This document provides information on companies act 2013 and details regarding types of companies, private limited companies vs public limited companies, memorandum of association, articles of association, prospectus and formation of a company. It discusses the nature and characteristics of a company including perpetual succession, separate legal entity, transferability of shares, and more. It also summarizes key differences between private and public limited companies such as minimum members, transferability of shares, and deposit acceptance.

1. Companies Act 2013
Dr. D. Joel Jebadurai
AP,MBA,SJCE

2. Company

3. Nature of the company
1. An incorporated association.
2. Separate legal entity.
3. Artificial person but not a citizen.
4. Perpetual succession.
5. Common seal.
6. Separate name
7. Limited liability.
8. Separation of ownership and management.
9. Transferability of shares.
10.Separate property.

4. Nature of the company
1. Number of members.
2. Share holders are actual owners.
3. Raising of capital on a large scale.
4. Capacity to sue.
5. Rigidity to objects.
6. Statutory requirements.
7. Company is a body corporate/ incorporate.
8. Maintenance of account books
9. Audit of account books
10.Has nationality and residence
11.Company is not a citizen

5. Types of companies
On the basis of
liability
Limited by shares
Limited by guarantee
Unlimted
On the basis of
mode of
Incorporation
Chattered Company
Statutory Company
Registered under companies Act
On the
basis of
ownership
Private company
Public company
Government company
On the basis
of jurisdiction
or functioning
National Company
MNC
Foreign company
Basis of
control/Shareh
olding
Holding company
Subsidiary Company
Other
types
One man company
Association not for profit
Existing company

6. Sl.No Private Limited Company Public Limited Company
1 A private company can be registered with a
paid-up capital of Rs.100000.
A public company must have a
minimum paid-up capital of
Rs.500000.
2 A private company cannot have less than
two members and more than fifty members.
The minimum number of persons
required to form a public company is
seven. There is no restriction on the
maximum number of members in a
public company.
3 A private company cannot invite the public
to subscribe to its share capital neither can it
invite the people to buy its debentures.
A public company invites the public
to subscribe to its share capital or to
purchase its debentures.
4 In a private company, the right to transfer its
shares is restricted by its articles. Thus, if a
private company has a share capital; it
imposes certain restrictions on the right of
its members to transfer the shares of the
company they hold.
In a public company, its shares are
freely transferable

7. 5 A private company has to add the
words ''Private limited" at the
end of its name.
A public company has to use the
word 'Limited' at the end of its
name.
6 A private company must have
minimum two directors.
A public company must have
minimum three directors.
7 A private company enjoys certain
privileges, that is, exemptions from
certain provisions of the companies
Act, 1956.
A public company does not enjoy
any such privileges.
8 Directors of a private company
need not file their consent with the
registrar to act as a director or sign
an undertaking to take up
qualification shares.
Directors of a public company
have to file their consent with
registrar to act as a director or sign
an undertaking to take up
qualification shares.

8. Sl.
No
Private Limited Company Public Limited Company
9 Legal controls on private
companies are less.
Legal controls and restrictions on public
companies are more in number and are strict.
10 In private companies, restrictions
on the managerial remuneration
are far less.
In public companies, there are restrictionson
managerial remuneration. Important
provisions relating managerial remuneration
are made in sections 198,309,310,311 of the
Companies Act, 1956. It cannot be more than
11% of net profits of the company.
11 Directors are allowed to borrow
from the private companies.
Directors cannot borrow from the public
companies.
12 In the case of a private company,
unless the articles of the company
provide for a large number, two
members personally present are
quorum for a meeting of a
company.
In the case of a public company,
unless the articles of the company provide for
a large number, five members personally
present are quorum for a meeting of the
company section 174[1].

9. 13 A private company is not
required to file a prospectus
or a statement in lieu of
prospectus with the
registrar Section 70[3].
A public company has to file a
prospectus or a statement in lieu of
prospectus with the registrar.
14 A private company can
commence its business
immediately after receiving
the certificate of
incorporation.
A public company can commence its
business only after it receives the
certificate to commence the business
from the Registrar of Companies.
15 A private company cannot
accept deposits from the
public other than the
shareholders, directors and
their relatives.
A public company is allowed to accept
the deposits from the public under the
companies Act subject to the provisions
of Sections 58A, 58AAA and 58B.

10. Formation of the company
a) Promotion stages
1) Discovery of a new idea
2) Detailed investigation
3) Assembling different factors
4) Financing the proposition
5) Promoter
b) Incorporation/Registration Stages
1) Preliminary activities
2) Documents to be filed with the Registrar
3) Payment of prescribed fees- Sec.161, Public account RBI
4) Certificate of incorporation- Corporate Identity Number
5) Capital subscription
6) Issue of prospectus
C) Commencement of business

11. Preliminary activities
1. Location of the registered office
2. Decide name
3. License under Industries Development and
Regulations act 1951
4. To make appointments- (Underwriters, bankers,
auditors, signatories),
5. Preparation of documents
6. Send the application to registrar

12. Documents
1. MOA
2. AOA
3. Information about the Head Office of the company- 30 days
4. List of Directors
5. Written consent of the Directors
6. Undertaking regarding qualification shares
7. Preliminary agreement with managerial personnel
8. Statutory declaration

13. MEMORANDUM OF ASSOCIATION
What it is?
The memorandum of association of a company is the charter and defines the
limitation of the power of the company established under the Act”.

