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STUDY MATERIAL
EXECUTIVE PROGRAMME
COMPANYCOMPANYCOMPANYCOMPANY LAWLAWLAWLAW
PAPER 1
ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003
tel 011-4534 1000, 4150 4444 fax +91-11-2462 6727
email [email protected] website www.icsi.edu
TIMING OF HEADQUARTERS
Monday to Friday
Public Dealing Timings
Phones
Fax
011-24626727
Website
www.icsi.edu
E-mail
[email protected]
Laser Typesetting by Delhi Computer Services, Dwarka, New Delhi Printed at IPP/JULY 2017
EXECUTIVE PROGRAMME
COMPANY LAW
In view of increasing emphasis on adherence to norms of good corporate
governance, Company Law assumes an added importance in the corporate legislative
milieu, as it deals with structure, management, administration and conduct of affairs of
Companies. A thorough study of various provisions of the Companies Act is a must for
becoming a competent and efficient Company Secretary. In the light of this, the study
material has been published to impart thorough knowledge to the students preparing
for the Company Law paper of the CS Executive Programme.
The study material is based on those sections of the Companies Act, 2013 and the
rules made there under which have been notified by the Government of India and
came into force w.e.f. April 01, 2014 (including Amendments/clarifications/circulars
issued there under upto June, 2017).
Company Secretaryship being a professional course, the examination standards
are set very high, with emphasis on knowledge of concepts, applications, procedures
and case laws, for which sole reliance on the contents of the study material may not be
enough. Besides Company Secretaries Regulations, 1982 requires the students to be
conversant with the amendments to the laws made upto six months preceding the date
of examination. This study material may therefore be regarded as basic material and
must be read along with the notified provisions of Companies Act 2013 and Rules
made thereunder.
The amendments made upto June, 2017 have been incorporated in this study
material. However, it may happen that some developments might have taken place
during the printing of the study material and its supply to the students. The students are
therefore advised to refer to the bulletin 'Student Company Secretary' and ICSI Journal
Chartered Secretary and other publications for updation of study material. In the event
of any doubt, students may contact the Directorate of Academics at
[email protected].
Although due care has been taken in publishing this study material yet the
possibility of errors, omissions and/or discrepancies cannot be ruled out. This
publication is released with an understanding that the Institute shall not be responsible
for any errors, omissions and/or discrepancies or any action taken in that behalf.
Should there be any discrepancy, error or omission noted in the study material, the
Institute shall be obliged if the same are brought to its notice for issue of corrigendum
in the e-bulletin' and Student Company Secretary'.
(iv)
Level of Knowledge: Expert Knowledge
Objective: To acquire knowledge and develop understanding of the regulatory framework of companies
with reference to various provisions of Companies Act and its schedules, rules, notifications, circulars,
clarifications there under including case laws and Secretarial standards.
Detailed Contents:
1. Introduction
• Company – Definition, Meaning, Nature and its Characteristics
• Nature and Forms of Business
• Company vis-à-vis other Forms of Business
• Concept of Corporate Personality, Corporate Veil, Limited Liability and Citizenship
2. Incorporation and its Consequences
• Types of Companies and their incorporation
• Promoters – Meaning, Position, Duties, Rights, Responsibilities and Liabilities
• Formation of Companies – Procedural Aspects
• Memorandum of Association & Articles of Association and their Alteration
• Contracts and Conversion of Companies
• Commencement of Business
3. Financial Structure
• Concept of Capital and Financing of Companies– Sources of Capital; Classes and Types of
Shares; Equity Shares with Differential Rights; Issue of Shares at Par, Premium and Discount;
Forfeiture and Surrender of Shares; Bonus Issues; Rights Issues; Issue of Sweat Equity Shares;
Employees Stock Option Scheme; Private Placement; preference shares and other forms of
securities
• Alteration of Share Capital– Reduction of Capital; Buy–Back of Shares
• Prospectus– Definition; Abridged Prospectus; Red–Herring Prospectus; Shelf Prospectus;
Information Memorandum; Contents, Registration; Misrepresentations and Penalties
• Debt Capital – Debentures, Debenture Stock, Bonds; Recent Trends and Dynamics of Corporate
Debt Financing; Debenture Trust Deed and Trustees; Conversion of and Redemption of
