� About the authors I-5� Preface I-7� Chapter-heads I-9� A Table showing enforcement of provisions of Companies

Act, 2013 from different dates I-53� Table showing list of sections of Companies Act, 2013 not yet

enforced I-81� Table showing list of sections of Companies Act, 1956

which are still in force I-89� Section key to prescribed Rules & Forms I-95� Table of Fees I-123� Key to prescribed forms I-131� Table showing sections of Companies Act, 2013 &

Corresponding Provisions of Companies Act, 1956 I-143� Table showing sections of Companies Act, 1956 &

Corresponding Provisions of Companies Act, 2013 I-155� Table showing sections of Companies Act, 1956 not

covered in Companies Act, 2013 I-169� List of notified Rules framed under Companies Act, 2013 I-173� Section-wise Index I-175� Draft Notification : Non-applicability of certain provisions to

Private Companies or applicability of certain provision toPrivate Companies with modifications I-181

1HISTORY OF COMPANY LEGISLATION

1.1 History of company legislation in India 1

CONTENTS

PAGE

I-13

2MEANING AND NATURE OF A COMPANY

2.1 What is a company ? 42.2 Definition of a company 52.3 Characteristic features of a company 5

2.3-1 Incorporated association 52.3-2 Legal entity distinct from its members 52.3-3 Artificial person 92.3-4 Limited liability 92.3-5 Separate property 102.3-6 Transferability of shares 112.3-7 Perpetual succession 112.3-8 Common seal 11

2.4 Lifting the corporate veil 132.5 Advantages of incorporation 222.6 Disadvantages of incorporation 232.7 Company vis-a-vis Body corporate 24

2.7-1 Is a society registered under the Societies Registra-tion Act, a body corporate? 25

2.7-2 Corporation sole 252.8 Is company a citizen 25

3KINDS OF COMPANIES

3.0 Introduction 273.1 Private company 27

3.1-1 Restrictions on transferability of shares 283.1-2 Limitation on number of members 293.1-3 Restriction on inviting public to subscribe for securi-

ties 293.1-4 Other requirements relating to a private company 29

3.1A One Person Company 303.1B Small Company 323.2 Public company [Section 2(71)] 333.3 Distinction between private and public company 333.4 Special privileges and exemptions available to private compa-

nies 34

PAGE

CONTENTS I-14

3.5 Conversion of a private company into a public company 353.6 Conversion of a public company into a private company 363.7 Statutory company 373.8 Registered companies 373.9 Limited liability companies 37

3.9-1 Companies limited by shares 373.9-2 Companies limited by guarantee 383.9-3 Companies limited by guarantee having share capital 38

3.10 Unlimited liability company 383.11 Associations not for profit [Section 8] 39

3.11-1 Alteration of Memorandum and Articles of Associa-tion 40

3.11-2 Partnership firm may become member 403.11-3 Conversion of a company formed under section 8 into

any other kind 403.12 Government companies 403.13 Foreign company 44

3.13-1 Special provisions relating to foreign companies 453.13-2 Other obligations of a foreign company (Sec. 382) - A

foreign company is further bound by the followingobligations 46

3.14 Holding and subsidiary companies 483.15 Public financial institutions [Sec. 2(72)] 503.16 Producer Companies 52

3.16-1 Overview of the provisions 533.16-2 Incorporation of Producer Companies 533.16-3 Objects of a Producer Company 543.16-4 Formation of Producer Company and its registration

[Section 581C] 553.16-5 Memorandum of association of a producer company

shall state 563.16-6 Directors 573.16-7 Subscription to the memorandum by non-incorpo-

rated body of producer institution 573.16-8 Status of a Producer Company 573.16-9 Articles of Association [Section 581G] 583.16-10 Registration of Producer Company 603.16-11 Amendment of Memorandum and Articles of Asso-

ciation of a producer company 61

PAGE

I-15 CONTENTS

3.16-12 Benefits to Members [Section 581E] 613.16-13 Voting rights of members of a producer company 623.16-14 Membership and conflicting business interest 633.16-15 Inter-State Co-operative Societies can become Pro-

ducer Company [Sections 581J-581N] 633.16-16 Transformation of inter-State co-operative society into

producer company 643.16-17 Officers and other employees of the society [Section

581N] 663.16-18 Directors of the society 673.16-19 Transfer of existing benefits, etc. on transformation 673.16-20 Appointment of Directors and their tenure [Section

581P] 683.16-21 Vacation of office by directors of a producer com-

pany [Section 581Q] 683.16-22 Powers and functions of the Board [Section 581R] 693.16-23 Committee of Directors [Section 581U] 703.16-24 Meetings of the Board and Quorum [Section 581V] 713.16-25 Liability of directors [Section 581T] 713.16-26 Chief Executive Officer (CEO) and his functions [Sec-

tion 581W] 723.16-27 Secretary of Producer Company [Section 581X] 733.16-28 General Meetings [Sections 581ZA, 581S, 581Y and

581Z] 733.16-29 Period of Notice 753.16-30 Contents of the Notice and Circulation of the notice 753.16-31 Quorum and Voting Rights 753.16-32 Filing of documents following AGM with ROC [sub-

section (10) of section 581ZA] 753.16-33 Producer institution as member 763.16-34 Extraordinary General Meeting on Requisition [Sec-

tion 581ZA(5)] 763.16-35 Share capital, special rights, bonus shares, transfer and

transmission [Sections 581ZB to 581ZD and 581ZJ] 763.16-36 The shares of a producer company has limited trans-

ferability 773.16-37 Issue of bonus share 773.16-38 Finance, Accounts and Audit [Sections 581ZE to

581ZI] 773.16-39 Internal Audit 78

PAGE

CONTENTS I-16

3.16-40 Duties of Auditor (Section 581ZG specifies duties ofthe auditor of a producer company and the sameshould not be mixed up with duties of internal audi-tors) 78

3.16-41 Donation or subscription by producer company 783.16-42 General and Other Reserves 793.16-43 Loans to Members and Investments [Sections 581ZK

and 581ZZ] - Loans and Advances 793.16-44 Register of investments [Section 581ZL(7) & (8)] 813.16-45 Amalgamation, Merger or Division of Producer Com-

pany [Section 581ZN] 823.16-46 Penalties [Section 581ZM] 853.16-47 Dispute Resolution [Section 581ZO] 853.16-48 Allied Provision 863.16-49 Striking off the name of producer company 863.16-50 Reconversion of a Producer Company to inter-State

Co-operative Society [Sections 581ZS and 581ZT] 873.16-51 Power of the Central Government to modify the pro-

visions of the Companies Act, 1956 in their applica-tion to Producer Company [Section 581ZT] 88

3.17 Illegal Association [Sec. 464] 893.17-1 Exceptions 893.17-2 Effects of an illegal association 90

3.18 Unregistered Companies [Section 375] 90

4FORMATION AND INCORPORATION

OF A COMPANY

4.1 Promotion 924.1-1 Who is a promoter 924.1-2 When promotion begins and ends 944.1-3 Legal position of a promoter 944.1-4 Duties of promoters 954.1-5 Remedies available to the company against the pro-

moter for breach of his duties 974.1-6 Liability of promoters 994.1-7 Remuneration of promoters 1004.1-8 Pre-incorporation contracts 100

PAGE

I-17 CONTENTS

4.2 Registration/Incorporation of a company 1024.2-1 Procedure for registration/incorporation of a com-

pany : Important Steps 1034.3 Certificate of incorporation 1054.3A Effect of certificate of incorporation 1064.3B Conclusiveness of certificate of incorporation 1064.4 Commencement of business 108

4.4-1 Companies not having share capital 1084.4-2 Companies having share capital 1084.4-3 Effect of non-compliance of the provisions of

section 11 109

5MEMORANDUM OF ASSOCIATION

5.1 Meaning and importance 1105.2 Memorandum of Association - Whether an unalterable charter 1105.3 Form and contents 111