14. MEMORANDUM OF ASSOCIATION
1) Name clause- Not be identical, similar, Govt.org. Pvt. Ltd. Ltd.
2) Situation clause- Place of registered office, 30 days commencement of
business, transferred with special resolution.
3) Object clause
4) Liability clause- limited by guarantee, shares
5) Capital clause- Authorized, issued, subscribed
6) Association & subscription clause- Pvt. ltd-2, Public limited -7

15. Alteration in MOA
Name clause
A company can change its name at any time by any of the following
procedures:
• By passing a special resolution.
• By obtaining the approval of the Central Government.
What are the Conditions for any such Alteration in the Name?
• The change of name shall not be allowed to a company which has defaulted
in filing its
• Annual returns
• Financial Statements
• Any document due for filing with Registrar
• repayment of matured deposits or debentures or interest on deposits or
debentures
RUN (Reservation of Unique Name), Registrar of the company

16. Alteration of Situation clause
• Shifting of the registered office from one state or UT to another state –
For the change in the registered office from one state to another state, an
application under sub-section (4) of section 13 is filed with the Central
Government in Form No. INC.23 along with the fee. The application must
be accompanied by the following documents:
1. Copy of MOA (Memorandum of Association) with proposed alterations.
2. A copy of the details of the general meeting at which the resolution
authorizing such alteration was passed. These details give the number of
votes cast in the favor or against the resolution.
3. A copy of Board Resolution or Power of Attorney.
4. A list of creditors and debenture holders is attached to the application,
drawn up to the latest date prior to the date of filing of an application by not
more than one month. It must include:
a. The name and address of the credit and debenture holder of the company.
b. The nature and amounts due to them in respect of debts, claims, or
liabilities.

17. Alteration in the object clause
• If the company wants to change the objective of its business,
then there is a requirement of special resolution that must be
passed.
• The details of the objective must be published in the
newspaper that too in different languages (one in English
and other in the vernacular language) where the registered
office of the company is situated and also on the website of the
company.

18. Alteration in the liability clause
• The alteration of the Liability Clause restricts the liability of
the Directors. The liability clause can be unlimited by passing
a special resolution which should be filed with the Registrar
within a period of 30 days.

19. Alteration in the capital clause
A company may alter the capital clause only if it is authorized by
its articles. Alteration can be for any of the following
purposes:
• Alteration of the Capital Clause
• An increase of its share capital by issue of new shares.
• Consolidation of existing shares into shares of larger amounts.
• Conversion of fully paid shares into stock or vice versa.
• Cancellation of unissued shares.

20. Privileges/exemptions of a private co.
• Only 2 persons may form themselves into a private
co.
• May work with only 2 directors
• It can allot shares without receiving the minimum
subscription
• It is not required to prepare and file prospectus with
the Registrar
• Directors of a private company are not required to
retire by rotation. All its directors can be permanent.
• It is not required to appoint independent directors,
woman directors, small shareholders directors etc.

21. • It may by its AOA, provide special disqualifications
for appointment of directors .
• No restriction on payment of remuneration to directors,
managing directors etc.
• Exempted from constituting committees like Audit
Committee, Nomination and Remuneration Committee.
• Exempted from Secretarial Audit
• Not required to rotate auditor/ audit firm
• Unless AOA provide for a larger no., quorum for
general meeting -2 members personally present

22. Special Privileges of Private Company
• Number of members-2
• Allotment before minimum subscription
• Prospectus or statement in lieu of prospectus- may
allot without issuing prospectus
• Issue of new shares
• Commencement of business
• Index of members
• Statutory meeting and statutory report
• Demand for poll
• Managerial Remuneration- 11 percent
• Number of directors- only 2
• Rules regarding directors

23. Articles of Association
• Section 2(5) of the Companies Act, 2013 defines the
“Article of Association.” AOA contains all the rules
and regulations that govern the company policy.
According to the Companies Act, 2013, every
company must have its own AOA.
• The Articles of Association is similar to a rule book,
within a company. This document contains internal
detailed governing aspects of the company’s
organisation. These include shares, (issue and rights
attached), details in manner of holding the company
meetings, the role and powers of the directors.

24. Contents of AOA

25. BASIS FOR
COMPARISON
MEMORANDUM OF
ASSOCIATION
ARTICLES OF
ASSOCIATION
Meaning Memorandum of Association
is a document that contains
all the fundamental
information which are
required for the
incorporation of the
company.
Articles of
Association is a
document containing
all the rules and
regulations that
governs the company.
Type of
Information
contained
Powers and objects of the
company.
Rules of the company.
Status It is subordinate to the
Companies Act.
It is subordinate to the
memorandum.

26. Retrospective Effect The memorandum of
association of the
company cannot be
amended retrospectively.
The articles of
association can be
amended
retrospectively.
Major contents A memorandum must
contain six clauses.
The articles can be
drafted as per the choice
of the company.
Obligatory Yes, for all companies. Only a private company
is required to frame its
articles while a public
company limited by
shares can adopt Table F
in place of articles.
Compulsory filing at
the time of
Registration
Required Not required at all.

27. Alteration Alteration can be done,
after passing Special
Resolution (SR) in Annual
General Meeting (AGM)
and previous approval of
Central Government (CG)
or Company Law Board
(CLB) is required.
Alteration can be done
in the Articles by
passing Special
Resolution (SR) at
Annual General
Meeting (AGM)
Relation Defines the relation between
company and outsider.
Regulates the
relationship between
company and its
members and also
between the members
inter se.
Acts done beyond
the scope
Absolutely void Can be ratified by
shareholders.

