Company law by Ritika Tiwari.pptx

COMPANY LAW
NOTES
RITIKA TIWARI

UNIT-1
INCORPORATION OF COMPANIES

COMPANY
1. Meaning and Definition
2. Characteristics
3. Classification
4. Legislation on Companies
5. Incorporation
6. Promotion
7. Registration
8. Memorandum of Association
9. Articles of Association

INTRODUCTION TO COMPANY
• Company is a voluntary association of persons formed for the purpose of
doing business having a distinct name and limited liability. It is a judicial
person having a separate legal entity distinct from the members who
constitute it, capable of rights and duties of its own and endowed with the
potential of perpetual succession.
• It is an association or collection of individual real persons and/or other
companies, who provide some form of capital. This group has a common
purpose or focus and an aim of gaining profits. The group or association of
persons can be made to exist in law and then a Company itself is
considered as “legal person”. The name company arose because, at least
originally, it represented or was owned by more than one real or legal
person.
• The company is managed on behalf of the shareholders by the Board of
Directors, elected at an Annual General Meeting. The shareholders can also

MEANING OF COMPANY
Company refers to a voluntary
association formed and organized to
carry on a business. This is an
organization or collection of
individuals, whether natural persons,
legal persons or a mixture of both.

MEANING OF JOIN STOCK COMPANY
Joint Stock Company refers to a
company having a joint stock or capital
that is divided into units of ownership
interest, such as shares which may be
transferred without consent of the other
shareholders.

DEFINITION OF THE COMPANY
According to H. L. Haney,
“A Company is a voluntary association of individuals
for profit, having its capital divided into transferable
shares the ownership of which is the condition of
membership”
Under Section 3(1) of Indian Companies Act, 1956, “A
Joint Stock Company means a company formed and
registered under this Act or an existing company &
Existing Company means a company formed and

CHARACTERISTICS OF A COMPANY
1. Artificial person: A company is an artificial person created by law not by
natural birth. Even though it has no natural personality, it has legal
personality. Therefore it can enter into contracts, sue and can be sued, own
property, appoint employees and borrow money like any other natural
person.
2. Common Seal: The common seal can serve as its signature. The common
seal is affixed on all important documents and contracts which is witnessed
by signature of two directors and countersigned by secretary where ever
required. The common seal is kept under the custody of directors. Since a
company is an artificial person having no physical features like a natural
person, it cannot sign. Hence every company by law must have a common
seal on which its name is engraved.
3. Compulsory Incorporation: A company is a voluntary association of
persons formed and incorporated under the existing Corinne law. Only when

4. Perpetual succession: Company‘s employees death, insolvency or insanity
will not affect its life and existence. It can be wound up only under the
provisions of the act.
5. Limited liability: Usually the liability of members of a company is limited to
the extent of uncalled or unpaid value of shares held by them.
6. Share capital: The capital required by the company is raised by issues
shares. A share is a share in the share capital of the company.
7. Separation of ownership and management: In company the ownership
and management are separated. The shareholders who are the owners do
not take active part in the everyday affairs of the company. Instead, they
elect their representatives known as Directors, who with the help of
managers and employees manage the company.
8. Legal Entity: Members cannot be personally held responsible for
Company Acts
9. Large membership: Maximum of 200 in the case of private limited and

ADVANTAGES OF A COMPANY
• Limited Liability: The members are liable only to the extent of unpaid value
of share. If the shares are fully paid up then the member is not liable for any
debts of the company.
• Continuity and Stability: A company existence is not affected by death,
insolvency or insanity of its members.
• Professional Management: The company appoints experienced, competent
and experts to manage the business. Their services lead to managerial and
administrative efficiency and accuracy.
• Large Capital: A company can collect huge capital for the business through
shares and debentures, public deposits; loans etc.
• Economies of scale: As the company operates on a large scale it enjoys
economies in production, distribution, management and financing.
• Bargaining Power: A joint stock company has strong bargaining power in
buying as well as in selling of goods because of its large scale production.

• Legal Status: Being a legal creation Company has permanent existence.
• Large Membership: A joint stock company (especially a public company)
has large number of members.
• Transferability of shares: Shares of a Joint Stock Company (especially
public companies) are freely transferable. This encourages people to invest
in shares.
• Employment: Joint Stock Company provides employment to a large number
of people directly and indirectly.
• Government Revenue: Joint Stock Companies provides revenue to the
government in the form of taxes charged directly and indirectly.
• Research and Development: Joint Stock Companies undertake R & D
continuously thus bringing about new and improved products which benefits
people. Incorporation of Companies 13.
• Economic Development: Because of Joint Stock Companies there is all
round development of trade, commerce and industry. The society in general

DISADVANTAGES OF A COMPANY
• Lacks Flexibility: Have to follow a detailed procedure or obtain sanctions
from various authorities. This results in lack of flexibility.
• No Business secrecy: Company have to publish accounts and other
records.
• Excessive government regulation: Company has to follow the numerous
provision of the Indian Companies Act.
• Difficult Formation: Legal formalities have to be undertaken to register.
• Delay in Decision Making: Decisions require shareholder’s approvals.
• Conflicts of Interest: There may arise a conflict of interest among various
parties (shareholders, management, workers etc.)
• Limited area: Cannot do business beyond the given boundaries
• Exploitation of shareholders: The directors may even manipulate the share
trading on the stock exchange. Thus shareholders can be exploited by

HIGHLIGHTS OF COMPANIES ACT 2013
PASSED BY THE LOK SABHA ON 18.12.12,
PASSED BY THE RAJYA SABHA ON 08.08.13
RECEIVED ASSENT FROM THE PRESIDENT ON AUGUST 29, 2013
1. Incorporation of Company
– Incorporation of a One Person Company has been permitted.
– Numbers of permissible members in private company has been raised to
200 as against existing limit of 50 members.
– Limit of number of members in an association or partnership (without
incorporation) to be increased up to 100.
2. Share Capital and Debentures
– Shares, other than sweat equity, cannot be issued at a discount.
– Reduction of share capital is subject to the approval of Tribunal.
– A company may issue preference shares redeemable after 20 years for
infrastructure projects.

3. Acceptance of Deposit by Companies:
– Deposit insurance is required to be provided as prescribed.
– Deposits can be secured and unsecured.
– The concept of small depositors is dispensed with.
4. Management and Administration
– Forms and Certification
– Meetings & Secretarial Audit
– Annual Documents
5. Appointment and Variations regarding Directors and Key Managerial
Personnel.
– Appointment & Key Managerial Personnel
– Status of Independent Director & Directorships
6. Meeting of Board and its Power:
– A notice of not less than 7 days in writing is required.

7. Accounts and Audits: Books of accounts can be kept in electronic form
also.
8. Inspection and Investigation :The provision for establishment of Serious
Fraud Investigation Office (SFIO) by the Central . Government is another
significant feature of the Act.
9. Corporate Social Responsibility (CSR) Formation of CSR Committee
has been made mandatory for a company having net worth of >500 crore
or more or turnover of > 1,000 crore or more or net profit of > 5 crore or
more during any financial year.
10.Compromises, Arrangement and Amalgamation: Separate provision for
merger between two small companies or holding and wholly owned
subsidiary.
11.National Company Law Tribunal (NCLT): Every proceeding presented
before the Tribunal shall be dealt with and disposed of within 3 months
from the date of commencement of proceeding before the tribunal.

CLASSIFICATION OF COMPANIES
Classification On the Basis of Liability
• (i) Companies limited by shares :
• The liabilities of the members is limited to the unpaid amount on
the shares.
• (ii) Companies limited by guarantee:
• The liability of the members of a company is limited to a fixed
amount which the members undertake to contribute to the assets
of the company in the event of it being wind up.
• (iii) Unlimited companies
• Without limited liabilities. Every member is liable to the debts of
the company as in an ordinary partnership in proportion to his
interest in the company.

Classification On the Basis of Number of Members.
Private Company: A private company means a company which,
– (a) Restricts the right to transfer its share if any.
– (b) Limits the number of members to 50, not including its employees.
– (c) Prohibits any invitation to the public, to subscribe for any shares and
debentures of the company.
– A private company must have its own articles of association.
• Can be formed by merely two persons by subscribing their names to the MoA.
• Minimum paid-up capital of one lakh rupees. Must use ‘Private Limited’ in
name.
Public Company: Company which is not a private company according to the
Companies Act 1956. Public company by its articles does not,
– 1. Restrict the right to transfer its shares if any,
– 2. Limits the number of members to 50 and
– 3. Prohibits any invitation to the public, to subscribe any shares or

Classification on the Basis of Incorporation
On the basis of incorporation, companies may be classified into,
(i) Chartered companies: -
• The crown in the exercise of royal prerogative has the power to create
a corporation by the grant of a charter . Example East India Company.
(ii) Statutory companies:-
• A company may be incorporated by means of a special act of
Parliament or any state legislature. Example railways, Water Works,
Gas, UTI, Bank of India. etc.
(iii) Registered companies:-
• Companies registered under the companies Act of 2013 are called
registered companies. Such companies come into existence when they
are registered under the company Act and a certificate of incorporation
is granted to them by the registrar. Such companies may be limited by
shares or guarantee.

