60 DAYS MONEY BACK GUARNTEE

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

COMPANY LAW
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BASICS OF COMPANY 2

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
SECTION 1 SHORT TITLE, EXTENT, CONCEPT OF COMPANY CHARACTERISTICS
COMMENCEMENT AND APPLICATION OF A COMPANY

AS PER SEC 20 GENERAL MEANING

Act may be called the COMPANIES ACT, 2013
• Separate Legal Entity
Company means a • Perpetual Succession
extends to the WHOLE OF INDIA • association of
company persons • Common Seal
registered Under • contribute money or
government has vested with power to enforce this Act (2013) OR • Transferability
money’s worth to a Shares(Sec. 42)
different provisions of this act at different point Any of the common stock,
of time previous • Capital of the • Separation of
Companies law company, ownership from
The provisions of this Act shall apply to : • Capital is employed in management.
• incorporated under this Act or under any some common trade • Separate property
previous Company law or business.
• Members share the
• Insurance companies
profit or losses
• Banking companies • Proportion of capital
• engaged in generation or supply of electricity. • Shares are always
• any special Act transferable
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BASICS OF COMPANY 3

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

COMPANY LIFTING OR PIERCING OF CORPORATE VEIL

 Lifting of corporate veil means ignoring the separate identity of a company.
 Lifting of corporate veil means disregarding the corporate personality and
ADVANTAGES DISADVANTAGES looking behind the retail persons who are in the control of the company

❑ Corporate • Formalities and expenses

Personality • Corporate disclosures Section 7 (7) deals with Protection of Revenue
punishment for
Limited Liability Separation of control from

UNDER STATUTORY
❑

INTERPRETATION
•

UNDER JUDICIAL
incorporation of Determination of
❑ Perpetual ownership companies by enemy character of

PROVISIONS
Succession • Greater social providing false the Company
❑ Transferable responsibility information.
Shares • Greater tax burden in Section 251 (1) deals Prevention of fraud
❑ Separate certain cases with liability for
making wrong Where a Company acts
Property • Detailed winding-up application for
❑ Capacity to Sue procedure as an agent of its
removal of name .
shareholders
Section 339 deals with
liability for making Subsidiaries acts as
fraudulent conduct agent
of business during
winding up
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E - GOVERNANCE 4

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
E-GOVERNANCE (MCA-21) – MCA-21-SCOPE DIGITAL SIGNATURE
MEANING CERTIFICATE (DSC)
E-Governance or Electronic governance is The scope of MCA-21 project covers
the application of Information Technology only the offices of ROCs, RDs, and
to the government functioning. MCA-21 the MCA headquarters at New Delhi. Every user who is required
stands for e-governance initiative of It does not include other offices of to sign an e-form for
Ministry of Corporate Affairs (MCA) of the MCA like Official liquidators, submission to MCA is
21st century. CLB/NCLT and Court. required to obtain a Digital
Signature Certificate MCA
BENEFITS OF MCA 21 has identified following 4
• MCA (govt.) types of user of DSC .
employees.
• Professionals(CS,CA
❖ Elimination of interface with the offices ,CWA and Lawyers)
of ROCs, RDs and the MCA • Authorized
❖ Better supervision and monitoring of signatory of the
compliance company including
❖ Mutually beneficial system MD, Directors, CS or
❖ Speed, transparency and efficiency Manager.
❖ Effective due diligence • Representative of
❖ Efficient services by professionals banks and financial
❖ Environment Friendly institutions.
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E - GOVERNANCE 5

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
No company shall appoint or re-appoint any individual as
director of the company unless he has been allotted a
DIRECTOR Director Identification Number (DIN) under section 154.
IDENTIFICATION Section 152(3) provides that every individual, intending
NUMBER (DIN) to be appointed as director of a company shall make an
application for allotment of DIN to the Central
Government in the prescribed Form DIR-3. A person
cannot have more than one DIN

E-FILING-VARIOUS PRE-FILL
CHECK
MODIFY
ADDENDUM TO
Text box
TERMS USAGES FORM AN EFORM

Stock CORPORATE
Drop Down Country E-FORM
ATTACHMENT PRESCRUTINY Exchange IDENTITY
Box Code SIZE
Code NUMBER (CIN)

Re- CERTIFIED Defective

Service Request
STP FORMS REFUND submission FILING CENTRE Role Check Forms
Number (SRN)
of an e-Form (CFC) /Documents
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E - GOVERNANCE 6

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

UPLOADING THE DULY FILLED UP E-FORM STEPS FOR FILING FINANCIAL

STATEMENTS IN XBRL MODE

❑ When the ‘submit’ button is pressed, the e-form

gets uploaded into the MCA central document
repository. ❑ The complete information as contained in the annual accounts and
❑ Thereafter, the requisite fees as applicable for the related documents; and the information required to be filed with the
e-form should be paid either on-line or off-line. Registrar of Companies should be reported in the XBRL instance
❑ Once the e-form has been accepted and payment of documents to be submitted with MCA.
fees has been acknowledged, a work item is created ❑ For preparing instance document, the taxonomy as applicable for the
and assigned to the appropriate MCA employee. relevant financial year is to be used.
❑ For every filing through MCA-21 portal, Service ❑ Download XBRL validation tool from MCA Portal
Request Number (SRN) is generated by the system. ❑ Load the instance document in the validation tool.
This SRN number is to be noted for future ❑ Validate the instance document.
reference. ❑ Pre-scrutiny of the instance document
❑ The authorized official of the/MCA affixes his ❑ Convert to pdf and verify the contents of the instance document.
digital signature for registering/ approving/ ❑ Attach instance document to the Form 23AC-XBRL and 23ACA-XBRL]
rejecting the same. ❑ Submitting the XBRL Form on the MCA portal.
❑ After the processing of the e-from is completed, an ❑ Viewing of balance sheet and profit and loss submitted in XBRL form on
acknowledgement e-mail is sent to the user MCA portal.
regarding its approval/ rejection.
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E - GOVERNANCE 7

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
Inspection, production and ORGANIZATION OF ROC OFFICE UNDER MCA
evidence of documents kept by
Registrar.- Rule 14 of
Companies (Registration offices The ROC office working from its address will virtually become the Back Office of the
and fees) Rules, 2014 Ministry. Since number of companies/entities may find it difficult to switch over to e-Filing
at the initial stage.

The inspection of the documents

maintained in the electronic registry so Front Office Back Office
set up by MCA and which are otherwise Virtual Front Office
The Front Office represents
available for inspection under the Act or Virtual Front Office Back Office represents
the interface of the
rules made thereunder, shall be made by facilities online filing of the offices of Registrar
corporate and public user
any person in electronic form. the e-Forms using of Companies,
with the MCA21 system.
This companies of Virtual Internet. Regional Directors
Front Office and Physical and Headquarters’
The System automatically and takes care of
Front Office. Virtual Front
does pre scrutiny of the internal processing of
Office merely represents a
e-Forms filed and the forms filed by the
computer facility for filing
indicates error messages corporate user as per
of digitally signed e-Forms
in case of incomplete or MCA norms and
by accessing the My MCA
invalid particulars. guidelines.
portal through Internet.
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E - GOVERNANCE 8

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
❖ Credit Card (online)
HARDWARE AND Affixing Digital Signature ❖ Internet Banking (online)
SOFTWARE PAYMENT
OF FEES TO ❖ Challan (offline)
REQUIREMENTS • User clicks the provision provided
MCA ❖ NEFT (National Electronic Fund
UNDER E-FILING (signature affixing icon) on the a-form, Transfer)
against his role, to digitally sign it.
• P-4 computer with • Utility to sign the e-Form opens, where
printer. SEARCH FACILITIES ARE AVAILABLE TO
user selects the intended certificate to
digitally sign the eForm. LOCATE THE REQUISITE INFORMATION
• Windows
2000/Windows XP. • After selecting the certificate, utility
digitally signs the e-Form with the
• Internet Explorer 6.0 certificate and the certificate ❖ Search for viewing
version and above. information gets embedded in the e- public document.
Form. ❖ Search for getting
• Above Acrobat Reader
7.0.5 version. Scanner; certified copy.
and ❖ Finding the
Corporate Identity
• Java Runtime Number (CIN) .
Environnent (JRE)
1.4.2 version.
❖ Checking
Company Name.
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MEMBERSHIP 9

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

DEFINITION OF MEMBER SEC. 2(55) Procedure for Becoming a Member by subscribing to the
Memorandum of Association
The subscribers of the memorandum of a company
shall be deemed to have agreed to become members • subscribers are selected by the promoters.
of the company, and on registration, shall be entered
as members in its register of member OR • The subscribers (minimum, two for a private
company and seven for a public company).
• The subscriber has to sign and write in
Every other person who his/her hand name in full,
agrees in writing to become a father’s/husbands’ name, address in full,
member of a company and occupation in the column meant for this
whose name is entered in its purpose
register of members shall, be
a member of the company OR • On registration of the company, the
subscribers become members of the
company
Every person holding shares
• The subscribers have to pay the money for
of the company and whose
the shares agreed to be taken by them
name is entered as a
beneficial owner in the • The names of the subscribers shall be placed
records of a depository on the register of members on registration
of the company.
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MEMBERSHIP 10

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

By subscribing to CESSATION OR TERMINATION OF

SECTION 19 OF COMPANIES ACT 2013

MODES OF ACQUIRING MEMBERSHIP

Memorandum MEMBERSHIP

OR HOW TO BECOME A MEMBER

• Surrender of shares
No company shall, either by itself or through its
nominees, hold any shares in its holding company By allotment of shares • Transfer of shares
and no holding company shall allot or transfer its • Transmission of shares
shares to any of its subsidiary companies and any
such allotment or transfer of shares of a company • Sale of shares of a member by
By transfer the company, where the
to its subsidiary company shall be void:
company has exercised lien on
shares.

• where the subsidiary company holds such By transmission • Forfeiture of shares

shares as the legal representative of a deceased
member of the holding company; or
• where the subsidiary company holds such By becoming a beneficial
shares as a trustee; or owner of shares.
• where the subsidiary company is a
shareholder even before it became a By estoppels (estopped
subsidiary company of the holding company: from his own conduct)
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MEMBERSHIP 11

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CAPICITY TO BECOME A MEMBER OR WHO CAN BECOME A MEMBER

MINOR CO. OPERATIVE SOCIETY TRADE UNION

There is no legal bar on minor AND SOCIETY
becoming a member of a A trade union registered under
A cooperative society is a
company, provided minor the Trade Union Act 1926 is legal
legal person, and so it has
acquires the shares are fully person (i.e. a body corporate)
power to hold property.
paid up, and no further capable of holding property
Therefore a cooperative society can become
obligation of liability is .Therefore a trade union can
a member in a company.
attached to such shares. become a member in a company.

FIRM HUF
COMPANY Hindu undivided
A firm is not a legal
There is no legal bar on minor becoming person. It cannot hold family (HUF) is not
a member of a company, provided minor property in its own a separate legal
acquires the shares are fully paid up, name; the property is person. Therefore,
and no further obligation of liability is Held in the names of the partners on An HUF cannot
attached to such shares. behalf of the firm. Therefore, a firm become a member
cannot become a member in a company. in a company in its
own name.
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MEMBERSHIP 12

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CAPICITY TO BECOME A MEMBER OR WHO CAN BECOME A MEMBER

JOINT HOLDERS GOVERNMENT

INSOLVENT
There is no legal bar on CG or SG can become a
minor becoming a member member in a body The shares of the insolvent
of a company, provided corporate VEST in the official receiver,
minor acquires the shares as the case may be. However,
are fully paid up, and no an insolvent continues as a
further obligation of liability member until his shares are
is attached to such shares. sold by the official receiver.

FOREIGNER
A foreigner can become a member in a company by
complying with the Requirements of foreign
exchange management act, 1999.In case a war
breaks out with such foreign country, the foreigner
cannot enforce any right available to the members.
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MEMBERSHIP 13

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

IMPERSONATION AS A MEMBER (Sec 57) VARIATION IN RIGHTS OF SHAREHOLDERS (SEC 48)

AS PER COMPANIES ACT 2013

If a person deceitfully personates Variation refers to variation of rights to the prejudice of any class of shareholders.
• an owner of any share OR Where the share capital of a company is divided into different classes of shares, the
rights attached to the shares of any class may be varied with:
• interest in a Company OR
EITHER OR
• coupon issued in pursuance of the
Companies Act, 2013 AND The consent in writing of the holders By passing special resolution at a separate
of not less than three-fourths of the meeting of the holders of the issued shares
issued shares of that class. of that class.
Provision with respect to such In the absence of any such provision in the
variation is contained in the memorandum or articles, if such variation is
memorandum or articles of the not prohibited by the terms of issue of the
company shares of that class
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MEMBERSHIP 14

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
Rights of dissenting shareholders in cases of variation in RULE 68A of NCLT RULES 2016
rights of shareholders (sec 48)

• The application to NCLT shall be made in Form No. NCLT. 1

• the holders of not less, in the aggregate, than 10% of the
issued shares of that class, being persons who did not consent • applicant shall at least fourteen days before the date of
to or vote in favour of the resolution for the variation, may the filing of the petition advertise the application in
apply to the Tribunal to have the variation cancelled. accordance with rule 35 OF NCLT RULES 2016 .
• variation shall not have effect unless and until it is confirmed
by the Tribunal. • Where any objection of any person whose interest is
likely to be affected by the proposed application is
• within 21 days after the date on which the consent was given received by the applicant, a copy thereof shall be served
or the resolution was passed, as the case may be. to the Registrar of Companies and Regional Director on
• one or more of their number as appointed in writing for the or before the date of hearing.
purpose. • Tribunal, after hearing the applicant and any other
• Tribunal shall hear the applicant and any other persons person may, if it is satisfied, having regard to all the
interested therein and having regard to all the circumstances circumstances of the case that the variation would
of the case, either confirm or cancel the variation. The unfairly prejudice to the shareholders of the class
decision of the Tribunal shall be final. represented by the applicant, cancel the variation and
shall, if not so satisfied, confirm the variation for reasons
• forward a copy of the order to the Registrar, within 30 days of
to be recorded
the service of the Tribunal order.
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MEMBERSHIP 15

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
COCEPT OF VETO

A veto – Latin for "I forbid" – is the power to unilaterally stop an official action, especially the
enactment of legislation. A veto may give power only to stop changes, thus allowing its holder to
protect the status quo.

VETO POWER AND CASTING VOTE

• Veto power is different than casting vote of Chairman.

Casting vote is applicable on in case of equality of votes
in favour and against.

• Veto power has not been defined in Companies Act.

veto power is: "to refuse to admit or approve
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REGISTERS AND RETURNS 16

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
Rule 3(1) of the Companies (Management and Administration)
REGISTER OF MEMBER AND REGISTER Rules, 2014 provides that for the purposes of section 88(1)(a) of
OTHER SECURITY the Companies Act, 2013, every company shall, from the date of its
OF
registration, keep and maintain a register of its members in Form
MEMBERS MGT-1.
Rule 4 says company
Rule 3(1) says shall maintain a
company shall separate register of Contents of the Register of debenture holders or any other
maintain a debenture holders security holders
Register of members
register of its or other security
members in holders Form MGT-2
Form MGT-1 for for section 88(1)(b) • Name of the member;
section 88(1)(a) or (c) • Address Rule 4 of the Companies (Management and
• Date of becoming Administration) Rules, 2014 provides that for the
member; purposes of section 88(1)(b) or (c) of the
• Date of cessation; Companies Act, 2013, every company which issues
• Amount of guarantee, if or allots debentures or any other security shall
any; maintain a separate register of debenture holders
• Any other interest, if any or other security holders, as the case may be, for
• Instructions, if any, given each type of debentures or other securities in
by the member with Form MGT- 2.Entries to be made in the register
regard to sending of simultaneously on the allotment by the Board.
notices etc.
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REGISTERS AND RETURNS 17

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

Foreign register of If so authorized by its articles keep in any

Entries for securities held with a depository
members, debenture country outside India a part of the register of
members or as the case may be, of debenture
holders, other holders or of any other security holders or of
security holders beneficial owners, resident in that country
(FOREIGN REGISTER)
Rule 7 of the
If shares, debentures Companies • within thirty days from the date of the
or other securities are (Management and opening of any foreign register, file Form
held with a depository, Administration) Rules, MGT-3.
the name, particulars 2014 provides that for • any change in the situation of such office or of
of the depository and the purposes of section its discontinuance file notice in Form MGT-3
number of shares, 88(4) of the with the Registrar of such change or
debentures or other Companies Act, 2013, discontinuance.
securities so held shall A company which has
be entered in the • foreign register shall be deemed to be part of
• share capital or the company’s register
respective register.
• which has issued • foreign register shall be maintained in the
debentures or same format as the Principal Register.
• any other security • foreign register shall be open to inspection
may, and may be closed.
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REGISTERS AND RETURNS 18

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

DECLARATION BY REGISTERED AND BENEFICIAL OWNER Penalty for non-maintenance of Registers

Declaration in respect of beneficial Filing of declaration of beneficial

If any person fails to make a declaration he shall
interest in any shares interest with the Company
be liable to a
Rule 9 of the Companies (Management Section 89(2), read with rule 9(2) of • penalty of fifty thousand rupees and in case
and Administration) Rules, 2014 the Companies (Management and of continuing failure, with a further penalty
provides that for the purposes of Administration) Rules, 2014 which of two hundred rupees for each day after the
section 89(1) “the registered owner, provides the beneficial owner shall first during which such failure continues,
shall file with the company, a file with the company, a declaration subject to a maximum of five lakh rupees.
declaration to that effect in Form MGT- disclosing such interest in Form
4, within thirty days from the date on MGT-5, within thirty days after required to file a return under sub-section (6),
which his name is entered in the acquiring such beneficial interest in fails to do so
register of members of such company: the shares of the company .
• penalty of one thousand rupees
for each day during which such
failure continues, subject to a
Filing of declaration of beneficial interest with the Registrar Section maximum of five lakh rupees in
89(6) provides that where any declaration under section 89 is received the case of a company and two
by the company, the company shall file, within thirty days from the lakh rupees in case of an
date of receipt of declaration by it, a return in Form MGT6. officer who is in default
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REGISTERS AND RETURNS 19

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
REGISTER OF SIGNIFICANT BENEFICIAL OWNERS IN A COMPANY SECTION 90

Every individual, who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside
India, holds beneficial interests, of not less than twenty-five per cent. or such other percentage as may be prescribed
Every company shall maintain a register of the interest Every company shall file a return of significant beneficial owners of the
declared by individuals company and changes therein
register maintained shall be open to inspection by any member A company shall give notice, in the prescribed manner, to any person