28. Prospectus
Sec. 2(36) of the Companies Act describes a prospectus as “any
document issued as a prospectus and includes any notice,
circular, advertisement or other document inviting deposits
from the public or inviting offers from the public for the
subscription or purchase of any share in, or debentures of a
body corporate.”

29. Characteristics
• It is a document by which the company procures its share
capital needed to carry on its activities
• It is an invitation to a member of the public that is the public
in invited to subscribe to the shares or debentures of the
company.
• It included any notice, circular, advertisement inviting
deposits from the public
• It must not exaggerated and it must contain full and honest
disclosures. All material facts must be disclosed and should
not be concealed. It must not contain false details and untrue
statements.

30. Objectives
• To bring to the notice of the public that a new
company has been formed.
• To preserve the authentic record of the terms and
allotment of which the public have been invited to
buy shares or debentures of the company
• To secure that the directors of the company accept
responsibility for the statements in the prospectus

33. Types of Prospectus
• Deemed Prospectus – Deemed prospectus has mentioned under
Companies Act, 2013 Section 25 (1). When a company allows or agrees
to allot any securities of the company, the document is considered as a
deemed prospectus via which the offer is made to investors. Any
document which offers the sale of securities to the public is deemed to
be a prospectus by implication of law.
• Red Herring Prospectus – Red herring prospectus does not contain
all information about the prices of securities offered and the
number of securities to be issued. According to the act, the firm
should issue this prospectus to the registrar at least three days before
the opening of the offer and subscription list.

34. • Shelf prospectus – Shelf prospectus is stated under section 31 of the
Companies Act, 2013. Shelf prospectus is issued when a company or any
public financial institution offers one or more securities to the public. A
company shall provide a validity period of the prospectus, which
should not be more than one year. The validity period starts with the
commencement of the first offer. There is no need for a prospectus on
further offers. The organization must provide an information memorandum
when filing the shelf prospectus.
• Abridged Prospectus – Abridged prospectus is a memorandum, containing
all salient features of the prospectus as specified by SEBI. This type of
prospectus includes all the information in brief, which gives a summary to
the investor to make further decisions. A company cannot issue an
application form for the purchase of securities unless an abridged
prospectus accompanies such a form.

35. Prospectus
• General Information
• Name & address of registered office of the company
• Details of letter of intent/industrial license
• Name of stock exchange where listed
• Date of opening, closing of the issue
• Name, address of lead manager, bankers to the issue, brokers to the issue
• Underwriting arrangement
• Capital Structure of the company
• Authorized, issued, subscribed, paid up capital of the company should be mentioned
• Size of the issue
• Details of the issues
• Objects of the issues
• Tax benefits available to the company
• Rights of the instrument holders
• Authority of the issues & details of resolution passed for the issues
• Terms of pay

36. Prospectus
• Details about the company management
• History, main objects, present business of the company
• Subsidiaries of the company
• Promoters and their background
• Name, address occupation of manager, managing director’s relationship with
the company
• Details about the project
• Cost of the project & means of financing
• Location of the project
• Plant & machinery for the projects Infrastructure facilities for raw materials
• Expected date of trial production and commercial production
• Schedule of Implementation of the projects

37. Prospectus
• Other Information
In respect of any issue made by the company and other listed
companies under the same management, the following details,
• Name of the company, year of issue, types of issue, amount of
issue & date of completion of the projects
• Procedure and time schedule for allotment & issue of certificates
• Management perception of risk factors
• Procedure for making application & availability of forms,
prospectus and mode of payment
• Changes in directors and auditors in the last 3 years

46. Board of Directors
• A director is a person appointed to perform the
duties and functions of director of a company
in accordance with the provisions of the
Companies Act, 2013.
• The Companies Act defines ‘director’ as ‘a
director appointed to the board of a company’

47. Types of Directors in a Board of Directors
• Alternate Director- Foreign country, not less than 3 months
• Executive and Non executive Director – Day to day activity, Give opinion for any
sensitive issues
• Independent Director- It means a person who possesses integrity, relevant expertise
and experience as a director and who does not have any personal or pecuniary
relationship with the promoters and management of the company
• Nominee Director -The board of a company, if authorised by the Articles of
Association, can appoint any person nominated by a shareholder or creditor or any
stakeholder in a company to be a nominee director
• Woman Director- Companies Act 2013 mandates appointment of one woman as a
director on board of all listed companies and specific public companies with paid-
up share capital of Rs. 100 crores or turnover of Rs. 300 crores.
• Shadow Director – Promoter of the company

48. Power of Board of Directors
1. to make calls on shareholders in respect of moneys
unpaid on their shares;
2. to issue shares;
3. to issue debentures or any instrument in the nature of
redeemable capital;
4. to borrow moneys otherwise than on debentures;
5. to invest the funds of the company;
6. to make loans;

49. 7. to authorize a director or the firm of which he is a partner or
any partner of such firm or a private company of which he is a
member or director to enter into any contract with the
company for making sale, purchase or supply of goods or
rendering services with the company;
8. to approve annual or half-yearly or other periodical
accounts as are required to be circulated to the members;
9. to approve bonus to employees;
10. to approve the capital expenditure on any single item or
dispose of a fixed asset in accordance with the limits as
prescribed by the Commission from time to time;

50. Power of Board of Directors
• 11. Provided that the acceptance by a banking company in the ordinary
course of its business of deposit of money from the public repayable on
demand or otherwise and withdraw able by cheque, draft, order or
otherwise, or placing of moneys on deposit by a banking company with
another banking companion such conditions as the directors may prescribe,
shall not be deemed to be a borrowing of money or, as the case may be, a
making of loan by a banking company with the meeting of this section;
12. to undertake obligations under leasing contracts exceeding one million
rupees;
13. to declare interim dividend; and

51. Power of Board of Directors
14. having regard to such amount as may be determined to be material (as
construed in Generally Accepted Accounting Principles) by the Board.
i. to write off bad debts, advances and receivables;
ii. to write off inventories and other assets of the company; and
iii. to determine the terms of and the circumstances in which a law suit may be
compromised and a claim or right in favour of a company may be released,
extinguished or relinquished.

