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Book No - 8
Fast Track Material in Company Law_31e
2
FAST TRACK MATERIAL IN COMPANY LAW
4. Limited Liability:
Limited by shares - Limited to the unpaid value.
Co. limited by guarantee - Limited to the amount guaranteed.
5. Separate property
6. Perpetual existence:
Members may come, members may go but company goes on
forever
Change or death of some or even all members do not affect
continuity of a Co.
Misuse: If the veil is used as a mask of fraud, then the courts will
lift the veil and look at the persons behind the company.
Daimler Co. Ltd vs. Continental tyre & Rubber Co. Ltd:
German company incorporated as England Company for the
purpose of selling tyres made in Germany.
During First World War, Co. started recovering its debts.
Court held this as trading with an enemy.
3. Protection of Revenue.
NOTES
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2. CLASSES OF COMPANIES
Statutory Companies:
These are created by a special act of the parliament/state
assembly.
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Companies Limited by Guarantee:
1. Liability is limited to a fixed amount which the members undertake.
2. to contribute to the assets of the company in the event of its
being wound up.
3. It is in the nature of Reserve Capital.
4. The liability of shareholders is limited to:
Guarantee co. without share capital - To the extent of
guarantee.
Guarantee co. with share cap. - To the extent of guarantee +
Un paid value on shares.
5. Requirement of own articles is mandatory
Issues:
No exemption if member+ employee.
Directors or MD are not considered to be employees, they will
be counted as members.
The limit of 50 is only for shareholders.
3. Prohibits from making an invitation to the public to subscribe for
any securities of the company.
4. Prohibits from making an invitation for acceptance of deposits
from persons other than its members.
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2. MCA Circular No.34/2011- Criteria to be declared as PFI:
Established under a Special Act or the Cos Act
Main Business should be Industrial / Infrastructural Financing.
In existence for at least 3 years and income from main
business exceed 50% of their total income.
Net worth Rs. 1000 crores
Registered as IFC with RBI or as an HFC with NHB.
For CPSUs/SPSUs no restriction shall apply with respect to
financing specific sector(s) and net worth
5. Revocation of licence:
The C.G. may revoke if objects clause changed without the
approval of the C.G.
Upon revocation, the registrar shall add the word "Limited" or
"Pvt. Ltd".
Before a licence is revoked, the C.G. shall give an opportunity
of being heard.
Copy Rights Reserved
6. Advantages: To MASTER MINDS, Guntur
Need not pay stamp duty.
A partnership firm can be a member.
Adopt in lieu of Co. a suitable name.
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Procedure for Conversion of a Private Co. into a Public
Company.
a. B.M: Should take the necessary decision and fix the time, place
and agenda of a general meeting.
b. Must issue notices.
G.M.: Convene the general meeting & pass S.R. (i) for altering
MOA & AOA and (ii) For deleting sec3(1)(iii) restrictions.
[Corresponding Sec 2(68) of Companies Act, 2013]
c. Prospectus / Statement in lieu of prospectus: File either
within 30 days.
d. Caution: Adopt abundant caution, because inclusion of untrue
statement will attract penalty.
e. Resolutions - ROC: File with ROC special resolution(s) + ex-
planatory statement within 30 days.
f. Apply to ROC: Apply to the Registrar a fresh Certificate of
Incorporation.
Copy Rights Reserved
g. Increase no. of members.
To MASTER MINDS, Guntur
h. Increase capital.
i. Becomes a public company from the date of passing the special
resolution.
a. B.M: Should take the necessary decision and fix the time, place
and agenda of a general meeting.
b. C.G.: Approval of the central government has to be obtained u/s 31.
c. Must issue notices.
d. G.M.: convene the G.M. to pass S.R. (i) For altering MOA & AOA;
and (ii) For inclusion of restrictions contained in Sec.3(1) (iii) .
e. Stock exchanges: File with the concerned stock exchange
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b. in practice as a chartered accountant, or a cost accountant
practice, or as a company secretary for at least fifteen years
c. a person having special knowledge and experience, of not
less than fifteen years, in various disciplines ,
d. a presiding officer of a Labour Court, Tribunal or National
Tribunal constituted under the Industrial Disputes Act, 1947
for at least five years.
Exception: A person who has not completed fifty years of age shall
not be eligible for appointment as Member.
Provided further that the Member may retain his lien with his parent
cadre or Ministry or Department, while holding office for a period
not exceeding one year.
