Company Act, 2013-1 PDF

TOPICS OF COMPANIES ACT , 2013
1) INTRODUCTION OF THE ACT .

2) BASICS OF COMPANY
A) WHAT IS COMPANY
B) WHICH ARE THE FEATURE OF COMPANY
C) LIFTING OF CORPORATE VEIL
3) TYPES OF COMPANIES
A) ON THE BASIS OF FORMATION
1) Registered company
2) Statutory company
B) ON THE BASIS OF LIMITATION OF MEMBERS
1) One person company
2) Private company
3) Public Company
C) ON THE BASIS OF LIABILITY OF MEMBERS
1) Limited by share
2) Limited by guarantee
3) Unlimited company
SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

D) ON THE BASIS OF CONTROL
1) Holding company
2) Subsidiary company
E) ON THE BASIS OF SIZE
1) Small company
F) ON THE BAS OBJECTIVE
1) Profit motive company
2) Non-profit motive company
4) INCORPORATION OF COMPANT
1) Incorporation procedure
2) MOA( MEMORANDUM OF ASSOCIATIO)
3) AOA( ARTICLES OF ASSOCIATION)
4) Points to be noted while preparing “AOA” and "MOA”
5) SHARE CAPITAL OF COMPANY
1) Meaning of share capital
2) Types of share capital
3) Voting right and issue of share at premium
4) Issue of share capital at discount and “Sweat equity”
share
5) Right issue, Purchase of own shares and Buy-back of
share
6) Call on share and Calls in advance
7) Forfeiture of shares and Surrender of shares

8) Underwriting and Brokerage
9) Allotment and Allotment procedure
6) PROSPECTUS OF COMPANY
1) Definition
2) Types of prospectus
3) Consequence of mis-statement

7) MEETING OF COMPANY
1) Definition
2) Types of meeting
3) Notice for meeting
4) Quorum of meeting
5) Chairman of Meeting
6) Proxies
7) Voting at meeting
8) Resolution
9) Minutes
8) ANNUAL RETURN
1) Definition
2) Contents of Annual Return
3) Format of Annual Return
4) Signing of Annual Return
5) Time limit for filing Annual Return
6) What if Annual Return not filed with “ROC”
7) Important points to be noted
9) REGISTERS OF COMPANY
1) Meaning
2) Register of members
3) Content of members
4) Declaration of Beneficial interest in any shares
5) Closure of Register
6) Preservation of Register
10) CHARGES OF COMPANY
1) Meaning
2) Types of Charges
3) Difference between Fixed and Floating Charges
4) Registration and procedure for registration of charge
5) Time limit within which Charge is to be registered
6) What if company is not registering its Charges
7) Procedure for satisfaction of Charges

11) DEBENTURE
1) Meaning
2) Types of Debenture
3) Appointment of Debenture
4) Duties of Debenture Trustee
5) Debenture redemption reserve( DRRS)
12) ACCEPTANCE OF DEPOSIT BY COMPANY
1) Meaning
2) Types of Deposit
3) Issue of Deposits
13) GLOBAL DEPOSITORY RECIEPTS “GDR”
1) Meaning
2) Issue of “GDR”
14) DIRECTORS
1) Meaning
2) Types of directors
3) Appointment of Directors
4) Re-Appointment of Directors
5) Dis-qualified from Directors
6) Duties of Directors
7) Resignation of Directors
8) Removal of Directors
9) Vacation of Directors
10) Remuneration of Directors
11) Power of “Board of Directors”
12) Restriction on Power of “Board of directors”

1) INTRODUCTION OF THE COMPANY ACT
SCOPE NAME
OF OF
ACT PREAMBLE ACT
TO REGULATE THE COMPANY COMPANIES ACT, 2013
APPLI
CABILI
TY OF AREA: WHOLE OF INDIA
ACT
1) BASICS OF COMPANY
A) WHAT IS THE MEANING OF COMPANY ?
The term “COMPANY” is derived from Latin word “COM+PANY”

COM = WITH OR TOGETHER
PANY= BREAD
2(20) of company act,2013
“ COMPANY” means a company incorporated under this act or under any previous
company law”
According to Haney: company is incorporated association having separate legal
entity with perpetual succession and common seal.
B) FEATURES OF COMPANY ?
SEPARATE LEGAL ENTITY: Company is separate legal person and artificial

Person . It distinguished from the shareholder the
company.
LIMITED LIABILITY : Liability of member of company is limited to the
amount of share held and guarantee given by them
PRPECTUAL SUCCESSION : The company has its existence from the time of
incorporation to wind-up . Members may go and
members may come but the company survive up to
winding up
SEPARATE PROPERTY : The company is having right to acquire properties for
its own and to transfer the said properties.
COMMON SEAL : the common seal is used by company for affixing it in

the document such as contract etc….. Since it’s a artificial
person and cannot sign on its own in the document.
TRANSFERABILITY OF
SHARE : the share of the members , except in private company
may be freely transferable .
CAPACITY TO SUE AND BE
SUED : Being a separate legal entity the company is having
Capacity to sue and it can be sued by others.
C) LIFTING OF CORPORATE VEIL
The separate personality of a company is a statutory privilege and it must be used

For legitimate business purpose only . Where a fraudulent and dishonest use is
Made of legal entity , the individual concerned will not be allowed to take shelter
Behind the corporate personality . The court will break through the corporate shell

And apply the principle of “lifting of corporate veil”. The court will look behind
The corporate entity and take action as through no entity separate from members
Existed and make the members or the controlling person liable for debt and obligation
Of the company.
1) Protection of revenue
The court may lift the corporate status , where its used for tax invasion or
circumventing tax obligation.
case: sir. Dinsha vs Menagee petit
2) Protection of welfare legislation

Where the company tries to avoid its legal obligation, the corporate veil shall be
Lifted to look at real picture.
case : workmen of associated rubber indusry vs Associated rubber
industry
3) Determination of enemy character of the company
Company being an artificial person can not be enemy or friend . But during war , it
May become necessary to lift corporate veil and see the person behind it to determine
Whether they are friend or enemy . This is due to the reason that though a company
Enjoy separate legal entity but its affaires are run by individuals.
case: Daimler co.ltd vs continental tire and rubber Co.ltd
4) Prevention of fraud
Where the company is used for committing fraud or improper conduct, the court
May lift the corporate veil and look at the reality of the situation
case: jones vs Lipman
5) Company mere sham or cloak
Where the company is a mere sham and was really a ploy used for committing
Illegalities and to defraud people. The court shall lift the corporate veil .

6) To punish for contempt of court
Company being an artificial person cannot disobey the order of court. Therefore
the person at fault should identified.
3) TYPES OF COMPANIES
A) ON THE BASIS OF FORMATION
REGISTRED STATUTORY COMPANY

COMPANY
Company registered under this act or Company coming into Existence
any previous act is called registered under separate Act of parliament is
company called Statutory company
B) ON THE BASIS OF NUMBER OF MEMBERS
ONE PERSON PRIVATE COMPANY PUBLIC COMPANY

COMPANY
ONE PERSON COMPANY

“1) One person company” means company which has only one person as a
member
2) Only a natural person, who is an Indian citizen and resident in India
shall eligible to Act as a member of one person company.

3) Resident in India means a person who has styed in India for the period
of not less than 182 days during the immediately preceding one colander
year.
4) The shareholders shall nominate another persons who shall become
shareholder incase of death/ incapacity of original shareholder
5) Only natural person who is an Indian citizen and resident in India shall,
shall nominee For the sole member of one person company
6) Such nomination shall be made FORM NO: INC-2 along with written
consent of Nominee in FORM NO: 3 , when at the time of incorporation
of company
7) nomination can withdraw his consent by giving a notice in writing to
sole members and to the one person
8) Where the shareholders of OPC ceases to be the members in the event
of death of Incapacity to the contract, his nominee becomes the members
of such OPC. Such newMember shall nominate within 15 day of becoming
members, a person as nominee.
9) The company shall file with the registrar an intimation of such cessa-
tion and nomination In FORM NO: INC-4 along with the fees within 30
days of the change in membershipWith prior written consent of person so
nominated in INC- 3
PRIVATE COMPANY
Private company is company which by its articles of association

1) Restrict the right to transfer the shares
2) Limit the numbers of members to 200 excluding present employees and
the past employees who become member during such employment and
continuous to be a member even after his seizes.
3) Prohibit any invitation to the public to subscribe to the security of company
Note: Joint share holder are to be regarded as single member

PUBLIC COMPANY
A company which is not a private company . A private company which is the

subsidiary of public company, shall be regarded as public company.
C) ON THE BASIS OF LIABILITY OF MEMBERS
LIMITED BY UNLIMITED
LIMITED BY SHARE GUARANTEE COMPANY
LIMITED BY SHARE
A company that is limited by shares is refers to a company that has the liability of
the members limited by such an amount that is unpaid on their respectively held
shares.
LIMITED BY GUARANTEE
A company having liability of its members limited by “MEMORANDUM “ to such

Amount as the member may respectively under take to contribute to the asset of
the company in the event of its being wound –up.
Guarantee company may be
1) with share capital
2) Without share capital
UNLIMITED COMPANY
A company having liability of its members unlimited

D) ON THE BASIS OF CONTROL
HOLDING SUBSIDIARY
COMPANY COMPANY
HOLDING COMPANY
Holding company means company which has subsidiary
SUBSIDIARY COMPANY
Company is deemed subsidiary of another if the other company

A) Control the composition of Board of directors
B) Exercise or control more then half of the total share capital either
single or along with its subsidiary
note: A sub-subsidiary shall also be regarded as subsidiary
D) ON THE BASIS OF SIZE
SMALL COMPANY
A small company is private company,

A) Paid-up capital of which does not exceed 50 lakh rupees or
B) Turn over does not exceed 2 crore
D) ON THE BASIS OF OBJECTIVE
PROFIT MOTIVE NON-PROFIT

COMPANY MOTIVE COMPANY
(SECTION 8
COMPANY)
PROFIT MOTIVE COMPANY
A company other than non- profit motive company
NON-PROFIT MOTIVE COMPANY (SECTION 8 COMPANY)
A company is referred to as Section 8 Company when it registered as a Non-Profit

Organization (NPO) i.e. when it has motive of promoting arts, commerce, education,
charity, protection of environment, sports, science, research, social welfare, religion
and intends to use its profits (if any) or other income for promoting these objectives
1) The income of NPO can not be used for paying out dividends to the company’s
members and has to be for the promotion of charitable objectives.
2) Such companies obtain an incorporation certificate from the central government
and are liable to adhere to the rules specified by the government
4) FORMATION OF COMPANIES
A) INCORPORATION PROCEDURE
STEP NO1:SELECTION OF NAME

 Company may be formed for any lawful purpose can not be formed for unlawful
purpose or illegal purpose
 Public company require 7 or more persons , no maximum limit
 Private company require 2 or more persons , maximum limited to 200.
 One person company require 1 person
 One person company treated as private company
 The promoter has to select names for the company
 Undesirable name can not be adopted for naming of company
 The promoter shall reserve the name by application in FORM-INC:1 TO ROC
he Registrar of Companies ( ROC ) is an office under the Ministry of Corporate
Affairs (MCA), which is the body that deals with the administration of companies
and Limited Liability Partnerships in India. At present, 25 Registrar of
Companies (ROCs) is operating in all the major states/UT’s
 Name shall be reserved for reasonable time period
 Within this time , promoter shall initiate the preparation of MOA AND AOA and
other necessary document in connection with incorporation company.
STEP NO4: PREPARETION AMD SUBMISSION OF AOA AND MOA DULY

SIGNED BY SUBSCRIBERS
1) Drafting
2) Vetting- Proof reading
3) Signing –the person signing Moa or Aoa is called subscribers and the action
indicates Subscribing
4) Stamping
5) Witness
6) Printing
STEP NO3: DECLARATION IN FORM NO: INC-8 FROM THE PROFESSIONALS

( CA/CMA/CS In Practice ) AND BY A DIRECTOR NAMED IN AOA ,MANAGER
OR SECRETARY OF COMPANY THAT ALL REQUIREMENT OF THIS ACT
AND RULE MADE UNDER THIS ACT INRESPECT OF REGISTRATION HAVE
BEEN COMPLIED

STEP NO4: AFFIDAVIT FROM SUBSRCIBERS TO MOA
It includes
1) he is not convicted of any offence in connection with the promotion,
formation or management of any company.
2) He is not been found guilty of any fraud or misfeasance or of any breach of
or of any breach of duty to any company during preceding 5 years .
3) All the documents filed with registrar contain correct, complete and true
information to the best of his knowledge and belief.
Such affidavit shall be submitted in FORM NO :INC- 9 with registrar of company.
STEP NO5: Submission of particulars of every subscribers to MOA along with

the proof of identity in form NO: INC-10

If its natural person- 1) personal data
2) Address
3) Communication Details
4) identity proof
5) Residential proof
6) Proof for nationality
Note: if he is already director or promoter of company:
7) Name of company
8) CIN ( corporate identification number)
If its body corporate: 1) Address of registered office
2) Name of body corporate
3) Place of business
4) CIN
5) Certified true copy of the board resolution specifying the
authorization to subscribe to MOA of proposed company
6) The number of shares held .
7) Name and designation of person authorized to subscribe the
MOA
LLP :1) Certified true copy of the board resolution specifying the
authorization to subscribe to MOA of proposed company
2) The number of shares held .