The information required by the The company shall,—

notice under sub-section (5) shall • where that person fails to give the company the information required by the notice within the
be given by the concerned person time specified therein; or where the information given is not satisfactory,
within a period not exceeding
apply to the Tribunal within a period of fifteen days of the expiry of the period specified in the
thirty days of the date of the notice.
notice
Tribunal may, after giving an opportunity of being heard to the person aggrieved by the order of the Tribunal may make an application
parties concerned, make such order restricting the rights to the Tribunal for relaxation or lifting of the restrictions placed under
attached with the shares within a period of sixty days of receipt sub-section(8), within a period of one year from the date of such order
If any person fails to make a declaration as required to maintain register under sub-section (2) and file the information under sub-
required under sub-section (1), he shall be section (4) or required to take necessary steps under sub-section (4A), fails to do so or
liable to a penalty denies inspection as provided therein, the company shall be liable to a penalty
If any person wilfully furnishes any false or incorrect information, he shall be liable to action under section 447
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REGISTERS AND RETURNS 20

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
Beneficial owner Registered owner Significant Beneficial Owner

Registered owner means a person whose name means an individual referred to in subsection
Beneficial owner means a person
is entered in the register of members of a (1) of section 90, who acting alone or
having beneficial interest in a share
company as the holder of shares in that together, or through one or more persons or
but whose name is not entered in
company but who does not hold the entire trust, possesses one or more of the following
the register of members of a
beneficial interest in such shares rights or entitlements in such reporting
company as the holder of that share
company, namely:-
PENALTY SECTION 92(5)
• holds indirectly, or together with any
Majority Stake means direct holdings, not less than ten per cent.
before the expiry of the period specified • holds indirectly, or together with any
• holding more than one-half of the therein such company and its every direct holdings, not less than ten per cent.
equity share capital in the body officer who is in default shall be liable to of the voting rights in the shares.
corporate; or a penalty of ten thousand rupees and in
• has right to receive or participate in not
case of continuing failure, with further
• holding more than one-half of the less than ten per cent. of the total
penalty of one hundred rupees for each
voting rights in the body corporate; or distributable dividend, or any other
day.
distribution.
• having the right to receive or
subject to a maximum of two lakh rupees • has right to exercise, or actually exercises,
participate in more than one-half of
in case of a company and fifty thousand significant influence or control, in any
the distributable dividend or any other
rupees manner
distribution by the body corporate;
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REGISTERS AND RETURNS 21

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

SECTION 93 OMITTED BY THE INSPECTION OF PRESERVATION OF REGISTER OF

COMPANIES (AMENDMENT )ACT,2017 REGISTERS, RETURNS MEMBERS ETC. AND ANNUAL RETURN
ETC RULE 14 RULE 15
• The registers required to be kept and
maintained by a company under section 88 and • members along with the index shall be
• The registers and indices preserved permanently
copies of the annual return filed under section maintained pursuant to
92 shall be kept at the registered office of the section 88 and copies of • debenture holders or any other security
company. returns prepared pursuant holders along with the index shall be
• The registers and their indices, except when to section 92, shall be open preserved for a period of eight years.
they are closed under the provisions of this Act, for inspection during • Copies of all annual returns prepared under
and the copies of all the returns shall be open business hours, at such section 92 and copies of all certificates and
for inspection by any member. reasonable time documents required to be annexed thereto
• Any such member, debenture-holder, other • Any such member, shall be preserved for a period of eight
security holder or beneficial owner or any debenture holder, security years
other. holder or beneficial owner • he foreign register of members shall be
or any other person may preserved permanently, unless it is
• inspection or the making of any extract or copy
require a copy of any such discontinued.
required under this section is refused,
register or entries therein
• The Central Government may also, by order, or return on payment of • The foreign register shall be kept in the
direct an immediate inspection of the such fee as may be specified custody of the company secretary or person
document authorised by the Board.
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SHARE CAPITAL PART-A 22

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

MEANING OF THE TERM CAPITAL MEANING AND NATURE OF A SHARE Kinds of share capital
EQUITY PREFERENCE
SHARES SHARES
Capital is the money, which a company has Section 2(84) of the Act defines a share as
raised by issue of its shares. It uses this money • Shares • Cumulative and
“a share in the share capital of a company,
to meet its requirements by way of acquiring with non-cumulative
and includes stock except where a
business premises and stock-in-trade etc. In Differenti shares .
distinction between stock and shares is
relation to a company limited by shares, the al Voting • Redeemable
expressed or implied.
word “capital” means the share capital Rights Preference
• share is a right to a specified amount of • Shares Shares
the share capital of a company, with • Convertible
TYPES OF CAPITAL
• share is not a sum of money but a EQUAL preference share
bundle of rights and liabilities. Rights • Participating or
non –
• share or other interest of any member participating
• Nominal, Authorised or Registered Capital
in a company is a movable property
• Issued Capital transferable
• Subscribed Capital • “Goods” means any kind of movable
• Called up Capital property other than actionable claim

• Paid-up Share Capital • share capital shall be distinguished by

its distinctive number
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COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
ISSUE OF SECURITIES AT A ISSUE OF SHARES AT DISCOUNT IS ISSUE OF SWEAT EQUITY SHARES
PREMIUM SECTION 52 PROHIBITED SECTION 53 SECTION 54

A company may issue securities • Section 53 (1) states that except as provided in According to section 2(88), sweat equity
at a premium when it is able to section 54(i.e. issue of sweat equity shares), a shares mean equity shares issued by a
sell them at a price above par or company shall not issue shares at a discount. company to its directors or EMPLOYEES
above nominal value. The • Section 53 (2) Any share issued by a company at a discount or for consideration, other
Companies Act, 2013, does not at a discount shall be void. than cash for providing know-how or
stipulate any conditions or • Section 53 (2A) a company may issue shares at making available rights in the nature of
restrictions regulating the issue a discount to its creditors when its debt is intellectual property rights or VALUE
of securities by a company at a converted into shares in pursuance of any ADDITIONS, by whatever name called.
premium. statutory resolution plan or debt • weat equity shares shall be valid for
restructuring scheme in accordance with any making the allotment within a
Section 52 (1) states that when a guidelines . period of not more than twelve
company issues shares at a • Section 53 (3) Where any company fails to months from the date of passing of
premium, whether for cash or comply with the provisions shall be liable to a the special resolution.
otherwise, a sum equal to the penalty the issue of shares at a discount or five
• Limits on issue of sweat equity
aggregate amount of the lakh rupees, whichever is less, and the
shares
premium received on those company shall also be liable to refund all
shares shall be transferred to a monies received with interest at the rate of • Sweat Equity Shares to be locked for
“securities premium account” twelve per cent. three years
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COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
ISSUE AND REDEMPTION OF NCLT RULES 2016 RULE 69
PREFERENCE SHARES
• Petition shall be in Form No. NCLT. 1
Section 55 (1) states Companies cannot issue
the following types of preference shares— • after hearing the petitioner and any other person as appears to it
to be interested in the petition, may, if it is satisfied
• Irredeemable Preference shares, or
• Preference shares redeemable after 20 ISSUE OF SECURITIES IN DEMATERIALISED FORM
years from the date of its issue.
• securities only in dematerialized form
• making any offer for issue of any securities or buyback of securities or
EXCEPTION Rule 10
issue of bonus shares or rights offer;
The maximum limit is extended to 30 years in the
• who intends to transfer such securities on or after 2nd October, 2018,
following situation---
shall get such securities dematerialized before the transfer;
• setting up and dealing with of infrastructural projects
• unlisted public company shall facilitate dematerialization of all its
• period exceeding 20 years but not exceeding 30 years. existing securities
• Minimum 10% of such preference shares should be • defaulted in sub-rule (5) shall make offer of any securities or buyback
redeemed every year from the 21st year onwards or its securities or issue any bonus or right shares till the payments to
earlier, on proportionate basis, at the option of the depositories or registrar to an issue and share transfer agent are made.
preference shareholders. (7) Except as provided in sub-rule (8), the provisions of the Depository
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COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

ISSUE OF SECURITIES IN DEMATERIALISED FORM

• Every unlisted public company shall ensure that

a) it makes timely payment of fees (admission as well as annual) to the depository and registrar to an issue and share transfer
agent in accordance with the agreement executed between the parties;
b) it maintains security deposit, at all times, of not less than two years’ fees with the depository and registrar to an issue and
share transfer agent, in such form as may be agreed between the parties; and
c) it complies with the regulations or directions or guidelines or circulars, if any, issued by the Securities and Exchange Board or
Depository from time to time with respect to dematerialization of shares of unlisted public companies and matters incidental
or related thereto.
• Except as provided in sub-rule (8), the provisions of the Depositories Act, 1996, the Securities and Exchange Board of India
(Depositories and Participants) Regulations, 1996 and the Securities and Exchange Board of India (Registrars to an Issue and Share
Transfer Agents) Regulations, 1993 shall apply mutatis mutandis to dematerialization of securities of unlisted public companies.
• unlisted public company governed by this rule shall submit Form PAS-6 to the Registrar with such fee
• The company shall immediately bring to the notice of the depositories any difference observed in its issued capital and the capital
held in dematerialized form.
• The grievances, if any, of security holders of unlisted public companies under this rule shall be filed before the Investor Education
and Protection Fund Authority.
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COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CONCEPT OF PROSPECTUS REGISTRATION of Prospectus Non-Compliance with Sec.26

[Sec.26]
Any Document described or issued as • Minimum ` 50,000 Maximum 3
Prospectus. Lakhs.
• Submission of Prospectus by or
• Red Herring Prospectus referred u/s 32, or on behalf of a Company or in • person who is knowingly a party to
relation to an Intended Company, the issue of such Prospectus shall be
• Shelf Prospectus referred u/s 31, or to the ROC for registration, is punishable with –
• Any Notice, Circular, Advertisement or other mandatory for issue of a) Imprisonment (Maximum 3
Document inviting offers from the public Prospectus. years) or
• Description b) Fine of Minimum
CONDITIONS WHERE ISSUE OF • Registration should be made on c) 50,000 Maximum ` 3 Lakhs, or
PROSPECTUS NOT NECESSARY or before the date of its
publication. d) Both.

• Prospectus should be dated.

• Rights Issue
• Prospectus should be signed
• Underwriters
• The Draft Prospectus should be
• Private placement approved
• Bonus issue • ROC will register the Prospectus
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

TYPES OF PROSPECTUS GOLDEN RULE OF LIABILITY FOR MIS-STATEMENTS IN

Abridged SHELF RED HERRING DRAFTING PROSPECTUS
Prospectus PROSPECTUS" PROSPECTUS" PROSPECTUS
[SEC.31] [SEC.32]
Abridged Shelf Prospectus" Red Herring • any statement which is untrue or
Prospectus means a Prospectus means a 3 THINGS SHALL BE misleading in the form or context .
means a Prospectus in Prospectus which CONSIDERED WHILE • Every person who authorized the issue
Memorandu respect of which does not include DRAFTING of such Prospectus is liable for
m containing the Securities or complete PROSPECTUS punishment u/s 447.
such salient class of Securities particulars of the
• Everything • Liability u/s 34 does not apply if the
features of a included therein quantum or price of
stated in person proves that –
Prospectus as are issued for the Securities
prospectus shall a) such statement or omission was
may be subscription in included therein. A
be true immaterial, or
specified by one or more Company proposing
SEBI. issues over a to make an Offer of • Nothing shall be b) he had reasonable
certain period Securities may issue half true grounds to
without the issue a Red Herring believe
of a further Prospectus prior to • No misstatement
Prospectus. the issue of a shall be stated in
Prospectus. prospectus
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
Punishment for fraudulently inducing persons to invest
Civil Liability for Mis-statements in Prospectus [Sec.35]
money. Section 36

Where a person has subscribed for Securities of a Company acting • any agreement for, or with a view to, acquiring, disposing of,
on any statement included, or the inclusion or omission of any subscribing for, or underwriting securities; or
matter, in the Prospectus which is misleading and has sustained
any loss or damage as a consequence thereof. • any agreement, the purpose or the pretended purpose of which
is to secure a profit to any of the parties from the yield of
securities
Persons Liable u/s 35 • view to obtaining credit facilities from any bank or financial
• The Company, institution,
• Director at the time of the issue of the
Prospectus,. Action by affected persons section 37
• has authorized himself to be named and
is named in the Prospectus as a Director
A suit may be filed or any other action may be taken under
• is a Promoter of the Company section 34 or section 35 or section 36 by any person, group of
• has authorized the issue of the persons or any association of persons affected by any
Prospectus, and misleading statement or the inclusion or omission of any
matter in the prospectus.
• is an Expert referred u/s 26(5).
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COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
SECTION 23 SAYS COMPANY MAY ISSUE OF SHARES Section 42 and Rule 14 of the Companies (Prospectus and
BY WAY OF Allotment of Securities) amendment Rules,2018

PUBLIC OFFER PRIVATE RIGHT ISSUE

• Private Placement offer letter
THROUGH PROSPECTUS PLACEMENT AND BONUS
ISSUE • Application form to accompany offer letter

Section 29 of the Act provides that every • Private offer to be previously approved by special resolution.
IPO FPO
company making public offer of any • Offer to maximum of 200 persons in a financial year.
security, shall issue the securities only in
ONLY FOR PUBLIC dematerialized form by complying with • Offer counted separately for each kind of security.
COMPANY the provisions of Depositories Act, 1996
• Payment from subscriber’s bank account.
and the regulations made thereunder.
• Filing of such record with the Registrar.

Section 62 of the Companies Act provides for • Return of allotment to Registrar

RIGHT
ISSUE OF the issue of “Rights Shares” and states that
whenever at any time, A COMPANY having a
SHARES share capital proposes to increase its
SECTION subscribed capital by the issue of further
62 (1)(a) shares
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
RULE 13 OF COMPANIES (SHARE CAPITAL BONUS SHARES SETION 63
AND DEBENTURES) RULES, 2014

The expression ‘Preferential Offer’ means an issue of shares or A company may, if its Articles provide, capitalize its profits by issuing
other securities, by a company to any select person or group of fully-paid bonus shares. The issue of bonus shares by a company is a
persons on a preferential basis and does not include shares or common feature. They are given free. The bonus shares allotted to the
other securities offered through a public issue, rights issue, members do not represent taxable income in their hands
employee stock option scheme, employee stock purchase scheme
or an issue of sweat equity shares or bonus shares or depository
receipts issued in a country outside India or foreign securities Advantages of Issuing Bonus Shares a company may issue fully
paid-up bonus shares to
• Fund flow is not affected its members, in any
PREFERENTIAL OFFER OF UNLISTED COMPANIES adversely. manner whatsoever, out of
• Market value of the members’ Sources for issue of Bonus
• The issue is authorized by its articles of association shareholdings increases with shares
• The issue has been authorized by a special resolution of the the increase in number of • Its free reserves;
members shares in the company.
• The securities
• The allotment of securities shall be completed within a period • Bonus shares is not an income. premium account; or
of twelve months from the date of passing of the special Hence it is not a taxable income.
resolution. • The capital
• Paid-up share capital increases redemption reserve
• The price of the shares or other securities to be issued on a with the issue of bonus shares. account.
preferential basis,
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
ALLOTMENT OF SHARES MINIMUM SUBSRIPTION (SEC. 39(1) THE MINIMUM SUBSCRIPTION

• Allotment means acceptance of offer • By the closure of issue otherwise

made by applicants to take shares of • Meaning : Minimum subscription is
refund the application money with in
company. the minimum amount stated in the
Fifteen days of the closure of the issue
• It is an appropriation of capital of prospectus, which in the opinion of
company directors, must be raised by the issue • IN CASE OF UNDERWRITTEN ISSUE
of share capital to start with. within 60 days of the closure of issue
otherwise refund the application
The following general principles • only if the amount stated in the
money with in next 10 days
should be observed with regard to prospectus as the minimum amount of
allotment of securities: subscription, is received.
COLLECTION OF MINIMUM
• Quantum of minimum subscription APPLICATION MONEY (SEC. 39(2)
shall be as under-
• The allotment should be made by • Condition for allotment
proper authority a) Under Companies Act: Amount • Quantum of Minimum Application
stated in the prospectus Money
• The allotment should be absolute and
b) Under SEBI Guidelines : 90% of the • Under companies Act : Note less than
unconditional
total issue size 5% of the Nominal Amount of the
• The allotment must be communicated. security
• Time limit for minimum subscription
• Under SEBI Guidelines: 25% of nominal
• Allotment against application only and effect of non-receipt
value of security.
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
PENALTY RETURN OF ALLOTMENT SEC. 39(4)

39 (5) In case of any default under sub-section (3) or sub-

• Section 39 (4) Whenever a company having a share capital makes
section (4), the company and its officer who is in default shall
any allotment of securities,
be liable to a penalty, for each default, of one thousand rupees
for each day during which such default continues or one lakh • it shall file with the Registrar a return of allotment in Form PAS-3.
rupees, whichever is less.

LISTING PERMISSION STOCK EXCHANGE(S) SEC. 40(1)

COLLECTION OF MINIMUM APPLICATION MONEY
Every Company making public offer of securities before making the
(SEC. 39(2) public offer, the company shall make an application to one or more
recognized stock exchange (s) and obtain permission for listing of its
securities.
• Condition for allotment: Allotment of securities can be made
only if the minimum value on application, is collected. Prospectus should state the name of the stock exchange (s) in which
securities shall be dealt. SEC. 40(2)
• Quantum of Minimum Application Money: Minimum amount
payable on application of any security shall be— Effect of approval or denial from RSE

• Under companies Act : Note less than 5% of the Nominal • Allotment of securities can be made, only if listing permission is
Amount of the security granted.