5.3-1 The name clause [Sec. 4(1)(a)] 1135.3-2 The registered office clause [Sec. 4(1)(b)] 1185.3-3 The objects clause [Section 4(1)(c)] 1195.3-4 Doctrine of ultra vires 1195.3-5 Liability clause [Sec. 4(1)(d)] 1235.3-6 The capital clause [Sec. 4(1)(e)] 1235.3-7 Name of a nominee in case of ‘One Person Company’

[Sec. 4(1)(f)] 1245.3-8 The association or subscription clause [Sec. 4(1)(e)] 124

5.4 Alteration of memorandum 1255.4-1 Change of name 1255.4-2 Change of registered office 1275.4-3 Change in objects clause 1295.4-4 Change in liability clause 1315.4-5 Alteration of capital clause 131

6ARTICLES OF ASSOCIATION

6.1 Introduction 1346.2 Memorandum and articles - Their relationship 1346.3 Distinction between memorandum of association and articles

of association 136

PAGE

CONTENTS I-18

6.4 Contents 1366.4-1 Provisions for entrenchment 1366.4-2 Regulations required in case of unlimited company,

company limited by guarantee and private companylimited by shares 138

6.5 Model form of articles 1386.6 Signing of articles 1386.7 Alteration of articles 139

6.7-1 Limitation on power to alter articles 1406.7-2 What amounts to alteration of articles 1436.7-3 Effect of altered articles 1446.7-4 Procedure for alteration of articles of association 144

6.8 Binding effect of memorandum and articles 1456.8-1 Members bound to the company 1456.8-2 Company bound to members 1466.8-3 Members bound to members 1476.8-4 Whether company or members bound to outsiders 1486.8-5 Whether Directors are bound by whatever is con-

tained in the articles 1496.9 Doctrine of constructive notice 1496.10 Doctrine of indoor management 150

7PROSPECTUS

7.1 Steps which are necessary before the issue of prospectus 1547.2 Meaning and definition of a prospectus 1547.3 Contents of a prospectus 157

7.3-1 Information to be given in a prospectus 1577.3-2 Reports to be set out in the prospectus 1587.3-3 Declaration 1597.3-4 Other matters 1597.3-5 Statement of an expert included in a prospectus 1597.3-6 Penalty for non-compliance 1607.3-7 Exemptions 1607.3-8 Variation in terms of contract or objects in prospec-

tus (Section 27) 1607.3-9 Offer of sale of shares by certain members of com-

pany (Section 28) 161

PAGE

I-19 CONTENTS

7.4 SEBI Regulations relating to prospectus 1617.5 Draft prospectus to be made public 1627.6 Abridged form of prospectus 1637.7 Is issue of prospectus (including abridged prospectus) compul-

sory/when prospectus is not required to be issued 1647.7A Statutory requirements in relation to a prospectus 164

7.7A-1 Dating of prospectus 1647.7A-2 Registration of prospectus 1647.7A-3 When registrar shall refuse registration of a prospec-

tus 1657.7A-4 Penalty 165

7.8 Prospectus by implication/Deemed prospectus [Section 25] 1657.8-1 Additional requirements relating to deemed prospec-

tus 1667.9 Shelf Prospectus and Information Memorandum [Section 31] 1677.10 Red-herring prospectus [Section 32] 1677.11 Mis-statements in a prospectus and their consequences 168

7.11-1 What is an untrue statement/mis-statement ? 1687.11-2 Remedies for mis-statement in a prospectus 1707.11-3 Civil Liability 1707.11-4 Criminal Liability 1717.11-5 Liability under section 36, i.e., punishment for fraudu-

lently inducing persons to invest money 1717.11-6 Class action suit/Action by affected persons (Sec-

tion 37) 1727.12 Golden rule for framing of prospectus 1727.13 Allotment of shares in fictitious names prohibited [Section 38] 1737.14 Announcement regarding proposed issue of capital 173

8ACCEPTANCE OF PUBLIC DEPOSITS

8.1 Meaning of deposits 1758.2 Acceptance of deposits 177

8.2-1 Acceptance of deposits from members 1778.2-2 Acceptance of deposits from public 1788.2-3 Deposits accepted before commencement of the Com-

panies Act, 2013 181

PAGE

CONTENTS I-20

9SHARE AND SHARE CAPITAL

9.1 Meaning and nature of a share 1829.1-1 Meaning 1829.1-2 Nature of a share 182

9.2 Share v. Share certificate 1849.3 Share v. Stock 1859.4 Kinds of shares 185

9.4-1 Preference Shares or Preference Share Capital 1869.4-2 Types of Preference Shares 1879.4-3 Equity shares [Section 43] 1899.4-4 Preference shares compared with equity shares 1909.4-5 Non-voting shares 1909.4-6 Par value of shares 1909.4-7 Global Depository Receipts [Section 41] 191

9.5 Raising of capital/Issue of shares 1919.5-1 Private placement of shares 1919.5-2 By an offer for sale 1929.5-3 By inviting public through prospectus 1929.5-4 Issue of shares to existing shareholders 192

9.6 Public issue of shares 1939.6-1 Book Building 1939.6-2 SEBI (Issue of Capital and Disclosure Requirements)

Regulations, 2009 with respect to public issue ofequity shares or any other security convertible intoequity shares general conditions 193

9.7 Employees’ Benefits Schemes 2199.7A Employees Stock Option Scheme [ESOS] 2199.7B Employee Stock Purchase Scheme [ESPS] 2219.7C Stock Appreciation Rights Scheme (SARS) 2229.8 Book Building 2229.9 SEBI Regulations for Preferential Issue 2289.10 Allotment of shares 234

9.10-1 Meaning of allotment 2349.10-2 General principles regarding allotment 2349.10-3 Statutory provisions regarding allotment 237

9.11 Jurisdictions of the Court 2399.12 Allotment of shares to a charitable institution by way of dona-

tion - Whether allowed 2399.13 Return as to allotment 240

PAGE

I-21 CONTENTS

9.14 Underwriting 2409.14-1 Meaning of underwriting 2409.14-2 Sub-underwriting 241

9.15 Brokerage 2429.16 Buy-back/Purchase of its own shares by a company 242

9.16-1 Sources to buy-back 2429.16-2 Conditions for buy-back 2439.16-3 Benefits/Objectives underlying buy-back of shares 2459.16-4 SEBI Regulations : SEBI (Buy-back of Securities) 2459.16-5 Penalty 2489.16-6 Prohibition for buy-back in certain circumstances

[Section 70] 2489.16-7 Giving of Loan/Financial Assistance Prohibited 249

9.17 Issue of securities at a premium 2509.18 Issue of shares at a discount 2529.19 Issue of sweat equity shares [Section 54] 252

9.19-1 SEBI Regulations with respect to sweat equity 2549.20 Share certificate [Section 56] 256

9.20-1 Time of issue of share certificate [Section 56] 2569.20-2 Object and effect of share certificate [Section 46] 257

9.21 Issue of share certificate [Section 46] 2589.22 Rights shares/Further issue of capital [Section 62] 259

9.22-1 Further allotment out of unsubscribed portion of capi-tal 260

9.22-2 SEBI regulations regarding rights issues [w.e.f. 26-8-2009 as amended up to 1-9-2014] 261

9.22-3 Duty of transferor to transferee in respect of rightsshares 263

9.22-4 Allotment to renouncee 2639.22-5 Procedure for issue of rights shares 263

9.23 Conversion of loans or debentures into shares 2659.23-1 Share capital to stand increased 266

9.24 Bonus shares 2669.24-1 SEBI Regulations, 2009 for issue of bonus shares 267

9.25 Distinction between bonus shares and rights shares 2689.26 Reduction of share capital 268

9.26-1 Procedure for reduction of capital 269

PAGE

CONTENTS I-22

9.26-2 Reduction of share capital without the sanction of theTribunal 270

9.26-3 Reduction of Capital v. Diminution of Capital 2719.27 Calls on shares 271

9.27-1 Requisites of a valid call 2729.27-2 Payment of calls otherwise than in cash 2739.27-3 Payment of calls in advance 2749.27-4 Interest on calls due but not paid 2749.27-5 Quantum and interval between two calls 274

