BUSINESS LAW
THE COMPANIES ACT, 2013

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TIMELINE
Companies Act in
India came into
existence in 1850
After
Independence, the
first Companies Act
of Independent
India was formed in
1956
On 2nd December,
2004 various
revisions were
proposed to the
Companies Act,
1956
On 18 December
2012 the bill was
placed in Rajya
Sabha with
amendments
The bill was then
passed by Rajya
Sabha on 8th
August 2013 and
was notified in the
gazette of India on
30th August 2013

WHAT IS A COMPANY?
• Company law is defined under the Company Act, 1956. Section 3 (1)(i) of the Company Act
1956 defines a company as, “a company formed or registered under this Act or an existing
company.”
• ‘Existing company’ means a company formed or registered under any of the earlier
Company laws
The Companies Act, 2013
The Companies Act 2013 is an Act of the Parliament of India on Indian company law
which regulates incorporation of a company, responsibilities of a company, directors,
dissolution of a company.
The Act has replaced The Companies Act, 1956 (in a partial manner) after receiving the
assent of the President of India on 29 August 2013.
A new term of "one-person company" is included in this act that will be a private
company and with only 98 sections of the Act notified.

Corporate Personality
Separate Legal Entity
Perpetual Succession
Common Seal
Limited Liability
Separate Property
Transferability of Shares
Capacity to sue and be
sued
FEATURES OF A COMPANY-

TYPES OF COMPANY

ON THE BASIS OF INCORPORATION
• STATUTORY COMPANY-
Statutory companies are those companies that have been constituted by an Act of Parliament or
State Legislature. The constitution, powers and scope of the activities of such companies or
corporations are provided under a special enactment which can be altered only and only by a
legislative amendment.
• REGISTERED COMPANY-
These are the companies that have been incorporated under the Act of 2013 or under any previous
company law and registered with the Registrar of the Companies.
• ROYAL CHARTERED COMPANY-
These are the companies formed under the royal charter of a company or by special order of king
or queen.

ON THE BASIS OF LIABILITY
• COMPANY LIMITED BY SHARES- In a company that is limited by shares, the liability of
the members of such a company is limited to the nominal value of the shares held by them. No
member can be called upon to pay anything more than the value of shares held by him.
• COMPANY LIMITED BY GUARANTEE- A company wherein the members undertake to
contribute to the assets of the company in the event of winding up, such a company is a
company limited by guarantee.
• UNLIMITED COMPANY- A company having no limit on the liability of its members is
termed as an unlimited company. The liability of members herein may stretch to their personal
assets in the event of winding up of the company in order to contribute to the assets of the
company.

ON THE BASIS OF CONTROL
• HOLDING COMPANY- Where one company controls the management of another company
then it is called holding company.
• SUBSIDIARY COMPANY- “Subsidiary Company” or “subsidiary”, in relation to any other
company (that is to say the holding company), means a company in which the holding
company—
controls the composition of the Board of Directors; or
exercises or controls more than one-half of the total voting power either at its own or
together with one or more of its subsidiary companies.

ON THE BASIS OF TRANSFERABILITY OF SHARES
• PRIVATE COMPANY-
Private Company means a Company which has a minimum share paid up capital of Rs 1 lakh and which
provides the following restrictions through its Articles of Association and Memorandum –
• Restricts the transfers of shares by its members.
• Limits the maximum number of members to 50.
• PUBLIC COMPANY-
A public company means a company which has a minimum share paid up capital of Rs 5 Lakh and
which is not a private company. It has following Features:
• At least 7 members are required to form a public company.
• It has at least 3 directors.
• It does not restrict transferability of shares.

Doctrine of piercing corporate veil
• Piercing the Corporate Veil necessitates looking beyond the corporation as a
legal entity. In other words, the courts ignore the corporation and deal with
the company's members or managers directly. As a result, the act is referred to
as piercing the corporate veil.
• The curtain can be lifted under the following circumstances.
• 1. The Presence of Fraud or Wrongdoing concerning Third Parties
• 2. Failure to maintain the companies’ separate identities
• 3. Failure to keep the company’s identity separate from that of its owners or
shareholders.

Scenarios under which courts consider piercing or lifting
the corporate veil are as below.
1. To determine the character of the company.
2. To protect revenue or tax.
3. to ovoid legal obligations.