Debentures
(v)
4. Membership in a Company
• Modes of Acquiring Membership
• Dematerialisation and Rematerialisation of Securities
• Transfer and Transmission of Securities in Physical and Dematerialized forms
• Nomination
• Directors– Types, Director’s Identification Number (DIN), Appointment/Reappointment,
Qualifications, Disqualifications, Vacation of Office, Retirement, Resignation and Removal of
Managing and Whole–Time Directors and Manager
• Role and Responsibilities of Directors
• Powers and Duties
• Loans to Directors
• Remuneration of Directors
• Contracts in which Directors are Interested
• Board of Directors and its Committees
• Company Secretary – Appointment, Role and Responsibilities
• Company Secretary as a Key Managerial Personnel
• Meetings:
Board/Committee(s); Resolution by Circulation; Minutes and Evidence
• General Meetings – Kinds of Meetings; Law, Practice and Procedure Relating to Convening and
Proceedings at General and Other Meetings; Notice, Quorum, Chairman, Proxy, Voting including
Voting through Electronic Means; Resolutions, Circulation of Members’ Resolution, etc.; Postal
Ballot; Recording, Signing and Inspection of Minutes;
• Distribution of Powers of a Company – Division of Powers between Board and General Meetings;
Acts by Directors in Excess of Authority; Monitoring and Management
• Sole Selling and Buying Agents – Meaning, Appointment and Reappointment, Removal; Powers
of Central Government and Rules Framed for the Purpose
6. Investments, Loans and Deposits
• Law relating to making investments in and granting loans to other bodies corporate and giving
guarantees and providing security
7. Accounts and Audit
Duties and Liabilities
(vi)
8. Dividends
• Declaration and Payment of Dividend
• Treatment of Unpaid and Unclaimed Dividend
• Transfer of Unpaid and Unclaimed Dividend to Investor Education and Protection Fund
• Board’s Report and Disclosures Contents and Annexure to Board’s Report
• Directors’ Responsibility Statement – Preparation and Disclosures
• Compliance Certificate – Need and Objective; Issue and Signing by Practising Company
Secretary
9. Registers, Forms and Returns
• Statutory Books and Registers prescribed under various provisions of the Company Law–
Maintenance, Authentication Place of Keeping and Inspection
• Filing of various Forms and Returns with the Authorities
• Procedure and Penalties for Delayed Filing
• Annual Return –Nature and Significance; Contents; and Certification by Practising Company
Secretary
• Inspector’s Report
• Law relating to Majority Powers and Minority Rights
• Shareholder Remedies – Actions by Shareholders; Statutory Remedies; Personal Actions
• Prevention of Oppression and Mis-Management
12. Merger, De-merger, Amalgamation, Compromises and Arrangements – An Overview
13. Producer Companies
14. Limited Liability Partnerships
15. Application of Company Law to Different Sectors
• Banking
• Insurance
(vii)
• Others
• Concept and Modes
20. An Introduction to E-Governance and XBRL
(viii)
Readings:
1. Dr. Avtar Singh : Company Law; Eastern Book Company, 34, Lalbagh, Lucknow –
226 001
2. C.R. Datta : Datta on the Company Law; Lexis Nexis, Butterworths Wadhwa,
Nagpur
3. A. Ramaiya : Guide to the Companies Act; Lexis Nexis, Butterworths Wadhwa,
Nagpur
Lines, Ludhiana – 141 001.
5. A.K. Majumdar, Dr.
: Company Law and Practice; Taxmann, 59/32, New Rohtak Road, New
Delhi-110 005.
6. V.S. Datey : Guide to Tax and Corporate Laws; Taxmann, 59/32, New Rohtak
Road, New Delhi-110 005.
7. M.C. Kuchhal : Modern Indian Company Law; Shri Mahavir Book Depot, 2603,
Nai Sarak, Delhi-110 006.
8. H.K. Saharay : Company Law; Universal Law Publishing Co., C-FF-1A, Dilkhush
Industrial Estate, G.T. Karnal Road, Delhi. -110033.
References:
1. D.K. Jain : Company Law Ready Reckoner; Bharat Law House Pvt. Ltd.; T-
1/95, Mangolpuri Industrial Area, Delhi-110083.
2. R. Suryanarayanan : Company Law Ready Reckoner; Commercial Law Publishers,
151, Rajinder Market, Opp. Tis Hazari Court, Delhi-110054.
3. Palmer : Company Law (Vol. 1); Stevens & Sons Ltd., London.
4. L.C.B. Gower : Principles of Modern Company Law; Stevens & Sons Ltd.,
London.
5. Taxmann’s : Circulars & Clarifications on Company Law; Taxmann, 59/32, New
Rohtak Road, New Delhi-110 005.
6. Bare Act : Corporate Laws; Taxmann, 59/32, New Rohtak Road, New Delhi-
110 005.
1A, Dilkhush Industrial Estate, G.T. Karnal Road, Delhi. -110 003.
(ix)
Journals:
2. Student Company
: ICSI, New Delhi
3. Corporate Law Adviser : Corporate Law Advisers, 613, Metro View Apt., Sector 13, Pocket
B, Dwarka, New Delhi-110075.
4. Company Law Journal : Company Law Journal (India) Pvt. Ltd., 53/15, Old Rajinder
Nagar, Post Box No. 2844, New Delhi-110060.
Note: The latest edition of all the books referred to above should be read.