3) Name of partner authorized to subscribe to MOA
Foreign company : 1) Copy of certificate of incorporation of the foreign body
corporate.
2) Address of registered office .
STEP NO6: Submission of particulars of persons mentioned in the article as first

director in form no: DIR-2 and consent to act as first director

1) Name including surname and family name
2) Director identification number
3) Residential address
4) Nationality Proof of identity
STEP NO7: Address of correspondence till registered office is established.
STEP NO: 8: Registration by ROC

After the finalization of several statutory requirements ,ROC inputs the
company’s name in the register of companies and releases the certificate of
incorporation in INC-11. Once the ROC provides an incorporation certificate
which is conclusive evidence of the existence of any company. The
Registrar together with the certificate of incorporation also issues a certificate of
commencement of business. A public limited company is required to get this
certificate prior to commencing business.
B) MOA (MEMORANDUM OF ASSOCIATION)
Section 2(56) of companies act ,2013

“memorandum of association means Memorandum of association as originally
framed and altered time to time”
OR
 MOA is the constitutional documents of company
 MOA is the chapter of company
 MOA define and confines the scope of company
 Positively state what the company can do and negatively state what the company
Can not do
CONTENTS OF MOA – CLAUSES OF MOA
N-NAME CLAUSE
O-OBJECT CLAUSE
C-CAPITAL CLAUSE
L-LIABILITY CLAUSE
A- ASSOCIATION CLAUSE( subscription clause)
S-SITUATION CLAUSE

N-NAME CLAUSE
 This is the clause specifies the name of the company
 The name of company should not be identical to any existing company
 If its private company, then it should have the word "PRIVATE LIMITED” at the end.
 If its public company , then it should have the word “ LIMITED” at the end.
OBJECT CLAUSE
 The object for which the company is proposed to be incorporated
For the company to be registered, the objects clause must be Divided into three
sub-clause, namely
1) MAIN OBJECT
2) OBJECT WHICH ARE ANCILLARY / ACCIDENTAL TOWARDS
ATTAINMENT OF MAIN OBJECT
3) OTHER OBJECT
MAIN OBJECTS
Company must state the main object to be pursued by the company on its
incorporation.
INCIDENTAL OR ANCILLARY OBJECT
These are such objects which, upon a fair and, reasonable construction, may be
Regarded as incidental or conclusive to the attainment of main object, but nothing
Further.
OTHER OBJECTS
These are objects which are covered neither by main object nor by objects ancillary
Or incidental there to, but which are nevertheless necessary to enable the company
To undertake all types of business activities which the company may anticipate to
pursue.

CAPITAL CLAUSE
The capital clause is applicable for the company which has some share capital.
It mentions,
 Amount of authorized capital with which the company gets registered
 The number of share of company
 Also nominal value of each share
LIABILITY CLAUSE
This clause states the liability of members of company. The liability may be
limited by share or by guarantee. This clause may be omitted incase of un-
Limited liability.
ASSOCIATION OR SUBSCRIPTION CLAUSE
Those who have agreed to subscribe to MOA must signify their willingness to
Associate and form a company.
SITUATION CLAUSE
 Only the state in which the registered office is situated is mentioned.
C) AOA (ARTICLES OF ASSOCIATION)

 AOA means, AOA, as originally framed and altered from time to time.
 its internal bylaws of company or Rules and regulations of company
which govern the management of its internal affairs and conduct of business
Contents of articles
1) Different classes of shares and right of shareholders
2) Procedure for making an issue of share capital and allotment there of.
3) Procedure for issue of share certificate and share warrants
4) Forfeiture of shares and procedure for their reissue
5) Procedure for transfer and transmission of shares

6) The time lag between calls on shares, conversion of shares into stock
7) Directors, their appointment , remuneration, qualification etc…..
D) PROCEDURE FOE ALTERATION OF “MOA AND “AOA”
MEETING
SATUTORY MEETING Every public company having share capital must
convene a general meeting of shareholders within a
period of not less than one month and not more than
six months after the date on which it is authorised to
commence its business. This is the first meeting of
the shareholders of the company and it is held once
in the whole life of the company
ANNUAL GENERAL It is a meeting of shareholders which is held once in
MEETING a year. The object of holding this meeting is to review
the progress and prospects of the company and elect
its office-bearers for the coming year.
EXTRA-ORDINARY Extraordinary meeting is a general meeting which is
MEETING held between two Annual General Meetings.
Extraordinary General Meeting is Called to discuss
any particular matter of urgent importance to the
company.
This meeting is called for the
consideration of any specific subject,
decision of which cannot be postponed
to the next Annual General Meeting.
BOARD MEETING At Least One Meeting in Every

Three Months:
The directors of a company exercise
most of their powers in a joint meeting
called the meeting of the Board

RESOLUTION
BOARD RESOLUTION Board resolutions are formal decisions
taken by the directors, either at board
meetings or in writing. Typically, a
simple majority vote of the directors is
all that is required to pass a board
resolution
ORDINARY RESOLUTION Passed by a simple majority (above
50%) of shareholders' votes.
SPECIAL RESOLUTION Vote in favour should be greater than or
equal to 3 times vote cast against
resolution
PROCEDURE FOE ALTERATION OF “MOA”
SITUATION
1) Changes of Name clause
VOLUNTRY CHANGE COMPULSORY CHANGE

1) Get the approval from “Central
government” IN FORM NO INC: 24. 1) Get the approval from “Central
2) Convey and Held Board meeting- Pass government” in form no: INC 24.
BOARD RESOLUTION 2) Convey and Held Board meeting- Pass
3) File E-FORM RUN( Reserve Unique BOARD RESOLUTION
Name –INC :1 ) with ROC for approval of 3) File E-FORM RUN( Reserve Unique
name Name, INC-1) with ROC for approval of
4) Name approval certificate from ROC, if name
applied name are available 4) Name approval certificate from ROC, if
5) Convey and hold Extra-ordinary applied name are available
general meeting- pass SPECIAL 5) Convey and hold Extra-ordinary general
RESOLUTION meeting- pass ORDINARY RESOLUTION
6) Filing formsMGT-14 with “ROC”- 6) Filing MGT-14 with “ROC”- True copy of
True copy of special resolution of EGM special resolution of EGM
7) Issuance of new certificate by “ROC 7) Issuance of new certificate by “ROC”in
”in INC- 25. INC-25.
No approval if its for adding or deleting ‘PVT’ or ‘”LTD”

2) Changes of Registered office ( situation Clause)
1) WITHIN SAME DISTRICT

2) FROM ONE DISTRICT TO ANOTHER DISTRICT
3) FROM ONE “ROC” TO ANOTHER “ROC”
4) FROM ONE STATE TO ANOTHER STATE
1) WITHIN SAME DISTRICT

1) Convey and hold Board Meeting- pass Board resolution
2) File FORM NO: INC-22 WITH ROC within 15 day of passing Board Resolution
3) No alteration in MOA
2) FROM ONE “DISTRICT” TO ANOTHER “DISTRICT”

1) Convey and hold Board Meeting- pass Board resolution
2) Convey and hold EXTRA-ORDINARY MEETING- pass special resolution
3) File “FORM NO: INC-22” within 15 day of passing special resolution
AND “FORM NO: MGT-14” WITH ROC within 30 days of passing special
resolution
4) No alteration in MOA
3) FROM ONE “ROC” TO ANOTHER “ROC”
1) Call and hold a Board meeting- pass Board Resolution
2) Hold the EXTRA-ORDINARY GENERAL MEETING- pass special resolution.
3) File form MGT-14 within 30 day of passing special resolution along
with notice of EGM, Certified true copy of special resolution with explana-
tory statement
4) File an application for seeking confirmation from Regional Directors in
Form INC-23
5)A declaration given by the key managerial personal or any two directors
authorized by the Board, that the company has not defaulted in payments
of dues to its workmen and has either the consent of its creditors for the-
proposed shifting or has made necessary provision for the payment thereof
6) Acknowledged copy of intimation to the Chief secretary of the state as
to theproposed shifting and that the employees interest is not adversely
affected consequence to propose shifting.
7) Obtain confirmation order from Regional Director
8) File confirmation order from “Regional Director” in FORM NO: INC-
28 with ROCwithin 60 days from the date of order
9) Notify registrar in FORM NO: INC-22 within 30 days from the receipts
of confirmation order of Regional Directors within 30 days .
10) No alteration of MOA
4) FROM ONE STATE TO ANOTHER STATE

1) Convey and held Board meeting- Pass Board Resolution
2) Convey and held EXTRA-ORDINARY GENERAL MEETING- pass special
resolution.
3) File FORM MGT -14 within 30 days of passing special resolution along with
notice of EGM, certified true copy of special resolution with explanatory
statement.
4) The company shall ,not more than 30 days before the date of filing of the
application in FORM NO: INC-23
1) Publish an advertise in FORM NO: INC-26 in the vernacular newspaper
in the vernacular language in the district and in English language in an
English news paper with widest circulation in the state in which in which
the registered office of the company is situated.
2) serve, by registered post with acknowledgement due, individual notice on
each debenture-holder and creditor of the company.
3) serve, by registered post with acknowledgement due, a notice and copy the
application to the registrar.
5) File application for seeking confirmation from Regional Director in e-form INC-23
6) File FORM NO: INC-28 within 30 day of confirmation order from Regional
Director.
7) Notify registrar in e-form INC-22 within 30 days from receipts of confirmation order
of Regional Director.
note: print new address of Registered office on company business letter, bill head,
letter paper, notices and other official publications.

3) Changes of Objects clause
1) Convey and hold Board Meeting- pass Board Resolution

2) Covey and Hold EXTRA-ORDINARY GENERAL MEETING- Pass special
resolution
3) File FORM NO: MGT-14 with the registrar within 30 days of passing the
special resolution.
4) Issuance of fresh certificate of incorporation
7 REASONS WHY OBJECT CLAUSE OR SITUATION CLAUSE IS CHANGED
1) To carry on business more economically.

2) To attain the main purpose of the company by new or improved mean
3) To enlarge or change the local area of operation
4) To carry on some business which under the existing circumstances may
conveniently or advantageously be combined with existing business.
5) To restore or abandon any of existing object
6) To sell or disposal of the whole or any part of undertaking
7) To amalgamate with any other object or person or body.
4) Changes of Liability clause ( Liability clause)

The liability clause can not be altered to make liability of members unlimited. But if
the shareholders agrees, and article permit, the liability of all directors or any one
of the director can be altered.
5) Changes of Association clause
This clause can not be altered, because, once subscriber has affixed his signature
and other details on “MOA” the documents are filed with ROC, he can not withdraw
his name for any reason.

