vdocument.in_companies-act-2013-ppt.pptx

Companies Act 2013 – timeline
2004 – Concept
paper
2004 – J J Irani
expert
committee
2008 –
Companies Bill
2008
2009 –
Companies Bill
2009
2011-
Companies Bill
2011
2012 -
Companies Bill
2012
18 Dec 2012 –
Lok Sabha
8 Aug 2013 –
Rajya Sabha
29 Aug 2013 –
President’s
Assent
12 Sep 2013 –
98 sections
notified
What next?

Companies Act, 2013: A statistical snapshot
• Number of schedules : 7
• Number of chapters: 29
• Number of sections: 470

• Definition of Company :-“Company” means a
company incorporated under this Act or under
any previous company law.
• Characteristics :
• Separate legal entity
• Limited liability
• Perpetual Succession
• Common Seal
• Transferability of shares
• Separate Property
• Capacity to sue

Types of Company
• Public Limited Company
• Private Limited company
• One Person Company
• Small Company
• Dormant Company
5

Private company
• Section2(68) “private company” means a company
having a minimum paid-up share capital of one lakh
rupees or such higher paid-up share capital as may be
prescribed, and which by it articles,—
• (i) restricts the right to transfer its shares;
• (ii) except in case of One Person Company, limits the
number of its members to two hundred;

• Provided that where two or more persons hold
one or more shares in a company jointly, they
shall, for the purposes of this clause, be treated
as a single member
• Provided further that—
(i) persons who are in the employment of the
company; and
(ii) persons who, having been formerly in the
employment of the company, were members of
the company while in that employment and have
continued to be members after the employment
ceased, shall not be included in the number of
members; and
(iii) prohibits any invitation to the public to
subscribe for any securities of the company

Public Company
Section 2(71) “public company” means a
company which—
• (a) is not a private company;
• (b) has a minimum paid-up share capital of five
lakh rupees or such higher paid-up capital, as
may be prescribed:
• Provided that a company which is a subsidiary
of a company, not being a private company,
shall be deemed to be public company for the
purposes of this Act even where such
subsidiary company continues to be a private
company in its articles

• Mr.Kumar is director of a private company
(XYZ) situated in Delhi which is subsidiary of
ABC limited.As the articles of association
clears that the XYZ is purely private
company.But there is some penal actions on
XYZ company considering as deemed public
company.The XYZ filed against penal action
stating to MCA that it is a purely private
company & the charges levied on it is
considering it as Public company. Is XYZ is
correct?

• Whether the subsidiary of a foreign company be
termed as public company or private company
as per the Companies Act, 2013.
• In terms of MCA General Circular no. 23/2014
dated 25th June 2014, an existing company, being
a subsidiary of a company incorporated outside
India, registered under the Companies Act, 1956,
either as private company or a public company by
virtue of section 4(7) of that Act, will continue as
a private company or public company as the case
may be, without any change in the incorporation
status of such company.

One Person Company
• Section2(62) “One Person Company” means a
company which has only one person as a member.
• Waives a number of compliance requirements.
• ‘Lives on’ even after the death/disability of the sole
member.
• OPC registered with one member.
• Appointment of another person as a nominee
member in the event of the subscriber’s death or his
incapacity
• Only natural person who is an Indian citizen and
resident in India is eligible to incorporate OPC.
11

Small Company
2(85) ‘‘small company’’ means a company, other than a
public company,—
(i) paid-up share capital of which does not exceed fifty lakh
rupees or such higher amount as may be prescribed
which shall not be more than five crore rupees; or
(ii) turnover of which as per its last profit and loss account
does not exceed two crore rupees or such higher amount
as may be prescribed which shall not be more than
twenty crore rupees:
• Provided that nothing in this clause shall apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special
Act

Dormant Company
• Dormant company: The 2013 Act states that a
company can be classified as dormant when it
is formed and registered under this 2013 Act
for a future project or to hold an asset or
intellectual property and has no significant
accounting transaction. Such a company or an
inactive one may apply to the ROC in such
manner as may be prescribed for obtaining the
status of a dormant company.[Section 455 of
2013 Act]
13

Dormant company
• Who can attain status of a dormant company? –
Companies;
– Formed for a future project, or to hold and asset /
intellectual property and has no significant accounting
transactions
– Not carrying out any significant business or operation, or
has not made any significant accounting transaction, or
has not filed financial statements / annual returns for 2
years
• Special resolution in AGM / confirmation from at least 3/4th
shareholders (by value) required to apply for being dormant
company
• Certain additional conditions prescribed for company to be
eligible to make application to be dormant company
14

Dormant company…
Concessions to dormant companies
• Dormant company not required to prepare cash flow
statement
• Dormant company to conduct at least 2 Board meetings
in a calendar year (with gap of 90 days between 2
meetings)
• Rotation of auditors not applicable
Limitations
• ROC to initiate process of striking off name of company in
case it remains dormant for consecutive 5 years
• Return to be filed within 30 days of end of financial year
of financial position duly audited by CA
15

One Person Company
• Simpler legal and governance regime for operation
and maintenance
• Waives a number of compliance requirements.
• ‘Lives on’ even after the death/disability of the sole
member
• OPC registered with one member
• Appointment of another person as a nominee
member in the event of the subscriber’s death or his
incapacity
• Only natural person who is an Indian citizen and
resident in India is eligible to incorporate OPC.

Types of OPC
• a company limited by shares; or
• a company limited by guarantee; or
• an unlimited company.

Appointment of directors
• Articles of a company may provide for the appointment
of the first directors
• If articles are silent then the subscriber to the
memorandum who is an individual shall be deemed to
be the first director of the company
• May have a single director
• Maximum-15 directors more than 15 after passing
Special Resolution
• Director must have stayed in India for a total period of
not less than 182 days in the previous calendar year

Meetings of Board
• At least one meeting of the Board of Directors
to conducted in each half of a calendar year
• Gap between the two meetings should not be
less than ninety days
• Exemption – if company has only one director.

Contract by One Person Company
• One Person Company limited by shares or by guarantee enters
into a contract with the sole member of the company who is
also the director of the company, the terms of contract or
offer are in writing or contained in a memorandum or
recorded in the minutes of the Board meeting held next after
entering into the contact.
• Inform the Registrar about every contract entered into by the
company within a period of fifteen days of the date of
approval by the Board of Directors.
• Contracts in ordinary course of business not required to
comply with the above.