52. Duties of Board of Directors
• 1) Subject to the provisions of this Act, a director of a company shall act in
accordance with the articles of the company.
• (2) A director of a company shall act in good faith in order to promote the
objects of the company for the benefit of its members as a whole, and in the
best interests of the company, its employees, the shareholders, the
community and for the protection of environment.
• (3) A director of a company shall exercise his duties with due and
reasonable care, skill and diligence and shall exercise independent
judgment.
• (4) A director of a company shall not involve in a situation in which he
may have a direct or indirect interest that conflicts, or possibly may
conflict, with the interest of the company.

53. Duties of Board of Directors
• (5) A director of a company shall not achieve or attempt to achieve
any undue gain or advantage either to himself or to his relatives,
partners, or associates and if such director is found guilty of
making any undue gain, he shall be liable to pay an amount equal to
that gain to the company.
• (6) A director of a company shall not assign his office and any
assignment so made shall be void.
• (7) If a director of the company contravenes the provisions of this
section such director shall be punishable with fine which shall not be
less than one lakh rupees but which may extend to five lakh
rupees.

54. Duties
• Duty to attend board meetings
• Duty to invest company’s money
• Statutory duties
1. Monitor the money received from the applicants
2. To call Extraordinary general meetings
3. Present financial statements- 6 month, 1000 or both
4. Forward statutory report
5. Call statutory meetings
6. Check the capital before declare dividend
7. Disclose interest while entering into a contract
8. Disclose his share holdings
9. Hold qualification shares
10. Do not enter into any contract with for purchase and sales

55. Liabilities of Board of Directors
• Tax Liability: Unless a Director or any Past Director can prove that
the non-recovery or non-payment of Taxes are attributable as gross
neglect or breach of duty, then any present or past Director
(pertaining to the time period of defaulter) will be liable to pay the
shortfall in tax amount and any penalty associated.
• Refunding of share application or excess in share application money
• To pay for qualification shares
• Civil Liability in case of misstatement in Prospectus
• Fraudulent Business Conduct and all associated debts and contracts
executed

56. • Failure in making disclosures as stipulated SEBI
(Acquisition of Shares & Takeovers) Regulations, 1997 and
SEBI (Prohibition of Insider Trading) Regulations, 1992 by
the directors may attract legal proceedings by SEBI
• Cheques Bounced or dishonored: Under Negotiable
Instruments Act 1881, signing of dishonored by a Director
may lead to prosecution along with the company
• Offences under Income Tax Act, 1961
• Offences under Labour Laws, specifically in case of
Employees Provident Funds and Miscellaneous Provisions
Act, 1952 and Factories Act, 1948

57. Doctrine of Indoor Management
The doctrine of Constructive
Notice
The doctrine of Indoor
Management
Provides protection to the
company from outsiders
Provides protection to outsiders
from the internal affairs of a
company
Confined to the external
position and affairs of the
company
Confined to internal matters of
the company
Memorandum and Articles of
Association are public
documents
Internal affairs of a company
are not public knowledge i.e.
not registered anywhere
Is based on a negative concept
Can be termed as a positive
concept

58. Exceptions to Doctrine of Indoor Management
• The rule does not protect a person if he/she has prior
knowledge of the irregularity
• The rule cannot protect any person who did not study the
company’s MOA and AOA before entering into a contract i.e.
on part of his negligence
• The rule do not apply incase of forgery i.e. incase the outsider
relies on forged documents to claim protection under the rule
• This rule also does not apply to a transaction which are illegal
and void
• A person must take proper enquires about the person who is
dealing on behalf of the company. If he fails to make enquiry
he cannot rely on the rule

59. Corporate Veil
• The company, in the contemplation of law, is a person
distinct from the shareholders. In other words, the
company alone is liable for all the acts done and the
debts incurred by it and not the directors or the
shareholders who are in fact the beneficial owners
of the company. This principle is known as “The Veil
of Incorporation“

60. Corporate Veil
• Factors for Courts to Consider
• Components that a court may consider when determining
whether to pierce the corporate veil incorporate the
following:
• Unavailability or mistakes of corporate records
• Covering or misreports of company members
• Inability to keep up associations with related entities
• Inability to observe corporate formalities relating to
behavior and documentation

61. • Blending of assets of the company and the investors
• Manipulation of assets or liabilities
• Dysfunctional corporate officers or directors
• Notable undercapitalization of the business entity
• Draining of corporate funds by the
predominant shareholder(s)
• Treatment by a person of the assets of the company as
his/her own

62. Lifting the Corporate Veil
Statutory Provisions
1. Officer in default
2. Reduction of Membership
3. Improper use of name
4. Fraudulent Conduct
5. Failure to refund application money
Judicial Grounds
1. Fraud or improper conduct
2. Tax Evasion
3. Company as agent

63. MEANING :
Winding up of a company is the process whereby its life
is ended and its property administered for the benefit
of its creditors and members.