• Under SEBI Guidelines: 25% of nominal value of security. • No allotment of securities can be made, if listing permission is
denied.
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

DEPOSIT OF SECTION (40)(4) Punishment for Default UNDERWRITING

APPLICATION MONEY Sec. 40(5) COMMISSION SECTION
IN SEPARATE BANK 40(6)
ACCOUNT (SEC. 40(3)
Every Company making Public Any condition purporting to • Company is punishable with Section 40(6) provides that the
Offer of Securities Deposit All require or bind any applicant for fine of minimum 5 lakhs, company may pay commission
monies received on application securities to waive compliance maximum 50 lakhs to any person in connection with
from public for subscription to with any of the requirements of • Every officer in default is the subscription to its securities
the securities shall be kept in a this section shall be void. punishable (i) Imprisonment subject to such conditions as
separate bank a/c in a of Maximum 1 year, or (ii) prescribed under Rule 13 of the
scheduled bank, and shall not be fine of minimum 50,000, Companies (Prospectus and
utilized for any purpose other maximum 3 lakhs, or (iii) Allotment of Securities) Rules,
than as given below : both. 2014 as under:

• For adjustment against A company may pay commission

allotment, to any person in connection with
the subscription or procurement
• For repayment of Monies, of subscription to its securities,
whether absolute or conditional,
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COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
SHARES TO BE MOVEABLE PROPERTY SECTION 44 SHARES TO HAVE DISTINCTIVE NUMBERS SECTION 45

The shares or debentures or other interest of any member in a Every share in a company having a share capital shall be
company shall be movable property transferable in the manner distinguished by its distinctive number
provided by the articles of the company.
SHARE CERTIFICATES
PROVISIONS RELATING TO SHARE CERTIFICATES SECTION 46
• Issue of share certificate Rule 5 of the
• issued under the common seal. companies (Share Capital and Debentures)
• duplicate certificate of shares may be issued, if such certificate (a) is proved to Rules, 2014
have been lost or destroyed; or (b) has been defaced, mutilated or torn and is • issue of renewed or duplicate share certificate
surrendered to the company. Rule 6 of the companies (Share Capital and
• the manner of issue of a certificate as may be prescribed. Debentures) Rules, 2014
• share is held in depository form, the record of the depository is the prima facie Split Certificate A split certificate means a separate
evidence. certificate claimed by a shareholder for a portion of
• intent to defraud issues a duplicate certificate of shares, the company shall be his holding. The advantages of a split certificate are
punishable with fine which shall not be less than five times the face value of the that the shareholder may benefit in case of a
shares involved in the issue of the duplicate certificate but which may extend to transfer by way of sale or mortgage in small lots
ten times the face value of such shares or rupees ten crores whichever is higher and the right to multiply the certificates into as
many shares held by the shareholder.
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COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CALLS, FORFEITURE, SURRENDER AND Requisites of Regulations 13 to 18 of Table-F

REDUCTION OF SHARES a valid call • 14 days’ notice must be given to members
• interval of one month is required between two
• Board of successive calls .
• A call is a demand, by the company in pursuance of a • Board of directors has the power to revoke or
Directors to
Board resolution postpone a call after it is made.
make call(s)
• liquidator in the course of winding up of the company. on shares • Joint shareholders are jointly and severally liable
for payment of calls.
• amount payable in application on each share shall not • Call(s) to be • member fails to pay call money he is liable to pay
be less than five per cent of the nominal amount of made interest not exceeding the rate specified in the
the share. bonafide in articles or terms of issue or such lower rate, as
• all moneys payable by any member to the company on the interest the Board may determine.
the shares held by him under the memorandum or of the • desires to pay the call money in advance,
articles company • A defaulting member will not have any voting
right till call money is paid by him.
• default in payment of a valid call, the company can • Call(s) must
enforce payment of such moneys by legal process and be made on
forfeit the shares in case the call is not paid. uniform Interest on calls due but not paid
basis A member is generally made liable to pay interest on
• liability of members is enforceable only after a proper
notice which is called ‘call letter’ or call notice as 1st, • Notice of the calls made but not paid. The rate of interest to be
2nd and final or so on, call(s) charged is as specified in the Articles.
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
FORFEITURE OF SHARES Re-issue of Forfeited COMPANY’S LIEN ON SHARES
Shares
Forfeiture may be termed as penalty for Articles 9 to 12 of Table F of Schedule I to the Act carry
violation of terms of contract. Forfeiture the rules as to lien. These articles are not compulsory. A
Shares forfeited by a
of shares means taking back of shares company may adopt its own articles regarding the
company may either be
by the company from the shareholders. subject matter of lien as also regarding any money due to
cancelled or re-issued to
If the shareholder makes default in it from the shareholder either originally or subsequently
another person at the
payment of calls on shares, then the discretion of the Board. This by a special resolution
company can use the option of forfeiting is done by a Board
the shares. resolution. After the money SURRENDER OF SHARES
due is received from the new
For a valid forfeiture, satisfaction of member(s), the company
following conditions is necessary executes a transfer deed and surrender of shares means voluntary return of shares by
issues a share certificate, and the shareholder to the Company for cancellation. There is
• Articles of Association must if the original holder has no provision for surrender of shares in the Companies Act
authorise the forfeiture of shares. . already surrendered the
• Resolution for Forfeiture share certificate, it is duly • re-issued in the same way as the forfeited shares. In
transferred, otherwise after a this case, there is no reduction in capital.
• Power of forfeiture must be
public notice in a newspaper,
exercised bona fide and for the • No consideration can be paid by Company in exchange
a new share certificate is
benefit of the company of surrendered shares as it would amount to purchase
issued.
of its own shares, which is prohibited by Sec 68.
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

SECTION 66: Reduction of share capital without PROCEDURE FOR REDUCTION OF CAPITAL
REQUIREMENTS FOR sanction of the NCLT
REDUCTION
• Convene and hold a Board Meeting
• Forfeiture of shares
• Issue the notice of general meeting.
Reduction of capital refers to • Surrender of shares • Convene and hold the general meeting and pass the
reduction of Subscribed and necessary special resolution..
Paid-Up Capital of the • Diminution of capital • File E-Form now MGT- 14 .
Company. It applies to: • Make An application to NCLT for reduction in Form No.
• Redemption of redeemable
• Company limited by Preference shares RSC-1.
shares • The Tribunal shall, within fifteen days of submission of
• Purchase of shares of a member by the application under rule 2, give notice
• Company limited by the Company under Sec 242 • list of creditors within seven days of the direction by
Guarantee and having
tribunal,
share capital.
• notice to be published, in Form No. RSC-4 within seven
A Company can reduce its days from the date on which the directions are given,
capital only if: • file an affidavit in Form No. RSC-5
• Authorized by its Articles • he Tribunal may, if it is satisfied that the debt or claim
of every creditor of the company has been discharged
• Special resolution or determined or has been secured or his consent is
• NCLT approval obtained
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COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

TRANSFER OF SHARES AND PROCEDURE OF TRANSFER OF SHARES

TRANSMISSION OF SHARES • Purchase share transfer deed (form sh. 4)
• Thereafter, fill in all the particulars-e.g. Name of the concerned
SECTION 56 (2, 5) company, total number of shares being sold, distinctive number of
SECTION (56 (1, 3) and Rule 11(1,
AND Section 72 shares, particulars of transferor and transferee, amount of purchase
2, 3) of Companies (Share Capital
DEALS WITH consideration etc.
and Debentures) Rules, 2014
TRANSMISSION OF • Get the share transfer deed stamped as per Indian stamp act
deals with TRANSFER OF SHARES
SHARES • Signing share transfer deed by transferor and transferee
• Submit share transfer deed and share certificate to company
SEC 58 DEALS WITH REFUSAL BY THE CO. TO REGISTER • Company shall Enter the name of transferee in R.O.M. and enter the
TRANSFER AND TRANSMISSION OF SHARES name of transferee on back side of share certificate and give back to
transferee
INSTRUMENT OF TRANSFER
IN CASE OF LOSS OF TRANSFER DEED

a company, shall not register a transfer of securities

of, the company, unless a proper instrument of • In case of loss of the instrument, the company may register the transfer in
transfer duly stamped, dated and executed by or on terms of indemnity. It has been provided in section 56(2) of the Act that
behalf of the transferor and the transferee has been where, on an application in writing made to the company bearing adequate
delivered to the company by the transferor or stamp value for an instrument of transfer
transferee within a period of sixty days
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
DEPOSITORY DEMATERIALISATION REMATERIALISATION
Dematerilisation is a process by which Rematerialisation is a process by
A Depository is an organisation like a Central Bank where the physical shares are converted into which the electronic shares are
the securities of a shareholder are held in the electronic electronic shares at the request of the converted back into physical
form at the request of the shareholder through the medium investor. shares at the request of the
of a Depository Participant. investor.
DEMATERIALISATION PROCESS REMATERIALISATION
TWO BASIC CONDITIONS TO BECOME DEPOSITORY PROCESS
• Registered under Companies Act • Fills Dematerialization Request Form • Client submits
• Registered with SEBI (DRF) and lodges DRF and share Rematerialisation Request
certificates with DP Form (RRF) to DP.
• DP intimates the Depository and send • DP intimates Depository and
BENEFITS OF DEPOSITORY SYSTEM certificates and DRF form to DP sends RRF to the
• Elimination of bad deliveries Registrar/Issuer Registrar/Issuer.
• Depository intimates Registrar/Issuer • Depository intimates the
• Elimination of all risks associated with physical
• Registrar on receipt of DRF form Registrar/Issuer
certificates
cancel the share certificate and • Registrar/Issuer prints
• Immediate transfer and registration of securities entered in its ROM the name of certificates and sends to
• Reduction in handling of huge volumes of paper No depository as a registered owner. Investor.
stamp duty on transfer. • After that Registrar/Issuer confirms • Registrar/Issuer confirms to
to Depository. Depository
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COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

Financial restructuring METHODS OF FINANCIAL RESTRUCTURING

Financial restructuring of a company

involves a re-arrangement of its FOR UNDER-CAPITALIZED COMPANY FOR OVER-CAPITALIZED
financial structure to make the COMPANY
• Injecting more capital whenever required either by
company’s finances more balanced. It is
resorting to rights issue or additional public issue. • Buy-back of own
an adjustment of debt-equity ratio.
• Resorting to additional borrowings shares
• issuing debentures, bonds, etc or other • Paying back surplus
NEED FOR FINANCIAL
share capital to
RESTRUCTURING • Inviting and accepting fixed deposits from directors, their
shareholders
relatives, business associates and public.
• Repaying loans to
• Necessity for injecting more working financial
capital to meet the market demand institutions, banks,
for the company’s products or etc
services; • Repaying fixed
• When the company is unable to meet deposits to public
its current commitments; • Redeeming its
debentures, bonds
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COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
BUY BACK OF SHARES BUY BACK UNDER COMPANIES ACT

• Buy back of its own shares Section 68 OVERRIDES all other provisions of Companies Act 2013, as it starts
by a company is nothing with the words "Notwithstanding anything contained in the Act" but is SUBJECT
but reduction of share capital. to Section 70 of Companies Act. Though Capital is reduced under Buy Back, the
provisions of Section 66 of Companies Act 2013, requiring NCLT Approval is NOT
• It is nothing but a process
REQUIRED as Section 68 overrides all other Section 66. Thus, only sections 68,
which enables a company
69 & 70 to be complied with.
to go back to the holders
of its shares and offer to
purchase from them the LEGAL FRAMEWORK FOR BUY BACK
shares that they hold.

• To increase promoters holding

In case of listed In case of listed
• Increase Earnings per share companies: companies:
OBJECTIVE
BUY BACK

• Maintaining shareholders’ value. • Companies Act, • Companies Act,

2013 2013
• Restructuring the debt-equity mix
• SEBI (Buy-back • SEBI (Buy-back
• To counter a hostile takeover of Securities) of Securities)
• To return surplus cash not required by Regulations, Regulations,
business to share holders 2018 2018
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COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
IMPORTANT PROVISIONS OF PROHIBITION FOR BUY-BACK
BUY BACK OF SHARES
{SECTION 68} directly or indirectly, purchase its own shares or other specified securities in
directly or case such company has not complied with the provisions of
• Sources of buy back. indirectly
• Section 92 Annual Return
purchase its
• 8 pre conditions for buy back. own shares • Section123 Declaration of Dividend
• Explanatory statement or other • Section127 Failure to distribute dividend
• Completion of buy back specified
securities • Section 129 Financial Statement
• Methods of buy back
• Declaration of solvency . • subsidiary company including its own subsidiary companies;
• Extinguish and physically • investment company or group of investment companies;
destroy the securities bought-
back. • default, is made by the company, in the repayment of
deposits accepted either before or after the commencement
• Restriction on further issue of this Act, interest payment thereon, redemption of
• Register of buy back debentures or preference shares or payment of dividend to
any shareholder, or repayment of any term loan or interest
• Return of buy back
payable thereon to any financial institution or banking
• Penalty company:
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SHARE CAPITAL PART-H 43

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
SECURITIES WHICH STAMP DUTY ON BUY-BACK PROCEDURE FOR BUY-BACK OF SECURITIES
CAN’T BE BOUGHT
• authorized by a special resolution
BACK
• bought back have to be statutorily • The company shall file with the Registrar, along with the letter of offer,
Lock-in securities:- extinguished within 7 days from
• The letter of offer shall be dispatched immediately after filing the same with the
Any securities issued by a the last date of completion of buy-
Registrar of Companies.
listed company to its back.
promoters or group of • offer for buy-back shall remain open for a period of not less than fifteen days and
• no registration of such shares not exceeding thirty days.
employees, which subject to
takes place in the name of the
lock-in period, are not • securities offered is more than the total number of shares or securities to be
company.
available for buy-back bought back by the company
before expiry of lock-in • names of the members/ holders of
• complete the verifications of the offers received within fifteen days from the date
period. the shares have to be struck off
of closure
from the register of members if
Partly paid –up shares:- • immediately after the date of closure of the offer, open a separate bank account
the entire holding is bought back.
A company can’t buy-back and deposit therein,
its partly-paid up shares, on • buy-back cannot be construed as
transfer and stamp duty would • company shall within seven days of the time specified in sub-rule (7) Make
which call money is in
payment of consideration in cash Return the share certificates
arrear. not be payable in a case where
buy-back of shares takes place in • maintain a register of shares or other securities which have been bought back in
Non-transferrable securities Form No. SH.10
physical form
those securities which are
subject to lien or are • buy-back of shares will not be • after the completion of the buy-back under these rules, shall file with the
construed as “release” falling Registrar.
pledged or restricted by a
court can’t be bought –back under Article 55 of the Indian • There shall be annexed to the return filed with the Registrar in Form No. SH.11, a
by the company Stamp Act attracting stamp duty. certificate in Form No. SH.15 signed by two directors of the company
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ACCOUNTS OF COMPANIES 44

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

The shareholders provide capital to the company for running the business. They are in a way, the owners of the company. But, all of them
cannot take part in managing the affairs of the company as their number is usually much more.

REQUIREMENT OF KEEPING LOCATION OF BOOK OF ACCOUNT (SECTION 128 (1))

BOOKS OF ACCOUNT
(SECTION 128 (1)) Registered office Any other place

NATURE OF All the books of Place in India Board resolution

FEATURES OF
BOOKS TO BE account shall be kept
BOOKS OF
KEPT at the registered office
ACCOUNTS All or any of The Board must
BOOKS OF ACCOUNT OF BRANCH the books may pass a resolution
The company must be kept at any according approval
keep the books of • True and SECTION 128 (2)
other place in to keep the books at
account with fair view
• keep the books of account in the same manner India. such other place
respect to items • Accrual as specified in sub- section (1)
specified in clauses basis
• branch offices are required to send the proper The company shall give a notice to the
(i) to (iv) of sub-
• Double summarized return at quarterly intervals to the registrar within 7 days of passing the
section 2(13) of
entry company at its registered office and kept open Board resolution. (form AOC -5) (SECTION
the Companies Act,
to directors for inspection. 128 (1) Proviso)
2013
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ACCOUNTS OF COMPANIES 45

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
INSPECTION BY DIRECTORS Rule 4 of the Companies (Accounts) Rule, 2014
SECTION 128 (3)
• returns of the books of account of the company kept and maintained outside India
• The books of account etc. • other financial information maintained outside the country is required by a director,
maintained with India shall be open
for inspection • financial information shall be sought for by the director himself and not by or through his
power of attorney holder or agent or representative.
• financial information, if any,
maintained outside the country, PERIOD FOR WHICH BOOKS TO RESPONSIBILITY OF MAINTAINCE BOOKS
copies of such financial information
shall be maintained.
BE PRESERVED SECTION 128 (5) OF ACCOUNTS (section 128 (6))

• The inspection of books of account

• Not less than 8 financial years Person’s Charging a competent
of any subsidiary company shall be
made only by the person authorized • existence for less than 8 financial responsible person with duty of
by a resolution of the Board of years, then, for the entire period of its u/s 128(6) maintenance of books
Directors. existence.
• duty of every officer and employee • Where an investigation of the company Duty charged Duty charged
• MD to whom? by whom?
of the company to give to the person is ordered, the Central Government
making inspection all reasonable of may direct that the books of account • CFO
the Board of Directors. may be kept for such longer period as • WTD Any competent and Board
it may deem fit. reliable person
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ACCOUNTS OF COMPANIES 46

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
PENALTY SECTION 128 (6) SECTION 129 NON-APPLICABILITY Consolidated financial
FINANCIAL statement [Section 129(3)]
contravenes such provisions, with
STATEMENT
• Any insurance company;
fine which shall not be less than one or more subsidiaries or
or
fifty thousand rupees but which As per Section 2(40), associate companies, it shall,
may extend to five lakh rupees. financial statement • Any banking company; or in addition to financial
includes: • any company engaged in statements. company shall also
the generation or supply attach along with its financial
Legal requirements financial • Balance Sheet.
of electricity; or statement,
statement [Section 129(1)] • Profit and loss account
or in the case of • Any other class of Persons responsible and
company not for company
• give a true and fair view of the Penalty [Section 129(7)]
profit, income and
state of affairs of the company. • Managing director
expenditure Consolidated financial
• comply with accounting • Whole-tome director in
statement. statement [Section 129(4)]
standards notified under charge of finance
section 133. • Cash flow statement.
• form or forms as may be The provisions relating to the • Chief Financial Officer
• Statement of changes
provided for different class or in equity, if applicable. preparation, adoption and audit of • Any other person of a
classes of companies in the financial statements of a company charged by the
Schedule III. • Any explanatory note holding company shall, mutatis Board with such duty
annexed to above mutandis, apply to the
documents. consolidated financial statements. • All the directors,
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ACCOUNTS OF COMPANIES 47

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
PERIODICAL FINANCIAL RESULTS RE-OPENING OF ACCOUNTS ON COURT’S OR TRIBUNAL’S ORDERS

• results of the company on such periodical basis • A company shall not re-open its books of accounts and shall not recast its
and in such form as may be prescribed; financial statements,
• to obtain approval of the Board of Directors • The re- opening and recasting of financial statements is permitted
• file a copy with the Registrar within a period of • The accounts so revised or re-cast under this section shall be final.
thirty days • It may be noted that the Tribunal will include National Company Law Tribunal
(NCLT).
FINANCIAL STATEMENTS, BOARD REPORT • No order shall be made under sub-section (1) in respect of re-opening of books
ETC. SECTION 134 of account

• The Authority shall consist of the following persons to be appointed by

OF AUTHORITY
COMPOSITION the Central Government,
• STEP 1 PREPARATION OF FINANCIAL STATEMENTS
• The chairperson shall be a person of eminence, ability, integrity and
• STEP 2 SIGNING OF FINANCIAL STATEMENTS RULE 3 standing and having expertise and experience of not less than twenty-
• STEP 3 CIRCULATION OF FINANCIAL STATEMENTS five years in the field of accountancy, auditing, finance or law.
• STEP 4 ADOPTION OF FINANCIAL STATEMENTS • A full-time member shall be a person of ability,

• STEP 5 FILING OF FINANCIAL STATEMENTS TO ROC • A part-time member shall be a person who shall not, have any such
financial or other interest
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ACCOUNTS OF COMPANIES 48

