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CORPORATE LAW-1
EXTERNAL IMPORTANT QUESTIONS
1. NATURE DEFINITION CHARACTERISTICS AND
KINDS OF COMPANY?
2. REGISTRATION AND INCORPORATION OF
COMPANY?
3. LIFTING THE CORPORATE VEIL?
4. WHO ARE THE PROMOTERS?
5. ASSOCIATION OF ARTICLES & MEMORUNDUM
OF ARTICLE?
6. DOCTRINE OF ULTRAVIRES?
7. PROSPECTUS CIVIL AND CRIMINAL LIABILITY
FOR MISTATEMENT IN PROSPECTUS?
8. WHAT IS PRE.INCORPORATION CONTRACTS?
9. KINDS OF SHARES & STATUTORY RESTRICTION
ON ALLOTMENT OF SHARE?
10.POSITION APPOINTMENT QUALIFICATION
DISQUALIFICATION POWERS RIGHTS &DUTIES
OF DIRECTORS?
11.MEETINGS AND PROCEEDINGS?
12.CHAIRMAN FOR MEETING & HIS DUTIES?
13.MINUTES?
14.PROXY?
15.COMPROMISES RECONSTRUCTION AND
AMALGAMATION?
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16.WINDING UP & MODES OF WINDING UP OF

THE COMPANY?
17.PROCEDURE & CONSEQUENCES OF WINDING
UP?
18.PROCESS & DUTIES OF LIQUIDATOR?
19.COMPANY LAW BOARD?
20.INSPECTION & INVESTIGATION?

1. NATURE DEFINITION CHARACTERISTICS AND KINDS OF

COMPANY?
Ans. The Companies Act 2013 of India defines a company as-
A business entity which acts as an artificial legal person,
formed by a person or a group of persons to engage in or
carry on a business or industrial enterprise it includes trade,
business, transportation and any other activity which is
lawful

NATURE AND CHARACTERISTICS OF COMPANY:

➢ Incorporated association: A company comes into

existence when it is registered under the Companies Act
(or other equivalent act under the law). A company
must fulfil requirements in terms of documents (MOA,
AOA), shareholders, directors, and share capital to be
deemed as a legal association.
➢ Artificial Legal Person: In the eyes of the law, A
company is an artificial legal person which has the rights
to acquire or dispose of any property, to enter contracts
in its own name, and to sue and be sued by others.
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➢ Separate Legal Entity: A company has a distinct entity

and is independent of its members or people controlling
it. A separate legal entity means that only the company
is responsible to repay creditors and to get sued for its
deeds. The individual members cannot be sued for
actions performed by the company. Similarly, the
company is not liable to pay personal debts of the
members.

➢ Perpetual Existence: Unlike other non-registered

business entities, a company is a stable business
organisation. Its life doesn’t depend on the life of its
shareholders, directors, or employees. Members may
come and go but the company goes on forever.

➢ Common Seal: A company being an artificial legal

person, uses its common seal (with the name of the
company engraved on it) as a substitute for its
signature. Any document bearing the common seal of
the company will be legally binding on the company.

➢ Limited Liability: A company may be limited by

guarantee or limited by shares. In a company limited by
shares, the liability of the shareholders is limited to the
unpaid value of their shares. In a company limited by
guarantee, the liability of the members is limited to the
amount they had agreed upon to contribute to the
assets of the company in the event of it being wound
up.

Types of companies
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There are three types of companies provided for under this

section: -
(i) Chartered companies
(ii) Statutory companies
(iii)Registered companies

(i)Chartered companies

The crown in the exercise of the royal prerogative has power

to create a corporation by the grant of a charter to the
person assenting to be incorporated. No such companies can
be formed in Kenya after independence and section 389 only
serve as a reminder of English origin of our companies Act.

(ii) Statutory companies

A company may be incorporated by means of a special Act of

parliament. A statutory company has no shareholders and its
initial capital is provided by the treasury. It is expected to
operate according to commercial principles and to make
profit. If it makes losses and becomes unable to pay its
debts, its property can be attached by its creditors, but it
cannot be wound up on application of any
creditor. However, the government will come to its aid if it
has no cash or other assets to pay its creditors. Examples
include- Kengen, KP&L.Co, Kenya Pipeline, Kenya Railways,
KTDA, KVDA etc.

(iii)Registered companies
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A registered company is formed by registration under the

Companies Act. Section 2 of the Companies Act defines a
company as “a company formed and registered under this
Act.”

Classification of registered companies section 4(I) classifies

registered companies into:-
(a)Public company – A company formed by any seven or
more persons.
(b)Private company – A company formed by any two or more
persons.

A private company or a public company may be:-

(i) Limited by shares – if the liability or its members is limited
by its memorandum to the amount if any unpaid on the
shares held by them.

(ii) Limited by guarantee -- if the liability of its members is

limited by its memorandum to an amount which the
members have undertaken to contribute to the assets of the
company in the event of its being wound up.

(iii) Unlimited -- if it does not have any limit on the liability of

its members.

2.REGISTRATION AND INCORPORATION OF COMPANY?

Ans. After Promotion, the second stage in the formation of a
company is the registration or incorporation. The promoter
of a company should perform the following functions for
getting the company registered under the Companies Act.
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1. Approval of the Proposed Name of the Company

Before the company is registered, it is essential to obtain the
approval of the Registrar to its proposed name. There is a
specific application form for this purpose. The promoter
generally selects a few suitable names in order of preference
and apply to the National Company Law Tribunal through the
Registrar of the State in which the company is to be
registered in Form No. 1A along with a fee of Rs.100. On
hearing about the available name, the promoter has to
decide the name for the company.

2. Documents to be Filed with the Registrar during

registration
The promoter should then prepare and file the following
documents with the Registrar of Joint Stock Companies. He
should also pay the necessary filing and registration fees.

1. Memorandum of Association
The Memorandum should be printed and at least seven
persons each agreeing to take at least one share must
subscribe their names to Memorandum.

2. The Articles of Association

The Articles must also be signed by at least seven members.
If a public company doesn’t prepare and file Articles, then it
is deemed to have adopted Table A in Schedule I of the
Indian Companies Act.

3. List of Directors
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A complete list of directors, their addresses and occupations

and age. If not separate list is filed, the subscribers to the
Memorandum are deemed to be the first directors.

4. Consent of the Directors

When Directors of a Company are appointed by the Articles
of Association or named in the prospectus, a written consent
to act as directors and also a written undertaking to take up
and pay for the qualification shares if any are mandatory in
Incorporation of a Company.

