Corporate Law ( LLB- 305)

Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Semester: BALLB & BBALLB V
Name of the Subject:
CORPORATE LAW-305
FACULTY NAME: MS.ANNAPURNA
CHAKRABORTY TIWARI (ASSISTANT
PROFESSOR)

COMPANY
• A company is a legal entity formed by a group of individuals to engage in and
operate a business—commercial or industrial—enterprise. A company may be
organized in various ways for tax and financial liability purposes depending on the
corporate law of its jurisdiction.
• The line of business the company is in will generally determine which business
structure it chooses such as a partnership, proprietorship, or corporation. These
structures also denote the ownership structure of the company.
• They can also be distinguished between private and public companies. Both have
different ownership structures, regulations, and financial reporting requirements.

OTHER FORMS OF BUSINESS ORGANISATION
1.Sole Proprietorship
The simplest and most common form of business ownership, sole proprietorship is a
business owned and run by someone for their own benefit. The business’ existence is
entirely dependent on the owner’s decisions, so when the owner dies, so does the
business.
2.Partnership
These come in two types: general and limited. In general partnerships, both owners invest
their money, property, labor, etc. to the business and are both 100% liable for business
debts. In other words, even if you invest a little into a general partnership, you are still
potentially responsible for all its debt. General partnerships do not require a formal
agreement—partnerships can be verbal or even implied between the two business owners.

OTHER FORMS OF BUSINESS ORGANISATION
3.Corporation
Corporations are, for tax purposes, separate entities and are considered a legal person.
This means, among other things, that the profits generated by a corporation are taxed as
the “personal income” of the company. Then, any income distributed to the shareholders
as dividends or profits are taxed again as the personal income of the owners.
4.Limited Liability Company (LLC)
Similar to a limited partnership, an LLC provides owners with limited liability while
providing some of the income advantages of a partnership. Essentially, the advantages of
partnerships and corporations are combined in an LLC, mitigating some of the
disadvantages of each.

TYPES OF COMPANY
• Companies Limited by Shares
• Companies Limited by Guarantee
• Unlimited Companies
• One Person Companies (OPC)
• Private Companies
• Public Companies
• Holding and Subsidiary Companies
• Associate Companies
• Companies in terms of Access to Capital
• Government Companies
• Foreign Companies
• Charitable Companies
• Dormant Companies

ONE PERSON COMPANY
The Companies Act, 2013 completely revolutionized corporate laws in India by introducing
several new concepts that did not exist previously. On such game-changer was the
introduction of One Person Company concept. This led to the recognition of a completely
new way of starting businesses that accorded flexibility which a company form of entity can
offer, while also providing the protection of limited liability that
sole proprietorship or partnerships lacked.

FOREIGN COMPANY
• The term ‘foreign company’ is clearly laid down under Section 2 sub-section 42 of the
Companies Act, 2013 (New Act). A foreign company is any company or body
corporate incorporated outside India which, has a place of business in India whether
by itself or through an agent, physically or through electronic mode; and conducts any
business activity in India in any other manner.
• In order to be considered a ‘foreign company’, one has to fulfil both the
abovementioned criteria. Hence, this new definition has a wider scope compared to
the earlier Act. To fully appreciate the scope of the definition, it is necessary to define
the terms ‘electronic mode’ as well as ‘business activity’.

PROCESS OF INCORPORATION
NATURE AND CONTENT
The following steps are involved in the incorporation of a company-
1. Ascertaining Availability of Name
2.Preparation of Memorandum of Association and Articles of Association
3. Printing, Signing and Stamping, Vetting of Memorandum and Articles
4. Power of Attorney
5. Other Documents to be Filed with the Registrar of Companies
6. Statutory Declaration in e-Form No.1
7. Payment of Registration Fees
8. Certificate of Incorporation

DOCTRINE OF INDOORMANAGEMENT
• The doctrine of indoor management was evolved 150 years ago. It is also known as
Turquand’s rule.
• The role of the doctrine of indoor management is opposed to the role of the doctrine of
constructive notice.
• The doctrine of constructive notice protects the company against outsiders whereas
the doctrine of indoor management protects outsiders against the actions of the
company.
• This doctrine was laid down in the case of Royal British Bank V. Turquand