DOCTRINE OF INDOOR MANAGEMENT
• The Doctrine of Indoor Management is a significant legal principle in India which
states the affairs of a company, and those affairs are to be managed by its directors and
officers, and not by the outsiders
• It protects the directors and officers of a company from liability for its debts and other
liabilities
• This doctrine basically states that the company affairs should be conducted in a manner
that is fair and just to all the shareholders
• This doctrine is important because it ensures that the company is run in a transparent and
efficient manner
• The doctrine of indoor management applies to the offenses committed by directors and
officers of a company
• There are some of the key components of an indoor management system:
Documentation and retention of records, Internal control systems, Monitoring and
reporting mechanisms, Risk management processes
• This doctrine is solely for protecting the interests and the rights of the third party
who enter into transactions with the company in good faith and to whom the company
stands indebted

Memorandum Of Association (MoA)
• The Memorandum of Association or MOA of a company defines the
constitution and the scope of powers of the company.
Objective of registering a MOA
• The MOA of a company contains the object for which the company is
formed. It identifies the scope of its operations and determines the
boundaries it cannot cross.
• It is a public document according to Section 399 of the Companies Act ,
2013. Hence, any person who enters into a contract with the company is
expected to have knowledge of the MOA.
• It contains details about the powers and rights of the company.

Contents of the Memorandum Of Association (MoA)
• It consists of the following clauses:
1. Name Clause
2. Registered Office Clause
3. Object Clause
4. Liability Clause
5. Capital Clause
6. Subscription Clause

Article Of Association(AOA)
• As per Section 2 (5) of the Companies Act, 2013, Articles of Association have
been defined as the by-laws that regulate the operations and functioning of the
company like the appointment of directors and handling of financial records
to name a few.
Objectives of AOA
 Must include the regulations for the management of the company and matters
that have been prescribed under the rules.
 When a company is formed, certain rules and regulations are laid down along
with the objectives of the company’s operations and its purpose. These laws
regulate the internal affairs of a company.

Contents of Article Of Association
• Rights of various shareholders, share certificates, payment of a
commission.
 Transmission of shares
 Forfeiture of shares
 General meetings and proceedings
 Voting rights of members
 Dividends and reserves

FORMS OF ARTICLES OF ASSOCIATION
The forms for Articles of Association (AOA) in tables F, G, H, I,
and J for different types of companies have been mentioned under
Schedule I of the Companies Act, 2013. AOA must be in the
respective form.
 Table F- AOA of a company limited by shares
 Table G- AOA of a company limited by guarantee and
having a share capital
 Table H- AOA of a company limited by guarantee and not
having a share capital
 Table I- AOA of an unlimited company and having a share
capital
 Table J- AOA of an unlimited company and not having a
share capital

DIFFERENCE BETWEEN MEMORANDUM OF ASSOCIATION AND ARTICLE OF ASSOCIATION
MOA AOA
It is the constitution of the company. It defines the rules and regulations of the
company.
It shows relations with outside forces. It shows relations of internal working of
the company.
It is mandatory for all the companies. Table A can be used in place of AoA.
Filing at the time of company
registration.
Filing at the time of company registration
is optional.
MOA is not easily altered as it requires
prior approval from the Central
government.
The AOA can be easily altered by passing
a simple resolution.
The forms of Memorandum of
Association are in Tables A, B, C, D, E of
Schedule 1.
Forms of Articles of Association are in
Tables F, G, H, I, J of Schedule 1.

How to Register a Company in India
Step 1: Deciding your Business Structure
This is one of the most fundamental and foundational steps for the registration of a company anywhere around
the world. Deciding the business structure of your company will basically define the path your company takes
and how it handles operations for its entire lifetime. Thus, it becomes a pivotal step to decide the right business
structure conforming to your firm’s needs and wants.
Things to Consider for deciding the business structure
1. Number of owner/partners
2. Initial Investments in the business
3. Income Tax Rates
4. Attracting Investors

How to Register a Company in India
• Step 2: Obtaining a DSC [Digital Signature Certificate]
Digital Signature Certificate or DSC for short is basically the digital equivalent of the physical
certificates. It is basically used to verify the identity of a person or sometimes to access information and
get services on the internet or to sign certain documents digitally. how to register a company
• Step 3: File for Name Approval
When you have the plan to incorporate a company, you certainly have to have a name for it right? And it
is pivotal that the name approval procedure of the company goes smoothly and without objections or it
could stall all your progress of registering a company. To file for name approval for Public Companies,
PLCs (Public Limited Company), OPC, NBFC, etc use the RUN (Reserve Unique Name) e-form
Alternatively, to file for name approval, business owners can utilize the SPICe forms. SPICe stands for
Simplified Performa for Incorporating Company Digitally. How to register a company
In order to incorporate an LLP however, filing for name approval has to be done via the RUN-LLP forms.

How to Register a Company in India
• Step 4: Obtain DIN
DIN stands for Director Identification Number and it is a unique identification number given by the Central Government
to individuals intending to be the directors of a new or already existing company.
• Step 5: File for Incorporation
The Final step in the company incorporation procedure is filing for incorporation and the MCA has given dedicated forms
for incorporation of companies.
SPICe Forms (INC-32) The SPICe forms allow for the incorporation processing of Limited Companies (Public /Private/
LLP/OPC) and have the following procedures streamlined.
 Obtaining DIN
 Name Reservation
 Incorporation
 Pan Application
 TAN Number

How to Register a Company in India
• Step 6: File AoA and MoA
• MoA stands for Memorandum of Association and AoA stands for Articles of association. Together, these
two form the constitution of the company. These two basically define the extent of the legal powers wielded
by the company and the information about the business activities of the company along with the relationship
of the company with the shareholders.

KANODIA KNITS PVT LTD
v.
REGISTRAR OF COMPANIES DELHI & HARYANA [NCLAT]
Company Appeal (AT) No.216 of 2018
A.I.S. Cheema & Balvinder Singh. [Decided on 28/01/2019]
Companies Act, 2013 – Section 248 – Striking of name of the company documents could not
prove that the company was working – Whether name to be restores
Decision: Appeal dismissed
Brief facts:
The name of the appellant company was struck off by the Registrar of Companies, as the company
had not been carrying on business or nor in operations for two immediately preceding financial
years and the company had not obtained the status of dormant company under Section 455 of the
Companies Act, 2013
The appellant filed the appeal before NCLT (National Company Law Tribunal) claiming that it
had not been served with Notice under Section 248(1) of the Act and the Registrar of Companies
(ROC) had proceeded to issue notice under Section 248(5) of the Act and the name of the
appellant company was then struck off. The appellant claimed that the company had been doing
business and was in operation and audited financial statements for the year financial year 2012-13
to FY 2016-17 were filed.

The NCLT considered the case put up before it as well as the documents and came to the
conclusion that the appellant company failed to prove that it was carrying on business or was in
operation when its name was struck off and dismissed the appeal which was filed before it.
Against the dismissal the present appeal has been filed and the same claim is put up by the
appellant referring to the documents which were filed before NCLT.
Reason:
• Appellant company had not filed financial statements from the financial year ending 31.3.2004
till 31.3.2011.
• The balance sheet and annual return was filled for year ending 31.03.2012 and no filling was
done after that.
• Notice was duly issued to the company on 21.03.2017
• According to the ROC the appellant did not respond to the notice and further steps to strike off
the company were taken.
• After such notice the appellant made no effort to move the ROC and put up its case that the
appellant was in business or in operation when the name was struck off.

• Thus, they were not accepting the contention that opportunity to the appellant was not given.
Regarding the merits of the claim that the appellant was in business or in operation the documents
filed before us include two income tax returns for the assessment years 2016-17 and 2017-18.
• The return for 2016-17 claims that the gross total income of the year was Rs.504 and the income
tax return for 2017-18 claims that the gross total income was Rs.1473/-. If the invoices are seen,
the seller is shown as Kanodia Hosiery Mills and buyer is Kanodia Knit (P) Ltd. If the address of
the seller is perused in these invoices it is 35, North Basti Harphool Singh, Sadar Thana Road,
Delhi. This is the same address of the appellant, Kanodia Knits Pvt Ltd, also.
• How much weight such documents should be given is a foregone consequence. They were not
impressed by such documents to claim that the company was in business or in operation. Perusal
of the impugned order shows that the NCLT considered the documents placed before it.
Final Interpretation of Case
Having heard the appellant, and seeing the documents when they have considered the above findings
and observations of the NCLT, they do not find any reason to differ from NCLT. There is no
substance in this appeal. The appeal is rejected. No order as to costs.

Conclusion
The Companies Act, 2013 has introduced certain changes and
new ideas which will have to be adopted by companies as well
the society governed by this act. Though there are no two
opinions regarding the boldness and appropriateness of the new
step taken by the Government of India to overhaul the outdated
companies act of 1956, but the effectiveness of this step is
debatable as not all the aims and goals set forward by the
legislature. This was so because on paper, the provisions
seemed very effective but various difficulties were faced while
implementing these provisions.

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