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
FILING OF COST CORPORATE SOCIAL RESPONSIBILITY SECTION 138: INTERNAL AUDIT
AUDIT REPORT
CSR has many interpretations but can be understood to be a
• Every listed company
A company required concept imposing a liability on the Company to contribute to
to furnish cost audit the society (whether towards environmental causes, • Every unlisted public company having
report and other educational promotion, social causes etc.) along with the
documents to the reinforced duty to conduct the business in an ethical manner. 1. Paid up share capital of fifty crore rupees
Central Government It is also known as corporate conscience, corporate 2. Turnover of two hundred crore rupees
under sub-section citizenship, social performance or sustainable
(6) of section 148 of business/responsible business. 3. Outstanding loans or borrowings one
the Act and rules hundred crore rupees or more
made there under, BENEFITS OF CSR
4. Outstanding deposits of twenty five crore
shall file such • Strengthened brand positioning rupees
report and other
• Enhanced corporate image and reputation
documents using • Every private company having
the XBRL taxonomy • Satisfaction of economic and social contribution to society
given in Annexure- a) Turnover of two hundred crore rupees
• Contribution to the surrounding society
III for the financial b) Outstanding loans or borrowings from
years commencing • Increased ability to attract, motivate and retain employees
banks or public financial institutions
on or after 1st April, • Enhanced sales and market share exceeding one hundred crore rupees or
2014 in e-Form more
CRA-4 • Increased appeals to investors and financial analysts
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AUDIT OF ACCOUNTS 49

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
INTRODUCTION Manner and procedure of selection of auditors (Rule 3)

Audit is an examination of accounting records The Audit committee shall recommend the name of an individual or a firm as auditor to
undertaken with a view to establish the the Board for consideration or In case the company is not required to constitute the
correctness or otherwise of the transactions Audit Committee, the Board shall consider and recommend an individual or a firm as
reflected therein. The main object of audit is to auditor to the members in the AGM for appointment.
• Detection and prevention of errors. • Board agree with the recommendation of audit committee, then send to members.
• Detection and prevention of fraud. • Board does not agree with the recommendation of audit committee

APPOINTMENT OF FIRST AUDITOR Reappointment of retiring auditor

Government Company No auditor is appointed or
The first auditor shall be appointed by CAG within • He is not disqualified for re-appointment; reappointed at AGM –
60 days of registration of the company. Consequences
CAG does not appoint the first auditor the Board • He has not given to the company a notice
shall appoint the first auditor within next 30 days. in writing of his unwillingness to be
Where at any AGM, no auditor is
reappointed; and
appointed or re-appointed, the
In case any other Company • A special resolution has not been passed existing auditor shall continue to be
The first auditor shall be appointed by the Board at the AGM appointing some other auditor the auditor of the company.
of directors within 30 days of registration of the or providing expressly that he shall not be
company. re-appointed.
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COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CASUAL VACANCY IN THE OFFICE OF AUDITOR REMOVAL OF AUDITOR- Section 140 (1) and Rule 7
– Section 139 (8)

• The term ‘casual vacancy’ has not been defined under • Obtaining the prior approval of the Central Government (R.D.) by filling
the Companies Act, 2013. It generally means a vacancy an application in form ADT-2 within 30 days of resolution passed by the
caused by the auditor ceasing to act as such after Board.
accepting a valid appointment. • The company shall hold the general meeting within sixty days of receipt
• Where no auditor is appointed or reappointed it does of approval of the Central Government for passing the special
not result in a casual vacancy. resolution.

• vacancy created because of resignation of an auditor • The auditor concerned shall be given a reasonable opportunity of being
falls within the meaning of ‘casual vacancy. heard.

• In case of other than Government Company, the PENALTY FOR CONTRAVENTION OF SECTION 140(2)
RESIGNATION

auditor shall within 30 days from the date of

OF AUDITOR

resignation, file such statement to the company and

the registrar.
liable to a penalty of fifty thousand rupees or an amount equal to
• In case of Government Company or government
the remuneration of the auditor, whichever is less, and in case of
controlled company, auditor shall within 30 days from
continuing failure, with further penalty of five hundred rupees for
the resignation, file such statement to the company
each day after the first during which such failure continues, subject
and the Registrar and also file the statement with the
to a maximum of 2 lakh rupees.
Comptroller and Auditor General of India (CAG).
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AUDIT OF ACCOUNTS 51

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

POWERS OF TRIBUNAL- Section 140 (5) BRANCH AUDIT – SECTION 143 (8) AND RULE 12

A National Company Law Tribunal (NCLT) can either IN CASE OF LOCAL IN CASE OF FOREIGN BRANCHES
• Suo Moto or BRANCHES • Company’s auditor
• on an application from Central Government, or • Company’s auditor • Another qualified auditor
• on an application from person concerned • Another qualified • A person qualified to audit accounts
auditor according to laws of that country
NCLT RULES 2016 RULE 78
PUNISHMENT FOR COST RECORDS & AUDIT
• filed by the director on behalf of the company or the CONTRAVENTION – Maintenance of cost records is mandatory
aggrieved auditor to the Tribunal in Form NCLT-1. Section 147 only if such an order is made by the Central
• Tribunal is satisfied on an application of the • Section 147(1) Punishment Government.
company or the aggrieved person that the rights for contravention of Section
139 to 146 Order for which companies
conferred by the provisions of section 140 are being
abused by the auditor. • Section 147(2) Punishment • Such class of companies as are engaged
for contravention of Section in the production of such goods as may
• If the application is made by the Central Government
139, 143, 144, or 145 be prescribed.
and the Tribunal is satisfied that any change of the
auditor is required, it shall within fifteen days of • Section 147(3) Refund of • Such class of companies providing such
receipt remuneration by auditors services as may be prescribed.
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CHARGES 52

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
INTRODUCTION TYPES OF CHARGES

A charge is a right created by any person including a company FIXED CHARGES FLOATING CHARGES
referred to as “the borrower” on its assets and properties,
present and future, in favour of a financial institution or a bank,
referred to as “the lender”, which has agreed to extend financial Existing+Future Existing+Future
EXISTING EXISTING
assistance. Purchase Purchase
Immovable movable
Immovable movable
property property
property property
AS PER TRANSFER OF
AS PER COMPANIES ACT,
PROPERTY ACT, 1882
2013
According to Section 100
CRYSTALLISATION OF A FLOATING CHARGE
Section 2(16) of the
where immovable
Companies Act, 2013
property of one person is • Cases in which crystallization Takes place.
defines charges so as to ‘Crystallization’
by act of parties or
mean an interest or lien means that the right • ceases to carry on business. .
operation of law made
created on the property or of the company to
security for the payment of • makes a default in payment of interest or
assets of a company or any deal in the assets,
money to another; and the repayment of principal to the charge
of its undertakings or both which are subject of
transaction does not holder in accordance with the terms of
as security and includes a floating charge,
amount to a mortgage, it is the charge, and the charge holder brings
mortgage. comes to an end.
called charge. an action to enforce his security.
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CHARGES 53

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
REGISTRATION OF CHARGES CERTIFICATE OF REGISTRATION REGISTRATION OF CREATION OR
OF CHARGE Section 77(2) MODIFICATION OF CHARGE RULE 3

Section 77(1) provides that it shall be Section 77(2) of the Act states that when a charge is
the duty of every company creating a • particulars of the charge together
registered with the Registrar under section 77(1), he
charge with a copy of the instrument, if
shall issue a certificate of registration of such charge
any, creating or modifying the
• within or in Form No. CHG-2 and for registration of
charge in Form No.CHG-1
modification of Charge in Form No. CHG-3, to the
outside India, • If the particulars of a charge are
• person in whose favour the charge is created.
not filed in accordance with sub-
on its property or assets or any of its rule (1), such creation or
undertakings, whether tangible or APPLICATION TO REGISTRAR RULE 4 modification shall be filed in Form
otherwise, and situated in or outside No. CHG-l or Form No. CHG- 9.
India, to register the particulars of the • fails to register the charge hall be
charge signed by the company and the entitled to recover from the
charge-holder together with the • Registrar may, on being satisfied that the company the amount of any fees or
instruments, if any, creating such company had sufficient cause for not filing the additional fees or advalorem fees
charge in Form No. CHG-1 (for other particulars and instrument of charge, paid by him 'to the Registrar for the
than debentures) or Form No. CHG-9 • The application under sub-rule (1) shall be purpose of registration of charge.
(for debentures including made in Form No.CHG-l and Form No. CHG9 • A copy of every instrument
rectification), with the Registrar within supported by a de evidencing any creation or
30 days of its creation. modification of charge
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CHARGES 54

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CONSEQUENCES OF NON- APPLICATION FOR REGISTRATION OF REGISTER OF CHARGES
REGISTRATION CHARGE BY CHARGEHOLDER SECTION 78 MAINTAINED BY ROC
SECTION 81
• The charge shall be void Where a company fails to register the charge within
against the liquidator the period of 30 days specified in section 77, without The Registrar of Companies is
appointed under this Act or the prejudice to its liability in respect of any offence required to maintain a Register of
Insolvency and Bankruptcy under this Chapter, the person in whose favour the charges, separately, in respect of
Code, 2016, as the case may be charge is created may apply to the Registrar for each company pursuant to the
and any creditor of the registration of the charge along with the instrument provisions of section 81 of the
company. created for the charge, within such time and in such Companies Act, 2013. Section 81(2)
form and manner as may be prescribed provides that the Register of
• liable for the repayment of the charges shall be open to inspection
money secured by the charge. by any person on payment of fees of
Applicability of provisions relating to
• money secured by the charge modification of charge SECTION 79 Rs. 100 as prescribed
becomes payable immediately.
• punishable with fine minimum It provides that the provisions of Section 77 SATISFACTION OF CHARGE SECTION 82
1 lack and max. 10 lack. relating to registration of charge shall apply to: Satisfaction of charge is another
• A company acquiring any property subject to important aspect relating to debts created
• imprisonment up to 6 month or by a charge. In case of a full and complete
with a fine min. 25000/- max. 1 a charge within the meaning of that section;
OR payment of the secured charge registered
lack or with both. with the Registrar of Companies.
• modification of the charge.
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CHARGES 55

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
INTIMATION OF RECTIFICATION BY CENTRAL (SEC. 58) MORTGAGE
APPOINTMENT OF GOVERNMENT IN REGISTER OF CHARGES
RECEIVER OR • Mortgage" is the transfer of an interest in
MANAGER SECTION • the omission to give intimation to the Registrar of specific immoveable property for the purpose of
84 the payment or satisfaction of a charge securing the payment of money advanced or to
be advanced by way of loan : An existing debt or
• the omission or misstatement of any particulars future debt
appointment of a with respect to any such charge
receiver of, or of a • OR the performance of an engagement which
person to manage, the may give rise to pecuniary liability.
PUNISHMENT FOR
property, subject to a
CONTRAVENTION SECTION 86
charge, of a company or KINDS OF MORTGAGE
if any person appoints
such receiver or person penalty of five a) Simple Mortgage
under any power lakh rupees and b) Mortgage by conditional sale
contained in any every officer of
instrument, he shall, c) English mortgage
the company
within a period of thirty who is in default d) Usufructuary mortgage.
days from the date of the shall be liable to e) Mortgage by deposit of title deeds or equitable
passing of the order or of a penalty of fifty mortgage.
the making of the thousand
appointment rupees. f) Anomalous mortgage.
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PRODUCER COMPANY 56

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
• A producer company is company form of business organization. these types of companies are FORMATION OF PRODUCERS
working like co-operative societies.
COMPANY SECTION 378C
• Companies Amendment Act 2020 has made amendment under Companies Act 2013, After
section 378 of the Companies Act 2013 Act, the CHAPTER XXIA is inserted, containing the
provisions of producers company. • Any ten or more individuals,
• SECTION 378A TO SECTION 378ZU DEALS WITH PRODUCERS COMPANY each of them being a producer or
any two or more Producer
• Producer Company may carry on any of the activities specified in this clause either Institutions.
by itself or through other institution; • Registrar is satisfied that all the
• Processing
COMPANY SECTION 378B
OBJECTS OF PRODUCER

requirements of this Act have

• Manufacture, sale or supply of machinery, equipment or consumables mainly to its been complied with in respect of
Members; registration within thirty days.
• Providing education on the mutual assistance principles to its Members and others;
• activities for the promotion of the interests of its Members; • liability of its Members limited
• Generation, transmission and distribution of power, revitalization of land and water by the memorandum to the
resources, their use, conservation and communications relatable to primary amount,
produce; • may reimburse to its promoters
• Insurance of producers or their primary produce; all other direct costs associated
• Promoting techniques of mutuality and mutual assistance; with the promotion and
• Welfare measures or facilities registration of the company.
• any other activity, ancillary or incidental to any of the activities.
• shall become a body corporate as
• Financing of procurement, processing, marketing or other activities specified in
if it is a private limited company
clauses (a) to (j)
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PRODUCER COMPANY 57

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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
MEMBERSHIP AND VOTING RIGHTS OF MEMBERS OPTION TO INTER-STATE CO-OPERATIVE SOCIETIES TO
OF PRODUCER COMPANY SECTION 378D BECOME PRODUCER COMPANIES SECTION 378J

• any inter-State cooperative society with objects not confined to one

• membership consists solely of individual Members, the State may make an application to the Registrar for registration as
voting rights shall be based on a single vote for every Producer Company under this Chapter
Member.
• Every application under sub-section (1).
• where the membership consists of Producer Institutions • inter-State co-operative society is registered as a Producer Company,
only, the voting rights. the words "Producer Company Limited" shall form part of its name.
• where the membership consists of individuals and Producer • compliance with the requirements of sub-sections (1) to (3), the
Institutions, the voting rights shall be computed on the basis Registrar shall, within a period of thirty days.
of a single vote for every Member. .
• A co-operative society formed by producers, by federation or union of
• Member may continue to retain his membership, and the co-operative societies of producers or co-operatives of producers,
manner in which voting rights shall be exercised by the registered under any law for the time being in force.
Members. • The inter-State co-operative society shall, upon registration under sub-
• Producer Company may, if so authorised by its articles. section (1), stand transformed into a Producer Company,

• No person, who has any business interest which is in conflict • Upon registration as a Producer Company, the Registrar of Companies
with business of the Producer Company, shall become a who registers the company shall forthwith intimate the Registrar with
Member of that Company. whom the erstwhile inter-State cooperative society was earlier
registered for deletion of the society from its register.
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PRODUCER COMPANY 58

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

NUMBER OF DIRECTORS QUORUM OF THE GENERAL MEETING

Section 378-O provides that, every Producer Company shall have Section 378Y of the Act provides that unless Articles of
minimum five and not more than fifteen directors. Provided that in the Association require a larger number, one-fourth of the total
case of an Inter-State Co-operative Society as a Producer Company, such membership shall constitute the quorum at a general
company may have more than fifteen directors for a period of one year meeting.
from the date of its incorporation as a Producer Company.
STRIKING OFF NAME OF PRODUCER COMPANY
MATTERS TO BE TRANSACTED AT THE GENERAL MEETING SECTION 378ZP

• Approval of budget and adoption of annual accounts • fails to commence business within one year of its
• Approval of patronage bonus. registration or ceases to transact business with the
Members or if the Registrar is satisfied, after making
• Issue of bonus shares such inquiry as he thinks fit,
• Declaration of limited return and decision on the distribution of • Registrar has reasonable cause to believe that a Producer
patronage. Company is not maintaining any of the mutual assistance
• Specify the conditions and limits of loans that may be given by the principles specified,
Board to any director. • who is aggrieved by an order made under subsection (1),
• Approval of any transaction of the nature as is to be reserved in the may appeal to the Tribunal within sixty days of the order.
Articles. (4) Where an appeal is filed under sub-section (3),
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DEBENTURES 59

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

Raising of funds by issue of debentures or bonds is also a source of long-term capital for a company like share capital. Persons who
subscribe to the equity shares of a company are its owners while debenture holders are its creditors.

DEBT MARKET IN INDIA FEATURES/ CHARACTERISTICS OF DEBENTURE

Issue and listing of non- • A debenture is usually in the form of a

Issue of debt certificate
convertible debt securities
securities that are
are required to be made in • The certificate is an acknowledgement by the
convertible into
accordance with the company of indebtedness to a holder.
equity shares
provisions of the SEBI
shall be guided by • A debenture usually provides for the payment
(issue and listing of Debt
the SEBI (ICDR) of a specified sum at a specified date.
securities) Regulations,
Regulations, 2018
2008. • A debenture usually provides for payment of
interest until the principal sum is paid back.
DEBENTURE • A company shall not issue any debentures
carrying voting rights. [Sec. 71(2)]
Debenture includes debenture stock, bonds or any
other instrument of a company evidencing a debt, • A contract with the company to take up and
whether constituting a charge on the assets of the pay for any debentures of the company may be
company or not”. enforced by a decree for specific performance.
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DEBENTURES 60

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

KINDS OF DEBENTURE PRIOR APPROVAL OF THE GENERAL MEETING TO BORROW IN

EXCESS OF THE PAID-UP CAPITAL AND FREE RESERVES
Redeemable Debentures
Debentures are generally redeemable, that is to say, Where the amount of a proposed issue of debentures of a company together
they are issued on the terms that the company is bound with its existing borrowings will exceed its paid-up capital and free reserves,
to repay the amount of debentures, either at a fixed the proposed issue cannot be made before a special resolution is passed by
date, or upon demand, or after notice, or under a the company in general meeting pursuant to section 180(1)(c) and (2) of the
system of periodical drawings. Act empowering the Board to borrow in excess of the paid-up capital and free
reserves of the company.
Secured and Unsecured/ Naked Debentures
Where debentures are secured by a mortgage or a BONDS
charge on the property of the company, they are called
secured debentures.

Convertible Debentures
Bonds are typically issued by financial institutions, government undertakings
Convertible debentures are those in which an option is and large companies. The interest rate is assured and is paid at a fixed
given to the debenture holders to exchange a part or interval. On maturity, the principal is repaid. Bond is a form of loan.
whole of their debentures for shares in the company
under certain conditions and limitations imposed Therefore all the provisions applicable for debentures given in the Companies
regarding the period during which the option may be Act 2013 and other relevant statutes are applicable for bonds also
exercised.
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DEBENTURES 61

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

TYPES OF BONDS PRE CONDITIONS FOR ISSUING DEBENTURES DEBENTURE TRUST DEED
[SECTION 71]
• Deep discount bonds
• date of its redemption shall not exceed ten years from the
• Deep discount bonds debentures are issued for public
date of issue.
subscription, involving a considerable
• Sovereign bonds • debentures shall be secured by the creation of a charge on number of debenture holders, who do
• Convertible bonds the properties or assets of the company or its subsidiaries not have the time to look after their
or its holding company or its associates companies . interests in the properties mortgaged
Debenture Trustee • appoint the debenture trustee before the issue of or charged to them, a trustee may be
prospectus or letter of offer for subscription of its appointed for the supervision of their
debentures and not later than sixty days after the common interest.
not issue prospectus to more allotment of the debentures. A trust deed is made under which
than five hundred persons
• the debentures by way of a charge or mortgage shall be some person is appointed as trustee,
without appointing a debenture-
created in favour of the debenture trustee. whereby the properties of the
trustee.
company are mortgaged or charged to
prospectus or make an offer or • appoint a debenture trustee before the issue of prospectus trustee.
invitation to the public or to its or letter of offer for subscription of its debentures; and
The trust deed also contains
members exceeding 500 for the • The company shall execute a debenture trust deed in Form provisions dealing with the rights of
subscription of its debentures, No. SH.12 or as near thereto as possible, within 3 months the debenture holders and the
then only it is required to from the closure of issue. company.
appoint a debenture trustee.
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DEPOSITS 62

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

• Deposit/Public Deposit/Fixed Deposit is a kind of borrowing made by the companies.

Introduction: • It may be noted that deposits may be secured or unsecured borrowings.
• Sections 73 and 76 of the Companies Act, 2013 and Companies (Acceptance and Deposits)
Rules, 2014 are the relevant provisions relating to concept of Public Deposits.

TYPE OF COMPANIES ON THE BASIS OF KINDS OF DEPOSIT

BUSINESS ACTIVITIES

Acceptance of deposit from

BANKING Acceptance of deposits from the Public
NBFC Members (Section 73)
COMPANY NBNFC (Section 76) (case-2)
IF these (case-1)
Only a public company, having a NET
IF these companies IF these Any company (whether
WORTH of not less than one hundred
companies accept companies private or public) can
crore rupees OR a TURNOVER of not less
accept deposits deposits accept accept deposits from its
than five hundred crore rupees, can
Sections 73 and Sections 73 deposits members, subject to the
accept deposits from the Public. Such
76 and and 76 and Sections 73 passing of a resolution in
kind of public company, for the purpose
(Deposits) (Deposits) and 76 and general meeting and
of this Chapter, shall be referred to as
Rules, DO NOT Rules, DO APPLY subject to certain specified
‘Eligible Company’.
APPLY NOT APPLY conditions.
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DEPOSITS 63

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

PROHIBITION ON ACCEPTANCE COMPANY ACCEPTING DEPOSITS MEANING OF DEPOSIT

OF DEPOSITS FROM PUBLIC FROM PUBLIC— SECTION 76
SECTION 73(1) Any receipt of money by way of deposit or loan or
in any other form, by a company. And it EXCLUDES
Section 76 provides that a public the following:
No company shall invite, accept or company having such net worth or • Amount from government
renew deposits under this Act from turnover as mentioned above may
accept deposits from persons other • Amount from foreign govts
the public except in a manner
provided under section 76 than members of the company, namely • Loan from banking company/ Public Financial
from the public. Institutions etc.
73(2) A company by passing
ordinary resolution may accept Conditions • Commercial paper, etc.
deposits from its members subject • A public company of the nature • Intercompany LOAN
to the fulfilment of the following referred to above shall comply with
conditions, namely • Share Application Money etc.
the conditions stipulated
• Issue of circular to the members • Amount from director
• Prior credit rating and annual
• FILING OF CIRCULAR TO ROC renewal • Bonds or debentures

• Maintenance of liquid fund • Creation of charge on the assets • Amount accepted by nidhi company

• DEFAULT IN EXISITING DEPOSITS • Issue of circular in newspaper • Unsecured loans from promoters
• Employee security deposit
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DEPOSITS 64

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

Depositor [Rule 2(1)(d)] Joint Depositors [Rule 3(2)] REPAYMENT OF DEPOSITS

ACCEPTED UNDER THE
PREVIOUS ACT
• Any member of the company who has made a Where depositors so desire, deposits
deposit with the company in accordance with may be accepted in joint names, but not
the provisions of Section 73 of the Companies exceeding three, with or without any of
Act; or the clauses, namely, deposits accepted under the
• Any person who has made a deposit with a • “Jointly”, previous Act, any amount of
eligible company in accordance with the deposit or interest is due on the
provisions of Section 76 of the Companies Act • “Either or Survivor”, commencement of the new Act or
• “First named or Survivor”, becomes due later, the company
shall file with the Registrar in
Periods of Acceptance of Deposits [Rule 3(1)(a)] • “Anyone or Survivor”.
Form DPT-4 within three months
Ceiling on Rate of Interest and from the commencement of the
Act or from the date the payments
Brokerage [Rule 3(6)]
Minimum period Maximum period are due, a statement of all deposits
accepted by the company and
6 MONTH (1 exception Short term No company shall accept/renew deposits sums remaining unpaid and the
deposit not exceeding 10% of (paid up 36 at a rate of interest exceeding the interest due thereon and the
capital+ free reserves and security month maximum rate of interest prescribed by arrangements madefor
premium account) repayable after 3 RBI that the NBFCs can pay on their repayment.
month may be accepted public deposits.
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DIVISIBLE PROFITS AND DIVIDENDS 65

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
DIVIDEND Types of Dividend

Dividend defined under Section 2(35) of the

companies act, 2013, includes any interim Based on Declaration Based on Shares
dividend.

Declaration of Dividend by Final Dividend Interim Dividend

Preference Shares Equity Shares
Company u/s 123 in BORAD • Proposed by: BOD The Dividend will
MEETING be proposed and
• Finalized by: GM-OR
finalized by BOD.
Cumulative Non Cumulative
• WITH IN 5 DAYS Deposit dividend in
separate dividend account. The dividend declared
at AGM is final The dividend
• Payment of Dividend in 30 days u/s declared between
dividend. The dividend can be in arrears for any
127 2 AGM is interim
number of years. And it shall be paid
• If not then in Next 7 days Transfer dividend
for all years on declaration. Preference
amount in unpaid dividend account shareholders also earned voting rights
nd After 7 years Transfer of if dividend for 2 years has not paid (for
Dividend to IEPF u/s 124(5). detail refer section 47 .
• With in 90 days Publish on the
Website.
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DIVISIBLE PROFITS AND DIVIDENDS 66

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

Sources of Dividend Section 123 (1) PUNISHMENT

dividend has been PENALTY ON DIRECTOR

• Profits of the company PENALTY ON COMPANY
declared by a company punishable with simple
for the year for which Further, company shall
but has not been paid imprisonment which may
the dividend is to be paid. be liable to pay simple
or the warrant within extend to 2 years and
• Undistributed profits of interest @ 18% p.a. for
30 days from the date shall also be liable to fine
the previous financial years. the period of default.
of declaration of Rs. 1,000/-
• Moneys provided by the
Central Government or a
State Government for EXCEPTION (WHERE NO PENALTY APPLIES)
payment of dividend

• Where the dividend could not be paid by reason of the operation of any law;
MODE OF PAYMENT OF DIVIDEND • Where a shareholder has given directions to the company regarding the
payment of the dividend and those directions cannot be complied with;
• Cash
• Where there is a dispute regarding the right to receive the dividend;
• Cheque
• Where the dividend has been lawfully adjusted by the company against any
• Dividend warrant sum due to it from the shareholder;
• Electronic mode (ECS) • Where, for any other reason, the failure to pay the dividend
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DIVISIBLE PROFITS AND DIVIDENDS 67

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
INTERIM DIVIDEND [Sub- UNPAID DIVIDEND PENALTY
section (3) of Section 123] ACCOUNT SECTION 124
date of default, pay interest at the rate of twelve percent on such
amount of dividend as has not been transferred and the amount of
interest shall accrue to the benefit of the members in proportion to
• section 2(35) of where a dividend
the amount remaining unpaid to them.
companies Act 2013, declared by the Board or a
dividend includes interim company, interim or final, INVESTOR EDUCATION & PROTECTION FUND [IEPF]
dividend. as the case may be, has
not been paid or claimed
[SECTION 125]
• Interim dividend is within 30 days from the • Unpaid Dividend
usually paid in the middle date of the declaration, • Unpaid application money received by
of the year. the company shall companies for allotment of securities
transfer the unpaid or and due for refund;;
• Payment of interim • Unpaid matured deposits;
unclaimed dividend to an
dividend is optional. • Unpaid matured debentures;
account opened in a
• After declaration of scheduled bank to be • Interest accrued on (a) to (d) above;
interim dividend, the called “Unpaid Dividend • Grants and donations given to IEPF by the C/G, S/Gs,
amount must be deposited Account of Company • Interest or other income received out of the investments.
in a separate bank within seven days from • Sale proceeds of fractional shares
account within 5 days of the date of expiry of the • Redemption amount of preference shares remaining unpaid or
the declaration. said 30 days. unclaimed for seven or more years; and
• Such other amount as may be prescribed:
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DIVISIBLE PROFITS AND DIVIDENDS 68

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
unpaid and unclaimed for a period of 7 years (IEPFA)Appointment of Investor Education and Protection
from the date they become due for payment. The Chairperson and Members Fund Authority (Accounting, Audit,
Fund shall be utilized for holding of meetings and Transfer and Refund) Rules, 2016
• The refund in respect of unclaimed dividends, provision for offices and • RULE 5 Statement to be furnished to the
matured deposits, matured debentures, the officers) Fund .
application money due for refund and interest • RULE 6 Manner of transfer of shares
thereon; • Establishment of the authority
• Composition of the authority. under sub-section (6) of section 124 to
• Promotion of investors’ education, awareness and the Fund.
protection; • Chairperson of the Authority .
• Chief Executive Officer of the • RULE 7 Refunds to claimants from Fund.
• Distribution of any disgorged amount among
eligible and identifiable applicants for shares or Authority.
debentures, shareholders, debenture-holders or • Members of the Authority. RIGHT TO DIVIDEND, ETC. PENDING
depositors who have suffered loss due to wrong • Term of office of members of REGISTRATION OF SHARES [SECTION
actions by any person, in accordance with the the authority. 126]
orders made by the Court which had ordered • Functions of the authority. Where any instrument of transfer of
disgorgement; • Meetings . shares has been delivered to any company
• Reimbursement of legal expenses incurred in • Member not to participate in for registration and the transfer of such
pursuing class action suits under sections 37 and meetings in certain cases. shares has not been registered by the
245 by members, debenture-holders or depositors • Vacancies, etc., not to invalidate company, then the dividend is required to
as may be sanctioned by the NCLT; and proceedings of authority . be paid to the transferee in case the
• Any other purpose incidental thereto, in • Protection of action taken in transferor has given a mandate to that
accordance with such rules as may be prescribed. good faith effect.
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LOANS AND INVESTMENTS BY 69

COMPANIES
COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

FREE RESERVES • Give any loan to any person or other body corporate

Scope of • Give any guarantee, or provide security, in connection with a loan

As per section 2(43) “free reserves” sec. 186 • Acquire, by way of subscription, purchase or otherwise the securities
means such reserves which, as per of any other body corporate
the latest audited balance Sheet of a
company, are available for
distribution as dividend

REQUIREMENTS OF MAKING INTER CORPORATE LOANS AND INVESTMENTS BY COMPANIES

APPROVAL OF BOARD APPROVAL OF SHAREHOLDERS Approval of Public Financial Institution

required for making intercorporate loan, security proposed to be made or
investment, guarantee or security of any given by the Board, exceed the limits • No prior approval of public financial institution
amount. specified no investment or loan shall is required, up to 60% or 100%; as the case may
be made or guarantee shall be given be; provided there is no default in repayment of
Conditions loan
or security shall be provided unless
• approval of Board must be obtained prior previously authorised by a special • loans is beyond 60% or 100%, as the case may
• approval of Board must be obtained by resolution passed in a general be, then prior approval of the public financial
passing a unanimous resolution. meeting institution is required in all cases.
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LOANS AND INVESTMENTS BY 70

COMPANIES
COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

INTEREST RATE SECTION 186(7) NON – APPLICABILITY OF SECTION 186(11)

This section {except sub-section (1)} This section {except sub-section (1)}
• No loan shall be given under this does not apply to loans made or does not apply to any investment made
section at a rate of interest lower than guarantee or security provided or by
the prevailing yield of one year, three (investment) by • A company engaged in the business
year, five year or ten year Government • A banking company of financing of companies or of
Security closest to the tenor of the loan. • An insurance company providing infrastructural facilities
• Section 186(8) Restriction on • A housing finance company • A Non-Banking Financial Company
providing loan, guarantee or security in • A company engaged in the (NBFC).
case of default committed in repayment business of financing of • making investments in the ‘Rights
of deposit and/or interest thereon. companies or of providing Shares’ under Section 62(1)(a) of the
• Register of Loans, investment, infrastructural facilities. Companies At, 2013.
guarantee or security Section 186(9)
(10).
• Entries to be made in the register RESTRICTIONS ON MAKING INVESTMENT THROUGH NOT MORE THAN 2 LAYERS
within 7 days • company from acquiring any other company incorporated in a country outside
• Place of keeping and India.
preservation of the Register.
• Inspection of the Register • A subsidiary company from having any investment subsidiary for the purposes of
meeting the requirements under any law or under any rule or regulation
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LOANS AND INVESTMENTS BY 71

COMPANIES
COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
PENALTY UNDER SECTION 186(13) PROCEDURES INVOLVED IN MAKING LOAN, Investments of company
GIVING GUARANTEEAND PROVIDING to be held in its own
SECURITY name [Section 187]
punishable with fine which shall not be
less than 25,000 but which may extend
to 5 Lakhs and every officer of the • meeting of Board of Directors is to be convened after All investment made or held by
company who is in default shall be giving proper notice a company in a property,
punishable with imprisonment for a security or other asset must be
• No investment shall be made unless the resolution
term which may extend to 2 years and made and held by it in its own
sanctioning it is passed at a meeting.
with fine which shall not be less than name. The company may hold
25,000 but which may extend to 1 lakh. • checked whether there is any existing loan from any any shares in its subsidiary
public financial institution company in the name of any
• Arrange to convene a general meeting of shareholders nominee or nominees of the
after giving proper notice and to pass special company, if it is necessary to do
resolution therein. so to ensure that the number of
members of the subsidiary
• File the copy of special resolution in Form No. MGT-14
company is not reduced below
with the Registrar within 30 days of passing the
the statutory limit.
resolution.
• Registers are to be maintained in Form MBP-2.
• It is to be ensured that no loan shall be given at a rate
of interest lower than the prevailing yield
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GLOBAL DEVLOPMENTS 72

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
Duty to prepare directors’ remuneration report Formation of companies under the provisions of Singapore
under UK Companies Act, 2006(Section 420 & 422) Companies Act

The directors of a quoted company shall for each financial Any person may, whether alone or together with another person, by
year prepare a directors’ remuneration report which shall subscribing his name or their names to a memorandum and complying
contain the information specified in the Schedule to Act and with the requirements as to registration, form an incorporated company.
comply with any requirement of that Schedule as to how the A company may be
information is to be set out in the report.
• a company limited by shares;
• a company limited by guarantee; or
The advantages of Setting Up Business in
• an unlimited company.
Hong Kong:
Singapore Private Limited Company
• Free to Choose the Name of the Company. Private Limited Company is the most popular business entity in Singapore. It
• Utile Restriction of the Business Areas . usually has the words “Pte Ltd” or “Ltd” as part of its name. In many European
countries or the US, it is commonly known as a Corporation.
• Great Development in Low Taxation Environment.
The statement that “the provisions of the Hong Kong Companies Ordinance
• Easy to Get the International Credit. relating to formation of an incorporated company are broadly similar to the
• Doing Best to Get the Inhabitant Right in Hong Kong provisions of the Companies Act, 2013”
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MAJORITY POWERS AND MINORITY 73

RIGHTS
COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

POWERS OF MAJORITY EXCEPTION OF GENERAL RULE PREVENTION OF OPRESSION AND

• Ultra vires and illegal acts MISMANAGEMENT
• Fraud on minority . he minority shareholders are empowered
It is a cardinal rule of company law that prima
• Wrongdoers in control to bring action with a view to preventing
facie a majority of members of a company are
• Breach of fiduciary duties. the majority from oppression and
entitled to exercise the powers of the company
• Infringement of rights of a member mismanagement. These are the statutory
and generally to control its affairs.
rights of the minority shareholder.
• Minor acts of mismanagement,
‘THE PRINCIPLE OF NON- however, are not to be regarded as The words “oppression” and
oppression. “mismanagement” are not defined in the
INTERFERENCE’
Act. The meaning of these words for the
• There must be an unfair abuse of
purpose of Company Law should be used
The court will not usually intervene at the powers and impairment of confidence
in a broad generic sense and not in any
instance of shareholders in matters of internal • A member can complain of strict literal sense.
administration, and will not interfere with the oppression only in his capacity as a
management of a company by its directors so In general, oppression refers to an act of
member and not in his capacity as
long they are acting within the powers majority which is harsh and burdensome
director or creditor.
conferred on them under the articles of the on minority.
• The legal representatives of a Mismanagement refers to gross
company. The basic principle of non-
deceased member. negligence. Mere un-wise conduct of
interference with the internal management of
company by the court is laid down in the case • “Oppression must be a continuous business cannot be considered as
of Foss v. Harbottle. process. mismanagement.
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WINDING UP OF COMPANIES 74

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

DISSOLUTION CAN BE ACHIEVED BY ANY MODES OF WINDING UP

OF THE FOLLOWING PROCESS

Through Through Compulsory winding up AS Voluntary winding up AS PER INOLVENCY

Through PER COMPANIES ACT 2103 AND BANKRUPTCY CODE 2016
Merger/ Striking
Winding Up
Amalgamation Off
Process
Process Process

Winding Up–
Meaning Winding
up of a Company is
defined as a
process by which
the life of a
company is brought
to an end and its
property
administered for
the benefit of its
members and
creditors.
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OVERVIEW OF CORPORATE 75
REORGANISATION
COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CONCEPT OF BUSINESS ACQUISITION TWO TYPES OF BUSINESS ACQUISITION