64. An administrator is 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 respective rights.

65. MODES :
Modes of Winding up –
A company may be would up in any one of the three
ways,
(I) Compulsory winding up ie., by Tribunal
(II) Voluntary winding up
- Members’ Voluntary winding up
- Creditors’ Voluntary Winding up

66. Winding up
by
TRIBUNAL
http://www.accountancyage.com/aa/news/2402871/pwc-winds-up-last-remnants-of-enrons-european-operations

67. (I) Winding up by Tribunal
Grounds for Compulsory Winding up :
1. Special resolution: If the company has, by special resolution, resolved that the
company be wound up by the Tribunal;
2. Default in delivering the statutory report to the Registrar/ holding statutory
meeting (Registrar or contributory)
3. Failure to commence, or suspension of business
- wind up if business not started in 1 year
- wind up if business remains suspended for 1 year, and may not, if :
- reasonable prospects to start business/about to start
- good reasons for delay/valid reasons
4. Reduction in membership
5. Inability to pay its debt
(i) demand for payment neglected (debt more than 1 lakh , 21 days or 3 weeks have
expired and payment not paid)
(ii) decreed debt unsatisfied
(iii) commercial insolvency
6. If the company has acted against the interests of the sovereignty and integrity of
India, the security of the State, friendly relations with foreign States, public order,
decency or morality;
7. if the company has made a default in filing with the Registrar its financial statements
or annual returns for immediately preceding five consecutive financial years;

68. 8. Just and Equitable
1. When the substratum of a company is gone
(i) Basis of survival is gone (e.g a capsized ship)
(ii) Main object of the company has failed (e.g German
Date coffee co.)
(iii) When the business is being run on losses
(iv) Where the existing assets are insufficient with respect
to liabilities
2. Interest of minority is being affected
3. Where there is a deadlock in the management
4. Where public interest is to be taken care of
5. Where the company was formed to carry out fraudulent or
illegal business
6. Where the company is mere a bubble

69. Who can apply for Winding-up of company ??
1. Petition by the company
- after passing a special resolution
- companies prefer voluntarily closure
2. Petition by any creditor or creditors
http://indianexpress.com/article/business/companies/more-winding-up-petitions-
pour-in-against-vijay-mallyas-ub-holdings/
-by the creditor who has actual or contingent claim (for interest amount also)
- Central/State Government
- by prospective creditor - legal representatives of a deceased creditor
- by secured creditor - by debenture holder
3. Petition by any contributory or contributories (includes holder of fully paid up
shares)
GROUNDS :
- the membership is reduced below the statutory minimum, or
- he is an original allottee of shares, or
- he has held his shares for any 6 out of the previous 18 months, or
- the shares have devolved on him through the death of former holder / joint
ownership of shares

70. 4. Petition by all or any of the prior parties whether together or separately
- by all of above three together or separately
5. Petition by the Registrar (after approval from CG)
- failure to give statutory report (after expiration of 14 days from the last
date of meeting)
- business not commenced within a year from its incorporation /
suspension of business for a whole year.
- if number of members reduced below minimum
- company is unable to pay its debts
-just and equitable that the company to be wound up
6. Petition by the Central Government
- intent is to defraud its creditors, members or any other
- fraudulent or unlawful purpose/formation was because of doing any
fraud
- oppression on members
NOTE: - A copy of the petition made shall also be filed with the Registrar and the
Registrar shall, without prejudice to any other provisions, submit his views to the
Tribunal within sixty days of receipt of such petition.

71. Consequences of Winding up by the Tribunal
1. Intimation to Official Liquidator and Registrar
2. Copy of winding up order to be filed with Registrar (certified copy within 7
days)
3. Order for winding up deemed to be notice of discharge
4. Suits stayed
When a winding up order has been made, no suit or other legal proceeding
shall be commenced against the co. except by leave of the court
5. Powers of the Court
6. Effect of winding up order
An order for winding up shall operate in favor of all creditors &
contributories of co.
7. Official Liquidator to be Liquidator

72. Procedure of winding up by Tribunal
1. Official liquidator :
– for the purpose of winding up by the court, there shall be attached to each High
court an Official Liquidator appointed by Central govt.
– Same should be their with district court , the official for insolvency purposes or any
other officer can be appointed
2. Liquidator – on winding up order being made in respect of a co., the Official
Liquidator become the liquidator of the co.
3. Provisional liquidator – at any time after the presentation of a winding up
petition & before the making of a winding up order, the Court may appoint the
Official liquidator to be the liquidator provisionally
4. Notice to the company and chance for representations
On winding up order being made by the court, the official liquidator shall cease
to hold office as provisional liquidator and shall become the liquidator of the
company

73. WHO CAN BE APPOINTED AS OFFICIAL LIQUIDATOR?
A member from the panel of the professional firms of :
- chartered accountants
- advocates
- company secretaries
- cost and work accountants which the central government
may constitute.
• Body corporate approved by central government.
• Whole-time or part-time officer appointed by the central
government.

74. Statement of affairs
Where a petition for winding up is filed before the Tribunal by any person
other than the company, the Tribunal shall, if satisfied that a prima
facie case for winding up of the company is made out, by an order direct
the company to file its objections along with a statement of its affairs
within thirty days of the order
* The Tribunal may allow a further period of thirty days in a situation of
contingency or special circumstances
CONTENTS:
• Assets of the company – cash in hand , cash at bank , negotiable securities
• Debts and liabilities
• Details about its creditors and debtors
• Any other information required by the liquidator

75. Duties of a Liquidator (as per mca website + 2014 edition)
1. Proceedings in winding up
2. Winding up Committee
- Within three weeks from the date of passing of winding up order,
- the Company Liquidator shall make an application to the Tribunal
for constitution of a winding up committee
- to assist and monitor the progress of liquidation proceedings by the
Company Liquidator
- shall comprise of the following persons, namely:—
(i) Official Liquidator attached to the Tribunal;
(ii) nominee of secured creditors; and
(iii) a professional nominated by the Tribunal.

