INTER C.A. – LAW
INDEX
CHAPTER PARTICULARS PAGE
COMPANY LAW
1. PRELIMINARY 1–6
2. INCORPORATION OF COMPANY AND 7 – 13
MATTERS INCIDENTAL THERETO
3. PROSPECTUS AND ALLOTMENT OF 14 – 21
SECURITIES
4. SHARE CAPITAL AND DEBENTURES 22 – 33
5. ACCEPTANCE OF DEPOSITS BY 34 – 38
COMPANIES
6. REGISTRATION OF CHARGES 39 – 42
7. MANAGEMENT AND ADMINISTRATION 43 – 55
8. DECLARATION AND PAYMENT OF 56 – 61
DIVIDEND
9. ACCOUNTS OF COMPANIES 62 – 70
,J.K.SHAH CLASSES INTER C.A.- LAW
CHAPTER 1
THE COMPANIES ACT, 2013
UNIT 1: PRELIMINARY
• BACKGROUND AND AIM OF THE ACT
It came into existence at once from the date of notification in the Official Gazette
i.e., from 30th August, 2013,
It extends to the whole of India.
Structure of the Act: The Companies Act, 2013 has 470 Sections (covered in 29
Chapters) and 7 Schedules as against 658 Sections (covered in 13 Parts) and 15
Schedules of the Companies Act, 1956.
promote the development of the economy.
encourage transparency, accountability and high standards of corporate
governance;
recognize various new concepts and procedures facilitating convenience of doing
business
enforce stricter action against fraud
The word 'company' is derived from the Latin words (com= with or together; and
panis = bread or meal); and originally referred to an association of persons who took their
meals together.
The term 'company' has been defined under Section 2(20) of the Companies Act, 2013. As
per this, 'company' means a company incorporated under Companies Act, 2013 or
under any of the previous laws relating to companies.
'Company' shall be used in the sense as defined above for the entire Companies Act, 2013,
unless the context otherwise requires.
1. Separate legal entity
2. Limited liability
3. Perpetual Succession
4. Separate Property
5. Transferability of Shares
6. Common Seal
7. Capacity to sue and be sued
8. Separate Management:
9. Voluntary Association for Profit
IS COMPANY A CITIZEN?
Although, a company is regarded as a legal person (though artificial), it is not a citizen
either under the Constitution of India or the Citizenship Act, 1955.
HAS COMPANY A NATIONALITY AND RESIDENCE?
Corporate veil: refers to a separate legal existence enjoyed by the company
which is distinct from people who own & manage it.
It is an artificial curtain created by law which separates the company from the
people who own and manage it.
It means looking behind the company as a legal person, i.e., disregarding the
corporate entity and paying regard, instead, to the realities behind the legal
facade. Where the Courts ignore the company and concern themselves directly
with the members or managers, the corporate veil may be said to have been
lifted. Only in appropriate circumstances, the Courts shall lift the corporate
veil.
:1:
,J.K.SHAH CLASSES INTER C.A.- LAW
TYPES OF COMPANY
Company limited by shares:
Section 2(22), company limited by shares is a registered company having the liability
of its members limited to the amount, if any, unpaid on the shares respectively held by
them. If his shares are fully paid - up, he has nothing more to pay.
Company limited by guarantee:
Section 2(21), "guarantee company" is a company having the liability of its members
limited to such an amount as the members may respectively thereby undertake, by the
memorandum of association of the company, to contribute to the assets of the
company.
But a guarantee company having a share capital raises its initial capital from its
members, while the normal working funds would be provided from other sources, such
as fees, charges, subscriptions.
Unlimited Company:
As per Section 2(92), unlimited company is a company not having any limit on the
liability of its members. In such a company the liability of a member ceases when he
ceases to be a member.
Thus, the maximum liability of the members of such a company could extend to their
entire personal property to meet the debts and obligations of the company.
The members of an unlimited company are not liable directly to the creditors of the
company, unlike in the case of partners of a firm. The liability of the members is only
towards the company, so long it is a going concern; and in the event of its being
wound up, only the Liquidator can ask the members to contribute to the assets of the
company.
Private Company:
Section 2(68),
restricts the right to transfer its shares;
limits the number of its members to two hundred (except in case of One Person
Company)
prohibits any invitation to the public to subscribe for any securities of the company.
There should be at least two persons to form a private company i.e., the minimum no.
of members in a private company is two. A private company should have at least two
directors. The name of a private limited company must end with the words "Private
Limited".
Public Company:
As per Section 2(71),
• is not a private company
• Seven or more members are required to form the company.
• a private company which is a subsidiary of a public company shall also be
deemed to be a public company for the purposes of this Act, even where such
subsidiary company continues to be a private company in its articles
• A public company should have at least three directors. The name of a public
limited company must end with the word "Limited".