DOCTRINE OF ULTRA VIRES
• The expression “ultra vires” consists of two words: ‘ultra’ and ‘vires’.
‘Ultra’ means beyond and ‘Vires’ means powers.
Thus, the expression ultra vires means an act beyond the powers.
Here the expression ultra vires is used to indicate an act of the company, which is beyond
the powers conferred on the company by the objects clause of its memorandum.
• An ultra vires act is void and cannot be ratified even if all the directors wish to ratify
it.
Sometimes the expression ultra vires is used to describe the situation when the directors
of a company have exceeded the powers delegated to them. Where accompany
exceeds its power as conferred on it by the objects clause of its memorandum,

DOCTRINE OF CONSTRUCTIVE NOTICE
The notice is an information which is given legally or normally hand it over to person or
group of persons to give information about any particular information or a notice which is
given legally is summon which is a legal notice by the court to a person notifying that he or
she has to be present or appear in front of the court as the summon is issued to the defendant
in the suit filed against him by the plaintiff. Notice is mainly specifies the information
regarding any topic or any kind of news which is to be spread to all the people there by. So,
the main focus or main area is the Doctrine of Constructive Notice.
This doctrine is the principle of presumption of the knowledge of that particular subject or
information in the eyes of law. It is been presumed that you have knowledge or you know all
the information regarding the Articles and Memorandum of the company to the outsider to
the company.

MEMORANDUM OF ASSOCIATION
• The Memorandum of Association or MOA of a company defines the constitution and
the scope of powers of the company.
• In simple words, the MOA is the foundation on which the company is built. The
document which defines relationship between company and outsider.
• A memorandum of association (MOA) contains a name clause, registered office or
business location clause, objective or objects clause, liability clause, capital clause, as
well as an association clause. MOAs are legal documentation that are prepared prior to
the registration of limited liability companies (LLCs)

PROSPECTUS
A prospectus includes some of the following information:-
• A brief summary of the company’s background and financial information
• The name of the company issuing the stock
• The number of shares
• Type of securities being offered
• Whether an offering is public or private
• Names of the company’s principals
• Names of the banks or financial companies performing the underwriting

STATEMENT IN LIEU OF PROSPECTUS
• The Statement in Lieu of Prospectus is a document filed with the Registrar of the
Companies ( ROC ) when the company has not issued prospectus to the public for
inviting them to subscribe for shares.
• The statement must contain the signatures of all the directors or their agents
authorized in writing. It is similar to a prospectus but contains brief information.
• The Statement in Lieu of Prospectus needs to be filed with the registrar if the
company does not issues prospectus or the company issued prospectus but because
minimum subscription has not been received the company has not proceeded for
the allotment of shares.

SHARES
• Shares are units of ownership interest in a corporation or financial asset that provide
for an equal distribution in any profits, if any are declared, in the form of dividends.
The two main types of shares are common shares and preferred shares.
• Physical paper stock certificates have been replaced with electronic recording of stock
shares, just as mutual fund shares are recorded electronically. Most companies issue
common stock.
• The stock may benefit shareholders through appreciation and dividends, making
common stock riskier than preferred stock. Common stock also comes with voting
rights, giving shareholders more control over the business.
• In addition, certain common stock comes with pre-emptive rights ensuring that
shareholders may buy new shares and retain their percentage of ownership when the
corporation issues new stock.

SHARE CAPITAL
• Share capital is the money a company raises by issuing common or preferred stock.
The amount of share capital or equity financing a company has can change over time
with additional public offerings. The term share capital can mean slightly different
things depending on the context. Accountants have a much narrower definition and
their definition rules on the balance sheets of public companies. It means the total
amount raised by the company in sales of shares.A company's share capital is the
money it raises from selling common or preferred stock.
• Authorized share capital is the maximum amount a company has been approved to
raise in a public offering.
• A company may opt for a new offer of stock in order to increase the share capital on
its balance sheet.

