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W-http://onlythismuch.lawlabz.com COMPANY LAW Only This Much!

TYPE OF ISSUES

PUBLIC ISSUE

RIGHTS ISSUE

BONUS ISSUE

PREFERENTIAL ISSUE

Public Issue: Issue made to the public as whole requires filing prospectus with ROC, application to the stock exchange for listing and compliance with SEBI (DIP) Guidelines. [Public, if invitation is made to person exceeding 49 in number as per Sec 67(3)]. It includes Initial Public Offer (IPO), Follow-on Public Offer (FPO), et al.

Rights Issue: Issue made to existing shareholders proportionately with right to renounce thereof [Sec 81(1)]. Listed companies to file letter of offer with stock exchanges and comply with SEBI (DIP) Guidelines and to send abridged letter of offer to shareholder.

Bonus Issue: Issue made to existing shareholders where shares are issued (freely) as fully paid, out of securities premium account and free reserves. Listed companies cannot issue out of revaluation reserves and to comply with Chapter XV of SEBI (DIP) Guidelines. [proviso to Sec 205(3), Sec 78 & Sec 80].Note: Student may note that Reliance Power Limited recently issued bonus shares in which the promoters waived of their rights to participate in the bonus issue by a written letter to the company and the company passed a special resolution in this regard.

Preferential Issue: Unlisted companies can make private placement of equities or any other convertible instrument on complying with section 81(1A) read with Unlisted Public Companies (Preferential Allotment) Rules, 2003.

Preferential Issue / QIP: Listed company making preferential issue or make qualified institutional placement (QIP) [made only to QIB] shall comply with sec 81(1A) and shall comply with Chapter XIII or Chapter XIIIA of SEBI (DIP) Guidelines respectively, which includes pricing provisions, lock-in conditions, time within which the resolution as to be acted upon, certification etc…

APPOINTMENT OF DIRECTORS BY BOARD

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ADDITIONAL DIRECTORS u/s. 260

DIRECTORS APPOINTED IN CASUAL VACANCY u/s. 2621. Applicable ONLY for Public Limited Company;2. ONLY if Member Director (Dir appointed by Mem) dies, resigns,

etc...3. By Board Resolution (NOT Circular Resolution);4. Term will be the term of the Director in whose place he is

appointed; (Retire once Original Director term gets over).

ALTERNATE DIRECTORS u/s. 313

S.N

Particulars Sec. 260 Sec. 262 Sec. 313

1. Provides for Appointment of

Additional Director

Directors in Casual Vacancy

Alternate Directors

2. Applicability All companies Only Public Limited

All companies

3.3

Articles [AoA] Shall authorize or

- Shall authorize or amend AoA

AoA may prescribe,Yes, Directors can themselves appoint an Additional Director but NOT exceeding the Strength of the Board.

Provisions:1. AoA should authorize;2. UPTO Total Strength of BoD;3. By Board / Circular Resolution;4. Retire @ the ensuing AGM.

Provisions:1. AoA should authorize;2. ONLY if Original Director is outside State for more than 3 months;3. By Board / Circular Resolution [Not by Director];4. Vacates if Original returns to the State or Orig Dir term expires;5. Single Individual may act as Alternate to more than 1, then he will

get such No. of Votes but with single Sitting Fees.

Note:1. AoA may specify Share Qualification;2. On appointment, Original will get deemed Leave of Absence;

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BOARD MEETING (BM)

Understand DEFINITIONS

MD – Sec. 2(26)

“means”

A DIRECTOR ENTRUSTED with Substantial Powers of Mgmt THRO- Agreement/ GM Resol/Bd Resol/ MoA/AoA.

“includes”

A DIRECTOR occupying theposition of MD, by whatevername called.

“SUBJECT TO”superintendence,

control& direction of the

Board.

Following are NOT Substantial

Powers1. Affixing CommonSeal;

2. Operation of Bank of A/C.

3. Endorse/Sign/Register aSh. Certificate

WTD-Explanation to Sec. 269

“includes”A DIRECTOR in the WholeTime employment of the Co.

((Employee as a Dir))

Manager Sec. 2(24)to S-269

“means”

An INDIVIDUAL on whomwhole of the powers of mgmt DEVOLVES.

((Employee as a

“includes”

A DIR/an Individualoccupying the position ofMgr, by whatevername called.

“SUBJECT TO”

superintendence,control & directionof the Board.