Financial Statement
• The financial statement, signed by one director, for
submission to the auditor for his report thereon.
• Board of Directors Report means a report containing
explanations or comments by the Board on every
qualification, reservation or adverse remark or
disclaimer made by the auditor in his report.
• Filed with ROC within 180 days from the closure of the
financial year
• Financial statement, may not include the cash flow
statement

Exemption
• Section 96. Option to dispense with the requirement of holding an AGM
• Section 98. Power of Tribunal to call meetings of members
• Section 100. Calling of extraordinary general meeting.
• Section 101. Notice of meeting.
• Section 102. Statement to be annexed to notice.
• Section 103. Quorum for meetings.
• Section 104. Chairman of meetings
• Section 105.Proxies
• Section 106. Restriction on voting rights
• Section 107. Voting by show of hands
• Section 108. Voting through electronic means
• Section 109. Demand for poll
• Section 110.Postal ballot
• Section 111. Circulation of members’ resolution

Restrictions
• Such Company cannot be incorporated or converted
into a company under section 8 of the Act.
• Such Company cannot carry out Non-Banking Financial
Investment activities including investment in securities
of anybody corporates.
• No such company can convert voluntarily into any kind
of company until expiry of 2 years from the date of
incorporation, except in cases where capital or
turnover threshold limits are reached.
• No minor shall become member or nominee of the
One Person Company or hold share with beneficial
interest.

Conversion of OPC
• Where the paid up share capital exceeds fifty lakh
rupees or its average annual turnover during the
relevant period exceeds two crore rupees
• OPC to convert itself, within 6 months of the date on
which its paid up share capital is increased beyond
fifty lakh rupees or the last day of the relevant period
during which its average annual turnover exceeds
two crore rupees, into either a private company with
minimum of two members and two directors or a
public company with at least of seven members and
three directors in accordance with the provisions of
section 18 of the Act

Conversion of private company into
One Person Company
• A private company other than a company
registered under section 8 of the Act may
convert itself into OPC by passing a special
resolution in the general meeting.
• AND after obtaining a NOC from all its
members and creditors.

Other features of OPC
• OPC to lose its status if paid up capital exceeds
Rs. 50 lakhs or average annual turnover is more
than Rs. 2 crores in 3 immediately preceding
consecutive years.
• Mandatory rotation of auditor after expiry of
maximum term is not applicable.
• The annual return of a One Person Company shall
be signed by the company secretary, or where
there is no company secretary, by the director of
the company.

• Can a company form a One Person Company
(OPC) as its subsidiary?

• In terms of rule 3 of the Companies
(Incorporation) Rules, 2014, only a natural
• person who is an Indian citizen and resident in
India is eligible to incorporate OPC.
• Therefore, the question of any “body
corporate” or other form of organizations
being the single member does not arise

Small Company
• The concept of “Small Company” has been
introduced for the first time by the Companies
Act, 2013.
• The Act identifies some companies as small
companies based on their capital and turnover
for the purpose of providing certain
relief/exemptions to these companies.
• Most of the exemptions provided to a small
company are same as that provided to a One
Person Company.

Small Company - Section 2 (85)
A company, other than a public company,—
1. paid-up share capital of which does not exceed Rs. 50
lakh or such higher amount as may be prescribed which
shall not be more than Rs. 5 crore; or
2. turnover of which as per its last P&L A/c does not
exceed Rs. 2crore or such higher amount as may be
prescribed which shall not be more than Rs. 20 crore
Provided that nothing in this clause shall apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any
special Act;

Salient Features
• Only a private company can be classified as a small
company.
• Holding company, subsidiary company, charitable company
and company governed by any Special Act cannot be
classified as a small company.
• For a small company, either the paid up capital should not
exceed Rs. 50 lakhs or the turnover as per latest statement
of profit & loss should not exceed Rs. 5 crores.
• The status of a company as “Small Company” may change
from year to year. Thus the benefits which are available
during a particular year may stand withdrawn in the next
year and become available again in the subsequent year.

Special Provisions and Exemptions
• Privileges/exemptions available to a small company
are same as OPC.
• The annual return of a Small Company can be signed
by the company secretary alone, or where there is no
company secretary, by a single director of the
company.
• A small company may hold only two board meetings
in a year, i.e. one Board Meeting in each half of the
calendar year with a minimum gap of ninety days
between the two meetings.

Special Provisions and Exemptions
• A small company need not include Cash Flow
Statement as a part of its financial statements.
• Provision regarding mandatory rotation of auditor
not applicable to a small company.
• Holding and subsidiary companies are specifically
excluded from the concept of small company.
• In other words, a holding or a subsidiary company
can never enjoy the privileges of a small company
even though they may fulfill the capital or turnover
requirement of a small company.

• Whether a private Company having paid-up
share capital of rupees 45 lakhs and turnover
of Rs. 20 crores as per last audited balance
sheet will be treated as small company?

Stages in Company Incorporation
• Promotion
• Registration
• Floatation
• Commencement of Business
37

• A company comes into existence is generally by a
process referred to as incorporation. Once a company
has been legally incorporated, it becomes a distinct
entity from those who invest their capital and labour to
run the company.
• Usually the first step to form a company is the process
known a‘promotion’ where a person persuades others
to contribute capital to a proposed company before it is
incorporated . Such a person is called the promoter of
the company.
• Promoters also can enter into a contract on behalf of a
company before or after it has been granted a
certificate of incorporation, and arrange share issues in
the name of the company
38

• Definition :-
• Section 2 (69) of the Companies Act, 2013 defines the term
‘promoter’ as under:-
• “Promoter” means a person—
(a) who has been named as such in a prospectus or is identified
by
the company in the annual return referred to in section 92; 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.
• Provided that sub-clause (c) shall not apply to a person who is
acting merely in a professional capacity.(giving only
professional advice to the Board of directors, he shall not be
treated as a promoter.)

• Fiduciary Position of Promoter in company:-
1)Not to make any secret profit at the expense of the
company
2)To give benefit of negotiations to the company
3)To make full disclosure of interest or profit
4)Not to make unfair use of position.
• Position of promoters as regard pre-incorporation
contracts:-
1)Company not bind by pre-incorporation contract
2)Company cannot enforce pre-incorporation contract
3)Promoters personally liable.

Case studies
• Mr.Vikram is the promoter of Abascus Ltd.He entered into
an agreement with Real estate dealer to buy an land on the
behalf of the company on 15th july 2014.The Registrar of
companies issued him certificate of incorporation on 22nd
october 2014.After Incorporation company refuses to buy
the said plot of land.Has the real estate dealer has an
remedy against the promoter or against the company?
• Mr Sinha(Corporate Professional) prepares an AOA & MOA
on the instructions of the promoter of company.He also
paid the registration fees & got the company registered.Mr
Sihna filed a case against company for non-payment of his
professional fees. From whom he can recover this amount?

Steps to be followed while
Incorporation
1) Obtain Digital Signatures: Nowadays various document
prescribed under the Companies Act, 2013, are required to be
filed with the digital signature of the Managing Director or
Director or Manager or Secretary of the Company, therefore, it
is compulsorily required to Obtain a Digital Signature
Certificate from authorized DSC issuing authority for at least
one director to sign the E-forms related to incorporate like
form INC.1 and other documents.
.

