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1, , ., , a, , , , Definitions..., Section 2 ‘, Clause (2) - Accounting Standard, , Clause (7) - Auditing Standard, , Clause (13) - Books of Accounts, , Clause (31) - Deposit, , Clause (41) - Financial Year, , Clause (42) - Foreign Company, , Clause (47) - Independent Director, Clause (48) - Indian Depository Receipts, Clause (62) - One Person Company, Clause (85) - Small Company, , , , , , Section 23, 25 to 28, 33, 35, 39, Private Placement ....vosseosse+, , , , Section 43, 46, 47, 52 to 56, 61 to 72, , New Concepts Introduced by the, Companies Act, 2013... Z, , Case Studies ............., Model Question Paper, , , , , , , 1, , COMPANY LAW, The Companies Act, 2013, , , , Introductory :, , Companies Act, 2013 is an Act of the Parliament of India which, regulates incorporation of a company, responsibilities of acompany,, directors, winding up of a company. The 2013 Act is divided into 29, chapters containing 470 clauses as against 658 Section in the, Companies Act, 1956 and has 7 schedules. The Act has replaced, The Companies Act, 1956 after receiving the assent of the President, of India on 29 August 2013. The Act came into force on 12 September, 2013 with few changes like earlier private companies maximum, number of member was 50 and now it will be 200. A new term of, one person company is included in this Act that will be a private, company., , Highlights of New Indian Companies Act, 2013, , 1. Immediate Changes in official communications, like name,, address of its registered office, Corporate Identity Number (21, digit number allotted by Government), Telephone number, Fax, number, Email Id, Website address if any., , 2. One Person Company (OPC) : It's a Private Company having, only One Member and at least One Director. No compulsion to, hold AGM. Conversion of existing private companies with paidup capital upto % 50 Lacs and turnover upto % 2 Crores into, OPC is permitted., , 3. Woman Director : Every Listed Company / Public Company, with paid up capital of % 100 Crores or more / Public Company, with turnover of % 300 Crores or more shall have at least one, Woman Director.

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}, |, }, |, , 6, 3. Perpetual Succession: Per, , , Business Law (S.Y.B.A.F.: SP) Ty, rpetual succession Means that the, , changing from time to ¢, , a Company may keep changing ‘Ton me, pee not fect the company’s continuity. The death ,,, insolvency of individual members does not in any way affec,, the corporate existence ofa company. Members may come anq, go but the company can g° on forever. Company ceases to exic,, on winding up of the Company., , Company being a legal person is capable, disposing off property in its own name, the owner of its capital and assets. Th, he several or joint owners of the, , ’s property. No shareholder has any right on any of, Se eae ed by the company for he has no, , the assets of property owne i, legal or equitable interest in the company’s property. The, , property is vested in the company as a body corporate, and, no changes of individual membership affect the title of the, , company. The assets of a Company are not allowed to be used, for the payment of shareholders debts., , Transferable Shares: According to the Sec. 44 of the Companies, ‘Act, 2013, the shares or debentures or other interest of any, member in a company shall be movable property transferable, in the manner provided by the articles of the company. Every, share in a company having a share capital shall be distinguished, by it's distinctive number (Sec. 45). A certificate issued under, the common seal of the company, specifying the shares held, by any person, shall be prima facie evidence of the title of the, person to such shares (Sec. 46)., , The registration of the company enables a member to sell his, shares in the open market and to get back his investment, without having to withdraw the money from the company. This, provides liquidity to the investor and stability to the compan), , Capacity to sue and be sued: A company being a body corporate, can sue and can be sued in its own name., , Limited Liability: The popularity of the corporate form of, , organisation lies in the concept of limited liability. The company, being a separate person, is the owner of its assets and is bound, , Separate Property: A, of owning, enjoying and, The Company becomes, shareholders are not t, , Definitions, , 7, by it's own liabilities. The members do not undertake the, liabilities for company's debts. There may be companies with, , limited or unlimited liabilities. Liability of member depends, upon the type of company as follows :, , Sec. 2(21) of Companies Act, 2013 - "Company Limted by, Guarantee" means a company having the liability of it's, members limited by the memorandum to such amount as the, members may respectively undertake to contribute to the assets, of the company in the event of its being wound up., , Sec. 