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CONSENT OF THE BOARD

@ the meeting of BoD

Thro Circular Resol (CR)

[S.289]

Sec. 292Calls on SharesBuy-Back UPTO 10% (PC+FR)Borrowing thro Debentures

& OthersMake Investments & Loans

PC – Paidup CapitalFR – Free Reserves

SECTIONS262

293A

297 & 299

316 & 386

372A

488

BALANCE ITEMS

The remaining items can be passed either through Circular Resolution OR Board Resolution [@ the meeting of the Board]

Meeting of Brains = Board Meeting [BM]

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Dividend = Return on Investment (RoI) in Capital;

Pay First Preference (shares), Then Equity;

Payment is an Ordinary Business (OB) requiring Ordinary Resolution (OR);

Dividend shall be paid out of (a) profits;(b) profit for previous Financial Years Profit and (c) amount PROVIDED by the Govt. for this purpose.

The Company has to provide for the depreciation for the Previous Financial Years and Amount of Loss of the Previous Financial Years OR Amount equal to the amount of depreciation whichever is LESS, shall be SETOFF against the Previous Year profit BEFORE declaring the Dividend.

DIVIDENDS

[Sec. 205, 205A, 205C, 206, 206A & 207

FINAL DIVIDEND[at the AGM]

Recommended by Board [BoD]

UPTO BoD’s recommendation [if, Table A] may be DECLARED by Shareholders.

INTERIM DIVIDEND[between 2 AGMs]

Recommended by Board [BoD]

DECLARED by BoD

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CONDITIONSDepreciation (also ARREARS) to be provided;Note: Central Govt. can allow companies to declare dividend without providing for depreciation, if it is in public interest.Transfer of Reserves as per Rules;Board Recommendation;Shareholder or BoD Declaration.

DECLARATION

WITHIN 5 days in a Separate

Bank Account

WITHIN 30 days,

MAKE payments

WITHIN 7 days, OPEN

Unpaid Dividend Account

AFTER7

years

INVESTOR EDUCATION & PROTECTION FUND

U/S. 205C

PENALTY for NON-PAYMENT

Imprisonment &Rs.1000 per Day&Simple Interest @ 18%

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S- 77B [>] 77A [>] Companies ActSection 77A OVERRIDES all other provisions of Companies Act, as it starts with the words “Notwithstanding anything contained in the Act” but is SUBJECT to Section 77B of Companies Act. Though Capital is Reduced under Buy Back, the provisions of Section 100 of Companies Act, requiring Court Approval is NOT REQUIRED as Section 77A overrides all other (Sec.100) provisions of Companies Act. Thus, only sections 77A, 77AA & 77B to be complied with.

77B – PROHIBITION OF BUY BACKThrough

Subsidiary (-ies)

Through Investment Company

(ies)

Default in deposit or loan or its

interest, dividend, redemption of

preference / debt

Non-compliance of S-159=Annual Return; S-207=

Dividend; S-211=Annual

Accounts

77A – BUY BACK

SOURCESFree Reserves as per latest audited Balance

Sheet, free for distribution as Dividend

Securities Premium Account

Proceeds of shares / specified securities, NOT of the same kind issued

earlier

OPPRESSION & MISMANAGEMENT[SEC 397 & 398]

77 – TRANSFER to Capital Redemption Reserve (CRR)

Account – the “Nominal Value of Shares

purchased”

BUY BACK UNDER

COMPANIES ACT

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Rule in Foss v. Harbottle ORRule of Majority OR

Non-interference by Court

Compliance of Law;Act ratified by Ordinary Resolution;Proper Plaintiff is the Company (Not, the individual member)

This is a provision for Convenience & Expediency, to avoid multiplicity of suits.

Exceptions to Foss case ORRule of Minority OR

Interference by Courts ORProtection of Minority Interest

OPPRESSION & MISMANAGEMENTUltra Vires Act (beyond the powers);Fraud on Minority;Invasion of Individual Rights;Articles amendment for the vested interest of few;Spcl resol but ord resol+CG approval for vested interest of few

Eligibility u/s. 399[only @ the time of filing petition to CLB – Entry]

For Cos having Share Capital

Lesser of100 Members1/10 (Toto Members)1/10 (Issued Capital in which calls are paid)

For Cos having Share Capital

1/5 (Total number of members in Register of Members)

Cent Govt u/s.401May itself applyAuthorise any person to move CLB

Central Government u/s. 400CLB to give notice &

consider views of CG before passing the final order.

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