Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Lecture on Companies Act, 2013
Prof. (Dr.) Shyam Agarwal
1
Meaning of Company
 Distinct Legal Entity:
- Artificial Legal Person
- Invisible and Intangible
 Purpose Driven
- Econom...
The Companies Act, 2013 (CA 2013)
Definition of Company (Co)
 A Body Corporate, incorporated under CA 2013
(or Previous S...
Co as a Body Corporate: Advantages
1. Independent Legal Entity & Corporate Existence
- Independent of its Members
Salomon ...
Co as a Body Corporate: Advantages (2)
3. Everlasting Existence / Perpetual Succession:
- Co ‘Never dies’.
- Membership ma...
Co as a Body Corporate: Advantages (3)
5. Flexibility of Investment / Transferable Shares
- Benefit of : Liquidity to Inve...
Co as a Body Corporate: Advantages (4)
7. Professional Management /
Separation of Ownership and Management
- Shareholders ...
Company Partnership Firm
1. Governing Statutes
- CA 2013 - Indian Partnership Act, 1932
2. Formation
- Separate Legal Enti...
Company Partnership Firm (2)
5. Investment Flexibility
- Free Transfer of Shares - No Transfer ‘without Consent’ of
(In pr...
Co as a Body Corporate: Disadvantages
Source: Mostly from Trading Privileges with Limited Liability.
1. Lifting the Corpor...
Co as a Body Corporate: Disadvantages (2)
2. Exceptions to Privileges of Corporate Entity:
2.1 Concerning Government & Sta...
Co as a Body Corporate: Disadvantages (3)
(1.4) Government Companies
- Separate (from Govt.) Entity vs State Entity (State...
Co as a Body Corporate: Disadvantages (4)
2.2 Tests for Separate Entity (or Parent Co Liability)
(1) Profits to be Treated...
Co as a Body Corporate: Disadvantages (5)
2.3 Personal Liability of Directors and Members (Statutory)
(1) Non-compliance o...
Co as a Body Corporate: Disadvantages (6)
3. Procedural Formality and Expenses thereon.
- Can be very Expensive.
- Cumbers...
Co vs Limited Liability Partnership Firm (LLP)
Co LLP
1. Regulation by CA 2013 Agreement among Partners
2. Management – Ow...
Types of Companies: Salient Characteristics
1. Members / Shareholders
1.1 One Person Co (OPC, New Concept) [S 2(62), S 13]...
Types of Companies: Salient Characteristics (2)
1.3 Public Co (Defn: Not a Private Co) [S 2(71)]
- No Restriction on Share...
Thank You.
19
Upcoming SlideShare
Loading in …5
×