5. Statutory Declaration
A statutory declaration by any one of the following persons
stating that all the requirements of the Act regarding
Registration have been duly complied with:
1. An Advocate of the Supreme Court or High Court.
2. An Attorney or Pleader who is entitled to appear before
a High Court.
3. A Chartered Accountant who is engaged in formation of
the company and also practicing in India.
4. Any individual who is named in the Articles of
Association as the Company’s Director, Manager or
Secretary.

6. Notices of the Address of the Registered Office

The notice for the address of the registered office of the
company should be given within 30 days after its
incorporation or on the date from which the company
commences its business whichever is earlier.
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7. A Letter of Authority for Making Necessary Corrections in

Memorandum and Articles
A letter of authority on a non-judicial stamp paper of the
requisite value signed by all the subscribers in favour of one
of them or any other person for making necessary
corrections, on their behalf, in the Memorandum and Articles
and other papers is to be filed with the Registrar of
Companies.

8. Letter of Registrar of Companies about the Availability of

Name
Notarized original copy of Registrar of Companies stating the
availability of the proposed name is mandatory while
registering a company name. It should be filed with the
Registrar of Companies. However, the requirements as given
in points 3 and 4 above shall not apply to private companies
3. Payment of Necessary Fees
Along with the above-detailed documents, the registration
and filing fee as per the rates prescribed in Schedule X to the
Companies Act, 1956 are to be paid.

4. Registration of the Company

The Registrar of Companies will then verify the documents
submitted for registration. If there are any discrepancies
found, concerned person was called to visit the Registrar’s
office to rectify the errors in the documents. If the
documents for registrations are found in order, the Registrar
will register the company and a Registration number is
allotted.
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The Registrar under his hand and Seal of his office will issue a
Certificate of Incorporation. The date given by the Registrar
in the certificate will be the date of incorporation of the
company. The company will be considered to be a legal entity
from this date.

Certificate of Incorporation of the Company

After the above documents are filed with the Registrar and
the prescribed fees are paid and the Registrar is satisfied that
all the requirements of the Act regarding the registration
have been complied with, he will register the documents and
retain them.
The Registrar will then issue a certificate known as Certificate
of Incorporation and enter the name of the company in the
Register kept in his office. This Certificate of Incorporation
entitles the company as a legal person. In other words, the
company is born upon the issue of Certificate of
Incorporation.

3.LIFTING THE CORPORATE VEIL?

Ans. Corporate veil:
A legal concept that separates the personality of a
corporation from the personalities of its shareholders, and
protects them from being personally liable for the company’s
debts and other obligations

Lifting of Corporate veil:

At times it may happen that the corporate personality of the

company is used to commit frauds and improper or illegal
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acts. Since an artificial person is not capable of doing

anything illegal or fraudulent, the façade of corporate
personality might have to be removed to identify the persons
who are really guilty. This is known as ‘lifting of corporate
veil’.
There are two existing theories for the lifting of the corporate
veil. The first is the “alter-ego” or other self-theory, and the
other is the “instrumentality” theory.
The alter-ego theory considers if there is in distinctive nature
of the boundaries between the corporation and its
shareholders.
The instrumentality theory on the other hand examines the
use of a corporation by its owners in ways that benefit the
owner rather than the corporation. It is up to the court to
decide on which theory to apply or make a combination of
the two doctrines.
One of the main characteristic features of a company is that
the company is a separate legal entity distinct from its
members. The most illustrative case in this regard is the case
decided by House of Lords is

CASE LAWS:
Salomon v/s Salomon & Co. Ltd
In this case, Mr. Salomon had the business of shoe and boots
manufacture. ‘A Salomon & Co. Ltd.’ was incorporated by
Salomon with seven subscribers-Himself, his wife, a daughter
and four sons. All shareholders held shares of UK pound 1
each. The company purchased the business of Salomon for
39000 pounds, the purchase consideration was paid in terms
of 10000 pounds debentures conferring charge on the
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company’s assets, 20000 pounds in fully paid 1-pound share

each and the balance in cash.
The company in less than one year ran into difficulties and
liquidation proceedings commenced. The assets of the
company were not even sufficient to discharge the
debentures (held entirely by Salomon itself) and nothing was
left to the insured creditors. The House of Lords unanimously
held that the company had been validly constituted, since
the Act only required seven members holding at least one
share each and that Salomon is separate from Salomon & Co.
Ltd.
The entity of the corporation is entirely separate from that of
its shareholders; it bears its own name and has a seal of its
own; its assets are distinct and separate from those of its
members; it can sue and be sued exclusively for its purpose;
liability of the members are limited to the capital invested by
them.

Further in Lee v. Lee’s Air Farming Ltd. it was held that there
was a valid contract of service between Lee and the
Company, and Lee was therefore a worker within the
meaning of the Act. It was a logical consequence of the
decision in Salomon’s case that one person may function in
the dual capacity both as director and employee of the same
company.

4.WHO ARE THE PROMOTERS?

Ans. Founder members appoint one or more persons to
complete procedure of incorporation registration & they are
called as promotors of the company
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Characteristics of a Promoter:
1. A promoter conceives an idea for the setting-up a
business.
2. He makes preliminary investigations and ensures about the
future prospects of the business
3. He brings together various persons who agree to associate
with him and share the business responsibilities.
4. He prepares various documents and gets the company
incorporated.
5. He raises the required finances and gets the company
going.
Liabilities of a Promoter:
Following are the liabilities of a promoter:
(i) A promoter should not make secret profits out of the
dealings of the company.
(ii) He must deposit with the company all money received on
its behalf.
(iii) He must exercise due diligence and care while performing
the work of a promoter.
(iv)He will be personally responsible for all the preliminary
contracts till all these are approved by the company.
(v) He will compensate any person who made investments in
the company on the basis of untrue statements made by the
promoter

5.ASSOCIATION OF ARTICLES & MEMORUNDUM OF ARTICLE?

Ans. MOA- Memorandum of Association and AOA – Articles
of Association
Memorandum of Association (MOA) is a document that
contains all the fundamental data which are required for the
company registration.
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Articles of Association (AOA) is a document containing all the

rules and regulations that govern the company.

MOA and AOA are the two most important documents that
has to be drafted while forming a company. MOA defines
What, Where, Why and Who of the company and AOA
(Articles of Association) defines HOW of the company.
MOA- Memorandum of Association
Memorandum of Association should have the following in it.
This is considered to be the supreme document of any
company.

