FINAL STUDY NOTES FINAL : PAPER - 13 CORPORATE LAWS & COMPLIANCE The Institute of Cost Accountants of India CMA Bhawan, 12, Sudder Street, Kolkata - 700 016 SYLLABUS - 2016
CORPORATE LAWS & COMPLIANCE
Sep 26, 2022
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
FINAL : PAPER - 13
CORPORATE LAWS & COMPLIANCE
The Institute of Cost Accountants of India CMA Bhawan, 12, Sudder Street, Kolkata - 700 016
SY LLA
BU S -
20 16
First Edition : August 2016 Reprint : April 2017 Revised Edition : January 2018 Revised Edition : December 2018 Edition : August 2019 Reprint : January 2020 Revised Edition : October 2020
Published by : Directorate of Studies The Institute of Cost Accountants of India (ICAI) CMA Bhawan, 12, Sudder Street, Kolkata - 700 016 www.icmai.in
Printed at : M/s. Aravali Printers & Publishers (P) Ltd. W-30, Okhla Industrial Area, Phase - II New Delhi - 110 020.
Copyright of these Study Notes is reserved by the Institute of Cost Accountants of India and prior permission from the Institute is necessary
for reproduction of the whole or any part thereof.
Syllabus - 2016 PAPER 13: CORPORATE LAWS & COMPLIANCE
Syllabus Structure
A Companies Act 60% The Companies Act, 2013 50% Insolvency & Bankruptcy Code, 2016 10%
B Other Corporate Laws 25% C Corporate Governance 15%
A 60%
C 15%
B 25%
ASSESSMENT STRATEGY There will be written examination paper of three hours
OBJECTIVES To gain an expert knowledge of Corporate functions in the context of Companies Act & related Corporate Laws. To be able to assess whether strategies and the organization is in compliance with established regulatory framework, and Corporate Governanace.
Learning Aims The syllabus aims to test the student’s ability to: Understand the principles of Corporate Laws relevant for compliance and decision-making Analyze and interpret the impact of allied laws Evaluate the essence of Corporate Governance for effective implementation Demonstrate the role of a Corporate in socio-economic development
Skill set required Level C: Requiring skill levels of knowledge, comprehension, application, analysis, synthesis and evaluation.
Note: Subjects related to applicable statutes shall be read with amendments made from time to time. Section A : Companies Act 1. The Companies Act, 2013 50% Insolvency and Bankrupcy Code, 2016 (Annexure 1) 10% Section B: Other Corporate Laws 25% 2. SEBI laws and Regulation 3. The Competition Act, 2002 and its role in Corporate Governance 4. Foreign Exchange Management Act, 1999 5. Laws related to Banking Sector 6. Laws related to Insurance Sector Section C: Corporate Governance 15% 7. Corporate Governance 8. Social, Environmental and Economic Responsibilities of Business
SECTION A : COMPANIES ACT 2013 [60 MARKS]
1. The Companies Act, 2013 – rules, regulations prescribed there under with special reference to:
(a) Company Formation and Conversion (i) Incorporation of private companies, public companies, company limited by guarantee and unlimited
companies and their conversions/reconversion/re-registration (ii) Nidhi Companies, Mutual Benefit Funds and Producer Companies – concept, formation, membership,
functioning, Dissolution (iii) Formation of “Not-for-Profit” making companies (iv) Procedure relating to Foreign Companies Carrying on Business in India (v) Conversion of LLPs into Private Limited Companies and vice versa
(b) Investment and Loans (i) Procedure for inter-corporate loans, investments, giving off guarantee and security (ii) Acceptance of deposits, renewal, repayment, default and remedies
(c) Dividends (i) Profits and ascertainment of divisible profits (ii) Declaration and payment of dividend (iii) Unpaid and unclaimed dividend - treatment and transfer to Investor Education and Protection Fund
(d) Accounts and Audit (i) Maintenance of Books of Accounts (ii) Statutory Auditor, Special Auditor and Cost Auditor - Appointment, resignation, removal, qualification,
disqualification, rights, duties and liabilities (iii) Companies Auditor Report Order (CARO) Rules (e) Board of Directors & Managerial Personnel (i) Directors and Managerial Personnel - Appointment, Reappointment, Resignation, Removal (ii) Payment of remuneration to Directors and restrictions on the powers of Directors (iii) Powers of Board of Directors and Restrictions on the powers of Directors (iv) Obtaining DIN (v) Compensation for loss of office (vi) Waiver of recovery of remuneration (vii) Making loans to Directors, Disclosure of interest of a Director, Holding of Office or Place of Profit by a Director/Relative
(f) Board Meetings and Procedures (i) Board Meetings, Minutes and Registers (ii) Powers of the Boards (iii) Corporate Governance & Audit Committee (iv) Duties & Liabilities of Directors and (v) Power related to political contributions
(g) Inspection, Inquiry and Investigation
(h) Compromises, arrangements and amalgamations
(i) Prevention of oppression and mis-management (i) Majority Rule but Minority Protection (ii) Prevention of Oppression and Mis-management
(j) Revival and Rehabilitation of Sick Industrial Companies