Lecture on Companies Act, 2013

250 views

Published on

Lecture on Companies Act, 2013

Published in: Economy & Finance
  • Be the first to comment

  • Be the first to like this

Lecture on Companies Act, 2013

  1. 1. Lecture on Companies Act, 2013 Prof. (Dr.) Shyam Agarwal 1
  2. 2. Meaning of Company  Distinct Legal Entity: - Artificial Legal Person - Invisible and Intangible  Purpose Driven - Economic or Otherwise  To meet Given constraints, arising out of - Business Expansion, - Required Manpower size and - Financial Support Quantum. 2
  3. 3. The Companies Act, 2013 (CA 2013) Definition of Company (Co)  A Body Corporate, incorporated under CA 2013 (or Previous Statutes)  Consistency with Other Acts / Statutes 3 Type of Co Referral Statute Banking Co Banking Regulation Act, 1949 Insurance Co Insurance Act, 1938 Insurance Regulatory and Development Authority Act, 1999 Electric Co Electricity Act, 2003 Other Co (Any) Special Acts of Legislature for those Co types.
  4. 4. Co as a Body Corporate: Advantages 1. Independent Legal Entity & Corporate Existence - Independent of its Members Salomon vs Salomon & Co Ltd (1897 AC 22) Ashoka Marketing Ltd vs PNB (1990 – 4 SCC 406) - Separate Entity Principle Vodafone Intl Hldgs BV vs UoI (2012 – 6 SCC 613) 2. Limited Liability, for Business Debts - Co Owner of its Assets & Bound by its Liabilities. (as Separate from Members / Shareholders, who has Restricted Liability to Shares held & extends ‘Not’ to their Other assets. Except for Personal Guarantee by Shareholder – Directors, Co-signing of Co Debts.) 4
  5. 5. Co as a Body Corporate: Advantages (2) 3. Everlasting Existence / Perpetual Succession: - Co ‘Never dies’. - Membership may Change. (Members come and go.) But Co will be Same Entity with same - Privileges and Immunities with - Estates and Possessions, i.e., Co can go on ‘For ever’. 4. Separate Property: - Co may Own, Enjoy, or Dispose off Property in Its Name. - Member / Shareholder has ‘No’ Legal or Equitable Interest. 5
  6. 6. Co as a Body Corporate: Advantages (3) 5. Flexibility of Investment / Transferable Shares - Benefit of : Liquidity to Investor, and Stability to Co. 6. Capacity to Sue and Being Sued, in Co name - Co can lodge Criminal Complaints and seek Damages against Defamatory material. - But Co ‘Can Not’ have the Status of a Citizen under ‘Constitution of India’. State Trading Corp of India vs CTO (AIR 1963 SC 1811) 6
  7. 7. Co as a Body Corporate: Advantages (4) 7. Professional Management / Separation of Ownership and Management - Shareholders ‘Need Not’ be Managers of Co. 8. Proportionate Representation - One Share, One Vote principle. (Contrast to Cooperative Socy.) - Bigger Shareholders can Control. 9. Finances - Privilege of raising Capital by Public Subscription. (as Shares or Debentures.) - Public Financial Institutions generally ‘More Willingly’ support. 7
  8. 8. Company Partnership Firm 1. Governing Statutes - CA 2013 - Indian Partnership Act, 1932 2. Formation - Separate Legal Entity - No Mandatory Registration. - Oral or Written Agreement suffices. 3. Liability - Shareholders Limited - Unlimited Liability of Partners. Liability. 4. Property Status - Co owns and ‘Not’ - Partners’ ownership. Shareholders. 8
  9. 9. Company Partnership Firm (2) 5. Investment Flexibility - Free Transfer of Shares - No Transfer ‘without Consent’ of (In private co. separate other Partners. provision may bind.) 6. Number of Members - Minm: 7, Minm: 2. - Minm: 2 Max: 200 - ≤ 10 for Banking business (Pvt. Co) - ≤ 20 for Other business 7. Decision-Making - Shareholder Majority - All Partners’ Consent is must. 8. Life of Entity - Can Go forever. - Dissolves on Death of a Partner. 9
  10. 10. Co as a Body Corporate: Disadvantages Source: Mostly from Trading Privileges with Limited Liability. 1. Lifting the Corporate Veil. Breaking through; (a) Human beings are Real Beneficiaries of Co Advantages. Beneficial de-facto Owners of the Corporate Property. (b) For - Property and Capacity, - Acts done and Rights acquired, and - Liabilities assumed; Persons involved enjoy without Strict Accountability. (c) Corporate Personality Magic: One is Master & Servant simultaneously. except (i) where Misuse of Corporate Money, and (ii) in Contempt cases. 10