Definition- Memorandum:

As per Section 2(56) of the Companies Act,2013

“memorandum” means the memorandum of association of a
company as originally framed or as altered from time to time
in pursuance of any previous company law or of this Act
Memorandum Of Association:
Section 4 of the Companies Act,2013 deals with MOA. The
Memorandum of a company shall contain the following;
1. Name Clause:
The name of the company with the last word “Limited” in the
case of a public limited company, or the last words “Private
Limited” in the case of a private limited company.
2. Situation Clause:
The State in which the registered office of the company is to
be situated.
3.Object Clause:
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The objects for which the company is proposed to be

incorporated and any matter considered necessary in
furtherance thereof.
4.Liability Clause:
The liability of members of the company, whether limited or
unlimited, and also state,—
(i) in the case of a company limited by shares– liability of its
members is limited to the amount unpaid, if any, on the
shares held by them; and
(ii) in the case of a company limited by guarantee-the
amount up to which each member undertakes to
contribute—
(A) to the assets of the company in the event of its being
wound-up while he is a member or within one year after he
ceases to be a member, for payment of the debts and
liabilities of the company or of such debts and liabilities as
may have been contracted before he ceases to be a
member,as the case may be; and
(B) to the costs, charges and expenses of winding-up and for
adjustment of the rights of the contributories among
themselves;

5.Capital Clause:
(i) the amount of share capital with which the company is to
be registered and the division thereof into shares of a fixed
amount and the number of shares which the subscribers to
the memorandum agree to subscribe which shall not be less
than one share; and
(ii) the number of shares each subscriber to the
memorandum intends to take, indicated opposite his name;
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In the case of One Person Company, the name of the person

who, in the event of death of the subscriber, shall become
the member of the company.
Identical/undesirable names;
The name stated in the memorandum shall not—
(a) be identical with or resemble too nearly to the name of an
existing company registered under this Act or any previous
company law; or
(b) be such that its use by the company—
(i) will constitute an offence under any law for the time being
in force; or
(ii) is undesirable in the opinion of the Central Government
A company shall not be registered with a name which
contains—
(a) any word or expression which is likely to give the
impression that the company is in any way connected with,
or having the patronage of, the Central Government, any
State Government, or any local authority, corporation or
body constituted by the Central Government or any State
Government under any law for the time being in force; or
(b) such word or expression, as prescribed in the Companies
(Incorporation) Rules, 2014.
unless the previous approval of the Central Government has
been obtained for the use of any such word or expression.
MOA has to drafted very carefully as the company cannot go
against anything that is mentioned in this document. Even
AOA has to comply with MOA. For example, if you have
mentioned under object clause that you will do real estate
business in your MOA then you cannot do any other business
under this company name.
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More about MOA

• Memorandum of Association is one of the documents

which have to be filed with the Registrar of Companies

(ROC) at the time of incorporation of a company.
• It’s Mandatory for registering a company.

• MOA has to be printed and made public to the

shareholders and creditors or anybody associating with

the company.
• It is a basic document and the company’s

limits/boundaries and superstructure will be based on it.

• A company cannot alter MOA expect for the conditions

laid out in Companies Act.

AOA – Articles of Association

AOA is used to draft the rules and regulations that the

company has to follow and the layout of internal
management of the company. AOA should be drafted in such
a way that it should not violate anything that is mention in
MOA.

Definition –Articles:

As per Section 2(5) of the Companies Act,2013 “articles”

means the articles of association of a company as originally
framed or as altered from time to time or applied in
pursuance of any previous company law or of this Act.
Section 5 of the Companies Act,2013 deals with AOA.
The articles of a company shall contain the regulations for
the management of the company.
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The articles shall also contain such matters, as may be

prescribed.
It shall not prevent a company from including such additional
matters in its articles as may be considered necessary for its
management.
The articles set out provisions for the manner in which the
company is to be administered. They provide for matters like
appointment, powers, and duties of auditors, directors,
qualifications, the procedure for transfer and transmission of
shares and debentures. AOA is the next important document
after MOA and should describe the following in its articles
• How the shares are allocated and the manner in which

these shares have to be handled i.e

Lien/transfer/surrender/conversion of shares.
• Voting rights of members

• List of Intellectual Property rights

• Procedure to elect chairman and his voting rights

• List of Directors, including first directors or directors for

life, their appointment, remuneration, qualifications,

powers and proceedings of Board of directors’ meetings
• Dividends and reserves – How profits are divided

• Board of Directors and their powers

• How Accounts and Audits will be managed

• Borrowing Powers

• How the company can be dissolved

6.DOCTRINE OF ULTRAVIRES?
Ans. ultra vires describes acts attempted by a corporation
that are beyond the scope of powers granted by the
corporation's objects clause, articles of incorporation or in a
clause in its Bylaws, in the laws authorizing a corporation's
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formation, or similar founding documents. Acts attempted by

a corporation that are beyond the scope of its charter are
void or voidable
1. An ultra vires transaction cannot be ratified by
shareholders, even if they wish it to be ratified.
2. The doctrine of estoppel usually precluded reliance on
the defense of ultra vires where the transaction was
fully performed by one party.
3. A fortiori, a transaction which was fully performed by
both parties could not be attacked.
4. If the contract was fully executory, the defense of ultra
vires might be raised by either party.
5. If the contract was partially performed, and the
performance was held to be insufficient to bring the
doctrine of estoppel into play, a suit for quasi-contract
for recovery of benefits conferred was available.
6. If an agent of the corporation committed a tort within
the scope of his or her employment, the corporation
could not defend on the ground the act was ultra vires.
Several modern developments relating to corporate
formation have limited the probability that ultra vires acts
will occur. Except in the case of non-profit corporations
(including municipal corporations), this legal doctrine is
obsolescent; within recent years, almost all business
corporations are chartered to allow them to transact any
lawful business.
The Model Business Corporation Act of the United States
that: "The validity of corporate action may not be challenged
on the ground that the corporation lacks or lacked power to
act." The doctrine still has some life among non-profit
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corporations or state-created corporate bodies established

for a specific public purpose, such as universities or charities.

