About the authors I-5
Preface to the Eighteenth Edition I-7
Preface to the First Edition I-9
Chapter-heads I-11
Section-wise Index I-49
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 ? 6
2.2 Definition of a company 7
2.3 Characteristic features of a company 7
2.3-1 Incorporated association 7
2.3-2 Legal entity distinct from its members 7
2.3-3 Artificial person 10
2.3-4 Limited liability 10
2.3-5 Separate property 10
2.3-6 Transferability of shares 11
2.3-7 Perpetual succession 11
2.3-8 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 40
3.6 Conversion of a public company into a private company 41
3.7 Statutory company 42
3.8 Registered companies 42
3.9 Limited liability companies 42
3.9-1 Companies limited by shares 42
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 44
3.12-1 Alteration of Memorandum and Articles of Associa-tion 44
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 45
3.12.4 Exemptions to section 8 companies 45
3.13 Government companies 46
3.13-1 Legal status of a Government company 46
3.13-2 A Government company - Whether a private or pub-lic company 47
3.13-3 Exemptions to a Government company 47
3.14 Foreign company 48
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) 50
3.14-2e Books of account and other records (sec.384) 50
3.14-2f Requirements as to Prospectus (Secs. 387 to389) 50
3.14-2g Foreign companies in which not less than50% of the paid-up share capital is in Indianhands 51
3.14-2h Penalty 51
3.14-2i Winding-up 51
3.14A Offer of Indian Depository Receipts (Sec. 390) 51
3.15 Holding and subsidiary companies 52
3.16 Public financial institutions [Sec. 2(72)] 53
3.17 Unregistered Companies [Section 375] 54
3.18 Producer Companies [Secs. 581A to 581ZT of the CompaniesAct, 1956] 54
TEST YOUR KNOWLEDGE 64
4FORMATION AND INCORPORATION
OF A COMPANY
4.1 Promotion 65
4.1-1 Who is a promoter 65
PAGE
I-17 CONTENTS
4.1-2 When promotion begins and ends 66
4.1-3 Legal position of a promoter 67
4.1-4 Duties of promoters 68
4.1-5 Liabilities of promoters 68
4.1-5a For non-disclosure 68
4.1-5b Under Companies Act 69
4.1-6 Remuneration of promoters 69
4.1-7 Pre-incorporation contracts 70
4.1-8 Liability of promoters vis-a-vis pre-incorporation con-tracts 71
4.2 Registration/Incorporation of a company 72
4.2-1 Procedure for registration/incorporation of a com-pany : Important steps 72
4.2-1a Type of Company 72
4.2-1b Application for availability/reservation ofname 72
4.2-1c Preparation of Memorandum and Articlesof Association 72
4.2-1d Preparation of other documents 73
4.2.1e Filing of documents for registration 74
4.3 Integrated Process for Incorporation 75
4.3A Certificate of incorporation 76
4.3B Effect of certificate of incorporation 77
4.3C Conclusiveness of certificate of incorporation 77
4.3C-1 Consequences of incorporating a company by filingfalse information/suppression of information 77
4.4 Commencement of business 78
TEST YOUR KNOWLEDGE 78
5MEMORANDUM OF ASSOCIATION
5.1 Meaning and importance 80
5.2 Memorandum of Association - Whether an unalterable charter 80
PAGE
CONTENTS I-18
5.3 Form and contents 81
5.3-1 The name clause [Sec. 4(1)(a)] 82
5.3-1a Undesirable Names 83
5.3-1b Too similar name 85
5.3-1c Publication of name (Sec. 12) 86
5.3-2 The registered office clause [Sec. 4(1)(b)] 87
5.3-3 The objects clause [Section 4(1)(c)] 88
5.3-4 Doctrine of ultra vires 88
5.3-4a Implied powers 89
5.3-4b Powers which are not implied 90
5.3-4c Effects of ultra vires transactions 90
5.3-5 Liability clause [Sec. 4(1)(d)] 91
5.3-6 The capital clause [Sec. 4(1)(e)] 92
5.3-7 Name of a nominee in case of ‘One Person Company’[Sec. 4(1)(f)] 92
5.3-8 The association or subscription clause [Sec. 4(1)(e)] 92
5.3-8a The statutory requirements regarding sub-scription of memorandum 93
5.4 Alteration of memorandum 94
5.4-1 Change of name 94
5.4-1a Change of name at the instance of the com-pany 94
5.4-1b Change of name on a direction from theCentral Government 94
5.4-1c Effect of change of name 95
5.4-2 Change of registered office 96
5.4-2a Change of registered office from one pre-mises to another premises in the same city,town or village [Sec. 12] 96
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] 96
5.4-2c Change of Registered Office from one Stateto another State 96
5.4-3 Change in Objects Clause 98
5.4-4 Change in Liability Clause 99
5.4-5 Change in Capital Clause 99
PAGE
I-19 CONTENTS
5.4-5a Increase of authorised share capital 100
5.4-5b Consolidation and sub-division of shares 100
5.4-5c Conversion of shares into stock and viceversa 100
5.4-5d Diminution of share capital 101
TEST YOUR KNOWLEDGE 101
6ARTICLES OF ASSOCIATION
6.1 Introduction 103
6.2 Memorandum and Articles - Their Relationship 103
6.3 Distinction between memorandum of association and articlesof association 105
6.4 Contents 105
6.4-1 Provisions for Entrenchment 105
6.4-2 Regulations required in case of unlimited company,company limited by guarantee and private companylimited by shares 107
6.5 Model form of articles 107
6.6 Signing of Articles 107
6.7 Alteration of articles 108
6.7-1 Limitation on power to alter Articles 109
6.7-2 Effect of Altered Articles 111
6.8 Binding Effect of memorandum and articles 112
6.8-1 Members bound to the company 112
6.8-2 Company bound to members 113
6.8-3 Members bound to members 114
6.8-4 Whether company or members bound to outsiders 114
6.8-5 Whether Directors are bound by whatever is con-tained in the articles 116
6.9 Doctrine of constructive notice 116
6.10 Doctrine of indoor management 117
6.10-1 Exceptions to the doctrine of indoor management 118
6.10-1a Where the outsider had knowledge ofirregularity 118
6.10-1b No knowledge of articles 118