DEBENTURE
Debentures are documented in an indenture. An indenture is a legal and binding
contract between bond issuers and bondholders. The contract specifies features of a
debt offering, such as the maturity date, the timing of interest or coupon payments, the
method of interest calculation, and other features. Corporations and governments can
issue debentures. A debenture is a type of debt instrument that is not backed by any
collateral and usually has a term greater than 10 years.
Debentures are backed only by the creditworthiness and reputation of the issuer.
Both corporations and governments frequently issue debentures to raise capital or
funds.

DEBENTURE BOND
• The term debenture bond refers to debt issued by a company that is not secured by
collateral. Debenture bonds are a source of capital and would appear as liabilities of
the company on the balance sheet.
• Also known as certificates of indebtedness, bond debentures are oftentimes used by
large companies to raise money. Unlike mortgage bonds, which are backed by
physical assets, debentures are unsecured loans. Perhaps the most commonly issued
debenture is Treasury Bills, or T-Bills, which are issued by the federal government.
• The value of a debenture to investors relies solely on the perceived creditworthiness of
the issuing company. For example, a security issued by a company with a bond rating
of AAA would be deemed a relatively safe investment.Within this category of
investments, there is also a prescribed payment structure. Senior debentures are paid
before subordinate, or junior, securities and the risk of non-payment would increase as
subordination increases.

CLASSIFICATION OF COMPANY SECURITIES
• Security, in business economics, written evidence of ownership conferring the
right to receive property not currently in possession of the holder.
• The most common types of securities are stocks and bonds, of which there are
many particular kinds designed to meet specialized needs. This article deals
mainly with the buying and selling of securities issued by private corporations.
• create two kinds of securities: bonds, representing debt, and stocks,
representing ownership or equity interest in their operations

CLASSIFICATION OF COMPANY SECURITIES
1. Equity securities
Equity almost always refers to stocks and a share of ownership in a company (which is
possessed by the shareholder). Equity securities usually generate regular earnings for
shareholders in the form of dividends. An equity security does, however, rise and fall in
value in accord with the financial markets and the company’s fortunes.
2. Debt securities
Debt securities differ from equity securities in an important way; they involve
borrowed money and the selling of a security. They are issued by an individual,
company, or government and sold to another party for a certain amount, with a promise
of repayment plus interest. They include a fixed amount (that must be repaid), a
specified rate of interest, and a maturity date (the date when the total amount of the
security must be paid by).

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Bonds, bank notes (or promissory notes), and Treasury notes are all examples of debt
securities. They all are agreements made between two parties for an amount to be
borrowed and paid back – with interest – at a previously-established time.
3. Derivatives
Derivatives are a slightly different type of security because their value is based on an
underlying asset that is then purchased and repaid, with the price, interest, and maturity
date all specified at the time of the initial transaction.
The individual selling the derivative doesn’t need to own the underlying asset outright.
The seller can simply pay the buyer back with enough cash to purchase the underlying
asset or by offering another derivative that satisfies the debt owed on the first.
A derivative often derives its value from commodities such as gas or precious metals such
as gold and silver.

INTERCORPORATE LOAN
• When a company provides loan, security or guarantee to another company or any
entity is termed as inter-corporate loans. And, when a company invests in any other
company in any form is referred as inter-corporate investment.
• According to the Companies Act, 2013 investments cannot be made through more than
two layers of companies. According to the same, the word investment implies to:
• Subscribing or purchasing of shares
• Subscribing or obtaining of share warrants
• Subscribing or purchasing of debt securities

ROLE OF COURT TO PROTECT INTERESTS OF CREDITORS
AND SHAREHOLDERS
1. The court of law protects the interests of creditors and shareholders under the
creditor protection law.
2. The court of law uses the process of the legislation to help the creditors with
the clearing of the debt amount through the insurance companies.
3. The shareholders are also protected by the court of law for maintaining a
standard of living.
4. There are various methods by which the shareholders can return the money to
the creditors as provided by the court of law.