(k) Corporate Winding Up and Dissolution (i) Kinds of Winding up - Powers of the Court and Official Liquidator
(l) Companies Incorporated outside India
(m) Offences and Penalties
(n) National Company Law Tribunal and Special Courts
Insolvency and Bankruptcy Code, 2016 (Annexure 1) (a) An introduction (b) Corporate Insolvency Resolution Process (c) Liquidation of a Corporate Person
SECTION B : OTHER CORPORATE LAWS [25 MARKS]
2. SEBI Laws and Regulations (a) The Securities Exchange Board of India Act, 1992 - Rules, Regulations and Guidelines issued there under Clause 49 and SEBI (Issue of Capital and Disclosures Reguations), 2009 (b) The Securities Contracts (Reguation) Act, 1956
3. The Competition Act, 2002 (a) Competition – Meaning, objectives, extent and applicability (b) Competition Commission of India (c) Areas affecting competition
4. Foreign Exchange Management Act, 1999 (a) Exports, Imports and Foreign Funds under Deferred Payment, ECB Route, Loans and Export Remittance and
Import Remittance
5. Laws related to Banking Sector: (a) The Banking Regulation Act, 1949 (b) The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (c) The Prevention of Money Laundering Act, 2002 – Role of Cost Accountants in Anti-Money Laundering (AML)
Audits to check tax evasion and transfer of funds
6. Laws related to Insurance Sector: (a) The Insurance Act, 1938 (b) The Insurance Regulatory and Development Authority Act, 1999
SECTION C : CORPORATE GOVERNANCE [15 MARKS]
7. Corporate Governance (a) Overview-Issues and Concepts (b) Corporate Governance Practices/Codes in India (c) Corporate Governance in family business (d) Corporate Governance in state-owned business – the MOU system
8. Social, Environmental and Economic Responsibilities of Business. (a) National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (b) Corporate Social Responsibility – Nature of activities; Evaluation of CSR projects (c) E-governance
SECTION A - COMPANIES ACT Study Note 1 : The Companies Act, 2013
Part A: COMPANY FORMATION AND CONVERSION
A : 1.1 Incorporation of private companies, public companies, company limited by guarantee
and unlimited companies and their conversions/reconversion/re-registration 1 A : 1.2 Nidhi Companies, Mutual Benefit Funds and Producer Companies - concept, formation,
membership, functioning, Dissolution 23 A : 1.3 Formation of Not-for-Profit making companies 32 A : 1.4 Procedure relating to Foreign Companies Carrying on Business in India 35 A : 1.5 Conversion of LLPs into Private Limited Companies and vice versa 38
Part B: INVESTMENT AND LOANS
B : 1.1 Procedure for inter-corporate loans, investments, giving off guarantee and security 41 B : 1.2 Acceptance of deposits, renewal, repayment, default and remedies 43
Part C: DIVIDENDS
C : 1.1 Profits and ascertainment of divisible profits 51 C : 1.2 Declaration and payment of dividend 51 C : 1.3 Unpaid and unclaimed dividend - Treatment and transfer to Investor Education and Protection Fund 54
Part D: ACCOUNTS AND AUDIT
D : 1.1 Maintenance of Books of Accounts 57 D : 1.2 Statutory Auditor, Special Auditor and Cost Auditor - Appointment, resignation, removal, qualification, disqualification, rights, duties and liabilities 70 D : 1.3 Company Auditor Report Order (CARO) 83
Part E: BOARD OF DIRECTORS & MANAGERIAL PERSONNEL
E : 1.1 Directors and Managerial Personnel - Appointment, Reappointment, Resignation, Removal 89 E : 1.2 Payment of remuneration to Directors and Managerial Personnel and Disclosure 102 E : 1.3 Powers of Board of Directors and Restrictions on the Powers of Directors 110 E : 1.4 Obtaining DIN 112 E : 1.5 Compensation for Loss of Office 116 E : 1.6 Waiver of recovery of Remuneration 117
Contents
E : 1.7 Making loans to Directors, Disclosure of Interest of a Director, Holding of Office or Place of Profit by a Director/Relative 117 E : 1.8 Interested Directors 122
Part F: BOARD MEETINGS AND PROCEDURES
F : 1.1 Board Meetings, Minutes and Registers 125 F : 1.2 Powers of the Board 134 F : 1.3 Corporate Governance & Audit Committee 137 F : 1.4 Nomination and Remuneration Committee 143 F : 1.5 Stakeholders Relationship Committee 144 F : 1.6 Corporate Social Responsibility Committee 145 F : 1.7 Duties and Liabilities of Directors 145 F : 1.8 Powers related to Political Contributions 147
Part G: INSPECTION, INQUIRY AND INVESTIGATION
G : 1.1 Power to call for information, inspect books and conduct inquiries 152 G : 1.2 Conduct of inspection and inquiry 154 G : 1.3 Report on inspection made 154 G : 1.4 Search and seizure 155 G : 1.5 Investigation into affairs of Company 156 G : 1.6 Establishment of Serious Fraud Investigation Office (SFIO) 156 G : 1.7 Investigation into affairs of Company by SFIO 157 G : 1.8 Investigation into Company’s affairs in other cases 159 G : 1.9 Security for payment of costs and expenses of investigation 160 G : 1.10 Firm, body corporate or association not to be appointed as Inspector 160 G : 1.11 Investigation of ownership of company 160 G : 1.12 Procedure, powers, etc., of Inspectors 160 G : 1.13 Protection of employees during investigation 162 G : 1.14 Power of Inspector to conduct investigation into affairs of related companies, etc. 163 G : 1.15 Seizure of documents by Inspector 164 G : 1.16 Freezing of assets of Company on inquiry and investigation 164 G : 1.17 Imposition of restrictions upon securities 164 G : 1.18 Inspector‘s report 165 G : 1.19 Actions to be taken in pursuance of Inspector‘s report 165 G : 1.20 Expenses of investigation 166 G : 1.21 Voluntary winding up of company, etc., not to stop investigation proceedings 166 G : 1.22 Legal advisers and bankers not to disclose certain information 167 G : 1.23 Investigation etc. of foreign companies 167 G :1.24 Penalty for furnishing false statement, mutilation, destruction of document 167