6.10-1c Forgery 119
PAGE
CONTENTS I-20
6.10-1d Negligence 119
6.10-1e Others 120
TEST YOUR KNOWLEDGE 120
7PROSPECTUS
7.1 Meaning and definition of a prospectus 124
7.2 Contents of a prospectus 126
7.2-1 Information to be given in a Prospectus 127
7.2-2 Reports to be set out in the Prospectus 128
7.2-3 Declaration 129
7.2-4 Other Matters 129
7.2-5 Statement of an Expert included in a Prospectus 129
7.2-6 Penalty for non-compliance 130
7.2-7 Exemptions 130
7.2-8 Variation in terms of contract or objects in prospec-tus (Section 27) 130
7.2-9 Offer of sale of shares by certain members of com-pany (Section 28) 130
7.3 Draft Prospectus to be made public 131
7.3A Abridged Prospectus 131
7.4 Is issue of prospectus compulsory/When prospectus is notrequired to be issued? 132
7.5 Statutory requirements in relation to a prospectus 133
7.5-1 Dating of prospectus 133
7.5-2 Registration of prospectus 133
7.5-3 When Registrar shall refuse registration of a prospec-tus 133
7.5-4 Penalty 134
7.6 Prospectus by implication/Deemed prospectus [Sec. 25] 134
7.6-1 Additional requirements relating to deemed prospec-tus 134
7.7 Shelf Prospectus and Information Memorandum [Section 31] 135
7.8 Red-herring prospectus [Section 32] 136
7.9 Mis-statements in a prospectus and their consequences 136
7.9-1 What is an untrue statement/mis-statement ? 136
7.9-2 Remedies for mis-statement in a prospectus 138
PAGE
I-21 CONTENTS
7.10 Golden Rule for framing of Prospectus 140
7.11 Allotment of shares in fictitious names prohibited [Sec. 38] 141
7.12 Announcement regarding proposed issue of capital [Section 30] 141
TEST YOUR KNOWLEDGE 142
8ACCEPTANCE OF PUBLIC DEPOSITS
8.1 Meaning of deposits 145
8.2 Acceptance of deposits 147
8.2-1 Acceptance of Deposits from Members 147
8.2-2 Acceptance of Deposits from Public 149
8.2-3 Deposits accepted before commencement of the Com-panies Act, 2013 151
TEST YOUR KNOWLEDGE 152
9SHARE AND SHARE CAPITAL
9.1 Meaning and nature of a share 153
9.1-1 Meaning 153
9.1-2 Nature of a share 153
9.2 Share v. Share certificate 155
9.3 Share v. Stock 155
9.4 Kinds of Shares 156
9.4-1 Preference Shares or Preference Share Capital 157
9.4-1a Types of Preference Shares 158
9.4-1b Conditions for issue and redemption ofRedeemable Preference shares 158
9.4-2 Equity Shares [Section 43] 160
9.4-3 Preference shares compared with equity shares 160
9.4-4 Non-voting shares 161
9.5 Par Value of Shares 161
9.6 Raising of capital/Issue of shares 161
9.6-1 Private placement of shares 161
9.6-2 By an offer for sale 162
9.6-3 By inviting public through prospectus 162
9.6-4 Issue of shares to existing shareholders 162
PAGE
CONTENTS I-22
9.7 Public issue of shares 163
9.7-1 Book Building 163
9.7-2 SEBI Regulations for Issue of Shares to the Public 163
9.7-3 Green Shoe Option 176
9.7-4 Employees Stock Option Scheme [ESOSs] 178
9.8 Allotment of shares 180
9.8-1 Meaning of allotment 180
9.8-2 General principles regarding allotment 180
9.8-2a Proper authority 180
9.8-2b Allotment against application only 181
9.8-2c Allotment not to be in contravention of anyother law 181
9.8-2d Reasonable time 181
9.8-2e Communication 182
9.8-2f Absolute and unconditional 182
9.8-3 Statutory provisions regarding allotment 183
9.8-3a Registration of prospectus [Section 26(4)] 183
9.8-3b Application money [Sec. 39(2)] 183
9.8-3c Minimum subscription [Section 39(1 & 3)] 183
9.8-3d Closing of the subscription list 184
9.8-3e Permission to deal on a stock exchange [Sec.40] 184
9.8-3f Basis of allotment 185
9.8-3g Over-subscription 185
9.8-3h Return as to allotment 185
9.8-3i Underwriting 185
9.8-3j Brokerage 187
9.9 Purchase of its own shares by a company/Buy-back of sharesby a company 187
9.9-1 Sources to Buy-Back 187
9.9-2 Conditions for Buy-Back 188
9.9-3 Penalty 189
9.9-4 Prohibition for Buy-Back in Certain Circumstances[Section 70] 189
9.10 Financial Assistance for Purchase of its Own Shares 190
9.10-1 Penalty 191
PAGE
I-23 CONTENTS
9.10-2 Financial Assistance in contravention of section67(2) - Whether unlawful 191
9.11 Issue of securities at a premium 191
9.12 Issue of shares at a discount [Section 53] 192
9.13 Issue of sweat equity shares [Section 54] 193
9.14 Share certificate 194
9.14-1 Time of issue of share certificate (Sec. 56) 194
9.14-2 Object and effect of share certificate (Sec. 46) 195
9.14-2a Estoppel as to title 195
9.14-2b Estoppel as to payment 195
9.14-3 Issue of duplicate share certificate 196
9.15 Rights shares/Further issue of capital [Section 62] 196
9.15-1 Further allotment out of unsubscribed portion of capi-tal 198
9.15-2 Allotment to renouncee 198
9.16 Conversion of loans or debentures into shares 198
9.17 Bonus shares [Section 63] 199
9.17-1 SEBI Regulations, 2009 for issue of bonus shares 200
9.18 Distinction between bonus shares and rights shares 202
9.19 Reduction of share capital 202
9.19-1 Procedure for reduction of capital 203
9.19-2 Reduction of share capital without the sanction of theTribunal 204
9.19-3 Reduction of capital v. Diminution of capital 205
9.20 Calls on shares 205
9.20-1 Requisites of a valid call 206
9.20-2 Payment of calls otherwise than in cash 207
9.20-3 Payment of calls in advance 207
9.20-4 Interest on calls due but not paid 207
9.21 Forfeiture of shares 208
9.21-1 Forfeiture of fully paid shares 210
9.21-2 Effect of forfeiture 210
9.21-3 Re-issue of forfeited shares 211
9.21-4 Annulment of forfeiture 212
9.22 Surrender of shares 212
PAGE
CONTENTS I-24
9.23 Transfer of shares 213
9.23-1 Procedure for effecting transfer of shares 215
9.23-1a Blank Transfer 216
9.23-1b Transfer of Partly-Paid Shares 216
9.23-1c Transfer of Shares Held in Joint Names 216
9.23-1d Refusal of registration and Appeal againstrefusal 217