CLASS ACTION SUIT
• A class action is a suit in which a group of people with the same or similar injuries
caused by the same product or action file suit against the defendant as a group. Other
names for class action lawsuits include “mass tort litigation” or “multi-district
litigation” .
• A class action lawsuit is used when a number of people suffer the same or similar
injuries as a result of the use of the same product or the same wrongful action. Because
many individual injuries are not worth enough to support a lawsuit, when they band
together, the value of the lawsuit adds up. That’s when a class action makes sense.

DERIVATIVE ACTIONS
A derivative action, also called the shareholder derivative suit, comes from two causes
of action, actually: it is an action to compel the corporation to sue and it is also an
action brought forth by the shareholder on behalf of the corporation for redressal
against harm to the corporation. Such an action allows the shareholders monitoring and
redressal of any harm caused to the corporation by the management within, in a case
where it is unlikely that the management itself would take measures to redress the harm
caused. Thus, the action is ‘derivative’ in nature when it is brought by a shareholder on
behalf of the corporation for harm suffered by all the shareholders in common. This
happens when the defendant is someone close to the management, like a director or
corporate officer or the controller. If the suit is successful, the proceeds are forwarded
not to the shareholder who brought the suit but to the corporation on behalf of which
the cause of action was established.

KINDS OF COMPANY MEETING
4 types of company meetings are-
1. Statutory meeting,
2. Annual general meeting,
3. Extraordinary general meeting,
4. Class meetings.
1.Statutory meeting-
This is the first meeting of the shareholders conducted after the commencement of the
business of a public company. Companies Act provides that every public company
limited by shares or limited by guarantee and having a share capital should hold a
meeting of the shareholders within 6 months but not earlier than one month from
the

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date of commencement of business of the company. Usually, the statutory meeting is the
first general meeting of the company. It is conducted only once in the lifetime of the
company. A private company or a public company having no share capital need not conduct
a statutory meeting.
2. Annual General Meeting
The Annual General Meeting is one of the important meetings of a company. It is usually
held once in a year. AGM should be conducted by both private and public ltd companies
whether limited by shares or by guarantee; having or not having a share capital. As the
name suggests, the meeting is to be held annually to transact the ordinary business of the
company.

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3. Extra-ordinary General Meetings (EOGM)
Statutory Meeting and Annual General Meetings are called the ordinary meetings of a
company. All other general meetings other than these two are called Extraordinary General
Meetings. As the very name suggests, these meetings are convened to deal with all the
extraordinary matters, which fall outside the usual business of the Annual General
Meetings.
EOGMs are generally called for transacting some urgent or special business, which cannot
be postponed till the next Annual General Meeting. Every business transacted at these
meetings is called Special Business.

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4. Class Meetings
Class meetings are those meetings, which are held by the shareholders of a particular class
of shares e.g. preference shareholders or debenture holders.
Class meetings are generally conducted when it is proposed to alter, vary or affect the rights
of a particular class of shareholders. Thus, for effecting such changes it is necessary that a
separate meeting of the holders of those shares is to be held and the matter is to be approved
at the meeting by a special resolution.
For example, for cancelling the arrears of dividends on cumulative preference shares, it is
necessary to call for a meeting of such shareholders and pass a resolution as required by
Companies Act. In case of such a class meeting, the holders of other class of shares have no
right to attend and vote.