9.28 Forfeiture of shares 2749.28-1 Forfeiture of fully paid shares 2779.28-2 Effect of forfeiture 2779.28-3 Re-issue of forfeited shares 2789.28-4 Annulment of forfeiture 279

9.29 Surrender of shares 2799.30 Transfer of shares 279

9.30-1 Time within which transfer must be registered 2809.30-2 Power of the Board of directors to refuse registration

of transfer of shares 2819.30-3 Procedure of transfer 282

9.31 Blank transfer 2839.31-1 Ills associated with blank transfers 284

9.32 Transfer of partly-paid shares 2849.33 Transfer of shares held in joint names 2849.34 Transfer when complete 2849.35 Right of transferees pending registration of transfer [Sec. 126] 2859.36 Notice of refusal 285

9.36-1 Returning back the documents 2869.36-2 Retention of certificates 286

9.37 Appeal against refusal to register transfer 2879.38 Transfer of shares on the basis of pre-incorporation transfer

deeds 2889.39 Transfer of shares after winding-up - Whether valid 2899.40 Transfer of shares under depository system 2899.41 Transfer of shares in favour of pledgee 2909.42 Transfer of shares by way of gift 2909.43 Forged transfer 290

9.43-1 Consequences of forged transfer 290

PAGE

I-23 CONTENTS

9.44 Priority between transferees 2919.45 Transmission of shares and debentures 2919.46 Distinction between transfer and transmission 2939.47 Nomination of shares and debentures 2939.48 Secretarial practice/Steps with regard to registration of trans-

fer of shares 2949.49 Transfer by legal representative 2969.50 Lien on shares 2969.51 Lien and forfeiture compared 2979.52 Variation of shareholders’ rights 298

9.52-1 Can equity shares already issued be converted intoredeemable preference shares ? 298

9.52-2 Can redeemable preference shares be converted intoconvertible preference shares ? 298

10MEMBERSHIP

10.1 Definition of a member 30010.1-1 Can purported promise to convert loan into shares be

a ground for rectification of Register of members? 30110.2 Member v. Shareholder 30110.3 Modes of acquiring membership 302

10.3-1 By subscribing to the memorandum of association 30210.3-2 By agreement and registration 30210.3-3 By agreeing to purchase qualification shares 30310.3-4 Can legal heirs of a deceased shareholder be regarded

as members for the purpose of filing a petition forprevention of oppression and mismanagement undersections 397-398 [Now section 241] ? 303

10.4 Who may become a member 30410.4-1 Minor 30410.4-2 Company 30510.4-3 A partnership firm 30510.4-4 A foreigner 30610.4-5 Receiver/Official Liquidator 30610.4-6 Can a public office be registered as a member 30610.4-7 Societies registered under the Societies Registration

Act, 1860 30710.4-8 Can shares be held in the name of a trade union ? 307

PAGE

CONTENTS I-24

10.4-9 Joint membership 30710.4-10 Hindu undivided family 308

10.5 Termination of membership 30810.6 Impersonation as a shareholder 30910.7 Rights of a member/shareholder 309

10.7-1 Contractual and other Rights 31010.7-2 Statutory Rights 31010.7-3 Other Rights 310

10.8 Duties and Liability of members 31110.9 Member v. Contributory 31210.10 Expulsion of a member 312

11REGISTERS AND RETURNS

11.1 Introduction 31511.2 Statutory books to be kept by a company 31511.3 Optional books 31511.4 Register of Charges [Section 85] 31611.5 Register of members/debentureholders 317

11.5-1 Register of Members/Debentureholders and Index ofMembers/Debentureholders, etc. [Section 88] 317

11.5-2 Foreign Register 31811.5-3 Penalty 31811.5-4 Shares held in trust 31811.5-5 Inspection of Register of Members, etc. [Section 94] 318

11.6 Register of investments not held in company’s name [Section187] 319

11.7 Register of fixed deposits [Section 73] 31911.8 Books of account 319

11.8-1 Place of maintenance of books of account 31911.8-2 Inspection of books of account, etc. of companies 32011.8-3 Period for which books of account to be preserved 320

11.9 Register of contracts or arrangements in which directors areinterested [Section 189] 32011.9-1 Entries in the register 32111.9-2 Place of keeping and inspection of the register 32111.9-3 Period for which register to be preserved 32111.9-4 Filing of particulars 321

PAGE

I-25 CONTENTS

11.9-5 To be produced at general meeting 32111.9-6 Exemptions 32111.9-7 Penalty 321

11.10 Register of Directors and Key Managerial Personnel and theirshareholding [Section 170] 32111.10-1 Filing of Return with the Registrar 32311.10-2 Can the register be kept in loose-leaf form ? 323

11.11 Register of loans and investments by company [Section 186] 32311.12 Minutes book 324

11.12-1 Inspection of minute-books of general meeting [Sec-tion 119] 326

11.12-2 Signing of minutes of board meetings 32611.12-3 Minutes kept in a loose-leaf form 327

11.13 Annual return [Section 92] 32711.13-1 Signing of the Annual Return 32811.13-2 Place of keeping 328

11.14 Return of allotment [Section 39] 32811.15 Place of keeping and inspection of registers, returns, etc. [Sec-

tion 94] 32911.15-1 Period for which the registers, returns and records

are required to be kept 32911.15-2 Inspection of registers and returns [Section 94] 33011.15-3 Penalty 33011.15-4 Power of the Central Government to order inspection 33011.15-5 Registers, etc., to be evidence 331

12INVESTMENTS, LOANS, BORROWINGS

AND DEBENTURES

12.1 Investments 33212.1-1 Meaning of ‘investments’ 33212.1-2 Investments to be held in company’s own name 33212.1-3 Investments in other companies and bodies corpo-

rate/Inter-corporate loans and investments 33412.2 Implied power to borrow ? 336

12.2-1 Exercise of borrowing powers 33612.2-2 Temporary loans 33712.2-3 Ultra vires borrowings 33712.2-4 Charges under the Companies Act, 2013 338

PAGE

CONTENTS I-26

12.2-5 Registration of charges [Section 77] 34112.2-6 Register of charges to be kept by Registrar [Section 81] 34312.2-7 The memorandum of satisfaction [Sections 82 and 83] 34312.2-8 Rectification by Central Government in register of

charges [Section 87] 34412.2-9 Company’s register of charges [Section 85] 34412.2-10 Modification of charges 344

12.3 Debentures 34512.3-1 Meaning and definition 34512.3-2 Characteristic features of a debenture 34512.3-3 Debenture stock 34612.3-4 Distinction between ‘shareholder’ and ‘debenture-

holder’ 34612.3-5 Issue of debentures 34712.3-6 Kinds of debentures 35112.3-7 Debenture trust deed 35312.3-8 Rights/Remedies of debenture-holders 35612.3-9 SEBI Regulations, 2009 pertaining to convertible debt

instruments 357

13DIVISIBLE PROFITS AND DIVIDEND

13.1 Meaning of Dividend 36013.2 Concept of Profit 36113.3 Profits v. Divisible Profits 361

13.3-1 Meaning of Divisible profits 36113.3-2 ‘Profits available for Distribution’ v. ‘Profits available

for dividend’ 36113.4 Sources out of which dividends may be paid 362

13.4-1 Out of current profits 36213.4-2 Out of past reserves 36213.4-3 Monies provided by Government 36313.4-4 Depositing dividend declared in a scheduled bank in

a separate account 36313.5 Provision for depreciation 36313.6 Declaration of dividend on preference and equity shares 363

13.6-1 Dividend on preference shares 36313.6-2 Dividend on equity shares 36413.6-3 Interim dividend 366

PAGE

I-27 CONTENTS

13.7 Payment of dividend 36613.7-1 Dividend payable to whom 36613.7-2 Dividend is to be paid in cash 36713.7-3 Time within which dividends to be paid 367

