

28.12 Stamp duty on security certificates 644

28.12-1 Payment of stamp duty at the time of entry into thedepository 644

28.12-2 Stamp duty in the case of transfer of securities withinthe depositories 644

28.12-3 Stamp duty payable while opting out of depository 644

28.12-4 Stamp duty in respect of transactions outside thedepository mode 644

28.13 Distinctive number of shares 645

28.14 Exercise of membership rights in respect of securities held bya Depository 645

28.15 The evidential value of the records of the depository 645

28.16 Cognizance of offence by Courts 645

28.17 Penalty for offences under the Depositories Act 645


29COMPANY LAW IN A COMPUTERISED

ENVIRONMENT - E-GOVERNANCEAND E-FILING

29.1 What is e-Governance 647

29.2 Filing of applications, documents, inspection etc. in electronicform 647

29.2-1 Electronic form to be exclusive, alternative or addi-tional 648

29.2-2 Providing of value added services through electronicform [Section 401] 648

PAGE

CONTENTS I-48

29-2-3 Application of provision of Information TechnologyAct, 2000 649

29.3 Advantages of e-Filing 649

29.4 Launch of MCA-21 Programme 649

29.5 Five Step e-Filing Process 651

29.6 Completion of e-Filing 653

29.7 Guidelines for Annual e-Filing 653

29.7-1 Guideline for preparing the e-Forms for Annual Filing 653

29.7-2 Guideline for submitting the e-Forms on MCA Portal 653


I-49 CONTENTS

contents · 2016-07-05 · 4.2-1d preparation of other documents 76 4.2-1e filing of application...

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