POWERS OF DIRECTOR
The directors can exercise the following powers, only by passing a resolution in the
meetings of the board:
Make calls on shareholders
1. Authorize the buyback of securities and shares
2. Issue securities and shares
3. Borrow monies
4. Investing the funds
5. Grant loans
6. Approve the financial statement
7. Approve amalgamation/merger
8. Diversify the business
9. Take over a company

INDEPENDENT DIRECTOR
The companies act 1956 does not provide us the specific definition of an Independent
Director. But Independent Directors are in the limelight as per the Companies Act, 2013. A
separate criterion has been established for the companies to have an Independent Director.
Basically, we can say that an independent director is a non-executive director of a company
who helps the company in improving corporate credibility and governance standards. He/
She does not have any kind of relationship with the company that may affect the
independence of his/ her judgment.
The term “Independent Director” has been defined in the Act, along with several new
requirements relating to new requirements relating to their appointment, duties, role, and
responsibilities. The provisions relating to appointment of Independent directors are
contained in Section 149 of the Companies Act, 2013 should be read along with Rule 4 and
Rule 5 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

WOMEN DIRECTOR
Second proviso to sub-section (1) of Section 149 of the Companies Act, 2013 prescribes
that certain class of companies as prescribed shall at least have one woman director on its
board.
Rule 3 of Companies (Appointment and Qualifications of Directors) Rules, 2014 deals
with Woman Director in detail and it also prescribes the class of companies as referred to in
Section 149 of the Act on which this provision is applicable. The said rule lays down the
following:
1. The class of companies for which appointment of woman director is mandatory:
Every listed company;
Every other public company having: a) paid–up share capital of one hundred crore rupees or
more; or b) turnover of three hundred crore rupees or more. The paid up share capital or

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turnover, as the case may be, as on the last date of latest audited financial statements shall be
taken into account.
2. Time period given to the company for compliance with the provision.
When the provision of appointment of woman director is applicable to the company, the
company shall comply with such provisions within a period of six months from the date of
its incorporation.
3. Intermittent Vacancy of a Woman Director
Any intermittent vacancy of a woman director shall be filled-up by the Board at the earliest
but not later than:
i. Immediate next Board meeting; or
ii. Three months from the date of such vacancy.

PREVENTION OF OPPRESSION AND MISMANAGEMENT
Section 397(1) of the Companies Act provides that any member of a company who
complains that the affair of the company are being conducted in a manner prejudicial to
public interest or in a manner oppressive to any member or members may apply to the
Tribunal for an order thus to protect his /her statutory rights.
Sub-section (2) of Section 397 lays down the circumstances under which the tribunal may
grant relief under Section 397, if it is of opinion that :-
(a)the company’s affairs are being conducted in a manner prejudicial to public interest or in
a manner oppressive to any member or members ; and

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(b) to wind up the company would be unfairly and prejudicial to such member or
members , but that otherwise the facts would justify the making of a winding up order on
the ground that it was just, equitable that the company should be would
The tribunal with the view to end the matters complained of, may make such order as it
thinks fit.

Investor protection
Protection of investors means safeguard and enforcement of the rights and claims of a
person in his role as an investor. The capital of a company may be divided into Equity
capital and Debt capital. The persons who contribute to the equity capital of a company are
called investors. Investors have the voting rights in every matter of the company and are
entitled to get dividend. It is different from the creditors who contribute to the debt capital
of the company, who in turn get fixed rate of interest on the money so lent. Moreover,
creditors have limited voting rights only with respect to those matters which directly affect
their interest such as reduction of capital, winding up of company etc.

INSIDER TRADING
• Insider trading is defined as a malpractice wherein trade of a company's
securities is undertaken by people who by virtue of their work have access to
the otherwise non public information which can be crucial for making
investment decisions.
• When insiders, e.g. key employees or executives who have access to the
strategic information about the company, use the same for trading in the
company's stocks or securities, it is called insider trading and is highly
discouraged by the Securities and Exchange Board of India to promote fair
trading in the market for the benefit of the common investor. Insider trading is
an unfair practice, wherein the other stock holders are at a great disadvantage
due to lack of important insider non-public information.

Corporate fraud
Corporate fraud consists of activities undertaken by an individual or company that are done
in a dishonest or illegal manner, and are designed to give an advantage to the perpetrating
individual or company. Corporate fraud schemes go beyond the scope of an employee’s
stated position, and are marked by their complexity and economic impact on the business,
other employees and outside parties.
There are many types of corporate fraud, including the following common frauds:
1. Theft of cash, physical assets or confidential information
2. Misuse of accounts
3. Procurement fraud
4. Payroll fraud
5. Financial accounting mis-statements

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6. Inappropriate journal vouchers
7. Suspense accounting fraud
8. Fraudulent expense claims
9. False employment credentials
10. Bribery and corruption.

