Companies Act for Entrepreneurs

8/8/2019 Companies Act for Entrepreneurs

http://slidepdf.com/reader/full/companies-act-for-entrepreneurs 1/178

5 DECEMBER 09 www.afterschool.tk study material of PGPSE / CSE

1

COMPANIES ACT FOR

ENTREPRENEURS

by :

DR. T.K. JAINAFTERSCHOOL

centre for social entrepreneurship

sivakamu veterinary hospital road

bikaner 334001 rajasthan, india

FOR ± PGPSE / CSE PARTICIPANTS

mobile : 91+9414430763




2

My words....

Ours is a great country with immense entrepreneurial potential. However,

our legal system and taxation system is so cumbersome that our creativity

and talent is wasted / unnecessarily diverted in these sectors. I wish that

these are simplified so that an ordinary entrepreneur can understand these

without help from any expert. Here I present companies act for

entrepreneurs. I wish that more people should become entrepreneurs. Let us

wish that some likeminded person is able to reach policy making level and

is able to change these. An ordinary Indian entrepreneur wishes to remainan honest entrepreneur and contribute to the development of nation, but our

systems and processes .. ...




3

While giving inter-corporate

loans, what should be theminimum rate of interest ?

It should carry the rate of interest not lower

than the prevailing bank rate being standard

rate made public under Section 49 of the

Reserve Bank of India Act, 1934.




4

What is the limit, beyond which a company must

obtain permission of shareholders through special

resolution before inter-corporate loan?

The limit is 60% of its paid-up share capitaland free reserves or 100% of its free reserves,

whichever is more.




5

Can a company invest in inter-

corporate investments in someoneelse's behalf ?

No

investments made by a company on its own

behalf must be made and held by it in its own

name.




6

Can board of directors invest

money in intercorporateinvestments?

Yes, subject to some conditions and limits

Read : Section 292 of the Act




7

Are deposits taken by a company

repayable before maturity ?

No

Deposits are not repayable before maturity.




8

What are provisions relating to

acceptance of deposits ?Section 58A :Company cant invite any deposits

unless deposits are invited in accordance with

Companies (Acceptance of Deposits) Rules,1975,

an advertisement must be issued by the

company in prescribed formthe company must not have defaulted in

repaying deposit or interest thereon.




9

What is penal interest rate in case

of failure in repayment of deposits?

Payment for penal interest @18% p.a. Must be

made by the company for deposits, which have

matured and are claimed as well but they have

remained unpaid. However, in case of deposits

made by small depositors the penal interest rateshall be @20% p.a. which shall be

compoundable with annual rests.




10

What types of deposits are not

part of Sec. 58A ?

1. Deposit made for booking/purchase of car, etc.

2. Deposits accepted by financial companies like hire-purchase,

finance company, a housing finance company, an equipment leasing

company, a chit fund company or a company

3. Deposits accepted by a sick industrial company covered by the

Sick Industrial Companies (Special Provisions) Act, 1985,4. Deposits accepted by relief undertakings under law



5 DECEMBER 09 www.afterschool.tk study material of PGPSE / CSE 11




Who are responsible for keeping

books of accounts ?

1. managing director or manager and allofficers and other employees of the company,

and

2. if the company has neither a managingdirector nor manager then every director of the

company.

(sec 209)




To whom is it necessary to

circulate balance sheet andauditor's report ?1. every member of the company;

2. every trustee for debenture holders

whether such member or trustee is entitled to

have notice of general meeting to be sent to

him or not; and

3. all other persons who are entitled to havenotice of general meetings. (sec. 219) (clause

32)




What should be the contents of

director's report ?

1. the state of the company¶s affairs;

2. the amount, if any, which it proposes to carry to any reserves3. the amount, if any, which it recommends should be paid by way of

dividend;

4. material changes and commitments, if any, affecting the financial

position of the company which have occurred between the end of the

financial year of the company to which the balance sheet relates and thedate of the report.

5. the conservation of energy, technology absorption, foreign exchange

earnings and outgo[Section 217(1)].




What can be classified as material changes taking

place after balance sheet date ± which must be

reported in annual report ?

purchase, sale or destruction of plant or the destruction of

inventories.

Substantial decline in the market value of inventories or investments.lapse of a patent which had given the company a virtual monopoly in

the sale of its principal products.

tax liabilities of prior period or the settlement of any legal or other

proceedings either favourably or adversely, if they were pending at

the balance sheet date.

Significant Legal proceedings against the company.

Important changes in the capital structure










What is the schedule VI of

companies act about ?