• Digital Signature Certificates (DSC) are the digital
equivalent (that is electronic format) of physical
or paper certificates. Examples of physical
certificates are drivers' licenses, passports or
membership cards. Certificates serve as proof of
identity of an individual for a certain purpose; for
example, a driver's license identifies someone
who can legally drive in a particular country.
Likewise, a digital certificate can be presented
electronically to prove your identity, to access
information or services on the Internet or to sign
certain documents digitally

2) Obtain Director Identification Number [Section 153]
• As per 153 of the Companies Act, 2013, every
individual intending to be appointed as director of a
company shall make an application for allotment of
Director Identification Number in form DIR.3 to the
Central Government in such form and manner and
along with such fees as may be prescribed.
• Therefore, before submission of e-Form INC.1 for
availability of name, all the directors of the proposed
company must ensure that they are having DIN and if
they are not having DIN, it should be first obtained

• What is the procedure of obtaining DIN?
• Any person intending to apply for DIN shall have to make an
application in eForm DIR-3 and should follow the following
procedure:
• 1. eForm DIR-3 has to follow the online e-Filing process .
• 2. Attach the photograph and scanned copy of supporting
documents i.e. proof of identity, and proof of residence as per
the guidelines. Physical documents are not required to submit
at DIN cell.
• 3. Along with the supporting documents, Verification as per
Form DIR-4 shall also be attached. This shall contain the
Name, Father’s name, date of birth and text of declaration
and physical signature of the applicant.

• 4. The eForm shall have to be digitally signed and shall be
uploaded on MCA21 portal.
• 5. Upon upload, Pay the fees for eForm DIR-3. Only
electronic payment of the fees shall be allowed (I.e.
Netbanking / Credit Card). No challan payment will be
accepted under revised procedure of DIN allotment.
The applicant is required to get himself/herself registered on
the MCA21 Portal to obtain login id, which is necessary for
payment of the fees. After obtaining the login-id, Login to
the MCA21 portal and click on 'eForm upload' link available
under the 'eForms' tab for uploading the eForm DIR-3 .
eForm DIR-3 will be processed only after the DIN
application fee is paid.
• 6. Upon upload and successful payment,
• Form DIR-3 is mandatorily to be signed by an Applicant and
a practicing professional or secretary (who is a member of
ICSI) in whole time employment or the Director of the
existing company

• 7. Processing of e Form DIR-3
• In case, DIR-3 gets certified by the professional
(i.e. CA(in whole time practice)/ CS(in whole time
practice)/ CWA (in whole time practice)/, the DIN
will be approved by the system immediately
online (in case it is not potential duplicate).
• 8. Post-approval changes in particulars of Form
DIR-3
• If there is any change in the particulars submitted
in eform DIR-3, applicant can submit e-form DIR-6
online. For instance in the event of change of
address of a director, he/ she is required to
intimate this change by submitting eform DIR-6
along with the required attested documents

3. Name availability for proposed company
• As per section 4(4) read with Rule-9 of Companies
(Incorporation) Rules, 2014, application for the
reservation/availability of name shall be in Form no. INC.1
along with prescribed fee of Rs. 1,000/-. In selection of
Company name should be in accordance with name guidelines
given in Rule-8 of Companies (Incorporation) Rules, 2014.
• After approval of name ROC will issue a Name availability
letter w.r.t. approval for availability of name for a proposed
company.
• Validity of Name approved by ROC: As per section 4(5),
maximum time for which name will be available has been
prescribed in the law itself under section 4(5). The name will
be valid for a period of 60 Days from the date on which the
application for Reservation was made.

• 4. Preparation of the Memorandum of Association
(MOA) and Articles of Association (AOA)
• Drafting of the MOA and AOA is generally a step subsequent
to the availability of name made by the Registrar. It should be
noted that the main objects should match with the objects
shown in e-Form INC.1. These two documents are basically
the charter and internal rules and regulations of the company.
Therefore, it must be drafted with utmost care and with the
advice of the experts and the other object clause should be
drafted in a very broader sense.
• As per section 4(6) the memorandum of a company shall be in
respective forms specified in Tables A, B, C, D and E in
Schedule I as may be applicable to such company.
• As per section 5(6) the articles of a company shall be in
respective forms specified in Tables F, G, H, I and J in

• 5. Application for incorporation of a company
• application for incorporation of a private and Public company,
with the Registrar, within whose jurisdiction the registered
office of the company is proposed to be situated, shall be filed
in Form no. INC 7 [Rule 12 to 18] along with Form no. INC.22
for situation of registered office of the Company,
• · Declaration in Form No. INC-8 by Professionals. (As per
Rule-14 of Companies (Incorporation) Rules, 2014, A
declaration in the prescribed form by an advocate, a CA, CMA
or CS in practice who is engaged in the formation of the
company, and by a person named in the articles as a director,
manager or secretary of the company, that all the requirements
of this Act and the rules made there under in respect of
registration and matters precedent or incidental thereto have
been complied with;)

• Affidavit from each of the subscriber to the Memorandum
in Form No. INC-9 , (an affidavit from each of the
subscribers to the memorandum and from persons named as
the first directors, if any, in the articles that he is not
convicted of any offence in connection with the promotion,
formation or management of any company, or that he has
not been found guilty of any fraud or misfeasance or of any
breach of duty to any company under this Act or any
previous company law during the preceding five years and
that all the documents filed with the Registrar for
registration of the company contain information that is
correct and complete and true to the best of his knowledge
and belief;)

• Form no. INC 22:As per Rule 25 of verification of
registered office
• Section 12(2) of the Companies Act, 2013 states that
the Company shall furnish to the Registrar
verification of its registered office within a period of
thirty days of its incorporation in such manner as may
be prescribed.
• Section 12(4) of the Companies Act, 2013 states that
Notice of every change of the situation of the
registered office, verified in the manner prescribed,
after the date of incorporation of the company, shall
be given to the Registrar within fifteen days of the
change, who shall record the same.