13.8 Dividend warrants 36913.9 Dividend mandate 36913.10 Unpaid and unclaimed dividends 370

13.10-1 Unpaid dividends 37013.10-2 Transfer of unpaid dividend to Investor Education and

Protection Fund [Fund] 37013.11 Establishment of Investor Education and Protection Fund

[Section 125] 37113.12 Can dividends be paid out of capital ? 37313.13 Payment of dividend out of capital profits 374Annex 13.1 Specimen resolutions 379

14COMPANY MANAGEMENT

14.1 Meaning of a Director 38014.2 Who may be appointed as a director ? 38114.3 Qualifications for directors 38114.4 Disqualifications of a director 38114.5 Legal position of directors 383

14.5-1 Directors as agents 38314.5-2 Directors as trustees 38414.5-3 Directors as managing partners 38414.5-4 Are directors employees of the company? 384

14.6 Full time v. Part time director 38514.7 Appointment of Directors 386

14.7-1 Appointment of first directors [Section 152] 38614.7-2 Appointment of directors at general meeting 38714.7-3 Deemed re-appointment of a retiring director

[Section 152] 38814.7-4 Rotational and non-rotational directors vis-a-vis

private company 38814.7-5 Appointment of a director other than a retiring direc-

tor [Section 160] 38914.7-6 Appointment by Board of directors [Section 161] 390

PAGE

CONTENTS I-28

14.8 Resident director 39214.9 Independent director 392

14.9-1 Who is an Independent director 39214.9-2 Selection of Independent director 39414.9-3 Manner of Appointment 39414.9-4 Re-appointment 39514.9-5 Remuneration 39514.9-6 Resignation or Removal 39514.9-7 Separate meetings 39514.9-8 Evaluation mechanism 39614.9-9 Term of office 39614.9-10 Liability of Independent directors 39614.9-11 Compliance with the Company’s Code of Conduct 396

14.10 Appointment of directors by proportional representation[Section 163] 39814.10-1 Single transferable vote 39814.10-2 Cumulative voting 400

14.11 Appointment of directors by third parties (Nominee Directors) 40114.12 Assignment of office by director [Section 166] 40214.13 Minimum and maximum number of directors 40314.14 Appointment of woman director on the Board 40414.15 Appointment of director elected by small shareholders [Sec-

tion 151] 40414.16 Number of directorships 40514.17 Vacation of office of a director [Section 167] 40614.18 Removal of a director 407

14.18-1 Removal by shareholders 40714.18-2 Removal by Tribunal [Section 242] 409

14.19 Resignation by a Director 41014.20 Validity of the acts of a director where his appointment is in

valid [Section 176] 41114.21 Powers of the Board of Directors 412

14.21-1 Restrictions on powers of directors 41514.22 Political contributions by directors [Section 182] 417

14.22-1 Meaning of Political Contribution 41714.22A Related party transactions [Section 188] 41814.23 Interested Director 421

14.23-1 Disclosure of Interest 42214.24 Duties of Directors 422

PAGE

I-29 CONTENTS

14.24-1 Statutory duties 42214.24-2 General duties 424

14.25 Liabilities of Directors 42514.25-1 Liability to the company 42614.25-2 Liability to third parties 42714.25-3 Liability for breach of statutory duties 42814.25-4 Liability for acts of co-directors 42814.25-5 Criminal liability 428

14.26 Loans to Directors 42814.27 Remuneration of Directors (Managerial Remuneration) 430

14.27-1 Meaning of managerial remuneration 43014.27-2 Directors’ entitlement to remuneration 43014.27-3 Manner of payment of managerial remuneration 43114.27-4 Sitting fees 43114.27-5 Overall limits to managerial remuneration 43114.27-6 Determination of managerial remuneration 43114.27-7 Individual ceiling on managerial remuneration 43214.27-8 Remuneration payable to an Independent director 43214.27-9 Refund of excess remuneration 43214.27-10 Additional remuneration from subsidiary 43314.27-11 Private companies 43314.27-12 Managerial remuneration vis-a-vis Schedule V 43314.27-13 Perquisites not included in managerial remuneration 43514.27-14 Remuneration payable to a managerial person in two

companies 43614.27-15 Meaning of effective capital 436

14.28 Managing Director and other Key Managerial Personnel 43614.28-1 Meaning of managing director 43614.28-2 Managing director - Whether an employee 43714.28-3 Meaning of Key Managerial Personnel 43714.28-4 Appointment of managing director 43714.28-5 Approval of the Central Government 43814.28-6 Number of companies of which one person may be

appointed Managing Director/Key Managerial Per-sonnel 439

14.28-7 Filling of vacancy in the office of whole-time keymanagerial personnel 440

14.28-8 Tenure of appointment 440

PAGE

CONTENTS I-30

14.28-9 Remuneration 44014.28-10 Disqualifications 440

14.29 Manager 44114.29-1 Meaning 44114.29-2 Disqualifications of a manager 44114.29-3 Number of companies a person can be appointed

manager 44114.29-4 Remuneration of manager [Section 197] 441

14.30 Prohibition of simultaneous appointment of different catego-ries of managerial personnel [Section 196] 441

14.31 Distinction between managing director and manager 44214.32 Whole time director 44214.33 Procedure for appointment of managing director/whole time

director/manager 442

15COMPANY SECRETARY AND PRACTISING

COMPANY SECRETARY

15.1 Definition of company secretary/secretary 44515.2 Appointment of whole-time company secretary 445

15.2-1 Compulsory appointment of a whole-time companysecretary 445

15.2-2 Manner of appointment of whole-time company sec-retary 446

15.2-3 Whole-time company secretary not hold office in morethan one company 446

15.2-4 Vacation of office of the whole-time company secre-tary 446

15.2-5 Penalty 44615.3 Procedure for appointment 44615.4 Position of company secretary 44715.5 Duties of secretary 449

15.5-1 General duties 44915.5-2 Statutory duties 449

15.6 Liabilities of company secretary 45015.6-1 Statutory liabilities 45015.6-2 Contractual liabilities 453

15.7 Functions of company secretary [Section 205] 45315.8 Secretarial audit [Section 204] 453

PAGE

I-31 CONTENTS

15.9 Rights of company secretary 45415.10 Role of company secretary 455

15.10-1 As statutory officer 45515.10-2 Secretary as a coordinator 45615.10-3 As an administrative officer 458

15.11 Dismissal of a company secretary 45815.12 Company secretary in practice 459

15.12-1 Who can use the designation of secretary 45915.12-2 Who can practise 45915.12-3 Who cannot practise 46015.12-4 Can a firm practise 46015.12-5 Areas of practice 46115.12-6 Certificate of practice 46215.12-7 Cancellation of certificate of practice 46215.12-8 Restoration of certificate of practice 46315.12-9 Company secretary not to engage in any other busi-

ness or occupation 46315.12-10 Can a company secretary have more than one office 463

15.13 Professional misconduct 46415.14 Quality Review Board 465Annex 15.1 The First Schedule to the Company Secretaries Act, 1980

as amended in 2006 466

Annex 15.2 The Second Schedule to the Company Secretaries Act,1980 as amended in 2006 469

Annex 15.3 Resolution under regulation 168 of the Company Secre-taries Regulations, 1982 471

16COMPANY MEETINGS-I - GENERAL

16.1 Meaning of ‘meeting’ 47316.2 Kinds of meetings 47316.3 Requisites of a valid meeting 47416.4 Meeting to be properly convened 474

16.4-1 Proper authority 47416.4-2 Proper and adequate notice 474

16.5 Meeting to be legally constituted 47816.5-1 Chairman of a meeting 47816.5-2 Quorum 480

PAGE

CONTENTS I-32

16.6 Meeting to be properly conducted 48216.6-1 Ascertaining the sense of the general meeting 48216.6-2 Rules in respect of voting 48316.6-3 Passing of resolutions by postal ballot 48616.6-4 Proxy [Section 105] 48816.6-5 Motion, amendment, point of order 490

16.7 Resolutions 49216.7-1 Ordinary resolution [Section 114(1)] 49216.7-2 Special resolution 49216.7-3 Resolutions requiring special notice 492