:2:
, J.K.SHAH CLASSES INTER C.A.- LAW
One Person Company:
Definition: As per Section 2(62),one person company is a company which-
One Person Company' means a company which has only one person as a member.
It is basically a private company with some unique features.
As regards the name of a One Person Company, the Act provides that the words "One
Person Company" or 'OPC' shall be mentioned in brackets below the name of such
Company, wherever its name is printed, affixed or engraved.
Law with respect to formation of OPC provides that—
The memorandum of OPC shall indicate the name of the other person, who shall,
in the event of the subscriber’s death or his incapacity to contract, become the
member of the company.
The other person whose name is given in the memorandum shall give his prior
written consent in prescribed form and the same shall be filed with Registrar of
companies at the time of incorporation.
Such other person may be given the right to withdraw his consent.
The member of OPC may at any time change the name of such other person by
giving notice to the company and the company shall intimate the same to the
Registrar.
Any such change in the name of the person shall not be deemed to be an
alteration of the memorandum.
Only a natural person who is an Indian citizen and resident in India (person who
has stayed in India for a period of not less than 182 days during the immediately
preceding one calendar year)-
a) Shall be eligible to incorporate a OPC;
b) Shall be a nominee for the sole member of a OPC.
A natural person shall not be a member of more than a OPC at any point of time
and the said person shall not be a nominee of more than a OPC.
Where a natural person being member in OPC becomes member in another such
company by virtue of his being a nominee in that OPC, such person shall meet
the eligibility criteria (as given in point above) within a period of 182 days.
No minor shall become member or nominee of the OPC or can hold share with
beneficial interest.
Such Company cannot be incorporated or converted into a company under
section 8 of the Act. Though it may be converted to private or public companies
in certain cases. The procedure of conversion is given in the rules 6 & 7 of the
Chapter II.
Such Company cannot carry out Non-Banking Financial Investment activities
including investment in securities of anybody corporate.
OPC cannot convert voluntarily into any kind of company unless two years have
expired from the date of incorporation, except where the paid up share capital is
increased beyond fifty lakh rupees or its average annual turnover during the
relevant period exceeds two crore rupees.
Small Company
Section 2(85),
(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher
amount as may be prescribed which shall not be more than ten crore rupees;
And
(ii) turnover of which as per as per profit and loss account for the immediately preceding
financial year does not exceed two crore rupees or such higher amount as may be
prescribed which shall not be more than one hundred crore rupees:
:3:
INDEX
CHAPTER PARTICULARS PAGE
COMPANY LAW
1. PRELIMINARY 1–6
2. INCORPORATION OF COMPANY AND 7 – 13
MATTERS INCIDENTAL THERETO
3. PROSPECTUS AND ALLOTMENT OF 14 – 21
SECURITIES
4. SHARE CAPITAL AND DEBENTURES 22 – 33
5. ACCEPTANCE OF DEPOSITS BY 34 – 38
COMPANIES
6. REGISTRATION OF CHARGES 39 – 42
7. MANAGEMENT AND ADMINISTRATION 43 – 55
8. DECLARATION AND PAYMENT OF 56 – 61
DIVIDEND
9. ACCOUNTS OF COMPANIES 62 – 70
,J.K.SHAH CLASSES INTER C.A.- LAW
CHAPTER 1
THE COMPANIES ACT, 2013
UNIT 1: PRELIMINARY
• BACKGROUND AND AIM OF THE ACT
It came into existence at once from the date of notification in the Official Gazette
i.e., from 30th August, 2013,
It extends to the whole of India.
Structure of the Act: The Companies Act, 2013 has 470 Sections (covered in 29
Chapters) and 7 Schedules as against 658 Sections (covered in 13 Parts) and 15
Schedules of the Companies Act, 1956.
promote the development of the economy.
encourage transparency, accountability and high standards of corporate
governance;
recognize various new concepts and procedures facilitating convenience of doing
business
enforce stricter action against fraud
The word 'company' is derived from the Latin words (com= with or together; and
panis = bread or meal); and originally referred to an association of persons who took their
meals together.
The term 'company' has been defined under Section 2(20) of the Companies Act, 2013. As
per this, 'company' means a company incorporated under Companies Act, 2013 or
under any of the previous laws relating to companies.
'Company' shall be used in the sense as defined above for the entire Companies Act, 2013,
unless the context otherwise requires.
1. Separate legal entity
2. Limited liability
3. Perpetual Succession
4. Separate Property
5. Transferability of Shares
6. Common Seal
7. Capacity to sue and be sued
8. Separate Management:
9. Voluntary Association for Profit
IS COMPANY A CITIZEN?
Although, a company is regarded as a legal person (though artificial), it is not a citizen
either under the Constitution of India or the Citizenship Act, 1955.
HAS COMPANY A NATIONALITY AND RESIDENCE?