76. (iii) Preliminary Report:
Where the Tribunal has made a winding up order or appointed a Company Liquidator,
such liquidator shall, within sixty days from the order, submit to the Tribunal, a report
containing the following particulars, namely:—
– the nature and details of the assets of the company including their location and
value, stating separately the cash balance in hand and in the bank, if any, and
– the negotiable securities, if any, held by the company:, amount of capital issued,
subscribed and paid-up;
– the existing and contingent liabilities of the company including names, addresses
and occupations of its creditors, the debts due to the company and the names,
addresses and occupations of the persons from whom they are due and the
amount likely to be realized on account thereof;
– guarantees, if any, extended by the company;
– list of contributories and dues, if any, payable by them and details of any unpaid
call;
– details of trade marks and intellectual properties, if any, owned by the company;
– details of subsisting contracts, joint ventures and collaborations, if any;
– details of holding and subsidiary companies, if any;
– details of legal cases filed by or against the company; and
– any other information which the Tribunal may direct
(iv) Additional reports

77. 3. Custody of company’s property (from 2014 book)
4. Perform duties imposed by court in the proceedings of
winding up
(i) taking over assets;
(ii) examination of the statement of affairs;
(iii) recovery of property, cash or any other assets of the
company including benefits derived there from;
(iv) review of audit reports and accounts of the company;
(v) sale of assets;
(vi) finalisation of list of creditors and contributories;
(vii) compromise, abandonment and settlement of claims;
(viii) payment of dividends, if any; and
(ix) any other function, as the Tribunal may direct from
time to time

78. 5. Directions from the Court: The liquidator may apply to the court for
directions in relation to any particular matter arising in winding up
6. Proper books
7. Audit of accounts
• The Company Liquidator shall make periodical reports to the Tribunal
and in any case make a report at the end of each quarter with respect to
the progress of the winding up of the company in such form and manner as
may be prescribed.
• The Company Liquidator shall place before the Tribunal a report along
with minutes of the meetings of the committee on monthly basis duly
signed by the members present in the meeting for consideration till the
final report for dissolution of the company is submitted before the
Tribunal.
• The Company Liquidator shall prepare the draft final report for
consideration and approval of the winding up committee.
• The final report so approved by the winding up committee shall be
submitted by the Company Liquidator before the Tribunal for passing of a
dissolution order in respect of the company.
8. Appointment of committee of inspection
9. Pending liquidation (file statement certified by auditor)

79. Dissolution of company by Tribunal
• Application to the Tribunal :
When the affairs of a company have been completely wound up, the
Company Liquidator shall make an application to the Tribunal for
dissolution of such company.
• Order by Tribunal:
The Tribunal shall on an application filed by the Company Liquidator make an
order that the company be dissolved from the date of the order, and the
company shall be dissolved accordingly.
• Forward order to the Registrar
A copy of the order shall, within thirty days from the date thereof, be
forwarded by the Company Liquidator to the Registrar.
Default :
If the Company Liquidator makes a default in forwarding a copy of the order
within the period specified. The Company Liquidator shall be punishable
with fine which may extend to five thousand rupees for every day during
which the default continues.

80. Voluntary
Windingup

81. Contributory (2014 edition)
Every person who is liable to contribute to the assets
of the co. in the event of its being wound up
List of contributories
– List A ( present members)
– List B (past members within 1 year)

82. Voluntary winding up
Circumstances :
1. By passing an ordinary resolution
2. By passing a special resolution (members)
Commencement :
- resolution passed
Advertisement of resolution :
- notice to be given within 14 days (either in Official gazette or newspaper)

83. Types of Voluntary Winding up -
(a) Members’ voluntary winding up
(b) Creditors voluntary winding up

84. A. Members voluntarily wind up:
Members’ voluntary winding up is possible only in case of solvent
companies.
Declaration of solvency:
To wind up a company voluntarily, its director or directors, shall, at a meeting
of the Board, make a declaration verified by an affidavit to the effect that
the company has no debt or whether it will be able to pay its debts in full
from the proceeds of assets sold in voluntary winding up.

85. Declaration made shall have no effect for the purposes of this
Act, unless—
- it is made within five weeks immediately preceding the date of the passing of
the resolution for winding up the company and it is delivered to the Registrar for
registration before that date;
- it contains a declaration that the company is not being wound up to defraud any
person or persons;
- it is accompanied by a recent copy of the report of the auditors of the company.(
P&L Balance sheet)
- where there are any assets of the company, it is accompanied by a report of the
valuation of the assets of the company.
NOTE :
Any director of a company making a declaration under this section without having
reasonable grounds for the opinion that the company will be able to pay its debts in
full from the proceeds of assets sold in voluntary winding up shall be punishable with
imprisonment for a term which shall not be less than three years but which may
extend to five years or with fine which shall not be less than fifty thousand rupees
but which may extend to three lakh rupees, or with both.