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Committee consisting of
a. Chief Justice of India or his nomineeChairperson;
b. a senior Judge of the Supreme Court or a Chief Justice of High
Court Member;
c. Secretary in the Ministry of Corporate AffairsMember;
d. Secretary in the Ministry of Law and JusticeMember; and
e. Secretary in the Department of Financial Services in the
Ministry of Finance Member.
NOTES
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3. INCORPORATION OF A COMPANY
Procedure for Incorporation of Co.
Stage 1:
1. Type of Company:, (i) Public companies and (ii) Private companies.
2. Name of company:
Not allowed to use a name which is prohibited under the
Emblems & Names (Prevention of improper use) Act, 1950.
Give min. 3 names in order of preference, to ROC in form IA
ROC informs availability within reasonable time.
Such name shall be available for 60 days. ROC may extend
this.
Stage 2:
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5. Power of Attorney: The promoters may appoint a person
giving power of attorney.
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2. Where a company having share capital has not issued a
prospectus unless:
It has filed with the Registrar a statement in lieu of prospectus.
No calls in arrears from Directors.
A statutory declaration in Form No.19 signed by one of the
directors or the secretary.
NOTES
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MOA is a Charter (Constitution) & defines its raison d'etre i.e. reason for
its existence.
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NAME CLAUSE
1. Very important asset and identity.
2. Undesirable name to be avoided: When does a name
become undesirable?
Too similar to the name of another existing company:
Misleading
3. Injunction if identical name adopted: Can apply to the NCLT
for stopping the new company from using such name.
4. Limited or Private Limited: Now all the companies are allotted
a Corporate Identity Number (CIN) in addition to the name.
5. Name of defunct company can be used: Defunct (non
operational) for a long time then its name can be used.
OBJECTS CLAUSE
Objects to be achieved
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1. Importance:
Should start its business with an object, specified as the
Main Object
Object clause sets the boundary
If abandoned-court may order winding up of the company
under Sec.433(c)
3. What to be stated?:
Main objects and Ancillary or Incidental or Implied objects
and Other objects
Powers limited to:
a. Express powers b. Implied powers
2. Guarantee Company:
Guarantee co. without share capital - To the extent of guarantee.
Guarantee co. with share capital - To the extent of guarantee
+ unpaid value of shares.
CAPITAL CLAUSE
States the amount of share capital
Nominal or Authorised capital.
The minimum limit is 1 lakh in case of private companies and 5
lakhs in case of public companies.
Stamp duty and Registration fee determined on this basis
No share capital is not required to have the capital clause
ASSOCIATION CLAUSE
At least 2 and 7 subscribers.
Shall be attested by at least 1 witness.
Has to take at least one share.
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Procedural Limits:
1. Alteration of MOA
2. S.R.:
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1. Limited to Unlimited:
a. After incorporation a member cant be compelled to
undertake more liability
b. A limited company can change its liability to unlimited if all
S.H.s agree in writing.
2. Unlimited to Limited:
a. By passing a SR stating:
The manner in which liability of members is to be limited and
Providing for appropriate alteration in MOA and AOA.
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b. Does not affect any debts, liabilities etc.
c. Must be intimated to ROC within 30 days.
Articles of Association
Meaning: Contain the rules & regulations for the internal management.
Means: the AOA as originally framed or as altered from time to time
or applied in pursuance of any previous company law or of this Act.
Special disclosures
Copy Rights Reserved
Limitations to alteration:
Only by passing a special resolution.
Must not exceed the powers given by MOA.
Must not be against Companies Act.
Must not be against any other law.
Shall not be illegal or opposed to public interest.
For the benefit of the company as a whole.
Must not be against to an order of the court.
The articles should not be in fraud on minority or inflict hardship
on minority without corresponding benefit to the company as a
whole.
For converting a Public Co. into a Private Co., the approval of the
C.G. is necessary.
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Since it is beyond the scope of an accountants authority, it
was held void.
Copy Rights Reserved
Doctrine of ultravires.
2. Effect:
An act of ultravires to the Companys act / MOA is illegal and
void and it cannot be ratified
An act ultravires the articles, but intravires the Companies
act / MOA, can be ratified by a resolution
An act ultravires the directors, but intravires the company
(i.e. MOA/AOA) can be ratified by the shareholders, but such
ratification shall not be inconsistent to the Companies Act.
Purpose of Doctrine:
To protect the interest of shareholders.
Protect the interest of creditors.
Who is a Promoter?