(x)
ARRANGEMENT OF STUDY LESSONS PAPER 1: COMPANY LAW (100 Marks)
Lesson No. Subject
4 MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION
5 CONTRACTS AND CONVERSIONS
7 ALTERATION OF SHARE CAPITAL
8 PRIVATE PLACEMENT AND PROSPECTUS
9 DEBT CAPITAL
11 ALLOTMENT OF SECURITIES AND ISSUE OF CERTIFICATES
12 MEMBERSHIP IN A COMPANY
13 TRANSFER AND TRANSMISSION OF SECURITIES
14 INSTITUTION OF DIRECTORS
17 APPOINTMENT AND REMUNERATION OF KEY MANAGERIAL PERSONNEL
18 GENERALMEETINGS
20 DEPOSITS
23 BOARD’S REPORT AND DISCLOSURES
24 REGISTERS, FORMS AND RETURNS
25 INSPECTION AND INVESTIGATION
27 MERGER, DE-MERGER, AMALGAMATION, COMPROMISE AND ARRANGEMENTS – AN OVERVIEW
28 PRODUCER COMPANIES
31 OFFENCES, PENALTIES AND THEIR COMPOUNDING
32 WINDING UP OF COMPANIES
33 STRIKING OFF NAME OF COMPANIES
34 AN INTRODUCTION TO E-GOVERNANCE AND XBRL
TEST PAPER
EXECUTIVE PROGRAMME
COMPANY LAW
Company vis-a vis other Forms of Business … 10
Development of Company Law in India ... 12
Concept Paper on Company Law, 2004 and Dr. J J Irani Committee Report … 15
Companies Bill 2012 … 16
Companies Act 2013 … 16
Doctrine of Lifting of or Piercing the Corporate Veil ... 17
Illegal Association ... 20
Lesson Round-Up … 21
SELF-TEST QUESTIONS ... 22
Government Companies … 47
Foreign Companies … 55
Associate Company … 58
Investment Companies ... 59
Producer Companies … 59
Nidhi Companies … 60
Dormant Companies ... 71
Learning Objectives/Lesson Outline … 77
Duties of a Promoter ... 80
Promotors Duties under the Indian Contract Act … 82
Termination of Promoters’ Duties ... 82
Remedies available to the Company against the Promoter ... 82
Liabilities of Promoters ... 83
Rights of Promoters ... 85
Formation of Companies … 86
Filing of Documents with Registrar of Companies ... 88
Issue of Certificate of Incorporation by Registrar ... 92
Conclusive Evidence ... 93
Documents of incorporation to be preserved … 93
How to Incorporate Company under the Companies Act, 2013 … 94
Punishment for furnishing False or Incorrect Information at the time of Incorporation … 95
Powers of Tribunal … 95
Incorporation of Companies with Charitable Objects under Section 8 … 97
Rule 8 (Companies Incorporation) Rules, 2014 … 98
Lesson Round-Up … 102
Learning Objectives/Lesson Outline … 105
Memorandum of Association ... 106
Contents of Memorandum ... 107
Loans, borrowings, guarantees and Ultra Vires Rule … 115
Implied Powers … 115
Shareholder’s right in respect of ultra vires acts … 116
Effects of ultra vires Transactions ... 116
Declaration for Subscription ... 118
Signing of Memorandum … 118
Alteration of Name Clause ... 120
Alteration of Registered Office Clause ... 122
Rule 30-31 of Companies (Incorporation) Rules, 2014 … 123
Alteration of Objects Clause of the Company ... 126
Registration of Alteration ... 127
Alteration of Memorandum of Association … 129
Articles of Association ... 129
Registration of Articles ... 131
Consistency of Articles of Association with Companies Act, 2013 … 133
Alteration of Articles of Association ... 134
Effect of altered Articles … 136
Alterations of Memorandum or Articles to be noted in every Copy … 136
Distinction between Memorandum and Articles ... 137
Legal Effect of Memorandum and Articles ... 137
Constructive Notice of Memorandum and Articles ... 139
Monies Payable by Members is a Debt ... 140
Interpretation of Memorandum and Articles ... 140
Doctrine of Indoor Management ... 140
Exceptions to the Doctrine of Indoor Management ... 142
Doctrine of Alter Ego … 143
Lesson Round-Up … 144
Commencement of New Business by an Existing Company … 150
Common Seal ... 150
Conversion of Companies already registered … 150
Conversion of a Private Company into a Public Company and Vice Versa ... 150
Rule 33 of Companies (Incorporation) Rules, 2014 … 152
Private Company (which is a subsidiary of public company) Deemed to be a Public Company ... 152
Conversion of Section 8 Company into a Company of other kind ... 152
Conversion of One Person Company into a Public Company or Private Company … 155
Rule 7- Conversion of Private Company into an OPC … 156
Conversion of Companies … 158
Learning Objectives/Lesson Outline … 161
Publication of Authorised, Subscribed and Paid-Up Capital … 163
Meaning and Nature of a Share ... 163
Kinds of Shares ... 164
Preference Shares Compared with Equity Shares ... 165
Issue of Securities at a Premium … 166
Issue of Sweat Equity Shares ... 167
Companies (Share Capital and Debentures) Rules, 2014 … 168
Shares with Differential Voting Rights … 171
Issue and Redemption of Preferential Shares … 174
Further Issue of Shares ... 177
Bonus Shares ... 179
Prescriptions under Companies (Share Capital and Debentures) Rules, 2014 … 180
Employee Stock Option Scheme … 180
Issue of Shares on Preferential Basis ... 185
Rule 13 of Companies (Share Capital and Debentures) Rules, 2014 … 185
Lesson Round-Up … 189
Difference between Share and Stock ... 195
Reduction of Share Capital under Companies Act, 2013 ... 195
Confirmation of reduction of capital [Section 66(3)] … 196
Publication of the order of the Tribunal … 196
Deliver a copy of order of Tribunal to Registrar … 197
Diminution of Share Capital … 197
Reduction of Share Capital without sanction of the Court … 200
Buy Back of Securities ... 201
Lesson Round-Up … 206
Invitation to Public ... 210
Provisions of Companies Act, 2013 with respect to prospectus … 211
Private Placement ... 211
Public Offer ... 216
Deemed Prospectus ... 216
Reports to be set out in the Prospectus … 221
Other matters and Reports to be stated in the Prospectus … 223
Filing a copy of Prospectus with Registrar … 225
Penalty for Contravention of Section 26 … 226
Rule 7 of Companies (Prospectus and Allotment of Securities) Rules, 2014 … 227
Offer of Sale by Members … 229
Shelf Prospectus … 230
Red-Herring Prospectus … 231
Abridged Prospectus … 231
(xvi)
Page
Remedies for Misrepresentation in Prospectus ... 233
Remedies against Directors or Promoters ... 233
Criminal Liability for Mis-statements in Prospectus ... 235
Who is entitled to Remedies ... 235
Penalty for Fraudulently Inducing to Invest Money ... 236
Prohibition of Personation for Acquisition ... 236
Lesson Round-Up … 237
Power of Company to Borrow ... 242
Unauthorised or Ultra Vires Borrowing ... 242