86. 1. Provisions applicable to members’ voluntarily winding up
• Appointment and remuneration of liquidators
• Board’s power to cease on appointment of liquidator
• Power to fill vacancy in office of liquidator (contributory/other OL)
• Notice of the appointment of liquidator to be given to registrar (within 10
days from the event)
• Power of liquidator to accept shares
• Duty of liquidator to call creditor’s meeting at the time of insolvency
(Rs.5000 fine to liquidator)
• Duty to call general meeting at the end of each year
• Final meeting after dissolution (by advt. published not less than one
month and within one week after the meeting submit reports to Registrar)
• Provisions as to annual and final meeting in case of insolvency

87. 2. Publication of resolution to wind up voluntarily:
Where a company has passed a resolution for voluntary winding up
and a resolution is passed, it shall within fourteen days of the
passing of the resolution give notice of the resolution by
advertisement in the Official Gazette and also in a newspaper which
is in circulation in the district where the registered office or the
principal office of the company is situate.
Default:
The company and every officer of Rs.5000 for every day during which
such default continues.
3. Effect of voluntarily winding up:
In the case of a voluntary winding up, the company shall from the
commencement of the winding up cease to carry on its business except as far
as required for the beneficial winding up of its business:
– Provided that the corporate state and corporate powers of the company
shall continue until it is dissolved.

88. B. Creditors Voluntary Winding Up
Where the Board of directors does not file a declaration as to solvency of
the company, the voluntary winding up is called ‘ the Creditors ‘ voluntary
winding up.
- if the members and creditors nominate two different persons as
liquidators, creditors’ nominee shall become the liquidator of the
company.
- Besides, in the case of creditors’ winding up, if the creditors so wish ,
a ‘ committee of inspection ‘ may be appointed to work along with the
liquidators.

89. PROVISIONS applicable:
1. Meeting of creditors (2014 + mca website)
(i) creditors meeting to be called with general meeting (or next day)in
which voluntary winding up resolution is to be passed
(ii) Where two-thirds in value of creditors of the company are of the opinion
that:
- it is in the interest of all parties that the company be wound up
voluntarily, the company shall be wound up voluntarily; or
- the company may not be able to pay for its debts in full from the
proceeds of assets sold in voluntary winding up and pass a resolution that it
shall be in the interest of all parties if the company is wound up by the
Tribunal in accordance with the provisions, the company shall within
fourteen days thereafter file an application before the Tribunal.
2. Notice to registrar: A resolution passed at the creditors meeting must be
filed with the registrar within 10 days of the passing thereof. otherwise fine
of 500 Rs per day(S501).
3. Appointment of liquidator: (mca website)
The company in its general meeting, where a resolution of voluntary
winding up is passed, shall appoint a Company Liquidator from the panel
prepared by the Central Government for the purpose of winding up its
affairs and distributing the assets of the company and recommend the fee to
be paid to the Company Liquidator.

90. 4. Notice of appointment of liquidator:
The company shall give notice to the Registrar of the appointment of a Company
Liquidator along with the name and particulars of the Company Liquidator, of
every vacancy occurring in the office of Company Liquidator, and of the name of
the Company Liquidator appointed to fill every such vacancy within ten days of
such appointment or the occurrence of such vacancy.
5. Power to remove and fill the vacancy of appointed liquidator:
(i) A Company Liquidator appointed under section 310 may be removed by the
company where his appointment has been made by the company and, by the
creditors, where the appointment is approved or made by such creditors.
(ii) If a vacancy occurs by death, resignation, removal or otherwise in the office of
any Company Liquidator appointed by, the company or the creditors, as the case
may be, fill the vacancy in the manner specified.
6. Committee of inspection: The creditors at their first or any subsequent meeting,
appoint a committee of inspection of not more than 5 members.
7. Fixing of liquidator’s remuneration: the remuneration of the liquidator is fixed by
the committee of inspection/ creditors/ court

91. 8. Powers and duties of Company Liquidator in voluntary winding up
(both creditor and member)
(i) The Company Liquidator shall settle the list of contributories, which shall be prima
facie evidence of the liability of the persons named therein to be contributories.
(ii) The Company Liquidator shall call general meetings of the company for the purpose
of obtaining the sanction of the company by ordinary or special resolution, or for
any other purpose he may consider necessary.
(iii) The Company Liquidator shall maintain regular and proper books of and any officer
authorized by the Central Government may inspect such books of account.
(iv) The Company Liquidator shall prepare quarterly statement of accounts in such form
and manner as may be prescribed and file such statement of accounts duly audited
within thirty days from the close of each quarter with the Registrar, failing which
the Company Liquidator shall be punishable with fine which may extend to five
thousand rupees for every day during which the failure continues.
(v) The Company Liquidator shall pay the debts of the company and shall adjust the
rights of the contributories among themselves.
(vi) The Company Liquidator shall observe due care and diligence in the discharge of his
duties.
(vii) If the Company Liquidator fails to comply with the provisions, he shall be
punishable with fine which may extend to Rs.10 lakhs.