Part H: COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS
H : 1.1 Power to compromise or make arrangements with creditors and members 170 H : 1.2 Power of Tribunal to enforce compromise or arrangement 173 H : 1.3 Merger and amalgamation of companies 173 H : 1.4 Merger and amalgamation of certain companies 176 H : 1.5 Merger or amalgamation of company with foreign company 179 H : 1.6 Power to acquire shares of shareholders dissenting from scheme or contract approved by majority 179 H : 1.7 Purchase of minority shareholding 179 H : 1.8 Power of Central Government to provide for amalgamation of companies in public interest 180
H : 1.9 Registration of offer of schemes involving transfer of shares 180 H : 1.10 Preservation of books and papers of amalgamated companies 181 H : 1.11 Liability of officers in respect of offences committed prior to merger, amalgamation, etc 181
Part I: PREVENTION OF OPPRESSION AND MISMANAGEMENT
I : 1.1 Majority Rule but Minority Protection 183 I : 1.2 Prevention of Oppression and Mismanagement 186
Part J: REVIVAL AND REHABILITATION OF SICK INDUSTRIAL COMPANIES
J : 1.1 Determination of sickness 193
J : 1.2 Application for revival and rehabilitation 193
J : 1.3 Exclusion of certain time in computing period of limitation 193
J : 1.4 Appointment of interim administrator 193
J : 1.5 Committee of creditors 193
J : 1.6 Order of Tribunal 193
J : 1.7 Appointment of administrator 193
J : 1.8 Powers and duties of company administrator 193
J : 1.9 Scheme of revival and rehabilitation 193
J : 1.10 Sanction of scheme 193
J : 1.11 Scheme to be binding 193
J : 1.12 Implementation of scheme 193
J : 1.13 Winding up of company on report of company administrator 193
These provisions are no longer applicable. Students are advised to follow the Insolvency & Bankruptcy Code, 2016, in Annexure - 1.
Part K: CORPORATE WINDING UP AND DISSOLUTION
K : 1.1 Modes of Winding Up 196 K : 1.2 Winding up by the Tribunal 196 K : 1.3 Voluntary Winding Up 216 These provisions are no longer applicable. Students are advised to follow the Insolvency & Bankruptcy Code, 2016, in Annexure - 1.
K : 1.4 Provisions applicable to every mode of winding up 217 K : 1.5 Official Liquidators 224
Part L: COMPANIES INCORPORATED OUTSIDE INDIA
L : 1.1 Foreign Company 229 L : 1.2 Application of Act to foreign companies 230 L : 1.3 Documents, to be delivered to Registrar by foreign companies 230 L : 1.4 Accounts of foreign company 232 L : 1.5 Display of name, of foreign company 233 L : 1.6 Service on foreign company 233 L : 1.7 Debentures, annual return, registration of charges, books of account and their inspection 233 L : 1.8 Fee for registration of documents 234 L : 1.9 Interpretation 234 L : 1.10 Dating of prospectus and particulars to be contained therein 234 L : 1.11 Provisions as to expert‘s consent and allotment 235 L : 1.12 Registration of prospectus 236 L : 1.13 Offer of Indian Depository Receipts 236 L : 1.14 Application of sections 34 to 36 of Chapter XX 237 L : 1.15 Punishment for contravention 237 L : 1.16 Company‘s failure to comply with provisions of this Chapter not to affect validity of contracts 237
Part M: OFFENCES AND PENALTIES
M : 1.1 Types of Penalties 239 M : 1.2 Offences to be non-cognizable 242 M : 1.3 Application of fines 243
Part N: NATIONAL COMPANY LAW TRIBUNAL AND APPELLATE TRIBUNAL
N : 1.1 National Company Law Tribunal 246 N : 1.2 Special Courts 255
Section B – OTHER CORPORATE LAWS Study Note 2 : SEBI Laws and Regulations
Part A: THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT,1992
A : 2.1 The Securities and Exchange Board of India Act,1992 261
Part B: REVISED CLAUSE 49 OF THE LISTING AGREEMENT
B : 2.1 Revised Clause 49 of The Listing Agreement and Guidelines Issued Under Clause 49 277 These provisions are no longer applicable. Students may refer SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015
Part C: SEBI ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS
C : 2.1 SEBI Issue of Capital and Disclosure Requirements (ICDR) Regulations, 2018 279
Part D: SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015
D : 2.1 Applicability 287 D : 2.2 Compliance 288 D : 2.3 Registrar and Transfer Agents 288 D : 2.4 Policy on Preservation of Documents - Reg. 9 288 D : 2.5 Grievance Redressal Mechanism - Reg. 13 288 D : 2.6 Board of Directors 288 D : 2.7 Vigil Mechanism 289 D : 2.8 Related Party Transactions 289 D : 2.9 Obligations Pertaining to Material Subsidiaries 289 D : 2.10 Obligations Pertaining to Independent Directors 289 D : 2.11 Board Obligation 290 D : 2.12 Miscellaneous Provisions 290 D : 2.13 Record to be Maintained 291