16.7A Validity of votes 49316.8 Circulation of members’ resolutions [Section 111] 49416.9 Registration of certain resolutions and agreements [Section 117] 49516.10 Minutes [Section 118] 495Annex 16.1 Specimen of notice, agenda, proxy, minutes, resolutions,

etc. notice and agenda of annual general meeting 497

17COMPANY MEETINGS-II -

GENERAL BODY MEETINGS

17.1 Need for meetings 50117.2 Annual General Meeting (AGM) 501

17.2-1 Which companies to hold 50117.2-2 Gap between two AGMs [Section 96] 50117.2-3 Extension of time 50217.2-4 What about a situation where annual accounts are

not ready 50217.2-5 Meeting beyond statutory time 50317.2-6 Cancelling or postponing of convened meeting 50317.2-7 Can a general meeting properly convened be cancelled

or its holding deferred? 50417.2-8 Day, hour and place of AGM 50417.2-9 Can a company hold two AGMs on the same day? 50417.2-10 Business to be transacted [Section 102] 50417.2-11 Notice of the meeting 505

17.3 Extraordinary General Meeting (EGM) 50717.4 Class meetings 509

PAGE

I-33 CONTENTS

18COMPANY MEETINGS-III - BOARD MEETINGS

18.1 Need for board meetings 51118.2 When to hold 511

18.2-1 First meeting 51118.2-2 Subsequent meetings 511

18.3 Participation of directors through video conferencing or otheraudio visual means [Section 173(2)] 512

18.4 Board meeting 51418.4-1 Notice of board meeting 51418.4-2 Proper authority to call meeting of Board of Direc-

tors 51418.4-3 Notice - Whom to be given 51418.4-4 Notice to interested directors 51418.4-5 Notice of adjourned meeting 515

18.5 Contents and agenda of board meeting 51518.6 Time and place of board meeting 51618.7 Quorum 51618.8 Adjournment for want of quorum 51718.9 Passing of Resolutions by Circulation [Section 175] 51718.10 Minutes of the board meeting 51818.11 Duties of company secretary with respect to board meetings 519

18.11-1 Before the meeting 51918.11-2 During the meeting 52018.11-3 After the meeting 520

18.12 Chairman of board meetings 520Annex 18.1 Specimen of notice, agenda and minutes 522

19ACCOUNTS AND AUDIT

ACCOUNTS19.1 Books of account required to be kept 52619.2 Inspection of books of account 528

19.2-1 Directors’ right of inspection 52919.2-2 Right of a shareholder to inspect books of account 52919.2-3 Investigation by the Serious Fraud Investigation

Office (SFIO) 529

PAGE

CONTENTS I-34

19.3 Persons responsible for keeping proper books of account [videsub-section (6) of section 128] 530

19.4 Financial Statements 53019.4-1 Preparation and presentation of financial statements 531

19.5 Authentication of Accounts 53319.6 Can Approval of Annual Accounts be delegated? 53419.7 Publication of quarterly results - Requirements under listing

agreement 53419.8 Board’s Report 536

19.8-1 Directors’ Responsibility Statement 53719.8-2 Disclosures with respect to employees’ stock option

scheme 53819.8-3 Reserves and Dividends 53819.8-4 Conservation of energy, technology absorption, for-

eign exchange earnings and outgo 53919.8-5 Contracts and arrangements with related parties 54019.8-6 Policy on directors’ appointment and remuneration 54019.8-7 Disclosure about the number of meetings of the

Board/Committees 54019.8-8 Notes forming part of the accounts 54019.8-9 Additional information under the Companies

(Accounts) Rules, 2014 54119.8-10 Corporate Social Responsibility Report 54119.8-11 Composition of Audit Committee 54219.8-12 Management Discussion and Analysis Report as per

Clause 49 of the Listing Agreement 54219.8-13 Corporate Governance Report 54219.8-14 Report to be signed by the Chairman of the Board 542

19.9 Circulation of Financial Statements 54419.10 Adoption and filing of financial statements 545

19.10-1 Filing of financial statements with the registrar 54519.10-2 Filing of financial statements in XBRL format 546

19.11 Reporting on revised annual statements of accounts 54619.11-1 Re-opening of accounts on Court’s or Tribunal’s

orders 54719.11-2 Voluntary revision of Financial Statements or Board’s

Report 54819.12 Accounting Standards 548

PAGE

I-35 CONTENTS

19.12-1 Convergence of Accounting Standards in India withInternational Financial Reporting System (IFRS) 550

19.12-2 National Financial Reporting Authority 55119.13 Internal Audit 552

AUDIT19.14 Need for audit/Objective of audit 55219.15 Who can be appointed as an Auditor (Qualifications) 55419.16 Who cannot be appointed as an Auditor (Disqualifications) 555

19.16-1 Disqualification due to fraudulent acts 55719.16-2 Ceiling on Audit 557

19.17 Auditor not to render certain services 55719.18 Appointment of first auditors 55819.19 Appointment of subsequent auditors 558

19.19-1 Appointment of subsequent auditor for a Governmentcompany 559

19.20 Tenure of appointment 56019.21 Compulsory rotation of auditors 560

19.21-1 Period for rotation 56019.21-2 Cooling off period 56119.21-3 Joint audit 562

19.22 Reappointment of retiring auditor 56219.23 Rights of retiring auditor [Section 140(4)] 56219.24 Casual vacancy 56419.25 Removal and resignation of an auditor 564

19.25-1 Removal before expiry of the term 56419.25-2 Resignation of auditor 56519.25-3 Removal by the Tribunal 565

19.26 Remuneration of auditors 56619.27 Status of the auditor 566

19.27-1 As an officer of the company 56719.28 Rights of the company auditor 568

19.28-1 Right of access to books and account, etc. 56819.28-2 Right to obtain Information or Explanation 56819.28-3 Rights with respect to branch accounts 56819.28-4 Right to sign the report 56919.28-5 Right to receive notices, etc. 56919.28-6 Right to attend general meeting 56919.28-7 Right to remuneration 570

PAGE

CONTENTS I-36

19.28-8 Auditors’ lien 57019.29 Duties of Company Auditor 571

19.29-1 Duty to make a report under section 143 57119.29-2 Compliance with auditing standards 57719.29-3 Duty to report fraud 57719.29-4 Duty to attend general meeting 57719.29-5 Duty to make statement in prospectus 578

19.30 Duty to produce documents and evidence 57819.31 Duty to acquaint themselves with their duties 57819.32 Limitation of auditor’s duties 57819.33 Special provisions relating to audit of Government Companies 580

19.33-1 Appointment of Auditors 58019.33-2 Audit of Government Companies 581

19.34 Punishment for Contravention 58219.34-1 Penalty on the company and officers in default 58219.34-2 Penalty on the auditor 582

19.35 Audit Committee 58219.35-1 Establishment of vigil mechanism 587

19.36 Joint audit 58719.37 Cost audit [Section 148] 589

19.37-1 Maintenance of cost records 59019.37-2 Appointment and remuneration of cost auditor 59019.37-3 Report of cost auditor 59119.37-4 Cost audit to be in addition to financial audit 59219.37-5 Appointment of a firm of cost accountants as cost

auditors 59219.37-6 Cost Auditor cannot be internal auditor 59219.37-7 Penalties 59319.37-8 Secretarial audit 593

Annex 19.1 General instructions for preparation of balance sheet andstatement of profit and loss of a company 595

Annex 19.2 Extracts from Secretarial Standard-10 (SS-10) on Board’sReport 610

Annex 19.3 Summary of requirements for maintenance of costrecords and cost audit as prescribed under rule 3 andrule 4 of the Companies (Cost Record and Audit) Rules,2014 616

PAGE

I-37 CONTENTS

20INSPECTION, INQUIRY AND INVESTIGATION

INSPECTION

20.1 Power to call for information, inspect books and conductinquiries 619

20.2 What books and papers can be inspected? 62120.3 Place and time of inspection 62120.4 Duties of directors, officers, employees of the company to

assist in inspection 62120.5 Powers of the inspector 62220.6 Supply of report 62320.7 Inspection by Reserve Bank 623