7.PROSPECTUS CIVIL AND CRIMINAL LIABILITY FOR

MISTATEMENT IN PROSPECTUS?
Ans. A prospectus is issued either by or on behalf of a public
company on its formation or subsequently or on behalf of a
person engaged in formation of a public company.
For the purpose of financial information following reports are
issued along with prospectus:
1. Reports by auditors of the company regarding its assets
and liabilities and profit and losses.
2. Reports regarding profit and losses for five preceding
financial years including report of subsidiaries in such manner
as may be prescribed.
3. Reports about the securities or transaction to which
proceeds of securities are to be applied directly or indirectly.
Considering the reporting liabilities of auditor the Companies
Act, 2013 has also taken appropriate steps for safeguarding
the mechanism by including criminal and civil liabilities.
The section for criminal liabilities read as follows
• “Where a prospectus, issued, circulated or distributed
under this Chapter, includes any statement which is
untrue or misleading in form or context in which it is
included or where any inclusion or omission of any
matter is likely to mislead, every person who authorizes
the issue of such prospectus shall be liable under section
447.
• Provided that nothing in this section shall apply to a
person if he proves that such statement or omission was
immaterial or that he had reasonable grounds to
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believe, and did up to the time of issue of the

prospectus believe, that the statement was true or the
inclusion or omission was necessary. “
• Section 447 is stringent in its way. The section provides
for the punishment for fraud.
• This hereby implies that any misstatement in prospectus
will lead to fraud and will attract section 447
• Section 447 states that without giving effect to any
liability under any other law for the time being in force
any person who is guilty of fraud shall be punishable
with imprisonment for a term not less than six months
but which may extend to 10 years and shall be liable to
fine not less than the amount involved in fraud but may
extend to 3 times the fraud amount.
• However, if the fraud involves public interest the term
of imprisonment shall not be less than 3 years.
The section for civil liabilities read as follows
• “Notwithstanding anything contained in this section,
where it is proved that a prospectus has been issued
with intent to defraud the applicants for the securities
of a company or any other person or for any fraudulent
purpose, every person referred to in subsection (1) shall
be personally responsible, without any limitation of
liability, for all or any of the losses or damages that may
have been incurred by any person who subscribed to
the securities on the basis of such prospectus”
• In accordance with the above section the civil liabilities
will be imposed on director of the company, issuer of
prospectus, promoter of the company, person who has
authorized issue of prospectus, expert referred to in
section 26.
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• Such above person shall personally liable without any

limitation or extent and shall be liable to make good the
damage or loss caused to the persons who has
subscribed such securities on the basis of such
prospectus

8.WHAT IS PRE.INCORPORATION CONTRACTS?

Ans. Pre-incorporation contract is an agreement which is
entered into, usually by a promoter on behalf of a company
at a time when the company’s formation has not been
completed by its registration. Such contracts may relate to
property which the promoters wish to purchase for the
company or they may be made with persons whose know-
how is vital to the success of the company. The promoters
may perhaps have arranged for the company to take over an
existing business, and therefore need to make a contract
with the vendor for its sale or purchase.
Before its incorporation, a company has no capacity to
contract. A contract entered into by promoters on behalf of
a proposed company is void in so far as the company is
concerned. The promoters cannot be agents for a principal
which has not yet come into existence. In such cases the
company cannot sue or be sued on it. The company has no
legal existence until it is incorporated.

It therefore follows: -

(i)That when the company is registered, it is not bound by

pre-incorporation contracts.
In a Case Law, it was stated that a solicitor prepared the
memorandum and articles of association and paid all the
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necessary registration fees on the instructions of persons

who later became directors. He claimed his fees and
expenses on the liquidation of the company. The court of
appeal held that the company was not liable to pay the
solicitor cost, though it had taken the benefit of its work.

(ii)That the company when registered cannot ratify the

agreement. The company was not a principal with
contractual capacity at the time when the contract was
made. A contract can be ratified only when it is made by an
agent for a principal who is in existence and who is
competent to contract at the time when the contract is
made.

9.KINDS OF SHARES & STATUTORY RESTRICTION ON

ALLOTMENT OF SHARE?
Ans. company can collect required capital by allotment of
shares and debentures
Notification published in newspapers called as public issue
Inserted parties can apply on performa application to
purchase of shares of the company may distribute max 67%
profit among share holders called as dividend
these shares are as follows:
1.ORDINARY SHARES: in ordinary share company makes
payment of dividend depends on profit earned by company
in financial year if there is non-profit then company will not
pay dividend to shareholders
2.PREFERENCE SHARES: Company also allots preference
shares amount of this share is higher than ordinary shares
company declares to pay mini dividend to preference share
holder company can pay higher dividend depends on profit
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but mini dividend have to be paid even though there is loss

to company
3.FOUNDER SHARES: company issue founder shares to those
persons who have played import in corporation of the
company such share are issued free of cost or at lesser value
in appreciation of their services
4.BONUS SHARES: The company may issue bonus shares to
existing share holders as incentives it is given in percentage
free of cost as incentives to the share’s holders
5.DISCOUNT SHARES: The company may also give discount on
shares there is collection of lesser amounts then face value of
the shares
6.REDEEMABLE SHARES: These share holders may give
security of share certificate to company and borrow loan
company may issue max 75% loan on face value of the shares
after refund of loan amount with interest company may
return back the shares if default is done then company may
issue notice and forfeit the shares
Restrictions on Allotment of Shares:
The following restrictions have been prescribed by the
Companies Act regarding allotment of shares:
(a) Minimum Subscription:
Sec. 69(1) states that no allotment can be made by the
company until the minimum subscription has been received.
(b) Application Money:
Sec. 69(3), however, lays down that the amount payable on
each share with the application form must not be less than
5% of the nominal value of the shares.
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(c) Money to be Deposited in a Scheduled Bank:

Sec. 69(4) states that money received from the applicants
must be deposited in a Scheduled Bank until the certificate to
commence business has been obtained or until the entire
amount payable on applications for shares in respect of the
minimum subscription has been received by the company.
(d) Returns of Money:
Sec. 69(5) states that if the minimum subscription has not
been raised or if the allotment could not be made within 120
days from the date of publication of the prospectus, the
directors must return the money received from the
applicants. If the money is refunded within 130 days no
interest is payable, beyond which the directors are liable to
pay interest @ 6% p.a. from the 130th day to the day of
repayment.
(e) Statement in lieu of Prospectus:
Sec. 70 of the Companies Act states that a public company
which has not issued any prospectus must deliver to the
Registrar for registration a statement in lieu of prospectus
signed by every director or proposed director or his agent in
the form prescribed in Schedule III of the Act, at least 3 days
before the first allotment of shares.
(f) Opening of the Subscription List:
Sec. 72 lays down that no allotment can be made until the
beginning of the 5th day after the publication of the
prospectus or such later time as may be prescribed for the
purposes in the prospectus.
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(g) Revocation of Application:

Application for shares cannot be revoked until after the
expiration of the 5th day after the time of opening of the
subscription list except in one case, i.e. if any responsible
person gives public notice of withdrawal of the consent to
the issue of the prospectus, any applicant can revoke his
application.