Part E: THE SECURITIES CONTRACTS (REGULATION) ACT,1956
E : 2.1 The Securities Contracts (Regulation) Act,1956 293
PART F: SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS, 2015
F : 2.1 SEBI (Prohibition of Insider Trading) Regulations, 2015 307
Study Note 3 : The Competition Act, 2002
3.1 Competition - Meaning, objectives, extent and applicability 311 3.2 Competition Commission of India 312 3.3 Areas affecting competition 325
Study Note 4 : Foreign Exchange Management Act, 1999
4.1 Introduction 333 4.2 Broad structure of the FEMA 334 4.3 Important definitions 335 4.4 Regulation and management of foreign exchange 339 4.5 Authorised person 349
Study Note 5 : Laws Related to Banking Sector
PART A: THE BANKING REGULATION ACT, 1949
A : 5.1 Introduction 353 A : 5.2 About Banking Regulation Act, 1949 354 A : 5.3 Salient features of the Banking Regulation Act, 1949 355
PART B: THE SECURITIZATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002
B : 5.1 Introduction 363 B : 5.2 Important Definitions 363 B : 5.3 Regulation of Securitisation and Reconstruction of Financial Assets of Banks and Financial Institutions 365 B : 5.4 Enforcement of Security Interest 368
PART C: THE PREVENTION OF MONEY LAUNDERING ACT, 2002
C : 5.1 The Prevention of Money Laundering Act, 2002 373 C : 5.2 Role of Cost Accountants in Anti- Money Laundering (AML) Audits to check tax evasion and transfer of funds 381
Study Note 6 : Laws Related to Insurance Sector
PART A: THE INSURANCE ACT, 1938
A : 6.1 Introduction 395 A : 6.2 Principles of Insurance Law 397 A : 6.3 Important Definitions 401 A : 6.4 Provisions Related to Insurance 402
PART B: THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ACT, 1999
B : 6.1 Introduction 409 B : 6.2 The Insurance Regulatory and Development Authority Act, 1999 409 B : 6.3 Function of IRDA 409 B : 6.4 Important definitions 410
B : 6.5 Insurance Regulatory and Development Authority of India 410 B : 6.6 Duties, Powers and Functions of Authority 411 B : 6.7 Finance, Accounts & Audit 411 B : 6.8 Other Matters 412
Section C – CORPORATE GOVERNANCE Study Note 7 : Corporate Governance
7.1 Overview-Issues and Concepts 415 7.2 Corporate Governance Practices/Codes in India 423 7.3 Corporate governance in family business 438 7.4 Corporate governance in state-owned business - the MOU system 443
Study Note 8 : Social, Environmental and Economic Responsibilities of Business
8.1 National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business 449 8.2 Corporate Social Responsibility - Nature of activities; Evaluation of CSR projects 455 8.3 E-governance 466
Annexure 1 : (Addendum to Section A)
INSOLVENCY AND BANKRUPTCY CODE, 2016 Introduction 473 Corporate Insolvency Resolution Process 477 Liquidation of a Corporate Person 493
Section A Companies Act
The Companies Act, 2013
This Study Note includes:
A : 1.1 Incorporation of private companies, public companies, company limited by guarantee and unlimited companies and their conversions/reconversion/re-registration
A : 1.2 Nidhi Companies, Mutual Benefit Funds and Producer Companies - concept, formation, membership, functioning, Dissolution
A : 1.3 Formation of Not-for-Profit making companies
A : 1.4 Procedure relating to Foreign Companies Carrying on Business in India
A : 1.5 Conversion of LLPs into Private Limited Companies and vice versa
Study Note - 1 THE COMPANIES ACT, 2013 PART - A : COMPANIES FORMATION AND CONVERSION
A : 1.1 INCORPORATION OF PRIVATE COMPANIES, PUBLIC COMPANIES, COMPANY LIMITED BY GUARANTEE AND UNLIMITED COMPANIES AND THEIR CONVERSIONS/RECONVERSION/RE-REGISTRATION
1.1.1 Introduction
The Companies Act, 2013 consisting of 29 Chapters, 470 Sections and 7 Schedules as against 658 Sections under 13 Parts and 15 schedules in the Companies Act, 1956, was notified partially on 12th September 2013 (55 sections) and partially again on 26th March, 2014 (168 sections with effect from 1.4.2014). Part of the provisions related to National Company Law Tribunal have been notified with effect from 1st June, 2016. The provision relating to Class Action Suits also has been enforced with effect from 1st June, 2016. The jurisdiction in respect of merger and acquisitions and compromises and arrangements under Chapter XV (corresponding to earlier sections 391 – 394 in the previous Companies Act, 1956) still rests with the High Courts.
The Companies Act, 2013 (hereafter ‘The Act’) consolidates and amends the law relating to the companies in India and replaces the Companies Act, 1956 in phases, which is 56 years old. The new Act intends to improve corporate governance and to further strengthen regulations for the corporate sector with the introduction of key provisions as to Duties and Liabilities of Directors/Independent Directors, Auditor Rotation, Establishment of Serious Fraud Investigation Office (SFIO), Constitution of National Financial Reporting Authority (NFRA), Class Action Suit, Corporate Social Responsibility (CSR) etc.