Part I Format of balance sheet

Part II : Profit and loss a/c

Part III interpretation




What is the schedule X of


Fees to be paid to registrar




What is the schedule IX of


Form of proxy




What is the schedule XIII of


Conditions to be fulfilled for appointment of

MD / manager / wholetime director without

permission from central government

part I : appointment

Part II : remuneration



5 DECEMBER 09 www.afterschool.tk

study material of PGPSE / CSE

22

What is the schedule XIV of


Rate of depreciation





23

What is the schedule IA of


List of relatives





24

What is the schedule II of


Matters to be specified in prospectus

part I : matter

Part II : report

Part III : other provisions





25

What is the schedule III of


Form of statement in lieu of prospectus (sec.70)

part I : format

Part II : reportsPart III: other provisions





26

What is the schedule IV of


Form of statement in lieu of prospectus to be

used on conversion of a private company into a

public company (sec. 44)

part I : format

Part II : reports

Part III : other provisions





27

What are the contents of part III of

the companies act ?

Prospectus, Allotment etc

from sec. 55 to 81





28

What are the contents of part IV

of the companies act ?

Share capital and debentures

Sec. 82 to 123





29

What are the contents of part V of

the companies act ?

Registration of charges

(sec. 124 to 145)





30

What are the contents of part V of

the companies act ?

Arbitrage, compromise, arrangement,

reconstruction

sec. 389 to 396





31

What are the contents of part VII

of the companies act ?

Sec. 425 to 560





32

What is the schedule V of


Contents and format of annual return





33

How can a company appoint MD

?

1. By virtue of an agreement with the company.through a resolution passed by the company.

3. By virtue of a resolution passed by the Board of

directors.

4. By virtue of the memorandum of association.

5. By virtue of the Articles of Association.





34

Is there any time limit for tenure

of MD ?

No company can appoint a managing director

for a term exceeding five years at a time. He

may, however, be re-appointed for another

term of five years.





35

Can an MD be appointed MD in

another company also ?

Nono public company and no private company

which is a subsidiary of a public company can

appoint any person as managing director, if he

is already either the managing director or

manager of any other company





36

If a person who is convicted in a

crime relating to formation of a

company, be appointed as MD ?

No

a person convicted of any offence in connection with

the promotion, formation or management of a

company or in course of winding up of a company

under Section 542 of the company Act can not beappointed a director





37

Is it necessary to retire some

directors by rotation every year ?

Yes

not less than two-thirds of the total number of

directors of a public company or of a private

company which is a subsidiary of a public

company, are liable to retirement by rotation

(sec. 255)





38

If you appoint an alternate director instead

of a director (who is going abroad), will

he continue to work after return of director ?

No

An alternate director has no locus standi, the

moment the principal director returns to the

state in which the board meeting of the

company is ordinarily held, he ceases to be the

director

t t





39

s an approva o t e entra

Government required to remove a

person from managingdirectorship?

No

approval of the Central Government is notrequired to remove a person from managing

directorship. Do it as per the articles of

association. You may have to give himcompensation

read sec. 284 (for additional details)





40

What are disqualifications for

MD?1. is an undischarged insolvent or has at anytime been

adjudged as insolvent;

2. suspends or has at any time suspended payment to his

creditors, or makes, or has at any time made, a compositionwith them; or

3. is or has at any time been, convicted by a Court of an

offence involving moral turpitude.

4 any disqualifications mentioned in Part I of Schedule XIII(age of less than 25 or more than 70 etc. ) (imprisoned /

fined for over 1000 under any business law)





41

What are powers of an MD ?

As per articles of association

genrally MD can undertake buying fixedassets, selling assets, borrowings, investing,

entering into contracts, appointment of senior

personnels etc.





42

Can an MD change service

conditions of other employees?Yes

being in charge of the management of the

company¶s affairs, the MD enjoys the power tovary the duties of employees within

permissible limits. [V. Ramaswami v. Madras

TImes Printing & Publishing Co., AIR 1917

Mad 485].





43

Is sitting fees a part of managerial

remuneration ?

Yes

payment of sitting fee to managerial personnel

is part of managerial remuneration and in case

of Schedule XIII appointments, no sitting fee is

payable in the absence of any proviso made

therein.





44

Is there any limit to

reimbursement of medical

expenses of the director ?

Yes, it is Rs. 9 Lakhs

any reimbursement of medical expenses in

excess of Rs.. 9 Lakhs in total managerial

remuneration package requires approval of the

Central Government under Section 310 of the

Companies Act.





45

What is the duty of a chairman in

the meeting ?

The primary duty of the chairman of a Board or

company meeting is to ensure the presence of quorum before proceeding with the

deliberations of the meeting and then to

conduct the meeting in a peaceful atmosphereso that the business on the agenda before the

meeting is transacted in an orderly fashion.





46

Can the chairman adjourn a

meeting ?

Yes ± but only in exceptional cases - thechairman has the right to adjourn a meeting

when it is impossible to continue the meeting,

by reason of disorder or other like cause [John

v. Rees, (1969)± not to properly convened andwell organised meeting .





47

Can a secretary participate in

meetings or do negotiations ?He cannot participate in the management of the company¶s

affairs

He cannot negotiate contracts on behalf of the companyHe cannot borrow money in the company¶s name

He cannot register transfers of shares without the Board¶s

authority

He cannot call meetings of members.

He has no power to strike a name off the Register of Members

He cannot bind the company by contract;







49

What is the role of a secretary ?

1. He is an agent of the Board of directors, i.e. as a

liaison or link between the Board on the one hand and

the executive and staff, shareholders, customers andgeneral public on the other;

2. He is the officer-in-charge of secretarial work;

3. to act as a chief business executive or chief

administrative officer of the company, if he is put

incharge of office administration, including accounts,

taxation and legal sections.





50

Who can appoint / dismiss a

company secretary ?

Appointment of Company Secretary is made by

means of a resolution passed at meeting of Board of Directors.

Dismissal of a company secretary can be done

by the Board of Directors or by the ManagingDirector (if authorized by the Board).





51

Can a company secretary

advertise?

Practising company secretaries are allowed toadvertise the corporate advisory services

provided by him subject to the Guidelines for

Advertisement by Company Secretary in practice.





52

Is it necessary for a company to

appoint a company secretary ?Every Company having a paid up share capital

of Rs. 2 crore or more is compulsorily required

to have a Company Secretary u/s 383A.

Every company having a paid up share capital

of Rs. 10 lakhs or more but less than Rs. 2

crore is required to file a certificate fromcompany secretary in whole time practice in

prescribed form and as per rules





53

What is the role of quality review

board ?Quality Review Board reviews quality in the

field of professional services like company

secretaryship. It consisting of a chairperson andfour other members, who shall be appointed

from amongst the persons of eminence having

experience in the field of law, economics, business, finance or accountancy. (Section

29A).





54

What are the various types of

meetings ?1. Statutory Meeting as per Section 165 of

the Act;

2. Annual General Meetings as per Section166 of the Act;

3. Extraordinary General Meetings;

4. class meetings of shareholders5. meeting of debenture holders

6. board meeting





55

When should a company organise

statutory meeting ?

Between one month to six months from the

date at which the company is entitled to

commence business,





56

What are the contents of a statutory report ? (which

is presented at statutory meeting) (sec. 165)1. Shares allottment details

2. Cash received on shares with an abstract of receipts and payments

and balance in hand;

3. Preliminary expenses of the company²an account or estimatethereof;

4. Names, addresses and occupations of the directors, auditors, etc.

5. Particulars of contracts

6. Unfulfilled underwriting contract

7. Calls, if any, unpaid by the directors and manager;

8. Particulars of commission and brokerage paid or payable to the

directors or the manager.





57

When should AGM be held ?

Earlier of these :

1. 15 months from date of the last annualgeneral meeting;

2. the last day of the calendar year;

3. 6 months from the close of the financialyear.





58





59

What types of names are not

allowed ?Those coming under The Emblems and Names

(Prevention of Improper Use) Act, 1950

words which are offensive to any section

having close phonetic resemblance to the name

of a company

If it includes the word Co-operative etc

if it is an exact Hindi translation of the name of

an existing company in English





60

Is promotor of a company its

trustee or an agent ?

No, A promoter is neither an agent of, nor a

trustee for, the company because it is not in

existence. However, he occupies a fiduciary

position





61

What are the liabilities of a

promotor ?

For misstatement as per Section 56 andSchedule II regarding matters to be stated and

reports to be set out in the prospectus

Under Section 62, a promoter is liable for anyuntrue statement in the prospectus





62

What deeds are invalid without

common seal ?

Power of attorney which would be required

to be made in favour of a person to execute thedeeds on behalf of the company;

Share certificates;

Share warrants;Any deed as required by the Articles.





63

What is the meaning of constructive

notice of memorandum and articles ?

every person who enters into a contract with a

company has the means of ascertaining and is

consequently presumed to know, not only the

exact powers of the company but also the

extent to which these powers have been

delegated to the directors, and of anylimitations placed upon the exercise of these

powers as per MoA and AoA.





64

What are the legal effects of

MoA?

the members are bound to the company;the company is bound to the members;

the members are bound to members

the company is bound to outsiders.





65

What is the difference between

MoA and AoA?The memorandum defines the relation between the

company and the outsiders, while the articles regulate

the relationship between the company and itsmembers and between the members themselves

The AoA is subsidiary both to the Companies Act and

the MoA.

members have a right to alter the articles by a specialresolution, but in case of MoA permission of CLB /

Govt is required.





66

Who an object to reduction in

capital by a company ?

Creditors can object. If any creditor objects,

then either his consent to the proposed

reduction should be obtained or he should be

paid off or his payment be secured.





67

WHEN DOES CRYSTALLISATION OF

FLOATING CHARGE TAKE PLACE ?

1. when the company goes into liquidation;

2. when the company stops its business;

3. when the creditors or the debenture holderstake steps to enforce their security e.g. by

appointing receiver to take possession of the

property charged;4. on the happening of the event specified in

the deed.

I i i f h i h





68

Is registration of charge with

registrar of companies

compulsory?

Yes

Section 125 of the Act requires a company tofile, within 30 days after the date of the

creation of a charge, with the Registrar,

complete particulars together with theinstrument, if any, creating, evidencing or

modifying the charge

Wh t d t il t b f i h d t





69

What details must be furnished to

registrar of companies at the time

of registration?

1. the total amount secured by the whole series;

2. the dates of resolutions authorising the issue of the series and the date of covering deed, if any, by

which the security is created or defined;

3. a general description of the property charged;

4. the names of trustees, if any for the debenture

holders.





70

What is the purpose of registration

of charge ?

It creates a notice to whosoever acquires a

future interest in the charged assets.





71

What details are kept by registrar

when he registers a charge ?

1. the date of its creation.

2. the amount secured by the charge;

3. short particulars of the property charged;

and

4. the persons entitled to the charge





72

What are the cases when charge

need not be registered ?

A charge created by operation of law does not

require the registration . But a charge created

by act of parties requires registration.





73

Is there a change in ownership at

the time of charge ? No

there is no transfer of interest in the case of a

charge. Charge does not operate as transfer of

an interest in the property and a transferee of the property gets the property free from the

charge provided he purchases it for value

without notice of the charge. But a mortgage isa transfer of an interest in a specific immovable

property and it is good against subsequent

transferees





74

Is it necessary to keep a register of charge

and a copy of charge instrument open for

public inspection ?

Yes Every company is required to keep at its registered office a

register of all charges (including mortgages) with details of all

charges specifically affecting property of the company and allfloating charges on the undertaking or on any property of the

company giving in each case a short description of the property

charged, the amount of the charge, and the names of the

persons entitled to it (Section 143). every company must alsokeep at its registered office, a copy of every instrument creating

any charge (Section 136).





75

How should a company inform

registrar of satisfaction of charge ?

The company must intimate satisfaction of the

charge in e-form 17 prescribed under the

Companies (Central Government¶s) General

Rules and Forms (Amendment) Rules, 2006

accompanied by appropriate fees, prescribed inSchedule X of the companies Act witin 30 days





76

Can a charge be modified ?

Yes, but whenever the terms or conditions are

modified, it is the duty of the company to send

to the Registrar the particulars of such

modification within 30 days. For registration of

modification of charges also e-form 8 has to befiled with the Registrar.





77

What is mortgage ?

According to Section 58 of the Transfer of

Property Act, 1882, a mortgage is the transfer

of an interest in specific immoveable property

for the purpose of securing the payment of

money advanced or to be advanced by way of

loan, an existing or future debt or the performance of an agreement which may give

rise to pecuniary liability.

Wh i d i i l i





78

When a company tries to reduce its capital, it passes a

special resolution and takes permission from CLB.

What criteria does CLB consider while giving permission ?

The interests of creditors must be safeguarded;The interests of shareholders

&

the public interest must be considered





79

Compare surrender to forfeiture of

share?

Both forfeiture and surrender lead totermination of membership. But in the former

case, it is at the initiative of company and in

the latter case at the initiative of member or shareholder.

What are the methods to reduce





80

What are the methods to reduce

share capital without court / CLB

?

1 Forfeiture2. buy back

3. redemption of preference shares

4. purchase of shares as per sec 4025. surrender of shares





81





82

Can a minor become a member of

a company?

No

however, a guardian can hold shares on his behalf

minor can acquire shares (they must be fully

paid), the guardian will sign on transfer deedon behalf of minor





83

Can a subsidiary company be a

member of a holding company ?

No

there are some exceptions





84

Exceptions ± when subsidiary can

be a member in holding company?

1 when subsidiary is a legal representative of a

deceased person in holding company2. when subsidiary is a trustee

3. when a subsidiary was a member before

becoming a subsidiary4. when subsidiary was a member before this

company law was enacted





85

Can a trust become a member of a

company ?

No

however a trustee can hold shares on behalf of

the trust





86

Can a society become a member

of a company ?

Yes





87

Can a non resident become a

member of a company ?

Only with permission from RBI / or as per

RBI'S scheme / guidelines





88

What are rights of a member ?

Attend AGM

voting right

free access to books of accounts & register of member

take copy of balance sheet & p&l a/c

appoint proxy

appoint dierctor & auditor

go to court (for his rights and against oppression)





89

How does a person loose

membership of a company?

If he sells the shares of the company

shares are converted into share warrant

surrender of share

buy back / redemption

lien on shares

court's order





90

Who is a member ?

1. the person who subscribes memorandum

2. the person who buys shares

3. whose name is there in register of member





91

What is statement in lieu of

prospectus ?

Every public company must prepare either

prospectus or statement in lieu of prospectus

a company can go for allotment of shares only

after 3 days of issue of statement in lieu of

prospectus or at least 5 days after issue of prospectus





92

What are contents of a prospectus

?

Part I general information, capital structure,

terms of issue, management etc.Part II reports by auditors / accountants /

statutory information

Part III details of above documents ± wherecan their copies be obtained. Details of vendors

etc.





93

Should prospectus be signed by

director?

Yes ± by all the persons whose name has beenmentioned

it must be written that a copy of this prospectus

has been submitted to registrar for registration





94

What is the time limit for issue of

prospectus after registration?

90 days





95

What is the penalty for non-

registration of prospectus ?

5000





96

What is doctrine of ultra vires?

Doing an act beyond articles / authority /

resolution / memorandum / company law iscalled ultra vires . The person taking such

decision is personally liable for such act. It was

given in Ashtray Railway Carriage and Iron

company case

ultravires act is void and cannot be approved





97

What is the effect of ultravires act

?

Company cant sue, but other firm can suecompany

directors are personally responsible for the act





98

What are exceptions to the law of

ultra vires?

The act is ultra vires the directors, but intra

vires the company ± the company will be

liable.

h i h diff b





99


share and stock ?Stock = a bundle of shares put together

share can be issued, stock cant be issued to public. Shares

can be converted into stock every share has a distinct number, stock doesnt have.

Shares have their own nominal value, stock dont have

their own value. They are based on shares. Shares cant be

sold in fractions, stock can be sold in fraction. Stock isalways fully paid up and it can be issued only by public

company





100

contd...

Shares are in physical form bear distinct numbers, whereas

stocks are the consolidated value of share capital. Shares may or

may not be fully paid-up. Stock is always fully paid-up

Shares have a nominal value, stock does not have any nominalvalue.

All shares are of equal denomination whereas denomination of

stocks vary.

Stock cannot be issued in the first instance, whereas shares areissued to the public initially. On conversion of shares into stock, the

provisions of the Act governing the shares shall cease to apply to the

share capital as it is converted into stock (Section 96).

Wh li bili i i f





101

What are liabilities in case of

misstatement in prospectus?

Every director / promotor / person who

authorised prospectus will have civil andcriminal liability as per sec.59,60, 62,63,68

criminal liability = 2 year jail + fine 50000

civil liability = compensation, rescission of contract, penalty (50000)

What are defences against civil





102

What are defences against civil

liability in case of misstatement in

prospectus ?

1. the person has withdrawn his consent before publication

of prospectus2. prospectus issued without his knowledge

3.. he had a reasonable belief based on information

4. expert had given his report on the basis of reasonable

grounds

5. on basis of public office documents

Wh d f i





103

What are defences against

criminal liability ?

1. when the statement is immaterial

2. when there was a reasonable ground to

believe so at the time of issue of prospectus

(sec. 63(1) )

Wh h h i i f





104

What are the characteristics of a

company ?

Common seal

legal identity

artificial person

perpetual successionright to sue and be sued





105

What is corporate veil?

A company is different from its members.

There is a veil between company and its

members

Wh th t lift t





106

When can the court lift corporate

veil ?When there is a possibility of fraud / tax avoidance /

illegal work / government revenue escape etc.

When company violates rules / law / procedures

When company is a sham

when comapany has been formed to avoid one's

contractual liabilities

When company is agent of its shareholders

when company has been created against public interest /

for vested interest

Wh t th t f i





107

What are the types of companies

on the basis of liability ?

Limited liability company

unlimited liability company

Limited by guarantee company

Wh t th t f i





108


on the basis of control ?

Holding company

subsidiary company

Wh t th t f i





109


on the basis of ownership ?

Private company

Public company

government company

foreign company

Wh t th t f i





110


on the basis of incorporation ?

Chartered company (which used to work in

pre-independence India having charter fromBritain)

statutory company (created by an act of

parliament)

registered company (ordinary company,

registered under companies act)





111

What are the privileges of a private company

in comparison to public company ?They can start with only 2 members (sec 12))

It can allot shares without minimum subscription (Sec. 69)

No need of prospectus / statement in lieu of prospectus(sec.70)

No requirement of rights issue in case of next issue (sec.

81)

No need of certificate of commencement of busienss, itcan start just after incorporation (sec 148)





112

What are the privileges of a private company

in comparison to public company ?

It can work with only 2 directors (sec. 252)

No need of statutory meeting and statutory

report (Sec. 165)

No need to keep index of members (sec 151)

No restriction on managerial remuneration

Rules regarding directors are less stringent

When ill a pri ate compan





113

When will a private company

convert into a public company ?

By Mistake -

if it gives public invitation for its sharesif its members increase beyond 50

etc.

(sec. 43)

Company law board may pardon the mistake






114


convert into a public company ?When at least 25% of its capital is with public company /

public companies

Average annual turnover over Rs 10 crores

When a private company holds at least 25% shares of a

public company

when a private company accepts public deposit

(sec. 43A - in all these cases, it will become deemed

public company)






115


convert into a public company ?

By CHOICEA private company can change its articles and

become public company and file a prospectus

with registrar in 30 days of conversion

(read sec. 44)

How will a public company





116

How will a public company

convert into a private company ?

It is more difficult

1. special resolution

2. permission of govt.

3. in 1 month new copy of articles have to besubmitted






117


private and public company? PRIVATE

Only 2 directors can start

Cant transfer sharesfreely

No prospecus / statutory

meeting

Min 2 max 50 members

PUBLIC

Min. 3 directors can start

Can transfer shares freely prospecus / statutory

meeting essential

Min 7 max ± no limit on

members

What are the documents which





118

promotors prepare before starting

a company ?1 memorandum of association

2 articles of association

3. prospectus

4 preliminary contracts

5. underwriting contracts6 contracts with lead banker / lead manager /

manager to issue

How to pick up name of the





119

How to pick up name of the

company ?

Check availability of name

(name should not be similar to existing

company and should not be restricted) (sec. 20)





120

How to apply for a Name?

First check out availability of name on the

website :http://www.mca.gov.in/DCAPortalWeb/dca/co

mpName.do

Submit the filled in Form-1A along with theapplication fee of Rs.500/- at the cash counter

of RoC or send the application and DD by post.





121

Hwo to get name approved ?

You can apply for a name in the prescribed

form (Form-1A) along with the application fees(Rs.500/-) at the RoC. You can give a

maximum of 4(four) names in order of

preference in your name application.

RoC=registrar of companies





122

What after name is approved?

After getting the name approved, prepare the

necessary documents for registration of the

company and file the same at RoC along with

the registration and filing fees. Registration and

filing fees vary depending upon the Authorised

capital. In addition, Memorandum of

Association and Articles of Association andForm-1 require payment of stamp duty as per

concerned state stamp act.

What is the validity period of the





123

What is the validity period of the

Name approved?the approved name is valid for a period of 6 months from

the date of approval. The Applicant can renew the name

within 6 months by submitting a fresh Name application(Form-1A) along with the fees of Rs.500/-, by mentioning

that the application is for renewal of the name already

approved. ( Names inadvertently allowed or which are

against the guidelines, which have subsequently come to

the notice, may be withdrawn by the RoC before or after

incorporation of the company).

What is the minimum Authorised





124

What is the minimum Authorised

Capital for a company?

The minimum authorised capital for Private

Limited Company ± Rs.1,00,000/-

For Public Limited Company ± Rs.5,00,000/-

What is the minimum number of





125

directors required to form a

company?

Minimum no. of directors for Private Limited

Company ± Two.

For Public Limited Company ± Three.






126

subscribers required for

registration of a company?

Minimum no. of subscribers for Private

Limited Company ± Two.

For Public Limited Company ± Seven.

What is the minimum Paid-up





127

Capital at the time of registration

of a company?

The minimum paid up capital for PrivateLimited Company ± Rs.1,00,000/-

For Public Limited Company ± Rs.5,00,000/-






128

shares to be subscribed at the time

of incorporation?

Minimum subscription for Private Limited

Company ± Shares worth Rs. One lakh.

Minimum subscription for Public LimitedCompany ± Shares worth Rs. Five Lakhs.






129

Authorised capital and Paid-up

capital?

Authorised capital is the capital with which thecompany is registered. The company can issue

shares up to the level of Authorised Capital.

Paid up capital means the amount of capitalactually paid by the shareholders in respect of

shares allotted to them.

Where can the company under the





130

Companies Act, 1956 be

registered?

The Company can be registered with the

Registrar of Companies of the state under

whose jurisdiction the proposed company¶sregistered office will be situated

What are the documents to be





131

What are the documents to be

filed with RoC every year?Invariably, the Balance Sheet and Annual

Return have to be filed every year. Other

documents such as, Return of Allotment

(Form-2), Change of Registered office (Form-

18), Change among the Directors (Form-32),

Charges (Form-8, 10, 17, 13)etc., have to be

filed within the due date from the events taking place in the company as per the Companies

Act, 1956

Can I inspect a company¶s





132

documents available with RoC

and how?Yes. You can inspect the documents processed

and registered in the companies document file

for a particular company by paying theInspection fee of Rs.50/- per company.

You can see them on portal also

Visit : http://www.mca.gov.in/

an o ta n a copy o acompany¶s document available in





133

company s document available in

the records with RoC? If so, whatis the procedure for the same?

Yes. A certified copy of the requested

document will be issued on payment of Rs.25/-

per page of document, together with a formal

application and a non-judicial stamp paper of

Rs.10/- for each document.





134

What is ³Investor Education and Protection Fund´?

Investor Education and Protection Fund (IEPF) has come into force

w.e.f 1st October, 2001. Any amount standing in a) Unpaid

dividend, b) Unpaid Application Money received by company for allotment of shares, c) Unpaid matured deposits under section 58A

of the Companies Act, 1956, d) Unpaid matured debentures,

e) Interest accrued on (a) to (d) above

after seven years from the date which they became due for payment

within 30 days to be deposited in the designated Branch of Punjab

National Bank. A return in Form No.1 has to be submitted

What are the requirements





135

regarding appointment of directors

?

1. obtain the consent (approval) of directors

and submit it to RoC

2. Director to submit undertaking (on stamp

paper) that he would buy qualification shares

3. Particulars of first directors / subsequent

directos appointed should be submitted to RoC

in 30 days of appointment.

h i h l f di





136

What is the role of directors?

They are employeesthey are agent of the company

they are trustees of the company

they are officers of the company

Directors powers (only through





137


directors' meeting)

1. make call on shares

2. issue debenture

3. borow money

4. invest funds of company

5 make loan


di ' i ) ( l b d





138

directors' meeting) (only at board

meeting) ?to fill vacancy in the board (sec 262)

to sanction contracts in which a director is interested (sec

297)to appoint MD / MD when the person is already an MD in

another company (sec. 316, 386)

to invest in companies of the same group (sec. 372)

directors shareholding notice (sec 308)

directors' interest notice (sec 299)

What are the statutory duties of a





139

What are the statutory duties of a

director?

to file return of allotment in 30 days

to disclose interest (sec. 299, 300)

to disclose receipt from transferee of property /

compensation from transferee of share

to not to issue irredeemable preference share

What are general duties of





140

W at a e ge e a dut es o

directors?

Not to delegate except as per articles /

companies act

not to make secret profit

to take care of the company

to attend board meetings regularly

What are disqualifications for





141

q

director? (sec. 274)

Unsound mind

undischarged insolventconvicted for moral turpitude

calls in arrears for more than 6 month

disqualified by court under sec. 203 due tofraud etc.

H t di t ?





142

How to remove director ?

Ordinary resolution after special notice (14 day

notice) by shareholders (sec. 284)

Govt may refer the case to company law board

and remove the director on advise of CLB

(388B to E)

Company law board (CLB) ± when there is

oppression and mis-management (397,398,402)

M ti f di t ?





143

Meetings of director ?

4 meetings in a year, at least 1 meeting in 3

months

Notice (sec. 286) ± 7 day written notice toevery director

quorum = 1/3rd member or 2 (whichever is

higher )if quorum is not present, the meeting is

adjourned for next week same time.

Wh t t f ti th ?





144

What types of meetings are there ?

Directors meetingcreditors meeting

shareholders meeting

What types of meetings do





145

yp g

shareholders have ?

AGM (annual general meeting)

EGM (Extraordinary general meeting) (sec.

169)

Statutory meeting (sec. 165)

class meeting

Wh t i ti ?





146

What is a proper meeting ?

Properly convened

there must be quorum and chairman

proceedings must be proper

minutes should be prepared


di l ti d i l





147

ordinary resolution and special

resolution ?

Ordinary resolution = simple majority (51%)

(sec. 189(1)

SR = 75% majority (sec. 189(2)

What are the matters that require





148

q

special notice (sec 190)?14 day notice to company is required for :

1. appointment / removal of director

2. appointment / removal of auditor 3. to remove a director before his term expire

4. any other matter which require special notice

as per articles / lawthe company will inform shareholders at least 7

days before the meeting

Wh t i F / H b ttl ?





149

What is Foss v/s Harbottle case?

It is about prevention of oppression andmismanagement in a company

in this case it was held that majority will take

the decisions and only in exceptional cases,

minority can also decide.

Cases, when minority can also





150

y

decide ?1. when ultra vires (beyond the legal powers) act is done

2 fraud on minority

3. when personal rights of individual members areinfringed

4. where acts requiring special notice and special

resolutions are done with ordinary resolutions

5. reconstruction / amalgamation (sec. 394)

6. oppression / mismanagement (sec 397)

What to do in case of oppression





151

pp

and mis management ?

Apply to govt for relief / winding up of

company

Apply to CLB for relief / winding up of

company

Apply to court for winding up of company

Who can apply ? (sec 399 401)





152

Who can apply ? (sec. 399, 401)

At least 100 members

or

1/10th of total members

or

any member holding 1/10 of capital

if there is no share capital :

1/5th of total number of members

govt cal also apply / govt can take application with less

number of members also

What can govt Do ?





153

What can govt. Do ?

Appoint new directors (sec 408)

CLB may ask to change articles and introduce

proportioanal representation

CLB may prevent change in board (sec. 409)

What are the various methods of





154

winding up ?

1. winding up by court ± sec. 433

2. voluntary winding up

a. winding up by members

b. winding up by creditors

3. winding up under supervision of court

When will court order for winding





155

up of a company (sec. 433)

1. no statutory meeting

2. no commencement of business

3. membership below 7 (2 for private)

4 inability to pay debt

5. just and equitable cause





156

What is certificate of





157

incorporation?If RoC is satisfied about all the documents that

you have submitted (MoA, AoA, Prospectus,

Statutory declaration, Directors appointment),the RoC will issue certificate of incorporation

(sec.33)

a private comany can now start business, but a public company will have to obtain Certificate

for commensement of business.

What is Certificate for





158

commensement of business ?

RoC will grant it only if :

1. directors have purchased qualification shares

2. statutory declarations and prospectus /

statement in lieu of prospectus have been

submittted3 minimum subscription

What about contract before

certificate of commencement of





159

certificate of commencement of

business?All contracts between the date of incorporation

and date of certificate of commencement of

business are provisional and will bind thecompany only after certificate of

commencement of business.

If a company doesnt start business in 1 year from date of incorporation, the court may order

for the wound up of the company

What is doctrine of contructive





160

notice ?

Every outsider who deals with a company is

supposed to know about its MoA and AoA

any person can go to registrar of companies or

the website and read MoA and AoA of any

company

What is doctrine of indoor





161

management ?

All those who deal with a company can assume

that provisions of articles have been followed

by the officers of the company

What are the exceptions to the





162

doctrine of indoor management ?1. if you know about irregularity in the

company

2. if you are careless and it is your negligencethat you didnt notice violation of company

systems and procedures... if with little efforts

you could have discovered that articles are notimplemented properly, you are taking decisions

at your own risk.

Inspection Charges of Company Documents





163

Inspection Charges of Company Documents

Viewing Company Documents on Portal Rs. 50.00 per

Company

Certified Copy of Company Documents

Certificate of Incorporation Rs. 50.00 per copyAny other public document Rs. 25.00 per page per document

Transfer Deeds

Nominal Face value of shares is upto Rs. 5000 Rs. 50.00 per

deed

Nominal Face value of shares is more than Rs. 5000

Rs. 100.00 per deed

What is the meaning of





164

contributory ?

Any person who is liable to pay some money /assets to the company in the event of winding

up. If any share is partly paid, then shareholder

is also a contributory for remaining amount.

(sec. 428)

What are the the two parts of list





165

of contributories ?

Part A = list of present contributories

Part B = list of past contributories (upto one

year back)

What is the liability of present





166

members?

1. for the amount unpaid by them2. in case of limited by guarantee- by the

guarantee given by the member

3. in case of unlimited company = by his share

What is the liability of past





167

members ?

If the court is satisfied that present members

cant contribute, then it may ask past members

to contribute

they are not responsible for debts contracted by

company after they ceased to be members

What is a A compromise?





168

What is a A compromise?

it means settlement or adjustment of claims in

dispute by mutual concessions.

What is an Arrangement ?





169

What is an Arrangement ?

It is a reorganization of share capital of company by consolidation of shares of

different classes or division of shares into

shares of different classes or by both these

methods.

s t necessary or t e court toobtain views of registrar while





170

sanctioning a scheme of arrangement / compromise?

Yes the court is bound to seek a report of theRegistrar of Companies in order to ensure that

the affairs of the company have not been

conducted in a prejudicial manner.

When can the court intervene in case of

compromise / arrangement with creditors





171

compromise / arrangement with creditors

/ members by a company ?

It can intervene on the application of the

company or of any creditor or member of the

company, or in the case of a company which is

being wound up, of the liquidator

On receipt of application, it can order a

meeting of the creditors or class of creditors, or

of the members or class of members

How are preferential payments made in case of

i d 530 ?





172

wind up as per sec. 530 ?

1. firt pay taxes and govt dues

2. wages salaries etc. (not more than 4 months

during last 12 months)

3. acrued holidays

4. ESI liability

5. worker compensation act liability

6.PF/pension / gratuity liability

7. expenses of investigation (sec. 235,237)

What is the role of liquidator?





173

What is the role of liquidator?

The liquidator (the person who settles wind up process) may pay as per norms ± he has to first

pay to workmen and then to secured creditors

(sec. 529A) law of insolvency apply in such

matters.

How to handle unclaimed





174

dividend?

Unclaimed dividends have to be deposited

with RBI (after 6 months) if it is not claimed

for 15 years, it will become govt. Revenue.

Share transfer to be void ?





175

Share transfer to be void ?

Any share transfer after commencement of

winding up is void (except when it is approved

by court or liquidator) (SEC. 536)

Are Voluntary transfer of asset





176

void ?

Yes, all voluntary transfer of assets during last1 year before winding up are void.

However, transfer of assets in ordinary

business, for consideration and in good faith

are allowed

What is onerous property?





177

W at s o e ous p ope ty?

The liquidator may abandon oneraous property

of the company (sec. 535). it is the property

which will give more loss than profitexamples of onerous property :

1. unprofitable contracts

2. land ± with covenants3. any other property ± which is not saleable /

with covenants

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