Intra vires Borrowing but Outside the Scope of Agents’ Authority ... 243
Judicial pronouncement relating to borrowing powers of company … 244
Types of Borrowing … 245
Charge on Uncalled Capital ... 247
Debentures … 247
Debenture Stock ... 249
Provisions for Issue of Debentures under Companies Act, 2013 … 251
No Debenture shall carry Voting Right … 251
Creation of Debenture Redemption Reserve Account ... 252
Appointment of Debenture Trustees … 253
Duties of Debenture Trustees … 254
Judicial Pronouncements about Debentures ... 255
Register of Debentureholders ... 256
Foreign Bonds ... 257
Instruments in Money Market ... 259
Lesson Round-Up … 259
Learning Objectives/Lesson Outline … 261
Kinds of Charges ... 262
Postponement of a Floating Charge ... 265
Difference between Mortgage and Charge … 266
Registration of Charges- Provisions of Companies Act, 2013 ... 267
Condonation of Delay in filing of Charge … 268
Rule 12 of Companies (Registration of Charges) Rules, 2014 … 269
Certificate of Registration of Charge … 270
Acquiring Property under Charge and Modification of Charge … 270
Satisfaction of Charges … 270
Notice of Charge … 271
Register of Charges ... 271
Lesson Round-Up … 272
Learning Objectives/Lesson Outline … 275
Provisions relating to Allotment-Companies Act 2013 ... 278
Judicial Pronouncements about return of Allotment … 279
Issue of Certificates … 279
Split Certificate … 286
Personation of Shareholders … 287
Calls and Forfeiture … 287
Acceptance of Uncalled Capital … 289
Quantum and Interval between two Calls … 289
Forfeiture of shares … 290
Re-issue of Forfeited Shares ... 292
Surrender of Shares … 292
Who may become a Member ... 298
Minimum Number of Members ... 301
Cessation of Membership ... 302
Personation and Penalty ... 303
Register of Members ... 303
Rule 3 of Companies (Management and Administration) Rules, 2014 … 304
Rule 5 of Companies (Management and Administration) Rules, 2014 … 304
Rule 8 of Companies (Management and Administration) Rules, 2014 … 305
Judicial pronouncement … 305
Rule 6 of Companies (Management and Administration) Rules, 2014 … 306
Inspection of Registers … 306
Rule 14 of Companies (Management and Administration) Rules, 2014 … 307
Register prima facie evidence ... 307
Rectification of a register of Members ... 308
Foreign Register … 309
Rule 7 of Companies (Management and Administration) Rules, 2014 … 309
Closing of Register of Members … 310
(xix)
Page
Rule 10 of Companies (Management and Administration) Rules, 2014 … 311
Rule 15 of Companies (Management and Administration) Rules, 2014 … 311
Power of the Central Government to Investigate into the Ownership of Shares ... 312
Rule 9 of Companies (Management and Administration) Rules, 2014 … 313
Rights of Members ... 313
Shareholders’ Pre-emptive Rights ... 316
Rights of Dissenting Members ... 317
Nomination by Security holders … 317
Liability of Members ... 318
Learning Objectives/Lesson Outline … 321
Transfer or Transmission of Securities … 322
Power to Refuse Registration and Appeal against Refusal (Section 58) … 324
Rectification of Register of Members under Section 59 … 326
Stamp Duty Payable and Affixation/Cancellation of Stamps ... 327
Lost Transfer Deeds ... 329
Transfer of Debentures ... 329
Transmission of Securities ... 331
Judicial Pronouncements about Transfer of Shares … 334
Transfer of Securities Registered with a Depository … 337
Compliance with Section 56 – A Mandatory provision ... 337
Blank Transfer ... 339
Forged transfer … 340
Death of transferor or transferee before registration of transfer ... 342
Rights of Transferor ... 343
Effects of Transfer ... 345
Transfer of Shares in Depository Mode ... 347
Legal Framework for Depository Systems … 347
Free Transferability of securities ... 349
Safeguards on Transfer of Securities in Dematerialized Mode … 349
Lesson Round-Up … 350
Number of Directorships … 355
Indian Resident Director … 355
Appointment of Directors ... 357
Director Identification Number … 363
Duties of Directors - Section 166 … 369
Vacation of Office of Director - Section 167 … 370
Resignation of Directors ... 371
Lesson Round-Up … 374
SELF-TEST QUESITONS ... 374
Manner of selection of an Independent Director ... 379
Code for Independent Directors ... 380
Tenure of Independent Directors … 383
Liability of Independent Director … 384
Retirement by Rotation not applicable to Independent Directors … 384
Remuneration of Independent Director … 385
Lesson Round-Up … 385
SELF-TEST QUESTIONS ... 385
Compliance with Secretarial Standards related to Board Meetings ... 394
Quorum for Board Meetings ... 394
Passing of Resolution by Circulation ... 395
Board Committees … 395
Nomination and Remuneration Committee under Section 178 ... 401
Stakeholders Relationship Committee ... 402
Penalty for Contravention … 402
Other Board Committees ... 405
Restriction on Powers of Board ... 406
Disclosure of Interest by Directors ... 407
Related Party Transactions under Section 188 ... 408
Rule 15 of the Companies (Meeting of Board and its Powers) Rules, 2014 ... 410
Penalties for non-compliance ... 413
Register of Contracts or Arrangements in which Directors are interested ... 418
Contract of Employment with Managing Director or Whole-Time…
EXECUTIVE PROGRAMME
COMPANYCOMPANYCOMPANYCOMPANY LAWLAWLAWLAW
PAPER 1
ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003
tel 011-4534 1000, 4150 4444 fax +91-11-2462 6727
email [email protected] website www.icsi.edu
TIMING OF HEADQUARTERS
Monday to Friday
Public Dealing Timings
Phones
Fax
011-24626727
Website
www.icsi.edu
[email protected]
Laser Typesetting by Delhi Computer Services, Dwarka, New Delhi Printed at IPP/JULY 2017
EXECUTIVE PROGRAMME
COMPANY LAW
In view of increasing emphasis on adherence to norms of good corporate
governance, Company Law assumes an added importance in the corporate legislative
milieu, as it deals with structure, management, administration and conduct of affairs of
Companies. A thorough study of various provisions of the Companies Act is a must for
becoming a competent and efficient Company Secretary. In the light of this, the study
material has been published to impart thorough knowledge to the students preparing
for the Company Law paper of the CS Executive Programme.