The Companies Act, 2013 is administered by the Central Government through the Ministry of Corporate Affairs (MCA) and…
CORPORATE LAWS & COMPLIANCE
The Institute of Cost Accountants of India CMA Bhawan, 12, Sudder Street, Kolkata - 700 016
SY LLA
BU S -
20 16
First Edition : August 2016 Reprint : April 2017 Revised Edition : January 2018 Revised Edition : December 2018 Edition : August 2019 Reprint : January 2020 Revised Edition : October 2020
Published by : Directorate of Studies The Institute of Cost Accountants of India (ICAI) CMA Bhawan, 12, Sudder Street, Kolkata - 700 016 www.icmai.in
Printed at : M/s. Aravali Printers & Publishers (P) Ltd. W-30, Okhla Industrial Area, Phase - II New Delhi - 110 020.
Copyright of these Study Notes is reserved by the Institute of Cost Accountants of India and prior permission from the Institute is necessary
for reproduction of the whole or any part thereof.
Syllabus - 2016 PAPER 13: CORPORATE LAWS & COMPLIANCE
Syllabus Structure
A Companies Act 60% The Companies Act, 2013 50% Insolvency & Bankruptcy Code, 2016 10%
B Other Corporate Laws 25% C Corporate Governance 15%
A 60%
C 15%
B 25%
ASSESSMENT STRATEGY There will be written examination paper of three hours
OBJECTIVES To gain an expert knowledge of Corporate functions in the context of Companies Act & related Corporate Laws. To be able to assess whether strategies and the organization is in compliance with established regulatory framework, and Corporate Governanace.
Learning Aims The syllabus aims to test the student’s ability to: Understand the principles of Corporate Laws relevant for compliance and decision-making Analyze and interpret the impact of allied laws Evaluate the essence of Corporate Governance for effective implementation Demonstrate the role of a Corporate in socio-economic development
Skill set required Level C: Requiring skill levels of knowledge, comprehension, application, analysis, synthesis and evaluation.
Note: Subjects related to applicable statutes shall be read with amendments made from time to time. Section A : Companies Act 1. The Companies Act, 2013 50% Insolvency and Bankrupcy Code, 2016 (Annexure 1) 10% Section B: Other Corporate Laws 25% 2. SEBI laws and Regulation 3. The Competition Act, 2002 and its role in Corporate Governance 4. Foreign Exchange Management Act, 1999 5. Laws related to Banking Sector 6. Laws related to Insurance Sector Section C: Corporate Governance 15% 7. Corporate Governance 8. Social, Environmental and Economic Responsibilities of Business
SECTION A : COMPANIES ACT 2013 [60 MARKS]
1. The Companies Act, 2013 – rules, regulations prescribed there under with special reference to:
(a) Company Formation and Conversion (i) Incorporation of private companies, public companies, company limited by guarantee and unlimited
companies and their conversions/reconversion/re-registration (ii) Nidhi Companies, Mutual Benefit Funds and Producer Companies – concept, formation, membership,
functioning, Dissolution (iii) Formation of “Not-for-Profit” making companies (iv) Procedure relating to Foreign Companies Carrying on Business in India (v) Conversion of LLPs into Private Limited Companies and vice versa
(b) Investment and Loans (i) Procedure for inter-corporate loans, investments, giving off guarantee and security (ii) Acceptance of deposits, renewal, repayment, default and remedies
(c) Dividends (i) Profits and ascertainment of divisible profits (ii) Declaration and payment of dividend (iii) Unpaid and unclaimed dividend - treatment and transfer to Investor Education and Protection Fund
(d) Accounts and Audit (i) Maintenance of Books of Accounts (ii) Statutory Auditor, Special Auditor and Cost Auditor - Appointment, resignation, removal, qualification,
disqualification, rights, duties and liabilities (iii) Companies Auditor Report Order (CARO) Rules (e) Board of Directors & Managerial Personnel (i) Directors and Managerial Personnel - Appointment, Reappointment, Resignation, Removal (ii) Payment of remuneration to Directors and restrictions on the powers of Directors (iii) Powers of Board of Directors and Restrictions on the powers of Directors (iv) Obtaining DIN (v) Compensation for loss of office (vi) Waiver of recovery of remuneration (vii) Making loans to Directors, Disclosure of interest of a Director, Holding of Office or Place of Profit by a Director/Relative
(f) Board Meetings and Procedures (i) Board Meetings, Minutes and Registers (ii) Powers of the Boards (iii) Corporate Governance & Audit Committee (iv) Duties & Liabilities of Directors and (v) Power related to political contributions
(g) Inspection, Inquiry and Investigation
(h) Compromises, arrangements and amalgamations
(i) Prevention of oppression and mis-management (i) Majority Rule but Minority Protection (ii) Prevention of Oppression and Mis-management
(j) Revival and Rehabilitation of Sick Industrial Companies
(k) Corporate Winding Up and Dissolution (i) Kinds of Winding up - Powers of the Court and Official Liquidator
(l) Companies Incorporated outside India
(m) Offences and Penalties
(n) National Company Law Tribunal and Special Courts