Classification on the Basis of Control
• Holding Company
– A company which controls another company is called Holding Company.
• Subsidiary Company
– A company which is controlled by another company is called subsidiary
company. The Companies Act, 1956 and latest Amendments provides
that a holding company is one, if it:
• (a) Controls the composition of board of directors of another company.
• (b) Holds more than half of the nominal value of the equity share
capital of another company.
• (c) Is a subsidiary of any company which in turn is a subsidiary of
another company.
– If one company holds the majority of shares (more than 50%) in another
company, the latter becomes the subsidiary of the former.

Classification on the Basis of Ownership
• Government Company
– Any company in which more than 51 percent of paid up share capital is
held either by the central government or any state government or both
governments or partly by the central governments and partly by one or
more state governments is known as government company.
– According to the section 617, the subsidiary of a government company is
also considered as a government company.
– The corporations such as State Trading Corporation of India Ltd. and
Minerals and Metals Trading Corporation of India Ltd. are two popular
Government Companies.
• Non-government Company
– All other companies except the government companies are called non-
government companies. They do not satisfy the characteristics of
government companies.

Sno Criteria Private Limited Public Limited
1 Members Min 2 & Max 50 Min 7 & Max no limit
2 Transfer od
shares
Strictly transferred Freely transferable
3 Public invitation Can not invite public for
subscribing to its share
capital.
Can do.
4 Name Has to use “Private Limited” Only “Limited”
5 Privileges More Less
6 #of Directors Min 2 Min 3
7 Appointment of
Directors
No restrictions Has to file
8 Legal Control Less Strict
9 Loans Directors can barrow from Directors can not barrow
Key Differences in Private vs Public companies

ONE PERSON COMPANY
• Introduced by the Companies Act, 2013
• First recommended by the committee of Dr. JJ Irani in 2005
• As per Sub- Section 62 of Section 2 of The Companies Act,
2013, …'One Person Company means a company which has
only one member'.
• One person company will gives all benefits of a private limited
company.
• Only for Indian.
• One Man can form max 5 OPC.
• Incorporated as a private limited company.

SPECIAL FEATURES OF ’ONE PERSON
COMPANY’ (OPC)
1) An OPC can be formed under any of below categories:
–a) Company limited by guarantee.
–b) Company limited by shares
2) An OPC limited by shares shall comply with
following requirements:
a) Shall have minimum paid up capital of INR 1 Lakh.
b) Restricts the right to transfer its shares.
c) Prohibits any invitations to public to subscribe for the
securities of the company.

EXEMPTIONS AVAILABLE TO ONE PERSON
COMPANY - LEGAL PROVISIONS
1) Signatures on Annual Returns
ii) Holding Annual General Meetings
iii) Board Meetings and Directors
iv) Signatures on Financial Statements
v) Contracts by One Person Company

LEGISLATION ON COMPANIES
• An act or process of making establishing laws or rules or provisions for
regulating the activities of certain persons or companies.
• Legislation on companies is imposed by the Indian Companies Act, 2013.
• Major provisions applicable for companies are
1. Registered Companies
2. Insurance Companies
3. Banking Companies
4. Electricity Production Companies
5. Companies Registered Under Special Act
6. Corporate Company
• Some Key provisions of Companies Act, 2013
– CSR KMP- Key Managerial Personnel
– NFRA -National Financial Reporting Agency Women Director

INCORPORATION
• Incorporation refers to the formation of a legal and authorized corporation or
company. A company comes into existence only when it is registered with the
Registrar of Companies. Below are steps of incorporation:-
– Approval of Name
– Filing of Documents
– Memorandum of Association (MOA):
– Objectives of the company and Incorporation.
– Approval of name.
– Filing of documents .
– Payment of filing and registration
– Articles of Association (AOA):
– Rules and regulations of internal management of the company.
– Payment of Filing and Registration Fees

ADVANTAGES OF INCORPORATION
• Independent corporate existence
• Limited liability
• Separate property
• Perpetual succession
• Common seal
• Capacity for suits
• Professional management:
• Transferable shares:
• Lifting of corporate veil:
• Determination of character
• For benefit of revenue
• Fraud or improper conduct
• Agency or Trust or Government Company
• Under statutory provisions
DISADVANTAGESOFINCORPORATION

PROMOTION
• Promotion refers to all those activities that are required to be undertaken to
establish a new business unit for manufacturing or distribution of any
product or provide any service to the people.
• This involves ascertaining as to whether all the basic requirements such as
land, building, raw material, machine, equipment's etc. are available or not.
If they are available one can assemble them, arrange the necessary funds
and set up the business unit to give shape to the initial idea of establishing
business.
• The whole process is called business ‘promotion’ and the person who does
it is called the ‘promoter’.
Role and Importance of Promoter
• A promoter can be a person or group of persons who take necessary steps
to arrange the basic requirements and establish a business unit.
• Promoter conceives the idea of business enterprise, analyses its prospects,
works out a tentative scheme of organization, brings together the requisite
men, material, machines and money and starts the enterprise.

FUNCTIONS OF A PROMOTER
• Discovering of idea for establishing a company.
• Investigate about demand for product, availability of power, labour, material,
etc.
• Find out suitable persons who are willing to act as first directors of the
company and are ready to sign on the Memorandum of Association.
• Selecting of bank, legal advisor, auditors and underwriters for the company.
5. To prepare essential documents of the company.
• Prepare draft of the MoA, AoA, Prospectus of the company and get them
printed.
• To submit all the documents, required for incorporation with the Registrar.
• To arrange for advertisement of prospectus of the company in the
newspapers.
• To meet all the preliminary expenses for floating of a company.

RIGHTS OF PROMOTERS
• Right to receive preliminary-expenses.
• Right to receive remuneration for their services.
• Right to receive the proportionate money from co-promoters.
Labilities of the Promoters
• To disclose the liability and pay the secret profits if promoters
have earned.
• Liability is up to the completion of contracts.
• Liability on statutory mistakes or fraud in the prospectus.
• His property becomes liable for payment even after his death.

TYPES OF PROMOTERS
• Professional Promoters: Specialists in promoting new business ventures.
• Financial Promoters: These promoters float companies only during
favorable conditions in the securities market.
• Technical Promoters: These promoters are technical experts in different
fields.
• Entrepreneurial Promoters: They conceive new ideas of business, take
necessary steps to set up the business unit to give it a shape and ultimately
control and manage it. Most promoters in India (like Tata, Birla and
Ambanies) fall in this category.
• Specialized Institutions: There are certain financial institutions which
provide financial assistance and guidance in launching new ventures and
often collaborate with new entrepreneurs to promote new business.
• Government: Central & state governments also act as promoters in public
sector or joint sector which involve huge amount of capital and risk. HMT,

REMUNERATION OF A PROMOTER
• A promoter does not have any right to receive any kind of compensation from
the company for his services. But he can receive remuneration when a
promoter enters into a contract with the company for the services provided by
him.
• A promoter is not liable to receive any remuneration with regard to the
payment made by him in relation to the formation of the company if there is
no such contract.
• A promoter can obtain remuneration for the services in this following ways:
– 1. A promoter for cash or fully paid shares can sell his own property at a
profit to the company if he discloses about this effect.
– 2. A promoter can be given an alternative by a company to buy a specific
number of shares.
– 3. A promoter can obtain a commission on the shares sold by him.