92. 9. Board’s power to cease on appointment of liquidator
- all the powers of the directors would be ceased but creditor or
committee of inspection can sanction them to continue
10. Company Liquidator to submit report on progress of winding up
The Company Liquidator shall report quarterly on the progress of winding
up of the company in such form and in such manner as may be prescribed
to the members and creditors and shall also call a meeting of the
members and the creditors as and when necessary.
At least one meeting each of creditors and members in every quarter
and apprise them of the progress of the winding up of the company in
such form and in such manner as may be prescribed.
11. Power of liquidator to accept shares

93. 12. Final meeting and dissolution of company:
As soon as the affairs of a company are fully wound up, the Company
Liquidator shall prepare a report of the winding up and thereafter call a
general meeting of the company.
(i) If the majority of the members of the company after considering the
report of the Company Liquidator are satisfied that the company shall be
wound up, they may pass a resolution for its dissolution.
(ii) Within two weeks after the meeting, the Company Liquidator shall—
(a) send to the Registrar a copy of the final winding up accounts of
the company and copies of the resolutions passed in the meetings; and
(b) file an application along with his books and papers of the
company relating to the winding up, before the Tribunal for passing an
order of dissolution of the company.
(iii) If the Tribunal is satisfied, after considering the report of the Company
Liquidator that the process of winding up has been just and fair, the
Tribunal shall pass an order dissolving the company within sixty days of
the receipt of the application .
(iv) The Company Liquidator shall file a copy of the order with the
Registrar within thirty days.
(v) The Registrar, on receiving the copy of the order passed by the
Tribunal shall forthwith publish a notice in the Official Gazette that the
company is dissolved.

94. CONSEQUENCES of Voluntary winding up
1. As to shareholders
2. As to Creditors
- where the company is solvent
- where the company is insolvent
3. As to servants and officers
4. As to proceedings against the company
5. As to costs

95. • The Cadbury Report which was released in the UK in 1991
outlined that "Corporate governance is the system by which
businesses are directed and controlled.“
Corporate Governance is the system of rules, practices and
processes by which a company is directed and controlled.
Corporate governance essentially involves balancing the
interests of the many stakeholders like shareholders,
management, customers, suppliers, financiers, government and
the community in a company.
CONCEPT OF CORPORATE GOVERNANCE

96. • Fairness -Fairness refers to equal treatment, for example, all
shareholders should receive equal consideration for whatever
shareholdings they hold.
• In addition to shareholders, there should also be fairness in the
treatment of all stakeholders including employees,
communities and public officials. The fairer the entity appears
to stakeholders, the more likely it is that it can survive the
pressure of interested parties
BASIC PRINCIPLES OF CORPORATE GOVERNANCE

97. • Accountability - Corporate accountability refers to the obligation and
responsibility to give an explanation or reason for the company’s actions and
conduct.
• Responsibility - The Board of Directors are given authority to act on behalf
of the company. The Board of Directors are responsible for overseeing the
management of the business, affairs of the company, appointing the chief
executive and monitoring the performance of the company. In doing so, it is
required to act in the best interests of the company.
• Accountability goes hand in hand with responsibility. The Board of Directors
should be made accountable to the shareholders for the way in which the
company has carried out its responsibilities.
BASIC PRINCIPLES OF CORPORATE GOVERNANCE - 2

98. • Transparency - A principle of good governance is that
stakeholders should be informed about the company’s
activities, what it plans to do in the future and any risks
involved in its business strategies.
• Transparency means openness, a willingness by the
company to provide clear information to shareholders and
other stakeholders. For example, transparency refers to
the openness and willingness to disclose financial
performance figures which are truthful and accurate.
BASIC PRINCIPLES OF CORPORATE GOVERNANCE - 3

99. • Disclosure of material matters concerning the organisation’s
performance and activities should be timely and accurate to
ensure that all investors have access to clear, factual
information which accurately reflects the financial, social and
environmental position of the organisation.
• Organisations should clarify and make publicly known the
roles and responsibilities of the board and management to
provide shareholders with a level of accountability
BASIC PRINCIPLES OF CORPORATE GOVERNANCE - 4

100. • Few New Provisions of Companies Act 2013 for Directors and
Shareholders
• One or more women directors are recommended for certain classes of
companies
• Every company in India must have a resident directory
• The maximum permissible directors cannot exceed 15 in a public limited
company. If more directors have to be appointed, it can be done only with
approval of the shareholders after passing a Special Resolution
• The Independent Directors are a newly introduced concept under the Act. A
code of conduct is prescribed and so are other functions and duties
• The Independent directors must attend at least one meeting a year
CG IN INDIA – A REVIEW

101. • Every company must appoint an individual or firm as an auditor.
The responsibility of the Audit committee has increased
• Filing and disclosures with the Registrar of Companies has
increased
• Top management recognizes the rights of the shareholders and
ensures strong co-operation between the company and the
stakeholders
• Every company has to make accurate disclosure of financial
situations, performance, material matter, ownership and governance
CG in India - a review – 2

102. Additional Provisions in Companies Act 2013
• Related Party Transactions – A Related Party Transaction (RPT) is the
transfer of resources or facilities between a company and another
specific party. The company devises policies which must be disclosed
on the website and in the annual report. All these transactions must be
approved by the shareholders by passing a Special Resolution as the
Companies Act of 2013. Promoters of the company cannot vote on a
resolution for a related party transaction.
• Changes in Clause 35B – The e-voting facility has to be provided to the
shareholder for any resolution is a legal binding for the company.
CG in India - a review – 3

103. • Corporate Social Responsibility – The company has the
responsibility to promote social development in order to
return something that is beneficial for the society.
• Whistle Blower Policy – This is a mandatory provision by
SEBI which is a vigil mechanism to report the wrong or
unethical conduct of any director of the company.
CG in India – a Review – 4

104. Benefits of Corporate Governance
a. Good corporate governance ensures corporate success
and economic growth.
b. Strong corporate governance maintains investors’
confidence, as a result of which, company can raise
capital efficiently and effectively.
c. It lowers the capital cost.
d. There is a positive impact on the share price.
• It provides proper inducement to the owners as well as
managers to achieve objectives that are in interests of
the shareholders and the organization.