6) Changes capital clause
 All clause of “MOA” except capital clause can be altered by special resolution
 There are 2 way of increasing authorized capital
1) if there is no requirement of alteration of “AOA”
2) If there is requirement of alteration of “AOA”
IF THERE IS NO REQUIREMENT OF ALTERATION OF “AOA”
Situation: No provision in “AOA” regarding increasing of capital

Example: “AOA” state that authorized capital shall be as per “MOA”
1) Convey and hold Board Meeting- pass BOARD RESOLUTION

2) Convey and hold EXTRA-ORDINARY GENERAL MEETING- pass Ordinary
resolution.
3) File FORM NO:MGT-14 with ROC within 30 days of passing special Resolution.
4) Filing FORM SH-7 within 30 days of passing ordinary resolution with ROC.
2) IF THERE IS REQUIREMENT OF ALTERATION OF “AOA”
1) Convey and hold Board meeting of Directors- pass Board Resolution.

2) Convey and hold Extra-ordinary General meeting –pass special resolution.
3) File FORM NO:MGT-14 with ROC within 30 days of passing special Resolution.
4) File FORM NO: SH-7 within 30 days of passing the Ordinary Resolution.
PROCEDURE FOE ALTERATION OF “AOA”
1) Convey and hold the Board meeting of Directors- pass Board resolution
2) Convey and hold the Extra-ordinary general meeting- pass special resolution
3) File FORM MGT-14 with registrar of company within 30 days of passing special
resolution.

D) DOCTRINE OF ULTRA VIRES
DOCTRINE OF UTRA VIRES

ULTAR- Beyond VIRES- Power
1) ULTRA VIRES OF COMPANY ACT- VOID-ABINITIO + ILLEGAL (PUNISHABLE).
2) ULTRA VIRES OF MOA- VOID-ABINITIO.
(CASE: ASHBERY RAILWAY CARRIAGE AND IRON CO LTD VS RICHE)
3) ULTRA VIRES OF AOA- VALID, IF ITS RATIFIED.
 Any act by an company ,which is not specified in its object or incidental is
regarded as void at common law.
 Such act is referred to as being ultra vires that is beyond the power of the
company.
E) DOCTRINE OF CONSTRACTIVE NOTICE OR DEEMED NOTICE
 Every person dealing with the company is deemed to have read MOA and AOA
and understood the contents thereof in the correct perspective.
(CASE: KOTLA VENKATSWAMY Vs. RAMAMOORTY)
 Because ,after registration MOA and AOA become a public documents.
 This doctrine operate in favour of the company and operates against the person
dealing with company.
F) DOCTRINE OF INDOOR MANAGEMENT
 Rule of indoor management is exception to this rule.

 The outsider dealing with the company are entitled to assume that as far as
internal proceeding are concern, every thing has been regularly done.
 Rule of indoor management operates to protect the outsiders against the
company.
( CASE: ROYAL BRITISH BANK VS TURQUAND)

 There are certain exceptions to the rule
1) Sufficient ground for suspicious.
2) Forgery.
3) Act ultra vires the company.
4) knowledge of irregularities.
5) No knowledge of MOA and AOA.
INSHORT: Doctrine of constrictive of notice -Company favorable.
Doctrine of indoor management – Outside favorable.
G) POINTS TO BE NOTED WHILE ALTERING MOA OR AOA
 Don’t violate “MOA” while changing “AOA”

 Don't violate companies act while altering “AOA”
First place- Companies act
Second place- Memorandum of association
Third place – Articles of association
 Protect minorities interest while altering “AOA”
H) DIFFERENCE BETWEEN MOA OR AOA
MOA AOA
Its constitutional document of Its internal by laws of company
company
It define the relationship It define the relationship

between company and outsider between company and members
Ultra vires is void Ab-initio Ultra vires of “AOA” may be ratified by
“AOA”
“MOA” having six clauses, anything No clauses in “AOA”
other than 6 is treated as “AOA”
Model of “MOA” can not be adopted “AOA” model can be adopted .if
company is limited by share.
5) SHARE CAPITAL OF COMPANIES
1) MEANING OF SHARE CAPITAL

Q: What you mean by share ?
In layman :Share means money paid for purchasing bundle of rights in one
company
Definition: “Share means shares in the share capital of company”.
Q: What you mean by stock?
layman: stock means , A group of share put together as bundle in bigger lots as
stock
CLASSIFICATION OF SHARE CAPITAL
1) Authorized share capital: The authorized capital is maximum amount

a company can rise from its shareholders as
share capital. This amount is referred in capital
clause of “MOA” of the company
2) Issued capital : Issued capital is the part of authorized capital
actually issued to the shareholders.
3) Subscribed capital : It’s the part of issued capital that has been
subscribed by the public.
4) Call up capital : Call-up capital is the amount of the issued capital
that the limited liability companies request their
shareholders to pay.
5)Paid up capital : Paid-up capital is the amount of money a company
has received from shareholders in exchange for
share.
6) Calls in arrears : The company calls for money from shareholders
when needed within a certain period. If the share-
holder is not able to pay the call amount due on
allotment, such amount is taken as “calls in arrears”

2) TYPES OF SHARE CAPITAL
1) Preference share capital: Preference shares are those which have preferential
right to the payment of dividend during the life-time
of the company and preferential right to return of
capital when company is wound-up.
Classification of preference share capital
1) CONVERTIBLE PREFERENCE SHARE

2) NON CONVERTIBLE PREFERENCE SHARE
3) CUMULATIVE PREFERENCE SHARE
4) NON CUMULATIVE PREFERENCE SHARE
5) PARTICIPATING PREFERENCE SHARE
6) REDEEMABLE PREFERENCE SHARE
7) IRREDEEMABLE PREFERENCE SHARE
CONVERTIBLE PREFERENCE SHARE
 Its also called optional preference share

 A convertible preference shares gets the right of conversion into in to
equity share.
NON CONVERTIBLE PREFERENCE SHARE

 A non- convertible preference share does not have right of conversion into
equity Share
 All preference share are non-convertible unless clearly stated to be convertible

CUMULATIVE PREFERENCE SHARE
 If dividend is not paid on such share, the arrear of dividend are carried forward
And are paid subsequent year.
 All the preference shares are cumulative preference shares unless clearly state.
NON-CUMULATIVE PREFERENCE SHARE

 Divided is paid out of each year profit
 If the dividend is not paid on such share, the right to divided lapse
 Its not carried as arrears.
PARTICIPATING PREFERENCE SHARE
 Participating preference share carry a right to participate in the surplus profit
Along with equity shareholder equity shareholder after dividend at certain
rate has been paid to equity shareholder.
REDEEMABLE PREFERENCE SHARE

 This type of preference share may have an pre-determined redemption period
And redemption value so investor can get their investment value after an
particular period.
IRREDEEMABLE PREFERENCE SHARE

 This type of preference share may be treated as perpetual security if it have
no redemption period so the investor can get their investment value at the
time of winding of the company.
2) Equity share capital: Equity share is share other than prefer-
ence share. or Equity shares are those shares, which entitled dividend and
re-payment only after he claim of preference shares have been satisfied.
that is an equity an equity shareholder is entitled to all profit of company
after setting the fixed claim on preference share. They are called real owner
ofthe company because they have voting right and full right to participate
in the management of the company.
Classification of EQUITY share capital BASED ON VOTING RIGHT
1) EQUITY SHARE WITH NORMAL VOTING RIGHT

2) EQUITY SHARE WITH DIFFERENTIAL VOTING RIGHT
1) EQUITY SHARE WITH NORMAL VOTING RIGHT

Voting right of such share holder shall be in proportion to his share of paid-up
equity capital.
2) EQUITY SHARE WITH DIFFERENTIAL VOTING RIGHT
 The shares with differential voting rights (DVR) means shares that give the
holder differential rights as to voting (either more or less voting right) as
against the ordinary shareholder of company.
 Conditions to be complied for issuing of this types of shares
• “AOA” authorized to do so.
• Authorized by ordinary resolution by General meeting.
• In case of listed company- resolution by postal ballot .
• Such share shall not exceed 26% of total post-issued equity share capital at
any point of time.
• Company having consistent track record of profit for 3 years.
• Company has not defaulted in filing ‘Financial statement’ and ‘Annual return’
for 3 financial years immediately preceding the year in which its decided to
Issue such shares.
• The company has not failed to repay its deposits and interest there on due
date or redeem its debenture on due date or pay dividend
• The company has not been convicted of any offence arising under SEBI act
1992, The security contract regulation act,1956 and Foreign exchange mana-
gement act,1999.
I
ISSUE OF SHARE AT PREMIUM

Q : Can company issue share at premium?
ANS : Yes
Q : How much premium , a company can fix?
ANS : Any amount, based on economic situation.
But premium shall be applied only for following purpose.
1) Issuing fully paid bonus shares to members.

2) Right of preliminary expenses of company
3) Right-off commission paid, expenses incurred for discount allowed in
relation
to share or debenture.
4) Premium paid on redemption of preference share
5) Buy-back of share
4) ISSUE OF SHARE CAPITAL AT DISCOUNT AND “SWEAT EQUITY”

SHARE
ISSUE OF SHARE AT DISCOUNT
• The issue of share at discount means the issue of the shares at price less than the
face value of the share.
EX: if a company issue share of 100 at 90 the 10 (100-90) is the amount of discount.
• Section 79 of companies act,1956 , permits the issuance of share at discount

subject to CG approval . Now section 53 of companies Act,2013, prohibit the
issuance of share at discount except “SWEAT EQUITY SHARE”.

• Any share issued by a company at discount price shall be void.
• If a company contravene the provision, shall be punishable with a fine not less
than 100,000 which may extended to 500,000.
SWEAT EQUITY SHARE
Section 2(88) Company Act 2013 : ‘sweat equity shares’ as such equity shares as are
issued by a company to its directors or employees at a discount or for consideration
other than cash , for providing their know-how or making available rights in the
nature of intellectual property rights or value additions , by whatever name called.
Procedures for issuance of sweat equity share
 The issue is authorized by special resolution by shareholder.

 The resolution shall specifies the number of shares, current market price,
consideration , if any, and class or classes of employees or directors to
whom such equity shares are to be issued.
 The sweat equity share should be of class of shares already issued.
 At least 1 year should have elapsed since than the company become entitled to
commence business.
 In the case of listed company ,SEBI, regulation are to be complied with

5) RIGHT ISSUE, PURCHASE OF OWN SHARES AND BUY-BACK OF
SHARE
RIGHT ISSUE
 Where a public company limited by shares intend to increase the paid-up capital
By issue of further shares at any time after the expiry of the following limit , the
offer shall made to the existing shareholders.
1) Two year from the date of incorporation of company
2) One year from the date of first allotment of share
which ever is earlier
 Offer shall be made to shareholder by specifying the number of shares offered to
him and at least 15 days shall be given
 Where shareholder fails to communicate within the stipulated time limit, the
offer is deemed to have been declined
 The notice offering the shares shall contain statement in respect of right to
renounce the offer in favour of others person unless there is a provision to
contrary in “AOA”
 Where there was no intimation of shareholder within stipulated time or person
in whose favour the right or renounce fails to take-up the shares , the board of
directors can dispose the shares in such manner as beneficial to company.
 The share need not be offered to the existing shareholders under the following
Situation
1) The EGM- pass special resolution
2) The company in “EGM”-pass an ordinary resolution and attain the
approval of the “CG” stating that the proposal is beneficial to company.
 The provision of this section does not apply in following cases

1) private company
2) increased in subscribed capital because of exercising of an option attached
to a bond/debenture to converted to such bond /loan into share of company
provided the term of such option.