STEPS INVOLVED IN PROMOTION OF COMPANY
• Discovery of a Business Idea
– The process of business promotion begins with conception of an idea of
business opportunity
• Investigation and Verification
– Taking into consideration its technical feasibility and commercial viability
• Assembling
– Assembling or making arrangements for all the necessary requirements
• Financing the Proposition
– Financial plans are prepared with respect to the amount of capital
required

REGISTRATION
• The Registrar of Companies (ROC) is an appointment of the Ministry of
Corporate Affairs which is responsible for the regulation of Indian enterprises
in Industrial and Services Sector. - [defined under Sub-Section 75 of Section 2 of the
Companies Act, 2013]
• At present, there are 22 Registrars of Companies.
• The ROC is responsible for fostering business ethics in the current paradigm.
• Term ‘Registrar’ means a Registrar, an Additional Registrar, a Joint Registrar,
a Deputy Registrar or an Assistant Registrar. [According to Section 2(75)]
• ROCs as appointed under Section 396 of the Act primarily have the duty of
registering companies incorporated in the respective States and the Union
Territories.
• The Central Government exercises administrative control over offices through
the respective Regional Directors (RD) who are in-charge of the respective

PRELIMINARY STEPS INVOLVED IN REGISTRATION
1. Deciding the Type of Company
2. Deciding the Location of Registered Office
3. Acquiring DIN from Central Government
4. Acquiring Digital Signature
5. Selecting and Reserving Company Name
6. Drafting Memorandum
7. Drafting Articles
8. Inspecting the Drafts
9. Printing of the Memorandum and Articles
10. Stamping of the Documents
11. Dating of the Documents
12. Obtaining Signature of the Subscriber
13. Getting Consent of the Nominee in Case of an OPC

FUNCTIONS OF THE REGISTRAR OF COMPANIES
• Section 77(2) - Issue certificate of registration of charge without which the
charge cannot be taken into account by liquidators or creditors.
• Section 78 - The Registrar gives a notice to the company in order to enable
it to inform whether the company has itself created a charge and if it has not,
then inform about the reason for the same.
• Section 81 - Registrar is required to keep the register of charges in respect
of every company.
• Section 93 - Return is to be filed with Registrar in case promoters’ stake
changes.
• Section 137 - Copy of Financial Statement to be filed with the Registrar.
• Section 157 - Company to inform the Registrar of the Identification Number.
• Section 208 - After inspection and inquiry, the Registrar is required to submit
a report in writing to the Central Government.

POWERS OF THE REGISTRAR OF COMPANIES
• Section 7 - Registration of a company is obtained by
filing an application with the ROC.
• Section 83 - Power to make entries of satisfaction and
release without intimation from company.
• Section 206 - Power to call for information, inspect
books and conduct inquiries.
• Section 209 - Power of search and seizure.
• Section 248 - Power to remove the name from the
register of companies.

MEMORANDUM OF ASSOCIATION (MOA)
• The Memorandum of Association is the principal document in the formation
of a company. It is called the charter of the company. It contains the
fundamental conditions upon which the company is allowed to be
incorporated or registered. It defines the limitations of the powers of the
company. The purpose of memorandum is to enable the shareholders,
creditors and those who deal with the company to know what its permitted
range of activities or operations is. It defines the relationship of the company
with the outside world.
MEANING OF MEMORANDUM OF ASSOCIATION
Memorandum of Association is a document that regulates a company’s
external activities and must be drawn up on the formation of a registered or
incorporated company. The memorandum of association gives the
company’s name, names of its members (shareholders) and number of
shares held by them and location of its registered office.

CAUSES OF THE MEMORANDUM OF ASSOCIATION
• Name Clause: Contains name by which the company will be established.
• Situation Clause: Contains the name of the state in which the registered
office of the company is or will be situated.
• Objects Clause: Contains detailed description of the objects and rights of
the company, for which it is being established.
• Liability Clause: Contains financial limit up to which the shareholders are
liable to pay off to the outsiders on the event of the company being
dissolved or closed down.
• Capital Clause: Contains the proposed authorized capital of the company.
• Subscription Clause: Contains the name and address of at least seven
members in case of public limited company and two members in case of a
private limited company, who agree to associate or join hands to get the
undertaking registered as a company.

PROCEDURE FOR THE ALTERATION OF CAPITAL CLAUSE AND OBJECTS CLAUSE
The object clause is the important clause in the Memorandum of
Association. It can be altered by Sec. 17(1) by passing a special
resolution so as enable it.
(i) To carry on its business more economically or more efficiently.
(ii) To attain its main purpose by new or improved means.
(iii) To enlarge or change the local area of its operation.
(iv) To carry on some business which under existing circumstances
may conveniently or advantageously be combine with the objects
specified in the Memorandum.
(v) To restrict any of the objects specified in the Memorandum.
(vi) To sell or dispose of the whole or any part of the under taking or
any of the under taking of the Company.

PROCEDURE OF ALTERATION
(i) Special resolution: A special resolution shall be passed at a General
meeting of the Company with respect to alteration of the objects of the
Company.
(h) Copy of the resolution to be filed with the registrar: The Company shall file
with the registrar a copy of the special resolution within one month from the
date of the resolution along with a printed copy of the Memorandum as altered.
Procedure of alteration of Capital clause
⚫Change in Capital clause which may involve increase, reduction or
reorganization of Capital.
⚫(i) Special resolution must be passed by the company
⚫(ii) To file with registrar a notice of alteration in Form No.5 within 30 days of
the alteration. In case of increase in authorized capital, to deposit along with
the notice requisite registration fees for the increased capital.

ARTICLES OF ASSOCIATION (AOA)
The Articles of Association of a company contains the various rules and
regulations for the day to day management of the company. These rules are
also called the bye-laws. It covers various rights and powers of its members,
duties of the management and the manner in which they can be changed. It
defines the relationship between the company and its members and also among
the members themselves. The rules given in the AOA must be in conformity
with the Memorandum of Association.
MEANING OF ARTICLES OF ASSOCIATION
• Article of Association is a document that specifies the regulations for a
company’s operations. The articles of association define the company’s
purpose and lays out how tasks are to be accomplished within the
organization, including the process for appointing directors and how financial
records will be handled.
• Articles of association often identify the manner in which a company will issue
stock shares, pay dividends and audit financial records and power of voting

Contents of Articles of Association
1. Share capital, rights of shareholders, variation of these rights,
payment of underwriting commission.
2. Lien on shares.
3. Calls on shares.
4. Transfer of shares. Incorporation of Companies
5. Transmission of shares.
6. Forfeiture of shares.
7. Conversion of shares into stock.
8. General meetings and proceedings thereof.
9. Directors, their appointment, remuneration, qualifications,
powers. 10. Dividend and Reserves.

RULES & REGULATIONS OF AOA
Articles of Association of a company generally contain rules and regulations with
regard to the following matters:
– (a) Preliminary contracts.
– (b) Use and custody of common seal.
– (c) Allotment, calls and lien on shares.
– (d) Transfer and transmission of shares.
– (e) Forfeiture and re-issue of shares.
– (f) Alteration ofshare capital.
– (g) Issue of share certificates and share warrants.
– (h) Conversion of shares into stock.
– (i) Procedure of holding and conducting company meetings.
– (j) Voting rights and proxies of members.

ALTERATION OF ARTICLES OF ASSOCIATION
The AOA of a Company can be altered at any time subject to the following :
– (i) The alteration must not be inconsistent with (i.e., against) the
Memorandum of Association, the Companies Act and any other law of
the country.
– (ii) The alteration must not constitute a fraud on the minority of
shareholders. It must be made bonafide for the benefit of the Company
as a whole.
– (iii) The alteration must not result in breach of contract with outsiders.
– (iv) The alteration must be made by passing a special resolution.
– (v) A copy of the special resolution must be filed with the registrar within
30 days of passing the special resolution.
– (vi) An altered or revised printed copy of the Article of Association must
be filed with the registrar within 3 months of passing the special
resolution

CERTIFICATE OF INCORPORATION
Certificate of incorporation is a legal document required at the
time of company formation. It is said to be a license to form a
company, issued by the state government. The private limited
company in India is measured by the shares that are a
shareholder is only liable to a limit of creditors. A Pvt. limited
company cannot offer their share to general public, so it cannot
trade on the public stock exchanges, the main difference
between a Private limited and public limited company. The
private limited company has to suffix limited or incorporation as
the name is the reason of lid or inc written at the end of the
company name

PRIVATE COMPANY REGISTRATION OR COMPANY FORMATION INCLUDES
SEVEN STEPS -
a) Filling application for DIN and DSC that are Director
Identification Number and Digital signature Certificate.
b) Selecting and checking and applying for availability of name.
c) Drafting of MOA and AOA that are Memorandum of association
and article of association respectively.
d) Filling of E-forms with Registrar of companies.
e) Registrar of companies’ fees and stamp duty to be paid for it.
f) All verification of the documents by Registrar of companies.
g) Certificate of Incorporation is issued to director of company.
h) This process can also be seen as issuing ofthe Certificate of
Incorporation which is necessary for the company formation.

CERTIFICATE OF INCORPORATION MAINLY
INCLUDES FIVE THINGS IN IT
a) The name of the corporation with its abbreviation.
b) A statement of business purpose.
C) The corporation’s registered office’s address and the name of
registered agent for the address.
d) Number of the shares of stock which are authorized to be
issued and a description of the different types of stock that can
be issued by the Company if there are more than one type.
e) The name and address of the corporation’s incorporated.