The study material is based on those sections of the Companies Act, 2013 and the
rules made there under which have been notified by the Government of India and
came into force w.e.f. April 01, 2014 (including Amendments/clarifications/circulars
issued there under upto June, 2017).
Company Secretaryship being a professional course, the examination standards
are set very high, with emphasis on knowledge of concepts, applications, procedures
and case laws, for which sole reliance on the contents of the study material may not be
enough. Besides Company Secretaries Regulations, 1982 requires the students to be
conversant with the amendments to the laws made upto six months preceding the date
of examination. This study material may therefore be regarded as basic material and
must be read along with the notified provisions of Companies Act 2013 and Rules
made thereunder.
The amendments made upto June, 2017 have been incorporated in this study
material. However, it may happen that some developments might have taken place
during the printing of the study material and its supply to the students. The students are
therefore advised to refer to the bulletin 'Student Company Secretary' and ICSI Journal
Chartered Secretary and other publications for updation of study material. In the event
of any doubt, students may contact the Directorate of Academics at
[email protected].
Although due care has been taken in publishing this study material yet the
possibility of errors, omissions and/or discrepancies cannot be ruled out. This
publication is released with an understanding that the Institute shall not be responsible
for any errors, omissions and/or discrepancies or any action taken in that behalf.
Should there be any discrepancy, error or omission noted in the study material, the
Institute shall be obliged if the same are brought to its notice for issue of corrigendum
in the e-bulletin' and Student Company Secretary'.
(iv)
Level of Knowledge: Expert Knowledge
Objective: To acquire knowledge and develop understanding of the regulatory framework of companies
with reference to various provisions of Companies Act and its schedules, rules, notifications, circulars,
clarifications there under including case laws and Secretarial standards.
Detailed Contents:
1. Introduction
• Company – Definition, Meaning, Nature and its Characteristics
• Nature and Forms of Business
• Company vis-à-vis other Forms of Business
• Concept of Corporate Personality, Corporate Veil, Limited Liability and Citizenship
2. Incorporation and its Consequences
• Types of Companies and their incorporation
• Promoters – Meaning, Position, Duties, Rights, Responsibilities and Liabilities
• Formation of Companies – Procedural Aspects
• Memorandum of Association & Articles of Association and their Alteration
• Contracts and Conversion of Companies
• Commencement of Business
3. Financial Structure
• Concept of Capital and Financing of Companies– Sources of Capital; Classes and Types of
Shares; Equity Shares with Differential Rights; Issue of Shares at Par, Premium and Discount;
Forfeiture and Surrender of Shares; Bonus Issues; Rights Issues; Issue of Sweat Equity Shares;
Employees Stock Option Scheme; Private Placement; preference shares and other forms of
securities
• Alteration of Share Capital– Reduction of Capital; Buy–Back of Shares
• Prospectus– Definition; Abridged Prospectus; Red–Herring Prospectus; Shelf Prospectus;
Information Memorandum; Contents, Registration; Misrepresentations and Penalties
• Debt Capital – Debentures, Debenture Stock, Bonds; Recent Trends and Dynamics of Corporate
Debt Financing; Debenture Trust Deed and Trustees; Conversion of and Redemption of
Debentures
(v)
4. Membership in a Company
• Modes of Acquiring Membership
• Dematerialisation and Rematerialisation of Securities
• Transfer and Transmission of Securities in Physical and Dematerialized forms
• Nomination
• Directors– Types, Director’s Identification Number (DIN), Appointment/Reappointment,
Qualifications, Disqualifications, Vacation of Office, Retirement, Resignation and Removal of
Managing and Whole–Time Directors and Manager
• Role and Responsibilities of Directors
• Powers and Duties
• Loans to Directors
• Remuneration of Directors