10.POSITION APPOINTMENT QUALIFICATION

DISQUALIFICATION POWERS RIGHTS &DUTIES OF
DIRECTORS?
Ans. Directors carry the management of the company all
directors are called as board of directors in private company
minimum 2 directors and in public company minimum 3
directors are necessary

The directors are explained as follows:

DIRECTORS AS AGENTS: Directors are like agents because

they carry on all transactions in name of the company and
not on personal name, they represent to the company in all
transactions

DIRECTORS AS TRUSTEES: They are like trustees because

company have full faith on the directors on all transactions in
name of the company and not personal name, they represent
the company in all transactions
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DIRECTORS AS OWNERS: They can enter in to contract to

purchase and save movable and immovable properties of the
company

APPOINTMENT OF DIRECTORS:

APPOINTMENT BY FOUNDER MEMBERS: When company is

established then directors are appointed by founder
members of the company
BY GOVERNMENT: All directors are appointed in govt
company by respective govt and there is no voting just govt
may be either state govt or central govt under where
company is functioning
BY BOARD OF DIRECTORS: When there is a casual vacancy
arises because of death of director or resignation of the
director then it is filled up by other director this appointment
is regularized when there is election of board of directors

RIGHT OR POWERS OF DIRECTORS U/S 179:

All the powers are vested in board of directors

There are no of rights or powers which can be summarized as
follows:
1. Directors have right to hold meeting and pass the
resolution relating to affairs of the company it is passed
collectively or by majority opinion of the directors
2. Directors have right to enter in to contract on behalf of
the company
3. There is right to file cases on behalf of the company to
protect rights and interest of the company
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4. There is right of directors to assign on share certificates

debenture certificates are prospectus
5. Directors have right to open account in the name of the
company to issue shares of the company
6. Directors have right to file to enter in to contract on
behalf of the company in bank and operate it with one
of or more signatures
7. Directors have right to give notification on behalf of the
company to issue shares of the company
8. Directors have right to borrow loan if it is necessary for
the company

DUTIES OF DIRECTORS U/S 166:

1. There is duty to take any decisions collectively and not

personally
2. Duty to enter in to contract in the name of the company
3. Duty to make re-payment of loan taken for requirement
of company
4. There is duty to have check and control over activities of
employee of the company because they are answerable
for any illegality in the company
5. There is duty of directors to hold meeting regularly for
better management of the company
6. If one files a case against the company, then directors
have duty to engage advocate and defend the case in
the court
7. There is duty to declare elections when directors expire
8. Duty to attend annual general meetings and answer the
question of members and get the balance approved in
the country
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GROUNDS OF TERMINATION OR REMOVAL OF DIRECTORS:

1. When there is expiry of the term of appointments

2. If any director commits act of mis conduct or any other
criminal act
3. When the director is of unsound mind and very old in
age that he is unable to do work
4. If he remains absent for 3 continuous meeting without
giving any reason
5. When he becomes directors of more than 20 companies
6. When there is closer or winding up of the company
7. When he submits resignation on any grounds

11.MEETINGS AND PROCEEDINGS?

Ans. Ordinarily, a meeting may be defined as assembly of
people for lawful purpose or coming together of at least two
people for the same reason.
• A Co. meeting may be defined as, “a conference or
coming together of at least a quorum of members in
order to transact either the ordinary or special business
of the company”.
• Therefore, a meeting can no more be constituted by one
person than it could if no shareholders at all had
attended

ROLE OF COMPANY MEETING:

• Since a company is an artificial person, it cannot act on

its own. It is the directors, elected representatives of
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shareholders who are vested with the powers of control

and management of the company. Since directors must
work as a team, meetings are held frequently. It is at
these meetings that matters relating to the company
business are decided.
• Similarly, shareholders meetings are also important as it
is here that shareholders can look after their interest by
exercising the powers conferred on them by
statute. These meetings provide an opportunity to
shareholders to come together and take decisions for
their welfare by controlling the Board of Directors and
their activities

• Company law functions in democratic matter and all

decisions are taken in the meetings there are 5 kinds of
meetings specified in company law
1.statutory meeting
2.annual general meeting
3.extra-ordinary meeting
4.class meeting
5.board of directors’ meetings

STATUTORY MEETING:
• Every company limited by shares Guarantee having a
share capital shall within a period of not less than 1
month and not more than 6 months from the date at
which the co is entitled to commence business ,hold
a general meeting of the members of the co.-
This meeting is called “ Statutory Meeting “.
• This is the First meeting of the co. This is held once in
the lifetime of co.
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STATUTORY REPORT:
• The Board of Directors shall at least 21 days before the
day on which the meeting is to be held , forward a
report called the “ statutory report “. Which contains all
the necessary information relating to the formational
aspect of the co.

ANNUAL GENERAL MEETING:

• Every co shall in each year hold a general meeting as its

Annual General Meeting. - There shall not be an interval
of more than 15 months between Annual General
Meeting of the co and the next.
• A Co may hold its first AGM within a period of 18
months from the date of its incorporation. - If a Co fails
to hold AGM, any member can apply to the Co - Law
Board for calling the meeting. The Co and every Officer
who is default shall be punishable with fine.
IMPORTANCE OF AGM:

1.Shareholder can exercise control over the affairs of the Co.

2.Discuss and Review the working of the Co.
3.Dividends are declared in AGM.

EXTRA-ORDINARY GENERAL MEETING:

• Any meeting other than Statutory Meeting and AGM of
a Co is called an “Extra-ordinary General Meeting”. It is
called for transacting some urgent or special business
which cannot be postponed till the next General
Meeting. It may be called by
1. By the Board of Directors on its own or
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2. By the Board of Directors on the requisition of members

or
3. By the Requisitions, themselves on the failure of the Board
of Directors

REQUISITE OF A VALID MEETING:

• Proper Authority
• Notice of Meeting Should be given not less 21 days’
notice
• Contents of the Notice a. Place b. Date c. Hour of
meeting d. Statement of the business to be
transacted at the meeting.