PROSPECTUS
• After getting the Certificate of Incorporation or Registration a public limited
company invites the public to subscribe to its shares. This is done by issuing
a document called Prospectus.
• There are two types of prospectuses for stocks and bonds: preliminary and
final.
• The preliminary prospectus is the first offering document provided by a
securities issuer and includes most of the details of the business and
transaction in question.
• The final prospectus is printed after the deal has been made effective and
can be offered for sale and supersedes the preliminary prospectus.
• A fund prospectus contains details on its objectives, investment strategies,
risks, performance, distribution policy, fees and expenses and fund
management

MEANING AND DEFINITION OF PROSPECTUS
• Prospectus refers to a formal legal document, which is required
by and filed with the Securities and Exchange Commission that
provides details about an investment offering for sale to the
public. A prospectus contains the facts that an investor needs to
make an informed investment decision
• Under the Companies Act, a prospectus has been defined as
“any document described or 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 shares or debentures of a
company or body corporate”.

OBJECTIVES OF PROSPECTUS
i) It informs the company about the formation of a new
company.
ii) It serves as written evidence about the terms and
conditions of issue of shares or debentures of a
company.
iii) It induces the investors to invest in the shares and
debentures of the company.
iv) It describes the nature, extent and future prospectus
of the company.
v) It maintains all authentic records on the issue and

CONTENTS OF PROSPECTUS
i) The prospectus contains objectives of the company, name, addresses and
signatories of the MoA and the number of shares held by them.
ii) The name, addresses and occupation of directors and managing directors.
iii) The number and classes of shares and debentures issued.
iv) The qualification share of directors.
v) The number, description and the document of shares or debentures which
within the two preceding years have been agreed to be issued other than
cash.
vi) The name & addresses of the vendors of any property acquired by
company
vii) Particulars about the directors, secretaries & treasures, their
remuneration.
viii) The amount for the minimum subscription.

TYPES OF PROSPECTUS
1. Shelf Prospectus
– “Shelf Prospectus” means a prospectus in respect of which the securities
or class of securities included therein are issued for subscription in one or
more issues over a certain period without the issue of a further prospectus.
– Accordingly as per Section 31: Any class of Companies, as prescribed by
the Securities and Exchange Board may file a shelf prospectus with the
Registrar at the stage of the first offer of securities included therein which
shall indicate a period not exceeding one year as the period of validity of
such prospectus which shall commence from the date of opening of the
first offer of securities under such prospectus.
– A company filing a shelf prospectus shall require to file an information
memorandum containing all material facts relating to new charges created.

2. Red Herring Prospectus
– “Red Herring Prospectus” means a prospectus which does not include
complete particulars of the quantum or price of the securities included
therein.
– Section 32 of the Act deals with Red Herring Prospectus. It provides that:
A company proposing to issue a red herring prospectus shall file it with
the Registrar at least three days prior to opening of the subscription list
and the offer. As per this section, a company proposing to make an offer
of securities may issue a red herring prospectus prior to the issue of a
prospectus.
– A red herring prospectus shall carry the same obligations as are
applicable to a prospectus. Any variation between the red herring
prospectus and a prospectus shall highlight as variations in the
prospectus.
– Upon the closing of the offer of securities, the prospectus stating therein
the total capital raised, whether by way of debt or share capital, and the
closing price of the securities and any other details as are not included in

STATEMENT IN LIEU OF PROSPECTU
If a company does not want to issue a prospectus to the public for
subscription of the shares, this statement is required to be issued to the public
for necessary information. It must be signed by every person named in it as
director or by his agent authorized in writing: The nature of the information of
this document is more or less similar to that given in the prospectus. A copy of
this statement must be filed with registrar within prescribed time. This
provision does not apply to private company.
• Share Certificate:
• Share warrant:
• Common seal:
• Dividend:
• Minimum subscription:
• Transmission of shares:
• Underwriting

STATEMENT IN LIEU OF PROSPECTUS
• In case of a private limited company, it can immediately start its business as soon
as it is registered. In case of public limited company a certificate, known as
certificate of commencement of businesses must be obtained from the Registrar
of Companies before starting its operation. For this purpose it has to file a
statement with the following declarations to the Registrar of Companies.
– (a) That a prospectus has been filed with the Registrar of Companies.
– (b) Shares have been allotted up to amount of the minimum subscription.
– (c) That the Directors have taken up or purchased the minimum number of
shares required to qualify them to be Director.
– (d) No money is liable to become refundable to applicants by reason of failure
to obtain permission for shares to be traded in a recognized stock exchange.
– (e) A statutory declaration by a Director or the Secretary of the company
stating that the requirements relating to the commencement of business have
been duly complied with.

COMMENCEMENT OF BUSINESS
• Private limited company, it can immediately start its business as soon
as it is registered.
• Public limited company a certificate, known as certificate of
commencement of businesses must be obtained from the Registrar of
Companies before starting its operation. For this purpose it has to file
a statement with the following declarations to the Registrar of
Companies.
1. That a prospectus has been filed with the Registrar of Companies.
2. Shares have been allotted up to the amount of minimum
subscription.
3. That the Directors have taken up or purchased the minimum
number of shares required to qualify them to be Director.
4. That no money is liable to become refundable to the applicants by

UNIT-2
MANAGEMENT OF COMPANIES

DIRECTOR
• A company being an artificial person, does not have a mind of its own and
thus cannot act on its own, it can only act through natural persons or the
people (Director) who are members of it.
• Thus, director act on behalf of the company.
• Director play a significant role in the structure of the company.
• A director takes any decision regarding the management of the company.
They regarded as BRAIN of the company.
• A Director is a member of the board of the directors.
DEFINITION
According to the Section 2 (34) of the Companies ACT 2013=> Director means
a director appointed to the board of a company. Section 149 there must be
minimum
• 3 directors in public company.
• 2 directors in private company.

QUALIFICATION OF DIRECTOR
1. Must be a Natural person.
2. Need not possess any academic qualification.
3. No age limit.
4. As per Sec 152(2)- without DIN(Director Identification Number) no
person shall be appointed as a Director of a company.
5. Must be competent to contract. He should be major sound mind and
not declared insolvent.
6. No qualification for director.
Exception:-> In case article of a company specifies then such person must have the
required qualification to become director.
7. He must not have been disqualified on the ground of insolvency or
conviction by court.

DISQUALIFICATIONS
• Section 164 of the company act 2013 describe a person not to be eligible for
appointment as a director of a company.
1. Unsound mind person.
2. Undischarged insolvent.
3. Insolvency petition is given and pending.
4. Convicted by Court for any offence.
5. If disqualifying order is passed by court of tribunal.
6. Calls in Arear.
7. If DIN are not compiled with or Provided.
8. When director has not filled financial statement or any annual returns
for 3 consecutive years.
9. When director fail to pay its deposit or interest.

LEGAL POSITION OF DIRECTOR
• Directors as agents:-
–Directors real relationships with company is governed by
the company so they are principal (Company) and Agent
(Directors).
• Directors as Trustees:-
–Director must act in a good faith and can not make any
secrete profit for themselves and also the trusties of the
property of the company.
• Directors as Fiduciary:
–Director stands as power towards company.
–The funds of the company which are in there control.

LEGAL POSITION OF DIRECTOR…CONTINUES.
• Director as a Managing Director or Partner :
– Directors are interested with the management
affairs of the company by share holders.
– Directors are elected representatives of all the
shareholders of the company.
– Directors are contributing the large part of
share capital of share capital.
• Director as a organ of the company:
– Justice Neville – Said that => Board of
directors are the brain of company.
– Also act as a employee as a officer.

APPOINTMENT OF DIRECTOR
• First Director or Deemed Director :
– Mean the director of the company who assumes office from the date of
incorporation of the company.
– Are appointment by articles of association and also provide there name and
numbers. Also know as shadow director.
• Appointment of director at General meeting.
– Except first director the subsequent directors are appointment by the
company in the general meeting.
• Example:- A company has 6 directors so only 2 directors (Meaning 1/3 of 6 ) are permanent
directors and the remaining 4 shall be liable to retire by rotation.
– [A] Retirement by rotation : Example:- A company has 6 directors so only 2 directors
(Meaning 1/3 of 6 ) are permanent directors and the remaining 4 shall be liable to retire by rotation.
– [B] When annual general meeting (AGM) did not held.
• AGM is the duty of directors, they its not being conducted then director
can not take advantage of THERE OWN and they retire on their time.