3) Have been approved by CG before the issue of such debenture or bond and
have been approved by special resolution passed in “EGM” before the issue
of such bond or debenture
4) Conversion of such loan / bond is as per direction of “CG”
PURCHASE OF OWN SHARE ( BUY BACK OF SHARE)
Buy back of shares is the method of cancellation of share capital. Its leads to a redu-
ction in the share capital of a company as opposed to issue of share which result in
an increase in the share capital.
Conditions are to be satisfied for buy back of share
 Authorization in “AOA”
 Special resolution by shareholders
 The ratio of aggregate of Debt and Equity shall be 2:1
 Listed company- Declaration of solvency certificate shall be file with registrar of
company and SEBI in FORM NO: SH-9
Q : Where from I can buy back ?
Ans:
1) existing shareholder
2) Open market ( stock exchange)
3)From Employee to whom shares were issued under stock option scheme
or sweat equity
4) Odd lot holders
Q : Which are the source of buy back of share ?
Ans:
1) Free reserves
2) Security premium
3) Fresh issue ( but should not be same class of shares)

Q : WHAT IS THE QUANTUM OF BUY BACK ( NO OF SHARES THAT CAN
BE BUY-BACK).
ANS : Number of shares to be bought back in respect of equity shares should not
exceed 25 % of total paid-up equity share capital.
Q : WHAT IS THE AMOUNT THAT CAN BE UTLISED FOR BUY BACK OF
SHARE ?
ANS:
Board resolution : 10 % or less of the paid-up equity capital and free
reserve of the company
Shareholder Resolution: 25% or less of paid-up total paid-up equity capital
and free reserves of the company.
Q : WHAT IS THE TIME LIMIT FOR BUY BACK OF SHARES
ANS :
1) Every buy back is required to be completed within 12 months from the
Date of passing the resolution or Board resolution.
2) No offer of bay back shall be made within a period of the closure of the
proceeding offer of buy back.
3) A company buying back its securities is prohibited from making a further
issue of securities within a period of 6 months.
PROHIBITION ON BUY BACK OF SHARE

1) Through any subsidiary company including its own subsidiary companies.
2) Through any investment company or group of investment company
3) If default, is made by company in the payment of deposit
6) CALL ON SHARE AND CALLS IN ADVANCE
CALL ON SHARE

 A call is demanded by the company to its shareholder to pay the whole or part of
the balance remaining unpaid on each share either during the life time of company
Or by the liquidator in the event of winding up of company.
 Power to make call vests only with board of Directors and it can not be delegated.
 Call can be made by liquidator in the event of winding of company.
 Reserve capital can not be called up except in the event of winding of company.
 Call on the share failing under the same class must be made on uniform basis.
 Share of the same nominal value , on which different amount have been paid-up,
are not deemed to fall under the same class.
ex: One class of share of face value at 10 and 6 paid-up is different from the
other class of shares which has face value 10 and 4 paid-up.
 Call amount can not exceed 25% of nominal value of the share.
 Gap between calls should be at least one month.
 Where call amount is not paid, interest can be charged on such calls and after giving
Due notice the director have power to forfeit the share
CALL IN ADVANCE
 A company may, if so authorized, by its article ,accept from any member the
whole Or part of the amount remaining unpaid on any share held by him , even
if no part Of that amount has been called up.
 However, calls made in advance do not entitled the shareholder to additional
voting right
 Calls in advance are not refundable
 Calls in advance earn interest at the rate specified in the “AOA”
 In the event of winding-up, the shares called in advance money ranks not to
creditor and be should be paid along with interest before payment is made to
other shareholder.
7) FORFEITURE OF SHARES AND SURRENDER OF SHARES
FORFEITURE OF SHARE
 Where the amount due on share is unpaid and the articles have a provision to
\ this effect ,shares can be forfeited.
 Shares can be forfeited only for non-payment of call money . But if the articles
Permit, forfeiture can be made from non-compliance of any other condition also.
 Notice is to be served on the following shareholder stating:
@ The amount of unpaid
@ The last date within which payment should be made which shall not be less
than 14 days
@ A statement that if amount is not paid within the specified date the share will
be forfeited.
@ Generally an contract of the “AOA” will also be sent showing the direction
power to forfeit the shares.
 An improper notice will be invalid the procedure of the forfeiture.
 Until the forfeited share are re-issued there will be a reduction in the paid up
capital of company.
 Forfeited shares can be re-issued but the price charged from new member
together with the amount received from the old member shall not be less than
the nominal value of the share
 Upon forfeiture, the member is no longer liable in respect of outstanding call
amount. However, if the company goes in to liquidation within one year of
cessation of his membership, he will be put in the “B” list of contributors, in such
scenario, the post member shall be liable for the payment of unpaid calls if the
person to whom such forfeited shares were re-issued fails to pay the unpaid call
on share
SURRENDER OF SHARE
 Surrender of share is voluntary act by shareholder and it can be accepted by the

Board direction if the “AOA” permits it.
 Forfeiture is a forcible act where as surrender is a voluntary act.
 Where the shares are partly paid and the directors accepts surrender of shares
its unlawful leads to reduction in liability of a member and reduction in capital.

8) UNDERWRITING AND BROKERAGE
UNDERWRITING OF SHARE
 It’s a contract between the company and underwriters where in case of the whole
agreed portion of share or debenture are not applied for, the underwriters will
themselves apply for the unapplied shares or debenture .
This is a commitment by the underwriters who normally is financially sound
person and is registered with “SEBI”.
 Consideration is in the form of commission irrespective of whether or not the
underwriter are called upon to take –up the shares or debentures. The consider-
ation is for the risk which they expose themselves.
 Underwriting commission may be paid subject to following conditions:

1) The payment of commission should be authorized by “AOA”
2) The name and address of the underwriters and the number of shares or
debenture underwritten by each of them should be disclosed in the prospectus
3) The amount of commission should not exceed 5 % of price at which the share
have been issued of or amount of rate authorized by ”AOA” which over is less
and in case of debenture it shall not exceed 2.5%
4) The rate should disclosed in prospectus or statement in lieu of prospectus and
filed with “ROC” along with copy of under writing contract before the payment
of commission
5) The number of shares or debentures which person have agreed to subscribe
absolutely and conditionally for commission should be disclosed in the manner
aforesaid.
6) A copy of contract for the payment of commission should be delivered to “ROC”
along with prospectus or statement in lieu of prospectus for registration.

BROKERAGE
 It’s a fee paid for placing a share ,payment of brokerage is lawful

 Placing is generally done by issue house who take-up large block of shares
which transferred to their client or friends
 Brokerage is different from underwriting commission .
In case of underwriting , if the shares are not subscribed, the underwriters is bond
to take the shares where as there is no such obligation for a broker.
8) ALLOTMENT AND ALLOTMENT PROCEDURE
Q : WHAT IS ALLOTMENT ?
ANS: “Appropriation of un appropriated capital” is called allotment.
RAISING OF CAPITAL
PUBLIC ISSUE PRIVATE PLACEMENT RIGHT ISSUE BONUS ISSUE
PARTICULAR PUBLIC ISSUE PRIVATE PLACEMENT
PUBLIC COMPANY PROSPECTUS STATEMENT OF LIEU OF

PROSPECTUS
PRIVATE COMPANY CAN NOT GO FOR PUBLIC CAN GO FOR PRIVATE

ISSUE PLACEMENT ( statement of
lieu of prospectus not
required)

PUBLIC ISSUE
Within the preparation of prospectus

1) Every company making public offer shall before making an application to
one or more recognized stock exchange or exchanges and obtain permission
for securities to be dealt with in such stock exchange or exchanges
2) The prospectus shall state the name or names of the stock exchange in which
the securities shall be dealt with.
3) prospectus must be submitted with “ROC”.
4) Distribute the shares to public.
5) Public will stars to subscribe the share capital.
APPLYING SHARES IS OFFER and ALLOTMENT OF SHARES IS ACCEPTANCE
6) Prospectus shall state the minimum application money to be received.
7) Application money shall no be less than 5% of nominal value of shares.
Q : When the public will starts submit its application ?
ANS : No allotment shall be made until the beginning of 5th day after that on
which the prospectus so issued. The object of this provision is to get
sufficient time to the public digest the content of prospectus and obtain
independent advice.
8) When an issue of share for public is open to invite to subscribe for share
of company , the same is called opening of subscription
9) Companies ac its salient regarding closing of subscription list .However
according to “SEBI” The subscription must be open for at least 3 day .
The subscription list should not be kept open for a period of more then
10 days in case of the issue is underwritten and 21 days in other case.
10) All money received from applicants for shares shall be deposited and kept in
scheduled bank until the minimum subscription is received.
Q : How long this A/C can be maintained.
ANS : Until the minimum subscription is received .
Q : What you mean by minimum subscription ?
ANS : The minimum subscription is the amount which the opinion of BOD must be
raised by the issue of shares so that the company has necessary fund to carry
its objectives

NOTE: AS PER “SEBI”- A COMPANY MAKING ANY PUBLIC ISSUE OF SHARES,
DEBENTURES MUST RECEIVE AT LEAST 90 % OF MINIMUM SUBSCRIPTION.
11) If the stated minimum subscription is received, than company can goes on
allotting shares to applicants.
Q : How long can be, within which the minimum application money shall be
received ?
ANS: within 30 day from the date of issue of prospectus .
Q : What the company will do if the minimum subscription is not received by
company within the prescribed period ?
ANS : The application deposit shall be refunded within 15 days from the day of
closure of issue
Note: it there is delay beyond the 15 days than, the applicants should be repaid
With interest at the rate 15 % per annum. The director of a company should also
bear the liability to meet the interest obligation. The refund should be made directly
to the bank account of the applicant .
• In case there is any default in complying with the above provisions, the company
and the defaulting officers should pay a fine of 1000 rupees per day. The penalty
will be calculated for the number of days for which the company has committed
the default. However , the maximum amount of fine payable cannot exceed
100000 lack rupees.
IN SHORT
APPLICATION TO STOCK EXCHANGE
ACCEPT REJECT
Express Rejection Implied Rejection

Express Rejection: Stock exchange expressly pass an order
Implied rejection : Within closure of subscription list ,stock exchange neither accept
or Rejected.
Rejection
Refund Application to CG
Refund within 8 days from Within 15 days receipts of express

Receiving rejection order or rejection or expiry of 10 weeks
Or 8 days of the end of 10 closure of subscription list .
Weeks from the end of subscription
List. Default : 15 % of interest per Annum.
CENTRAL GOVERNMENT
Approve Reject
Shares can be allotted Refund application money within 8 days

Default : 15 % of interest per Annum.
minimum subscription
RECIEVED NOT RECIEVED
Refund the amount received as

Application money within 15 days
From the day on which subscription
List is closed
If the amount is not refunded within such period ,than directors of company who
Are officers in default shall be jointly and severally liable to repay the money with
Interest at the rate 15 % per annum.