• Contracts in which Directors are Interested
• Board of Directors and its Committees
• Company Secretary – Appointment, Role and Responsibilities
• Company Secretary as a Key Managerial Personnel
• Meetings:
Board/Committee(s); Resolution by Circulation; Minutes and Evidence
• General Meetings – Kinds of Meetings; Law, Practice and Procedure Relating to Convening and
Proceedings at General and Other Meetings; Notice, Quorum, Chairman, Proxy, Voting including
Voting through Electronic Means; Resolutions, Circulation of Members’ Resolution, etc.; Postal
Ballot; Recording, Signing and Inspection of Minutes;
• Distribution of Powers of a Company – Division of Powers between Board and General Meetings;
Acts by Directors in Excess of Authority; Monitoring and Management
• Sole Selling and Buying Agents – Meaning, Appointment and Reappointment, Removal; Powers
of Central Government and Rules Framed for the Purpose
6. Investments, Loans and Deposits
• Law relating to making investments in and granting loans to other bodies corporate and giving
guarantees and providing security
7. Accounts and Audit
Duties and Liabilities
(vi)
8. Dividends
• Declaration and Payment of Dividend
• Treatment of Unpaid and Unclaimed Dividend
• Transfer of Unpaid and Unclaimed Dividend to Investor Education and Protection Fund
• Board’s Report and Disclosures Contents and Annexure to Board’s Report
• Directors’ Responsibility Statement – Preparation and Disclosures
• Compliance Certificate – Need and Objective; Issue and Signing by Practising Company
Secretary
9. Registers, Forms and Returns
• Statutory Books and Registers prescribed under various provisions of the Company Law–
Maintenance, Authentication Place of Keeping and Inspection
• Filing of various Forms and Returns with the Authorities
• Procedure and Penalties for Delayed Filing
• Annual Return –Nature and Significance; Contents; and Certification by Practising Company
Secretary
• Inspector’s Report
• Law relating to Majority Powers and Minority Rights
• Shareholder Remedies – Actions by Shareholders; Statutory Remedies; Personal Actions
• Prevention of Oppression and Mis-Management
12. Merger, De-merger, Amalgamation, Compromises and Arrangements – An Overview
13. Producer Companies
14. Limited Liability Partnerships
15. Application of Company Law to Different Sectors
• Banking
• Insurance
(vii)
• Others
• Concept and Modes
20. An Introduction to E-Governance and XBRL
(viii)
Readings:
1. Dr. Avtar Singh : Company Law; Eastern Book Company, 34, Lalbagh, Lucknow –
226 001
2. C.R. Datta : Datta on the Company Law; Lexis Nexis, Butterworths Wadhwa,
Nagpur
3. A. Ramaiya : Guide to the Companies Act; Lexis Nexis, Butterworths Wadhwa,
Nagpur
Lines, Ludhiana – 141 001.
5. A.K. Majumdar, Dr.
: Company Law and Practice; Taxmann, 59/32, New Rohtak Road, New
Delhi-110 005.
6. V.S. Datey : Guide to Tax and Corporate Laws; Taxmann, 59/32, New Rohtak
Road, New Delhi-110 005.
7. M.C. Kuchhal : Modern Indian Company Law; Shri Mahavir Book Depot, 2603,
Nai Sarak, Delhi-110 006.
8. H.K. Saharay : Company Law; Universal Law Publishing Co., C-FF-1A, Dilkhush
Industrial Estate, G.T. Karnal Road, Delhi. -110033.
References:
1. D.K. Jain : Company Law Ready Reckoner; Bharat Law House Pvt. Ltd.; T-
1/95, Mangolpuri Industrial Area, Delhi-110083.
2. R. Suryanarayanan : Company Law Ready Reckoner; Commercial Law Publishers,
151, Rajinder Market, Opp. Tis Hazari Court, Delhi-110054.
3. Palmer : Company Law (Vol. 1); Stevens & Sons Ltd., London.
4. L.C.B. Gower : Principles of Modern Company Law; Stevens & Sons Ltd.,
London.
5. Taxmann’s : Circulars & Clarifications on Company Law; Taxmann, 59/32, New
Rohtak Road, New Delhi-110 005.
6. Bare Act : Corporate Laws; Taxmann, 59/32, New Rohtak Road, New Delhi-
110 005.
1A, Dilkhush Industrial Estate, G.T. Karnal Road, Delhi. -110 003.
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Journals:
2. Student Company
: ICSI, New Delhi
3. Corporate Law Adviser : Corporate Law Advisers, 613, Metro View Apt., Sector 13, Pocket
B, Dwarka, New Delhi-110075.
4. Company Law Journal : Company Law Journal (India) Pvt. Ltd., 53/15, Old Rajinder
Nagar, Post Box No. 2844, New Delhi-110060.
Note: The latest edition of all the books referred to above should be read.