Auditing concept
The word “audit” is a very generic word, it essentially means to examine something
thoroughly. But we will be learning about auditing as it relates to accounting and the
finance world. So audit meaning is the thorough inspection of the books of accounts of
the organization.
This involves the examination of vouchers and the verification of various assets of the
organization. And the person who carries out such an audit is known as the auditor.
The International Federation of Accountants has given the following definition of an audit,
“audit is an independent inspection of the financial information of any organization,
whether profit-oriented or not profit-oriented, irrespective of its legal form, status or size
when such examination is conducted with a view to express an opinion thereof”.

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The one important thing to remember is that an audit is a close inspection of the
books of accounts, but it does not absolutely guarantee error-free books. The
auditor only expresses his opinion on the accuracy of the books, he does not give
his opinion on the financial status of the company or predict its future.
If he is satisfied with the examination then he will state that the financial accounts
are true and fair, which means they are absent of any material misstatement. But
this is not an opinion about the financial status of the company.

EVOLUTION OF CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility (‘CSR’) was introduced in the Companies Act, 2013. It
requires that every company having net worth of rupees five hundred crore or more, or
turnover of rupees one thousand crore or more or a net profit of rupees five crore or more
during any financial year shall constitute a Corporate Social Responsibility Committee of
the Board consisting of three or more directors, out of which at least one director shall be
an independent director. The Board’s report shall disclose the composition of the
Corporate Social Responsibility Committee.Company shall disclose the composition of
the Corporate Social Responsibility Committee.
The Corporate Social Responsibility Committee shall formulate and recommend to the
Board a Corporate Social Responsibility Policy which shall indicate the activities to be
undertaken by the company as specified in Schedule VII of the Companies Act, 2013, it
shall recommend the amount of expenditure to be incurred on the activities referred to

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above and monitor the Corporate Social Responsibility Policy of the company from time-to-
time.
The Board of every company shall after taking into account the recommendations made by
the Corporate Social Responsibility Committee, approve of the Corporate Social
Responsibility Policy for the company and disclose contents of such Policy
in its report and also place it on the company’s website, if any, in such manner as may be
prescribed and ensure that the activities as are included in Corporate Social Responsibility
Policy of the company are undertaken by the company.
The Board of every company shall ensure that the company spends, in every financial year,
at least two per cent of the average net profits of the company made during the three
immediately preceding financial years, in pursuance of its Corporate Social Responsibility
Policy.

CORPORATE CRIMINAL LIABILITY
In layman’s terms, the doctrine of corporate criminal liability is essentially the doctrine of
respondeat superior which has been imported into criminal law from tort law. This doctrine
states that a corporation can be made criminally liable and convicted for the unlawful acts
of any of its agents, provided those agents were acting within the scope of their actual or
apparent authority. Apparent authority is that authority which an agent can be inferred to
have by an average reasonable person, whereas actual authority is authority that a
corporation knowingly entrusts to its agent or employee. To simplify matters, if a rational
relationship can be established between an employee’s criminal conduct and his corporate
duties, the corporation will be held criminally liable for the employee’s conduct.
Throughout the ages, the evolution of the doctrine of corporate criminal liability faced
many major issues, the main ones being:
The failure to identify or prove criminal intent of a juristic, fictional being. As corporations

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are intangible legal entities, finding the mens rea necessary for the commission of a
criminal act proved to be quite the obstacle.
Sanctions were the second problem. A corporation cannot be imprisoned or put to death and
hence the threat of imprisonment which plays a major role in criminal law could not be
applied here. This lead to speculation that criminal law was not appropriate for the
enforcement of this doctrine.
Courts required the accused in a criminal case to be physically brought before them for
proceedings to take place. This was obviously not possible in the case of corporations.
Prior to the twentieth century, it was believed that a corporation lacked the mens rea
required for the commission of a criminal act and hence to attain a criminal conviction. The
idea that “A corporation has no soul to damn, and no body to kick” was widely prevalent at
that time.