If the amount is not refunded within such period ,than directors of company who
Are officers in default shall be jointly and severally liable to repay the money with
Interest at the rate 15 % per annum.
Important points to be noted
 Company should not collect the application money by cash. The

company may receive cheques or demand drafts for the payment of the
application deposit.
PRIVATE PLACEMENT
 Its an invitation to subscribe securities from selected group of persons or

Company other than by way of public offer
 For this purpose “Private placement offer letter” issued
Procedure for issue of share through “Private placement”
 Conduct board meeting pass board resolution

 Conduct “Extra-ordinary” general meeting pass “special resolution”
 File MGT-14 within 30 days from the date of passing special resolution
 Circulate PAS-4 (Letter of offer) to the person to whom the offer is made.
It shall be sent either in writing or in electronic mode.
Q : Maximum numbers of persons to whom invitation shall be made ?
Ans: 200 person in aggregate in financial year.
Note: Restrictions aforesaid would be reckoned individually for each
kind of security that is equity share, preference share or
debenture.
Note: Without completing allotment of one kind of securities, another
kind of security shall not be issued.
 Company shall maintain a complete record of private placement offers in
Form PAS-5.
Q: How to make payment for subscription ?
ans:
@ Every identified person willing to subscribe to the private
placement shall apply by payment of subscription money either
by cheque or demand draft or other banking channel and not by
cash.
@ The money received on application shall be kept in a separate
bank account in a scheduled bank and shall not be utilized for any
purpose other than-
(a) for adjustment against allotment of securities; or
(b) for the repayment of monies where the company is unable to
allot securities
Q: How to make allotment of shares and refund of money if allotment not
made ?
ans:
@ Make allotment within 60 days from the date of receipts application
money.
@ If the Company fails to allot the securities within 60 days, then it
shall repay the application money to the subscribers within 15 days
from the expiry of 60 days along with interest @12% per annum
which shall be calculated from the expiry of 60 days.
 File PAS-3 within 15 days of allotment along with a complete list of all the
allottees
6) PROSPECTUS OF COMPANY
Definition Prospectus:
A company's prospectus is a formal legal document designed to provide information

and full details about an investment offering for sale to the public.
This document is used to help potential investors make a more informed decision
on whether or not to invest

Prospectus can be defined as “any document which is described or issued as a
prospectus”.
This also includes
@Shelf prospectus
@Red herring prospectus
@Any notice,
@circular,
@Advertisement or any other document acting as an invitation to offers
from the public.
RISING OF CAPITAL BY
PUBLIC COMPANY
From public
Private placement
(known person)
Issue house
PROSPECTUS
Right issue
STATEMENT IN
LIEU
PROSPECTUS
DEEMED
(SILP)
PROSPECTUS
LETTER OF
OFFER
Contents of Prospectus:
1) Information About Company:
GENERAL INFORMATION ABOUT COMPANY:
 About Management
 Proposed Issue
 Term of Issue
 Present Market Price
 Other companies in which same management is exist
FINACIAL INFORMATION ABOUT COMPANY:
 Dividend Declared
 Profit/Loss and Balance Sheet
 Auditor Report
OTHR DISCLOSURE ABOUT COMPANY:
 Signing Requirement
Date of publication of prospectus shall be included

3) Attachment of prospectus:
A) 3 CONSENT
 Act as director
 Includes expert reports
 Any other person who authorized the issue ( ex: banker, auditor)
B) CONTRACTS
 Contract with managing director
 Copy of under writing agreement
 Material contract entered 2 year before the issue of prospectus.
4) Signature of prospectus:
It must be signed by Directors/propose Directors/promotors

4) Filing of prospectus with ROC:
prospectus is not to be issued by a company or on its behalf unless on or
before the date of publication, a copy of the prospectus is delivered to the
registrar for registration
Types of Prospectus:
1) ABRIDGED PROSPECTUS
2) SHELF PROSPECTUS
3) RED HERRING PROSPECTUS
4) DEEMED PROSPECTUS/OFFER FOR SALE
1) ABRIDGED PROSPECTUS
 The dictionary meaning of ‘abridge’ is to shorten something without

destroying the meaning of the original.
 It is a document containing a prospectus summary
 it is shorter than a prospectus, it reduces the cost of a public capital issue.
 A prospectus is a very voluminous document, and one cannot be expected
to read it completely and invest in this fast pacing world. One needs quick,
relevant and crisp information about the company. To serve this purpose,
an abridged prospectus is made
 A copy of the prospectus shall, on a request being made by any person
before the closing of the subscription list , be furnished to him
2) SHELF PROSPECTUS
 A shelf prospectus is a type of prospectus issued by companies making multiple

issues of bonds for raising funds.
 The advantage of a shelf prospectus is that a new prospectus need not be issued
every time the company issues securities. A maximum of four issues of
securities can be made using a shelf prospectus. A shelf prospectus should be
used within a maximum of one year.
 Changes may take place in the financial position of the company after the shelf
prospectus is filed. These changes should be intimated to the Registrar of
Companies (ROC). For this purpose, an Information Memorandum should be
filed.
3) RED HERRING PROSPECTUS
 Red herring Prospectus means a prospectus which does not include complete
particulars of the quantum or price of the securities included therein. In simple
terms a red herring prospectus contains most of the information pertaining to
the company’s operations and prospects, but does not include key details of the
issue such as its price and the number of shares offered
 Such company proposing to issue a red herring prospectus shall file it with the
Registrar at least 3 days prior to the opening of the subscription list and the
offer.
 Any variation between the red herring prospectus and a prospectus shall be
highlighted as variations in the prospectus.
4) DEEMED PROSPECTUS/OFFER FOR SALE
 When any company to offer securities for sale to the public, allots or agrees to
allot securities, the document will be considered as a deemed prospectus
through which the offer is made to the public for sale. The document is deemed
to be a prospectus of a company for all purposes and all the provision of content
and liabilities of a prospectus will be applied upon it
Consequence of mis-statement of Prospectus:
Mis-statement:
a) Statement included which is misleading in form and context in which its
included
b) Wilful omission
Consequence
If the prospectus contains a misleading statement, the liability of the company, the
directors, promoters and others who authorized the issue can be classified into
three kinds viz.,
Civil Liability,
Criminal Liability, and
Liability under the Law of Contract.
1. CIVIL LIABILITY
An aggrieved shareholder who purchased shares by placing reliance on the
misleading prospectus has remedies against the company, and remedies against
the directors, promoters and experts.
a. Remedies Against the Company
The aggrieved shareholder has remedy against the company.
 Rescission of the Contract,
1. Rescission of the Contract
The person who purchased shares on the basis of the prospectus containing
misstatements can rescind the contract (cancel the contract). He is eligible for
rescission whether the misstatement is made intentionally or unintentionally. He
has to surrender his shares to the company. Then his name will be removed from
the register of the members. The money paid by him will be refunded by the
company.

b. Remedies against the Promoters, Directors, Experts, and
Persons authorized the issue of the Prospectus
The directors, promoters, experts, and others who have authorized the issue of the
prospectus are liable to compensate the aggrieved shareholder for the loss or
damages he may have to incur because of the untrue statement.
2. CRIMINAL LIABILITY
where a prospectus includes any untrue statement or misleading in form or
context in which it is include or where any inclusion or omission of any matter
Is likely to mislead, every person who authorize the issue of such prospectus shall
be punishable
 with imprisonment -For the term which shall not be less than 6 month but
which may extended to 10 years.
Fraud- For the term which shall not be less than 3 years but which may
extended to 10 years
 Fine- which shall not be less than the amount involved in the fraud, but which
may extended to 3 times the amount involved in the fraud.
3. LIABILITY IN CASE OF OPEN MARKET PURCHASE
One who purchased shares in the open market from any shareholder of the
company (not relying on the prospectus) can’t rescind the contract for the
purchase of shares. The person who authorized the issue of prospectus cannot be
held liable.
7) MEETING OF COMPANY
Q: Meeting means what ?

As per dictionary ,An assembly of people for a particular purpose, especially
for formal discussion.
MEETING
BOARD METING MEMBERS MEETING CLASS MEETING
ANNUAL GENERAL METING EXTRA-ORDINARY METING

BOARD METING A board meeting is a meeting of a company’s board of
directors, held usually at certain times of the year to discuss
company-wide policies or issues.
Members' meetings, or shareholders' meetings, are held

MEMBERS MEETING
when the company needs to make an important decision
Class meetings are meetings which are held by

CLASS MEETING holders of a particular class of shares, e.g.,
preference shareholders. Such meetings are normally
called when it is proposed to vary the rights of that
particular class of shares
MEMBERS MEETING
Every Members meeting 4 procedure is required
1) PROPERLY CONVEY
2) PROPERLY CONSTITUTE
3) PROPERLY CONDUCTED
4) PROPERLY CONCLUDED
ANNUAL GENERAL METING
An annual general meeting (AGM) is a yearly gathering of a company's

interested shareholders. At an AGM, the directors of the company present an
annual report containing information for shareholders about the company's
performance and strategy.
 In every “ANNUAL GENERAL MEETING”4 ordinary business is required.

1) Consideration and adoption of Balance sheet ,profit / loss , Board report
and Audit report ( Adoption of book of accounts)
2) Declaration of Dividend
3) Appointment of Director in place of retiring director
4) Appointment of Auditors in place of retiring auditor and fixing remuneration
 Time limit for holding “AGM”
ANNUAL GENERAL MEETING
EXISTING COMPANY NEWLY INCORPORATED COMPANY
EXISTING COMPANY
3 TIME LIMIT
1) Each calendar year “ANNUAL GENERAL MEETING” shall be held

2) Time gap between two “ANNUAL GENERAL MEETING”
shall no be more then 15 month + Extension from “ROC”
3) End of financial year- within 6 month + extension from “ROC”
WHICH EVER IS EARLIER
EXAMPLE: (without Extension)
PARTICULAR FY-20-21 FY- 21-22
DATE OF “ANNUAL GENERAL 30/09/2020 ?

MEETING”
Criteria 1 : Before 31/12/2021 Criteria 2 : 31/12/2021 Criteria 3: 30/9/2021

CONCLUSION: 30/9/2021 ( earlier date)

EXAMPLE: (with Extension- 2 moth given by “ROC”)
PARTICULAR FY-20-21 FY- 21-22
DATE OF “ANNUAL GENERAL 30/06/2020 ?

MEETING”
Criteria 1 : Before 31/12/2021 Criteria 2 : 30/11/2021 Criteria 3: 30/11/2021
CONCLUSION: 30/11/2021 ( earlier date)
NEWLY INCORPORATED COMPANY
WITHIN 9 MONTH FROM THE END OF THE FINANCIAL YEAR
Note: if it comply afore said provision , it need not held “AGM” in the year of
incorporation and in the subsequent year
EXAMPLE:ONE
Date of incorporation : 30/9/2020
End of financial year : 31/3/2021
Due date for “AGM” : 31/12/2021
 DATE , TIME AND PLACE OF “AGM”
• The meeting can be conducted on any day, which is not a national holiday.
• An AGM should be conducted during the business hours between 9 a.m.
and 6 p.m. only.
• The meeting can be held at registered office or at any place which is within
the limits of the city or town or village in which the registered office is
situated

 WHAT IF “AGM” IS NOT HOLD ?
 If any default is made in holding annual general meeting of the company the
Tribunal on application of member of company may call an” AGM”
 Such direction may includes a direction that one member in company present
in person or by proxy shall be deemed to be constitute a meeting.
 Every officers of the company who is in default shall punishable with a fine
which may extend to 1,00,000
 In case of continuing default with a further fine which may extend RS 5000
for each day which the default continue.
EXTRA-ORDINARY METING
A meeting of the shareholders and directors of company to discuss subjects that

cannot wait until the next annual general meeting
Calling for extra-ordinary meeting
BOARD OF
BOARD OF DIRECTORS
DIRECTORS
ON THE REQUSITION OF SHARE HOLDERS
(SUO
OR MEMBERS
MOTO)
BOARD OF DIRECTORS
ON THE REQUSITION OF SHARE HOLDERS OR
MEMBERS

SPECIFIED NUMBER OF Deposits requisition
REGISTRED
MEMBERS
OFFICE
Company with share capital

Members holding at lest 1/10 of the  It shall be either be written or through
Paid up capital of company and Electronic media
entitles to vote on the date of  State the transaction to be done at the
requisition Meeting
 Signed by all requisitionists or a
Company without share capital
Requsitionist
 Specify place, date , day and hours' of
Members holding at lest 1/10 of the
Meeting.
Voting power of company and
entitles to vote on the date of
requisition
 Board is to proceed to call a meeting for consideration of matter within 21

Days from the date of receipts of valid requisition.
 The meeting shall be conducted within 45 days of receipts of valid requisition.
 The notice of meeting shall be sent to those members of company within 3
days on which requisitionists deposits requisition with company.
 if the board fails to call meeting within stipulated time , the requsitinists have
right to call meeting within 3 month from the date of requisition.
 if any expenses are incurred to requsitionists in calling meeting shall be
reimbursed by company and such amount so paid shall be deducted from
any amount payable to such directors , who is in default in calling the meeting

Board should take
Necessary step to call meeting
21-days
Date of Board fails to take 45- days
requisition Necessary step to call meeting
3month
Share holders shall call the meeting
NOTICE FOR MEETING
A Notice of Meeting of a Company is a document informing the members or

directors of a company about an upcoming meeting.
 The company must give a clear 21 days' notice to its members for calling
the AGM.
 The notice may be given in writing through speed post or registered post
or via electronic mode
 A General meeting can be called at a notice period shorter than 21 days if
at least 95% of the members entitled to vote in the meeting agree to the
shorter notice. The consent may be given in writing or through electronic
mode
To whom ,notice is to be served ?
1) Member of company
2) Legal representative of deceased shareholder
3) Assignee of an insolvent member.
4) Auditor of company
5) Director of company

CONTENTS OF NOTICE
1) Date
2) Time
3) Place
4) Business to be transacted at meeting
Business to be transacted at meeting
Annual General Extra-Ordinary General

Meeting Meeting
Ordinary Business Special Business

Special Business
Ordinary Business
1) Consideration and adoption of the audited financial statements.