Business acquisition is the process of acquiring a

company to build on strengths or weaknesses of the MERGER AND AMALGAMATION TAKEOVER
acquiring company.
REGULATED BY SECTION
TWO TYPES OF AMALGAMATION 230 AND 232 OF UNLISTED COMPANY LISTED COMPANY
COMPANIES ACT 2013 SECTION 235, 236 and 238 SEBI TAKEOVER
Amalgamation in the nature of merger are in effect a OF COMPANIES ACT 2013 CODE 2011
mode by which one company acquires another
company’s asset and liabilities in such a way that, the
THREE PERSPECTIVES OF MERGER AND AMALGAMTION
equity shareholders of the combining entities continue
to have a proportionate share in the equity of the
combined entity. AS PER AS PER INCOME AS PER ACCOUNTING
Amalgamation in the nature of purchase are in effect a COMPANIES ACT TAX ACT STANDARD - 14
mode by which one company acquires another company
and hence, the equity shareholders of the combining Only definition (AS)-14 RECOGNIZES TWO
entities do not continue to have a proportionate share in No definition of of amalgamation TYPES OF AMALGAMATION:-
the equity of the combined entity or the business of the merger and and not of Amalgamation in the nature of
acquired company is not intended to be continued after amalgamation merger merger. Amalgamation in the
amalgamation nature of purchase.
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OVERVIEW OF CORPORATE 76
REORGANISATION
COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CATEGORIES OF MERGERS OTHER CLASSIFICATION OF REVERSE MERGER
MERGER
Congeneric Merger Conglomerate
Congeneric mergers means merger Merger Reverse merger takes place when a
• Cash Merger
within same industries and taking healthy company merges with a
place at the same level of economic This type of merger • Defacto Merger financially weak company. In the
activity. involves coming • Down Stream Merger context of Companies Act, 2013
together of two or more there is no distinction between a
Vertical Merger companies engaged in • UP Stream Merger
merger or a reverse merger because
Vertical mergers occur between different industries • Short-Form Merger in either case one company merges
firms which are complementary to and/or services with another company.
each other. • Triangular Merger
• BACKWARD MERGER
• FORWARD MERGER CONCEPT OF REVERSE MERGER UNDER SICA
Horizontal Merger
This class of merger is a merger The scheme of merger prepared by the operating agency shall be examined
between business competitors who by the BIFR and copies of the scheme with modifications, if any, made by
are manufacturers or distributors BIFR, shall be sent to the sick industrial company, the operating agency and
of the same type of products or in case of amalgamation, also to any other company concerned and the BIFR
who render similar or same type of shall also publish or caused to be published the draft scheme in brief in
services for profit such daily newspapers as the BIFR may consider necessary for suggestions
and objections if any, within the specified period.
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REGISTERED VALUER 77

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
Valuation by Registered Valuers SECTION 247
247(1) Where a valuation is required to be made in respect of any property, stocks, shares,
debentures, securities or goodwill or any other assets (herein referred to as the assets) or net worth of
a company or its liabilities under the provision of this Act, it shall be valued by a person having such
qualifications and experience, registered as a valuer and being a member of an organisation
recognised, in such manner, on such terms and conditions as may be prescribed and appointed by the
audit committee or in its absence by the Board of Directors of that company.
247(2) The valuer appointed under sub-section (1) shall,
• make an impartial, true and fair valuation of any assets which may be required to be valued;
• exercise due diligence while performing the functions as valuer;
• make the valuation in accordance with such rules as may be prescribed; and
• not undertake valuation of any assets in which he has a direct or indirect interest or becomes so
interested at any time during a period of 3 years prior to his appointment as valuer or 3 years after
valuation of assets was conducted by him
247(3) If a valuer contravenes the provisions of this section or the rules made thereunder, the valuer
shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may
extend to one lakh rupees
247(4)Where a valuer has been convicted under sub-section (3), he shall be liable to
1. refund the remuneration received by him to the company; and
2. pay for damages to the company or to any other person for loss arising out of incorrect or
misleading statements of particulars made in his report
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REGISTERED VALUER 78

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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
Institute of Company Secretaries of India – Power of Central Government to Direct Companies to Furnish
Registered Valuer Organisation (ICSI-RVO) Information or Statistics

Section 405 of the Companies, Act, 2013 states that the Central Government
The IBBI vide Registered Valuers Organisation
may, by order, require companies or any class of companies, to furnish such
Recognition No. IBBI/RVO/2018/003 recognised
information or statistics with regard to their or its constitution or working, and
ICSI RVO as a Registered Valuers Organisation for
within such time, as may be specified in the order.
the Asset Class(es):-
• Land and Building
Failure to furnish information or statistics by the companies required
• Plant and Machinery by the Central Government
• Securities or Financial Assets

If any company fails to comply with an order specified above, or knowingly

furnishes any information or statistics which is incorrect or incomplete in
any material respect, the company shall be punishable with fine which may
extend to twenty-five thousand rupees and every officer of the company who
is in default, shall be punishable with imprisonment for a term which may
extend to six months or with fine which shall not be less than twenty-five
thousand rupees but which may extend to three lakh rupees, or with both.
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TRANSPARENCY AND DISCLOSURES 79

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
Transparency is a pivotal feature DISCLOSURES UNDER SEBI (LODR) REGULATIONS, 2015
in the market based monitoring
of companies and is central to
shareholders’ ability to exercise REGULATION 9 PRESERVATION OF DOCUMENTS
their ownership rights on an
• The listed entity shall have a POLICY for preservation of documents, approved by its board of
informed basis, which can help
directors. Listed entity may keep documents in electronic mode.
attract capital and maintain
confidence in the capital REGULATION 13 GRIEVANCE REDRESSAL MECHANISH
markets.
• The listed entity shall ensure that Adequate Steps Are Taken for expeditious redressal of
investor complaints. The listed entity shall ensure that it is registered on the SCORES platform or
There are no of legislations such other electronic platform
where corporates have to make
various disclosure. Some of REGULATION 18 AUDIT COMMITTEE
important legislations are as
follows: • Every listed entity shall constitute a qualified and independent audit committee . Minimum 3
directors SHALL BE MEMBERS OF AUDIT COMMITEE nd 2/3RD SHALL BE INDEPENDENT
• SEBI (LODR) Regulations, DIRECTOR.
2015
• The chairperson of the audit committee shall be an Independent Director.
• Sexual Harassment
(Prevention, Prohibition and • At least 4 Board Meetings in a Year nd Maximum Gap B/w Two Meetings 120 days
Redressal) Act, 2013 • Quorum of Meetings: 2 Members or 1/3 Members of audit committee and at least 2 independent
• Companies Act, 2013 director
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TRANSPARENCY AND DISCLOSURES 80

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

REGULATION 19 NOMINATION & REMUNERATION REGULATION 20 STAKE HOLDER RELATIONSHIP COMMITTEE

COMMITTEE • constitute a Stakeholders Relationship Committee to specifically look
Board of Directors shall constitute the nomination and into the various aspects of interest of shareholders, debenture holders
remuneration committee. Constitution of N&R Committee will and other security holders.
be as follow: • The chairperson of this committee shall be a non-executive director.
• Minimum 3 directors SHALL BE MEMBERS OF COMMITTEE • The board of directors shall decide other members of this committee.
• 50% SHALL BE INDEPENDENT DIRECTOR • At least three directors, with at least one being an independent director,
• THE CHAIRMAN SHALL BE INDEPENDENT DIRECTOR shall be members of the Committee

• Chairman of the company shall not Chair such Committee.

REGULATION 21 RISK MANAGEMENT COMMITTEE
• Chairman of Company can appoint as Member of
• Board of Directors shall constitute the risk management committee.
committee.
• regulation shall be applicable to top 500 Listed Entities.
• Chairperson of Committee may be present at the Annual
General Meeting. • Majority of Members of committee will be members of the board.
• The quorum for a meeting of the nomination and • The board of directors shall define the role and responsibility of the Risk
remuneration committee shall be either two members or Management Committee and may delegate monitoring and reviewing of
one third of the members of the committee, whichever is the risk management plan to the committee and such other functions as
greater, including at least one independent director in it may deem fit
attendance. • The risk management committee shall meet at least once in a year
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TRANSPARENCY AND DISCLOSURES 81

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
RULE 22 VIGIL MECHANISM: DISCLOSURES UNDER SEBI (LODR) REGULATIONS,
• The listed entity shall formulate a vigil mechanism for directors and 2015
employees to report genuine concerns.
• The vigil mechanism shall provide for adequate safeguards against
victimization of director(s) or employee(s) or any other person who • RULE 24 Corporate governance requirements with respect
avail the mechanism. to subsidiary of listed entity .
• The Vigil Mechanism also provides for direct access to the chairperson • RULE 24A SECRETARIAL AUDIT
of the audit committee in appropriate or exceptional cases. • RULE 27 OTHER CORPORATE GOVERNANCE COMPLIANCE
REQUIREMENT.
RULE 23 RELATED PARTY TRANSACTIONS. • RULE 29 PRIOR INTIMATIONS.
• formulate a policy on materiality of related party transactions and on • RULE 30 DISCLOSURES UNDER REGULATION 30 AND
dealing with related party transactions SCHEDULE III- PART-A/B
• require prior approval of the audit committee. • RULE 33 FINANCIAL RESULTS
• may grant omnibus approval for related party transactions proposed to • RULE 34 ANNUAL REPORT
be entered into by the listed entity .
• 43A. Dividend Distribution Policy
• All material related party transactions shall require approval of the
shareholders through resolution and no related party shall vote to • RULE 46 WEBSITE
approve on such resolutions whether the entity is a related party to the
particular transaction or not.
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TRANSPARENCY AND DISCLOSURES 82

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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

DISCLOSURES UNDER SEBI (SHARE BASED Disclosure Requirements under the Sexual
EMPLOYEE BENEFITS) REGULATIONS, 2014 Harassment of Women at Workplace
(Prevention, Prohibition & Redressal) Act, 2013

Regulation 14 of the Regulations provides that in addition to the

information that a company is required to disclose, in relation to The Act mandates that all companies having more than 10
employee benefits under the Companies Act, 2013, the Board of directors women employees shall disclose in annual report following
of such a company shall also disclose the details of the scheme(s) being details as per section 22 and 28 of the Act. Rule 14 of Sexual
implemented, as specified by SEBI in this regard. SEBI vide circular dated Harassment of Women at Workplace (Prevention,
16th June, 2015 has provided for following disclosure requirements in the Prohibition & Redressal) Rules, 2013 provides that the
Board’s Report. annual report which the Complaints Committee shall
• The Board of directors in their report prepare shall contain following information
shall disclose any material change in • Number of complaints of sexual harassment received in
the scheme(s) and whether the the year
scheme(s) is / are in compliance
with the regulations. • Number of complaints disposed off during the year
• Further, SEBI has prescribed • Number of cases pending for more than ninety days
specific details which shall be
disclosed on the company's website • Number of workshops or awareness programmed against
and a web-link thereto shall be provided sexual harassment carried out
in the report of board of directors. • Nature of action taken by the employer or District Officer
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TRANSPARENCY AND DISCLOSURES 83

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

POLICIES

The Companies incorporated under the Indian

Company Law are required to frame different POLICIES TO BE ADOPTED AS PER SEBI
Policies/ maintain systems/ plans and devise LODR REGULATIONS
Codes of/ for the Company/ Board of Directors and
Senior Management Personnel/ Directors and • Policy for preservation of documents
Employees etc. pursuant to the provisions of the
Companies Act, 2013 and other corporate laws. • Policy for determining material
subsidiary
The table below lists the various Policies/ Codes to
be framed, applicability, manner of framing and • Policy on materiality of related party
disclosure requirements etc. transactions
1. Corporate Social Responsibility (CSR)Policy
2. Whistle Blower Policy – A Vigil mechanism • Policy for determination of materiality.
3. Policy for formal annual evaluation by the • Vigil Mechanism/ Whistle Blower policy
Board of its own performance,
4. Policy on directors’ appointment And • Policy on diversity of board of directors
remuneration of the directors, KMP and other • Dividend Distribution Policy
employees
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MEDIATION AND CONCILIATION 84

UNDER COMPANIES
COMPANY LAWACT 2013
CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
MEDIATION AND CONCILIATION PANEL Companies (Mediation and Conciliation) Rules, 2016
SECTION 442 • Rule 3 Panel of mediators or conciliators
• maintain a panel of experts to be called as the • Rule 4 Qualifications for empanelment.
Mediation and Conciliation Panel.
• Rule 5 Disqualifications for empanelment
• Any of the parties to the proceedings may, at any
time during the proceedings before the Central • Rule 6 Application for appointment of Mediator or Conciliator and his appointment
Government or the Tribunal or the Appellate • Rule 30 Matters not to be referred to the mediation or conciliation.
Tribunal, apply to the Central Government or the • Rule 11 Procedure for disposal of matters
Tribunal or the Appellate Tribunal,
• Rule 12 Mediator or Conciliator not bound by the Evidence or Civil Procedure,
• The Central Government or the Tribunal or the
• Rule 13 Representation of parties.
Appellate Tribunal before which any proceeding is
pending may, suo motu, refer any matter • Rule 14 Consequences of non-attendance of parties at sessions or meetings on due
pertaining to such proceeding to such number of • Rule 16 Offer of settlement by parties.
experts from the Mediation and Conciliation Panel
as the Central Government or the Tribunal or the • Rule 17 Role of Mediator or Conciliator
Appellate Tribunal, as the case may be, deems fit. • Rule 18 Parties alone responsible for taking decision
• Any party aggrieved by the recommendation of the • Rule 19 Time limit for completion of mediation or conciliation.
Mediation and Conciliation Panel may file • Rule 25 Settlement agreement.
objections to the Central Government or the
Tribunal or the Appellate Tribunal, as the case • Rule 26 Fixing date for recording settlement and passing order
may be. • Rule 27 Expenses of the mediation and conciliation
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DRAFTING UNDER COMPANIES ACT 85

2013
COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

PRACTICAL ASPECTS OF DRAFTING RESOLUTIONS

• All essential facts are included in the resolution.

• Surplus and meaningless words or phrases should not be included in resolutions.
• Resolutions must indicate the relevant provisions or sections of the Act and the
Rules pursuant to which they are being passed.
• If a resolution is one which requires the approval of the Central Government or confirmation of the National
Company Law Tribunal/Court, this must be stated in the resolution.
• A resolution must indicate when it will become effective.
• A resolution must confine itself to one subject matter and two distinct matters should not be covered in one
resolution.
• A resolution should be crisp, concise and precise and should be flexible enough to take care of eventualities.
• Where lengthy resolutions have to be approved, they should be divided into paragraphs and should be
arranged in their logical order having regard to the subject matter of the resolution.
• A resolution must be so drafted that anybody not present at the meeting or anybody referring to it at a later
date will know clearly what the decision was at that meeting without referring to any other document.
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MISCELLANEOUS PROVISIONS OF 86
THE COMPANIES ACT,
COMPANY LAW 2013
CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
2 (59)"OFFICER" SECTION 20 SERVICE OF DIRECTORS’ AND OFFICERS’
DOCUMENTS LIABILITY INSURANCE
Officer includes any director, manager or key
managerial personnel or any person in accordance • registered post or • provides financial protection for the Directors
with whose directions or instructions the Board of • by speed post or and Officers of the Company in the event they
Directors or any one or more of the directors is or are are sued in conjunction with the performance
accustomed to act • by courier service or
of their duties as they relate to the Company..
• by leaving it at its
• treated as management Errors and Omissions
2(60) "OFFICER WHO IS IN DEFAULT" registered office
Policy.
• or by means of such
• Director can be held personally responsible for
• Whole-time director electronic or
acts of the Company, most Directors and
• Key managerial personnel • other mode as may officers will demand that they be protected
be prescribed rather than put their personal assets at stake.
• there is no key managerial personnel, such
director or directors as specified.
ESTABLISHMENT OF SPECIAL COURTS [SECTION 435 TO 440]
• person in accordance with whose advice,
directions or instructions the Board of Directors
of the company is accustomed to act, • speedy trial of offences • a Metropolitan Magistrate or a
• contravention of any of the provisions of this Act. Judicial Magistrate of the First
• single judge holding office Class, in the case of other offences
• issue or transfer of any shares of a company,
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MISCELLANEOUS PROVISIONS OF 87
THE COMPANIES ACT,
COMPANY LAW 2013
CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
COMPOUNDING OF OFFENCE SECTION 441 NCLT RULES 2016
RULE 84 Right to apply under section 245
• An offence is punishable with fine only • An application under sub-section (1) of section 245, read with sub-section
• An offence is punishable with imprisonment or (3) of section 245 of the Act, shall be filled in Form NCLT-9.
fine • A copy of every application under sub-rule (1) shall be served on the
• An offence which is punishable with company, other respondents and all such persons as the Tribunal may direct.
imprisonment or fine or with both
imprisonment RULE 85. Conducting a class action suit
• class has so many members
• there are questions of law or fact common to the class;
CLASS - ACTION SECTION 245 • claims or defences of the representative parties.
• representative parties will fairly and adequately protect the interests of the
class.