Defenition:
a person
a. Who has been named as such in a prospectus or Is identified
by the company in the annual return; or
b. who has control over the affairs of the company, directly or
indirectly whether as a shareholder, director or otherwise; or
c. in accordance with whose advice, directions or instructions the
Board of Directors of the company is accustomed to act.
Question of Fact: It is a question of fact depending upon the
role performed by him. Those who appointed as professional -not
be a promoter. If professional renders more than professional
assistance-promoter.
More than one promoter. A company also a promoter.
May be an individual, firm, an AOP or a body corporate
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Remuneration of Promoter.
Pre-Incorporation Contracts
2. Legal Position:
There must be two parties to a contract. But before
incorporation, it is not an entity.
Hence, contract never binds the company.
Provisional Contracts.
NOTES
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6. PROSPECTUS
Prospectus
Case studies:
The test is not who receives the document, but who can apply it.
NASH VS. LYNDE: In this case, some copies of a document marked
strictly confidential and circulated in small circle of friends. The
court held- no issue to the public.
Offer to kith and kin of a director is not an invitation to the public
An advertisement in newspaper was held to be a prospectus as it
invited the public.
Circular issued by a co. to the shareholders of other co. for
acquiring the shares in such other company in exchange of
shares of that company do not amount to Prospectus.
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Mass Mailing:
Even if the invitation is made to those who receive it, shall be
treated as invitation to public, if it is made to 50 or more persons.
But it is an exception to NBFC or public financial institution.
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Whereas a private company may issue securities
a. by way of rights issue or bonus issue; or
b. Through private placement.
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10. Non Registration: Company and every other party to the issue
are liable for a fine of upto Rs. 50,000.
General information:
a. Name and address of the registered office
b. Dates of opening, closing and earliest closing of the issue
c. Names and addresses of lead managers, legal advisers,
auditors etc.
Other information:
Outstanding litigations relating to
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Financial information:
Statutory information:
Underwriting arrangements, names of underwriters, amount
underwritten.
Details of public or rights issue during the last five years
Debentures and redeemable preference shares outstanding
Details of directors, managing directors
Revaluation of assets, if any, during the last 5 years.
Penalty for applying in fictitious name for subscribing or
transferring.
Abridged prospectus.
Same number: The abridged prospectus (in Form 2A) and the
share application form should bear the same printed number.
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An untrue statement or misstatement is one, which is misleading, in
the form and context in which it has been included in the
prospectus.
Note:
1. Secondary market: Purchaser of shares in secondary market
has no right to claim compensation.
2. A subscriber to the memorandum has no right to claim
compensation.
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1. Purpose:
When promoters can tap their money from private resources.
Need not prepare a prospectus but they must prepare a
document called SLP.
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2. When issued:
Sec.44: When a private company is converted into a public
company.
Sec.70: When a public company having share capital which
does not issue a prospectus or
Which has issued a prospectus but has not proceeded with
allotment of shares or debentures to the public has to issue a
statement in lieu of prospectus at least 3 days before the date
of the allotment.
Sec.149: Public company having share capital which has not
issued a prospectus can get the certificate of commencement
of business after filing a statement in lieu of prospectus.
5. Penalty:
The Co. and every director shall be liable to a fine up to
Rs.10, 000.
If there is any misleading statement, Sec.70(5) of Companies
Act, 1956 imposes exactly the same criminal liability,
penalties and defenses as Sec. 34 of Companies Act, 2013
imposes in respect of a prospectus.
Historical background:
To evade the requirements of filing prospectus - allotting the
entire issue of shares or debentures to an Issuing house at a
certain price.
The Issuing House then published an advertisement inviting
public to buy at a higher price.
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Document containing offer of securities for sale to be deemed
prospectus:
issued by the company.
Act lays down the following provisions-
Shelf prospectus
Any class or
Classes of companies as prescribed by SEBI
May file a shelf prospectus with the ROC at the stage of the first
offer of securities for a period of one year.
When the validity period starts: It shall commence from the date
of opening of the first offer of securities under that prospectus.
Whom it applies?
To those prescribed by the SEBI
NOTES
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Statutory:
File either Prospectus / Statement in lieu of prospectus with
ROC, before allotment.
It shall make an application to a recognized Stock Exchange(s).
Application Money: Minimum 5% of nominal value companies
Act Minimum 25%of nominal value-SEBI.
Restriction on use of Application Money:
- To be kept in a separate bank account shall not be utilized for
any purpose other than
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a. Adjustment of excess moneys against allotment of securities
permitted to list; or
b. Repayment of money,within the time specified by the SEBI,
where the company is for any other reason unable to allot
securities
c. Utilise only for the purposes stated in the prospectus.