2) Consideration of the Director’s report and auditor’s report.
3) Dividend declaration to shareholders.
4) Appointment of directors to replace the retiring directors.
5) Appointment of auditors and deciding the auditor’s remuneration.
.
Special Business (Deemed Special Business or Transaction)
 Apart from the above ordinary business, any other business may be
conducted as a special business of the company
 The explanatory statement is required to be given in case of special
businesses only.
 contents of explanatory statement :
1. it shall explain the transaction
2. State the nature of interest or concern directors, managing directors,
key managerial personal in the transaction.
Exception of 2: proposed transaction with company and director and
key managerial personal hold <2 % of share capital of company , than need
not state interest or concern
 As a result of nondisclosure or insufficient disclosure being made in the
explanatory statement, any benefit accrues to the promoter, director,
manager, key managerial personnel or relatives thereof, either directly or
indirectly, then person to whom such benefit is accrued shall hold such
benefit in trust for the company. Such person shall be liable to compensate
the company to the extent of such benefit received by him
 The ordinary business of the company will be passed by an ordinary
resolution
 However, in case of special business transactions, the resolution may be
passed as an ordinary resolution or a special resolution, depending on the
applicable legal provisions.
NOTICE BY ELECTRONIC MODE
Notice of meeting can be send directly to an e-mail address provided by the
Member of company , this is what we say sending of notice by electronic mode
Procedure for sending notice by electronic mode
 Notice may send through email as text or attachment .
 Email shall be addressed to person entitled to receive such as per records of
the company or as provided by depository.
 A company is required to provide an advanced opportunity at least once in
a financial year. To the Member to register his email address or to update a
fresh email id with the company or get such details updated with the depository
 if the notice is sent in form of a non-editable attachment to an e-mail, such
attachment should be in the Portable Document Format (PDF) or a non-
editable format together with a ‘link of instructions’ for receipt of
downloading a relevant version of the software
 The subject line in e-mail shall state the name of the company, notice of the
type of meeting, place and the date on which the meeting is scheduled.
 The company shall ensure that it uses a system that produces confirmation
of the total number of recipients e-mailed and a record of each recipient to
whom the Notice has been sent. The copy of such records and any Notices
of any failed transmissions and subsequent re-sending shall be retained by
or on behalf of the company as ‘‘proof of sending’’.
 The company is not responsible for the failure in transmission beyond the
its control
 If a Member does not provide an updated e-mail address the company shall
not be in default for non-receipt of such Notice by the Member.
 The notice of the general meeting of the company shall be simultaneously
placed on the website of the company
Q:WHAT WILL HAPPEN WHEN FAILS TO SERVE NOTICE ?
FAILURE TO SEND NOTICE
Accidental Failure Intentional Failure
Meeting is valid Decisions are valid Meeting is invalid
Any accidental omission to give notice to, or the non-receipt of such notice by,
any member or other person who is entitled to such notice for any meeting
shall not invalidate the proceedings of the meeting

QUORUM FOR MEETING
Quorum means: Minimum numbers of members required to transact

business at meeting
 Quorum –present at the time of commencement of every business.

 Quorum is presumed to be present
 Business is transacted without quorum , business is void
PUBLIC COMPANY PRIVATE COMPANY
1000 – 5 2 members personally present

1000 – 5000 -15 personally present
(proxy not allowed)
>5000 – 30
The “AOA” of company shall indicate quorum more than this number
Or otherwise the above will be applicable .
HOW LONG THE MEMBERS CAN WAITE FOE QUORUM ?
Members shall wait “Half and hour” for quorum to be met.
WHAT WILL DO IF THE QUORUM IS NOT MET AFTER WAITING ½ HOUR ?
Meeting called by
Requsitionists others
Meeting stands cancelled Adjourned to next week ,Same day,

same time And same place
Q: WHAT WILL DO ,IF IN THE ADJOURNED MEETING ALSO, QUORUM IS NOT
PRESENT ?
The member present shall be considered as quorum.
CHAIRMAN OF MEETING
 Chairman is the regulator of meeting
 AOA” shall provide for the appointment of chairman in a meeting .
 If “AOA” silent on the matter, Member personally present at the meeting at the
meeting shall elected one of themselves to be the chairman by showing hands.
 if any member demanded election of chairman by poll, than the chairman by
showing hand shall continue to be chairman and shall conduct a fresh election
by poll . If some other person is elected as chairman by poll , than other person
shall be chairman of rest of the meeting.
PROXIES
MEANING OF PROXY
 a person appointed by a company member to attend and vote in place of the
member at a company meeting
Q: WHO IS TO BE APPOINTED AS PROXY , MEMBER OR OUTSIDER ?
A proxy need not be a member of the company, may be outsider also
Q: HOW THE MEMBER KNOW ABOUT THE OPTION OF APPOINTMENT OF PROXY ?
Every notice sent by a company for calling a meeting must prominently
mention the right of a member to appoint a proxy along with the fact that the
proxy need not be a member’ of the company. If default is made in complying
with the above provision, every officer of the company who is in default shall
be punishable with fine which may extend to five thousand rupees.
Q:HOW TO APPOINT A PROXY ?
ANS: By using proxy form- MGT 11
The instrument appointing a proxy shall be in writing; and be signed by the
member , if the member is a body corporate, be – under its seal or be signed.

Q:WHERE , THIS PROXY FORM IS TO BE DEPOSITED AND TIME LIMIT FOR
DEPOSITION ?
Proxy instrument has to be deposited with the company 48 hours before the
time of the meeting. For each meeting, a separate proxy is required.
Q: CAN ONE PROXY APPOINT ANOTHER PERSON AS HIS PROXY ?
No
Q: WHAT A PROXY CAN DO AND CAN NOT DO , IN MEETING ?

A proxy shall not have the right to speak at such meeting and shall not be
entitled to vote except on a poll. Unless the Articles of a company otherwise
provide, the said provisions shall not apply in the case of a company not having
a share capital
Q: CAN THE MEMBERS OF COMPANY REQUEST TO INSPECT PROXY FORM ?
Every member entitled to vote at a meeting of the company shall be entitled to
inspect proxy during the period beginning 24 hours before the time fixed for
the meeting and ending with the conclusion of the meeting. But member has to
Give notice not less than 3 days, to company .
Q: CAN COMPANY SEND NOTICE BY REQUESTIG TO APPOINT A PERSON AS
PROXY ?
No invitation to appoint any person as proxy shall be issued at the company’s
expense. In case of violation of this provision, every officer of the company
who knowingly issues such invitations shall be punishable with a fine which
may extend to 1 lakh rupees.
Q: HOW MANY MEMBERS A PROXY CAN REPRESENT ?
A proxy can represent not more than 50 members whose aggregate
shareholding carrying voting rights must not exceed 10% of total share
capital
REPRESENTATION OF PRESIDENT OR GOVERNER
If the president or governor of state is a member of company ,may appoint any
Person to act his representative at the meeting of company. Such appointed
Person will be deemed to be the member of company and shall exercise the
Same rights and power as the president or the governor could have exercised.
REPRESENTATION OF CORPORATION
If a body corporate is a member of company , it can authorize any person to act
As its representative at any meeting of a company. Such authorization to be given
By way of board resolution, the authorized person to exercise the same rights
And power ,including the right to vote by proxy and by postal ballot
VOTING AT MEETING
1. VOTING BY SHOW OF HAND

2. VOTING ON POLL
3. VOTING BY POSTAL BALLOT
4. VOTING THROUGH ELECTRONIC MEANS
1. VOTING BY SHOW OF HAND
 Every annual general meeting, a resolution put to the vote of meeting, shall be
decided on the basis of voting by show of hands at the first instance, unless a
poll is demanded or the voting is carried out electronically.
 In voting by show of hands proxies cannot vote unless the articles provided
therefor
 every member has right to cast only one vote, irrespective of the number of
shares he holds.

2.VOTING ON POLL
Voting by poll means a system in which ballot paper are distributed among the
members present at the meeting, in person or by proxy, to participate in the
voting. All the members in person or by proxy at a meeting have the voting right
in a poll in proportion to the number of shares held by each of them
Q: WHEN THE POLL WILL BE CONDUCTED ?

 Chairman has power to order for a poll at his own motion.
 At the request of specified number of Members :
In the case of a company having share capital- by any member present in
person or proxy, and holding shares for a paid up value of Rs. 500,000 or more or
members having voting right of not less than 1/10th of the total voting power.
In the case of any other company- any member or members present in person
or proxy holding not less than 1/10 of the total voting power has a right to demand
on poll.
Q: CAN MEMBERS WITHDRAW THEIR DEMAND FOR POLL ?

The person or persons who demanded a poll may withdraw the demand at any
time, with the permission of the chairman
Q: MAXIMUM TIME LIMIT FOR CONDUCTING POLL ?