CLASS MEETING:

• In this meeting all members are not invited to attend

the meeting where there is any problem relating to only
share holders than company call meeting of only
shareholders if it is problem in debenture holder than
they are called in this meeting
• E.g. the company want to reduce or increase rate of
interest then they call meeting of only debenture
holders and take decisions after their approval

BOARD OF DIRECTORS MEETING:

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• This meeting is called by manager of the company and

information is given to all the directors at least 3 days in
advance
• Company can hold any number of meeting of board of
directors in this meeting they discuss day to day
problems of the company and pass resolution or take
decisions
• Such as to borrow loan to appoint staff to transfer staff
to take action against employee to open new branch of
company to give notification for allotment of shares
therefore all regular matter of the company are decided
in the board of directors meeting

PROCEDURE AT THE MEETING:

• At the commencement of the meeting, the board shall

place a list showing the names, addresses and
occupations of the members of the company and the
number of shares held by them. The list shall remain
open for inspection by members during continuance of
the meeting. The members present at the meeting may
discuss any matter relating to the formation of the
company or arising out of statutory report.
• But the meeting cannot pass any resolution on any item
or on a subject of which notice has not been given by
the Act.
• Section 130 (8) provides that the meeting may adjourn
from time to time and at any adjourned meeting, a
resolution can be passed after due notice in accordance
with the articles has been given so that if the company
at the original meeting wishes to pass a resolution and
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sufficient notice has not been given, it can resolve to

adjourn for the necessary period in order to allow notice
to be given.
• The adjourned meeting is treated as if it is an original
meeting for the purpose of transacting business.

12.CHAIRMAN OF MEETING & HIS DUTIES?

Ans. The Chairman is a necessary element of company
meeting and is usually appointed by the articles of the
company. Generally, Chairman is higher post in the company,
who represent the management of the affairs of the
company. Until a Chairman is elected, the president of the
company usually acts as de facto Chairman.

major duties of a chairman in a meeting. The duties are:

1. The Meeting is in Order

2. According to Rules
3. Agenda is Followed
4. Within the Scope of the Meeting
5. Discussion on Motions Only
6. Maintenance of Order
7. Opportunity to Speak
8. Accurate Voting
9. Minutes are Kept
10. Other Duties.

1. The Meeting is in Order:

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First of all, the chairman shall see that the meeting itself is
in order and for that the following points have to be taken
into consideration:
(a) That a proper notice has been sent to all the persons
entitled to receive a notice.
(b) That only those persons who are entitled are present at
the meeting (including invitees, if any).
(c) That his own appointment is in order.
(d) That the quorum of members is present.
(e) If there is want of quorum at the beginning and the
quorum is not present within half an hour then the chairman
is to see that the meeting is adjourned.

2. According to Rules:
It is the duty of the chairman to see that the proceedings are
carried on strictly according to the rules.

3. Agenda is Followed:
The chairman shall see that the business at a meeting is
conducted in the order as given in the agenda. He may vary
the order with the consent of the meeting. When he finds
that some important item is placed at the bottom of the
agenda which needs discussion on the day and within the
presence of the largest number of participants, but much
time has passed in taking up a few items at the top, he
changes the order.

4. Within the Scope of the Meeting:

It is his duty to see that the participants do not raise
discussions or suggestion of amendments or otherwise on
any matter which is not within the scope of the meeting
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5. Discussion on Motions Only:

Further, the chairman shall also see that the participants do
not discuss anything for which specific motion is not before
the house.

6. Maintenance of Order:
A major duty of the chairman is to see that perfect order and
tranquillity prevail at the meeting). Unless there is perfect
order, the business of the meeting cannot be conducted
smoothly and timely the chairman has powers to take steps
to maintain order, discipline and decorum at the meeting.

7. Opportunity to Speak:
The chairman shall see that every participant gets reasonable
opportunity to speak. Generally, he does not allow one
individual to speak more than once on the same topic unless
he is compelled to explain something what he has already
said. The chairman must see that persons belonging to the
minority group, if any, and whatever small number they may
have, are given opportunities to place their views.

8. Accurate Voting:
Another major duty of the chairman is to see that the sense
of the house is properly ascertained. It means that voting is
conducted perfectly and the results are declared accordingly.
In case a special resolution is necessary, he shall see that the
difference of votes is correct. He has to ask the secretary to
arrange poll when it is demanded. In counting votes the
36 | P a g e

chairman takes the help of the secretary as well as of the

‘tellers” appointed by him.

9. Minutes are Kept:

It is the duty of the chairman to confirm the minutes, by
putting his signature, prepared by the secretary after the
meeting is over. Similarly, the chairman shall see that the
secretary takes necessary notes at a meeting so that minutes
can be subsequently prepared. The chairman himself puts
down notes on the detailed agenda sheet for the purpose

10. Other Duties:

The chairman has some other formal duties.
For example:
(a) If he is elected as a temporary chairman, his duty is to
vacate when, the fixed chairman arrives.
(b) He shall not be partial in his behaviour and shall exercise
his casting vote, if any, very selectively.

13.MINUTES?
Ans. Meeting minutes keep an official account of what was
done or talked about at formal meetings, including any
decisions made or actions taken.
• They are taken during a formal meeting of the board of
directors or shareholders of a corporation, such as initial
and annual meetings. Typically, meeting minutes are
recorded by the corporation’s secretary (or another
individual appointed at the meeting).
• Your meeting minutes do not need to include every little
detail. You just need to document the key information
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and any decisions made or actions taken. In general,

your minutes should be detailed enough to serve as
your corporation’s “institutional memory.”

Typical minutes will include the following:

• Basic information about the meeting: date, time,

location.
• Who attended, along with a special note in the cases
where attendees came late or left early.
• Agenda items with a brief description of each item.
• Voting actions with a detailed account of how each
individual voted, along with any abstentions.
• Time when meeting was adjourned

• Minutes do not need to be filed with the state but can

instead be kept with your other corporate records, such
as articles of incorporations, bylaws, and resolutions.
• Like other documents, you should keep minutes on hand
for at least seven years. Members of the corporation,
such as shareholders, officers, and directors, are entitled
to review the meeting minutes upon “reasonable
request” to the corporation.
• While you don’t need to file these documents with the
state, they should still be considered important
documents and are essential for protecting your
corporation’s good standing and your limited liability
status.