1) Application for DIN
2) Name Availability:After obtaining name availability, within 60
days its required to file incorporation documents with ROC.
3)Filing Incorporation form:
 E-form – INC-2- Application for Incorporation
E-form – INC-3 – Nominee consent form.
E- Form - INC-22 – Situation of Registered office
E-form – INC-9- Affidavit from subscriber of memorandum.
E-form – INC-10- form of verification of signature of
subscriber.
DIR-12- Consent of Director
MOA & AOA.
4)Certificate of Incorporation – The register office will issue
form No. INC- 11

Sr.
No.
Nature of E-Forms Form No. Due Date Of Filing
1. Application for reservation of name INC.1 NA
2. Application for incorporation INC.2 60 days
3. Nominee – Consent Form INC.3 15 days
4. Change in Member/Nominee INC.4 30 days
5. Intimation of exceeding threshold –
i.e. ceased to be OPC
INC.5 60 days
6. OPC – Application for conversion INC.6 NA
7. Filing of Special Resolution MGT.14 30 days
8. Application for DIN DIR 3 NA
9. Verification for DIN DIR 4 NA

Memorandum & Articles of
Association

• The Memorandum of Association is the charter of a
company. It is a constitution document, which amongst
other things, defines the area within which the company
can operate.
• As per section 2(56) “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.
• The company cannot depart from the provisions of the
memorandum. If it enters into a contract or engages in
any trade or business which is beyond the powers
conferred on it by the memorandum, such a contract or
the act will be ultra-vires (Beyond Powers) the company
and hence void.

Model Forms of Memorandum
• Table A is applicable in the case of companies limited
by shares;
• Table B is applicable to companies limited by
guarantee not having a share capital;
• Table C is applicable to the companies limited by
guarantee having a share capital;
• Table D is applicable to unlimited companies not
having a share capital;
• Table E is applicable to unlimited companies having a
share capital.

Name Clause
• A company being a legal entity must have a name of its own
to establish its separate identity.
• The name of the company is a symbol of its independent
corporate existence.
• The first clause in the memorandum of association of the
company states the name by which a company is to be
known.
• The company may adopt any suitable name provided it is
not undesirable.
• It should be published & engraved in all documents along
with the CIN No.
• in case of One Person Company, the words ‘‘One Person
• Company’’ shall be mentioned in brackets below the name
of such company, wherever its name is printed, affixed or
engraved.

• Rectification of name of a company (Section
16):-
• Section 16 provides that if by inadvertence or
otherwise a name has been registered which is
identical to or too nearly resembles the name of
an existing company whether registered under this
Act or the previous company law, the Central
Government may direct thecompany to change its
name.
• The company shall change its name within a
period of 3 months from the issue of the above
direction after passing an ordinary resolution for
the purpose.

Situation Clause
• The name of the State in which the registered office
of the company is to be situated must be given in the
memorandum. But the exact address of the registered
office is not required to be stated therein. Within 15
days of it incorporation, and at all times thereafter,
the company must have a registered office to which
all communications and notices may be sent

Objects Clause
• Under section 4(1)(c)of the Companies Act,
2013, all companies must state in their
memorandum the objects for which the
company is proposed to be incorporated and
any matter considered necessary in furtherance
thereof.

Liability Clause
• The fourth compulsory clause must state that liability of
the members is limited, if it is intended that the company
be limited by shares or by guarantee. The effect of this
clause is that, in a company limited by shares, no
member can be called upon to pay more than what
remains unpaid on the shares held by him.
• The fifth compulsory clause which must state the
amount of the capital with which the company is
registered, unless the company is an unlimited liability
company. The shares into which the capital is divided
must be of fixed value, which is commonly known as the
nominal value of the share. The capital is variously
described as “nominal”, “authorised” or “registered”

• Declaration for Subscription:- (INC-13)
The statutory requirements regarding
subscription of memorandum are that:
— each subscriber must take at least one share;
— each subscriber must write opposite his name
the number of shares which he agrees to take.
• Signing & Stamping of Memorandum

Articles of Association
• The articles of a company shall be in respective
forms specified in Tables, F, G, H, I and J in
• In terms of section 5(1), the articles of a company
shall contain the regulations for management of
the company. The articles of association of a
company are its bye-laws or rules and regulations
that govern the management of its internal affairs
and the conduct of its business.
• They are subordinate to and are controlled by the
memorandum of association.

Entrenchment
• The entrenchment provisions allow for certain clauses in the
articles to be amended upon satisfaction of certain conditions
or restrictions (such as obtaining a 100% consent) greater than
those prescribed under the Act.
• This provision acts as a protection to the minority shareholders
and is of specific interest to the investment community
• When can a Company add provisions for entrenchment to
AOA?
(1) Either on formation of a company, or
(2) by an amendment in the articles
• In the case of a private company the amendment has to be
agreed to by all the members of the company;
• In the case of a public company by a special resolution.

Contents of Articles
Adoption of preliminary contracts.
3. Number and value of shares.
4. Issue of preference shares.
5. Allotment of shares.
6. Calls on shares.
7. Lien on shares.
8. Transfer and transmission of shares.
9. Nomination.
10. Forfeiture of shares.
11. Alteration of capital.
12. Buy back.
13. Share certificates.
14. Dematerialisation.

Alteration of MOA
1) Alteration of Name Clause:-
• Special resolution to be filed by company Form
No. MGT-14(Special resolution)
• Approval from central government in writing
• Once approval granted within specific time period
the form no. INC-25(Certificate of incorporation
pursuant to name change) will be issued.
• Its not applicable to those company who default
in filing annual returns or deposit or debentures or
interest thereon.

2)Alteration of Registered Office Clause:-
Change within the local limits of same town-
• Board Resolution filed by company.
• Notice to ROC in form No. INC-22
Change from one city to another within the same State-
• Special Resolution filed by company(MGT-14)
Change within the same State from the jurisdiction of
one Registrar of Companies to the jurisdiction of
another Registrar of Companies-
• Confirmation by Regional Director.

Change of Registered office from one State to
another-
• Application by Central Government.

Alteration of Objects Clause & Liability
Clause:-
• By passing an special resolution (Form
No.MGT-14)
Alteration of Capital Clause:-
• By passing an ordinary Resolution

Alteration of AOA
• A company has a statutory right to alter its
articles of association.
• But the power to alter is subject to the
provisions of the Act and to the conditions
contained in the memorandum.

• XYZ limited is shifting their registered office
from Mumbai to Pune. The company took
approval from shareholders & filed MGT-14
along with INC-22 with ROC.But ROC has not
approved the form mentioning that they did
not took approval from authority.Is any
remedy available to Company?

Prospectus & Allotment of
Securities

• The act governs the issue of not only shares but all types of
securities.
• Companies may now issue Global Depository Receipt by
passing the special resolution and subject to such conditions as
may be prescribed.
• The content to be prescribed the Prospectus has now been
made more detailed.
Chapter III

Raising of Capital From Public
• The companies can raise money by offering
securities for sale to the public.
• They can invite the public to buy shares, which
is known as public issue.
• For this purpose the company may issue a
prospectus, which may include a notice
circular, advertisement or other documents
which are issued to invite public deposits.

• Public Company may issue securities:-
-Through prospectus
-Through private placement
- Through right issue or bonus issue.
• Private Company may issue securities:-
-Through private placement
- Through right issue or bonus issue.