9.23-2 Right of transferees pending registration of transfer[Sec. 126] 219
9.23-3 Transfer of Shares under Depository System 220
9.24 Forged transfer 221
9.24-1 Consequences of forged transfer 221
9.25 Priority between transferees 222
9.26 Transmission of shares and debentures 222
9.27 Distinction between transfer and transmission 223
9.28 Nomination of shares and debentures [Section 72] 223
9.29 Lien on shares 224
9.30 Lien and forfeiture compared 225
9.31 Variation of shareholders’ rights 225
TEST YOUR KNOWLEDGE 226
10MEMBERSHIP
10.1 Definition of a member 233
10.2 Member v. Shareholder 234
10.3 Modes of acquiring membership 235
10.3-1 By subscribing to the memorandum of association 235
10.3-2 By agreement and registration 235
10.4 Who may become a member 236
10.4-1 Minor 236
10.4-2 Company 238
10.4-3 A partnership firm 238
10.4-4 A foreigner 238
10.4-5 Can a public office be registered as a member 238
10.4-6 Can shares be held in the name of a Trade Union 239
PAGE
I-25 CONTENTS
10.4-7 Joint membership 239
10.4-8 Hindu undivided family 240
10.5 Termination of membership 240
10.6 Impersonation as a shareholder 240
10.7 Rights of a member/shareholder 241
10.7-1 Contractual and other rights 241
10.7-2 Statutory Rights 241
10.7-3 Other Rights 242
10.8 Duties and Liability of members 242
10.9 Member v. Contributory 243
10.10 Expulsion of a member 244
TEST YOUR KNOWLEDGE 245
11REGISTERS AND RETURNS
11.1 Introduction 246
11.2 Statutory books to be kept by a company 246
11.3 Optional books 246
11.4 Register of Charges (Section 85) 247
11.5 Register of Members/Debenture-holders 248
11.5-1 Register of Members/Debenture-holders and Indexof Members/Debenture-holders, etc. [Sec. 88] 248
11.5-2 Foreign Register 249
11.5-3 Penalty 249
11.5-4 Shares held in Trust 249
11.5-5 Inspection of Register of Members, etc. (Section 94) 249
11.6 Register of investments not held in company’s name (Section187) 250
11.7 Register of fixed deposits [Sec. 73] 250
11.8 Books of account 250
11.8-1 Place of maintenance of books of account 250
11.8-2 Inspection of books of account, etc. of companies 251
11.8-3 Period for which books of account to be preserved 251
11.9 Register of contracts or arrangements in which directors areinterested [Sec. 189] 251
11.9-1 Entries in the register 252
PAGE
CONTENTS I-26
11.9-2 Place of keeping and inspection of the register 252
11.9-3 Period for which register to be preserved 252
11.9-4 Filing of particulars 252
11.9-5 To be produced at general meeting 252
11.9-6 Exemptions 252
11.9-7 Penalty 252
11.10 Register of Directors 253
11.10-1 Register of Directors and Key Managerial Personneland their shareholding [Sec. 170] 253
11.10-2 Filing of Return with the Registrar 253
11.10-3 Can the register be kept in loose-leaf form ? 254
11.11 Register of Loans and Investments by company (Section 186) 254
11.12 Minutes book 254
11.12-1 Inspection of minute-books of general meeting (Sec-tion 119) 256
11.12-2 Signing of minutes of board meetings 256
11.12-3 Minutes kept in a loose-leaf form 257
11.13 Annual return (Section 92) 257
11.13-1 Signing of the Annual Return 258
11.13-2 Place of keeping 258
11.14 Return of allotment (Section 39) 258
11.15 Place of keeping and inspection of registers, returns, etc.(Section 94) 259
11.15-1 Period for which the registers, returns and recordsare required to be kept 259
11.15-2 Inspection of registers and returns (Section 94) 260
11.15-3 Penalty 260
11.15-4 Power of the Central Government to order inspection 260
11.15-5 Registers, etc., to be evidence 260
TEST YOUR KNOWLEDGE 260
12INVESTMENTS, LOANS, BORROWINGS
AND DEBENTURES
12.1 Investments 262
12.1-1 Meaning of ‘investments’ 262
PAGE
I-27 CONTENTS
12.1-2 Investments to be held in company’s own name 262
12.1-2a Exemptions [Section 187(2)] 262
12.1-2b Register of investments not held incompany’s own name 263
12.1-2c Penalty 264
12.2 Investments in other companies and bodies corporate/Inter-corporate loans and investments 264
12.3 Borrowings 266
12.3-1 Exercise of borrowing powers 267
12.3-2 Temporary loans 267
12.3-3 Ultra vires borrowings 267
12.3-4 Charges under the Companies Act, 2013 269
12.3-5 Registration of charges (Sec. 77) 271
12.3-6 Register of charges to be kept by Registrar [Sec. 81] 273
12.3-7 The memorandum of satisfaction [Secs. 82 and 83] 273
12.3-8 Rectification by Central Government in register ofcharges [Sec. 87] 274
12.3-9 Company’s register of charges [Sec. 85] 274
12.3-10 Modification of charges 275
12.4 Debentures 275
12.4-1 Meaning and definition 275
12.4-2 Characteristic features of a debenture 276
12.4-3 Debenture stock 276
12.4-4 Distinction between ‘shareholder’ and ‘debenture-holder’ 276
12.4-5 Issue of debentures 277
12.4-6 Kinds of debentures 281
12.4-7 Debenture trust deed 283
12.4-8 Rights/Remedies of debenture-holders 286
TEST YOUR KNOWLEDGE 287
13DIVISIBLE PROFITS AND DIVIDEND
13.1 Meaning of Dividend 289
13.2 Concept of Profit 289
13.3-1 Profits v. Divisible Profits 290
PAGE
CONTENTS I-28
13.3-2 ‘Profits available for Distribution’ v. ‘Profits availablefor dividend’ 290
13.4 Sources out of which dividends may be paid 290
13.4-1 Out of current profits 291
13.4-2 Out of past reserves 291
13.4-3 Monies provided by Government 292
13.5 Declaration of dividend on preference and equity shares 292
13.5-1 Dividend on preference shares 292
13.5-2 Dividend on equity shares 293
13.6 Interim dividend 294
13.7 Payment of dividend 295
13.7-1 Dividend payable to whom 295
13.7-2 Dividend is to be paid in cash 296
13.7-3 Time within which dividends to be paid 296
13.8 Dividend warrants 297
13.9 Unpaid and unclaimed dividends 298
13.9-1 Unpaid dividends 298