Insolvency and Bankruptcy Code, 2016 (Annexure 1) (a) An introduction (b) Corporate Insolvency Resolution Process (c) Liquidation of a Corporate Person
SECTION B : OTHER CORPORATE LAWS [25 MARKS]
2. SEBI Laws and Regulations (a) The Securities Exchange Board of India Act, 1992 - Rules, Regulations and Guidelines issued there under Clause 49 and SEBI (Issue of Capital and Disclosures Reguations), 2009 (b) The Securities Contracts (Reguation) Act, 1956
3. The Competition Act, 2002 (a) Competition – Meaning, objectives, extent and applicability (b) Competition Commission of India (c) Areas affecting competition
4. Foreign Exchange Management Act, 1999 (a) Exports, Imports and Foreign Funds under Deferred Payment, ECB Route, Loans and Export Remittance and
Import Remittance
5. Laws related to Banking Sector: (a) The Banking Regulation Act, 1949 (b) The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (c) The Prevention of Money Laundering Act, 2002 – Role of Cost Accountants in Anti-Money Laundering (AML)
Audits to check tax evasion and transfer of funds
6. Laws related to Insurance Sector: (a) The Insurance Act, 1938 (b) The Insurance Regulatory and Development Authority Act, 1999
SECTION C : CORPORATE GOVERNANCE [15 MARKS]
7. Corporate Governance (a) Overview-Issues and Concepts (b) Corporate Governance Practices/Codes in India (c) Corporate Governance in family business (d) Corporate Governance in state-owned business – the MOU system
8. Social, Environmental and Economic Responsibilities of Business. (a) National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (b) Corporate Social Responsibility – Nature of activities; Evaluation of CSR projects (c) E-governance
SECTION A - COMPANIES ACT Study Note 1 : The Companies Act, 2013
Part A: COMPANY FORMATION AND CONVERSION
A : 1.1 Incorporation of private companies, public companies, company limited by guarantee
and unlimited companies and their conversions/reconversion/re-registration 1 A : 1.2 Nidhi Companies, Mutual Benefit Funds and Producer Companies - concept, formation,
membership, functioning, Dissolution 23 A : 1.3 Formation of Not-for-Profit making companies 32 A : 1.4 Procedure relating to Foreign Companies Carrying on Business in India 35 A : 1.5 Conversion of LLPs into Private Limited Companies and vice versa 38
Part B: INVESTMENT AND LOANS
B : 1.1 Procedure for inter-corporate loans, investments, giving off guarantee and security 41 B : 1.2 Acceptance of deposits, renewal, repayment, default and remedies 43
Part C: DIVIDENDS
C : 1.1 Profits and ascertainment of divisible profits 51 C : 1.2 Declaration and payment of dividend 51 C : 1.3 Unpaid and unclaimed dividend - Treatment and transfer to Investor Education and Protection Fund 54
Part D: ACCOUNTS AND AUDIT
D : 1.1 Maintenance of Books of Accounts 57 D : 1.2 Statutory Auditor, Special Auditor and Cost Auditor - Appointment, resignation, removal, qualification, disqualification, rights, duties and liabilities 70 D : 1.3 Company Auditor Report Order (CARO) 83
Part E: BOARD OF DIRECTORS & MANAGERIAL PERSONNEL
E : 1.1 Directors and Managerial Personnel - Appointment, Reappointment, Resignation, Removal 89 E : 1.2 Payment of remuneration to Directors and Managerial Personnel and Disclosure 102 E : 1.3 Powers of Board of Directors and Restrictions on the Powers of Directors 110 E : 1.4 Obtaining DIN 112 E : 1.5 Compensation for Loss of Office 116 E : 1.6 Waiver of recovery of Remuneration 117
Contents
E : 1.7 Making loans to Directors, Disclosure of Interest of a Director, Holding of Office or Place of Profit by a Director/Relative 117 E : 1.8 Interested Directors 122
Part F: BOARD MEETINGS AND PROCEDURES
F : 1.1 Board Meetings, Minutes and Registers 125 F : 1.2 Powers of the Board 134 F : 1.3 Corporate Governance & Audit Committee 137 F : 1.4 Nomination and Remuneration Committee 143 F : 1.5 Stakeholders Relationship Committee 144 F : 1.6 Corporate Social Responsibility Committee 145 F : 1.7 Duties and Liabilities of Directors 145 F : 1.8 Powers related to Political Contributions 147
Part G: INSPECTION, INQUIRY AND INVESTIGATION
G : 1.1 Power to call for information, inspect books and conduct inquiries 152 G : 1.2 Conduct of inspection and inquiry 154 G : 1.3 Report on inspection made 154 G : 1.4 Search and seizure 155 G : 1.5 Investigation into affairs of Company 156 G : 1.6 Establishment of Serious Fraud Investigation Office (SFIO) 156 G : 1.7 Investigation into affairs of Company by SFIO 157 G : 1.8 Investigation into Company’s affairs in other cases 159 G : 1.9 Security for payment of costs and expenses of investigation 160 G : 1.10 Firm, body corporate or association not to be appointed as Inspector 160 G : 1.11 Investigation of ownership of company 160 G : 1.12 Procedure, powers, etc., of Inspectors 160 G : 1.13 Protection of employees during investigation 162 G : 1.14 Power of Inspector to conduct investigation into affairs of related companies, etc. 163 G : 1.15 Seizure of documents by Inspector 164 G : 1.16 Freezing of assets of Company on inquiry and investigation 164 G : 1.17 Imposition of restrictions upon securities 164 G : 1.18 Inspector‘s report 165 G : 1.19 Actions to be taken in pursuance of Inspector‘s report 165 G : 1.20 Expenses of investigation 166 G : 1.21 Voluntary winding up of company, etc., not to stop investigation proceedings 166 G : 1.22 Legal advisers and bankers not to disclose certain information 167 G : 1.23 Investigation etc. of foreign companies 167 G :1.24 Penalty for furnishing false statement, mutilation, destruction of document 167