Prospectus
• Sec2(70) “prospectus” means any document
described or issued as a prospectus and includes
a red herring prospectus referred to in section
32 or shelf prospectus referred to in section 31
or any notice, circular, advertisement or other
document inviting offers from the public for the
subscription or purchase of any securities of a
body corporate
• It is an invitation issued to the public to
purchase or subscribe shares or debentures of
the company.

Contents of the prospectus
• General information
• Capital structure
• Terms of present issue
• Management and projects
• Management and perception of risk factor
It is compulsory to register the prospectus
with the Registrar

Process of filing Prospectus
• Draft Offer document – SEBI
• Offer document – ROC/Stock exchange.
• Red hearing prospectus. –ROC/Stock
exchange.

Red Hearing Prospectus
• “Red herring prospectus” means a prospectus
which does not include complete particulars of
the quantum or price of the securities included
therein.
• The company shall file red herring prospectus
with Registrar of companies at least three days
before the opening of the subscription list and
the offer.
• A red herring prospectus shall carry the same
obligation as are applicable to a prospectus. In
case there is any variation between red herring
prospectus and a prospectus shall be highlighted
as variation in the prospectus.

ISSUE OF APPLICATION FORMS AND
ABRIDGE PROSPECTUS
• Every application form for the purchase of the
securities of a company shall be issued unless
the form is accompanied by an “Abridge
Prospectus”
• There is no need for abridge prospectus in
case of:
• a) Underwriting Agreement; and
• b) Private placement.

Private Placement
• When an issuer makes an issue of securities to
a select group of persons not exceeding 200,
which is neither right issue or bonus issue,it is
called private placement. It is of two types:-
• Preferential allotment
• Qualified Institutional placement(QIP)

Conditions to be fulfilled
• Approval of shareholders-Special resolution.
• Invitation to not more than 200 persons in
any financial year.
• Value of such offer per person should not be
less than twenty thousand of the face value
of securites.

Shelf Prospectus
• It means a prospectus in respect of which the
securities or class of securities included therein
are issued for subscription in one or more issues
over a certain period without the issue of a
further prospectus.
• Any class of company may file a shelf prospectus
with the Registrar of Companies at the stage of
first offer of securities.
• The shelf prospectus shall indicate that validate
period of the shelf prospectus is a period not
exceeding one year from the date of first offer of
securities under that prospectus. Once, a shelf
prospectus has been issued, there will be no
requirement of any further prospectus for any
subsequent offer of these securities issued during
this validity period.

• For any subsequent issue, company shall file
an “Information Memorandum”. This
information memorandum shall contain all
material facts relating to (i) new charges
created; and (ii) changes in financial position
of the company from first/previous offer to
this second/subsequent offer under this Shelf
Prospectus.
• When an offer of securities is made on shelf
prospectus, the information memorandum
together with shelf prospectus shall be
deemed to be a prospectus.

Civil Liability for Misstatements
In case of any untrue statement in the
prospectus
• The liability will be on the director of the
company , whose name was written during
the time of issue
• The persons who have authorized their names
to be theirs in the prospectus to be named as
directors
• Promoter
• Every person including the person who is an
expert and has authorized his name to be
issued with the prospectus

• If a prospectus is issued in contravention of
the provisions of section 26, the company
shall be punishable with fine which shall not
be less than fifty thousand rupees but which
may extend to three lakh rupees and every
person who is knowingly a party to the issue
of such prospectus shall be punishable with
imprisonment for a term which may extend to
three years or with fine which shall not be
less than fifty thousand rupees but which may
extend to three lakh rupees, or with both

• Mr.X filed a case against ABC limited fort the
misrepresentation of prospectus. Plaintiff
received a prospectus regarding the
incorporation of Defendant’s company, which
highlighted that the company would have the
right to use steam or mechanical power. After
receiving the prospectus, Plaintiff bought shares
of the company, relying on the allegations of the
prospectus, and believing that the company had
the absolute right to use steam or mechanical
power. The board of trade refused to allow steam
or mechanical power, and the company was
wound up, unable to complete its work.The
plaintiff can get remedy against it?

• A purchased from B 1000 shares of a company
on the basis of prospectus containing wrong
statements.
• What remedies are available to A against the
company?
If there is privities of contract between A and B
then what will be your argument?

Chapter IV- Share Capital and
Debentures

ILLUSTRATION
• A company is registered with a capital of Rs.
1,00,000 divided into 10,000 shares of Rs. 10
each. The authorized capital of the company
in such a case is Rs. 1,00,000. The company
offers 8,000 shares to the public which takes
them up. The issued capital of the company is
Rs. 80,000. The calls up only Rs 6 per share. In
such a case the called up capital is Rs. 48,000
and the uncalled capital is Rs. 32,000.

Public
Companies
Private Companies
Public
Issue
Private
Placement
Right & Bonus
Issue
Private
Placement
Right & Bonus
Issue

• Condition for voting rights to Preference Shareholders
has been changed. Now preference shareholders can
vote on all resolution placed before the company when
dividends payable in respect of a class of preference
shares are in arrears for a period of 2 years or more.
• Company cannot issue shares at discount other than
as sweat equity, no provision has been provided for any
approval.
• A company may issue preference shares redeemable
after 20 years for such infrastructure projects as may
be specified subject to redemption of specified % of
preference shares on annual basis at the option of the
preference shareholder.

Kinds of Share Capital
• The share capital of a company limited by
shares shall be of two kinds, namely:—
(a) Equity share capital—
• (i) with voting rights; or
• (ii) with differential rights as to dividend,
voting or otherwise in accordance with such
rules as may be prescribed; and
• (b) Preference share capital:

Equity Shares with
Differential Rights
• Both Public and Private companies are continued to be permitted.
• Conversion of existing equity share capital with voting rights into equity
share capital carrying differential voting rights and vice–versa not
permitted
• Differential rights can be with respect to dividend, voting or otherwise,
only if:
-Authorisation by Articles and Shareholders by SR;
-Upto 26% of the total post-issue paid up equity share capital including
equity shares with differential rights issued at any point of time;
-Track record of dividend payment in last 3 immediate last FYs
-No default in filing Accounts and Annual Return in 3 immediate last FYs
-No default in payment of dividend, debentures, deposit, preference shares,
loan from bank/FIs, statutory dues of employees. Principle and
Interest/Dividend both
-No default under SEBI, SCRA, FEMA and RBI Act

• DVR shares were allowed in India in 2000
• DVR shares are like ordinary shares, but with
fewer voting rights. These allow a company to
dilute equity without a matching reduction in
promoters' stake. The aim of limiting voting
rights is preventing hostile takeovers by
separating economic interests and voting
rights.
• DVR shares are priced lower at issuance and
offer higher dividends; in return, the voting
rights are limited.