Corporate veil: refers to a separate legal existence enjoyed by the company
which is distinct from people who own & manage it.
It is an artificial curtain created by law which separates the company from the
people who own and manage it.
It means looking behind the company as a legal person, i.e., disregarding the
corporate entity and paying regard, instead, to the realities behind the legal
facade. Where the Courts ignore the company and concern themselves directly
with the members or managers, the corporate veil may be said to have been
lifted. Only in appropriate circumstances, the Courts shall lift the corporate
veil.
:1:
,J.K.SHAH CLASSES INTER C.A.- LAW
TYPES OF COMPANY
Company limited by shares:
Section 2(22), company limited by shares is a registered company having the liability
of its members limited to the amount, if any, unpaid on the shares respectively held by
them. If his shares are fully paid - up, he has nothing more to pay.
Company limited by guarantee:
Section 2(21), "guarantee company" is a company having the liability of its members
limited to such an amount as the members may respectively thereby undertake, by the
memorandum of association of the company, to contribute to the assets of the
company.
But a guarantee company having a share capital raises its initial capital from its
members, while the normal working funds would be provided from other sources, such
as fees, charges, subscriptions.
Unlimited Company:
As per Section 2(92), unlimited company is a company not having any limit on the
liability of its members. In such a company the liability of a member ceases when he
ceases to be a member.
Thus, the maximum liability of the members of such a company could extend to their
entire personal property to meet the debts and obligations of the company.
The members of an unlimited company are not liable directly to the creditors of the
company, unlike in the case of partners of a firm. The liability of the members is only
towards the company, so long it is a going concern; and in the event of its being
wound up, only the Liquidator can ask the members to contribute to the assets of the
company.
Private Company:
Section 2(68),
restricts the right to transfer its shares;
limits the number of its members to two hundred (except in case of One Person
Company)
prohibits any invitation to the public to subscribe for any securities of the company.
There should be at least two persons to form a private company i.e., the minimum no.
of members in a private company is two. A private company should have at least two
directors. The name of a private limited company must end with the words "Private
Limited".
Public Company:
As per Section 2(71),
• is not a private company
• Seven or more members are required to form the company.
• a private company which is a subsidiary of a public company shall also be
deemed to be a public company for the purposes of this Act, even where such
subsidiary company continues to be a private company in its articles
• A public company should have at least three directors. The name of a public
limited company must end with the word "Limited".
:2:
, J.K.SHAH CLASSES INTER C.A.- LAW
One Person Company:
Definition: As per Section 2(62),one person company is a company which-
One Person Company' means a company which has only one person as a member.
It is basically a private company with some unique features.
As regards the name of a One Person Company, the Act provides that the words "One
Person Company" or 'OPC' shall be mentioned in brackets below the name of such
Company, wherever its name is printed, affixed or engraved.
Law with respect to formation of OPC provides that—
The memorandum of OPC shall indicate the name of the other person, who shall,
in the event of the subscriber’s death or his incapacity to contract, become the
member of the company.
The other person whose name is given in the memorandum shall give his prior
written consent in prescribed form and the same shall be filed with Registrar of
companies at the time of incorporation.
Such other person may be given the right to withdraw his consent.
The member of OPC may at any time change the name of such other person by
giving notice to the company and the company shall intimate the same to the
Registrar.
Any such change in the name of the person shall not be deemed to be an
alteration of the memorandum.
Only a natural person who is an Indian citizen and resident in India (person who
has stayed in India for a period of not less than 182 days during the immediately
preceding one calendar year)-
a) Shall be eligible to incorporate a OPC;
b) Shall be a nominee for the sole member of a OPC.
A natural person shall not be a member of more than a OPC at any point of time
and the said person shall not be a nominee of more than a OPC.
Where a natural person being member in OPC becomes member in another such
company by virtue of his being a nominee in that OPC, such person shall meet
the eligibility criteria (as given in point above) within a period of 182 days.
No minor shall become member or nominee of the OPC or can hold share with
beneficial interest.
Such Company cannot be incorporated or converted into a company under
section 8 of the Act. Though it may be converted to private or public companies
in certain cases. The procedure of conversion is given in the rules 6 & 7 of the
Chapter II.
Such Company cannot carry out Non-Banking Financial Investment activities
including investment in securities of anybody corporate.
OPC cannot convert voluntarily into any kind of company unless two years have
expired from the date of incorporation, except where the paid up share capital is
increased beyond fifty lakh rupees or its average annual turnover during the
relevant period exceeds two crore rupees.
Small Company
Section 2(85),
(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher
amount as may be prescribed which shall not be more than ten crore rupees;
And
(ii) turnover of which as per as per profit and loss account for the immediately preceding
financial year does not exceed two crore rupees or such higher amount as may be
prescribed which shall not be more than one hundred crore rupees:
:3:
