COMPANY ACT 2013 - Amit Popli Law ClassesCOMPANY ACT 2013 By CA Amit Popli ... According to section 19 of the Companies Act, 2013, no company shall, either by itself or through its

COMPANY ACT 2013

By CA Amit Popli-Faculty ICAI & ETEN Satellite Classes for IPCC & Final

AMENDMENT FOR NOV-2014-CA-IPCC SECTION TO BE USED IN THIS CHAPTER

SECTION

As per 1956

SECTIONS

As per 2013

PARA No of Book Any new change/Modification from Company

Act 1956

Section 4 Section 2(87) &

19 22.2

Yes, use of total share capital rather than Equity

share capital

Section 23 New Para NA



Section 41 Section 2(55) 25.1 No

Section 60A Section 31 27.6

Yes, Now such companies as authorized by SEBI

can issue such prospectus

Section 60B Section 32

27.7

The new Act, 2013 only says about the filing of

red herring prospectus and final prospectus and

removes the filing of information memorandum as

given under the 1956 Act.

Section 62 Section 35 27.12 No



Section 68 Section 36

27.16

The 2013 Act prescribes punishment for falsely

inducing another person to enter into an agreement

to obtain credit facilities from any bank or

financial institution has also been provided.



Section 69 Section 39 26.4

Remaining rules as provided under such para (as

per Company Act 1956) are same

Section 73 Section 40 26.4

Remaining rules as provided under such para are

same

Section 77B Section 70

30.11

Under the Companies Act, 2013 now the company

can buy-back even if it has defaulted in the

repayment of deposit or interest thereon,

redemption of debentures or preference shares or

payment of dividend or repayment of any term

loan or interest thereon to any financial institution

or bank, provided the default has been remedied

and a period of 3 years have elapsed after such

default ceased to subsist. Whereas under the 1956

Act, prohibition on buy- back is ceased

2

immediately when default ceased to subsist.

• The 2013 Act added a default under section 123

related to declaration of dividend in addition to the

default related to the filing of the annual return,

failure to distribute dividend and Financial

statement provided under the Companies Act,

1956 where a company will not be able to

directly/indirectly purchase its own shares or other

specified securities.




Section 111

& 111A

Section 58

31.3

The new law under the 2013 Act,

Reduces the period within which private

company has to intimate refusal to register

the transfer from 2 months to 30 days.

In case of a public company, the time-limit for

registration of transfer has been reduced to

30 days.

The power of making the appeal has now

been limited for the transferee only.

The time period of making an appeal to the

tribunal has been reduced from 2 months to

30 days.

Where no notice is served there the appeal

should be filed within 60 days.

In case of a public company the time period of

making an appeal to the tribunal has been

simplified to 60 days. Where no notice

received, the appeal should be filed within 90

days.

Section 111

& 111A

Section 59 31.3

No





Section 173 Section 102

28.7

The 2013, Act states that in case of special

business to be transacted at the AGM then

explanatory statement shall specify the extent of

share holding interest of promoters, directors,

managers, and KMP, if their shareholding is 2% or

more of the paid up share capital. Whereas extent

of such shareholding interest mentioned in the

1956 Act is not less than twenty per cent of the

paid-up share capital of that other company.

Section 174 Section 103 28.8 Change in Quorum for public limited company


Section 181

& 183

Section 106 28.12 No



Section 187A Section 112 28.11 No


Section 188 Section 111 28.16 Eligibility criteria has changed


Sec 408 New Para Constitution of NCLT

Sec 410 New Para Constitution of Appellate Tribunal

4

Chapter-1-Basic Concepts 1.1 PRIVATE COMPANIES [Section 2 (68)]

Meaning A private company is one

which has a minimum paid up capital of rupees one lakh or such higher paid

up capital as may be prescribed and

which by its Articles of Association, puts the following restrictions

Restriction-AOA 1 Restricts the right to transfer its shares, if any.

2 Limits the maximum number of its members to 200 (excluding the present

or past employees of the company).

3 Prohibits any invitation to the public to subscribe for any securities

PRACTICAL QUESTION

Quest Fortune Traders Ltd. Was registered as a private limited company. There are 224 members in

the company as noted below:

(i) Directors and their relatives 54

(ii) Employees 100

(iii) Ex-employees (shares were allotted when they were employees) 50

(iv) 5 couples holding shares jointly in the names of husband and wife (5 x 2) 10

(v) Others 15

The Board of Directors of the company proposes to convert it into a Public company. Only

because of the fact that its member has exceeds minimum prescribed criteria. Advise the Board

of directors?

1.2 PUBLIC COMPANIES [Section 2 (71)]

Meaning A public company is one

Which is not a private company

Has a minimum paid up capital of rupees five lakh or such higher paid up

capital as may be prescribed

Provided that, a company which is a subsidiary of a company, not being a private

company, shall be deemed to be public company for the purposes of this Act even

where such subsidiary company continues to be a private company in its articles.

PRACTICAL QUESTION

Quest A Pvt Ltd is a company subsidiary to XYZ Ltd. Discuss the position in following cases:-

1. How much Paid up capital A Pvt Ltd shall have

2. Whether members of A Pvt Ltd can transfer their shares

3. A Pvt Ltd want to issue prospectus, will it be possible’

4. A Pvt Ltd provided a loan of Rs 1.0 :Lacs to Ajay for acquiring its shares

1.3 HOLDING AND SUBSIDIARY COMPANIES [Section 2(87)]

Meaning of

Holding &

Subsidiary

A holding company is one which has the control over the other company

Holding Company which exercise control.

Subsidiary Company A company on which said control is exercised.

As per the law there exist an holding and subsidiary relations between 2 companies

in following circumstances:-

As per the law there exist an holding and subsidiary relations between 2 companies in following

circumstances:-

1. Control over the

composition of

board of directors :

Where one company controls the composition of the Board of Directors of another

company. In such case former becomes the holding and the latter become a

subsidiary company

When a company shall be considered to have control over the composition of

the Board of Directors of another company:-

If said company has the powers to appoint or remove all or majority of the

directors of the other company.

2. Holding of

majority of shares

exercises or controls more than one-half of the total share capital either at its own or

together with one or more of its subsidiary companies:

PRACTICAL QUESTION

Quest-1 The paid-up Share Capital of AVS Private Limited is `1 crore, consisting of 8 lacs Equity

Shares of `10 each, fully paid-up and 2 lacs Cumulative Preference Shares of `10 each, fully

paid-up. XYZ Private Limited and BCL Private Limited are holding 3 lacs Equity Shares and

1,50,000 Equity Shares respectively in AVS Private Limited. XYZ Private Limited and BCL

Private Limited are the subsidiaries of TSR Private Limited.

With reference to the provisions of the Companies Act, 2013, examines whether AVS Private

Limited is a subsidiary of TSR Private Limited? Would your answer be different if TSR

Private Limited has 8 out of total 10 directors on the Board of Directors of AVS Private

Limited?

Quest-2 A Ltd hold shares in B Ltd in fiduciary capacity i.e. as trustees for beneficiary. C Ltd. Discuss

the relationship between

A Ltd and B Ltd

A Ltd and C Ltd

Quest-3 Discuss about the position of Holding and Subsidiary in following cases

H Ltd S Ltd

D1 D2 D3 D4 D5

H Ltd has a right to appoint

3 directors of S Ltd

H Ltd

H1 H2 H3

S Ltd

D1 D2 D3 D4 D5

H Ltd has a right to appoint

2 Directors of S Ltd,

whereas S Lts has a right to

appoint 1 director of H Ltd

H Ltd S Ltd

Total Paid Up Shares Capital

Shares=10,00,000

H Ltd holds Entire Equity

6

Share Capital of Rs 3,50,000

and rest of capital is held by Z

Ltd

1.4 HOLDING AND SUBSIDIARY COMPANIES TRANSACTION [Section 19]

Subsidiary

company not to

hold shares in its

holding company-

According to section 19 of the Companies Act, 2013, no company shall, either by

itself or through its nominees-

(i) hold any shares in its holding company, and

(ii) no holding company shall allot or transfer its shares to any of its

subsidiary companies, and any such allotment or transfer of shares of a

company made to its subsidiary company shall be void.

Exceptions (a) where the subsidiary company holds such shares as the legal representative of a

deceased member of the holding company; or

(b) where the subsidiary company holds such shares as a trustee; or

(c) where the subsidiary company is a shareholder even before it became a subsidiary

company of the holding company.

Special Note The subsidiary company referred to in the above exceptions shall have a right to

vote at a meeting of the holding company only in respect of the shares held by it as

a legal representative or as a trustee, as referred to in clause (a) or clause (b) of the

said exceptions.

1.5 NATIONAL COMPANY LAW TRIBUNAL

Constitution [Section 408]

Power to constitute According to section 408 of the Companies Act, 2013, the Central

Government shall, by notification, constitute, a Tribunal to be known as the

National Company Law Tribunal

Members It shall consist of a President and such number of members, as the Central

Government may deem necessary.

Qualification of

President and

Members of

Tribunal

According to section 409 of the Companies Act, 2013, the President shall be

a person who is or has been a Judge of a High Court for five years.

A person shall not be qualified for appointment as a Judicial Member unless

he is or has been—

a judge of a High Court; or

a District Judge for at least five years; or

an advocate of a court for at least ten years.

1.6 APPELLATE TRIBUNAL

Constitution [Section 410]

Power to constitute As per section 410 of the Companies Act, 2013, the Central Government

shall constitute, an Appellate Tribunal to be known as the National

Company Law Appellate Tribunal

Members It shall consist of a chairperson and number of Judicial and Technical

Members, not exceeding eleven, to be appointed for hearing appeals against

the orders of the Tribunal.

Qualifications of

Chairperson and

members of

Appellate Tribunal

Section 411 of the Companies Act, 2013 says that the chairperson shall be a

person who is or has been a Judge of the Supreme Court or the Chief Justice

of a High Court.

A Judicial Member shall be a person who is or has been a Judge of a High

Court or is a Judicial Member of the Tribunal for five years.

A Technical Member shall be a person having special knowledge and

experience, of not less than twenty-five years in various disciplines related

to management, conduct of affairs, revival, rehabilitation and winding up of

companies.

1.7 PUBLIC OFFER AND PRIVATE PLACEMENT [Section 23]

1. Modes of issue by

Public Company

(a) to public through prospectus , or

(b) through private placement; or

(c) through a rights issue or a bonus issue, and

(d) in case of a listed company or a company which intends to get its securities

listed, with the provisions of the Securities and Exchange Board of India Act,

1992 and the rules and regulations made there under.

2. Modes of issue by

Private Company

By way of Right issue or Bonus issue

Through Private Placement

1.8 POWERS OF SEBI [Section 24]

Power to regulate

issue of securities

Any issue and transfer of securities etc of the listed companies / companies which

intend to get their securities listed, shall be administered by SEBI and the Central

Government, as required.

Power of Securities

and Exchange

Board

Any issue and transfer of securities etc of the listed companies / companies which

intend to get their securities listed, shall be administered by SEBI, in other words

SEBI may exercise its powers in relation to:-

(i) issue and transfer of securities; and

(ii) non-payment of dividend, by listed companies or those companies

which intend to get their securities listed on any recognised stock

exchange in India, be administered by the Securities and Exchange

Board by making regulations in this behalf

Power of CG In any other case, be administered by the Central Government.

8

1.9 PROSPECTUS [Section 2 (70)]

Meaning Means any document described or issued as a prospectus and includes a red herring

prospectus referred to in section 32 or shelf prospectus referred to in section 31 or

any notice, circular, advertisement or other document inviting offers from the

public for the subscription or purchase of any securities of a body corporate.

1.10 ADVERTISEMENT OF PROSPECTUS [Section 30]

Content of

Advertisement

a. the contents of its memorandum as regards the objects, the liability of members

and the amount of share capital of the company, and b. the names of the signatories to the memorandum and the number of shares

subscribed for by them, and

c. its capital structure.

1.11 ABRIDEGED PROSPECTUS [SECTION 2(1)]

1. Meaning A memorandum containing such salient features of a prospectus as may be specified

by the Securities and Exchange Board by making regulations in this behalf.

2. It shall

accompany

Application Form

(Sec 33)

No application form for shares in or debentures of a company can be issued unless it

is accompanied by an abridged prospectus containing all the prescribed features

Exception 1 Where the form of application is issued to person who is bona fide invited to

enter into an underwriting agreement.

2 Where form of application is issued in relation to shares or debentures which

were not offered to the public.

3 Where the application is issued to existing members or debenture holders of

the company whether with or without the right of renunciation.

4 Where the application is issued in relation to shares or debentures which are

(i) Uniform in all respects with shares or debentures previously issued, and

(ii) Dealt in or quoted at a recognized stock exchange.

1.12 SHELF PROSPECTUS [Section 31]

1. Why Shelf

Prospectus

A public company is required to issue a prospectus for raising finance from

the public.

Every time a fresh issue of securities is made, issuing a fresh prospectus is

a costly and time consuming process.

In order to minimize such burden, the concept of 'shelf prospectus' is

introduced which will be valid for a period of one year.

2. Document

required along with

Shelf Prospectus

For any subsequent offering within the validity period only an 'information

memorandum' for updating the information under the specified heads is required to

be filed.

3. Meaning of Shelf

Prospectus

Any class or classes of companies as prescribed by the Securities and Exchange

Board of India may file a shelf prospectus with the registrar of companies at the

stage of the first offer of securities for a period of one year.

4. Benefit of Filing

Shelf Prospectus

A company filing a shelf prospectus with the Registrar shall not be

required to issue prospectus afresh at every stage of offer of securities by it

within a period of validity of such shelf prospectus.

Thus at the time of making any subsequent offer, company shall-

File an updated Information memorandum

Issue to the public, updated information memorandum along with shelf

prospectus

5. Information

Memorandum shall

contain material

facts which pertains

to

Creation of New Charge; and

Changes in Financial position of company which has occurred between the

first offer of security, previous offer of security and the succeeding offer of

security.

1.13 RED HERRING PROSPECTUS [SECTION 32]

1. Meaning of Red-

herring Prospectus

"Red-herring prospectus" means a prospectus which does not have complete

particulars on the price of the securities offered and the quantum of securities

offered.

2. Provisions

regarding Red

Herring

Prospectus

1 Any variation between the red-herring Prospectus and prospectus shall be

highlighted as variations by the issuing company.

2 The applicant can exercise his right to withdraw from the application on

any intimation of variation within seven days from the date of such

intimation

3 According to section 32 of the Companies Act, 2013, red herring

prospectus may be issued by a company prior to the issue of a prospectus

and shall be filed with the registrar at least 3 days prior to the opening of

the subscription list and the offer.

3. When the Final

Prospectus shall be

filled

Upon the closing of the offer of securities, a final prospectus shall be filed

In a case of a listed public company with the SEBI and ROC; and

In any other case with the ROC only.

4. Final Prospectus

shall contain

Upon closing of the offer of securities, the details of information which are not

included in the red herring prospectus is to be filed with the registrar and the SEBI.

1.14 DEEMED PROSPECTUS OR PROSPECTUS BY IMPLICATION OR OFFER FOR SALE

[SECTION 25]

1. Meaning Where the company allots or agrees to allot any shares or debentures to

any issuing house or others

With a view that such shares or Debentures would be offered to public for

sale

Any such document by which this offer for sale to public is made

shall be deemed to be a prospectus issued by a company and

All provisions applicable to prospectus shall be applicable to it with

specified modification.

2. Presumption It will be presumed that an allotment or an agreement to allot shares or debentures

10

with Deemed

Prospectus

to the issuing houses was made with a view to offer them to public in case:-

(a) Shares were offered to the public for sale within 6 months after they were

allotted or agreed to be allotted to issuing house, or

(b) Whole consideration in respect of shares/debentures had not been received by

the company.

3. Matters to be

Stated in Deemed

Prospectus

Contents of prospectus

Liability in respect of mis -statements, in and omissions from prospectus,

or otherwise relating to prospectus,

shall apply with the modifications

1.15 CRIMINAL LIABILITY FOR MIS STATEMENT [Section 34]

Liability According to Sections 34 of the Companies Act, 2013, where any prospectus is issued or circulated or distributed containing any statement which is untrue or misleading in form in which it is included, then every person who authorizes the issue of such prospectus shall be liable for fraud.

Defense available He can escape his liability under this section if he can prove that:-

(a) Statement was immaterial; or

(b) He had reasonable ground to believe the statement to be true.

1.16 CIVIL LIABILITY FOR MIS STATEMENT [Section 35]

Liability Where any person subscribes for securities on the basis of misleading statements or inclusion or omission of any matter in the prospectus resulting in any loss or damages, then the company and every person who has authorized the issue of such prospectus or a director, promoter and the other, whosoever is liable- shall have to compensate every person who has sustained such loss or damage.

Defense available No person shall be liable, if he proves that—

(a) having consented to become a director of the company, he withdrew his

consent before the issue of the prospectus, and that it was issued without

his authority or consent; or

b) the prospectus was issued without his knowledge or consent, and that on

becoming aware of its issue, he forthwith gave a reasonable public notice

that it was issued without his knowledge or consent.

1.17 PENALTY FOR FRAUDULENTLY INDUCING PERSONS TO INVEST MONEY

[Section 36]

When this

Provision shall

apply

Section is attracted where any person who, induces or attempts to induce another

person to enter into, or to offer to enter some agreement by making any false,

deceptive or misleading statement, promise or forecast or by any dishonest

concealment of material:

Attempt to induce

must be to enters

1 Any agreement for, the acquisition, disposal, subscribing for, or underwriting

Shares or debentures

into any of

following

agreement

2 Any agreement for the purpose of securing any profit to any of the parties from

the yield of shares or debentures, or from fluctuations in the value of shares or

debentures

3 Any agreement for obtaining credit facilities from any bank or financial institution.

1.18 ACTIONS BY AFFECTED PERSON [Section 37]

When this

Provision shall

apply

The section 37 of the Companies Act, 2013, provides that a suit may be filed or any

other action may be taken by any person, group of persons or any association of

persons who have been affected by any misleading statement or the inclusion/

omission of any matter in the prospectus.

1.19 PENALTY FOR ACQUISITION OF SECURITIES [Section 38]

Punishment for

Personation for

acquisition, etc., of

securities

According to this section 38 of the Companies Act, 2013, those persons who apply

in a fictitious name or make multiple applications or otherwise induce a company to

allot or register any transfer of securities in fictitious name shall be liable for fraud.

And the amount so received through disgorgement of gain, seizure and disposal of

such securities, shall be credited to the IEPF(Investor Education and Protection

Fund).

1.20 LEGAL RULES

1. Minimum

subscriptions and

application money

[Section 39]

Minimum

Subscription

No allotment of any securities of a company shall be offered to the

public for subscription unless the minimum amount (stated in the

prospectus) has been subscribed.

Application

money

It the amount which is payable on each share along with the

application for purchase or shares.

This amount must not be less than 5% of the nominal value of

shares.

2. Consequences in

case of failure to

received Minimum

Subscription

Within a period of thirty days from the date of issue of the prospectus, or such other

period as may be specified by the Securities and Exchange Board, the amount

received shall be returned within such time and manner as may be prescribed.

3. Listing of public

issue with

recognized stock

exchange

[Section 40]

Every company making public offer, before making such offer, shall, make an

application to one or more recognized stock exchange to obtain permission for

the securities to be dealt with.

Any allotment made without permission shall be void.

All the moneys received on application from public for subscription to the

securities shall be kept in a separate bank account. In case of default, the

company and every officer who is in default shall be punishable with fine/with

imprisonment/both.

1.21 PROHIBITION ON BUY BACK OF SHARES OR OTHER SPECIFIED SECURITIES-

Whether directly or Indirectly [Section 70]

12

1. No Buy Back

from Subsidiary

A company cannot purchase its own shares through any subsidiary company

including its own subsidiary company.

2. No buy Back

through a

Investment

company

A company cannot purchase its own shares through any investment company.

3. No Default of Repayment of deposit or interest thereon,

Redemption of debentures or preference shares or

Payment of dividend or

Repayment of any term loan or interest thereon to any financial institution or

bank.

Special Note: - The prohibition is lifted if the default has been remedied and a

period of 3 years has elapsed after such default ceased to subsist.

4. No Non-

Compliance of

filing of Annual Return (section 92),

declaration of dividend (section 123) or

punishment for failure to distribute dividend (section 127) and

Preparation of financial statement (section 129)

1.22 MEANING [Section 2(55)]

Meaning Person whose name has been entered in the register of members are called as

members of the company. Membership may be taken by:

Subscribing in the memorandum of the company or

by agreeing in writing to become member of the company or

by entering his name in the records of depository as beneficial owner of the

shares in a company. Every company has to maintain a register of members containing detailed

particulars of each member, to be kept at the registered office of the company or any

other place.

1.23 CLOSURE OF REGISTER OF MEMBERS or DEBENTURE HOLDERS or OTHER

SECIRITY HOLDERS [Section 91]

1.Applicable This section is applicable in case of closure of register of member , register of

debenture holders as well as other security holders

2. Maximum

Closure allowed

upto

1. At one time-30 Days

2. For Entire Year- 45 Days

3. Publication of

Notice

Company shall publish notice intimating such closure atleast 7 days before such

closure in a vernacular newspaper

4. Penalty for non-

compliance

If the register of members or of debenture-holders or of other security holders is

closed without giving the notice or after giving shorter notice than the company and

every officer of the company who is in default shall be liable to a penalty of 5,000/-

for every day subject to a maximum of one lakh rupees during which the register is

kept closed.

1.24 PUBLICATION OF AUTHORISED, SUBSCRIBED AND PAID UP SHARE CAPITAL

[Section 60]

Provision According to the section 60 of the Companies Act, 2013, where any notice,

advertisement or other official publication, or any business letter, etc. of a company

contains a statement of the amount of the authorized capital of the company, there

such mentioned documents shall also contain the amount of the capital which has

been subscribed and the amount paid-up.

Penalty for non-

compliance

If any default is made, there the company shall be liable to pay a penalty of ten

thousand rupees and every officer of the company who is in default shall be liable to

pay a penalty of five thousand rupees, for each default.

1.25 CALLS ON SHARES

1. Meaning A ‘call’ may be defined as a demand made by a company on its shareholders to pay

the whole or a part of the balance, remaining unpaid on each share at any time

during the continuance of a company

2. Resolution of the

Board

The call must be made by a resolution Passed of board of directors. The resolution

must specify the amount of the call, and the time and place of payment of calls.

3. Uniform basis

[Section 49]

Section 49 of the Companies Act, 2013 provides that where any calls for further

share capital are made on the shares of a class, such calls shall be made on a

uniform basis on all shares falling under that class.

The shares of the same nominal value on which different amounts have been paid-

up, shall not be deemed to fall under the same class.

4. Bona fide The call must be made bona fide in the best interest of the company. Power to call

should not misused by directors to make calls for their personal benefits

5. Compliance of

AOA

The call must be made strictly in accordance with the provisions of the articles of

the company

6. Notice to be

Served Properly

Proper notice shall be served on members stating the date, time and last date for

payment of call. Any irregularity in issuance of notice will invalidate the notice, in

spite of the fact that such irregularity was not material.

1.26 PAYMENT OF CALLS IN ADVANCE [Section 50]

1. Provision As per section 50 of the Companies Act, 2013 a company may accept from any

member the whole or a part of the amount remaining unpaid on any shares, even if

no part of that amount has been called up.

2. Voting Power A member of the company limited by shares shall not be entitled to any voting rights

in respect of the amount paid by him until that amount has been called up.

1.27 PAYMENT OF PROPORTIONATE DIVIDEND [Section 51]

Provision As per section 51 of the Companies Act, 2013, a company may, if so authorised by

14

its articles, pay dividends in proportion to the amount paid-up on each share.

1.28 CONVERSION OF UNLIMITED COMPANY INTO LIMITED COMPANY [Section 65]

1. Procedure for

conversion

Section 65 of the Companies Act 2013, lays down the procedure for the conversion

of the unlimited company into a limited company by increasing the nominal amount

of each share or/ and by providing that the company cannot call unpaid portion of

share capital except in the event of winding up.

2. Steps for

Conversion

(a) increase the nominal amount of its share capital by increasing the nominal

amount of each of its shares, but that no part of the increased capital shall be

capable of being called up except in the event and for the purposes of the

company being wound up;

(b) by providing that a specified portion of its uncalled share capital shall not be

capable of being called up except in the event and for the company being

wound up.

3. Default in

Compliance

If any default is made in complying with the order of the Tribunal under this section,

the company shall be punishable with fine which shall not be less than one lakh

rupees but which may extend to five lakh rupees and

Every officer of the company who is in default shall be punishable with

imprisonment for a term which may extend to one year or with fine which shall not

be less than one lakh rupees but which may extend to three lakh rupees, or with

both.

1.29 REFUSAL TO REGISTER THE TRANSFER OF SHARES [Sec 58]

IN CASE OF

PRIVATE

COMPANIES

If a private company limited by shares refuses, to register the transfer of, or the

transmission of the right to any securities or interest of a member in the company,

the company shall send notice of the refusal to the transferor and the transferee or

to the person giving intimation of such transmission, within a period of thirty days

from the date on which the instrument of transfer, or the intimation of such

transmission, was delivered to the company.

Right of Appeal to

transferee

Transferee may prefer an appeal to Tribunal. The appeal should be in writing and

should be filed within the prescribed time.

Meaning of

Prescribe Time

Where the

company gives a

notice of refusal

Appeal should be filed within 30 days of the receipt of

such notice, and

Where the

company does not

give any notice of

refusal

Appeal should be filed within 60 days from the date on

which the instrument of transfer was delivered to the com

IN CASE OF

PUBLIC

COMPANIES

If a public company without sufficient cause refuses to register the transfer of

securities within a period of thirty days from the date on which the instrument of

transfer or the intimation of transmission, is delivered to the company, the

transferee may submit an appeal to tribunal, within a period of

sixty days of such refusal or

where no intimation has been received from the company, within ninety days

of the delivery of the instrument of transfer or intimation of transmission

Power of Tribunal The Tribunal, while dealing with an appeal may, after hearing the parties, either

dismiss the appeal, or by order— o direct that the transfer or transmission shall be registered by the company and

the company shall comply with such order within a period of ten days of the

receipt of the order; or

o direct rectification of the register and also direct the company to pay

damages, if any, sustained by any party aggrieved.

Incase of

Contravention

If a person contravenes the order of the Tribunal he shall be punishable with

imprisonment for a term not less than one year but may extend to three years and

with fine not be less than one lakh rupees but may extend to five lakh rupees.

1.30 RECTIFICATION OF REGISTER OF MEMBERS [Sec 59]

Remedy to the

aggrieved for not

carrying the changes

in the register of

members:

Appeal to Tribunal may be submitted by aggrieved party if the name of any

person is, without sufficient cause,

entered in the register of members of a company, or

after having been entered in the register, is, omitted there from, or

if a default is made, or unnecessary delay takes place in entering in the

register

Order of the

Tribunal

The Tribunal may, after hearing the parties to the appeal by order, either

dismiss the appeal or

direct that the transfer or transmission shall be registered by the company

within a period of ten days of the receipt of the order, or

direct rectification of the records of the depository or the register and direct

the company to pay damages, if any, sustained by the party aggrieved.

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Other Points 1. The provisions of this section shall not restrict the right of a holder of

securities, to transfer such securities and any person acquiring such

securities shall be entitled to voting rights unless the voting rights have

been suspended by an order of the Tribunal.

2. Where the transfer of securities is in contravention of any of the

provisions of the Securities Contracts (Regulation) Act, 1956, the

Securities and Exchange Board of India Act, 1992 or this Act or any other

law for the time being in force, there the Tribunal may, on an application

made direct any company or a depository to set right the contravention

and rectify its register or records concerned.

1.31 REGISTRATION OF CHARGE [Section 65]

1. Meaning Every company is under an obligation to keep at its registered office a register of

charges and enter therein all charges specifically affecting property of the company

and all floating charges on the undertaking or any property of the company.

2. Punishment for contravention

As per section 86 of the Companies Act, 2013, if a company makes any default with

respect to the registration of charges covered under Chapter VI, there penalty shall

be levied, ranging from 1 lakh to 10 lakhs.

Every defaulting officer is punishable with imprisonment for a term not exceeding 6

months or fine which shall not be less than 25,000 rupees, but not exceeding 1 lakh

rupees or both.

Chapter-2-General Meeting

2.1 EXTRA ORDINARY GENERAL MEETING [Section 100]

1. Who can call? Extraordinary General Meeting may be called by

Board,

Requisitionists or

CLB.

2. EGM by Board

of Directors

1. Suo motu

i.e. on their

own

The Board may, whenever it thinks fit, call an extraordinary

general meeting.

2. On

Requisition of

the Members

Board on the requisition of the required number of the

members can call an extraordinary general meeting. Required

number of members will be as follows:

3. Meaning of

Required Numbers

Case A

For company

having share

capital

Members holding at least 10% of the paid up share capital of the

company,

CaseB

For company

having no

share capital

Members having at least 1/10 of the total voting power

4. Requirement as

to Requisition

1 The requisition must contain all the matters for consideration of which the

meeting is to be called.

2 If any special resolution is intended to be passed at the requisitioned meeting,

the Board shall be deemed not to have duly convened the meeting if they do

not give such notice thereof as is required.

4 Requisition must be signed by all the Requisitionists. In case of joint

shareholders, a requisition signed one or some of them for the purpose of this

section is also sufficient.

5 The requisition must be deposited at the registered office of the company.

5. Action to be

taken by Board

upon receipt of

Requisition

The Board of Directors must proceed within 21 days of the deposit of the

requisition to convene a meeting which must be held within 45 days of such

deposit of the requisition with the company.

6. EGM by

Requisitionists

themselves

If the board fails to call an EGM, than such a meeting shall be called by the

Requisitionists themselves. Every effort should be made in conducting the meeting

in similar manner as it is called by BOD

7. Time limit for

holding EGM as

per

Where the meeting is called by the Requisitionists, such meeting must be held

before the expiry of 3 months from the date of deposit of requisition.

8. Consequences of

Absence Quorum

If the Quorum is not present within half an hour from the time appointed for holding

of the meeting the meeting, shall stand dissolved if it is called on the requisition of

the members. But if the articles provide otherwise then articles will apply.

9. Right of

Requisitionists

If default is made in calling the meeting by the board and Requisitionists themselves

proceed to call an EGM. They shall be entitled to claim all reasonable expenses

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incurred by them for convening a meeting from the company.

10. Consequences

for Director who

are at default

Any such expenses shall be bear out of remuneration of directors who are at fault.

PRACTICAL QUESTION

May-06 To remove the Managing Director, 40% members of Global Ltd. Submitted requisition for holding extra-ordinary general meeting. The company failed to call the said meeting and hence the requisitionists held the meeting. Since the Managing Director did not allow the holding of meeting at the registered office of the Company, the said meeting was held at some other place and a resolution for removal of the Managing Director was passed. Examine the validity of the said meeting and resolution passed therein in the light of the companies Act, 2013.

Hint It was held by the SC in case of LIC v Escorts that, Every shareholder of a company has a right to requisition for an extraordinary general meeting. He is not bound to disclose the reasons for the resolution to be proposed at the meeting.

Section 100 of the companies Act contains provisions regarding holding of extraordinary general meetings. It provides that if directors fail to call a properly requisitioned meeting, the requisitionists or such of the requisitionists as represent not less than 1/10th of the total voting rights may call a meeting to be held on a date fixed within 3 months of the date of the requisition.

Where a meeting is called by the requisitionists and the registered office is not made available to them, still meeting will remain a valid meeting and Further, resolutions properly passed at such a meeting, are binding on the company.

Thus, in the given case, since all the above mentioned provisions are duly complied with. Hence the meeting with the resolution removing the managing director shall be valid.

2.2 STATEMENT TO BE ANNEXED TO THE NOTICE [Section 102]

When According to section 102 of the Companies Act, 2013 , a statement setting out all the material facts concerning each item of special business to be transacted at a general meeting, shall be annexed to the notice calling such meeting.

It includes 1. All material facts concerning each item of business.

2. The nature of interest of

every director and the manager, if any;

every other key managerial personnel; and

relatives of the persons mentioned in point (i) and (ii).

3. where any item of special business to be transacted at a meeting of the

company, relates to or affects any other company, the extent of shareholding

interest in that other company of every promoter, director, manager, if any, and

of every other key managerial personnel of the first mentioned company shall, if

the extent of such shareholding is not less than two per cent of the paid-up

share capital of that company, also be set out in the statement.

2.3 PROPER CHAIRMANSHIP [Section 104]

1. Appointment of

Chairman

Option-1 Unless the article of a company provides otherwise, the members

personally present at the meeting shall elect one of them to be the

chairman thereof on a show of hands.

Option-2 If a poll is demanded on the election of the chairman (whether

before/after the election of chairman on a show of hand) then it

shall be taken forthwith and the person elected as chairman on

show of hands shall exercise all the powers of chairman.

If some other person is elected chairman as a result of poll he

shall be the chairman for the rest of the meeting.

2. Voting Rights of

a Chairman

Chairman is entitled to exercise one vote as a member of a company and

second/casting vote as a Chairman in case of equality of votes (if articles provides)

on a show of hands or a poll. As he is not a member Chairman is entitled to exercise

only second/casting vote as a chairman in case of equality of votes on a show of a

hand or a poll.

2.4 QUORUM for GM (Section 103)

1. Meaning of

Quorum

It means minimum number of members that must be present in order to constitute a

valid meeting.

2. Quorum

Required for

General Meeting

(a) in case of a public company,—

Quorum for the meeting

Number of members as on date of a meeting

5 members personally present not more than one thousand

15 members personally present

more than one thousand but up to five thousand

30 members personally present exceeds five thousand

(b) in the case of a private company, two members personally present, shall be the quorum for a meeting of the company

3. Who will be

considered as

Member Personally

Present

(i) A member of the company

(ii) Authorized representative of a body corporate.

(iii) Representative of President/Governor of the state.

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4. Who will not be

considered as

Member Personally

Present

(i) Proxy appointed by the member.

(ii) Proxy appointed by authorized representative of a body corporate/

Representative of President/Governor.

5. When Quorum

Required?

Quorum must be present at the time of commencement of GM.

7. Effect of Absence

of Quorum

If the Quorum is not present within half an hour from the time appointed for

holding of the meeting, following shall be applied:

Priority Step need to be taken

1 Provision contained under AOA shall apply

2 Meeting shall be adjourned at a place and time as board may determine.

3 Meeting shall be Adjourned to the same day in the next week at the

same time and same place

Note If at adjourned meeting quorum is not present within half an hour, members present

shall form quorum. A single member shall not constitute quorum at an adjourned

meeting.

Notice of an adjourned meeting

Where the meeting stands adjourned to the same day in the next week at the same time and place, or to such other date and such other time and place as the Board may determine, there the company shall give at least 3 days notice to the members either individually or by publishing an advertisement in the newspapers.

2.5 VOTING [Sec 106]

1- Restriction on voting rights

1 In case of non payment of Calls due on shares

2 In case of non payment of other dues against the members

3 Where right of lien is exercised by the company in respect of shares

2.Right to use the

Voting Right

Differently

On a poll taken at a meeting of a company, a member entitled to more than one

vote, or his proxy, where allowed, or other person entitled to vote for him, as the

case may be, need not, if he votes, use all his votes or cast in the same way all the

votes he uses.

3. Voting by a show

of hands

Section 107 of the Companies Act, 2013 provides that at general meeting a

resolution put to the vote of the meeting shall, unless a poll is demanded or the

voting is carried out electronically, be decided on a show of hands.

PRACTICAL QUESTIONS

May-09-

Modified The articles of ABC Limited provided that only those shareholders would be entitled to vote whose names have been there on the Register of Members for two months before the date of the meeting. X' a member, of the ABC Limited was holding 200 equity shares of the company. X transferred his shares to Y before one month form the date on which the meeting was due. The name of Y could not be entered in the Register of Members as the application of transfer of shares was pending. Y attended the meeting but he was prohibited by the company from exercising his voting right on the ground that he has not hold his shares for specified period as

provided in the articles before the date of the meeting.

State whether Y can exercise his voting right in the meeting? State also the grounds upon which Y may be excluded from exercising his voting rights in the meeting of the shareholders.

Hint A public limited company can not impose any restriction on voting right of its members on any ground other than those specified under section 106.

Since above ground of restriction is not covered under section 106, thus restriction so imposed shall be invalid

Nov-05 C, a member of LS & Co. Ltd., holding some shares in his own name on which Final call money has not been paid, is denied by the company voting right at a general meeting on the ground that the articles of association do not permit a member to vote if he has not paid the calls on the shares held by him. With reference to the provisions of the Companies Act, 2013, examine the validity of company's denial to C of his voting right.

Hint Since restriction is imposed as per the ground as specified u/s 106, thus company is justified

May-10 J held 100 partly paid up shares of LKM Limited. The company asked him to pay the final call money on the shares. Due to some unavoidable circumstances he was unable to pay the amount of call money to the company. At a general meeting of the shareholders, the chairman disallowed him to caste his vote on the ground that the articles do not permit a shareholder to vote if he has not paid the calls on the shares held by him. J contested the decision of the Chairman. Referring to the provisions of the Companies Act, 2013 decide whether the contention of J is valid

Hint Since restriction is imposed as per the ground as specified u/s 106, thus company is justified

2.6 PROXIES [Section 105]

1. Who Appoint a

Proxy

Every member who is entitled to attend and vote at a meeting of the company shall

be entitled to appoint another person (whether a member or not) as his proxy to

attend and vote instead of himself.

2. Duties of Proxy Proxy is Bound to Vote According to the Directions of the Member Appointing Him

since relationship between a member and his proxy is that of principal and agent.

3. Limitations of a

Proxy

A proxy (if not member) shall not be entitled to speak at the meeting.

A proxy is not counted for the purpose of quorum

shall not be entitled to vote except on a poll.

4. Who can be

appointed as a

Proxy

Any Person (whether member or not)

5. Statement

authorizing

appointment of

Proxy in Notice

Notice calling a meeting shall contain a statement that member can appoint proxy

and proxy need not necessarily be a member of a company.

6. Deposit of Proxy

Form

It should be submitted to the company

48 hours before the meeting

In case Article provides any further shorter period than it should be complied

with

7. Appointment of Should be as per the AOA

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Proxy in Case of

Joint Holdings?

In absence thereof, first named joint holder should sign the proxy.

8. Relationship

Between Member

and Proxy

The relationship between a member and his proxy is that of a principal and agent.

The proxy is bound to vote according to the directions of the member appointing

him.

9. Inspection of

Proxy

Every member entitled to vote at a meeting of the company, or on any resolution to

be moved thereat, shall be entitled during the period beginning twenty-four hours

before the time fixed for the commencement of the meeting and ending with the

conclusion of the meeting, to inspect the proxies lodged, at any time during the

business hours of the company,

provided not less than three days’ notice in writing of the intention so to inspect is

given to the company.

10. Situation where

an invitation are

issued at

company’s

expenses

Every officer of the company who knowingly issues the invitations as aforesaid or

wilfully authorises or permits their issue shall be punishable with fine which may

extend to one lakh rupees. However, an officer shall not be punishable whereby reason only of the issue to a

member at his request in writing of a form of appointment naming the proxy, or of a

list of persons willing to act as proxies, if the form or list is available on request in

writing to every member entitled to vote at the meeting by proxy.

11. Revocation of

Proxy

1 When a member appointing a proxy, personally attend the meeting.

2 When a member appointing a proxy, appoint another proxy at a later date, in

such a case person appointed proxy subsequently shall be treated as proxy

3 Where intimation of death or insanity is received prior to commencement of

meeting (whether original or adjourned)

4 Where intimation of transfer of shares is received by company prior to

commencement of meeting (whether original or adjourned)

12. Rights of a

Proxy

1 A proxy shall be entitled to vote in case of voting by poll even if an article does

not provide so

2 Proxy can vote on show of hand only of such power is expressly provided by

Article.

3 A proxy may demand for poll

PRACTICAL QUESTION

Nov-04 Annual General Meeting of a Public Company was scheduled to be held on 15.12.2003. Mr. A, a

shareholder, issued two Proxies in respect of the shares held by him in favour of Mr. 'X' and Mr.

'Y'. The proxy in favour of 'Y' was lodged on 12.12.2003 and the one in favour of Mr. X was

lodged on 15.12.2003. The company rejected the proxy in favour of Mr. Y as the proxy in

favour of Mr. Y was of dated 12.12.2003 and thus in favour of Mr. X was of dated 15.12.2003.

Is the rejection by the company in order?

Hint As per Section 105 of the Companies Act, 2013 a proxy should be deposited 48 hours before

the time of the meeting. In the given case, the proxies should have, therefore, been deposited

on or before 13.12.2003 (the date of the meeting being 15.12.2003). X deposited the proxy

on 15.12.2003.

Therefore, proxy in favour of Mr. X has become invalid. Thus, rejecting the proxy in favour

of Mr. Y is unsustainable. Proxy in favour of Y is valid since it is deposited in time.

May-08 The Chairman of the meeting of a company received a Proxy 54 hours before the time fixed for

the start of the meeting. He refused to accept the Proxy on the ground that the Articles of the

company provided that a Proxy must be filed 60 hours before the start of the meeting. Decide,

under the provisions of the Companies Act, 2013 whether the Proxy holder can compel the

Chairman to admit the Proxy?

Hint As per Section 105 of the Companies Act, 2013 proxy shall be deposited with the company

within 48 hours before the meeting.

Any provisions contained in the Articles of a company that requires a longer period than 48

hours before a meeting of the company for depositing a proxy shall be void. Thus contention of

Mr X is valid

May-10 K, a member of MNO Limited, appoints L as his proxy to attend the general meeting of the

company. Later he (K) also attends the meeting. Both K (the member) and L (the proxy) voted

on a particular resolution in the meeting. K's vote was declared invalid by the chairman stating

that since he has appointed the proxy and L's vote has been considered as valid. K objects to the

decision of the Chairman. Decide, under the provisions of the Companies Act, 2013 whether K's

objection shall be taxable.

Hint Decision by Chairman is invalid. Since K i.e. a member himself attended a meeting and voted on

resolution, it will amount to revocation of proxy. Thus any vote put by L i.e. proxy shall be

invalid

2.7 APPOINTMENT OF REPRESENTATIVE

1. Representation of

Company [Section

113]

Where a company is a member of another company, it may attend the meeting of

any other company through a representative.

The representative must be appointed by a resolution of the board of directors.

The person so appointed is entitled to exercise the same rights and powers

(including the right to vote by proxy) on behalf of the company as the member

personally present may exercise.

2. Representation of

the President and

Governors [Section

112]

Where a president or Governor is a member of any company, they may appoint a

person to attend meeting in their place as their Representative.

Said Representative shall be treated as a member personally present thus he

avails all power thereof.

2.8 RESOLUTION [ Sec 114]

Ordinary

Resolution

A resolution shall be an ordinary resolution when

The notice of general meeting required under the Act has been duly given,

The votes cast including the casting vote if any of the chairmen (whether on

show of hand or on a poll as the case may be) exceed the votes if any cast

against the resolution.

Meaning of

Special Resolution

A resolution shall be an ordinary resolution when

The notice of general meeting required under the Act has been duly given,

The votes cast including the casting vote if any of the chairmen (whether on

show of hand or on a poll as the case may be) are at least 3 times the number of

votes if any cast against the resolution).

The intention to propose the resolution as a special resolution has been duly

24

specified in the notice calling the general meeting or other intimation given to

the members.

PRACTICAL QUESTION

Nov-05 At a General meeting of a company, a matter was to be passed by a special resolution. Out of

40 members present, 20 voted in favour of the resolution, 5 voted against it and 5 votes were

found invalid. The remaining 10 members abstained from voting. The Chairman of the meeting

declared the resolution as passed.

With reference to the provisions of the Companies Act, 2013, examine the validity of the

Chairman's declaration.

Hint In the given problem, the votes cast in favour (20) being more than 3 times of the votes cast

against (5), if other conditions of Section 114 are satisfied, the decision of the Chairman is in

order.

Nov-07 For a special resolution in a Company's general meeting, 10 voted in favour, 2 against and 4

abstained. The chairman declared the resolution as passed. Is it a valid resolution as per the

provisions of the Companies Act, 2013

Hint The Resolution which is passed is a valid Special Resolution.

2.9 CIRCULATION OF MEMBERS' RESOLUTION [Section 111]

1. Options Available

to Members

Option-1-To move a Resolution in Meeting

Option-2-To Send any other requisition

2. Number of

Members required

to move an

application

Members/Members holding at least 1/10 of the voting power

3. Duty of Company Company shall

(a) Give notice to members entitled to have notice of meeting of any resolution

which is intended to be moved at Meeting.[For Option-1]

(b) Circulate to members entitled to have notice of meeting any statement with

regard to any proposed resolution to be dealt with at general meeting [For

Option-2]

4. No liability to

send Notice unless

(a) a copy of the requisition signed by the member is deposited at the registered

office of the company

At least 6 weeks before the meeting in case of requisition proposes a

resolution.

At least 2 weeks before the meeting in case of any other requisition.

(b) Requisitionists has deposited a sum reasonably sufficient to meet the

company's expenses in giving effect to the requisition

5. No Circulation by

Company

If Central Government is satisfied on basis of application of the company or any

other aggrieved person, that the right is being abused to secure needless publicity

for defamatory matter.

Documents

COMPANY ACT 2013 - Amit Popli Law ClassesCOMPANY ACT 2013 By CA Amit Popli ... According to section 19 of the Companies Act, 2013, no company shall, either by itself or through its