2(22) - Company limited by shares means a company, having the liability of its members limited by the memorandum, to the amount, if any, unpaid on the shares respectively held, by them., , Sec. 2(63) - One person company means a company which has, only one person as a member., , Common Seal: The Company has a separate legal existence, under its own common seal. It can enter into contract with, outsiders with its directors and with its members under its, , common seal., , Capacity to Contract in it's own name : Company being a, separate legal person is capable of contracting in it's own name., It can contract with outsiders as well as with persons who form, the company because company is considered as separate from, the persons who form the company. There are two limitations, on companies contract viz., , (a) Natural limitation - which is due to its nature. Company, being an artificial person can only contract through it's, agent. Directors are the agents of the company. Directors, enter into contract on behalf of the company under the, , common seal of the company., , Company — Principal, L L, , Director — Agent

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F Business Law (S.Y.B.A_}, , 4 OF A CO” =, , 1., , é eo ulsory under the Act of 20);, , istration: Registration is compulsory uns + Of 2073, igeoele date Sareea mentioned in the ce ttificate of, incorporation subscribers to the memorandum and jj Other, incorpo! come the member of the company from time, , rsons, who s ;, s time shall be a body corporate by the name contained jp, , dum; capable of exercising all the functions Of an, Roan Sere the Act and having perpey,., succession and a common seal with power to acquire, hold an,, dispose of property, both movable and immovable, tangible, and intangible, to contract and to sue and be sued by the Said, , name., Sec. 464 Prohibition of association or Partnership of Persons, , exceeding certain number, No association or partnership consisting of more than such, number of persons as may be prescribed shall be formed {o;, , the purpose of carrying on any business that has for its objects, the acquisition of gain by the association or partnership or by, , the individual members thereof, unless it is registered as ;, , company under this Act or is formed under any other law {o;, , the time being in force., , The number of persons which may be prescribed under this, * section shall not exceed one hundred., , Exceptions :, (a) a Hindu undivided family carrying on any business, or, , (b) an association or Partnership, if it is formed by, , Professionals who are governed by Special Acts., , Every member of an association or partnership carrying on, , business in contravention of the above provisions shall be, , punishable with fine which may extend to one lakh rupees and, , shall also be personally liable for all liabilities incurred in such, iness,, , ey, , , , 5, , Definitions, , 2. Independent Corporate Existence- Separate Legal Entity: A, Company has a separate legal existence. It is a distinct legal, Person existing independent of its members. On the other hand,, a partnership has no legal existence apart from its partners. It, is nothing but a collection of partners., , A well-known illustration of the principle of separate legal, existence is the decision of the House of Lords in Salomon Vs, , Salomon & Co. [(1897) AC22]., , Salomon was a shoe manufacturer. He incorporated a Company, named, Salomon & Company Ltd. for the purpose of taking, over and carrying on his business, The seven subscribers to the, memorandum were Salomon, his wife, daughter and four sons, and they remained the only members of the Company. Salomon, with his two sons constituted the Board of Directors of the, Company. The business was transferred to the company for £, 40,000. Salomon took £ 20,000 shares of 1 each and debentures, worth £ 10,000. Within one year the Company went into, liquidation. On winding up the unsecured creditors contended, that Company was not having independent existence., , It was held that Salomon and Company Ltd. fulfilled all the, requirements of the legislature. It was therefore treated as a, Company separate and a distinct independent corporation., , Re. Kondoi Tea Co. Ltd. [(1886) ILR-13Cal-43}, , The principle of separate legal existence of a Company had been, recognised in India even before the Salomon’s decision in the, decision given by the Calcutta High Court., , Facts of the case - Certain persons transferred a tea estate toa, Company and claimed exemptions from ad valorem duty on the, ground that they themselves were the share holders in the, Company and therefore it was nothing but a transfer to them, in one to themselves under another name. The Court observed, that “ The Company was a separate person, a separate body, altogether from the share holders and the transfer was as much, 4 conveyance, a transfer of the property, as if the share holders, had been totally different persons.”