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ARRANGEMENT OF STUDY LESSONS PAPER 1: COMPANY LAW (100 Marks)
Lesson No. Subject
4 MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION
5 CONTRACTS AND CONVERSIONS
7 ALTERATION OF SHARE CAPITAL
8 PRIVATE PLACEMENT AND PROSPECTUS
9 DEBT CAPITAL
11 ALLOTMENT OF SECURITIES AND ISSUE OF CERTIFICATES
12 MEMBERSHIP IN A COMPANY
13 TRANSFER AND TRANSMISSION OF SECURITIES
14 INSTITUTION OF DIRECTORS
17 APPOINTMENT AND REMUNERATION OF KEY MANAGERIAL PERSONNEL
18 GENERALMEETINGS
20 DEPOSITS
23 BOARD’S REPORT AND DISCLOSURES
24 REGISTERS, FORMS AND RETURNS
25 INSPECTION AND INVESTIGATION
27 MERGER, DE-MERGER, AMALGAMATION, COMPROMISE AND ARRANGEMENTS – AN OVERVIEW
28 PRODUCER COMPANIES
31 OFFENCES, PENALTIES AND THEIR COMPOUNDING
32 WINDING UP OF COMPANIES
33 STRIKING OFF NAME OF COMPANIES
34 AN INTRODUCTION TO E-GOVERNANCE AND XBRL
TEST PAPER
EXECUTIVE PROGRAMME
COMPANY LAW
Company vis-a vis other Forms of Business … 10
Development of Company Law in India ... 12
Concept Paper on Company Law, 2004 and Dr. J J Irani Committee Report … 15
Companies Bill 2012 … 16
Companies Act 2013 … 16
Doctrine of Lifting of or Piercing the Corporate Veil ... 17
Illegal Association ... 20
Lesson Round-Up … 21
SELF-TEST QUESTIONS ... 22
Government Companies … 47
Foreign Companies … 55
Associate Company … 58
Investment Companies ... 59
Producer Companies … 59
Nidhi Companies … 60
Dormant Companies ... 71
Learning Objectives/Lesson Outline … 77
Duties of a Promoter ... 80
Promotors Duties under the Indian Contract Act … 82
Termination of Promoters’ Duties ... 82
Remedies available to the Company against the Promoter ... 82
Liabilities of Promoters ... 83
Rights of Promoters ... 85
Formation of Companies … 86
Filing of Documents with Registrar of Companies ... 88
Issue of Certificate of Incorporation by Registrar ... 92
Conclusive Evidence ... 93
Documents of incorporation to be preserved … 93
How to Incorporate Company under the Companies Act, 2013 … 94
Punishment for furnishing False or Incorrect Information at the time of Incorporation … 95
Powers of Tribunal … 95
Incorporation of Companies with Charitable Objects under Section 8 … 97
Rule 8 (Companies Incorporation) Rules, 2014 … 98
Lesson Round-Up … 102
Learning Objectives/Lesson Outline … 105
Memorandum of Association ... 106
Contents of Memorandum ... 107
Loans, borrowings, guarantees and Ultra Vires Rule … 115
Implied Powers … 115
Shareholder’s right in respect of ultra vires acts … 116
Effects of ultra vires Transactions ... 116
Declaration for Subscription ... 118
Signing of Memorandum … 118
Alteration of Name Clause ... 120
Alteration of Registered Office Clause ... 122
Rule 30-31 of Companies (Incorporation) Rules, 2014 … 123
Alteration of Objects Clause of the Company ... 126
Registration of Alteration ... 127
Alteration of Memorandum of Association … 129
Articles of Association ... 129
Registration of Articles ... 131
Consistency of Articles of Association with Companies Act, 2013 … 133
Alteration of Articles of Association ... 134
Effect of altered Articles … 136
Alterations of Memorandum or Articles to be noted in every Copy … 136
Distinction between Memorandum and Articles ... 137
Legal Effect of Memorandum and Articles ... 137
Constructive Notice of Memorandum and Articles ... 139
Monies Payable by Members is a Debt ... 140
Interpretation of Memorandum and Articles ... 140
Doctrine of Indoor Management ... 140
Exceptions to the Doctrine of Indoor Management ... 142
Doctrine of Alter Ego … 143
Lesson Round-Up … 144
Commencement of New Business by an Existing Company … 150
Common Seal ... 150
Conversion of Companies already registered … 150
Conversion of a Private Company into a Public Company and Vice Versa ... 150
Rule 33 of Companies (Incorporation) Rules, 2014 … 152
Private Company (which is a subsidiary of public company) Deemed to be a Public Company ... 152
Conversion of Section 8 Company into a Company of other kind ... 152
Conversion of One Person Company into a Public Company or Private Company … 155
Rule 7- Conversion of Private Company into an OPC … 156
Conversion of Companies … 158
Learning Objectives/Lesson Outline … 161
Publication of Authorised, Subscribed and Paid-Up Capital … 163
Meaning and Nature of a Share ... 163
Kinds of Shares ... 164
Preference Shares Compared with Equity Shares ... 165
Issue of Securities at a Premium … 166
Issue of Sweat Equity Shares ... 167
Companies (Share Capital and Debentures) Rules, 2014 … 168
Shares with Differential Voting Rights … 171
Issue and Redemption of Preferential Shares … 174
Further Issue of Shares ... 177
Bonus Shares ... 179
Prescriptions under Companies (Share Capital and Debentures) Rules, 2014 … 180
Employee Stock Option Scheme … 180
Issue of Shares on Preferential Basis ... 185
Rule 13 of Companies (Share Capital and Debentures) Rules, 2014 … 185
Lesson Round-Up … 189
Difference between Share and Stock ... 195
Reduction of Share Capital under Companies Act, 2013 ... 195
Confirmation of reduction of capital [Section 66(3)] … 196
Publication of the order of the Tribunal … 196
Deliver a copy of order of Tribunal to Registrar … 197
Diminution of Share Capital … 197
Reduction of Share Capital without sanction of the Court … 200
Buy Back of Securities ... 201
Lesson Round-Up … 206
Invitation to Public ... 210
Provisions of Companies Act, 2013 with respect to prospectus … 211
Private Placement ... 211
Public Offer ... 216
Deemed Prospectus ... 216
Reports to be set out in the Prospectus … 221
Other matters and Reports to be stated in the Prospectus … 223
Filing a copy of Prospectus with Registrar … 225
Penalty for Contravention of Section 26 … 226
Rule 7 of Companies (Prospectus and Allotment of Securities) Rules, 2014 … 227
Offer of Sale by Members … 229
Shelf Prospectus … 230