Opening of Subscription list: Beginning of the 5 day after the
th
Allotment procedure:
Copy Rights Reserved
BOD Resolution To MASTER MINDS, Guntur
Posting of allotment letters
Filing the return of allotment to ROC
Prepare register of members
Dispatch of Share Certificates
Minimum subscription.
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Listing of shares on stock exchange and consequences of
failure to get the shares listed.
Irregular Allotment
Allotment
Allotment before Allotment with
before receipt of minimum applying to
5th Day
subscription stock
Application money exchange for
<5% of nominal value permission to
or as specified by lost shares
SEBI Allotment stock
Allotment without exchange has
filing prospectus / refused listing
statement in lieu of
prospectus
Application money not
kept in scheduled
Bank
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It must state:
1. In case shares are allotted in cash:
Number and nominal amount of the shares
Names, addresses and occupations of the allottees and
amount paid.
2. In case shares allotted are not bonus shares and allotted as fully
or partly paid up otherwise than in cash: Must produce
Contract in writing constituting the title of the allottee
Contract of sale or contract of service or other consideration in
respect of which the allotment was made
Also, state the number and nominal amount of the shares so
allotted.
3. In the case of issue of bonus shares: nominal amount of the
shares allotted; names and addresses and occupations of the
allottees and a copy of the resolution authorising the issue.
4. In the case of issue of shares at a discount: return must also
include a copy of the resolution authorising such an issue, a
copy of the Tribunals order sanctioning the issue.
Conditions:
a. Authorized by AOA
b. 5 % for shares and 2.5% for debentures or rate specified in
AOA whichever is lower.
c. The rate, names & addresses of underwriters, their
underwriting shall be disclosed in the prospectus or in the
statement in lieu of prospectus.
d. A copy of the underwriting contract shall be filed with the
Registrar along with the prospectus or the statement in lieu of
prospectus for registration.
e. May be paid in cash or in kind.
f. Paid only in respect of those shares which are offered to the
public for subscription. Exception in the following case:
A person for a commission has subscribe the shares
Before the issue of the prospectus some other person has
subscribed for any or all of them.
aggregate amount of commission payable is disclosed in
such prospectus.
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NOTES
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8. DEPOSITS
Deposit means any deposit of money with the Co. and includes any
amount borrowed by a company but shall not include amounts
specified by RBI.
Deposits does not include the following:
From the Central or State Govt. or from any other source and
whose repayment is guaranteed by C.Govt / S.Govt.
Any amount received as a loan from a Banking company, SBI (incl.
its subsidiaries), Nationalised banks including a co-operative bank.
Any amount received from IDBI, IFCI, ICICI etc.
Amount received by a company from another company.
Security deposit received from the employee of the company.
Security deposit or advance money received from any
purchasing agent, selling agent in the ordinary course of
business of the company.
Advance received against orders for the supply of goods or
selling of properties.
Subscription amount in respect of any shares, debentures, bonds,
pending allotment or any amount received as calls in advance.
Amount received from a present director or amount received
from its shareholders by a private company. Such director /
shareholder shall declare in writing at the time of paying the
money that it has not been borrowed by him or has not been
accepted by him from others.
Issue of bonds / debentures secured by the mortgage of any
immovable property or with an option to convert them into shares.
Amount received in transit or trust,
Any amount brought in by the promoters by way of unsecured
loans in pursuance of stipulations of financial institutions.
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Period:
Maximum Period - 36 Months
Minimum Period - 6 Months.
Rate of Interest: Not exceeding 11% p.a. at rests, not shorter than
monthly rests.
Brokerage:
Ceiling of Deposits:
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Maintenance of Liquid Assets:
Deposit or Invest: Shall not be less than 15% of the deposits
st
maturing during the year ending on 31 of March of next
following year.
To provide limited safeguard to the deposit holders
Shall not be utilised for any purpose other than for the repayment of
deposits maturing.
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Register of Deposits:
Name and Address of the depositor.
Date and Amount of Deposit.
Period of deposit.
Date of repayment. Copy Rights Reserved
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Net worth: means the aggregate value of the paid-up share capital
and all reserves created out of the profits and securities premium
account, after deducting the aggregate value of the accumulated
losses, deferred expenditure and miscellaneous expenditure not
written off, as per the audited balance sheet, but does not include
reserves created out of revaluation of assets, write-back of
depreciation and amalgamation.
th
Return of Deposits: It is to be filed on or before 30 day of June,
of every year, with the Registrar of Companies.
The provisions of this Act relating to a prospectus shall, so far as
may be, apply to an advertisement referred to in Section 58A.
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Other Consequences:
Prohibited from accepting deposits.
Directors are disqualified.
Consumer Protection Act also provides relief to depositors.
The term small depositor has been defined as a depositor who has
deposited in a financial year a sum not exceeding Rs.20,000 in a
company. Sec.58AA provides the following:
NOTES
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9. MEMBERSHIP
1. Contents:
Name, address and occupation, if any, of each member.
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NOTES
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10. SHARE CAPITAL
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Authorised by a resolution in the general meeting specifying
maximum rate of discount.
To be confirmed by the TRIBUNAL or CG.
The resolution must specify the maximum rate of discount. (Not
more than 10%)
The shares must be issued within 2 months.
Prospectus should state.
Copy Rights Reserved
Applicability to debentures
To MASTER MINDS, Guntur
Penalties:
Default shall be punishable with fine upto Rs 500.
Directors are liabile to the company in case of improper issue of
shares at a discount.
Conditions:
Must be of class already issued.
At least 1 year must have completed
S.R.
The resolution should specify the number of shares, Current
maker price etc.
Only to permanent employees Copy Rights Reserved
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1. Equity Shareholders:
Have right to vote
Poll and Show of hands: Poll-proportionate rights. Show of
hands- only 1 vote.
Calls in advance: not entitled for advance paid.
Proxy
2. Preference Shareholder:
Have only on matters relating to them.
Exceptions
Cumulative preference shares: If dividends are in arrears
for aggregate period of two years
Non-cumulative preference shares: If dividends are in arrears
for two years Or for any 3 years during the period of 6 years
3. Restriction on voting rights:
A private or public co. may restrict the rights if calls in arrears
are there.
In addition a private co. can put some more restrictions.
st
1 case: Sec.94.
nd
2 case: Sec.94A - Automatic increase
When the C.G. directs that convert debentures into shares. and
Where the C.G., on an application made by the public financial
institutions, directs like so
Copy Rights Reserved
In this case:
To MASTER MINDS, Guntur
No need of passing O.R.
No need of provision in articles for alteration.
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3. Effects of conversion:
Register of members shall show the amount of stock held by
each member.
Does not affect in any way the rights of a member
Can be transferred in the same way as the shares
a. Numbering
Copy Rights Reserved
b. Denomination To MASTER MINDS, Guntur
c. Issue
d. Fully paid up
e. Division
3. Contents of notice:
Number of shares offered and
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Giving not less than 15 days for acceptance of offer,
Failing to give acceptance within that date is deemed as offer
having been declined,
Either decline the offer or can renounce in favour of any
other person.
Declines the offer - Issue for the benefit of the co.:
Preference Shareholders: Not applicable
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Private co.: A private co. can buy back its own shares and it can
give loan or financial assistance to purchase its shares.
Public and dependent private co.: Not permitted to buy its own
shares or give loan or financial assistance.
Exceptions.
Cases of Loan:
A banking Co. may lend the money for this purpose in the
ordinary course of its business.
Employees - Trustee
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1. Sources of funds:
Its free reserves or
The securities premium account or
The proceeds of any shares /other specified securities.
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Free reserves- means such reserves which, as per the latest
audited balance sheet of a company, are available for distribution
as dividend:
Provided that
Any amount representing unrealised gains, notional gains or
revaluation of assets,
Whether shown as a reserve or otherwise, or
Any change in carrying amount of an asset or of a liability
recognised in equity, including
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Maximum limit:
In total: 25% of net worth
For equity capital: 25% of paid up capital
Debt equity ratio: should not be more than 2:1.
Fully paid up
Listed: SEBI.
Unlisted: guidelines of C.G.
4. Time limit: Every buy-back shall be completed within 12 months
from the date of passing the S.R.
5. D.O.S.: Only a solvent co. is permitted to buy back its shares.
NOTES
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11. SHARE CERTIFICATE & WARRANT
Share Certificate.
1. Meaning:
A document showing title. Copy Rights Reserved
Indemnity bond
To MASTER MINDS, Guntur
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Share warrant.
NOTES
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Consequences:
To MASTER MINDS, Guntur
Not entitled to voting rights in respect of advance.
a company may, if so authorised by its AOA, pay dividends in
proportion to the amount paid-up on each share.
Liability to extent of advance is extinguished.
Can claim int.@ rate specified in AOA up to 6%p.a.
Not refundable.
In the event of winding up, int. should be paid first.
NOTES
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4. Time limit:
Quoted shares: 12 months from presentation or date of
closure of register whichever is later.
Others: Within 2 months.
Central Government is empowered to extend the aforesaid
time limit
Private Company:
The articles contain a provision restricting the right to transfer its
shares.
The right of transfer is generally restricted in the following
manner:
a. Persons to whom directors refuse transfer of shares.
b. By compelling the members to offer his shares to existing
shareholders first.
c. The directors must be communicated in writing of such
intention of the shareholder.
d. By specifying the method for calculating the price
Public company:
In the case of a public company also, there may be some
restriction on the members to transfer the shares.
Regulation 21(Table A) provides that the Board of Directors may
refuse to register the transfer of partly paid shares to a person
whom they do not approve.
Further, the Board may refuse to register the transfer of any
share, which has a lien by the company.
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Remedy available against Remedy available against
refusal: refusal
a. Appeal to NCLT a. Appeal in NCLT
b. Time limit for filling the within 30 days from the date
appeal: of delivery of instrument /
intimation of transfer.
Within 30 days of receipt
Who can file the appeal:
of notice of refusal or
Transferee.
Where no reply has been
time limit for filling the
received, within 60 days
appeal:
of lodging documents for
registration.
Within a period of 60 days of
such refusal or
where no intimation has been
received from the company,
within 90 days of the delivery
of the instrument
Penalty: If a person
contravenes the order of the
Tribunal he shall be punishable
with imprisonment for a term not
Copy Rights Reserved
less than one year but may
extend to three years and with
To MASTER MINDS, Guntur
fine not be less than one lakh
rupees but may extend to five
lakh rupees.
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Blank transfer.
7. Disadvantages / Evils:
Avoidance of transfer stamps.
Concealment of the identity
Evasion of tax b
1. Meaning:
By voluntary act of parties- transfer of shares.
By operation of la- transmission.
2.
Copy Rights Reserved
Death of S.H. To MASTER MINDS, Guntur
Adjudicated insolvent,
Shareholder is the Co. and that Co. goes into liquidation,
Amalgamation,
Member becomes mentally ill (lunatic)
Minor becomes major.
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4. Evidence: Transmission will be done on the basis of evidence
showing the entitlement of the transferee.
Certification of transfer.
1. Procedure - Sec.112:
Where a shareholder sells only part of his shares
The share certificate is not handed over to the buyer along
with the transfer deed.
The Co. retains the share certificate, endorses the instrument
with the words certificate lodged and return it to the transferor.
Then the transferor sends the certified transfer deed to the
transferee
The Co. cancels the original share certificate and in its place
issues two new certificates
2. No obligation to certify any transfer deed.
3. Liability for returning: If the CO. negligently returns - liable to
the transferee.
4. Liable for certification
1. Eligible Nominators:
Who can appoint Who cannot appoint
Nominee? Nominee?
Individuals holding Shares Non individuals
2. Appointment of Nominee:
Not eligible to be
Eligible to be Nominee
Nominee
6. Rights of Nominee:
Right as to Dividends
No Voting Rights: unless he is registered as a member.
NOTES
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14. DEBENTURES
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To be created for 50%
DRR Not required.
of the face value
Buy back Required
Not required.
arrangement
Redemption of debentures.
1. When possible:
AOA Or conditions of issue or
Not shown an intention to cancel.
2. Object: Formalities for issue need not be followed
3. Stamp duty is payable.
4. Similar rights.
5. The terms & conditions of reissue must be similar.
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Sec.117C :
No profits: No obligation.
NOTES
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15. CHARGE
Characteristics:
It is on a class of assets, but not simply on assets
Change from time to time.
Continue to deal with the assets charged
Possession is not given to creditors.
4. Penalties:
a. If a company makes any default with respect to the
registration of charges then penalty shall be levied, ranging
from 1 lakh to 10 lakhs.
b. Every defaulting officer is punishable with imprisonment for a
term not exceeding 6 months or fine which shall not be less
than 25,000 rupees, but not exceeding 1 lakh rupees or both.
Modification of a charge.
Satisfaction of charge.
1. Documents:
Form 8 and 13 duly signed by the Borrower and Lender.
Deed creating evidence as to Charge.
Fees as per Schedule X.
2. Time Limit:
Should be registered within 30 days after the date of its creation.
Additional 30 days may be granted on payment of additional fees
NOTES
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Types of Meetings
Called by Members
Called by (Sec 169)
C.G.