• Tata Motors:
In 2008, Tata Motors became the first company in India to
issue DVR shares. To fund the acquisition of Jaguar Land
Rover, it issued 6.4 crore DVR shares at Rs 305 a share
when the ordinary shares were at Rs 340. These DVRs offer
higher dividends but carry one-tenth the voting rights of
ordinary shares. This means 10 DVR shares equal one
ordinary share as far as voting rights are concerned
• For instance, the holders of Tata Motors' DVR shares can
cast one vote for every 10 shares held. However, they get
5% more dividend than ordinary shareholders. On 18 July
2012, the company gave Rs 4.10 a share as dividend to DVR
holders and Rs 4 a share to ordinary shareholders.

• Pantaloon Retail India:
The company issued bonus shares that were DVRs in
February 2009. These carry one-tenth voting rights of
ordinary shares and pay 5% additional dividend.
Gujarat NRE Coke:
The company issued DVR shares in 2010. The investor has
to hold 100 DVR shares for getting voting rights equal to
one ordinary share.
Jain Irrigation:
Jain Irrigation is a leading player in the micro-irrigation
system market. The company issued DVR shares in
November 2011 in the form of bonus to its existing
shareholders. Its 10 DVRs entitle investors to one vote in
shareholder meetings.

• (i) ‘‘Equity share capital’’, with reference to any
company limited by shares, means all share capital
which is not preference share capital;
Rights of Equity shareholder :-
a) Right of pre-emption in the matter of fresh issue.
b) Right to apply to the court to set aside the variations
to their rights to their detriment.
c) Right to receive a copy of statutory report before
holding of statutory meeting by public companies.
d) Right to apply to CLB(now NCLT) for calling of an
EGM,if company fails to call such a meeting.
e) Rights to receive annual accounts with auditors report
,directors reports & other information.

• Preference share capital means that part of
the issued share capital of the company which
carries or would carry a preferential right with
respect to –
• a) Payment of dividend
• b) Repayment of the amount of the share
capital paid-up or deemed to have been paid
up

Restriction on Preference share:-
No company shall issue any preference shares
which are irredeemable

• Conditions to be complied with before issuing
preference shares
• a) Articles of Association must authorize to issue
preference shares
• b) Approval of members is sought by way of
special resolution in the general meeting
• c) At the time of issue of preference shares,
• - there should not subsist default in the
redemption of preference shares issued either
before or after the commencement of 2013 Act.
• - no payment of dividend due on any preference
shares

• Maximum period upto which a company
limited by shares, can issue redeemable
preference shares
Not exceeding 20 years from the date of issue.
• A company may issue preference shares for a
period exceeding 20 years but not exceeding
30 years for infrastructure projects (Specified
in Schedule VI).

Sources for redemption of preference shares
• Redemption of preference shares shall be made only from the
following;
• i) Out of the profits of the company which would otherwise
available for dividend.
• ii) Out of the proceeds of a fresh issue of shares made for the
purpose of such redemption.
• A sum equal to the nominal amount of the shares to be
redeemed is to be transferred to a reserve called “Capital
Redemption Reserve”.
• If redemption is at premium then premium amount out of the
profits of the company or securities premium account.

• Capital Redemption Reserve account may be
applied by the company, in paying up unissued
shares of the company to be issued to
members of the company as fully paid bonus
shares.

• What is the position of a company when it is
unable to redeem any preference shares?
• When a company is unable to redeem any
preference shares, it can issue further
redeemable preference shares equal to the
amount due, including the dividend thereon
subject to the following conditions;
• i) With the consent of the preference
shareholders holding three-fourths in value; and
• ii) With the approval of the Tribunal on a petition
made by it in this behalf.

• Voting on preference shares:
• Section 47 prescribes restrictions on voting rights of
preference shareholders. The preference shareholders can vote
only on those resolution which can directly affect their rights
attached to their shares.
• It entitles a preference shareholder to vote on every resolution
placed before the company at any meeting if the company has
not paid the dividend in respect of a class of preference
shareholders for a period of consecutive 2 (two) or more years.
• This is applicable to both public & private
companies

Further Issue of Capital
• If company having share capital proposes to increase
its subscribed capital by the issue of further shares.
• Provisions relating to further issue of capital to be
applicable to all types of companies
• Existing shareholders on proportionate basis
• Apart from existing shareholders , shares may also be
offered to employees as ESOP
• The condition of expiry of two years of formation of
company OR 1 year from.
• Letter of offer shall be made limiting not less than 15
days & not more than 30 days.(if not accepted it shall
deemed to have been declined)

Preferential Basis
• To any person (including existing shares) for cash or other
than cash, if:
-Special Resolution passed;
-Price determined by Registered Valuer
• Preferential Offer means:
• Issue of shares or other securitieses by a company to any select
person or group of person on preferential basis & doesnot
include public issue, PI, Bonus, ESOP, ESPS,Sweat Equity,
Depository receipt in India/Abroad
• Inclue equity shares , PCD/NCD or any securities convertible
into equity at later date.
• Allotment be completed within 12 months from the date of SR
• Incase of convertible securities, the price of resultant share be
known beforehand.

Private Placement
• Private Placement to be made through issue of offer letter.
• - The offer to be made to maximum 50 persons at a time and not
more than to 200 persons in aggregate (excluding QIB and
ESOP), in a Financial Year.
• - Such allotment of shares restricted to 4 in a Financial Year
and not more than once in a calendar quarter with a minimum gap
of 60 days between any 2 such offers or invitations.
• - Value of such offer or invitation shall be with an investment
size of minimum Rs. 20,000 per person.
• - Payment be made by subscriber’s Bank Account only. No
Cash payment
• - S/R be passed

• - Allotment be completed within 60 days from date of
receipt of share application
• else repay within 15 days from date of completion of 60
days.
• - If unable to pay liable to repay interest @ 12% pa from
expiry of 60th day.
• - Share application be kept in separate bank account and
utiliize only for issue of shares else repay is unable to allot
• If made to more than 50 persons or such higher number
of persons as may be prescribed shall be deemed to be
an offer to the public.
• Non-compliance to above lead to stringent penalty which
may extend to higher of:
• Amount involved in Offer: or
• Rs. Two Crores

Sahara Case:
• Under the Act, 1956 the conditions relating to private
placement were applicable only to public companies.
on the contrary Act, 2013 provides various conditions
for private placement of shares and debentures which
apply to both private companies and public companies.
• The conditions imposed in relation to private
placements by companies seem to have been issued
after the ruling of the Hon"ble Supreme Court of India
in the case of Sahara Group.
• Sahara India Real Estate Corporation Limited ('SIRECL')
and Sahara Housing Investment Corporation Limited
('SHICL') issued unsecured optionally fully-convertible
debentures ("OFCDs") amounting to about Rs 24,000
crores to more than 2 crore investors