• Deemed Reappointment Of Retiring:
– At the annual General Meeting Director retires so vacancy
may fill-up by reappointing retiring partner or other person.
• No automatics reappointment:
• Fresh Appointment or New Appointment:
• Appointment of Director By Proportional representation [Section
265]:
– Directors are appointment by simple majority of 51% of votes
and 49 % minority votes.
• Appointment by Board of Directors [ sec 260,262,313]
– Directors are empowered to appoint
• Additional director
• Alternate director

• Appointment by Third Party [ sec 255]:
– Debenture holders , financial corporations and banks can be given
rights by AOA to appoint director.
• Appointment by Central Govt[ 408]:
– Sec 408 gives rights to Central govt to appoint a director on an
order passed by National Company Law Tribunal (NCLT).
– Directors are appointed for 3 years in this case.
• Appointment by Small Share holders:
– On 14 days notices share holders can appoint director but this is an
optional. Minimum share holders must be 100 and more to sign the
notice.
– Only for 3 years.
Appointment of Special Director by the Tribunal in case of sick industrial
companies (sec 424(B)).

REMOVAL OF DIRECTOR
• I. Removal by Shareholders Section 284 of the Act provides for the
removal of directors by the company before the expiry of their term of office.
– 1. A special notice of 14 days is required to be given to the company to
move an ordinary’ resolution to remove the director and to appoint new.
• II. Removal by the Central Government Under Section 388 of the Act, the
Central Government may order the removal of a director if an adverse
finding has been made by the Company Law Board against him, after
making an enquiry into cases such as fraud, misfeasance, persistent
negligence, default in carrying out his obligations or managing the business
in such a way as to cause damage to the business or defraud its creditors or
prejudice public interest.
• III. Removal by the Company Law Board The Company Law Board on
receiving application for prevention of oppression of mismanagement may
enquire into the matter and on enquiry, if it finds that relief ought to be

RIGHTS OF DIRECTOR
• Right to refuse to transfer shares:
– According to Section 111 of the Act, directors of private companies and
deemed public companies are entitled to refuse registration of transfer of
shares to a person whom they do not approve.
• Right to elect a Chairman:
– Regulation 76(1) of Table-A provides that the directors are entitled to elect
a chairman for the board meetings.
• Right to appoint a Managing director:
– The Board has the right to appoint the managing director/manager.
• Right to recommend dividend:
– The Board is entitled to decide whether dividend is to be paid or not.
Shareholders cannot compel the directors to pay dividend. However they
can reduce the rate of recommended dividend. Payment of dividend is the

DUTIES OF DIRECTORS
• Statutory Duties
– 1. To determine the amount of minimum subscription.
– 2. To prepare a statutory report and file a copy of it with the register.
– 3. To forward a copy of the statutory report to every member of the
company at least 21 days before the date on which the statutory meeting
is held.
– 4. To call an extraordinary general meeting of the company on the
requisition of the specified number of members.
– 5. To approve the balance sheet and profit and loss account before they
are submitted to the auditors for their report.
– 6. To prepare and place at the annual general meeting an annual report
of the of the company along with the balance sheet and profit and loss
account.
– 7. To pay dividends only out of divisible profit of the company.

– 9. To manage the affairs of the company efficiently.
– 10. To purchase and pay for qualification shares within the specified time.
– 11. To see that the board meetings are held at least once in every three
months and four times in a calendar year.
– 12. To disclose to the company their interest, if any, in any contract entered
into by the company
• General Duties
– a) They must manage the affairs of the company efficiently.
– b) They must act in good faith and in the interest of the company.
– c) They must discharge their duties with reasonable care, skill and
diligence.
– d) They must use the company’s property for the benefit of the company
and not for their personal benefit.
– e) They must not be negligent in the discharge of their duties.

LIABILITIES OF DIRECTOR
1. Liability to third parties/outsiders
(i) Omission or Misstatement in the Prospectus
(ii) If Failure to Repay Application Money on Withholding to list the shares
(iii) Breach of Implied Warranty of Authority
(iv) Fraudulent Trading
(v) If Failure to Repay Money on Non-recipient of minimum subscription.
2. Liabilities of independent and non-executive directors
(i)With his involvement or consent.
(ii) Where the director did not act consciously.
(iii) With his expertise assigned through board
3. Liability to the company
(i) Ultra Vires Acts
(ii) Mala Fide Acts

POWER OF DIRECTOR
• a) Powers to be exercised only at Board meeting
(Section 292).
• b) Power to make calls on shareholders in respect
of money unpaid on their shares.
• c) Power to issue debentures.
• d) Power to borrow moneys otherwise than on
debentures.
• e) Power to invest the funds of the company.
• f) Power to make loans

LOANS OF DIRECTOR
As per Section 185, no company can give any loan to its directors or to persons
in whom the directors are interested.
Exceptions: The provisions of this section does not apply in the following cases:
a. Loan given to a managing director/whole-time director, as a part of the
conditions of service extended by the Company to all its employees.
b. Loan given to a managing director/whole-time director in pursuant to any
scheme approved by the members by a special resolution.
c. A Company which in the ordinary course of its business provides loans or
gives guarantees or securities.
d. Loan made by a holding company to its wholly owned subsidiary company
or guarantee given/ security provided by a holding company in respect of
any loan made to its wholly owned subsidiary company.
e. Guarantee given/security provided by a holding company in respect of
loan made by any bank /financial institution to its subsidiary company.

REMUNERATION OF DIRECTOR
• Remuneration to Managerial Personnel Section 197 of the Companies Act,
2013 prescribed the maximum ceiling for payment of managerial
remuneration by a public company to its managing director whole-time
director and manager which shall not exceed 11% of the net profit of the
company in that financial year computed in accordance with section 198
except that the remuneration of the directors shall not be deducted from the
gross profits.
• Remuneration by a Company having no Profit or Inadequate Profit :
– The company shall not pay to its directors
• Remuneration to Directors in other Capacity [Section 197(4)]:
– Shall be inclusive of the remuneration payable for the services rendered
by him in any other capacity *.
• Sitting Fees to Directors for Attending the Meetings [Section 197(5)]:
– A director may receive remuneration by way of fee for attending the
Board/Committee meetings or for any other purpose as may be decided by

MANAGING DIRECTOR
A managing director or MD is a director of a company given special powers
by its articles of association.
Definition of Managing Director: The Companies Act Defines a managing
director Sec. 267 as “a director who by virtue of an agreement with the
company or of a resolution passed by the company in the general meeting or
by the board of directors, or by virtue of its memorandum or articles of
association, is entrusted with substantial powers of management which would
not otherwise be exercisable by him, and includes director occupying the
position of Managing Director by whatever name called”.
Qualification of Managing Director:The central government shall not grant
its approval unless it is satisfied that:
(1) It is in the interests of the company to have a managing director.
(2) Proposed MD is a fit and appointment is not against public interest.
(3) The terms and conditions of appointment are fair and reasonable

DISQUALIFICATION OF A MANAGING DIRECTOR
• A person cannot be appointed as the managing director or
whole time director of a company if he suffers from any of the
following disqualification:
–i) He is an un-discharged insolvent or has at any time been
adjudged an insolvent;
–ii) He suspends or has at any time suspended payment to
its creditors or has made a composition with them;
–iii) He is or has been convicted by the court of an offence
involving moral turpitude.

RESPONSIBILITIES OF MANAGING DIRECTORS
(i) Implement the Board’s policies and strategies.
(ii) Develop and present the strategic & annual business plans to Board
(iii) Report to the Board on progress against the strategic and annual business
plans. (iv) Manage the day-to-day operations of the company.
(v) Manage, motivate, develop and lead members of the Management Team.
(vi) Manage resources efficiently and effectively to achieve the company’s
objectives.
(vii) Chair Management Team meetings. i
viii) Take a leadership role in establishing or developing company’s culture &
values.
ix) insure that there is a fit between strategy and culture, and the company’s
processes and structure.
x) Ensure that appropriate internal audit processes and procedures are in place.

CORPORATE SOCIAL RESPONSIBILITY
• Corporate social responsibility (CSR) is also known as
corporate responsibility, corporate citizenship, responsible
business, sustainable responsible business (SRB) or
corporate social performance. It is a form of corporate self
regulation integrated into a business model
• Definitions of Corporate Social Responsibility
– According to Lord Holme and Richard Watts,
“Corporate Social Responsibility is the continuing
commitment by business to behave ethically and
contribute to economic development while improving the
quality of life of the workforce and their families as well as
of the local community and society at large”..