Part H: COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS
H : 1.1 Power to compromise or make arrangements with creditors and members 170 H : 1.2 Power of Tribunal to enforce compromise or arrangement 173 H : 1.3 Merger and amalgamation of companies 173 H : 1.4 Merger and amalgamation of certain companies 176 H : 1.5 Merger or amalgamation of company with foreign company 179 H : 1.6 Power to acquire shares of shareholders dissenting from scheme or contract approved by majority 179 H : 1.7 Purchase of minority shareholding 179 H : 1.8 Power of Central Government to provide for amalgamation of companies in public interest 180
H : 1.9 Registration of offer of schemes involving transfer of shares 180 H : 1.10 Preservation of books and papers of amalgamated companies 181 H : 1.11 Liability of officers in respect of offences committed prior to merger, amalgamation, etc 181
Part I: PREVENTION OF OPPRESSION AND MISMANAGEMENT
I : 1.1 Majority Rule but Minority Protection 183 I : 1.2 Prevention of Oppression and Mismanagement 186
Part J: REVIVAL AND REHABILITATION OF SICK INDUSTRIAL COMPANIES
J : 1.1 Determination of sickness 193
J : 1.2 Application for revival and rehabilitation 193
J : 1.3 Exclusion of certain time in computing period of limitation 193
J : 1.4 Appointment of interim administrator 193
J : 1.5 Committee of creditors 193
J : 1.6 Order of Tribunal 193
J : 1.7 Appointment of administrator 193
J : 1.8 Powers and duties of company administrator 193
J : 1.9 Scheme of revival and rehabilitation 193
J : 1.10 Sanction of scheme 193
J : 1.11 Scheme to be binding 193
J : 1.12 Implementation of scheme 193
J : 1.13 Winding up of company on report of company administrator 193
These provisions are no longer applicable. Students are advised to follow the Insolvency & Bankruptcy Code, 2016, in Annexure - 1.
Part K: CORPORATE WINDING UP AND DISSOLUTION
K : 1.1 Modes of Winding Up 196 K : 1.2 Winding up by the Tribunal 196 K : 1.3 Voluntary Winding Up 216 These provisions are no longer applicable. Students are advised to follow the Insolvency & Bankruptcy Code, 2016, in Annexure - 1.
K : 1.4 Provisions applicable to every mode of winding up 217 K : 1.5 Official Liquidators 224
Part L: COMPANIES INCORPORATED OUTSIDE INDIA
L : 1.1 Foreign Company 229 L : 1.2 Application of Act to foreign companies 230 L : 1.3 Documents, to be delivered to Registrar by foreign companies 230 L : 1.4 Accounts of foreign company 232 L : 1.5 Display of name, of foreign company 233 L : 1.6 Service on foreign company 233 L : 1.7 Debentures, annual return, registration of charges, books of account and their inspection 233 L : 1.8 Fee for registration of documents 234 L : 1.9 Interpretation 234 L : 1.10 Dating of prospectus and particulars to be contained therein 234 L : 1.11 Provisions as to expert‘s consent and allotment 235 L : 1.12 Registration of prospectus 236 L : 1.13 Offer of Indian Depository Receipts 236 L : 1.14 Application of sections 34 to 36 of Chapter XX 237 L : 1.15 Punishment for contravention 237 L : 1.16 Company‘s failure to comply with provisions of this Chapter not to affect validity of contracts 237
Part M: OFFENCES AND PENALTIES
M : 1.1 Types of Penalties 239 M : 1.2 Offences to be non-cognizable 242 M : 1.3 Application of fines 243
Part N: NATIONAL COMPANY LAW TRIBUNAL AND APPELLATE TRIBUNAL
N : 1.1 National Company Law Tribunal 246 N : 1.2 Special Courts 255
Section B – OTHER CORPORATE LAWS Study Note 2 : SEBI Laws and Regulations
Part A: THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT,1992
A : 2.1 The Securities and Exchange Board of India Act,1992 261
Part B: REVISED CLAUSE 49 OF THE LISTING AGREEMENT
B : 2.1 Revised Clause 49 of The Listing Agreement and Guidelines Issued Under Clause 49 277 These provisions are no longer applicable. Students may refer SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015
Part C: SEBI ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS
C : 2.1 SEBI Issue of Capital and Disclosure Requirements (ICDR) Regulations, 2018 279
Part D: SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015
D : 2.1 Applicability 287 D : 2.2 Compliance 288 D : 2.3 Registrar and Transfer Agents 288 D : 2.4 Policy on Preservation of Documents - Reg. 9 288 D : 2.5 Grievance Redressal Mechanism - Reg. 13 288 D : 2.6 Board of Directors 288 D : 2.7 Vigil Mechanism 289 D : 2.8 Related Party Transactions 289 D : 2.9 Obligations Pertaining to Material Subsidiaries 289 D : 2.10 Obligations Pertaining to Independent Directors 289 D : 2.11 Board Obligation 290 D : 2.12 Miscellaneous Provisions 290 D : 2.13 Record to be Maintained 291