Normally , polling shall be conducted within 48 hours from the time when
demand was made , but following two situation , polling shall be conducted
Immediately when requisition was made.
1) Appointment of chairman
2) Poll demanded for adjournment of meeting.
Q: WHICH ARE THE PROCEDURES OF CONDUCTING VOTING BY POLL ?
1) The Chairman shall appoint such number of persons as he deems necessary
to scrutinize the poll process and report thereon to him.
2) 2) The scrutinizer shall distribute the polling paper to the members &
proxies and lock an empty box in their presence.
3) The polling shall be in FORM NO: MGT-12
4) After voting, he will open the box in presence of at least 2 witnesses.
He shall count the votes and check the following things while doing so:-
a. The person voting is member in register of members during book closure.
b. The person is present at the meeting, from attendance register.
c. Validity of signature of the person signing, from specimen signatures.
d. In case, person voting is a proxy, then proxy registers and forms.
e. In case member a body corporate, authorization through Board
resolution.
f. Incomplete polling papers to be taken as invalid
5. In case, there is doubt upon validity of proxy, validity shall be decided in

consultation with the chairman.
6. The scrutinizer thereafter, prepare his report in form MGT-13 and submit
it to the chairman who shall counter-sign the same, within 7 days from date
of taking of poll.
7) The chairman shall declare the result of voting on poll
3 .VOTING BY POSTAL BALLOT
Postal Ballot describe the method of voting in which ballot paper are dispatched
to the members of the company and such paper returned to the company by
post, it is called the postal ballot.
Q: WHICH ARE THE PROCEDURES FOR CONDUCTING VOTING BY POSTAL
BALLOT ?
1) A notice should be send to all the shareholders, along with a draft resolution
explaining the reasons therefor and requesting them to send their assent or
dissent in writing on a postal ballot.
2) The notice shall be sent either
(a) by Registered Post or speed post,
(b) Or through electronic means like registered e-mail id o
(c) or through courier service for facilitating the communication of the assent or
dissent of the shareholder to the resolution within the said period of thirty
days
3) Notice shall specify the day, date, time and venue
4) Ordinary Business shall not be transacted by means of a postal ballot
5) An advertisement shall be published at least once in a vernacular newspaper in the
principal vernacular language of the district in which the Registered Office of the
Company is situated, and having a wide circulation in that district, and at least once
in English language in an English newspaper having a wide circulation in that district,
about having dispatched the ballot papers
6) The notice of the Postal Ballot shall also be placed on the website of the Company
7) The Board of Directors shall appoint one Scrutinizer, who is not in employment of
the Company and who, in the opinion of the Board can conduct the Postal Ballot
voting process in a fair and transparent manner
8) Postal ballot received back from the shareholders shall be kept in the safe custody
of the Scrutinizer and after the receipt of assent or dissent of the shareholder in
writing on a Postal Ballot,
9) No person shall deface or destroy the ballot paper or declare the identity of the
shareholder.
10) The Scrutinizer shall submit his report as soon as possible after the last date of
receipt of Postal Ballots but not later than seven days thereof.
11) The assent or dissent received after thirty days from the date of issue of notice
shall be treated as if reply from the member has not been received.
12)) The scrutinizer shall maintain a register either manually or electronically to
record their assent or dissent received
13) The Postal Ballot and all other papers relating to Postal Ballot including
voting by electronic means, shall be under the safe custody of the Scrutinizer till
the Chairman considers, approves and signs the minutes and thereafter, the
Scrutinizer shall return the Ballot Papers and other related papers or register to
the Company.
14) Every Company shall preserve such Ballot Papers and other related papers
or Register of assent or dissent safely.
15) The results shall be declared by placing it, along with the Scrutinizer’s
Report, on the website of the Company.
4. VOTING THROUGH ELECTRONIC MEANS
Electronic voting (e-voting) is a term encircling several different types of
voting, implementing both electronic means of casting a vote and electronic
means of counting votes
Two main types of e-Voting can be identified:
1) E-voting which is physically supervised by representatives of governmental
or independent electoral authorities (e.g. electronic voting machines located at
polling stations);
2) Remote e-Voting where voting is performed within the voter’s sole influence,
and is not physically supervised by representatives of governmental authorities
(e.g. voting from one’s personal computer, mobile phone, television via the
internet)
1) The notices of the meeting shall be sent to all the members, auditors of
the company, or directors either –
(a) by registered post or speed post ; or
(b) through electronic means like registered e-mail id;
(c) through courier service;
2) The notice shall also be placed on the website of the company,
3) The notice of the meeting shall clearly mention that the business may be
transacted through electronic voting system and the company is providing
facility for voting by electronic means

4) The notice shall clearly indicate the process and manner for voting by
electronic means and the time schedule including the time period during
which the votes may be cast and shall also provide the login ID and create
a facility for generating password and for keeping security and casting of
vote in a secure manner
5) The company shall cause an advertisement to be published, not less than
five days before the date of beginning of the voting period, at least once in
a vernacular newspaper in the principal vernacular language of the dis-
trict in which the registered office of the company is situated, and having a
wide circulation in that district, and at least once in English language in an
English newspaper having a wide circulation in that district, about having
sent the notice of the meeting
6) The e-voting shall remain open for not less than three days.
7) Board of directors shall appoint one scrutinizer, who may be chartered
Accountant in practice, Cost Accountant in practice, or Company Secre-
tary in practice or an advocate, but not in employment of the company and
is a person of repute who, in the opinion of the Board can scrutinize the
e-voting process in a fair and transparent manner.
8) The scrutinizer shall, within a period of not exceeding 3 working days
from the date of conclusion of e-voting period, unblock the votes in the
presence of at least two witnesses not in the employment of the compa-
ny and make a scrutinizer’s report of the votes cast in favor or against, if
any, forthwith to the Chairman
9) The scrutinizer shall maintain a register either manually or electroni-
cally to record the assent or dissent, received, mentioning the particulars
of name, address, folio number or client ID of the shareholders, number of
shares held by them, nominal value of such shares and whether the shares
have differential voting rights;
10) The register and all other papers relating to electronic voting shall re-
main in the safe custody of the scrutinizer until the chairman considers,
approves and signs the minutes and thereafter, the scrutinizer shall return
the register and other related papers to the company

11) The results declared along with the scrutinizer’s report shall be placed
on the website of the company
RESOLUTIONS
A proposed resolution is called a motion until it receives approval to be passed.

Once the necessary approval is obtained as per the provisions of the Companies
Act, 2013, it becomes a resolution.
RESOLUTIONS OF COMPANY
ORDINARY RESOLUTION SPECIAL RESOLUTION
ORDINARY RESOLUTION:
An ordinary resolution can be passed by a simple
vote either by proxy or in person and is passed by a majority
SPECIAL RESOLUTION
 In order for a special resolution to be passed at a General Meeting, a

supermajority is required in favour of it.
 Supermajority refers to at least 75 percent of the members voting in favor of the
resolution (The votes cast in favor of the resolution, are required to be not less
than three times the number of the votes, if any, cast against the resolution by
members so entitled and voting)
 The notice handed over to the members prior to the meeting has to specifically
mention on its agenda of the passing of a special resolution.
 Form MGT – 14 is required to be filed mandatorily with the Registrar of
Companies within 30 days of the resolution being passed, where the resolution
is a special resolution, especially.

Attachments include:-
Copy of the resolution passed.
An explanatory statement under section 102 of the Companies Act,
2013.
Copy of the Articles of Association (where any change is made).
Copy of the Memorandum of Association (where any change is
made)
RESOLUTION REQUIRING SPECIAL NOTICE
 It’s a different kind of ordinary resolution of which a notice of intension to move

a resolution has to be given to the company by the specified member .
 Specified member :
Member holding not less than 1 % of total voting power
or
Holding share on which aggregate sum not exceeding 5,00,000 has been
paid-up.
 The company shall immediately after the notice of intention to move any such
resolution has been received by it, give its members notice of the resolution .
MINUTES
A corporate minute book is a permanent and detailed record of your

corporation’s rules, activities and decisions. Notably, it is used as a vehicle for
the organization and storage of all your corporation’s documents.
PROCEDURE
@Minutes shall be written in third person and past tense
@Minutes shall record names of Directors present at the meeting physical-
ly or through Audio Visual
@Minute Record of presence of Quorum
@ The Chairman shall exercise absolute discretion in regard to the inclu-
sion or non-inclusion of any matter in the minutes on the below men-
tioned grounds that whether it:
Is or could reasonably be regarded as defamatory of any person or
Is irrelevant or immaterial to the proceedings or
Is detrimental to the interests of the company.
@The draft minutes shall be circulated within fifteen days from the date of
the conclusion of the Board Meeting by hand or by speed post or by regis-
tered post or by courier or by e-mail or by any other recognized electronic
means to all the members of the Board or the Committee, as on the date of
the Meeting, for their comments
@Minutes so finalized by the directors shall be entered in the Minutes
Book within thirty days from the date of conclusion of the Meeting.
Minutes, once entered in the Minutes Book, shall not be altered.
@ The Chairman shall initial each page of the Minutes, sign the last page
and append to such signature the date on which and the place where he
has signed the Minutes. If the Minutes are maintained in electronic form,
the Chairman shall sign the Minutes digitally
@Company shall circulate a copy of the said signed Minutes, certified by
the Company Secretary or where there is no Company Secretary by any
Director authorized by the Board, to all the Directors
@Minutes of all Meetings shall be preserved permanently in physical or in
electronic form with Timestamp
@Minutes Books shall be kept at the Registered Office of the company
@Minutes Books shall be in the custody of the Company Secretary
8) ANNUAL RETURN
Q: WHAT IS ANNUAL RETURN ?
Annual Return is a publicly available document prepared by a company every
year with the information available as at the close of the financial year, to be
filed with the Registrar of Companies. It is not a financial document rather it
contains general information about the company, its members, activities of
the company & other useful information. It is required to be prepared by
every company.
Q: WHICH ARE THE CONTENTS TO BE INCLUDED IN ANNUALRETURN ?
1. Details of its Registered office.
2. Principal Business activities.
3. Details of holding, subsidiary, and associate companies.
4. Details of members, debenture holders, and other security holders & their
shareholding pattern.
5. Particulars of promoters, directors, and Key Managerial Personnel(KMPs).
6. Its Indebtedness.
7. Details of Board Meetings & committee meetings and their attendance
particulars.
8. Details of the meeting of members or class thereof along with attendance
particulars.
9. Particulars of remuneration of directors & KMPs.
10. Details of any penalty or punishment imposed on the company, its
directors & officers.
11. Details of compounding or appeals.
12. Details of shares held by or on behalf of Foreign Institutional Investors
13. Such other particulars as may be prescribed.
Q: WHICH IS THE FORMATE OF ANNUAL RETURN ?
The format of the Annual return is e-Form MGT-7. This form is available for
download on the MCA website.
Q: WHO SHALL SIGNE THE ANNUAL RETURN ?

• Director AND CS ( PCS if There is no CS ).
• In Case Of OPC, Small Company and a start up Private Company : CS
OR Director ( if there is no CS )
• The Annual Return of the following companies shall be certified by PCS
in Form No MGT -8 :
• Listed Company
• Company having Paid Up share capital of ₹ 10 Crores or more
• Company having turnover of ₹ 50 Crores or more

Q: WHEN THE ANNUAL RETURN SHALL BE FILED WITH ROC ?
Within 60 days from the date on which AGM is held or should have been
held.
Q: WHAT IF ANNUAL RETURN IS NOT FILED WITH ROC ?
• Non Compliance By the company will attract Fine :- • ₹50K to ₹5 lakhs.
• Officer in Default shall be punishable with imprisonment or with fine or
both :-
• 6 Months ( Term of imprisonment )
• ₹50K to ₹5 Lakhs ( Quantum of Fine )
• Non Compliance by PCS will attract fine :- • ₹50K to ₹5 Lakhs.
IMPORTANT POINTS TO BE NOTED ON ANNUAL RETURN
1) Extracts of Annual Return

The extracts of the Annual Return shall form the part of the Board’s
Report. The format of extracts of Annual Return is Form MGT-9.
2) Preservation of Annual Return

Copies of annual returns prepared and copies of all certificate and
documents required to be annexed there to shall be preserved for a period
of 8 years from the date of filing with ROC
3) Place of preservation
Copies of annual return shall be kept at registered office of company

9)REGISTERS
 Registers of members-
Registers of Members  Registers of debenture
Holder/any other security Holder
 Foreign Registers
 Index of members
REGISTERS OF COMPANY
 Maintenance of Registers
Content of register
@ Time of entry
@ Place of Maintenance
 Authentication
Declaration of beneficial
interest in any share
Closure of registers
Preservation of registers
Registers of Members
 Section: 88 Read with Rule 3 of Companies

(Management and Administration) Rules,
Registers of
2014
members for each
 Every company having the members need to
class of Equity and
maintain the register of members as per
Preference share
Companies Act, 2013.
(separately)
 Format: The register of Member needs to
maintained in Form No. MGT-1

2014
Register of
 Every company having the debentures holder,
Debenture
need to maintain the register of debenture
Holders
holders as per Companies Act, 2013.
 Format: The register of Member needs to
maintained in Form No. MGT-2

Foreign Register of (Management and Administration) Rules,
Members, Debenture 2014
Holders, Other  A company having member, debenture holders
Security Holders or or any other security holders in foreign
Beneficial Owners country shall maintain the registers.
Residing Outside  Format: Every company shall maintain such
India register in format MGT-3 of such members,
debenture-holders, other security holders or
beneficial owners residing outside India.