• When Securities Exchange Board of India ('SEBI'),
had came to know of the large scale collection of
money from the public by Sahara through
issuance of OFCDs, it issued a show cause notice
to SIRECL and SHICL inter alia stating that the
issuance of OFCD's are public issue and therefore
liable to be listed u/s 73 of Act, 1956 and also
directed to refund the money solicited and
mobilized through the prospectus issued with
respect to the OFCDs, since they had violated
various other clauses of the SEBI (Disclosure and
Investor Protection) Guidelines, 2000 and also
various provisions of the SEBI (Issue of Capital
and Disclosure Requirements) Regulations, 2009

• it was urged by the Sahara Group that OFCDs
were issued in the nature of "hybrid
instruments" as defined u/s 2(19A) the Act,
1956 and SEBI did not have jurisdiction to
administer those securities since Hybrid
securities were not included in the definition
of 'securities' under the Securities and
Exchange Board of India Act, 1992 ("SEBI
Act"), or the Securities Contract Regulation
Act, 1956 ("SCRA"), but would be governed by
the Central Government under section 55A(c)
of the Act, 1956.

• The Supreme Court held that OFCDs issued by
Sahara Group were public issue of debentures,
hence securities and once the number 49 is
crossed, the proviso to Section 67(3) becomes
effective and it is an issue to the public, which
attracts Section 73(1) of Act, 1956 and
application for listing becomes mandatory
which falls under the administration of SEBI
u/s 55A(1) (b) of the Act, 1956. The Court
upheld the proceedings of the SEBI and
Sahara Group was ordered to refund the
amount to investors along with interest

Sahara Case
• Use of term ‘securities’ instead of ‘shares’ -
Use of the term shares in the Companies Act,
1956 restricted regulations of issuances of
various other instruments by Company to raise
funds . Companies manipulated this
loophole by using other terminology or
nomenclature for instruments used to raise
funds, thereby easily escaping the
regulatory oversight.

Case:
• Panacea Biotec Ltd has informed BSE that the
Company had allotted 3,43,00,000 , 0.5%, Non-
Convertible Cumulative Redeemable Preference
Shares (‘NCCRPS’) of Rs.10 (Rupees Ten) each at
par aggregating to Rs. 34.30 on private placement
basis to the promotes of the Company in pursuance of
Special Resolution passed by the shareholders in their
Extra-Ordinary General Meeting held on January 06,
2015 at the Registered Office of the
Company.Further, the aforesaid shares are issued in
physical form and the Company does not intend to
list the aforesaid shares on Stock exchange(s).

Case 2:
• Reliance Chemotex Industries Ltd has
informed BSE that a meeting of the Board of
Directors of the Company will be held on
January 17, 2015, inter alia, for allotment of
3,00,000 10% Cumulative Redeemable
Preference Share of Rs.100 each.

Issue of shares at discount
• Shares at Discount now not possible except
Sweat Equity Shares & dvr’s.

Sweat equity shares
• “Sweat equity shares” means such equity
shares, which are issued by a Company to its
directors or employees at a discount or for
consideration, other than cash, for providing
their know-how or making available rights in
the nature of intellectual property rights or
value additions, by whatever name called.

• Eligibility for Sweat-
a) Permanent employee of the Company who has been
working in India or outside India, for at least last 1 year
b) Director of Company-Whole time director or not
c) An employee or a director as defined in sub-clauses
(a) or (b) above of a subsidiary (in India or outside
India) or of a holding Company.
• Value Addition- Has been defined. It means actual or
anticipated economic benefits derived or to be derived
by Company from an expert or a professional for
providing know-how or making available rights in the
nature of intellectual property rights.
• Authorisation by shareholders- Yes, prior
shareholders approval through special resolution is
required.

• Time limit for issuing Sweat: Allotment of
sweat equity shares shall be made within 12
months from the date of passing special
resolution.
• Time Gap- There should be at least 1 year
between the commenced of business and
issue of such shares.
• Valuation- Valuation of sweat shares and
intellectual property rights(IPR)/know how/
value additions shall be done by Registered
Valuer.

• Limit on sweat equity: In a year, sweat shares
shall not exceed 15% of existing paid up equity
share capital or shares having issue value of
Rs. 5,00,00,000, whichever is higher. However,
it should not exceed 25% of paid up equity
capital of Company at any time.
• Mandatory lock-in period- 3 years from the
date of allotment. The fact that the share
certificates are under lock-in and the period of
expiry of lock in shall be mentioned in
prominent manner on share certificate.

• Infosys Technologies, which proposed sweat
equity in 1998 and 1999, has issued options
worth Rs 5,000 crore.
• AM Naik, chairman of Larsen & Toubro, holds
480,000 shares granted under sweat equity
valued at Rs 71 crore(as per 2009)
• Anil Singhvi of Gujarat Ambuja Cement
• BS Nagesh of Shopper's Stop
• YC Deveshwar of ITC
• KV Kamath and Lalita Gupte of ICICI Bank
• Dipak Gupta and Shivaji Dam of Kotak Mahindra
Bank are among the few holding shares worth
over Rs 10 crore granted under sweat equity.

Issue of Bonus Shares
Issue of Bonus Shares can be made out of:
• -Free reserves; or
• -the securities premium account; or
• -capital redemption reserve account

• Decision of issue of Bonus Shares once made by the
Board cannot be withdrawn
• Bonus Shares can be issued if –
(i) Authorisation by articles of association;
(ii) Board and shareholders’ approval;
(iii) there being no partly paid-up shares.
(iv)No issue of bonus shares in lieu of dividend
Prohibition on Issue of Bonus shares:-
• if the Company has defaulted in payment of:
 Interest/ Principal in respect of Fixed Deposits or
Debt Securities issued by it
 Statutory dues of employees such as contribution to
provident fund, gratuity , Bonus.

Case 1:
a) A company issue bonus shares in the 2:1
ratio.They distributed the bonus out of
capital revaluation reserves.The CLB(now
NCLT) opposed the bonus issue of the
company. Can company still issue bonus after
CLB objection?

SEBI’s norms
• It is mandatory for the companies to repurchase at least 50 per
cent of the offers, under the new norms issued by Sebi in August,
2013.
• Those not able to meet the target would be barred from launching
another offer for a period of one year while they could also be
imposed with a penalty amounting to maximum of 2.5 per cent
on the funds lying in the escrow account.
• Moreover, the companies are now required to complete their
buyback offers within six months as against 12 months allowed
earlier.
• Companies can buyback shares in two way -- open market and
tender offer.In an open market offer, firms can buyback shares
from shareholders without knowing the buyer, while tender offer
involves the company writing to its shareholders individually to
know their willingness for sale of shares in the buyback.