14.PROXY?
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Ans. Any member of a company entitled to attend and vote

at a meeting of the company shall be entitled to appoint
another person as a proxy to attend and vote at the meeting
on his behalf

The following points must be checked in relation to proxy:

1. Proxy does not speak at the meeting

2. Proxy votes only on poll unless articles provide
otherwise
3. Instrument of proxy is in form set out in form MGT-11
and is in writing it is duty signed by the appointer and
under the seal if appointer is a body corporate
4. Proxies are deposited 48 hours before the meeting if the
articles do not provide for such deposition more than 48
hours before any general meeting
5. Where any member has given 3 days’ notice to inspect
the proxies then it should be ensured that proxies were
open for inspection during 24 hours before the time of
the meeting during business hours of the meeting

WHO CAN APPOINT PROXY IN GENERAL MEETINGS:

1.Members of a company having a share capital

2.representatives of body corporate appointed under section
113 of the companies act 2013
3.representatives of the presidents and governors of the
state appointed under section 112
4.power of attorney holder of a member may vote by proxy if
authorised by such power of attorney
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Section 113 is not applicable where a company is composed

of shareholders who are individual who will exercise their
power to elect/appoint directors who will manage and
represent the company

15.COMPROMISES RECONSTRUCTION AND

AMALGAMATIONS?
Ans. The term compromise means settlement of a dispute by
mutual concession. In a compromise, the parties intend to
settle a dispute between them by a give and take
arrangement.
Arrangement is wider in scope and includes a reorganization
of the share capital of the company by the consolidation of
shares of different classes or by division of shares or by both
methods
Under Section 207, a company can enter into compromise or
arrangement with its creditors or members without going
into liquidation and the following procedure is adopted:-
(i) Application to court.
(ii) Meeting of creditors: - The court may order a meeting of
creditors or members of any class of them to be called.
(iii) Approval of the scheme: - Any compromise or
arrangement shall be binding on all the creditors or members
and also on the company or in the case of a company which
is being wound up, on the liquidators and contributories if:-
(a) The scheme is approved by majority in number
representing ¾ in value of creditors/members.
(b) The scheme is sanctioned by the court.
(iv) Copy of court’s order to be filled by the registrar.
(v) In default of the above requirements, every officer of the
company shall be punishable with a fine which may extend
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up to Sh. 100 for each copy in respect of which default is

made.

Reconstruction and Amalgamation

Reconstruction occurs when a company transfers the whole

of its undertaking and property to a new company consisting
substantially of the same shareholders.

The object of reconstruction is to re-organize capital and

variations of the right of investors.
Amalgamation is the blending of two or more existing
company so as to form a third entity or one company is
absorbed into and blended with another company.
It implies creation of a new company by a complete
consolidation of combining units. Under amalgamation,
none of the existing company retains its entity.
A reconstruction/amalgamation may take the following
forms: -
(i) By scheme of arrangement.
(ii) By sale of undertaking.
(iii) By sale of shares.
(iv) By amalgamation.
Sale of undertaking: - This involves a sale of the undertaking
as a going concern. In case of sale, some vital provisions
must be addressed to facilitate reconstruction and
amalgamation as follows: -
(i) The transfer of property and liabilities of a transferor
company.
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(ii) The allotment/appropriation by the transferee company

of any shares, debentures, and so on in that company which
under the compromise/arrangement are to be allotted.
(iii) The continuation by the transferee company of any legal
proceedings pending against the transferor.
(iv) The provision to be made for any person who within such
time and in such manner as the court directs, dissent from
the compromise/arrangement

Sale of shares: - If the offer to acquire shares is made, then

the shareholders have the option to approve the offer within
4 months. Approval should be made by 9/10 in value of the
shares or 90% of the value of shares. These shares exclude
shares already held by the transferee company or its
subsidiaries.

16.WINDING UP & MODES OF WINDING UP OF THE

COMPANY?
Ans. winding up is the last stage in the life of the company
It is also called as liquidation of the company.
• company is the legal person but winding up is the death
of the company
• There are many reasons of winding up of company in
order to complete procedure of winding up there is
appointment of officers called as liquidator
• He completes the procedure of dissolution of the
company

MODES OF WINDING UP:

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• There are 3 modes of winding up there are different

reasons to wind up the company, but procedure is
common which is completed by liquidator

1.VOLUNTARY WINDING UP:

• It is done by company because of following reasons:

a) There is heavy loss caused to the company
b) There is a big financial crisis in the company, and it
is likely to become insolvent
c) Companies unable to pay loss amount
d) There is no demand of product of the company in
market
e) When company is having non cooperation of their
employees and go on strike for a longer period

Because of all these reasons company calls meeting of

members called as Extra-ordinary meeting there is discussion
about the problem which company is facing after discussion
voting is taken in favour of winding up of the company if 75%
members vote in favour of dissolution of the company then
the resolution is passed called as special resolution company
also appoints liquidator and fix his rumination in same
meeting liquidator is generally technical person such as
engineers and legal experts

2.COMPULSORY WINDING UP:

• This winding up is done because of procedure of govt

registrar cancels registration certificate by issuing notice
to the company
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• Following are the grounds of the compulsory winding

up:
a) When company fails to hold statutory meeting
b) When company makes violation of object clause
specified in MOA
c) When company does not carry on any activity with
in 2 years period after registration
d) When activities of company are illegal
e) When company commits any criminal act

In compulsory winding up govt and registrar issue notice to

directors of the company to windup the company with a
specific period govt also appoints liquidator to carry on
winding up procedure

3.WINDING UP UNDER SUPERVISION OF COURT:

• In this winding up minimum 10% share holders have to

file petition in high court or supreme court and claim
remedy of winding up of the company this winding up is
done by orders of the court
• following are the grounds of the winding up:
a) when company is declared as insolvent
b) when company is unable to pay loan amount of the
debenture holders
c) when company is unable to pay lawful taxes to the
govt
d) when there is mismanagement of the company
e) official of the company has done corruption in the
company
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f) share holders are unable to get dividend for

number of years and it is there dead investments
g) when court has passed decree to attached property
of the company court also appoint liquidator to
carry on procedure of dissolution of the company

17.PROCEDURE & CONSEQUENCES OF WINDING UP?

Ans. There are 3 methods of winding up of a company
They are as follows:
1.voluntary winding up
2.compulsory winding up
3.winding up under supervision of court

In case the court issues a winding up order against the

company, the following consequences will follow:

1. The court shall immediately send the intimation of the fact

to the Official Liquidator and the Registrar (Sec. 444).
2. It shall also be the duty of the petitioner and the company
to file with the Registrar a certified copy of the court’s order
within thirty days from the date of making of the order. The
Registrar shall make record of this fact in his books relating to
the company and shall notify in the Official Gazette that such
an order has been made [Sec. 445 (1 & 2)]
3. The winding up order shall be deemed to be notice of
discharge to the officers and employees of the company
except when the business of the company is continued [Sec.
445 (3)].
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4. The powers of the board of directors will terminate and

these will vest in the Official Liquidator, who shall by virtue of
his office become the liquidator of the company.
5. No suit or other legal proceedings shall be commenced, or
if pending at the date of the winding up order, shall be
proceeded with, against the company, except by leave of the
court and subject to such terms as the court may impose.
Any suit or proceedings by or against the company which is
pending in any court other than that in which the winding up
of the company is proceeding, will also be transferred to and
disposed of by that court.
However, these provisions will not be applicable to any
proceedings pending in appeal before the Supreme Court or
a High Court (Sec. 446).
6. The winding up order shall operate in favour of all
creditors and all the contributories of the company and they
can avail themselves of it, as if the order was passed on a
petition filed by all of them jointly (Sec. 447).
7. The official liquidator shall within six months, from the
date of winding up order, submit a preliminary report to the
court regarding:

· Particulars of Capital
· Cash and negotiable securities
· Liabilities
· Movable and immovable properties
· Unpaid calls, and

18.PROCESS AND DUTIES OF LIQUIDATOR?