Red-Herring Prospectus … 231
Abridged Prospectus … 231
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Page
Remedies for Misrepresentation in Prospectus ... 233
Remedies against Directors or Promoters ... 233
Criminal Liability for Mis-statements in Prospectus ... 235
Who is entitled to Remedies ... 235
Penalty for Fraudulently Inducing to Invest Money ... 236
Prohibition of Personation for Acquisition ... 236
Lesson Round-Up … 237
Power of Company to Borrow ... 242
Unauthorised or Ultra Vires Borrowing ... 242
Intra vires Borrowing but Outside the Scope of Agents’ Authority ... 243
Judicial pronouncement relating to borrowing powers of company … 244
Types of Borrowing … 245
Charge on Uncalled Capital ... 247
Debentures … 247
Debenture Stock ... 249
Provisions for Issue of Debentures under Companies Act, 2013 … 251
No Debenture shall carry Voting Right … 251
Creation of Debenture Redemption Reserve Account ... 252
Appointment of Debenture Trustees … 253
Duties of Debenture Trustees … 254
Judicial Pronouncements about Debentures ... 255
Register of Debentureholders ... 256
Foreign Bonds ... 257
Instruments in Money Market ... 259
Lesson Round-Up … 259
Learning Objectives/Lesson Outline … 261
Kinds of Charges ... 262
Postponement of a Floating Charge ... 265
Difference between Mortgage and Charge … 266
Registration of Charges- Provisions of Companies Act, 2013 ... 267
Condonation of Delay in filing of Charge … 268
Rule 12 of Companies (Registration of Charges) Rules, 2014 … 269
Certificate of Registration of Charge … 270
Acquiring Property under Charge and Modification of Charge … 270
Satisfaction of Charges … 270
Notice of Charge … 271
Register of Charges ... 271
Lesson Round-Up … 272
Learning Objectives/Lesson Outline … 275
Provisions relating to Allotment-Companies Act 2013 ... 278
Judicial Pronouncements about return of Allotment … 279
Issue of Certificates … 279
Split Certificate … 286
Personation of Shareholders … 287
Calls and Forfeiture … 287
Acceptance of Uncalled Capital … 289
Quantum and Interval between two Calls … 289
Forfeiture of shares … 290
Re-issue of Forfeited Shares ... 292
Surrender of Shares … 292
Who may become a Member ... 298
Minimum Number of Members ... 301
Cessation of Membership ... 302
Personation and Penalty ... 303
Register of Members ... 303
Rule 3 of Companies (Management and Administration) Rules, 2014 … 304
Rule 5 of Companies (Management and Administration) Rules, 2014 … 304
Rule 8 of Companies (Management and Administration) Rules, 2014 … 305
Judicial pronouncement … 305
Rule 6 of Companies (Management and Administration) Rules, 2014 … 306
Inspection of Registers … 306
Rule 14 of Companies (Management and Administration) Rules, 2014 … 307
Register prima facie evidence ... 307
Rectification of a register of Members ... 308
Foreign Register … 309
Rule 7 of Companies (Management and Administration) Rules, 2014 … 309
Closing of Register of Members … 310
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Page
Rule 10 of Companies (Management and Administration) Rules, 2014 … 311
Rule 15 of Companies (Management and Administration) Rules, 2014 … 311
Power of the Central Government to Investigate into the Ownership of Shares ... 312
Rule 9 of Companies (Management and Administration) Rules, 2014 … 313
Rights of Members ... 313
Shareholders’ Pre-emptive Rights ... 316
Rights of Dissenting Members ... 317
Nomination by Security holders … 317
Liability of Members ... 318
Learning Objectives/Lesson Outline … 321
Transfer or Transmission of Securities … 322
Power to Refuse Registration and Appeal against Refusal (Section 58) … 324
Rectification of Register of Members under Section 59 … 326
Stamp Duty Payable and Affixation/Cancellation of Stamps ... 327
Lost Transfer Deeds ... 329
Transfer of Debentures ... 329
Transmission of Securities ... 331
Judicial Pronouncements about Transfer of Shares … 334
Transfer of Securities Registered with a Depository … 337
Compliance with Section 56 – A Mandatory provision ... 337
Blank Transfer ... 339
Forged transfer … 340
Death of transferor or transferee before registration of transfer ... 342
Rights of Transferor ... 343
Effects of Transfer ... 345
Transfer of Shares in Depository Mode ... 347
Legal Framework for Depository Systems … 347
Free Transferability of securities ... 349
Safeguards on Transfer of Securities in Dematerialized Mode … 349
Lesson Round-Up … 350
Number of Directorships … 355
Indian Resident Director … 355
Appointment of Directors ... 357
Director Identification Number … 363
Duties of Directors - Section 166 … 369
Vacation of Office of Director - Section 167 … 370
Resignation of Directors ... 371
Lesson Round-Up … 374
SELF-TEST QUESITONS ... 374
Manner of selection of an Independent Director ... 379
Code for Independent Directors ... 380
Tenure of Independent Directors … 383
Liability of Independent Director … 384
Retirement by Rotation not applicable to Independent Directors … 384
Remuneration of Independent Director … 385
Lesson Round-Up … 385
SELF-TEST QUESTIONS ... 385
Compliance with Secretarial Standards related to Board Meetings ... 394
Quorum for Board Meetings ... 394
Passing of Resolution by Circulation ... 395
Board Committees … 395
Nomination and Remuneration Committee under Section 178 ... 401
Stakeholders Relationship Committee ... 402
Penalty for Contravention … 402
Other Board Committees ... 405
Restriction on Powers of Board ... 406
Disclosure of Interest by Directors ... 407
Related Party Transactions under Section 188 ... 408
Rule 15 of the Companies (Meeting of Board and its Powers) Rules, 2014 ... 410
Penalties for non-compliance ... 413
Register of Contracts or Arrangements in which Directors are interested ... 418
Contract of Employment with Managing Director or Whole-Time…
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