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Business Law_Companies Act 2013_Assingment_PPT.pptx

  3. 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
  4. 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.
  5. 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-
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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
  14. 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.
  15. 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
  16. 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.
  17. 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
  18. 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
  19. 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.
  20. 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
  21. 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.
  22. 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
  23. 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.
  24. 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.
  25. 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.
  26. • 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.
  27. 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.