NEED FOR CORPORATE SOCIAL RESPONSIBILITY
1. Societal approach is very important to business organizations, which
demand that they should be responsive to the social problems of society.
2. To establish a good corporate image, business organizations include social
responsibility as a corporate objective.
3. Social welfare terms are included in the collaborative agreements, which
require the company to take up the social responsibility of business.
4. Donations to approved NGOs are also exempted from the income tax.
5. Commitment to social responsibility by an organization also enhances its
image, resulting in X better business environment.
6. Companies undertaking social responsibility can position their products
better and increase their market share.
7. If situation demands, due to natural calamities or accidents, a company has
to compensate the victims or provide medical treatment to the affected
people

CORPORATE GOVERNANCE
• A 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 in a company these include its shareholders,
management, customers, suppliers, financiers, government and the
community.
• Since corporate governance also provides the framework for attaining a
company's objectives, it encompasses practically every sphere of
management, from action plans and internal controls to performance
measurement and corporate disclosure.
• Governance provides the structure through which corporations set and
pursue their objectives while reflecting the context of the social, regulatory
and market environment.
• Governance is a mechanism for monitoring the actions, policies and

MEANING
• Meeting refers to gathering of group of people or members to
transact a business or for entertainment purposes. It must
constitute a minimum of two individuals. In few exceptional
cases, a single person can also constitute a valid meeting.
• In a company, meetings happen between various members,
directors, creditors etc. These meetings must be conducted in
compliance with the rules and provisions of the companies Act,
2013.
• A company meeting may be defined as a concurrence or
coming together of at least a quorum of members in order to
transact either ordinary or special business of the company.

A meeting should be conducted by following the procedure

REQUISITES & KEY POINTS OF COMPANY MEETING
✔Meeting must be properly organized
✔(i)Proper Authority (ii) Proper Notice
✔Meeting must be legally constituted
✔(i) Chairman and (ii) Quorum
✔Meeting must be properly conducted
✔(i) Voting, (ii) Poll (iii) Proxy, (iv) Resolution (v) Minutes of the Meeting
✔Must be held as per provisions/rules of Companies Act.
✔Minimum 2 people or more must be present in the meeting.
✔Assembly of persons must be for discussion and transaction of some
lawful business.
✔Must be held at a particular place, date and time.
✔Discussion points to be noted and shared with all the key members.

NOTICE
Notice is a legal communication about the day, date, time
and venue of the meeting. Under Company law, there
should be a 21 days clear notice to hold a meeting of the
members of the company, whereas a seven-day notice is
required to hold a meeting of the board of directors. In the
case of joint holders, notice is sent to the address of the
first joint holder. The company is not obliged to send
notices to other joint holders. Under certain
circumstances, the members may decide for a notice of
less than 21 days also. The onus on the company is to
send the notice, (normally by ordinary post). It is not
necessary for the company to ensure that the same is
received by the member

PROXY
• Where a member is not able to personally attend a meeting, he can depute
another person to attend the meeting on his behalf. The member is required to
fill in a form giving the particulars of his share holding and of the proxy. Proxy
forms are to be deposited with the company sufficiently in advance before the
commencement of the meeting. These proxies have restricted rights and are
not to be counted for quorum.
• A company cannot issue an invitation at its expense asking any member to
appoint a particular person as proxy. If the company does so, every officer in
default shall be liable to fine up to ? 1,000. But if a proxy form is sent at the
request of a member, the officer shall not be liable. Every member entitled to
vote at a meeting of the company, during the period beginning 24 hours before
the date fixed for the meeting and ending with the conclusion of the meeting
may inspect proxy forms at any time during business hours by giving 3 days
notice to the company of his intention to do so.

AGENDA
• Agenda refers to the business to be transacted at the meeting. In the case
of meeting of members, there would be a few matters to be discussed.
Therefore, the agenda is built into the notice itself.
• Agenda gives guidance and information as to the business to be discussed
and transacted in the meeting.
• The agenda for a meeting of shareholders could be ordinary business or
special business. The agenda for an annual general meeting is well set.
• There should be a notice and an agenda for the meetings of various
committees of board of directors, meetings of a class of people etc.
CHAIRMAN OF THE MEETING
Every meeting should be presided over by a member of the company who
is knows as chairman of the meeting the chairman of the BOD of the
company is designated as chairman of shareholder meeting in the AOA.

KINDS OF MEETING
1. Meeting of shareholder
a. statutory meeting
b. annual general meeting
c. extra ordinary general meeting
d. class meeting
2. Meeting of directors
a. board meeting
b. committee meeting
3. Meeting of creditors
a. creditors meeting
b. debenture holder meeting

STATUTORY MEETING
• Every public company having share capital must convene a general
meeting of shareholders within a period of not less than one month and not
more than six months after the date on which it is authorized to commence
its business. This is the first meeting of the shareholders of the company
and it is held once in the whole life of the company.
• The following companies need not to hold statutory meeting:
(i) Private company.
(ii) Company limited by Guarantee having no share capital.
(iii) Unlimited liability company.
(iv) A public company which was registered as a private company earlier.
(v) A company which has been deemed as a public company under Sec.
43 A.

OBJECTS OF STATUTORY MEETING:
The statutory meeting is held to inform the shareholders
about matters relating to incorporation, allotment of share,
the details of the contracts concluded by the company,
etc. According to Stephenson, “Statutory Meeting is
convened in order to the shareholders an opportunity for
seeing what degree of success has attained the floatation
of the company and in order that any special matters
requiring their approval may be laid before them.”

STATUTORY REPORT:
The directors are required to prepare and send a report
called the ‘Statutory Report’ to every member of the
company at least 21 clear days before the date of the
meeting. If the report is sent later it shall be deemed to
have been duly forwarded if it is so agreed to by a
unanimous vote of the members entitled to attend and
vote at the meeting [Sec. 165 (2)]. A copy of this report
should be sent to the Registrar.

STATUTORY REPORT
(i) Shares allotted: The total number of shares allotted distinguishing those
allotted as fully or partly paid-up otherwise than in cash and stating in case of
shares partly paid-up the extent to which they are so paid-up and in either case
the consideration for which they have been allotted.
(ii) Cash received: The total amount of cash received by the company in
respect of all the shares allotted, distinguished as aforesaid.
(iii) Abstract: An abstract of the receipts of the company and of the payments
made thereto, upto a date within seven days of the date of the report, exhibiting
under distinctive headings the receipts of the company thereto from shares and
debentures and other sources the payments thereto and particulars concerning
the balance remaining in hand and an account or estimate of the preliminary
expenses of the company, showing separately any commission, or discount
paid or to be paid on the issue or sale of shares or debentures.

(iv) Directors, auditors and other managerial personnel: The names,
addresses and occupations of its directors and auditors and also of its
manager and’ secretary, if any, and the changes which have occurred since
the date of the incorporation.
(v) Contracts: The particulars of any contract and the modification or the
proposed modification of any contract which is to be submitted for the approval
of the members at the meeting.
(vi) Underwriting contract: The extent to which the underwriting contract, if
any, has not been carried out and the reason therefore.
(vii) Arrears of calls: The arrears, if any due on calls from any director and the
manager.
(viii) Commission and brokerage: The particulars of any commission or
brokerage paid or to be paid to any director or to the manager in connection
with the issue or sale of shares or debentures of the company.

Certification of Report:
• The statutory report must be certified as correct by not less
than two directors; one of whom shall be the managing
director, if any The auditors of company then shall certify it as
correct regarding the shares allotted, cash received in respect
of such shares and the receipts and payment of the company.
[Sec. 165(4)]
• A certified copy of the statutory report shall be filed with the
registrar for registration immediately after the same has been
sent to the members of the company.[Sec. 165(5)]

Effect of Non-compliance:
(i) If default is made in complying with the provisions of Section
165, every director or other officer of the company who is in
default will be liable to a fine which may extend to Rs. 500.
(ii) If the statutory meeting is not held or the statutory report is
not filed as per the provisions of Companies Act, the company
may be compulsorily wound up under the orders of court. [Sec.
43(6)]
The court may, however, give direction for the statutory report to
be filed or a meeting to be held as the case may be and refuse to
order the winding up of the company. [Sec. 443(3)]

ANNUAL GENERAL MEETING (AGM)
It is a meeting of shareholders which is held once in a year. The object of
holding this meeting is to review the progress and prospects of the company
and elect its office-bearers for the coming year.
• Holding of the Meeting:
• The first annual general meeting of the company is held within 9 months of
its incorporation. After holding such meeting it is not necessary to hold any
other annual general meeting in the year of its incorporation and in the
next year.
• Subsequent annual general meeting must be held by the company each
year within six months of the closing of the financial year.
the interval between any two annual general meetings must not be more
than fifteen months. The registrar is empowered to extend the time up to a
period to three months except in the case of first annual general meeting.

EXTRA ORDINARY GENERAL MEETING
• Extraordinary meeting is a general meeting which is held between two
Annual General Meetings.
• Extraordinary General Meeting is Called to discuss any particular matter of
urgent importance to the company.
• This meeting is called for the consideration of any specific subject, decision
of which cannot be postponed to the next Annual General Meeting.
CLASS MEETING
When the meeting of a particular class of shareholders takes place such as
preference shareholder meeting, it is known as class meeting. Such a
meeting can be attended only by that class of shareholders. The articles
define the procedure for calling such meeting. Such a meeting is called for
the alteration in the rights and privileges of the shareholders and for the
purpose of conversion of one class of shares into another.