(Sec 167)
Others:
1. Meeting of debenture holders
2. Meetings of creditors and contributories in winding up.
3. Meetings of creditors otherwise than in winding up.
4. Meeting of directors:
a. Board meeting.
Copy Rights Reserved
b. Committee meeting. To MASTER MINDS, Guntur
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The requirements for the conduct of valid general meetings
The essentials of a valid meeting are that the meeting should be:
Properly convened:
a. Must be called by a proper authority: and
b. Proper notice must be served
Properly constituted:
a. Proper quorum must be present
b. Proper chairman must preside the meeting
Properly conducted:
a. The business must be validly transacted
b. Proper minutes must be prepared.
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Certification:
At least 2 directors-one should be the M.D.
The auditor should also certify in the areas relating to cash.
Send copy to Registrar
Meeting can be adjourned
Shareholders list should be kept
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Consequences of not holding SGM:
Director and Officer of the co. in default- fine upto rupees 5,000.
May be wound up under Section 433(b) by an order of the Court.
Sec.166:
Every company must hold an Annual General Meeting.
Time limit for first AGM: If it is the First Annual General Meeting,
It must be held within
(i) 18 months from the date of incorporation of the company.
(ii) 9 months of close of financial year (Section 210(3)). Whichever
is earlier.
Time limit for second and subsequent AGM: If it is the Second
and Subsequent Annual General Meeting
(i) It must be held in each calendar year. (Sec.166(1))
(ii) It must be held within 15 months of date of previous AGM.
(Sec.166(1))
(iii) It must be held within 6 months of the end of the financial year.
(Sec. 210(3))
Extension:
ROC can extend -3 months except for First AGM.
Application for extension is made only before the expiry of the
period given in 166(1).
Copy Rights Reserved
When and where:
To MASTER MINDS, Guntur
During business hours
Not on public holiday (*) - Sec.25 companies exempted.
Only at Registered office.
Two AGMs-on the same day- provided separate notices.
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Annual Return: File within 60 days from the day on which each of
the AGM with the Registrar.
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Types of Business which may be transacted at an AGM.
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Special Business
I. BY BOD
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B. On requisition of members:
th
Member holding 1/10 of paid Member holding 1/10
th
up share capital of the company of voting power
and having a right to vote
1. Other points;
Any call money is due - excluded in counting 1/10th.
Preference shareholders can join- if their dividends are in
arrears for specified period
Subsequent changes will not invalidate the requisition.
If >1 matter - each should satisfy the conditions.
Even 1 member holding the requisite shareholding is
entitled to request.
2. Compliance of requisition: The BOD must proceed within 21
days of the deposit - convene a meeting within 45 days of such
deposit.
Not having a share capital - Not less than 1/10 of the total
th
voting power
Date of deposit of requisition with the company
Requisitionists
To Call for To hold EGM themselves
21 Days
45 Days
3 Months
Judicial Pronouncements
Not necessary for the requisitionist to disclose reasons (LIC V.
ESCORTS LIMITED).
Directions not followed: A meeting which is not conducted in
accordance with the directions of the TRIBUNAL is not a valid
meeting & any business conducted is invalid.
Notice Sec.172
Need: Unless all are duly served with the notice-decisions taken in
meeting is not a valid. Authority-BOD.
Length of notice:
21 Clear days.
Sec.25 companies - 14 clear days notice.
Articles can provide for a larger but not shorter.
Other Notes:
Need not be given to members residents abroad.
Co.'s responsibility ceases with of service of notice
Accidental omission will not invalidate.
A deliberate omission to give notice to even a single member
shall invalidate the proceedings at the meeting.
If member refuses -then also valid.
Contents:
Copy Rights Reserved
Place, date and time. To MASTER MINDS, Guntur
Agenda
Explanatory Statement
Intention to propose the resolution as a Special Resolution.
Entitled to appoint a proxy and the proxy need not be a member.
Quorum
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Representatives:
A representative of a body corporate-member & counted
Representative of a President or Governor of the State -counted
Present in more than one capacity -counted as two.
For this purpose, the company shall also comply with the following
requirements:
a. Electronic mode means video conference facility
b. The notice of the meeting must inform shareholders regarding
availability of participation through video conference.
c. The Chairman of the meeting and Secretary shall assume the
following responsibilities:
Safeguard the integrity of the meeting via
videoconferencing.
Ensure proper videoconference equipment/facilities.
Prepare the minutes of the meeting.
