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The Companies Act 2013 The Companies (Amendment) Act 2017 The Companies (Amendment) Act 2020

The document provides an overview of key aspects of company law and formation under the Companies Act 2013, including: 1. The objectives of the Act are to simplify corporate law, ensure business integrity and conduct, and protect stakeholder interests. 2. A company is an incorporated association with features like separate legal entity, limited liability, and perpetual existence. 3. Companies are classified by ownership and can be private, public, holding, subsidiary, or foreign. 4. Formation involves promotion and registration, including submitting documents like the MOA and AOA to the registrar. 5. The memorandum sets the company's constitution and scope, while the articles provide internal management rules.

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0% found this document useful (0 votes)
210 views23 pages

The Companies Act 2013 The Companies (Amendment) Act 2017 The Companies (Amendment) Act 2020

The document provides an overview of key aspects of company law and formation under the Companies Act 2013, including: 1. The objectives of the Act are to simplify corporate law, ensure business integrity and conduct, and protect stakeholder interests. 2. A company is an incorporated association with features like separate legal entity, limited liability, and perpetual existence. 3. Companies are classified by ownership and can be private, public, holding, subsidiary, or foreign. 4. Formation involves promotion and registration, including submitting documents like the MOA and AOA to the registrar. 5. The memorandum sets the company's constitution and scope, while the articles provide internal management rules.

Uploaded by

Sana Rahman
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THE COMPANIES ACT 2013

The Companies(Amendment )Act 2017


The Companies (amendment ) Act 2020
Objectives of Companies Act 2013

• To simplify corporate law


• To ensure Business integrity and conduct in promotion and
conduction of business
• To ensure full and fair disclosure of the affairs of the company
• To ensure proper standards of accounting and auditing

• To protect interests of the stakeholders and creditors


• To enforce proper performance by company management

• Develop appropriate and comprehensive legal framework


Features/Characteristics of a
company
• Is an incorporated association
• Is an artificial person
• Is a separate legal entity(Salomon vs Salomon & Co)
• Limited liability
• Separate property
• Transferability of shares
• Perpetual existence
• Common seal
• Company may sue and may be sued in its own name
Classification of Companies
Private company
Public company
(Companies with limited liability, limited by guarantee,
unlimited liability)
Holding company and Subsidiary company
Foreign company
One person company(OPC)
Dormant company
Small company
Charitable company
Major provisions under the act
• Provisions made for OPC and Small company(paid upcapital -50L/turn
over-2Cr )
• Maximum members in private limited Coys is raised to 200
• The introduction of object(s) in MOA
• Entrenchment provisions in respect to AOA
• One woman director shall be mandatory
• BOD can exercise certain powers without consent by passing special
resolution
• Every listed company or one having more than 1000 share holders must
provide e-voting facility
• CSR activities mandatory for coy’s with (networth of 500Cr/turnover of
1000Cr/ net profit of 5 Cr or more)
• Consolidated financial statements are mandatory for Coy with more
than one subsidiary
Formation of a company

Two stages: Promotion and Incorporation/Registration


• Promotion: Promotion by the promoters(duties and liabilities)

• Registration: Documents to be submitted to ROC-MOA,AOA, Other


agreements to the Registrar, list of Directors and the Declaration,
affidavit from each subscriber, declaration by advocate, CA, cost
accountant or Company secretary, address of registered office, details
of subscribers, details of Directors(DIN, DSC)

-Certificate of Incorporation and Corporate identity number


-Commencement of Business/ Raise finance
-----Floatation :Initial Public Offer is made to the subscribers to raise the
capital(Release of Prospectus; or Statement in Lieu of Prospectus)
Case study:
• A group of persons, called promoters have submitted an application
to the Registrar of Companies, New Delhi for getting a company
incorporated as a public company. Pending the Registrar’s decision
of granting certificate of incorporation, the promoters enter into
certain contracts for the purchase of some assets for the proposed
company.

• Explain the legal position of promoters’ liability and the liability of


the proposed company after  its incorporation,  in this regard.[hint :
pre incorporation contracts]
Prospectus and its content
Definition :Sec 2(70) “ Prospectus is a document which includes any notice, circular,
advertisement or other document inviting the public or offers from the public for
the subscription or purchase of any share or debenture of a body corporate”
Sec 26- Matter in a Prospectus
• Names and address of persons involved with the company
• General information about the company
• Capital structure of the company
• Date and Terms of the issue
• Objects
• Particulars of the issue of shares
• Company, Project and Management
• Particulars regarding the management of other companies under the same
management
• Outstanding litigation pertaining to the operations and finances of the company
• Details about Directors, reports by the auditors etc
(In case of wrong information in prospectus- civil and criminal offense)
Procedure for online
incorporation
• Obtain DSC
• Obtain DIN(e Form-DIR 3)
• Reserve the company name with ROC
• Drafting MOA and AOA
• E-stamping(ROC fees and stamp duty to be paid)
• Filing Incorporation documents with ROC along with requisite
fees
• Verification of documents by ROC and Issuance of certificate
of incorporation