MEETING OF DIRECTORS
Board meetings are called for the following
(i) To issue shares and debentures.
(ii) To make calls on shares.
(iii) To forfeit the share
(iv) To transfer, the shares.
(v) To fix the rate of dividend.
(vi) To take loan in addition to debentures.
(vii) To invest the wealth of the company.
(viii) To think over the difficulties of the company.
(ix) To determine the policies of the company.

COMMITTEE MEETING
• The Board of Directors may form certain committees and delegate some of its
powers to them. These committees should consist of only directors. The
delegation of powers to such committees is to be authorized by the Articles of
Association and should be subject to the provisions of the Companies Act.
• In a large company routine matters like Allotment, Transfer, Finance are
handled by sub-committees of the Board of Directors. The meetings of such
committees are held in the same way as those of Board Meetings.
MEETINGS OF CREDITORS
• The meetings of creditors are called when the company proposes
to make a scheme for arrangement with its creditors.
• Section, 391 to 393 of the Companies Act not only give powers to
the company to compromise with the creditors but also lay down
the procedure of doing so.

DEBENTURE HOLDERS MEETING
• Meetings of the debenture holders are held according to the
conditions contained in the debenture trust deed.
• These meetings are called from time to time where the
interests of debenture holders are involved at the time of
reconstruction, reorganization, amalgamation or winding up of
the company.
• The rules and regulations entered in trust deed relate to the
notice of the meeting, appointment of a Chairman of the
meeting, passing the resolutions, quorum of the meeting and
the writing and signing of minutes

REQUISITES OF VALID MEETING
Proper Authority:
– Authority to call a general meeting is the board of directors of the
company. The notice of the meeting should be issued under their
authority, granted at a duly constituted meeting of the board or
passing a resolution by circulation. A single director has no power to
convene a meeting. The secretary of the company has no authority to
call a general meeting unless the Board resolves and authorizes him
to do so.
– Notice: A proper notice in writing to every member of the company is
required by law for the holding of every valid meeting. Notice must be
given even though a member has waived his right to have notice. It
must disclose the purpose for which the meeting is called. It must be
given at least 21 clear days before the date of the meeting

Contents of the notice:
The notice must contain the following particulars:
(i) It should specify the name of the meeting, the place, day
and hour of the meeting and the meeting to be valid must
be held at the place and time specified. Annual General
Meeting should be held on a working day during business
hours. However, a meeting may continue beyond
business hours. Extraordinary general meeting can be
held on any day including a holiday and not necessarily
during working hours.
(ii) It should also specify the nature of the business to be
conducted at the meeting.

Quorum
–Minimum number of members required to constitute a valid
meeting and to transact business therein is called ‘quorum’. No
meeting can be valid without quorum. Any resolution passed at a
meeting without quorum shall be invalid. Quorum is to be fixed by
the Articles of Association. But unless the articles provide for a
large number, 5 persons personally present in the case of a public
company and 2 members personally present in the case of private
company shall be the quorum for a meeting of a company.
–As per 2013 quorum for companies having more than 1000
members is 5 members. Quorum between 1000 to 5000 is 15
members. More than 5000 quorum is 30 members.

• Minutes book: a register should be maintained by every company
to note down the resolutions taken at every meeting. It should have
serially numbered pages. It should be kept at the registered office of
the company . It can be used as an evidence even in the courts of
law regarding any decision taken at the meeting of the company
separate minute book are to be maintained for different types of
meeting.
• Voting and polling: when any matter or motion is motion is
thoroughly discussed in a company meeting it should be passed as
a resolution with the majority opinion. Voting is the ordinary method
of obtaining members opinion on any matter. It can be exercised by
show of hand, voice vote etc., polling on the hand is a systematic
and scientific method of ascertaining opinion of members of the
company

• Company resolution: the decisions taken at the meetings of the
company are called resolutions. There are three types of resolution
ordinary resolution, special resolution and resolution requiring
special notice.
• Ordinary resolution: the resolutions passed with simple majority
or 2/3 of the majority of the shareholders presents at the meeting
are known as ordinary resolution
• Special resolution: its passed with the ¾ or 75% of votes of the
shareholder presented at the meeting.
• Resolution requiring special notice: the company should give a
special notice of at least 7 days to the members just as notice of
meeting before taking a decision

ESSENTIALS OF RESOLUTIONS
• i)Notice to the meeting should state that the resolution shall be passed as a
special resolution.
• ii) A 14-day special notice to be given to all shareholders.
• iii) An explanatory note, stating the circumstances and provisions of law as to
why the resolution should be a special resolution, should be appended to the
notice of the meeting.
• iv) The resolution shall be passed by a majority of not less than 75 per cent
of the members present in person.
• v) Law provides that if an ordinary resolution is passed where a special
resolution is required, it is deemed that no resolution has been passed.
• vi) Any decision to be taken by the board of directors shall be by way of a
board resolution. Board resolution could also be a circular resolution. A
resolution passed by a committee of the directors shall be valid as a board

Winding up of company is the process in which
the company ceases to exist anymore as a legal
unit and its possessions are managed in order to
discharge the claims of its creditors and
members. A supervisor, called liquidator, is
appointed and he takes the charge of the
company, liquidates its assets, payoff its debts
and distributes the surplus if any among the
members in accordance as per respective their
claims.

MEANING
• Winding up of a company is a process of putting an end to the life of
a company. It is a proceeding by means of which a company is
dissolved and in the course of such a dissolution its assets are
collected, its debts are paid off out of the assets of the company or
from contributions by its members, if necessary. If any surplus is
left, it is distributed among the members in accordance with their
rights.
• Definition of Winding Up is The process of selling all the assets of a
business, paying off creditors, distributing any remaining assets to
the principals or parent company, and then dissolving the business.
Winding up can refer to such a process either for a specific
business line of a corporation or to the dissolution of a corporation
itself.

MODES OF WINDING UP
– (A) Compulsory winding up: A company may be wound up by an order of
the court. Section 433 lays down the following grounds for the winding -
– Special resolution of the company
– Default in holding statutory meeting
– Failure to commence or suspension of business
– Reduction of members below minimum
– Inability to pay debts
– Just and equitable
– (B) Voluntary winding up: A company may, voluntary wind up its affairs, if it
is unable to carry on its business or if it was formed only for a limited purpose
etc.
– 1. Members’ voluntary winding up
– 2. Creditors’ voluntary winding up
– (C) Winding up under the supervision of the court:Winding up subject to
supervision of court, is different from "Winding up by court." Here the court

WINDING UP OF COMPANY BY TRIBUNAL
The company may require to wound up by the tribunal under section
271 under the following circumstances:
1 In case the company does not pay the debts, the debt of the creditor
exceeding Rs 1 lakhs is due and unpaid by the company within 21 days
from the due date, or any execution decree is passed in favour of the
creditor or tribunal has a reason that company will not pay off any debts
then company would be liable for winding up.
2. In case a company has made the provisions by passing a special
resolution that wound up is made by the tribunal.
3. In case of sick companies if no revival and rehabilitation is done, then
tribunal may order for the winding up of a company.

4. In case the company is formed in a fraudulent manner, or it has
reason to believe that the activity of the business is conducted
fraudulently then that company is liable to be wound up by the tribunal.
5. In case the formation of the company is for any unlawful purpose, or
the management of the company is guilty of misconduct or misfeasance,
then winding up is necessary by the tribunal.
6. In case the company fails to submit annual returns and financial
statements of the last five financial years continuously then the registrar
made the company defaulter n liable for winding up.
7. If the tribunal has the opinion that winding up of a company is necessary
for the good faith of the company.

COMPULSORY WINDING UP
1.Suspension of the business for one year from the date of incorporation or
suspension of business for whole year.
2. Reduction in number of minimum members as specified in the act (2 in
case of private company and 7 in case of public company)
But with the introduction of new Companies Act 2013, these above stated
grounds for winding up have been deleted and some new situations for
winding up have been inserted.
As per new Companies Act 2013, a company can be wound up by a
tribunal in the below mentioned circumstances:
1. When the company is unable to pay its debts
2. If the company has by special resolution resolved that the company be
wound up by the tribunal.

3. 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.
4. If the company has not filled its financial statements or
annual returns for preceding 5 consecutive financial
years.
5. If the tribunal by any means finds that it is just &
equitable that the company should be wound up.
6. 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.

VOLUNTARY WINDING UP
Voluntary winding up :-
– Members voluntary winding up
– Creditors voluntary winding up
The company can be wound up voluntarily by the mutual decision of
members of the company, if:
The company passes a Special Resolution stating about the winding up of
the company.
The company in its general meeting passes a resolution for winding up as a
result of expiry of the period of its duration as fixed by its Articles of
Association or at the occurrence of any such event where the articles
provide for dissolution of company.