Ensure that no one other than the concerned shareholder or
proxy to the shareholder is attending the meeting through
electronic mode.
It is recommended that these places would be situated all over
India in such a way that it covers top five States/Union Territories
based on maximum number of members or at least 1000 members,
whichever is more.
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Voting
1. Demand?:
Can be demanded before or after the proposal
Can be demanded even after the declaration of the result.
Chairman on his own motion may order a poll.
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2. Time limit :
For election of the Chairman or adjournment of meeting -
taken forthwith.
On any other question-by the Chairman within 48 hours
Signed:
By the appointer or his attorney.
If the appointer is a body corporate- under the seal of the co. & be
signed by an authorised officer.
JSH: Unless AOA otherwise prescribes-all must sign.
Depositing of Proxy: To be deposited with the Co. 48 hours
before the meeting.
Can a proxy be appointed before adjourned meeting:
If AOA permits-can appoint
In case of public company limited by shares if its articles are
silent even just before meeting
Where articles prohibit as such, then proxies cannot be lodged
before adjourned meeting.
Lodging of proxy at or before taking up poll:
Public company Yes, if articles are silent.
other companies No, if articles are silent.
Stamped: Must be duly stamped.
The proxies lodged for the original meeting - valid for the adjourned meeting.
A proxy can: Attend meeting, demand a poll, vote only on a poll.
Proxies cannot: Be counted for the purpose of quorum. Sunday is
included in computation of 48 hours.
Invalid: Two proxies by the same member on the same date- invalid.
Minutes Sec.193
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Ordinary and special resolution.
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The notice shall be sent to members at least 7 days before the GM.
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Illegal association
Definition:
more than 10 persons carrying on the business of banking Or
more than 20 persons carrying on any other type of business
Conditions of illegality:
More than the number prescribed as above.
For the purpose of carrying on a business.
Must be to acquire profit for itself or for its members.
Must not have been registered under the Companies Act.
Exception:
HUF
Stock Exchange
Non- profit Earning Associations
Consequences:
Not recognised by law and has no legal existence.
It cannot be wound up under the Companies Act
Every member shall be personably liable.
Punishable if carry on business under any name or title of which
limited is the last word
Every member - Punishable with fine which may extend to 10000.
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a. Forms of contracts (sec 46)
b. Drawing of bills of exchange and promosary notes by the
company(sec 47)
C. Authentication of documents (sec 54)
Forms of contracts [Sec 46]: The following contracts shall bind the
company-
a. Made on behalf of the company by any person acting under his
authority.
b. Contracts, which though oral are valid.
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c. Time limit:
Notice of a meeting - After 48 hours from the time of posting.
In any other case -at the time at which the document
would be delivered.
4. Newspaper advertisement.
5. Notice to Joint holder.
Relative Definition
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E Filing.
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Many forms require certification by CA /CWA/CS in practice. In
some cases, Secretary in full time employment of company can
certify the form.
If a company has sufficient equipment and facilities, the
documents can be filed by company Firm its office itself. This is
called Virtual Office.
Those who do not have adequate facilities can file documents
through Facilitation centers.
'Certified Filing Centers will facilitate e-filing of documents.
Every director will have to obtain DIN (Director's Identification Number).
Physical filing of documents is discontinued w.e.f, 15-9-2006 and e-
filing is compulsory from that date.
Issuance of certificates find approvals will continue to remain on
paper. This will be dispatched by post or courier to applicant.
Key Benefits:
Expeditious incorporation of Companies.
Simplified and ease of convenience in filing of Forms / Returns.
Better compliance management.
Total transparency through e-Governance.
Customer-centric approach.
Increased usage of professional certificate for ensuring
authenticity and reliability of Forms / Returns.
Building up a centralized database repository of corporate data.
Enhanced service level fulfillment.
Inspection of public documents of companies anytime from
anywhere.
Registrations as well as verification of charges anytime from
anywhere.
Timely redressal of investor grievances.
Availability of more time for MCA employees for monitoring and
supervision.
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Officer: includes
a. any director,
b. manager or
c. key managerial personnel or
d. any person in accordance with whose directions or instructions
the Board of Directors or
e. any one or more of the directors is or are accustomed to act.
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Registrar: means
a. a Registrar,
b. an Additional Registrar,
c. a Joint Registrar,
d. a Deputy Registrar or
e. an Assistant Registrar, having the duty of registering companies
and discharging various functions under this Act.
THE END
Note: For MCQs in Company Law & Other Laws. Refer our
Website www.gntmasterminds.com.
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