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Ans. LIQUIDATOR: , a liquidator is the officer appointed when

a company goes into winding-up or liquidation who has
responsibility for collecting in all of the assets under such
circumstances of the company and settling all claims against
the company before putting the company into dissolution.
Liquidator is a person officially appointed to 'liquidate' a
company or firm. Their duty is to ascertain and settle the
liabilities of a company or a firm. If there are any surplus
assets, they are distributed to the contributories.

RIGHT OF LIQUIDATOR:

1.Liquidator has right to take permission of movable and

immovable property of the company
2.he has right to make recoveries from the debtor
3.liquidator can file cases against debtors
4.he can open a/c and keep recovered money in the account
5.he can give notification to dispose property of the company
6.he can make consultation or take direction from the court
when it is required
7.he can take opinion of experts when it is required
8.he has right to do necessary expenses
9.he has right to claim remuneration

DUTIES OF LIQUIDATOR:

1. There is duty to maintain a/c of amount recovered and

expenses done during liquidations proceedings
2. There is duty to complete liquidation within specified
period which is generally 6 months which can be
entered on reasonable grounds
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3. There is duty to sell property by public auction

4. There is duty to prepare priority list of payments such as
bank loan electricity bill rent employees benefits and
after that payment is done to creditor
5. If complete payment is not possible then it is done in
proposition to all the creditors
6. There is duty to hold final meeting after winding up
which is attended by creditor and interested parties in
this reports detail is given about the recoveries and
payments if members ask any explanation then he has
to provide it

Liquidator is also having civil and criminal liability if he

commits any misappropriation or breach of trust

19.COMPANY LAW BOARD?

Ans. The Company Law Board (CLB) is a quasi-judicial body,
exercising equitable jurisdiction, which was earlier being
exercised by the High Court or the Central Government. The
Board has powers to regulate its own procedures. The
Company Law Board has framed “Company Law Board
Regulations 1991” prescribing the procedure for filing the
applications/petitions before it.
The Central Government has also prescribed the fees for
making applications/petitions before the Company Law
Board, under the “Company Law Board, (Fees on applications
and Petitions) Rules 1991”. The Board has its Principal Bench
at New Delhi, and four Regional Benches located at New
Delhi, Mumbai, Kolkata and Chennai.
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Any person aggrieved by any decision or order of the

Company Law Board may file an appeal to the High Court
within sixty days from the date of communication of the
decision or order of the Company Law Board to him on any
question of law arising out of such order

Powers of Company Law Board on application under section

397 or 398.

Without prejudice to the generality of the powers of the

Company Law Board under section 397 or 398, any order
under either section may provide for

(a) the regulation of the conduct of the company's affairs in

future;

(b) the purchase of the shares or interests of any members of

the company by other members thereof or by the company;

(c) in the case of a purchase of its shares by the company as

aforesaid, the consequent reduction of its share capital.

(d) the termination, setting aside or modification of any

agreement, howsoever arrived at, between the company on
the one hand, and any of the following persons, on the other,
namely

(i) the managing director.

(ii) any other director,

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(iii) the manager, upon such terms and conditions as may, in

the opinion of the Company Law Board, be just and equitable
in all the circumstances of the case

the setting aside of any transfer, delivery of goods, payment,

execution or other act relating to property made or done by
or against the company within three months before the date
of the application under section 397 or 398, which would, if
made or done by or against an individual, be deemed in his
insolvency to be a fraudulent preference

20.INSPECTION AND INVESTIGATION?

Ans. The responsibility of efficient running of the company,
maintenance of adequate books of accounts and effective
internal control is the responsibility of the management.
Inspections under Companies Act provide assurance to the
regulators that the management has satisfactorily achieved
these ends

INSPECTION UNDER SECTION209A

Inspection can be carried out by

1. The Registrar
2. Officer of the Government as may be authorised by the
Central Government in its behalf.
3. Officers of SEBI
The information brought out in the inspection reports, is
used for considering action under the provisions of the
Companies Act. Prosecutions are launched on the basis of
findings in the inspection reports. Besides, cases involving
non-compliance of the Companies Act, 1956 including
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inadequate maintenance of statutory records noticed during

such inspection are taken up with the companies for
necessary remedial action. In addition, information of
interest to other Government Departments and agencies as
brought out in the inspection reports are communicated to
them for suitable action

INVESTIGATION UNDER SECTION235: -

Investigation is the act of determining whether criminal

matters such as employee theft, securities fraud (including
falsification of financial statements), identity theft, and
insurance fraud have occurred.
(1) The Central Govt. may, where a report has been made by
the registrar under sub-section (6) of section 234 or under
sub-section (7) of that section , read with sub-section (6)
thereof, appoint one or more competent persons to
investigate the affairs of the company and to report thereon
in such a manner as the Central Government may direct.
(2) Where —–
(a) In the case of a company having a share capital an
application has been received from not less than two
hundred members or from members holding not less than
one-tenth of the total voting power therein, and
(b) in the case of the company having no share capital , an
application received from not less than one-fifth of the
person’s on the company’s register of members,

STRATEGY OF INSPECTION:
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Each assignment is unique, but the following approach can

be used:
• Understanding the issues and the problems

• Determining the objectives and time scales

• Finding out what other information is there to help with

the investigation

TECHNIQUES:

I. Analysis of the financial statements

a) Trend Analysis
b) Proportional Analysis
c) Even Amounts
d) Data-mining techniques such as Benford’s Law, a
procedure used to determine the likelihood that data have
been altered.
e) Ratio analysis
II. Inspection of documents and records
III. Conduct of interviews with persons who would have
knowledge about any fraud that’s occurred.

THE END
PREPARED BY
SUMMAIYA MEHMOOD
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