Class action suit can be filed against the

• Company
• Any of its directors
• Auditor, including audit firm
• Expert or advisor or consultant or any other
person
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COMPANY LAW
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

PART – B
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GENERAL MEETING 89

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

IN EVERY COMPANY GENERAL MEETING LENGTH OF NOTICE FOR CALLING GM

DECISIONS ARE TAKEN SECTION (SEC.101)
BY THE FOLLOWING
• ANNUAL GENERAL MEETING 96 97 99.
• EXTRA ORDINARY GENERAL MEETING 100 98 • clear twenty-one days' notice either in writing
SHAREHOLDERS or through electronic mode 101(1)
THE MEETING IN WHICH ALL COMPANIES
• not less than ninety-five per cent of the
SHAREHOLDERS TAKE SEC. 101 TO 121 ARE APPLICABLE TO ALL TYPES members entitled to vote at such meeting. 101
DECISION IS CALLED OF COMPANIES SEC. 122 certain sections not (1)
GENERAL MEETING. (THEY applicable on OPC
TAKE DECISION BY PASSING
O/R AND S/R) REQUISITES OF A WHO CAN CALL SEC. 101 SHORTER NOTICE
VALID GENERAL GENERAL
DIRECTORS MEETING MEETING shorter notice for general meeting is valid if
THE MEETING IN WHICH consent is given in writing or by electronic mode
• PROPERLY CALLED • Board
DIRECTORS TAKE DECISION • IN THE CASE OF AN ANNUAL GENERAL
IS CALLED BOARD • PROPERLY CONVENED • Members
MEETING.
MEETING. (THEY TAKE • NCLT
• PROPERLY
DECISION BY PASSING B/R) CONDUCTED • IN THE CASE OF ANY OTHER GENERAL
MEETING
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GENERAL MEETING 90

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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
RULE 18: Companies QUORUM FOR GM SEC. 103 ADJOURNMENT POSTPONEMENT CANCELLATION
(Management and
suspension of a putting off or where the meeting
Administration) Rules, meeting, to be deferring the holding no longer exists.
2014 In case of a public company
resumed at a later from a scheduled
• Five members personally time or date date to a future date
present not more than one
• Notice through email. Adjournment can be only before the It is the conclusion
thousand;
• Addressee of e-mail done only after commencement of a of a meeting
and its updation. • Fifteen members personally commencement of a meeting.
• Contents of e-mail present more than one meeting.
• The Company shall not thousand but up to five
be in default for non- thousand.
CHAIRMAN OF MEETING SEC. 104
delivery of notice by • Thirty members personally
email.. present meeting exceeds five
• Notice by email may be thousand;
sent in-house or
The Board of directors normally appoints one of the directors as
through the RTA.
the chairman for the meetings of the Board of directors and also
• Placement of notice on
In the case of a private company, for the general meetings of the company.
website.
• Advertisement of Two members personally present, The Articles also provide that the chairman of the Board shall be
notices in the shall bethe quorum for a meeting the chairman for general meeting of the company.
newspaper of the company. 103 (1)
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GENERAL MEETING 91

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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

PROXIES (Form No. MGT 11) RESTRICTION ON VOTING RIGHTS SECTION 106 Types of voting in a
SEC. 105 general meeting
• the articles of a company may provide that no member
• Any member of a company shall exercise any voting right in respect of any shares
• Voting by show of
entitled to attend and vote at a registered in his name.
hands
meeting of the company. • cannot restrict voting rights of member on any other • Voting on poll
• Shall be entitled to appoint ground.
another person (whether a • Voting by postal ballot
member or not ) • On a poll taken at a meeting of a company, a member
• E-voting
entitled to more than one vote, or his proxy,
• As his proxy.
• To attend and vote instead of APPLICABILITY OF E VOTING E-VOTING PERIOD
himself
• proxy so appointed shall not have
any right to speak at the meeting. • Unlisted Public Companies
The remote e-voting period shall be of minimum 3
Company having not less than
• may prescribe a class or classes of days and end necessarily 1 day before the general
1000 members.
companies shall not be entitled to meeting at 5:00 P.M. Once the vote on a resolution is
• Listed Companies MANDATORY.
appoint another person as a proxy cast by the member, he shall not be allowed to
• Private Companies E voting is
change it subsequently or cast the vote again.
not mandatory.
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GENERAL MEETING 92

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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

BEFORE OR ON DECLARATION OF RESULT SECTION 2 (65) POSTAL BALLOT RESOLUTION REQUIRING

OF SHOW OF HAND SPECIAL NOTICE (SEC 115)

Postal Ballot means voting by post or

A poll may be ordered A poll shall ordered by ANY MEMBER holding not less
through any electronic mode
by the chairman of his the chairman if a demand than 1% of total voting power or
own motion. is made by Members. holding shares on which an
Minutes — Meaning SECTION 118 aggregate sum of not less than 5
lakh has paid up
Rule 21 of Companies (Management and
Administration Rules, 2014) EXTRAORDINARY GENERAL
MEETING
The term 'minutes' though not
• Appointment of Scrutinizer defined in the Companies Act, There is generally a gap of around
• Documents to be provided to scrutinizers 2013, it may be considered as a a year or so in between two annual
written record of proceedings of general meetings. Important
• Role of Scrutinizers during polling process a meeting of any Company duly businesses arising in between two
• Report of Scrutinizers kept in pursuance of the law annual general meetings that
require shareholders approval
• Declaration of Result
shall be considered at the
extraordinary general meeting
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DIRECTORS PART – A 93

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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

DIRECTORS SHADOW DIRECTOR POSITION OF Application for Allotment of

DIRECTORS Director Identification Number
SECTION 153
• section 2 (34) of the Act prescribed that ALLOTMENT OF DIN SECTION 154
“director” means a director appointed to A person in accordance • Directors as
the Board of a company. with whose directions agents PROHIBITION TO OBTAIN MORE
or instructions, the THAN 1 DIN SECTION 155
• Section 2 (10) of the Companies Act, 2013 Board of directors is • Directors as
defined that “Board of Directors” or accustomed to act is trustees. DIRECTOR TO INTIMATE DIN
“Board”, in relation to a company, means called as ‘deemed SECTION 156
the collective body of the directors of the • Directors as
director’ or shadow COMPANY TO INFORM DIN TO ROC
company. officers
director. The words’ SECTION 157
accustomed to act’ • Directors as DIRECTOR TO INTIMATE DIN
imply that the Board employees
NEED FOR DIRECTORS SECTION 159
does not exercise its
own discretion but acts
blindly on the RULE 12-A of Companies (Appointment and
• A company cannot Act by itself. instruction or Qualification of Directors) RULES 2014
• Separation of ownership from directions of a person
management on regular and Every individual who holds a Director Identification
• Statutory requirement repetitive basis Number (DIN) as on 31st March of a financial year as per
these rules shall, submit e-form DIR-3-KYC
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DIRECTORS PART – A 94

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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

RULE 12B Companies (Creation and Disqualification of director

Maintenance of databank of
Independent Directors) Rules,
• Directors of company required to file e- • Personal Disqualification section 164(1)
form. 2019
Individual director will disqualify for
• Where the DIN of a director has been
respective period & also vacation of office u/s
marked as “Director of ACTIVE non- • CREATION AND MAINTENANCE 167.
compliant company”. OF DATA BANK RULE-3.
• “Director of ACTIVE compliant company.
• DUTIES OF THE INDIAN • Company disqualification section 164(2)
INSTITUTE OF CORPORATE
All director holding the position of director will
SECTION 149 INTRODUCES 3 NEW AFFAIRS RULE 4
be disqualified for 5 years and also vacation of
CONCEPTS • COMPLIANCES REQUIRED BY A office u/s 167
PERSON ELIGIBLE AND WILLING
TO BE APPOINTED AS AN
Disqualification in a private company—
• SECTION 149 (4) INDEPENDENT INDEPENDENT DIRECTOR RULE-
DIRECTORS. 6 Section 164(3)
• Second Proviso to section 149 WOMAN • RULE -6 Companies (Creation and
DIRECTORS. Maintenance of databank of A private company may by its Articles provide for
Independent Directors) Second any disqualification for appointment as Director
• SECTION 149 (3) RESIDENT DIRECTORS in addition to those specified above.
Amendment Rules, 2021.
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DIRECTORS PART – A 95

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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

Section 165(1): Maximum No. of 20

Directorship

Maximum 10 Public Remaining Other

company Companies

• Public company • Private

• Holding of Public • Section 8
company companies
• Subsidiary of • One person
Public company company
• Small companies
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APPOINTMENT OF DIRECTORS 96

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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

Section 152 Appointment of APPOITMENT OF FIRST DIRECTORS APPOINTMENT OF NOMINEE DIRECTORS

Directors
• IF DIRECTORS ARE NAMED IN ARTICLES. NOMINEE DIRECTORS: Subject to the articles of a
Where no provision is made in • IF THE DIRECTORS ARE NOT NAMED IN company, the Board may appoint any person as a
the articles of a company for THE ARTICLES director nominated by any institution in
the appointment of the first pursuance of the provision of any law for the time
director, the subscribers to the APPOINMENT BY PROPORTIONAL being in force or of any agreement or by the
memorandum who are REPRESENTIONAL (Sec. 163) Central Government or the State Government by
individuals shall be deemed to virtue of its shareholding in a Government
be the first directors of the Company.
company until the directors Section 163 shall not apply to(a) a
are duly appointed and in case Government Company in which the entire APPOINTMENT OF DIRECTORS BY SMALL
of a One Person Company an paid up share capital is held by the Central
SHAREHOLDER
individual being member shall Government, or by the State Government or
be deemed to be its first Governments or by the Central Government
director until the director or and one or more State Governments;(b) a
directors are duly appointed subsidiary of a Government Company, A listed company may have one director elected by
by the member in accordance referred in on (a) above, in which entire such small shareholders in such manner and with
with the provisions of this paid up share capital is held by that such terms and conditions as may be prescribed.
section. Government Company
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APPOINTMENT OF DIRECTORS 97

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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

SIMPLIFIED LANGUAGE REMOVAL OF DIRECTORS RESIGNATION BY A DIRECTOR—

POSITION AS PER THE NEW ACT—
SECTION 168
• Who can propose a small
shareholder as Director. • company has availed itself of
• Notice by the specified number of the option to appoint not less • Director shall give notice of his
shareholders giving specified than 2/3 rd directors resignation in writing.
details. according to the principle of
• The resignation will be effective at date
• Content of the notice proportional representation
later of
• Small shareholders’ Director shall u/s 163.
be treated as independent Director • A nominee director appointed a) Date of receipt of resignation by
• A person can be small by a financial institution company
shareholders’ Director in two under the terms of a loan b) Date of effectiveness mentioned in
companies. agreement. resignation:
• Restriction on small shareholders’
Director. • A director appointed by NCLT WITH IN 30 DAYS Company shall file with
• Disqualification for election as such u/s 242. ROC form number DIR 12 regarding
Director • A special director appointed resignation by director within 30 days
• Vacation of office by such Director by BIFR under Sec.16 (4) of AND Director MAY file with ROC form
• Some special points SICA. number DIR 11 with reason of resignation
and copy of resignation within 30 days
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

Introduction Audit Committee. Section Stake-holder

177 (1) Relationship
Committee. Section
The affairs of a company are managed by the Board of
Directors. It is, therefore, necessary that the directors should
178(5).
often meet to discuss various matters regarding the
Applicability
management and administration of the affairs of the company
in the best interest of the shareholders and the public interest. 1. Every Companies listed public
2. The Public Companies having
paid up share capital of ten
Essentials of a Valid Board Meeting Companies having more
crore rupees or more; or
than one thousand
3. The Public Companies having members, debenture
• Proper constitution of the Board of Directors; turnover of one hundred holders, deposit holders
• Due notice in accordance with the provisions of Section crore rupees or more; or or other security holders
173 of the Companies Act, 2013 must have been issued by 4. The Public Companies which at any time in a financial
an authorized person. have, in aggregate, year
• Presence of a properly elected or chosen person in the outstanding loans,
chair; and debentures and deposits,
exceeding fifty crore rupees.
• Proper quorum must be present for due transaction of
business.
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BOARD MEETINGS 99

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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

BOARD’S POWERS AND RESTRICTIONS THEREON Heads Charitable Political Defence

[SECTIONS 179 TO 183]
Section 181 182 183
• Director acting mala fide.
Applicable All Companies All Companies All Companies
• Incompetent Board
• Deadlock in the Board Not allowed to na To Government na
Companies and
Here, the shareholders in general meeting appointed Companies
additional directors, as the two existing directors were not incorporated
on talking terms. less than 3 yrs

Meaning of temporary loan Limit of Upto 5% of No Limit No Limit

Contribution average net
profit of last 3
• The term “temporary loan” means loan repayable on
years
demand or within six months from the date of the loan such
as short-term cash credit arrangement, the discounting of
Approvals Upto 5% = BR BR BR
bills, or shortterm seasonal loans but does not include loan
Above 5% = OR
for the purpose of financial expenditure of capital nature.
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VIRTUAL MEETING 100

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VIRTUAL MEETING – DEFINITION Procedures for Convening and Conducting Board’s Meetings

A meeting held totally by means of either

Video conferencing or other audio-visual • necessary arrangements to avoid failure
means is known as Virtual Meeting. A • take due and reasonable care,
virtual meeting is when people around the
world, regardless of their location, use • meeting shall be sent to all the directors in accordance with the provisions of sub-
video, audio, and text to link up online section (3) of section 173 of the Act.
• a roll call shall be taken by the Chairperson
THE MEETINGS ARE MAINLY • After the roll call, the Chairperson or the Secretary shall inform the Board about the
names of persons other than the directors.
• every meeting conducted authorised under these rules.
• audio- and/or video based • The statutory registers which are required to be placed in the Board meeting
• Audio conferencing • Every participant shall identify himself for the record before speaking
• Video conferencing • Chairperson of the meeting shall announce the summary of the decision taken.
• The draft minutes of the meeting shall be circulated among all the directors
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
Disclosure of Interest, Loan to directors GIVING OR READING OF GENERAL NOTICE AT BOARD MEETING
and Related Party Transactions
first meeting of the Board in which he participates as a • FORM FOR DISCLOSURE
director. • NOTICE OF DISCLOSURE NEEDS TO BE KEPT AT THE REGISTERED OFFICE AND
whether directly or indirectly, concerned or interested ITS PRESERVATION.
in a contract or arrangement or proposed contract • REQUIREMENT OF DISCLOSURE IF A DIRECTOR BECOMES CONCERNED OR
INTERESTED AFTER ENTERING INTO CONTRACT BY THE COMPANY.
contract or arrangement entered into by the company
without disclosure • CONTRACTS WITHOUT DISCLOSURE OF INTEREST BY A DIRECTOR SHALL BE
VOIDABLE AT THE OPTION OF THE COMPANY
director shall be "liable to a penalty of one lakh
rupees.
LOAN TO DIRECTORS, ETC. [SECTION 185]
ANALYSIS ON SECTION 184

• directly or indirectly, advance any loan, including any loan represented by

• OBJECT OF DISCLOSURE OF INTEREST. a book debt.
• REQUIREMENT FOR DISCLOSURE OF NATURE OF • advance any loan including any loan represented by a book debt.
INTEREST WHETHER DIRECT OR INDIRECT. • Nothing contained in sub-sections (1) and (2) shall apply
• loan is advanced or a guarantee or security is given or provided or utilised
• REQUIREMENT FOR DISCLOSURE OF INTEREST IS in contravention of the provisions
APPLICABLE TO ALL COMPANIES
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
RELATED PARTY TRANSACTIONS [SECTION Meaning of ‘Related Party: Section Meaning of ‘Relative:
188]
2(76) Section 2(77)
7 TYPES OF CONTRACT (SECTION 188 ) • director or his relative; As per this, a person shall be
• Sale, purchase or supply of any goods or materials; • key managerial personnel or his deemed to a relative of another
relative if, and only if
• Selling or otherwise disposing of, or buying,
• private company in which a director or • They are the members of a
property of any kind;
manager or his relative. HUF
• Leasing of property of any kind; • public company in which a director or • They are husband and wife;
• Availing or rendering of any services; manager is a director and holds along or
• Appointment of any agent for purchase or sale of
with his relatives, more than two per • The one is related to the
goods, materials, services or property cent. other in the manner
• Board of Directors, managing director indicated in Rule 4
• Such related party’s or manager is accustomed to act.
• person on whose advice, directions or
• Special Contracts Under Rule 15 instructions a director or manager is
GM – OR & BOD RESOLTION accustomed to act:
• any body corporate
• Other Contracts
• such other person as may be
BOD- Board of Directors Resolution only at Board meeting. prescribed.
(within 3 mths of contract)
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KMP appointment and their 103

remuneration COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

INTRODUCTION Managing Director Whole time director

A managing director is entrusted with A whole time director means director in
While the Board of Directors are responsible substantial powers of management which whole time employment of the company.
for providing the oversight, it is the key are not otherwise exercisable by a director
managerial personnel who are responsible
for not just laying down the strategies as well Managing director is not considered as Whole time director is considered in whole
as its implementation. whole time employee of company time employment of the company

Managing director - Manager - Section 2(53) SCHEDULE-V OF Appointment of Key Managerial

Section 2(54) COMPANIES ACT 2013 Personnel Section 203 (1)
Managing director must be Manager need not be a director
director • Part I Conditions for
listed company and every other
Managing director exercises Manager has the management of appointment
public company having a paid- up
substantial power of the whole or substantially the • Part II Remuneration share capital of rupees ten crores or
management whole of the affairs of a company.
• Part III Certificate of more, to appoint following whole-
A managing director, on his A managing director can continue Compliance of Schedule V time key managerial personnel:
ceasing to be a director, as a manager even though he
shall automatically cease to crease to be a director. • Part IV CG may exempt MD , CEO , Company Secretary; and
be the managing director as certain class of
Chief Financial Officer
well. companies
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remuneration COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

RULE 8. APPOINTMENT OF KEY RULE 8A APPOINTMENT OF CS IN APPOINTMENT OF MANAGING

MANAGERIAL PERSONNEL COMPANIES NOT COVERED RULE 8. DIRECTOR, WHOLE-TIME DIRECTOR OR
MANAGER
Every listed company and every other public A company other than a company covered
company having a paid-up share capital of under rule 8 which has a paid up share
ten crore rupees or more shall have whole- capital of 10 crore rupees or more shall • The appointment may be made with the
time key managerial personnel have a whole-time company secretary. approval of CG.
• The appointment may be made without CG
RESTRICTIONS REGARDING APPOINTMENT OF KEY MANAGERIAL PERSONNEL approval, provided such appointment is
accordance with Schedule V.
the same person should not act as both Chairman and Managing Director or Chief Payment to Director for Loss of Office, etc. in
Executive Officer of the Company. connection with Transfer of Undertaking,
Whole time KMP not to hold office in more than one company Property or Shares [Section 191]
If the office of any whole-time key managerial personnel is vacated, the resulting vacancy
shall be filled-up by the Board at a meeting of the Board within a period of six months No director of a company shall receive any
from the date of such vacancy. payment by way of compensation in case of
transfer of the whole or any part of any
penalty of 5lakh rupees and every director and kmp of the company who is in default
undertaking or property of the company or the
shall be liable to a penalty of 50000 and where the default is a continuing one, with a
transfer to any person of all or any of the shares
further penalty of one thousand rupees for each day after the first during which such
in a company;
default continues but not exceeding five lakh rupees.
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remuneration COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

Managerial Remuneration

Executive Directors (MD/WTD/MANAGER) Non Executive Directors

Based on Profit Based on Profit Sitting Fees

In case of Loss or In Case of Adequate In case of Loss or In Case of Adequate profit • Max Rs. 1 lac
inadequate profit profit inadequate profit per director per
board meeting
Remuneration In case company have ED
including its
based on Remuneration shall be based on No 1% of NP to all NED.
adjourn
schedule v section 197 Remuneration in Case company do not meeting.
• Maximum overall remuneration have ED 3% of NP to all
• It can be paid in
11% of NET PROFIT NED.
case of loss also.
• In case company have only 1 ED
• No Sitting Fees
5% of NP to that ED.
to Executive
• In Case company have 2 or more director shall be
ED 10% of NP to all ED. paid.
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AUDIT AND STANDARDS
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

INTRODUCTION APPOINTMENT SECRETARIAL FUNCTIONS OF Appointment of

OF C.S. AUDIT C.S. KMP by the Board
Despite the name, the role of a SECTION 203 and SECTION 204 and Rule SECTION 205 and Rule of directors
Company Secretary is not a clerical Rule 8/8A of 9 of Companies 10 of Companies
or secretarial one in the usual sense Companies

a resolution of the Board containing the terms and conditions of

APPOINTMENT OF COMPANY SECREATRY SECTION 203 the appointment including the remuneration.