DIFFERENT TYPES OF WINDING UP OF COMPANY
Winding up of a company is the process through which life of a company comes to an end
and its property is administered for the benefit of its members & creditors. An
Administrator, called a liquidator is appointed and he takes control of the company,
collects its assets, pays its debts and finally distributes any surplus among the members
in accordance with their rights.
As per section 270 of the Companies Act 2013, the procedure for winding up of a company
can be initiated either –
• By the tribunal or,
• Voluntary.
• Winding up of a Company by a Tribunal-

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As per new Companies Act 2013, a company can be wound up by a tribunal in the below
mentioned circumstances:
• When the company is unable to pay its debts
• If the company has by special resolution resolved that the company be wound up by the
tribunal.
• If the company has acted against the interest of the integrity or morality of India, security
of the state, or has spoiled any kind of friendly relations with foreign or neighboring
countries.
• If the company has not filled its financial statements or annual returns for preceding 5
consecutive financial years.
• If the tribunal by any means finds that it is just & equitable that the company should be
wound up.

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If the company in any way is indulged in fraudulent activities or any other unlawful business,
or any person or management connected with the formation of company is found guilty of
fraud, or any kind of misconduct.
Filing of Winding up Petition- Section 272 provides that a winding up petition is to be filed
in the prescribed form no 1, 2 or 3 whichever is applicable and it is to be submitted in 3 sets.
The petition for compulsory winding up can be presented by the following persons:
• The company
• The creditors ; or
• Any contributory or contributories
• By the central or state govt.

ROLE OF COURTS IN WINDING UP OF COMPANY
Statutory Demand – Before compulsory liquidation occurs, sometimes a statutory demand
(which gives the company directors 21 days to pay in full or negotiate a settlement) can be
issued. If the debt is still unpaid after 21 days, it is at this stage that the creditors will
usually apply for winding up petition to be heard at court.
Winding up Petition – The petition process itself can be quite arduous – as soon as seven
days after issue, the compulsory liquidation of your company can be advertised in the
London, Belfast or Edinburgh Gazette.
Bank Accounts are Frozen – The impact on the business can be devastating as the bank
account will be closed immediately without notice. Additionally, because all finance houses
have access to this information, it then becomes extremely difficult to secure credit.
Winding up Order – A Winding up petition that has been heard and approved at court
becomes a winding up order. At this stage, the company is closed down and put into

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compulsory liquidation.
High Court Hearing Approves Liquidation – Approval of liquidation at the high court is
followed by an interview with the official receiver. It is their duty to get the best return for
the creditors and to investigate the directors on the running of the company.
Official Receiver – The official receiver will usually examine the annual accounts of at least
the past three years, as well as management accounts, invoices and other relevant paperwork
to determine whether the company’s demise could be attributed to neglect on the part of the
company directors.
Appointment of liquidator – Where there are assets to be realised, the official receiver’s
role will be followed by a licensed insolvency practitioner (IP) to take over these duties.
Statement of Affairs – After appointment, the liquidator will prepare the Statement of
Affairs, which is a detailed document listing the companies assets and liabilities.

MERGER AND ACQUISITION OF COMPANY
The new Act has been lauded by corporate organizations for its business-friendly corporate
regulations, enhanced disclosure norms and providing protection to investors and
minorities, among other factors, thereby making M&A smooth and efficient. Its recognition
of interse shareholder rights takes the law one step forward to an investor-friendly regime.
The 2013 Act seeks to simplify the overall process of acquisitions, mergers and
restructuring, facilitate domestic and cross- border mergers and acquisitions, and thereby,
make Indian firms relatively more attractive to PE investors. The term ‘merger’ is not
defined under the Companies Act, 1956, and under Income Tax Act, 1961. However, the
Companies Act, 2013 without strictly defining the term explains the concept. A ‘merger’ is a
combination of two or more entities into one; the desired effect being not just the
accumulation of assets and liabilities of the distinct entities, but organization of such entity
into one business.