INVESTIGATION

20.8 Investigation 62420.9 Who can apply and the scope of investigation 624

20.9-1 On the report of Registrar or inspector 62420.9-2 The company, by passing special resolution [Section

210(1)(b)] 62420.9-3 The Court or Tribunal, by order [Section 210(2)] 62420.9-4 In public interest 625

20.10 Guidelines for ordering investigation into company’s affairs 62520.10-1 Complaint for violation by SEBI - Whether a bar to

investigation 62620.10-2 Fraud on creditors and on the court 626

20.11 Investigation into affairs of a company by Serious Fraud Inves-tigation Office 626

20.12 Investigation into company’s affairs in other cases 62720.13 Security for payment of costs and expenses of investigations 63020.14 Firm, body corporate or association not to be appointed as

inspector 63020.15 Investigation of ownership of a company [Section 216] 63120.16 Powers of inspectors 63120.17 Report of the inspector 63420.18 Follow up action by the Central Government on the investiga-

tion report of the inspector 63520.19 Expenses of investigation 63620.20 Protection of employees during investigation 63620.21 Publication of Inspector’s Report 637

PAGE

CONTENTS I-38

20.22 Freezing of assets of company 63720.23 Imposition of restrictions upon securities [Section 222] 63720.24 Saving for legal advisors and bankers [Section 227] 63820.25 Investigations etc. of foreign companies [Section 228] 63820.26 Non-disclosure of information in certain cases [Section 457] 63920.27 Penalty for furnishing false statements, mutilation or destruc-

tion of documents 63920.28 Difference between inspection and investigation 63920.29 Role of secretary with regard to investigation 640

21MAJORITY RULE AND MINORITY PROTECTION

21.1 Rule of majority 64321.2 Personal rights of members 64521.3 Representative and Derivative Action 64621.4 Exceptions to ‘the rule in Foss v. Harbottle’ 648

21.4-1 Ultra vires and illegal acts 64821.4-2 Breach of fiduciary duties 64821.4-3 Fraud or oppression against minority 64921.4-4 Inadequate notice of a resolution passed at a meet-

ing of members 65021.4-5 Qualified majority 65021.4-6 Where the personal rights of an individual member

have been infringed 65021.4-7 Statutory exceptions 650

22PREVENTION OF OPPRESSION AND

MISMANAGEMENT

22.1 Application to Tribunal for relief in cases of oppression, etc. 65322.1-1 Application to the Tribunal 65322.1-2 Who can apply [Section 241] 65422.1-3 Who cannot apply 662

22.2 Power of Tribunal 66322.2-1 Conditions for relief under section 242 66322.2-2 Relief under section 242 665

22.3 Meaning of oppression 66722.3-1 Oppression may be past or continuing nature 670

PAGE

I-39 CONTENTS

22.3-2 Applicability of principle of dissolution of partnership 67122.3-3 Acts held as oppressive 67222.3-4 Acts held as not oppressive 68022.3-5 Matrimonial differences 686

22.4 Meaning of public interest 68622.5 Petition to contain all material facts 687

22.5-1 True scope of section 241 68722.6 Oppression of majority 68822.7 Limitation 69022.8 Prevention of mismanagement 691

22.8-1 Application to Tribunal for relief in cases of misman-agement 691

22.8-2 Relief by the Tribunal 69122.8-3 Instance of mismanagement 69222.8-4 Conditions precedent for obtaining relief 69222.8-5 Acts held as mismanagement 69322.8-6 Acts held as not mismanagement 69822.8-7 Private agreement for investment and section 241 69922.8-8 Oppression and mismanagement and family centred

Companies 69922.8-9 Affairs of a company include affairs of its subsidi-

ary(ies) in appropriate cases 70522.8-10 Waiver, estoppel or acquiescence by a shareholder

holding 10% or more of shares in the company 70622.8-11 Interim Order 70622.8-12 Amalgamation of transferor company after filing of

petition under section 241 70622.9 Effect of ‘Arbitration clause’ in the Articles/Separate Agree-

ment 70722.10 Appeals against the orders of the Tribunal and variation of the

order of Tribunal 70822.11 Difference between winding up proceedings and proceedings

under sections 241 and 242 70922.12 Composite/simultaneous petition under sections 241 and 271 -

Whether maintainable 71022.13 Powers of the Tribunal [Section 242] 711

22.13-1 Whether the provisions of the Evidence Act and Codeof Civil Procedure are applicable to proceedingsunder section 241 716

PAGE

CONTENTS I-40

22.13-2 Some more cases on oppression and mismanage-ment 718

22.14 Class Action 72622.14-1 Who may file an application 72622.14-2 Against whom an application may be filed 72722.14-3 Relief under a class action 72722.14.4 Procedure to be followed by the Tribunal 72822.14-5 Order of the Tribunal 73022.14-6 Differences between application under section 241/

244 and class action under section 245 730

23COMPROMISES, ARRANGEMENTS,

RECONSTRUCTION AND AMALGAMATION

23.1 Meaning of compromise 73223.2 Meaning of arrangement 73223.3 Statutory provisions regarding compromise or arrangement 73423.4 Exercise of the Tribunal’s discretion 73823.5 Powers of the Tribunal 74523.6 Information as to compromise or arrangement [Section 230] 750

23.6-1 Matter to be addressed in the Tribunal’s order [Sec-tion 230(7)] 750

23.6-2 Is consent of stock exchange necessary for a schemeunder clause 24 of Listing Agreement ? 751

23.6-3 Whether a scheme of arrangement sanctioned bythe Tribunal would prevail over parallel agreementbetween the company and a shareholder? 751

23.6-4 Financial corporations, statutory corporations andGovernment being shareholders/lenders etc. 751

23.6-5 Buy-back of shares affected under section 230 75123.6-6 Takeover offer under section 230 75223.6-7 Reduction of share capital under section 230 75223.6-8 Debt Recovery Tribunal and the Companies Act in

the context of compromise and arrangement 75223.7 Reconstruction and amalgamation 75223.8 Meaning of reconstruction 75323.9 Meaning of amalgamation and merger 75323.10 Difference between amalgamation and reconstruction 75323.11 Reverse Merger 756

23.11-1 Features of Reverse Merger 756

PAGE

I-41 CONTENTS

23.11-2 Characteristics of a shell company 75723.11-3 Legal structure and compliance 75723.11-4 Procedure of a reverse merger 758

23.11A Legal provisions regarding reconstruction and amalgamation 75923.12 Reconstruction/Amalgamation by sale of undertaking [Section

232] 75923.12-1 Effect of amalgamation 76523.12-2 Duties of the Tribunal with respect to reconstruction/

amalgamation 76523.12-3 Amalgamation with existing company only 76823.12-4 Synergy of operation 76823.12-5 Compliance with the scheme 76923.12-6 Effect on legal proceedings 76923.12-7 Critical dates in amalgamation, mergers, etc. 77023.12-8 Valuation of shares and fairness of exchange ratio 771

23.13 Merger and Amalgamation of certain companies [Section 233] 77723.14 Merger or Amalgamation with foreign company [Section 234] 77923.15 Power to acquire shares of shareholders dissenting from scheme

or contract approved by majority [Section 235] 77923.15-1 Purchase of minority shareholding [Section 236] 78023.15-2 Registration of offer of schemes involving transfer of

shares 78123.16 Amalgamation of companies in public interest [Section 237] 785

23.16-1 Saving of proceedings 78623.16-2 Protection of members and creditors 78623.16-3 Role of Tribunal 787

23.17 Preservation of Books and Papers of Amalgamated Company[Section 239] 787

23.18 Offences committed prior to merger, amalgamation [Section240] 787

23.19 Impact of stamp duty on amalgamation 78723.20 Some more cases on compromises, arrangements, amalgam-

ations etc. 788Annex 23.1 Salient features of SEBI (Substantial Acquisition of

Shares and Takeovers) Regulations, 2011 797

PAGE

CONTENTS I-42

24REVIVAL AND REHABILITATION OF

SICK COMPANIES

24.1 Determination of Sickness 80224.2 Measures for revival and rehabilitation 80324.3 Procedure in pursuant of the application 804