13.9-2 Transfer of unpaid dividend to Investor Education andProtection Fund [Fund] 298
13.10 Establishment of Investor Education and Protection Fund[Sec. 125] 299
13.11 Can dividends be paid out of capital ? 301
13.12 Payment of dividend out of capital profits 301
TEST YOUR KNOWLEDGE 302
14COMPANY MANAGEMENT
14.1 Meaning of a Director 304
14.2 Who may be appointed as a Director? 304
14.3 Qualifications for Directors 305
14.4 Disqualifications of a Director 305
14.5 Legal position of directors 306
14.5-1 Directors as agents 306
14.5-2 Directors as trustees 307
14.5-3 Directors as managing partners 307
14.5-4 Are directors employees of the company? 308
PAGE
I-29 CONTENTS
14.6 Appointment of Directors 308
14.6-1 Appointment of first directors [Section 152] 308
14.6-2 Appointment of directors at general meeting 309
14.6-3 Deemed re-appointment of a retiring director[Sec. 152] 310
14.6-4 Rotational and non-rotational directors vis-a-vis pri-vate company 311
14.6-5 Appointment of a director other than a retiring direc-tor [Sec. 160] 311
14.6-6 Appointment by Board of directors [Section 161] 312
14.6-6a Appointment of Additional Director 312
14.6-6b Filling up Casual Vacancy 313
14.6-6c Alternate Director 314
14.7 Resident Director 315
14.8 Independent Director 315
14.8-1 Who is an Independent Director 315
14.8-2 Selection of Independent Director 316
14.8-3 Manner of Appointment 317
14.8-4 Re-appointment 317
14.8-5 Remuneration 317
14.8-6 Resignation or Removal 318
14.8-7 Separate Meetings 318
14.8-8 Evaluation Mechanism 318
14.8-9 Term of office 318
14.8-10 Liability of Independent Directors 319
14.8-11 Compliance with the Company’s Code of Conduct 319
14.9 Appointment of directors by proportional representation [Sec-tion 163] 321
14.9-1 Single transferable vote 321
14.9-2 Cumulative voting 321
14.10 Assignment of office by Director [Section 166] 322
14.11 Minimum and maximum number of directors 322
14.12 Appointment of woman director on the Board 323
14.13 Appointment of director elected by small shareholders [151] 323
14.14 Number of directorships 324
14.15 Vacation of office of a director [Section 167] 325
PAGE
CONTENTS I-30
14.16 Removal of a director 326
14.16-1 Removal by shareholders 326
14.16-2 Removal by Tribunal [Section 242] 328
14.17 Resignation by a Director 329
14.18 Validity of the acts of a director where his appointment isinvalid [Section 176] 331
14.19 Powers of the Board of Directors 331
14.19-1 Restrictions on powers of directors 334
14.20 Political contributions by Directors [Section 182] 336
14.21 Related party transactions [Section 188] 337
14.21-1 Meaning and Definition of related party [Section2(76)] 337
14.21-2 Meaning of Relative 338
14.21-3 Legal Provisions 338
14.22 Interested Director 34114.23 Duties of Directors 342
14.23-1 Statutory duties 34214.23-2 General duties 343
14.24 Liabilities of Directors 34514.24-1 Liability to the company 34514.24-2 Liability to third parties 34614.24-3 Liability for breach of statutory duties 34714.24-4 Liability for acts of co-directors 34714.24-5 Criminal liability 348
14.25 Loans to Directors 34814.26 Remuneration of Directors (Managerial Remuneration) 34914.27 Managing Director and other Key Managerial Personnel 356
14.27-1 Meaning of Managing director 35614.27-2 Appointment of managing director 35614.27-3 Number of companies of which one person may be
appointed Managing Director/Key Managerial Per-sonnel 358
14.27-4 Filling of vacancy in the office of whole-time keymanagerial personnel 359
14.27-5 Tenure of appointment 35914.27-6 Remuneration 35914.27-7 Disqualifications 359
PAGE
I-31 CONTENTS
14.28 Manager 360
14.28-1 Meaning 360
14.28-2 Disqualifications of a manager 360
14.28-3 Number of companies a person can be appointedmanager 360
14.28-4 Remuneration of manager (Section 197) 360
14.29 Prohibition of simultaneous appointment of different catego-ries of managerial personnel [Section 196] 360
14.30 Distinction between managing director and manager 361
14.31 Whole time director 361
TEST YOUR KNOWLEDGE 361
15COMPANY SECRETARY AND PRACTISING
COMPANY SECRETARY
15.1 Definition of company secretary/secretary 368
15.2 Appointment of whole-time company secretary 368
15.2-1 Compulsory appointment of a whole-time companysecretary 368
15.2-2 Manner of appointment of whole-time company sec-retary 369
15.2-3 Whole-time company secretary not hold office in morethan one company 369
15.2-4 Vacation of office of the whole-time company secre-tary 369
15.2-5 Penalty 369
15.3 Duties of secretary 369
15.3-1 General duties 369
15.3-2 Statutory duties 370
15.4 Liabilities of company secretary 370
15.4-1 Statutory liabilities 370
15.4-2 Contractual liabilities 373
15.5 Company secretary in practice 374
15.6 Functions of company secretary [Section 205] 374
15.7 Secretarial audit [Section 204] 374
TEST YOUR KNOWLEDGE 375
PAGE
CONTENTS I-32
16COMPANY MEETINGS-I - GENERAL
16.1 Meaning of ‘Meeting’ 376
16.2 Kinds of Meetings 376
16.3 Requisites of a valid meeting 376
16.4 Meeting to be properly convened 377
16.4-1 Proper authority 377
16.4-2 Proper and adequate notice 377
16.5 Meeting to be legally constituted 383
16.5-1 Chairman of a meeting 383
16.5-2 Quorum 385
16.5-3 Presence of Directors and Auditors 387
16.6 Meeting to be properly conducted 38816.6-1 Ascertaining the sense of the general meeting 38816.6-2 Rules in respect of voting 38916.6-3 Passing of resolutions by postal ballot (Section 110
read along with Rule 22 of the Companies (Manage-ment and Administration) Rules, 2014) 391
16.6-4 Proxy (Section 105) 39216.6-5 Motion, amendment, point of order 394
16.7 Resolutions 39616.7-1 Ordinary resolution [Section 114(1)] 39616.7-2 Special resolution 39716.7-3 Resolutions requiring special notice 397