• INC-29 ---one form for incorporation(DIN, name approval and


incorporation
Memorandum of Association
Sets out the constitution of the company and defines the scope
of the functioning of the company
• Purpose of Memorandum
• Form of Memorandum (Table B, C, D, E in Schedule 1)
• Content (name clause, Object clause, registered office clause,
liability clause, capital clause, Association or subscription
clause)
• Alteration of Memorandum(change of name, registered office,
object clause, liability clause, capital clause, subscription)
• Doctrine of Ultra vires(beyond powers)
• Doctrine of Constructive notice
Articles of Association
The rules, regulations and bye laws for the internal management of
the affairs of the company . The rules are framed with the intent of
carrying out the aims and objectives set out in MOA
Contents of AOA: Rules and bye laws related to-
• Share capital, share certificate, rights of share holders
• Allotment of shares and calls on shares
• Payment of underwriting commission
• Lien, Transfer and Forfeiture on shares
• Conversion of shares into stock
• General meeting of shareholders, voting rights, poll in meetings
• Directors, their appointment, shares, qualification etc
• Powers, duties, rights and liabilities od Directors and members
• Accounts and audit
• Winding of the company
WHAT ARE THE DIFFERENT
TYPES OF SHARES AND
DEBENTURES ?
IPO
A corporation’s first offer of its share to the public market via a stock
exchange.
Types:
• Fixed price method-Price is decided by the issuer
• Book building method- a base price with a band is realised. This aids
price and demand discovery. Procedure is as follows
- Underwriter/ book runner and lead manager(bank) are nominated
- Quantum of funds to be raised is decided, base and band is decided
- Prospectus with details of IPO is given to SEBI for approval
- Bids are invited ; shares and their price for the subscription is
understood
- Issue price is decided
- Book runner and the company conclude the final price and the issue is
frozen.
Types of investors: Retail individual investors-2Lakh(RII), Non-institutional
investors-above 2lakh(NII),Qualified institutional bankers(QIB)
Burger King India IPO gets
oversubscribed- Dec 2020

• https://
timesofindia.indiatimes.com/business/india-business/burger-k
ing-ipo-opens-for-subscription-things-to-know/articleshow/79
524730.cms

The initial public offering of Burger King India got subscribed


3.13 times on the first day of subscription on Wednesday.
Membership
• Member is the subscriber to the memorandum of a company
• Member agrees in writing to become the member and his name is
entered as member in the register
• Shareholders who join a firm at inception are called as ‘Founder
members’
• Members share a common purpose and focus their talent to achieve
certain goals of the organization
• Members are governed by AOA

Who can become a member


--Individual Indian, Foreigner, Company, Cooperative society, Limited
liability Partnership firm, Trade unions, (exceptions of minors)
Rights of members
• Right to obtain copies of basic documents
• Right to transfer shares
• Right to vote
• Right to call Extraordinary meeting(EGM)
• Right to receive notice on General meetings
• Right to appoint proxy
• Right to dividend, rights shares and bonus shares
• Right to obtain copy of financial statements
• Right to appoint auditor
• Right to appoint and remove Directors
• Right to inspect registers
• Right to final distribution upon winding up
• Right against oppression and mismanagement
Kinds of Company meetings
A Meetings of members:
1. General meetings
AGM and EGM
2. Class meetings(by holders of a particular class of shares)
B Board meetings
C Other meetings:
2. Meetings of debenture holders
3. Meetings of creditors
Meetings
• Requisites of a valid meeting
• Meeting must be convened by proper authority
• Members are served with proper notice
• Agenda of the meeting
• Quorum must be present
• Voting by ‘show of hands’, postal ballot and electronic means
• Proposal(motion) , voting and resolution
• Minutes must be recorded

Resolutions : Ordinary resolution(simple majority)


Special resolution(3/4 majority)
Company management
Management by Chairman, MD, Board of Directors, Managers

Directors are the persons who manage the affairs of the company
which is an artificial person
• Qualification of Directors
• Appointment of Directors
• Vacation of Director’s office(sec 167)
• Removal of Directors(removal by shareholders, central government,
Tribunal)
• Meeting of Directors
• Powers of BOD
• Duties and Liabilities

Other Directors: Additional D, Alternate D’, Nominee D’, Casual D’


Principles of Corporate Governance

• Rights and equitable treatment of shareholders

• Interests of other stake holders

• Role and responsibilities of the Board

• Integrity and ethical behavior

• Disclosure and transparency


Winding up of a company
• Modes of winding up
1. Compulsory winding up under an order of the Tribunal
2. Voluntary winding up(special resolution by members)

Grounds for winding up

• Inability to pay debt


• If actions of the company are against the integrity, sovereignty and
security of India
• Defaulted in filing financial statements with Registrar for 5 cons’ yrs
• Failure to revive a sick business
• Reduction in membership
Procedure for winding up
• Who may petition: Company itself, creditor/creditors, registrar,
contributory, official liquidator, any person authorized by the
Central government, or joint petition

• Appointment of a liquidator
• Commencement of winding up
• Procedure for winding up order
• Final meeting and dissolution of the company
THANK YOU

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