24.3-1 Appointment of interim administrator 80424.3-2 Committee of creditors 80424.3-3 Order for winding up proceeding 80424.3-4 Appointment of company administrator 80524.3-5 Power and duties of company administrator [Section

260] 80524.3-6 Scheme of revival and rehabilitation 805

24.4 Sanction of the scheme 80624.5 Winding up if scheme not approved by creditors 80724.6 Implementation of the scheme 807

24.6-1 Conclusive evidence 80724.6-2 Transfer of property and liabilities 80724.6-3 Binding nature of the scheme 80724.6-4 Modification, enforcement etc. of contracts 80824.6-5 Company administrator to implement the scheme 80824.6-6 Sale proceeds to be used as directed 808

24.7 Review of the sanctioned scheme 80824.8 Liability for misfeasance etc. 80824.9 Punishment for certain offences 80924.10 Bar on jurisdiction 80924.11 Rehabilitation and insolvency fund 809

25WINDING UP

25.1 Meaning 81125.2 Modes of winding up [Section 270(1)] 81125.3 Winding up by the Tribunal 811

25.3-1 Inability to pay its debts [Section 271(1)(a)] 81325.3-2 Winding up by Special Resolution [Section 271(1)(b)] 83125.3-3 Company acting against the interests of sovereignty

and integrity of India, the security of the State, thefriendly relations with foreign states, public order,decency or morality [Section 271(1)(c)] 832

25.3-4 Failure of revival or rehabilitation of a sick companyunder Chapter XIX [Section 271(1)(d)] 833

PAGE

I-43 CONTENTS

25.3-5 Company’s affairs been conducted in a fraudulent orunlawful manner etc. [Section 271(1)(e)] 837

25.3-6 Company making default in filing with the Registrarits Financial Statements or Annual returns for imme-diately preceding five consecutive financial years [Sec-tion 271(1)(f)] 838

25.3-7 Just and Equitable [Section 271(1)(g)] 83825.4 Who can make petition [Section 272] 847

25.4-1 The Company [Section 272(1)(a)] 84725.4-2 Creditor’s petition [Section 272(1)(b)] 84725.4-3 Contributory’s petition [Section 272(1)(c)] 85125.4-4 Joint petition [Section 272(1)(d)] 85225.4-5 The Registrar [Section 272(1)(e)] 85225.4-6 Person authorized by the Central Government [Sec-

tion 272(1)(f)] 85325.4-7 Central Government’s/State Government’s petition

[Section 272(1)(g)] 85325.4-8 Section 69 of the Indian Partnership Act and winding

up 85325.4-9 Can a petition be made for winding up by workers’

union of a company 85325.4-10 Right of any other person to be heard 85425.4-11 Admission of the winding up petition 85425.4-12 Winding-up and the Arbitration and Conciliation Act,

1996 85725.4-13 Procedure for making and service of the winding up

petition 85925.5 Commencement of winding up [Section 357] 86025.6 Procedure for winding up order 861

25.6-1 Petition 86125.6-2 Powers of the Tribunal [Section 273] 86125.6-3 Recall of winding up order 86225.6-4 Can winding up order be passed without hearing the

company concerned 86325.6-5 Admission of winding up petition does not necessar-

ily lead to Winding up order 86325.6-6 Stay of suits etc. on winding up order [Section 279] 86325.6-7 Statement of affairs to be filed on winding up 86725.6-8 Appointment of Company Liquidator 868

PAGE

CONTENTS I-44

25.6-9 Winding up Committee 86925.7 Consequences of winding up order 870

25.7-1 Does Board of directors become functus officio whena company is ordered to be wound up? 874

25.7-2 Directors and Officers of the company to submit tothe Tribunal audited books and account 875

25.8 Submission of report by Company Liquidator [Section 281] 87525.9 Promoters, directors etc. to cooperate with the Company Liq-

uidator [Section 284] 87625.10 Advisory Committee [Section 287] 877

25.10-1 Constitution and proceedings of Advisory Committee 87725.11 General powers of Tribunal in case of winding up by Tribunal 878

25.11-1 Power to stay winding up [Section 289] 87825.11-2 Settlement of list of contributories [Section 285] 88025.11-3 Delivery of property to Company Liquidator [Section

283] 88025.11-4 Set off [Section 295] 88125.11-5 Power to make calls [Section 296] 88125.11-6 Power to adjust Rights of Contributories [Section

297] 88225.11-7 Power to order costs [Section 298] 88225.11-8 Power to Order Public Examination of Promoters,

Directors, etc. [Section 300] 88225.11-9 Power to arrest absconding person [Section 301] 88325.11-10 Power to modify the terms and conditions after

confirmation of sale of properties 88325.12 Dissolution of company [Section 302] 883

25.12-1 Effect of order of dissolution 88425.13 Enforcement of and appeal from orders 884

25.13-1 Enforcement of orders [Section 424(3)] 88425.13-2 Appeals from orders [Section 421] 884

VOLUNTARY WINDING UP

25.14 Meaning and manner of voluntary winding up 88525.15 Declaration of solvency [Section 305] 88525.16 Meeting of creditors [Section 306] 88625.17 Commencement of voluntary winding up 88625.18 Consequences of voluntary winding up 887

PAGE

I-45 CONTENTS

25.18-1 Effect on status of company [Section 309] 88725.18-2 Board’s powers to cease [Section 313] 88725.18-3 Avoidance of transfers, etc. [Section 334] 88725.18-4 Discharge of employees 887

25.19 Appointment of Company Liquidators [Section 310(1)] 88825.19-1 Notice of appointment of Company Liquidator to be

given to ROC [Section 312] 88825.19-2 Power and duties of company liquidator in volun-

tary winding up [Section 314] 88925.19-3 Appointment of Committees [Section 315] 88925.19-4 Power of company liquidator to accept shares, etc. as

consideration of sale of property of the company[Section 319] 890

25.19-5 Duty of the company liquidator to inform theIncome-tax Officer 890

25.19-6 Duty of the company liquidator to report progress[Section 316] 890

25.19-7 Report to the Tribunal for examination of persons forsuspected fraud [Section 317] 890

25.19-8 Final meeting and dissolution [Section 318] 89125.19-9 Dissolution of the company 891

25.20 Liquidation and winding up distinguished 89225.21 Arrangement when binding on company and creditors in vol-

untary winding up [Section 321] 89225.22 Application to Tribunal to have questions determined [Section

322] 89325.23 Costs of voluntary winding-up [Section 323] 89325.24 Summary procedure for Liquidation [Section 361] 893

25.24-1 Appointment of Liquidator 89325.24-2 Report by the Official Liquidator 89425.24-3 Realization of assets and payment of liabilities by the

Official Liquidator 89425.24-4 Dissolution of the Company 894

25.25 Liquidators 89425.26 Liquidators in cumpulsory winding up 895

25.26-1 Provisional Liquidator 89525.26-2 Appointment, removal and resignation of Company

Liquidator 89525.26-3 Advisory Committee to act with Company Liquidator 895

PAGE

CONTENTS I-46

25.26-4 Powers and Duties of Company Liquidator in com-pulsory winding up [Section 290] 896

25.26-5 Duties of Company Liquidator in compulsory wind-ing up 899

25.27 Liquidators in voluntary winding up 90025.27-1 Notice by Company Liquidator of his appointment

[Section 312] 90025.28 Liquidator in summary procedure 901

25.28-1 Powers and function of Official Liquidator [Section360] 901

25.28-2 Official Liquidator in a summary procedure [Section361 to Section 365] 901

25.29 Provisions applicable to every mode of winding up 90125.30 Debts of all descriptions to be admitted to proof [Section 324] 90125.31 Application of insolvency rules in winding up of insolvent com-

panies [Section 325] 90325.32 Preferential Payments 903

25.32-1 Overriding preferential payment 90925.32-2 Priority between unsecured creditors 90925.32-3 Fraudulent preference [Section 328] 909