PROCEDURE FOR VOLUNTARY WINDING UP:-
1. Conduct a board meeting with 2 Directors and thereby pass a resolution with
a declaration given by directors that they are of the opinion that company has
no debt or it will be able to pay its debt after utilizing all the proceeds from
sale of its assets.
2. Issues notices in writing for calling of a General Meeting proposing the
resolution along with the explanatory statement.
3. Pass the ordinary resolution for the purpose of winding up by ordinary
majority or special resolution by 3/4th majority.
4. Conduct a meeting of creditors after passing the resolution, if majority
creditors are of the opinion that winding up of the company is beneficial for all
parties then company can be wound up voluntarily.
5. Within 10 days of passing the resolution, file a notice with the registrar for
appointment of liquidator.
6. Within 14 days of passing such resolution, give a notice of the resolution in

7. Within 30 days of General meeting, file certified copies of ordinary or special
resolution passed in general meeting.
8. Wind up the affairs of the company and prepare the liquidators account and
get the same audited.
9. Pass a special resolution for disposal of books and all necessary documents
of the company, when the affairs of the company are totally wound up and it is
about to dissolve.
10. Within 15 days of General Meeting of the company, submit a copy of
accounts and file an application to the tribunal for passing an order for
dissolution.
11. If the tribunal is of the opinion that the accounts are in order and all the
necessary compliances have been fulfilled, the tribunal shall pass an order for
dissolving the company within 60 days of receiving such application.
12. Liquidator would then file a copy of order with the registrar.
13. After receiving the order passed by tribunal, the registrar then publish a

CONSEQUENCES OF WINDING UP
1. Intimation to Official Liquidator and Registrar (section 444): Where the Court
makes an order for the winding up of a company, it shall intimate the Official
Liquidator and the Registrar regarding the order of winding up.
2. Once the winding up order is made, it is the duty of the petitioner and of the
company to file within 30 days a certified copy of the order with the Registrar.
3. Order for winding up as a notice of discharge [section 455 (3)]: The order for
winding up shall be treated as a notice of discharge to the officers and
employees of the company, until otherwise the company is continue to carry
on its business. In the case of an employee who works for the company on
contract basis, is eligible for damages due to wrongful discharge if the
company received winding up order before the expiry of such a contract.
4.Suits Stayed [section 446 (1)]. When a winding up order has been made, no
suit or other legal proceeding shall be commenced against the company
except by leave of the Court. Similarly pending suits shall not be proceeded
with except by leave of the Court

5. Powers of the Court [section 446 (2) and (3)]: The Court which is winding up
the company shall have jurisdiction to entertain or dispose of.
6. Any suit or proceeding by or against the company.
7. Any claim made or against the company.
8. Any application made under section 391 for compromise with creditors
9. Any question of priorities or any other question whatsoever, whether of law
or fact which may relate to or arise in course of the winding up.
Consequences of Voluntary Winding Up
(1) A voluntary winding up shall be deemed to commence from the date or the passing
of the resolution to that effect (Sec. 486).
(2) From the commencement of voluntary winding up, the company ceases to carry on
its business, except so far as may be required for the beneficial winding up thereof
(Sec. 487).
(3) The possession of the assets of the company vests in the Liquidator for realization
and distribution among the creditors. The corporate state and powers of the company

REMOVAL OF NAME OF THE COMPANY FROM
REGISTRAR OF COMPANIES
• Pursuant to Section 248(1) of the Companies Act, 2013
the Registrar of Companies can on suo motu basis
remove the name of the Company on the following
grounds:
– 1. A company has failed to commence its business
within one year of its incorporation; or
– 2. A company is not carrying on any business or
operation for a period of two immediately preceding
financial years and has not made any application
within such period for obtaining the status of a
dormant company under section 455.

PROCEDURE FOLLOWED BY THE REGISTRAR FOR STRIKING OFF THE
NAME
• The Registrar shall give a notice in writing in Form STK 1 which shall be sent to
all the directors of the company at the addresses available on record, by
registered post with acknowledgement due or by speed post. •
• The notice shall contain the reasons due to which the name of the company is
to be removed from the register of companies and shall seek representations, if
any, against the proposed action, from the company and its Directors along
with the copies of relevant documents.
• A notice issued under sub-section (1) or sub-section (2) of Section 248 shall be
published in the prescribed manner (Form STK-5 and Form STK-6) and also in
the Official Gazette for the information ofthe general public.
• At the expiry of the time mentioned in the notice, the Registrar may, unless
cause to the contrary is shown by the company, strike off its name from the
register of companies, and shall publish notice thereof in the Official Gazette,
and on the publication in the Official gazette of this notice, the company shall

INSOLVENCY AND BANKRUPTCY COD
Prior to Insolvency and Bankruptcy Code, 2016 (the “Insolvency Code”) the
existing framework was governed by:
– 1. The Companies Act, 1956 and the Companies Act, 2013;
– 2. The Sick Industrial Companies (Special Provisions) Act, 1985;
– 3. The Recovery of Debts Due to Banks and Financial Institutions (“RDDBFI”) Act, 1993;
– 4. The Securitization and Reconstruction of Financial Assets and Enforcement of Security
Interest (“SARFAESI”) Act, 2003;
– 5. The Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920;
– 6. Regulations, directions, circulars, rules, notifications and guidelines of the Reserve Bank
of India (“RBI”).
Objectives of the Code
An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of
corporate persons, partnership firms and individuals in a time bound manner for maximisation of
value of assets of such persons, to promote entrepreneurship, availability of credit and balance
the interests of all the stakeholders.

BENEFITS OF THIS CODE
1. Previously, four different forums - High Courts, Company Law
Board (CLB), Board for Industrial and Financial Reconstruction
(BIFR) and Debt Recovery Tribunal (DRT) have overlapping
jurisdiction, which gives rise to systemic delays and complexities in
the process. The code overcomes these challenges and would
reduce the burden on the courts as all litigation will be filed under the
code before the National Company Law Tribunal (NCLT) for
corporate insolvency and insolvency of LLPs, and before DRT for
individual insolvency and insolvency of unlimited partnership firms.
2. The code could ensure quicker resolution of NPA problems.
3. Bankruptcy laws accept that business ventures can fail and allow
entrepreneurs to make a new start.

APPLICATION
• The provisions of this code shall apply to:
– (a) Any company incorporated under the Companies Act, 2013 or under
any previous company law;
– (b) Any other company governed by any special Act for the time being in
force.
– (c) Any Limited Liability Partnership incorporated under the Limited
Liability Partnership Act, 2008;
– (d) Such other body incorporated under any law for the time being in
force, as the Central Government may, by notification, specify in this
behalf; and
– (e) Partnership firms and individuals in relation to their insolvency,
liquidation, voluntary liquidation or bankruptcy, as the case may be.

Imp Questions Unit -1
• Short Notes :
– Promotions
– MOA/AOA
– OPC-One Parson Company.
– Prospectus/Lieu of Prospectus
– Joint Stock Company
– Subsidiary company
– Rights of director
• Long Answers
– Explain the company and it’s features and Advantages.
– Explain highlights of Company’s Act 2013
– Explain the Difference between MoA & AoA.
– Explain the Incorporation of Company.
– Explain the Promotion of Company and It’s functions.

• Short Notes :
– Corporate governance.
– Corporate social responsibility.
– Board of Directors.
– Rights of Director.
• Long Answers
– Explain the appointment of directors.
– Explain the legal position of director.
– Discuss the duties and labilities of Board of Directors.
– Discuss the Need of CSR.
– Explain the Scope and Benefits of Corporate
Governance.

• Short Notes :
– Private Secretory
– Secretory of trade union.
– Legal Advisor.
– Company Secretory.
– Briefly explain the duties of Secretory.
– Secretarial audit.
• Long Answers
– Explain the appointment procedure of Secretory.
– Explain the statutory and general duties of company
secretory.
– Explain the rights and labilities of Company secretory.

• Short Notes :
– Notice
– Proxy
– Agenda
– Meeting
– Resolution
– Quorum.
• Long Answers
– Explain the requisites of Valid meetings.
– Explain the essentials of resolution.
– Explain the rules of Notice, Agenda, Proxy and
Quorum.

Important Questions Unit -5
• Short Notes :
– Liquidator
– Registrar of companies
– Creditor
– Insolvency and Bankruptcy Code 2016
– Winding up
• Long Answers
– Explain various modes of winding up company.
– Explain are the consequences of winding up the company.
– Explain who can apply for winding up for company.
– Explain insolvency and bankruptcy code 2016.

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