contents...2.4 lifting the corporate veil 12 2.4-1 under statutory provisions 13 2.4-1a...

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


2.5-4 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


2.10-9 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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


PAGE

CONTENTS I-48

contents...2.4 lifting the corporate veil 12 2.4-1 under statutory provisions 13 2.4-1a...

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