Applicability
• For Unlisted Public and Private Companies
Section 68, 69 and 70 of Companies Act, 2013 &
Rule 17 of Companies (Share Capital and
Debentures) Rules, 2014
• For Listed Companies : Section 68, 69 and 70 of
Companies Act, 2013 Rule 17 of Companies (
Share Capital and Debentures) Rules, 2014
Securities and Exchange Board of India (Buy-back
of Securities) Regulations, 1998 and Securities
and Exchange Board of India (Buy-back of
Securities) (Amendment) Regulations, 2013

Buyback of Shares
1) A company may buy its own securities from (referred to
buy back) out of :-
• a. its free reserves;
• b. the securities premium account
• C. proceeds of the issue of any shares or other specified
securities.
• Provided that no buy back of any kind of shares or
securities from same kinds of proceeds
2) No company shall purchase its own shares or other
specified securities under sub-section (1), unless—
(a) the buy-back is authorised by its articles;
(b) a special resolution has been passed at a general
meeting of the company authorising the buy-back

• Provided that nothing contained in this clause
shall apply to a case where—
• (i) the buy-back is, ten per cent. or less of the
total paid-up equity capital and free reserves
of the company; and
• (ii) such buy-back has been authorised by the
Board by means of a resolution passed at its
meeting;

• (c) the buy-back is twenty-five per cent. or less of the
aggregate of paid-up capital and free reserves of the
company:
• Provided that in respect of the buy-back of equity
shares in any financial year, the reference to twenty-
five per cent. in this clause shall be construed with
respect to its total paid-up equity capital in that
financial year;
• (d) the ratio of the aggregate of secured and unsecured
debts owed by the company after buy-back is not more
than twice the paid-up capital and its free reserves:
• Provided that the Central Government may, by order,
notify a higher ratio of the debt to capital and free
reserves for a class or classes of companies;

• (e) all the shares or other specified securities for
buy-back are fully paid-up;
(4) Every buy-back shall be completed within a
period of one year from the date of passing of
the special resolution, or as the case may be, the
resolution passed by the Board under clause (b)
of sub-section (2).
(5) The buy-back under sub-section (1) may be—
• (a) from the existing shareholders or security
holders on a proportionate basis;
• (b) from the open market;
• (c) by purchasing the securities issued to
employees of the company pursuant to a scheme
of stock option or sweat equity

6) Where a company completes a buy-back of its
shares or other specified securities under this
section, it shall not make a further issue of the
same kind of shares or other securities including
allotment of new shares or other specified
securities within a period of six months except by
way of a bonus issue or in the discharge of
subsisting obligations such as conversion of
warrants, stock option schemes, sweat equity or
conversion of preference shares or debentures
into equity shares.
•

• (7) No company shall directly or indirectly purchase its own
shares or other specified securities—
• (a) through any subsidiary company including its own
subsidiary companies;
• (b) through any investment company or group of
investment companies; or
• (c) if a default, is made by the company, in the repayment
of deposits accepted either before or after the
commencement of this Act, interest payment thereon,
redemption of debentures or preference shares or payment
of dividend to any shareholder, or repayment of any term
loan or interest payable thereon to any financial institution
or banking company:
• Provided that the buy-back is not prohibited, if the default
is remedied and a period of three years has lapsed after
such default ceased to subsist.

(8) Where a company purchases its own shares out of
free reserves or securities premium account, a sum
equal to the nominal value of the shares so purchased
shall be transferred to the capital redemption reserve
account and details of such transfer shall be disclosed
in the balance sheet.
• (a) The capital redemption reserve account may be
applied by the company, in paying up unissued shares
of the company to be issued to members of the
company as fully paid bonus shares.
9)Declaration of solvency.

Case 1:
• Jindal Steel & Power Ltd has informed BSE that as per
Regulation 14(3) of the Securities and Exchange Board of
India (Buyback of Securities) Regulations, 1998, as amended
(the “Buy-Back Regulations”), the Company has utilized at-
least 50% of the amount earmarked for the Buy-Back as
specified in the resolution passed by the Board of Directors at
its meeting held on August 30, 2013, i.e., the Minimum Buy-
Back Size of Rs. 500 crores.
• Accordingly, pursuant to paragraphs 1.7 and 4.3 of the public
announcement dated September 06, 2013 (the
“Announcement”), the duly authorized Sub-Committee of
Directors of the Company at its meeting held on February 04,
2014, unanimously approved that the buy-back offer of equity

• shares of the Company be closed on February
18, 2014, being a date earlier than the last date
for the completion of buy-back mentioned in
the Announcement, i.e. March 15, 2014. The
intimation regarding early closure of Buy back
was sent vide Company's letter dated February
04, 2014.Further the Company has informed
that, as per above decision, the Buy back has
closed on February 18, 2014

• On 9th Oct 2014: Infosys' board on Friday
approved a bonus issue of one equity share
for every equity share held by investors. The
company also announced a dividend of Rs 30
per share . The two announcements led to a 7
per cent surge in stock prices and sent Infosys
to a 52-week high of Rs 3,908 in intraday
trade. Infosys has not fixed a record date for
the bonus issue yet.

Debentures
(1) A company may issue debentures with an option to convert
such debentures into shares, either wholly or partly at the time
of redemption:
• Provided that the issue of debentures with an option to convert
such debentures into shares, wholly or partly, shall be approved
by a special resolution passed at a general meeting.
(2) No company shall issue any debentures carrying any voting
rights.
(3) Secured debentures may be issued by a company subject to
such terms and conditions as may be prescribed.
(4) Where debentures are issued by a company under this section,
the company shall create a debenture redemption reserve
account out of the profits of the company available for payment
of dividend and the amount credited to such account shall not be
utilised by the company except for the redemption of debentures

• The Central Government may prescribe the
procedure, for securing the issue of
debentures, the form of debenture trust deed,
the procedure for the debenture-holders to
inspect the trust deed and to obtain copies
thereof, quantum of debenture redemption
reserve required to be created and such other
matters.

Power to nominate
• (1) Every holder of securities of a company may, at any
time, nominate, in the prescribed manner, any person to
whom his securities shall vest in the event of his death.
• (2) Where the securities of a company are held by more
than one person jointly, the joint holders may together
nominate, in the prescribed manner, any person to whom
all the rights in the securities shall vest in the event of
death of all the joint holders.
• (3) Where the nominee is a minor, it shall be lawful for the
holder of the securities, making the nomination to appoint,
in the prescribed manner, any person to become entitled to
the securities of the company, in the event of the death of
the nominee during his minority.

vdocument.in_companies-act-2013-ppt.pptx

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