16.7A Validity of votes 39816.8 Circulation of members’ resolutions [Section 111] 39816.9 Registration of certain resolutions and agreements [Section
117] 399
16.10 Minutes 400
TEST YOUR KNOWLEDGE 400
17COMPANY MEETINGS-II -
GENERAL BODY MEETINGS
17.1 Need for meetings 405
17.2 Annual General Meeting (AGM) 405
17.2-1 Which companies to hold ? 405
PAGE
I-33 CONTENTS
17.2-2 Gap between two AGMs (Section 96) 405
17.2-3 What about a situation where Annual Accounts arenot ready 406
17.2-4 Meeting beyond Statutory Time 406
17.2-5 Cancelling or postponing of convened meeting 407
17.2-6 Day, hour and place of AGM 407
17.2-7 Business to be transacted [Section 102] 407
17.2-8 Notice of the meeting [Section 101] 408
17.3 Default in holding AGM 409
17.3-1 Tribunal to call or direct the calling of AGM 409
17.4 Extraordinary General Meeting (EGM) 410
17.5 Class meetings 412
TEST YOUR KNOWLEDGE 413
18COMPANY MEETINGS-III - BOARD MEETINGS
18.1 Need for Board Meetings 416
18.2 When to hold ? 416
18.2-1 First Meeting 416
18.2-2 Subsequent Meetings 416
18.3 Participation of directors through video conferencing or otheraudio visual means [Section 173(2)] 417
18.4 Board meeting 419
18.4-1 Notice of Board Meeting 419
18.4-2 Proper authority to call meeting of Board of Direc-tors 420
18.4-3 Notice - Whom to be given ? 420
18.4-4 Notice to interested directors 420
18.4-5 Notice of adjourned meeting 420
18.5 Contents and Agenda of Board Meeting 421
18.6 Time and place of Board meeting 421
18.7 Quorum 422
18.8 Adjournment for want of quorum 423
18.9 Passing of Resolutions by Circulation [Section 175] 424
18.10 Minutes of the Board meeting 424
TEST YOUR KNOWLEDGE 425
PAGE
CONTENTS I-34
19ACCOUNTS AND AUDIT
ACCOUNTS
19.1 Books of account required to be kept 427
19.2 Inspection of Books of Account 429
19.3 Persons responsible for keeping proper books of account [videsub-section (6) of section 128] 429
19.4 Financial Statements 430
19.4-1 Preparation and presentation of financial statements 431
19.5 Authentication of Accounts 433
19.6 Board’s Report 433
19.6-1 Directors’ Responsibility Statement 434
19.6-2 Additional information under the Companies(Accounts) Rules, 2014 435
19.6-3 Corporate Social Responsibility Report 435
19.6-4 Composition of Audit Committee 436
19.6-5 Report to be signed by the Chairman of the Board 436
19.7 Circulation of Financial Statements 436
19.8 Adoption and filing of Financial Statements 437
19.8-1 Filing of financial statements with the Registrar 437
19.8-2 Filing of financial statements in XBRL format 438
19.8-3 Reporting on revised annual statements of accounts 439
19.8-4 Re-opening of accounts on court’s or Tribunal’s or-ders 439
19.8-5 Voluntary revision of Financial Statements or Board’sReport 439
19.9 Accounting Standards 439
19.9-1 Convergence of Accounting Standards in India withInternational Financial Reporting System (IFRS) 440
19.9-2 National Financial Reporting Authority 440
19.10 Internal Audit 440
AUDIT
19.11 Who can be appointed as an Auditor (Qualifications) ? 441
19.12 Who cannot be appointed as an Auditor (Disqualifications) ? 442
PAGE
I-35 CONTENTS
19.12-1 Disqualification due to fraudulent acts 443
19.12-2 Ceiling on Audit 443
19.13 Auditor not to render certain services 443
19.14 Appointment of First Auditors 444
19.15 Appointment of subsequent Auditors 444
19.16 Tenure of appointment 445
19.17 Compulsory rotation of auditors 445
19.17-1 Period for rotation 445
19.17-2 Cooling off period 446
19.17-3 Joint Audit 446
19.18 Reappointment of retiring auditor 446
19.19 Rights of retiring auditor [Section 140(4)] 447
19.20 Casual vacancy 447
19.21 Removal and resignation of an auditor 447
19.21-1 Removal before expiry of the term 448
19.21-2 Resignation of Auditor 448
19.21-3 Removal by the Tribunal 448
19.22 Remuneration of auditors 448
19.23 Rights of the company auditor 449
19.23-1 Right of access to books and account, etc. 449
19.23-2 Right to obtain Information or Explanation 449
19.23-3 Rights with respect to Branch Accounts 450
19.23-4 Right to sign the report 450
19.23-5 Right to receive notices, etc. 451
19.23-6 Right to attend general meeting 451
19.23-7 Right to remuneration 451
19.24 Duties of Company Auditor 451
19.24-1 Duty to make a report under section 143 451
19.24-2 Companies (Auditor’s Report) Order, 2015 (CARO) 452
19.24-3 Compliance with auditing standards 453
19.24-4 Duty to report fraud 453
19.24-5 Duty to attend general meeting 453
19.25 Special provisions relating to audit of Government Companies 453
19.25-1 Appointment of Auditors 453
19.25-2 Audit of Government Companies 454
PAGE
CONTENTS I-36
19.26 Punishment for Contravention 455
19.26-1 Penalty on the company and officers in default 455
19.26-2 Penalty on the auditor 455
19.27 Audit Committee 455
19.27-1 Establishment of vigil mechanism 456
19.28 Cost audit [section 148] 456
19.28-1 Maintenance of cost records 457
19.28-2 Appointment and remuneration of cost auditor 457
19.28-3 Report of Cost Auditor 457
19.28-4 Cost Audit to be in addition to financial audit 458
19.28-5 Penalties 458
19.29 Secretarial Audit 458
TEST YOUR KNOWLEDGE 459
20INSPECTION, INQUIRY AND INVESTIGATION
INSPECTION
20.1 Power to call for information, inspect books and conductinquiries 462
20.2 What books and papers can be inspected? 464
20.3 Place and time of inspection 464
20.4 Duties of directors, officers, employees of the company toassist in inspection 464
20.5 Powers of the inspector 465
20.6 Supply of report 466
INVESTIGATION
20.7 Investigation 466
20.8 Who can apply and the scope of investigation 466
20.8-1 On the report of Registrar or inspector 466