Part E: THE SECURITIES CONTRACTS (REGULATION) ACT,1956
E : 2.1 The Securities Contracts (Regulation) Act,1956 293
PART F: SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS, 2015
F : 2.1 SEBI (Prohibition of Insider Trading) Regulations, 2015 307
Study Note 3 : The Competition Act, 2002
3.1 Competition - Meaning, objectives, extent and applicability 311 3.2 Competition Commission of India 312 3.3 Areas affecting competition 325
Study Note 4 : Foreign Exchange Management Act, 1999
4.1 Introduction 333 4.2 Broad structure of the FEMA 334 4.3 Important definitions 335 4.4 Regulation and management of foreign exchange 339 4.5 Authorised person 349
Study Note 5 : Laws Related to Banking Sector
PART A: THE BANKING REGULATION ACT, 1949
A : 5.1 Introduction 353 A : 5.2 About Banking Regulation Act, 1949 354 A : 5.3 Salient features of the Banking Regulation Act, 1949 355
PART B: THE SECURITIZATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002
B : 5.1 Introduction 363 B : 5.2 Important Definitions 363 B : 5.3 Regulation of Securitisation and Reconstruction of Financial Assets of Banks and Financial Institutions 365 B : 5.4 Enforcement of Security Interest 368
PART C: THE PREVENTION OF MONEY LAUNDERING ACT, 2002
C : 5.1 The Prevention of Money Laundering Act, 2002 373 C : 5.2 Role of Cost Accountants in Anti- Money Laundering (AML) Audits to check tax evasion and transfer of funds 381
Study Note 6 : Laws Related to Insurance Sector
PART A: THE INSURANCE ACT, 1938
A : 6.1 Introduction 395 A : 6.2 Principles of Insurance Law 397 A : 6.3 Important Definitions 401 A : 6.4 Provisions Related to Insurance 402
PART B: THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ACT, 1999
B : 6.1 Introduction 409 B : 6.2 The Insurance Regulatory and Development Authority Act, 1999 409 B : 6.3 Function of IRDA 409 B : 6.4 Important definitions 410
B : 6.5 Insurance Regulatory and Development Authority of India 410 B : 6.6 Duties, Powers and Functions of Authority 411 B : 6.7 Finance, Accounts & Audit 411 B : 6.8 Other Matters 412
Section C – CORPORATE GOVERNANCE Study Note 7 : Corporate Governance
7.1 Overview-Issues and Concepts 415 7.2 Corporate Governance Practices/Codes in India 423 7.3 Corporate governance in family business 438 7.4 Corporate governance in state-owned business - the MOU system 443
Study Note 8 : Social, Environmental and Economic Responsibilities of Business
8.1 National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business 449 8.2 Corporate Social Responsibility - Nature of activities; Evaluation of CSR projects 455 8.3 E-governance 466
Annexure 1 : (Addendum to Section A)
INSOLVENCY AND BANKRUPTCY CODE, 2016 Introduction 473 Corporate Insolvency Resolution Process 477 Liquidation of a Corporate Person 493
Section A Companies Act
The Companies Act, 2013
This Study Note includes:
A : 1.1 Incorporation of private companies, public companies, company limited by guarantee and unlimited companies and their conversions/reconversion/re-registration
A : 1.2 Nidhi Companies, Mutual Benefit Funds and Producer Companies - concept, formation, membership, functioning, Dissolution
A : 1.3 Formation of Not-for-Profit making companies
A : 1.4 Procedure relating to Foreign Companies Carrying on Business in India
A : 1.5 Conversion of LLPs into Private Limited Companies and vice versa
Study Note - 1 THE COMPANIES ACT, 2013 PART - A : COMPANIES FORMATION AND CONVERSION
A : 1.1 INCORPORATION OF PRIVATE COMPANIES, PUBLIC COMPANIES, COMPANY LIMITED BY GUARANTEE AND UNLIMITED COMPANIES AND THEIR CONVERSIONS/RECONVERSION/RE-REGISTRATION
1.1.1 Introduction
The Companies Act, 2013 consisting of 29 Chapters, 470 Sections and 7 Schedules as against 658 Sections under 13 Parts and 15 schedules in the Companies Act, 1956, was notified partially on 12th September 2013 (55 sections) and partially again on 26th March, 2014 (168 sections with effect from 1.4.2014). Part of the provisions related to National Company Law Tribunal have been notified with effect from 1st June, 2016. The provision relating to Class Action Suits also has been enforced with effect from 1st June, 2016. The jurisdiction in respect of merger and acquisitions and compromises and arrangements under Chapter XV (corresponding to earlier sections 391 – 394 in the previous Companies Act, 1956) still rests with the High Courts.
The Companies Act, 2013 (hereafter ‘The Act’) consolidates and amends the law relating to the companies in India and replaces the Companies Act, 1956 in phases, which is 56 years old. The new Act intends to improve corporate governance and to further strengthen regulations for the corporate sector with the introduction of key provisions as to Duties and Liabilities of Directors/Independent Directors, Auditor Rotation, Establishment of Serious Fraud Investigation Office (SFIO), Constitution of National Financial Reporting Authority (NFRA), Class Action Suit, Corporate Social Responsibility (CSR) etc.
The Companies Act, 2013 is administered by the Central Government through the Ministry of Corporate Affairs (MCA) and…
Related Documents