25.33 Avoidance of voluntary transfer [Section 329] 91125.34 Transfer for benefit of all creditors [Section 330] 91125.35 Liabilities and rights of certain fraudulently preferred person

[Section 331] 91125.36 Effect of floating charge [Section 332] 91225.37 Disclaimer of onerous property [Section 333] 91225.38 Avoidance of transfers, etc. after commencement of winding-

up [Section 334] 91425.39 Avoidance of certain attachments [Section 335] 91425.40 Offences by officers of companies in liquidation [Section 336] 91525.41 Penalty for fraud by officers [Section 337] 91725.42 Liability for not keeping proper books [Section 338] 91725.43 Liability for fraudulent conduct of business [Section 339] 91725.44 Damages for misfeasance etc. [Section 340] 919

25.44-1 Misfeasance, what constitutes 92225.44-2 Legal representatives, liability of 92325.44-3 Liability of Partners and Directors of Body Corporate

[Section 341] 92425.45 Prosecution of Delinquent Officer and Members of the Com-

pany [Section 342] 924

PAGE

I-47 CONTENTS

25.46 Miscellaneous provisions 92425.46-1 Statement that a company is in liquidation [Section

344] 92525.46-2 Books and papers of company to be evidence [Sec-

tion 345] 92525.46-3 Inspection of books and papers by creditors and

contributories [Section 346] 92525.46-4 Disposal of books and papers of company [Section

347] 92525.46-5 Information as to pending liquidations [Section 348] 926

25.47 Distribution of property of company [Section 320] 92725.47-1 Deposit of money by the Official Liquidator and Com-

pany Liquidator [Sections 349 to 351] 92725.47-2 Company Liquidation Dividend and Undistributed

Assets Account [Section 352] 92725.48 Default by the Company Liquidator to make returns [Section

353] 92825.49 Meetings to ascertain wishes of creditor and contributories [Sec-

tion 354] 92825.49-1 Rules relating to meetings of creditors and contribu-

tories 92925.50 Power of the Tribunal to declare dissolution of a Company

void 93025.51 Contributory 930

25.51-1 Meaning of contributory 93025.51-2 Contributory vis-a-vis Member 93125.51-3 Persons liable as contributories 93125.51-4 Liability of contributories [Section 285] 93325.51-5 Liability of present members 93325.51-6 Liability of past members 93325.51-7 Nature of liability of contributory [Section 296] 93425.51-8 Contributory’s right of set off 935

25.52 Unregistered companies 93525.52-1 Meaning of unregistered company [Section 375] 93525.52-2 Winding-up of an unregistered company [Section

375] 93625.52-3 Procedure for winding up of unregistered company 93725.52-4 Winding-up of a firm as an unregistered company 937

25.53 Winding-up of a Foreign Company 937

PAGE

CONTENTS I-48

25.53-1 Removal of name of company from register of com-panies 938

25.53-2 Provisions for removing the name 93825.53-3 Removal of the name by special resolution by a com-

pany [Section 248(2)] 93925.53-4 Restriction on making application under section 248 93925.53-5 Effect of Restoration 94325.53-6 Position of creditors on restoration 943

25.54 Vanishing Company 94325.55 Transfer of winding-up proceedings to Tribunal 94425.56 Some more cases on winding up 944

26AUTHORITIES UNDER THE COMPANIES ACT, 2013

AND MISCELLANEOUS PROVISIONS

26.1 Registrar of Companies (R.O.C.) 95026.1-1 Meaning 95026.1-2 Duties of Registrar 95126.1-3 Filing fees 95126.1-4 Powers of Registrar (ROC) 95126.1-5 Disposal of Records in the Offices of Registrars 952

26.2 Regional Director 95326.3 National Financial Reporting Authority [Section 132] 954

26.3-1 Role of NFRA 95426.3-2 Powers of NFRA 95526.3-3 Constitution and functioning of NFRA 95526.3-4 Books of account and annual report of NFRA 956

26.4 Serious Fraud Investigation Office [Section 211] 95626.4-1 Role of SFIO 95626.4-2 Constitution of SFIO 95626.4-3 Powers of SFIO 95726.4-4 Report of Investigation 958

26.5 National Company Law Tribunal and National Company LawAppellate Tribunal 95826.5-1 Civil Court not to have jurisdiction [Section 430] 95826.5-2 Expeditious disposal of applications, petitions or

appeal [Section 422] 95826.5-3 Order of the Tribunal 959

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I-49 CONTENTS

26.5-4 Appeal to the Appellate Tribunal [Section 421] 95926.5-5 Appeal to the Supreme Court [Section 423] 95926.5-6 Procedure to be followed by the Tribunal and Appel-

late Tribunal [Section 424] 95926.5-7 Powers of the Tribunal and Appellate Tribunal 95926.5-8 Rules to be followed in proceeding before the Tribu-

nal 96026.5-9 Meditation and Conciliation Panel 960

26.6 Special Courts 96126.6-1 Jurisdiction of the Special Court 96126.6-2 Summary Trial by the Special Court 96126.6-3 Application of the Code of Criminal Procedure [Sec-

tion 438] 96126.6-4 Appeal and Revision [Section 437] 962

MISCELLANEOUS PROVISIONS

26.7 Offences to be non-cognizable [Section 439] 96226.8 Compounding of certain offences under the Companies Act

[Section 441] 96326.9 Punishment for Fraud [Section 447] 965

26.9-1 Penalties for false statements made and false evidencegiven [Section 448] 965

26.9-2 Penalty where no specific penalty is provided else-where in the Act [Section 450] 965

26.9-3 Punishment in case of repeated default [Section 451] 96626.9-4 Penalty for wrongful withholding of property [Sec-

tion 452] 96626.9-5 Penalty for improper use of the words “Limited” and

“Private Limited” [Section 453] 96926.9-6 Power of Central Government to make Rules 969

26.10 Dormant Company 96926.11 Service of documents 971

26.11-1 Service of documents on a company 97126.11-2 Service of documents on R.O.C. [Section 20] 97126.11-3 Service of documents on members by company [Sec-

tion 20] 97126.12 Company law in a computerised environment - E-filing - Intro-

duction 972

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CONTENTS I-50

26.12-1 Filing of applications, documents, inspection etc. inelectronic form 972

26.12-2 Electronic form to be exclusive, alternative or addi-tional 972

26.12-3 Providing of value added services through electronicform [Section 401] 973

26-12-4 Application of provision of Information TechnologyAct, 2000 973

26.12-5 What is e-Governance 97326.12-6 E-filing of petitions and application before the Tribu-

nal 97826.13 The Depositories Act, 1996 : An Analysis 981

26.13-1 Objectives 981

APPENDICES

APPENDIX 1 : CIRCULARS & NOTIFICATIONS ISSUED UNDER THECOMPANIES ACT, 2013 991

APPENDIX 2 : LISTING AGREEMENT 1043APPENDIX 3 : CHARTS AND TABLES 1127

� Exemptions and privileges available to privatecompanies 1127

� Restrictions relating to a private company 1134

� Provisions applicable to one person company 1136

� Companies with charitable objects etc. [section 8companies] 1143

� Provisions applicable to foreign companies 1151

� Provisions applicable to Government Companies 1164

� Matters requiring sanction through ordinaryresolutions 1167

� Matters requiring sanction through specialresolutions 1172

� Powers of board to be exercised only byresolutions at board meetings 1182

� Matters requiring Central Government’s/regionaldirector’s approval 1189

� Statutory registers, books, etc., to be maintained 1193

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I-51 CONTENTS

� Documents to be filed with the registrar ofcompanies 1197

� Rights of shareholders vis-a-vis a company underthe Companies Act 1215

� Rights of group of shareholders 1224

� Penalties/punishment for defaults 1230

� Limitation Chart 1302

SUBJECT INDEX i

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CONTENTS I-52