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Who can file the application for Merger & Amalgamation propose: Section 230(1)
An application for Merger & Amalgamation can be file with Tribunal (NCLT). Both the
transferor and the transferee company shall make an application in the form of petition to
the Tribunal under section 230-232 of the Companies Act, 2013 for the purpose of
sanctioning the scheme of amalgamation.
Joint Application: Rule 3(2)
Where more than one company is involved in a scheme, such application may, at the
discretion of such companies, be filed as a joint-application.
However, where the registered office of the Companies are in different states, there will
be two Tribunals having the jurisdiction over those, companies, hence separate petition
will have to be filed.

CROSS BORDER MERGER, TAKEOVER CODE: ROLE OF SEBI
In recent times, corporate leaders are grabbing the foreign corporations or going for
partnership deeds if not capable of buying them and this is nothing but the magical change
in our corporate world because of which we now dare to go for acquisitions of foreign
companies or they are themselves eager to combine with us. This is the latest trend
developing between Indian Incorporations to grow faster by the way of Takeovers or
Merger with other big players. There is not a single company but a list of companies, which
are really looking forward to get their goals. There are several factors working behind this
change and in this essay we are trying to bring out some of the most important driving
factors of the recent trend of the Indian companies becoming global leaders and this time
they have chosen the path of Mergers and Takeovers outside the border.
Amalgamations can primarily be of two types, Mergers and Acquisitions. A merger can be
defined as an amalgamation of two or more companies into one, wherein the merging

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entities lose their identities. No fresh investment is made through this process. However, an
exchange of shares takes place between theentities involved in such a process. Generally,
the company that survives is the buyer that retains its identity and the seller company is
extinguished.
On the other hand, an acquisition or takeover is aimed at gaining a controlling interest in the
share capital of acquired company. It can be enforced through an agreement with the
persons holding a majority interest in the company's management or through purchasing
shares in the open market or purchasing new shares by private treaty or by making a take-
over offer to the general body of shareholders. In this process only one company loses its
identity that is the seller company.

SEBI’S TAKEOVER CODE FOR SUBSTANTIALACQUISITIONS OF
SHARES LISTED IN LISTED COMPANIES
On 4th November 1994, SEBI announced a take-over code for the regulation of substantial
acquisition of shares, aimed at ensuring better transparency and minimizing the occurrence
of clandestine deals. In accordance with the regulations prescribed in the code, on any
acquisition in a company, which makes acquirer’s aggregate shareholding exceed 15%, the
acquirer is required to make a public offer. The take-over code covers three types of
takeovers-negotiated takeovers, open market takeovers and bail-out takeovers. With the
beginning of 21st century we have witnessed a new era of development and liberalization, as
there is a remarkable and consistent growth in Indian economy. All this has led to a
significant growth in the structure of Indian Companies with further eagerness to grow faster
to compete with others, whether within India or outside our borders and hence the
companies have switched over to some new methods of expansion and restructuring, and

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takeover or merger is the latest method chosen by our companies to be parallel with foreign
companies. We can say it as a new era of liberalization after early 90s when we have started
our economic reforms. To see the real picture we have to look at few remarkable takeovers
and mergers by our companies which lead to the beginning of a new era.
These acquisitions have grown tremendously in last five-six years; the research of FICCI has
shown that in between 2000 to 2006 there have been 307 acquisitions amounting to more
than Rs 90,000 crores. And the reality is that the number of these deals is increasing and
similarly there are several mergers also taking place with the foreign companies in various
fields. The size of the companies is also increasing with a great velocity and we can say that
no one can stop India because now we are also capable of grabbing others and ready to take
risks.Indian companies had spent $20 billion to fund the 147 mergers and acquisitions deals
abroad in 2006, according to Dealogic.

THANK YOU

Corporate Law ( LLB- 305)

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Corporate Law ( LLB- 305)