20.8-2 The company, by passing special resolution [Section210(1)(b)] 467
20.8-3 The Court or Tribunal, by order [Section 210(2)] 467
20.8-4 In public interest 467
20.9 Investigation into affairs of a company by Serious Fraud Inves-tigation Office 467
PAGE
I-37 CONTENTS
20.10 Investigation into company’s affairs in other cases 468
20.11 Firm, body corporate or association not to be appointed asinspector 469
20.12 Investigation of ownership of a company [Section 216] 469
20.13 Powers of inspectors 470
20.14 Report of the Inspector 472
20.15 Follow up action by the Central Government on the investiga-tion report of the inspector 472
20.16 Investigations etc. of foreign companies (Section 228) 472
20.17 Penalty for furnishing false statements, mutilation or destruc-tion of documents 472
20.18 Difference between Inspection and Investigation 473
TEST YOUR KNOWLEDGE 474
21MAJORITY RULE AND MINORITY
PROTECTION
21.1 Rule of majority 475
21.2 Personal rights of members 477
21.3 Representative and Derivative Action 478
21.4 Exceptions to ‘the rule in Foss v. Harbottle’ 479
21.4-1 Ultra vires and illegal acts 479
21.4-2 Breach of fiduciary duties 479
21.4-3 Fraud or oppression against minority 479
21.4-4 Inadequate Notice of a resolution passed at a meet-ing of members 480
21.4-5 Qualified majority 481
21.4-6 Where the personal rights of an individual memberhave been infringed 481
21.4-7 Statutory exceptions 481
TEST YOUR KNOWLEDGE 482
22PREVENTION OF OPPRESSION
AND MISMANAGEMENT
22.1 Meaning of oppression 483
22.1-1 Oppression may be past or continuing nature 486
PAGE
CONTENTS I-38
22.1-2 Acts held as oppressive 486
22.1-3 Acts held as not oppressive 489
22.1-4 Acts held as mismanagement 490
22.1-5 Acts not held as mismanagement 491
22.2 Application to Tribunal for relief in cases of oppression etc. 492
22.2-1 Application to the Tribunal 492
22.2-2 Who can apply [Section 241] 492
22.2-3 Who cannot apply 495
22.3 Power of Tribunal 495
22.3-1 Conditions for relief under section 242 495
22.4 Oppression of majority 496
22.4-1 Interim order 496
22.5 Appeals against the orders of the Tribunal and variation of theorder of Tribunal 497
22.6 Composite/simultaneous petition under sections 241 and 271 -Whether maintainable 497
22.7 Powers of the Tribunal [Section 242] 497
22.8 Class Action 500
22.8-1 Who may file an application 500
22.8-2 Against whom an application may be filed 500
22.8-3 Relief under a class action 501
22.8-4 Matters to be considered by Tribunal 501
22.8-5 Order of the Tribunal 502
22.8-6 Differences between application under section 241/244 and class action under section 245 502
TEST YOUR KNOWLEDGE 503
23COMPROMISES, ARRANGEMENTS,
RECONSTRUCTION AND AMALGAMATION
23.1 Meaning of compromise 505
23.2 Meaning of arrangement 505
23.3 Statutory provisions regarding compromise or arrangement 506
23.4 Exercise of the Tribunal’s discretion 508
23.5 Powers of the Tribunal 512
23.6 Information as to compromise or arrangement [Section 230] 513
PAGE
I-39 CONTENTS
23.6-1 Matter to be addressed in the Tribunal’s order [Sec-tion 230(7)] 513
23.6-2 Buy back of shares, take-over offer and reduction ofshare capital 514
23.7 Reconstruction and amalgamation 514
23.8 Meaning of reconstruction 514
23.9 Meaning of amalgamation and merger 515
23.10 Difference between amalgamation and reconstruction 515
23.11 Take-over vs. Merger 516
23.12 Legal provisions regarding reconstruction and amalgamation 516
23.13 Reconstruction/Amalgamation by sale of undertaking [Section232] 516
23.13-1 Effect of amalgamation 518
23.13-2 Duties of the Tribunal with respect to reconstruction/amalgamation 518
23.13-3 Amalgamation with existing company only 519
23.13-4 Effect on Legal Proceedings 519
23.13-5 Effective dates in amalgamation, mergers, etc. 520
23.13-6 Valuation of shares and fairness of exchange ratio 520
23.13-7 Notice to be given to Central Government and otherauthorities [Sec. 230(5)] 521
23.13-8 Compliance with the scheme 521
23.13-9 Compliance with Accounting Standard 521
23.14 Merger and Amalgamation of certain companies [Section 233] 521
23.15 Merger or Amalgamation with foreign company [Section 234] 523
23.16 Power to acquire shares of shareholders dissenting from schemeor contract approved by majority [Section 235] 523
23.16-1 Purchase of Minority Shareholding [Section 236] 524
23.16-2 Registration of offer of schemes involving transfer ofshares 525
23.17 Amalgamation of companies in public interest [Section 237] 526
23.17-1 Saving of proceedings 528
23.17-2 Protection of members and creditors 528
23.17-3 Role of Tribunal 528
23.18 Preservation of Books and Papers of Amalgamated Company(Section 239) 529
PAGE
CONTENTS I-40
23.19 Offences committed prior to merger, amalgamation[Section 240] 529
TEST YOUR KNOWLEDGE 529
24REVIVAL AND REHABILITATION
OF SICK COMPANIES
24.1 Determination of Sickness 532
24.2 Measures for revival and rehabilitation 533
24.3 Procedure in pursuant of the application 533
24.3-1 Appointment of interim administrator 534
24.3-2 Committee of Creditors 534
24.3-3 Order for Winding up proceeding 534
24.3-4 Appointment of Company Administrator 534
24.3-5 Power and Duties of company administrator [Section260] 535
24.3-6 Scheme of revival and rehabilitation 535
24.4 Sanction of the scheme 536
24.5 Winding up if scheme not approved by creditors 536
24.6 Implementation of the scheme 537
24.6-1 Conclusive evidence 537
24.6-2 Transfer of property and liabilities 537
24.6-3 Binding nature of the scheme 537
24.6-4 Modification, enforcement etc. of contracts 537
24.6-5 Company administrator to implement the scheme 537
24.6-6 Sale Proceeds to be used as directed 537
24.7 Review of the sanctioned scheme 537