• DIR-12 within 30 days of their appointment

• Every listed company and every public company having paid up
share capital 10 crore or more shall have whole time kmp (Rule 8) • MGT-14 within 30 days of their appointment

• Every company which has a paid up share capital of ten crore Summons to company in civil matters can be served on a
rupees or more shall have a whole-time (RULE 8A) secretary As per rule 2 of order 9 of Code of Civil Procedure, in
case of suit against a corporation, summons can be served on
1. Company Secretary, Director or other principal officer of the
• shall be liable to a penalty of five lakh rupees and every director and corporation or
key managerial personnel of the company who is in default shall be 2. By leaving it or by sending by post to registered office of the
liable to a penalty of fifty thousand rupees corporation.
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COMPANY LAW
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PART – C
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AUDIT AND STANDARDS
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

SECRETARIAL AUDIT SCOPE OF SECRETARIAL AUDIT SECRETARIAL AUDIT

THE PROCESS
• listed company
• public company capital of fifty crore rupees or liable to a • APPOINTMENT OF
• Matters to be specified in the
more. penalty of SECRETARIAL AUDITOR.
Secretarial Audit.
• turnover of two hundred fifty crore rupees or two lakh • COMMUNICATION TO
more. rupees. • Flexibility in the form of EARLIEST INCUMBENT .
• outstanding loans or borrowings from banks or Compliance Certificate. • ACCEPTANCE OF
public financial institutions of one hundred • Verification of records and APPOINTMENT.
crore rupees or more Has to obtain secretarial documents. • PRELIMINARY
audit report in form no. MR 3 from P.C.S. DISCUSSIONS / SURVEYS .
• Crucial area of the Secretarial • PRELIMINARY MEETING.
Audit Report. • FINALIZATION OF AUDIT
UNDER SEBI RULES AND REGULATIONS
• Period of the Secretarial Audit. PLAN AND BRIEFING THE
STAFF.
• Disqualifications for • TESTING, INTERVIEWS
• The Depositories Act, 1996.
appointment of the Secretarial AND ANALYSIS .
• The SEBI (Substantial Acquisition of Shares and
Auditors. • WORKING PAPERS.
Takeovers) 2011.
• The SEBI (Prohibition of Insider Trading) Regulations, • Duty of the company to provide • AUDIT SUMMARY FOR
1992. all assistance and facilities for DISCUSSIONS .
• The SEBI(Issue of Capital and Disclosure Requirements) auditing the secretarial and • SUBMISSION OF
Regulations, 2018 . related records SECRETARIAL AUDIT
REPORT
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AUDIT AND STANDARDS
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

PENALTIES UNDER COMPANIES ACT, 2013 RULE 10 OF COMPANIES DUTIES OF A SECRETARY

(APPOINTMENT AND REMUNERATION
OF MANAGERIAL PERSONNEL) RULES,
• which is false in any material particulars,
knowing it to be false or 2014
• which omits any material fact, knowing it to be • provide to the directors of the company,
material. collectively and individually.
• facilitate the convening of meetings and
He shall be liable under section 447 (Fraud). • THE CONTRACTUAL
attend Board.
• obtain approvals from the Board, general • UNDER THE
SECTION 205 - FUNCTIONS OF COMPANY meeting, the government and such other COMPANIES ACT.
SECRETARY authorities. • UNDER THE INCOME-
• represent before various regulators, and TAX ACT.
other authorities.
• To report to the Board about compliance with the • assist the Board in the conduct of the • UNDER THE INDIAN
provisions of this Act, the rules made thereunder affairs of the company; STAMP ACT .
and other laws applicable to the company; • assist and advise the Board in ensuring • UNDER OTHER ACTS
• To ensure that the company complies with the good corporate governance and in
applicable secretarial standards; complying.
• discharge such other duties as have been
• To discharge such other duties as may be specified under the Act or rules;
prescribed. • Such other duties
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AUDIT AND STANDARDS
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

SECRETARIAL STANDARD-1 TIME PERIOD FOR ISSUE OF NOTICE

NORMAL NOTICE SHORTER NOTICE
Notice, Agenda and Notes of Agenda To transact urgent business, the Notice, Agenda
• SECRETARIAL STANDARD-1
convening a Meeting shall be given at and Notes on Agenda may be given at shorter
• NON-APPLICABLTY OPC in which there least SEVEN days before the date of period of time than stated above,
is only 1 director and section 8 the Meeting, unless the Articles
company. prescribe a longer period. If at least one Independent Director, if any, shall
be present at such Meeting.
In case the company sends the Notice,
SOME IMPORTANT POINTS Agenda and Notes of Agenda by Speed If no Independent Director is present, decisions
Post or by registered post or by taken at such a Meeting shall be circulated to all
courier, An Additional Two Days Shall the Directors and shall be final only on
be Added for the service of Notice. ratification thereof by at least one Independent
• CONVENING A MEETING Director, if any.
• DAY,TIME, PLACE, MODE AND SERIAL The Notice, Agenda and Notes on
NUMBER OF MEETING Agenda shall be sent to the Original In case the company does not have an
• NOTICE OF BOARD MEETING Director also at the address Independent Director, the decisions shall be final
• ADDRESS FOR SENDING THE NOTICE registered with the company, even if only on Ratification Thereof By A Majority Of The
TO DIRECTORS these have been sent to the Alternate Directors of the company, unless such decisions
• WHO WILL ISSUE NOTICE OF BOARD Director. were approved at the Meeting itself by a majority
MEETING of Directors of the company
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

FREQUENCY OF GENERAL MEETING QUORUM OF GENERAL MEETING

ANNUAL GENERAL EXTRA ORDINARY GENERAL MEETING:
MEETING • PRIVATE LIMITED:
Every Company in each Calendar The Board may also, whenever it deems fit, Two Members Personally Present.
Year, hold a General Meeting called call an Extra- Ordinary General Meeting of
the Annual General Meeting. the Company. • PUBLIC LIMITED:
In case of Public Company “Minimum Present of
FIRST AGM: The Board shall, on the requisition of Members required”
First AGM within 9 month from the Members who hold, as on the date of the
date of closing of First Financial receipt of a valid requisition can call an • 5 (five members) personally present if the
year of the Company. In case of Extra- Ordinary General Meeting, number of Members as on the date of Meeting is
First AGM, it is not necessary for up to 1000 (one thousand).
the company to hold any AGM in • In the case of Company having a Share
• 15 (Fifteen members) personally present if the
the calendar year of its Capital, not less than 1/10th of the paid-
number of Members as on date of Meeting is
Incorporation. up share capital carrying Voting Rights;
more than 1000 (one thousand) but upto 5000
OR
(five thousand)
Time period of First Annual
General Meeting after • In the case of a Company not having • 30 (thirty member) personally present if the
Incorporation of Company cannot share capital, not less than 1/10th of number of members as on date of the Meeting
be extended. total voting power of the Company. exceeds 5000 (five thousand)
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AUDIT AND STANDARDS
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

PROXY: SIGNING OF PROXY FORM MINUTES

• A member entitled to attend and vote • MEMBER IS INDIVIDUAL BY THE MEMBER, or Every company shall keep Minutes
is entitled to Appoint Proxy. His attorney duly authorized in writing . of all Meetings. Minutes kept in
accordance with the provisions of
• A proxy can’t act on behalf of more • MEMBER IS BODY CORPORATE If the the Act evidence the proceedings
than 50 members and members appointer is a body corporate than the recorded therein. Minutes help in
holding aggregate more than 10% of instrument of Proxy should be under its seal understanding the deliberations
the total share capital of the Company and shall be signed by the: An officer, or An and decisions taken at the
carrying voting rights. attorney duly authorized by it. Meeting.

• A proxy later in date can revoke the earlier dated proxies.

REVOCATION OF

• Proxy is valid until written notice of revocation has been received by WHEN PROXY FORMS CAN BE
the Company before the commencement of the Meeting or adjourned INSPECTED
PROXY

meeting.
• A notice of revocation of proxy shall be signed by the same Proxies shall made available for inspection during
Member(s) who had signed the proxy, in the case of joint the period beginning 24 hours before the
membership. commencement of the Meeting and Ending with the
• When both the Member and Proxy attend the Meeting, the proxy conclusion of the Meeting Between 9 a.m. to 6 p.m.
stand automatically revoked.
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AUDIT AND STANDARDS
COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

SECRETARIAL STANDARD-3 (SS-3) ON “DIVIDEND SECRETARIAL STANDARD-4 (SS-4)

REPORT OF THE BOARD OF DIRECTORS
• Secretarial Standard-3 (SS-3) on “Dividend”, issued by the Council of the
Institute of Company Secretaries of India for voluntary adoption by companies.

• This Standard shall come into effect from 1st January, 2018. • The Companies Act, 2013, requires the
Board of Directors of every company to
• Dividend is a return on the investment made in the share capital of a company, attach its report to the financial statements
as distinct from the return on borrowed capital, which is in the form of interest. to be laid before the members at the
• In commercial usage, the term “Dividend” refers to the share of profits of a annual general meeting.
company that is distributed amongst its Members.
• The Board’s Report is an important means
of communication by the Board of
• The term “Dividend” has been inclusively defined in the Act to the effect that it
Directors of a company with its
includes Interim Dividend. The Act neither specifically defines the term
stakeholders.
Dividend nor makes any distinction between Interim and Final Dividend.
• The Board’s Report should be based on the
• For the purposes of this Standard, capitalization of profits in the form of bonus company’s standalone financial statement
shares is not Dividend. and not on the consolidated financial
statement and should relate to the
• Companies licensed under Section 8 of the Companies Act, 2013 or financial year for which such financial
corresponding provisions of any previous enactment thereof are prohibited by statement is prepared
their constitution from paying any Dividend to its Members.
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AUDIT AND STANDARDS
COMPANY LAW CHART BOOK BY CS ANOOP JAIN
CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

• COMPANY SPECIFIC INFORMATION

• GENERAL INFORMATION PART II: OTHER
• CAPITAL AND DEBT STRUCTURE REQUIREMENTS
• CREDIT RATING OF SECURITIES
• INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
• MANAGEMENT
• DISCLOSURES RELATING TO SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES.
• APPROVAL OF THE
• DETAILS OF DEPOSITS
• PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS REPORT
• PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES • SIGNING OF THE
SECRETARIAL • CORPORATE SOCIAL RESPONSIBILITY (CSR) REPORT
STANDARD • CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE • DISSEMINATION
PART I: EARNINGS AND OUTGO • FILING AND
DISCLOSURES • RISK MANAGEMENT SUBMISSION OF THE
• DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM REPORT
• MATERIAL ORDERS OF JUDICIAL BODIES /REGULATORS
• AUDITORS
• SECRETARIAL AUDIT REPORT
• EXPLANATIONS IN RESPONSE TO AUDITORS’ QUALIFICATIONS
• COMPLIANCE WITH SECRETARIAL STANDARDS
• CORPORATE INSOLVENCY RESOLUTION PROCESS INITIATED UNDER THE
INSOLVENCY AND BANKRUPTCY CODE, 2016 (IBC)
• ANNUAL RETURN
• ADDITIONAL DISCLOSURES UNDER LISTING REGULATIONS
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

JOURNEY OF PROFESSION ‘Company Secretary’ or ‘Secretary’ means a Company

Secretary as defined in clause (c) of sub section (1) of DEEMED “TO BE IN PRACTICE”
OF COMPANY SECRETARY Section 2 of the Company Secretaries Act, 1980 who is
The Department of Company appointed by a company to perform the functions of the
Company Secretary under the Companies Act, 2013. A member of the Institute shall be deemed
Affairs conducting examination “to be in practice” when, individually or in
leading to Government Diploma partnership with one or more members of
in Company Secretary ship ASSOCIATES AND FELLOWS MEMBERS the Institute in practice
(GDCS), marked the beginning of
the profession of Company Any person whose A person, being an Associate who • engages himself
Secretaries in an organized name is entered in has been in continuous practice
the Register of in India as a Company Secretary • offers to perform or performs services
manner.
members for at least five years in relation to the promotion, forming,
incorporation,etc.
later in the wake of substantial
increase in the number of REGISTER OF MEMBERS • offers to perform or performs such
candidates for gdcs, • his full name, date of birth, domicile, residential and services as may be performed
In 1980, the Government moved professional addresses; • holds himself out to the public as a
the Company Secretaries Bill, • the date on which his name is entered in the Register; Company Secretary in practice; or
1980 to convert the Institute into
• his qualifications; • renders professional services or
a statutory body and company
secretaries act 1980 came in to • whether he holds a certificate of practice; and assistance
force • any other particulars which may be prescribed. • renders such other services
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CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

REMOVAL FROM THE REGISTER PROVISIONS RELATING TO MISCONDUCT UNDER THE IN CASE OF
OF MEMBERS COMPANY SECRETARIES ACT, 1980 ADVERTISEMENT
THROUGH
• who is dead; or WEBSITE:
• Professional misconduct in
• from whom a request has been • Professional misconduct in
relation to Company
received to that effect; or relation to Company • A Company
Secretaries in Practice.
• who has not paid any prescribed fee Secretaries in practice Secretary or a
(Part I of the First
required to be paid by him; or requiring action by firm of Company
Schedule)
disciplinary committee (Part Secretaries may
• who is found to have been subject at • Professional misconduct in
I of the Second Schedule) display
the time when his name was entered in relation to members of the
• Professional misconduct in photograph of the
the Register, Institute in service. (Part II
relation to members of the Company
of the First Schedule)
Institute generally, requiring Secretary or
EXPLANATORY STATEMENT TO BE • Professional misconduct in
action by disciplinary partners of the
ANNEXED TO NOTICE (Sec.102) relation to members of the
committee (Part II of the firm of Company
Institute generally. (Part III
Second Schedule). Secretaries in
of the First Schedule)
• CONTENT OF EXPLANATORY STATEMENT • Other misconduct in relation Practice .
• Other misconduct in
• AT ANY OTHER GM to members of the Institute • RESTRICTIONS
relation to members of the
• FULL TEXT OF THE RESOLUTION generally (Part III of the • DECLARATION
Institute generally (Part IV
• INDICATION OF NATURE OF BUSINESS Second Schedule) • EFFECTIVE DATE
of the First Schedule)
• EXPLANATORY STATEMENT
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MEGA FIRMS 117

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN
LIMITATIONS OF A SINGLE PRACTICING APPLICABLE RULES,
INTRODUCTION PROFESSIONAL ARE ENUMERATED AS REGULATIONS AND
UNDER: GUIDELINES FOR PCS OR FIRM
• rapidly changing economy, industrial OF PCS
• Irregular Cash flows;
environment and emergence of the • Company Secretaries
need for corporate governance and • Capital investment. (Fixed as well as Regulations, 1982.
ethical business practices of voluntary Working); • Schedule I and III of Company
disclosures, role of a practicing • No limit on working hours, clients expect PCS Secretaries Act, 1980 in
company secretary has also changed to be available 24*7; relation to Professional
substantially over last three decades. misconduct
• No work no pay is a rule; • Guidelines for issuing
• Company Secretary in Practice has
become a crucial player. • Need to continuously update oneself; compliance certificate and
signing of annual return.
• obtained new dimensions from being • No body to protect your mistakes, PCS is
• Guidelines framed by the
conscience keeper to compliance directly exposed to all kinds of acts of
council relating to approval of
officer, governance professionals, omission & commission;
proprietorship concern/firm’s
Advisor, strategist for the growth of • Has to create his own infrastructure name under regulation 169 of
corporate. the company secretaries
• Has to have staff, their appointments,
• The Company Secretaries to assume promotions, incentives, salaries, HR Regulations, 1982
the leadership position with new role, management; • Guidelines for advertisement
values and approach. by Company Secretary in
• Cannot directly or indirectly solicit clients. Practice
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MEGA FIRMS 118

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

APPLICABLE RULES, WHAT IS MULTIDISCIPLINARY /MEGA FIRM?

REGULATIONS AND GUIDELINES
FOR PCS OR FIRM OF PCS
Mega Firm can be described as a Partnership firm with more than twenty five partners. A firm
• Guidelines for compulsory which provides core professional service of a particular profession along with the allied and
attendance of Professional ancillary service with equal competence under one roof is a multidisciplinary firm.
development programmes by the
member Regulation 168B of Company Secretaries Regulations, 1982 determines the membership of
• Mechanism for maintenance of professional body for partnership, accordingly
attendance records of members at
professional development • The Institute of Chartered Accountants of India established under the Chartered Accountants
programmes and issuance of Act, 1949 (No. 38 of 1949);
Certificates for programme credit • The Institute of Cost and Works Accountants of India established under the Cost and Works
hours (PCH) Accountants Act, 1959 (No.23 of 1959);
• Guidelines for peer review of • Bar Council of India established under the Advocates Act, 1961 (No. 25 of 1961);
attestation services by Practising • The Institute of Engineers or Engineering from a University established by law or an
Company Secretaries institution recognized by law;
• Guidelines for professional dress • The Indian Institute of Architects established under the Architects Act, 1972 (No. 20 of 1972);
of Company Secretaries • The Institute of Actuaries of India established, under the Actuaries Act, 2006 (No. 35 of 2006);
• Guidelines for setting up and • Professional bodies or institutions outside India whose qualifications relating to Company
Conversion of Firms of PCS into Secretary recognized by the Council under Sub-section (2) of Section 38 of the Act
LLP. • This actually introduces the concept of multi disciplinary firms or mega firms.
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MEGA FIRMS 119

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

PRE REQUISITES BENEFITS OF A RISKS

MULTIDISCIPLINARY
FIRM
• All minds should work together and in • More cost on infrastructure and technology.
unison; • Dominance of senior partners over the younger
• Working in a team partners.
• Say go to ego;
environment
• Mutual faith and respect lays strong • Exposure to various • Defining exit route is difficult.
foundation; and different works • Lack of transparency may lead to disputes.
• Cost effective
• Unanimity shall be the rule on • If crack develops in mutual faith & trust, very difficult
• Exceptional training
important policy decisions; to cure.
and on-boarding
• Financial discipline is a must; • Continuous learning • Communication gap between partners
• Big growth
• Founder partners shall be given equal opportunities
status; • Revenue sharing PROCESS OF CONSTITUTION
• Structure &
• Income of the firm shall be distributed
Processes.
at short regular intervals; The process of formation of MDF shall be an outcome of
• Corporate or
Industry perception conscious and sincere decision and it is essential that the
• One shall not put undue influence on
• Reputation & risk- like minded professional should deliberate and take this
the others or show that he is king pin
adjusted value decision.
of the association.
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MEGA FIRMS 120

COMPANY LAW CHART BOOK BY CS ANOOP JAIN

CSEET , CS EXECUTIVE ND PROFESSIONAL COMPANY LAW CHART BOOK BY CS ANOOP JAIN

Agreement between partners Management of Firms

Partners must enter into a partnership agreement The mega firm requires effective management skills including skills for
defining inter alia the process of decision making, handling finance, dealing with human resources and day to day administration
allocation of duties, responsibilities, delegation of of the office. The management of a MDF is in itself a major challenge.
authorities, revenue sharing and exit route.

REVENUE SHARING MODELS

• partner bringing new client shall be given referral or induction share, say, @
15% of the fees settled and received; it can be for the first year or for given
number of years;

• Certain percentage of fees, say 15% shall be retained in business in common

pool for meeting expenses;

• 70% of the fees shall be given to the partner or partners who actually work on
the assignment (assignment share).