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10., , Business Law (S.Y.B.A.F.; sy M.ry), , have a director ,,., , f : Company must rector wh,, Ree ere cclvaind of 182 days or more in Previou., stayed in S, calendar year., ‘Accounting Year : Every Company shall follow Uniform, sean year i.e. 1st April - 31st March., 1: The Company CANNOT poe any king, , tee / security to any director, irector of holdin, ea Doig eaiees his relative, firm in which he or ime, sttve is partner, private limited in which he is director o,, member or any bodies corporate whose 25% or more of tota|, voting power or Board of Direcotors is controlled by him., , Articles of Association : Every copy of Memorandum of, Articles issued to members should contain a copy of all, , resolutions / agreements that are required to be filed with the, , Registrar., Disqualifications of Director : Allexisting directors must have, Directors Identification Number (DIN) allotted by centra|, government. Directors who already have DIN need not take, any action. Directors not having DIN should initiate the process, of getting DIN allotted to him and inform companies. The, , Company, in turn, has to inform registrar., , Financial Year : Under the new Act, all companies have to, follow a uniform Financial Year, i.e. from 1st April to 31st March., Those companies which follow a different financial year have, to align their accounting year to 1st April to 31st March within, 2 years. It is desirable to do the same as early as possible since, most of the compliances are on financial year basis under the, new Companies Act., , Appointment of Statutory Auditors : Every Listed Company, can appoint an individual auditor for 5 years and a firm of, auditors for 10 years. This period of 5/10 years commences from, the date of their appointment. Therefore, those companies have, reappointed their statutory auditors for more than 5/10 years,, have to appoint another auditor in Annual General Meeting, for year 2014., , Loans to Directo:, , , , Section 2, Definition of Company Section 2 (20), Clause (2) Accounting Standard, Clause (7) Auditing Standard, , Clause (13) Books of Accounts, Clause (31) Deposit, , Clause (41) Financial Year, , Clause (42) Foreign Company, , Clause (47) Independent Director, Clause (48) Indian Depository Receipts, Clause (62) One Person Company, Clause (85) Small Company, , , , Section 2(20) of the Companies Act, 2013 defines a company as,, "Company means a company incorporated under this Act or under, , any previous company Law."

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nl ee, Business Law (S.Y.B.A.F.: Sey) 1, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , 8 rs Act. C, Definitions 9, imitation imposed by the Company's Act. C Ompany, 0) eae any contract which goes beyond jts ty; was receiving huge dividend and interest income, transferred, ee documents viz Memorandum and Articles of his investments to 4 private companies formed for the purpose, x ue ‘Any contract beyond the powers and objec, of reducing his tax liability. These companies transferred the, kiko company as mentioned its document is ultra Vires income to D as a pretended loan. Held, the companies were, aiieseioe void-ab-initio. formed by D purely and simply as a means of avoiding tax, a obligation and the companies were nothing more than the, assessee himself., A COMPANY, , CHARACTERISTICS OF 2. Prevention of Fraud or Improper Conduct: The legal, personality of a company may also be disregarded in the interest, of justice where the machinery of incorporation has been used, , for some fraudulent ose like defrauding creditors., , 1. Registration | | > 3. Perpetual ; ee :, , Compulsory Fiseace Succession Jones V. Lipman, (1962) All E.R. 442. L agreed to sell a certain, land to J. He subsequently changed his mind and to avoid the, specific performance of the contract, he sold it to a company, , Fs Hf T al which was formed specifically for the purpose. The company, - had Land aclerk of his solicitors as the only members. J brought, 5. Transferable 5 ee ie Limited 8. Common |} 9. Capacity an action for the specific performance against L and the, ‘Shares being sued Liability Seal to contract company. The Court looked to the reality of the situation, ignored, the transfer and ordered that the company should convey the, , land toJ. :, , LIFTING OR PIERCING THE CORPORATE VEIL, 3. Determination of Character of a Company: A company may, , A company isa legal person distinct from its members [Salomon V assume an enemy character when persons in de facto control, Salomon & Co. Ltd. (1897) A.C. 22]. This principle may be referred of its affairs are residents in an enemy country. In such a case,, to as "the veil of incorporation". The effect of this principle is that the Court may examine the character of persons in real control, there is a fictional veil between the company and its members. That of the company and declare the company to be an enemy, is, the company has a corporate personality which is distinct from company., , 1 ee Daimler Co. Ltd. v. Continental Tyre & Rubber Co. Ltd. (1916), , It became necessary for the Courts to break through or lift the 2 A.C. 307. A company was incorporated in England for the, corporate veil or crack the shell of corporate personality and look at purpose of selling in England tyres made in Germany by a, the persons behind the company who are the real beneficiaries of German company which held the bulk of shares in the English, , the corporate fiction. company. The holders of the remaining shares, except one, and, , all the directors were Germans, resident in Germany. During, , Exceptions: The various cases in which corporate veil has been lifted the First World War, the English company commenced an action, , are as follows : for recovery of a trade debt. Held, the company was an alien, , - : F company and the payment of debt to it would amount to trading, , x cae ieee The Courts may ignere the corporate Gin de eetiy, and therefore the company was not allowed, pany where it is used for tax evasion. Sir Dins/ia to proceed with the action., , Maneckjee Petit, Re A. I. R. (1927) Bom. 371. D, anassessee, who