24.8 Liability for misfeasance etc. 538
24.9 Punishment for certain offences 538
24.10 Bar on jurisdiction 539
24.11 Rehabilitation and Insolvency Fund 539
TEST YOUR KNOWLEDGE 539
25WINDING UP
25.1 Meaning 540
PAGE
I-41 CONTENTS
25.2 Modes of winding up [Section 270(1)] 540
25.3 Winding up by the Tribunal 540
25.3-1 Inability to pay its debts [Section 271(1)(a)] 541
25.3-2 Winding up by Special Resolution [Section 271(1)(b)] 548
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)] 549
25.3-4 Failure of revival or rehabilitation of a sick companyunder Chapter XIX [Section 271(1)(d)] 549
25.3-5 Company’s affairs been conducted in a fraudulent orunlawful manner etc. [Section 271(1)(e)] 550
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)] 550
25.3-7 Just and Equitable [Section 271(1)(g)] 55025.4 Who can make petition [Section 272] 555
25.4-1 The Company [Section 272(1)(a)] 55625.4-2 Creditor’s petition [Section 272(1)(b)] 55625.4-3 Contributory’s petition [Section 272(1)(c)] 55725.4-4 Joint petition [Section 272(1)(d)] 55825.4-5 The Registrar [Section 272(1)(e)] 55825.4-6 Person authorized by the Central Government [Sec-
tion 272(1)(f)] 558
25.4-7 Central Government’s/State Government’s petition[Section 272(1)(g)] 558
25.4-8 Can a petition be made for winding up by workers’union of a company 559
25.4-9 Right of any other person to be heard 55925.5 Commencement of winding up [Section 357] 55925.6 Procedure for winding up order 560
25.6-1 Petition 56025.6-2 Provisional liquidator 56025.6-3 Company Liquidator 56025.6-4 Removal and Replacement of liquidator [Section
276] 56125.6-5 Winding up Committee 56125.6-6 Powers of the Tribunal [Section 273] 562
PAGE
CONTENTS I-42
25.7 Consequences of winding up order 56225.8 Submission of report by Company Liquidator [Section 281] 56525.9 Promoters, directors etc. to cooperate with the Company Liq-
uidator [Section 284] 56625.10 Advisory Committee [Section 287] 567
25.10-1 Constitution and proceedings of Advisory Committee[Section 287] 567
25.11 General Powers of Tribunal in case of winding up by Tribunal 56825.12 Dissolution of company [Section 302] 569
25.12-1 Effect of order of dissolution 56925.13 Enforcement of and appeal from orders 570
25.13-1 Enforcement of Orders [Section 424(3)] 57025.13-2 Appeals from Orders [Section 421] 570
VALUNTARY WINDING UP
25.14 Meaning and manner of voluntary winding up 57025.15 Declaration of solvency [Section 305] 57125.16 Meeting of Creditors [Section 306] 57125.17 Commencement of voluntary winding up 57225.18 Consequences of voluntary winding up 572
25.18-1 Effect on status of company [Section 309] 57225.18-2 Board’s powers to cease [Section 313] 57225.18-3 Avoidance of transfers, etc. [Section 334] 57225.18-4 Discharge of employees 573
25.19 Appointment of Company Liquidators [Section 310(1)] 57325.19-1 Notice of appointment of Company Liquidator to be
given to ROC [Section 312] 573
25.19-2 Power and Duties of Company Liquidator in volun-tary winding up [Section 314] 574
25.19-3 Appointment of Committees [Section 315] 574
25.19-4 Power of Company Liquidator to accept shares, etc.as consideration of sale of property of the company[Section 319] 574
25.19-5 Duty of the Company Liquidator to inform theIncome-tax Officer 575
25.19-6 Duty of the Company Liquidator to report progress[Section 316] 575
25.19-7 Report to the Tribunal for examination of persons forsuspected fraud [Section 317] 575
PAGE
I-43 CONTENTS
25.19-8 Final meeting and dissolution [Section 318] 57525.19-9 Dissolution of the company 576
25.20 Liquidation and winding up distinguished 57625.21 Arrangement when binding on company and creditors in vol-
untary winding up [Section 321] 577
25.22 Application to Tribunal to have questions determined [Section322] 577
25.23 Costs of voluntary winding-up [Section 323] 57825.24 Summary procedure for Liquidation [Section 361] 578
25.24-1 Appointment of Liquidator 57825.24-2 Report by the Official Liquidator 57825.24-3 Realization of assets and payment of liabilities by the
Official Liquidator 57825.24-4 Dissolution of the Company 579
25.25 Liquidators 57925.26 Liquidators in compulsory winding up 579
25.26-1 Provisional Liquidator 57925.26-2 Appointment, removal and resignation of Company
Liquidator 57925.26-3 Advisory Committee to act with Company Liquidator 57925.26-4 Powers and Duties of Company Liquidator in com-
pulsory winding up [Section 290] 579
25.26-5 Duties of Company Liquidator in compulsory wind-ing up 581
25.27 Liquidators in voluntary winding up 58225.27-1 Notice by Company Liquidator of his appointment
[Section 312] 582
25.28 Liquidator in Summary Procedure 582
25.28-1 Powers and Function of Official Liquidator [Section360] 582
25.28-2 Official Liquidator in a summary procedure [Section361 to Section 365] 583
25.29 Provisions applicable to every mode of winding up 583
25.30 Debts of all descriptions to be admitted to proof [Section 324] 583
25.31 Application of insolvency rules in winding up of insolvent com-panies [Section 325] 583
25.32 Preferential Payments 584
25.32A Antecedent and other transactions 587
25.32A-1 Fraudulent preference [Section 328] 587
PAGE
CONTENTS I-44
25.33 Avoidance of voluntary transfer [Section 329] 587
25.34 Transfer for benefit of all creditors [Section 330] 588
25.35 Liabilities and rights of certain fraudulently preferred person[Section 331] 588
25.36 Effect of floating charge [Section 332] 589
25.37 Disclaimer of onerous property [Section 333] 589
25.38 Avoidance of transfers, etc. after commencement of winding-up [Section 334] 590
25.39 Avoidance of certain attachments [Section 335] 590
25.40 Offences by officers of companies in liquidation [Section 336] 591