  11. 11. Co as a Body Corporate: Disadvantages (2) 2. Exceptions to Privileges of Corporate Entity: 2.1 Concerning Government & State (1.1) Determination of Character and Distinct Existence - Thin line of Demarcation (1.2) For Benefit of State Exchequer - when Tax Evasion is resorted to or Tax Obligation is Circumvented; Court may Disregard Corporate Entity & Privileges. (1.3) Fraud or Improper Conduct - Corporate Entity can’t be for Illegal or Fraudlent purposes 11
  12. 12. Co as a Body Corporate: Disadvantages (3) (1.4) Government Companies - Separate (from Govt.) Entity vs State Entity (State Agent) Landmark Judgment by Justice Krishna Iyer: [1981 - 1 SCC 449 (1981)] Any Authority Controlled by GoI is itself State. (Art 12. Definition – …“the State” includes.. all local or other authorities.. Under the control of the GoI.) - Enforcement of Fundamental Rights after Scrutiny of real Character of Entity. - Especially, in case of no Functioning Autonomy. 12
  13. 13. Co as a Body Corporate: Disadvantages (4) 2.2 Tests for Separate Entity (or Parent Co Liability) (1) Profits to be Treated as Profit of Parent Co; (2) Appointment by Parent Co to top Positions; (3) Head or Brain of Co: Whether Parent or Other; (4) Decision on Adventure, especially regarding - What should be Done, - Capital Quantum on Venture; (5) Whether Own Skill and Direction ?; (6) Where is Constant and Effectual Control of Co. Above applies also for ‘Taxation Clubbing’ purposes. 13
  14. 14. Co as a Body Corporate: Disadvantages (5) 2.3 Personal Liability of Directors and Members (Statutory) (1) Non-compliance of requirements of Incorporation (S 464), (2) Mis-description of Name (S 12), (3) Fraudulent Conduct of Business (S 339), (4) Holding and Subsidiary Co [S 2(46), S 2 (87)], When, BoD is closely involved. But MNC Subsidiary is treated separately. Above implies that Incorporation does not Cut off Personal Liability at All Times and in all Circumstances. 14
  15. 15. Co as a Body Corporate: Disadvantages (6) 3. Procedural Formality and Expenses thereon. - Can be very Expensive. - Cumbersome Procedures constrains ‘Ease of Doing Business’. - Source of Rent Seeking and Uncalled-for Interferences. 4. Co is ‘Not a Citizen’. - But it has: (a) Nationality, (Country where Incorporated) with “No change allowed like a Citizen”, and (b) Domicile and Residence (Location of Registered Office). 15
  16. 16. Co vs Limited Liability Partnership Firm (LLP) Co LLP 1. Regulation by CA 2013 Agreement among Partners 2. Management – Ownership Divide Not Distinct 3. Governed by Statute More Flexibility & Lesser Compliance mandated 4. Compliance Mandated like Statutory Meetings, Quarterly BoD Meetings. No Specific Statutory provision is laid down. 5. Expenses (1) Minm. Statutory Fee Rs. 6,000/- (2) Minm. Paid-up Capital Public Ltd - Rs. 5 lakhs Pvt. Ltd - Rs. 1 lakh. Rs. 800/- No Specified Limit. 16
  17. 17. Types of Companies: Salient Characteristics 1. Members / Shareholders 1.1 One Person Co (OPC, New Concept) [S 2(62), S 13] - Member: Only One Person (Indian Citizen and Resident of India) - Indian individual with Limited Liabilities does Business. - MoA must indicate Alternate Member, in case of Physical Exigency. 1.2 Private Co [S 3(1)(b)] - Restricts ‘Right’ to Share Transfers - No. of Members: ≤ 200. (Minm: 2) - No Public invitation to Subscribe Co Securities. 17
  18. 18. Types of Companies: Salient Characteristics (2) 1.3 Public Co (Defn: Not a Private Co) [S 2(71)] - No Restriction on Share Transfer. - Unlimited Number of Members. - Public Invitation to Subscribe its Securities (like IPO etc.). - Usually Listed on Recognized Stock Exchange. - Co can Alter Activities, by Special Resolution. - Conversion of Private Ltd. Co to Public Ltd. Co and Vice Versa (Only with Approval of Tribunal; S 14(1). 18
  19. 19. Thank You. 19

×