25.41 Penalty for fraud by officers [Section 337] 592
25.42 Liability for not keeping proper books [Section 338] 593
25.43 Liability for fraudulent conduct of business [Section 339] 593
25.44 Damages for misfeasance etc. [Section 340] 594
25.44-1 Misfeasance, what constitutes 596
25.44-2 Legal representatives, liability of 596
25.44-3 Liability of Partners and Directors of Body Corporate[Section 341] 597
25.45 Prosecution of Delinquent Officer and Members of the Com-pany [Section 342] 597
25.46 Miscellaneous provisions 597
25.46-1 Statement that a company is in liquidation [Section344] 598
25.46-2 Books and papers of company to be evidence [Sec-tion 345] 598
25.46-3 Inspection of books and papers by creditors andcontributories [Section 346] 598
25.46-4 Disposal of books and papers of company [Section347] 598
25.46-5 Information as to pending liquidations (Section 348) 599
25.47 Distribution of property 600
25.47-1 Distribution of property of company [Section 320] 600
25.47-2 Deposit of money by the Official Liquidator and Com-pany Liquidator [Sections 349 to 351] 600
25.47-3 Company Liquidation Dividend and UndistributedAssets Account [Section 352] 601
25.48 Default by the Company Liquidator to make returns [Section353] 601
PAGE
I-45 CONTENTS
25.49 Meetings to ascertain wishes of creditor and contributories [Sec-tion 354] 601
25.50 Contributory 60225.50-1 Meaning of contributory 60225.50-2 Contributory vis-a-vis Member 60225.50-3 Persons liable as contributories 60225.50-4 Liability of contributories (Section 285) 60425.50-5 Liability of present members 60425.50-6 Liability of past members 60425.50-7 Power of Tribunal to make calls [Section 296] 60525.50-8 Contributory’s right of set off 605
25.51 Unregistered Companies 60625.51-1 Meaning of unregistered company [Section 375] 60625.51-2 Winding-up of an unregistered company [Section
375] 60625.51-3 Procedure for winding up of unregistered company 607
25.52 Winding-up of a Foreign Company 60725.53 Removal of name of company from register of companies 608
25.53-1 Provisions for removing the name 60825.53-2 Removal of the name by special resolution by a com-
pany [Section 248(2)] 60925.53-3 Restriction on making application under section 248 60925.53-4 Effect of Restoration 61225.53-5 Position of creditors on restoration 612
25.54 Transfer of winding-up proceedings to Tribunal 613TEST YOUR KNOWLEDGE 613
26SERVICE OF DOCUMENTS
26.1 Service of documents on a company 61726.2 Service of documents on R.O.C. [Section 20] 61726.3 Service of documents on members by company [Section 20] 61726.4 Electronic Service of documents 618TEST YOUR KNOWLEDGE 618
27CORPORATE GOVERNANCE
27.1 Meaning of Corporate Governance 619
PAGE
CONTENTS I-46
27.2 Need for Corporate Governance 61927.3 Current Developments 62027.4 Corporate Governance in India 621
27.4-1 Kumar Mangalam Birla Committee Report 62227.4-2 Voluntary Guidelines on corporate governance and
social responsibilities 62227.4-3 Clause 49 of the Listing Agreement 622
27.5 Certain Provisions of the Companies Act, 2013 vis-a-vis Corpo-rate Governance 625
TEST YOUR KNOWLEDGE 626
28THE DEPOSITORIES ACT, 1996 : AN ANALYSIS
28.1 Objectives 62828.2 Salient features of Depositories Act, 1996 62828.3 Meaning of Depository 62928.4 Benefits of depository system 62928.5 Services to be rendered by a Depository 629
28.5-1 Who can render Depository services ? 63028.5-2 Securities eligible for depository services 63028.5-3 Are all eligible securities required to be in the deposi-
tory mode? 630
28.5-4 Who is a participant? 631
28.5-5 Responsibilities of a depository vis-a-vis participant 631
28.5-6 Status of the depository in the records of the issuer 631
28.5-7 Status of an investor who avails of depository ser-vices 631
28.6 Dematerialisation of securities 63128.6-1 Fungibility 632
28.7 How does an investor avail services of a depository? 63228.8 Free transferability of services 632
28.8-1 Types of securities freely transferable 63328.8-2 Is it required to have a transfer deed for transfer of
securities within the depository mode? 63328.9 Rematerialisation 63328.10 Powers of SEBI under the Depositories Act, 1996 63328.11 Bye-laws of a depository 634
28.11-1 Contents of the bye-laws 634
PAGE
I-47 CONTENTS
28.12 Stamp duty on security certificates 635
28.12-1 Payment of stamp duty at the time of entry into thedepository 635
28.12-2 Stamp duty in the case of transfer of securities withinthe depositories 635
28.12-3 Stamp duty payable while opting out of depository 635
28.12-4 Stamp duty in respect of transactions outside thedepository mode 635
28.13 Distinctive number of shares 636
28.14 Exercise of membership rights in respect of securities held bya Depository 636
28.15 The evidential value of the records of the depository 636
28.16 Cognizance of offence by Courts 636
28.17 Penalty for offences under the Depositories Act 636
TEST YOUR KNOWLEDGE 636
29COMPANY LAW IN A COMPUTERISED
ENVIRONMENT - E-GOVERNANCEAND E-FILING
29.1 What is e-Governance 638
29.2 Filing of applications, documents, inspection etc. in electronicform 638
29.2-1 Electronic form to be exclusive, alternative or addi-tional 639
29.2-2 Providing of value added services through electronicform [Section 401] 639
29-2-3 Application of provision of Information TechnologyAct, 2000 639
29.3 Advantages of e-Filing 640
29.4 Launch of MCA-21 Programme 640
29.5 Five Step e-Filing Process 642
29.6 Completion of e-Filing 644
29.7 Guidelines for Annual e-Filing 644
29.7-1 Guideline for preparing the eForms for Annual Filing 644
29.7-2 Guideline for submitting the eForms on MCA Portal 644
TEST YOUR KNOWLEDGE 645
PAGE
CONTENTS I-48
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