2014
Index of members  Company is required to maintain the Index of
Members and debenture-holders in which
serial wise entries shall be made for members
and debenture-holders.

Time for Entries
Within 7 days after the approval of “Board of
directors “ of
 Allotment or transfer of shares , Debenture ,other
securities
 Buy back of share, Reduction of share capital ,Sub-
division, consolidation of share
 Issue of sweat equity share, Transfer of share,
Transmission of shares
Within 15 days from :
Maintenance  Listed company- Any pledge, charge ,lien or
hypothecation created by promoters
Place of maintenance
 Registers shall be maintained at registered office
 Any other place other than registered office:
@ Approval by members by the way of Special resolution
@ To Within city , Town or Village in which registered
office is situated.
OR
@To any other place in India in which more than
1/10 of total members entered in register are residing
 Entries made in this register shall be authenticated

Authentication by CS
OR
 Authorized Person where there is no CS
in the Company.

Content of register
1) Name of guardian, 1) Name of member

2) Address of nominee 2) Address
3) Date of cessation 3) Occupation
Content 4) E-mail Address
of
1) PAN OR CIN register 1) Status
2) Unique identification 2) Nationality
number 3) Date of birth
4) Fathers /mother
spouse name
Declaration of beneficial interest in any share
Registered owner has to Beneficial owner has to

make a declaration to make a declaration to
company in Form No:MGT- company in Form No:MGT-
4 within 30 days from the 5 within 30 days after
day on which his name is acquiring such beneficial
entered in register interest
If any changes occurs in the If any changes occurs in the

beneficial interest , beneficial interest ,
Registered owner shall Beneficial owner shall
submit Form No:MGT-4 submit Form No:MGT-5
within 30 days to company within 30 days to company
On receipt of declaration , the company shall make note of same

and file it with ROC in Form No: MGT-6 within 30 days
Closure of registers
 A company may close the register of members or debenture holders or other

security holder for any period not exceeding in aggregate of 45 days in each
year
 It shall not exceed 30 days at one time
 For this purpose 7 day notice shall be given to all members
Preservation of registers
 Register Members preserved PERMANENTLY and shall be kept under

the custody of CS or Authorized person
 Register of Debenture and Other Security Holder shall be preserved for 8
year from the date of Redemption of Debenture and other Security and
shall be kept under the custody of CS or Authorized person
10) CHARGES
Charge means: Interest or lien created on
@ property
@ undertaking
@ Both
including mortgage.
TYPES OF CHARGES
FIXED CHARGE FLOATING CHARGE
A fixed charge is created on the When the charge is created not on the
identified asset of the company. definite property is called the floating
On the creation of charge, the charge. It mostly covers the property
company give up all its right on which is on fluctuation state like stock
the property and therefore in trade. The property on which the
dispose or sale of the property floating charge is created keeps
changing from time to time as the
company is free to deal with the
property as it deems fit

Q:WHAT IS THE MAIN DIFFERENCE BETWEEN FIXED CHARGE AND FLOATING
CHARGE ?
When fixed charge is created on any asset , then the company can not dispose
the asset without the consent of charge holder , but , when floating charge is
Created on any property , company can deal with such property , but when
Happening of certain event becomes unable to deal with it.
Q:WHEN FLOATING PROPERTY CAN NOT BE DEALS BY COMPANY ?
ANS: When it become crystallized ( conversion of floating charge with fixed-
charge)
Crystallization occurs
@ when the company gets liquidation

@ when the charge holder asked for the repayment of company and the company
fails to do so
Then in such cases, the charges holders go for fixing the charge. That is called
as charge got crystallized. With the crystallization, the company cannot sale
or use the property on its will, and the lender get the possession of the asset as
happened in the fixed charge
 A CHARGE CREATED BY A COMPANY IS REQUIRED TO BE
REGISTERED WITH THE REGISTRAR.
Procedure for registration of charge
Borrower- Company
FORM NO: CHG-1
Or Signed by
FORM NO: CHG-9
(Debenture)
Lender-Charge Holder
@ Registration shall be made in either

FORM NO: CHG-1 or FORM NO: CHG-9
@ it shall be signed by both company and
FILE WITH “ROC”
Charge holder
@then file form with “ROC”

Q: WHAT TIME FRAME WITHIN WHICH CHARGE IS TO BE REGI STERED ?
 The company must record all kinds of charges under the Registrar of
Companies (ROC) within 30 days of the formation of that specific charge
 if fails to register charge within 30 days , company shall make an application
to “ROC” for seeking extension of time limit in FORM NO: CHG-1
 Then “ROC” can increase this period around 30 days from the day of
creation of charge , provided it has to be paid with an additional fee.
Q: REGISTRATION IS REQUIRED IF THE PROPERTY SITUATED OUTSIDE INDIA ?

It does not matter whether the charge is formed within India or outside
India.
Q: REGISTRATION IS REQUIRED IF ANY CHANGES HAPPENS IN TERMS OF CHARGES
(MODIFICATION) ?
Yes: Change may be
@ in terms
@ in amount
@ in interest rate
@ in repayment of schedule
The process is identical to the creation of charge as the application needs to
be submitted to Registrar of Companies who further issues the certificate of
the required change.
Q: WHAT WILL DO IF THE COMPANY IS NOT REGISTERING CHARGES ?

 The person in whose favour charge created may make application to “ROC”
For registration
 The registrar shall issue notice to company allowing fourteen days for
registration of charge, where the company either itself get the charge registered
or shows the sufficient cause for non-registration

 If the charge does not get registered within the time provided, then the
charge can be registered by the holder of charge on payment of the fees.
Also, the charge holder gets reimburse of the amount spent on registering
of the charge
Procedure for satisfaction of charge
When the company repaid the loan amount to the banks or other financial
institution, then charge is satisfied, and that is called a satisfaction of
charge.
Company shall intimate with “ROC” about satisfaction of charge within 30
days from the day of such payment in FORM NO: CHG-4
Registrar will send the notice to the holder of charge to reply within
fourteen days as to whether the full payment or satisfaction of the charge
has been made
If no cause of reply shown within such time from the holder of charge, then
the Registrar in his register of charge will record the satisfaction of charge
and will also inform the company.FORM NO:CHG-5
Register of charge in the custody of Registrar and their inspection

Registrar has to maintain the register mentioning all the details of the
charges registered. The register will be open to inspection by any person on
the payment of fees.
Register of charge in the custody of Company and their inspection
Company has to maintain the register mentioning all the details of the
charges registered in FORM NO: CHG-7 . The register will be open to
inspection during business hours
@ by member or creditor at free of cost
@ by any other member on the payment of prescribed fees

11) DEBENTURE
Meaning of debenture:
 Sometimes when the Company is in need of funds without diluting its equity
state, the Company opts for Debentures Issue. Debenture is debt to the
Company. It’s like a loan which needs to be repaid over a certain period of time.
Debentures carry fixed interest rate.
 Section 2 (30) of the Companies Act, 2013 define inclusively debenture as “
debenture” includes debenture stock, bonds or any other instrument of a
company evidencing a debt, whether constituting a charge on the assets of the
company or not. Thus, Debenture is a written instrument acknowledging a debt
to the Company
Types of debenture:
1. Secured/ Unsecured Debenture:
The debenture issue can be secured by a mortgage or charge on the property
of the company and when the same are not secured they are known as
unsecured (with nominal collateral security) debentures.
2. Convertible/ Non-Convertible Debentures:
The debentures issued can be converted into equity shares on a specified
date- Convertible
The debentures issued can not be converted into equity shares-Non-
convertible
3. Redeemable/ Irredeemable Debentures:

• When debentures will be redeemed on the expiry of the debenture
issue- Redeemable debenture
• When company will not redeem its debentures and only interest will
paid to the debenture holders until the company wishes to redeem or
cancel the debentures- Irredeemable debenture
Voting Right of debenture:
 The debentures do not carry any voting rights
 when the debentures are issued at the option of conversion, then ones
converted to equity they shall carry voting rights as other equity shares
Conditions for issue of shares:
1. The redemption period of debenture:
 Secured debenture- 10 years
 infrastructure projects company, Infrastructure Finance companies
and Infrastructure Debt Fund Non-Banking Financial Companies- 10-
30 years.
2. The issue shall be secured by way of charge on the properties or assets of
the company or its subsidiaries or its holding company or its associates
companies, having a value which is sufficient for the due repayment of the
amount of debentures and interest thereon
3. The company shall appoint a debenture trustee before the issue for
subscription of its debentures.
4. The company shall execute a debenture trust deed to protect the interest of
the debenture holders within sixty days from the date of allotment.
Q :WHO IS DEBENTURE TRUSTEE ?
ANS: A debenture trustee is a person or entity, appointed by the issuer
company and is given the task to protect the interests of the debenture
holders and he will also serve as a mediate factor between the issuer
company and the debenture holder
Q : WHO WILL BE APPOINTED AS DEBENTURE TRUSTEE ?
ANS: Person
A scheduled bank
A public financial institution
An insurance company
A body corporate
Q : WHO WILL NOT BE APPOINTED AS DEBENTURE TRUSTEE ?
ANS: Person shall not be appointed as debenture trustee
1. if he has a share ownership in the company.
2. if he is a promoter of the company, employee or the manager.
3. Creditor to the company.
4. if he is relative of any promoter or director or key managerial
person

Q : HOW TO APPOINT DEBENTURE TRUSTEE ?
ANS: By obtaining the consent from proposed debenture trustee.
Q : WHAT ARE THE DUTIES OF DEBENTURE TRUSTEE ?
ANS: 1. Ensure that the assets of the company issuing debentures ,are
sufficient to discharge the interest and principal amount at all times.
2. Satisfy himself that the letter of offer does not contain any matter which
is inconsistent with the terms of the issue of debentures or with the trust deed.
3. call for reports on the utilization of funds raised by the issue of
debentures;
4. Take possession of trust property in accordance with the provisions of
the trust deed.
5. To take appropriate measures to protect the interest of the debenture
holders in case of any breach of the trust deed or law.
6. To ensure that the debentures have been converted or redeemed as per
the provisions and conditions under which they are offered to debenture
holders.
7. To enforce security in the interest of the debenture holders in case of any
default by moving to assets for collection of debt.
8. To appoint a nominee director on the board of issuer entity when
required. A nominee director can be appointed in case of below happenings:
a) Two consecutive defaults in payment of interest to debenture
holder
b) Default in the creation of security for debentures
c) Default in the redemption of debt
Q : WHAT MEAN BY DEBENTURE TRUST DEED ?
ANS: A debenture trust deed is an instrument that a company executes in
favor of a debenture trustee, thereby appointing them and defining their
role and duties to protect the interest of debenture holders before
debentures are offered for public subscription.

 Such trust deed shall be in FORM NO: SH-12 and shall executed
within
3 months of closure of the issue or offer.
 debenture holders can inspect the deed and can also get a copy of it
by paying a certain fee
 The company has to forward the debenture trust deed within seven
days of
making the payment.
Q : WHAT IF ANY PROVISION CONTANIN IN TRUST DEED WHICH

EXEMPT DEBENTURE TRUSTEE FROM ANY LIABILITY DUE TO
BREACH OF ANY TRUST.
ANS: Such provision is void
Debenture Redemption Reserve AND Investment

Debenture Redemption Reserve (DRR) is a reserve required to be created by the
company issuing debentures. It is a form of reserve set aside out of the profits of
the company. Section 71(4) of the Companies Act, 2013 mandates every company
issuing debentures to create a DRR out of the profits of the company available for
payment of dividend and the amount credited to such account shall be utilized by
the company only for redemption of debentures
 The company shall create Debenture Redemption Reserve equivalent to at
least 50% of the amount raised through the debenture issue before
debenture redemption commences
 Every company required to create Debenture Redemption Reserve shall on
or before the 30th day of April in each year, invest or deposit, as the case
may be, a sum which shall not be less than 15%,of the amount of its
debentures maturing during the year ending on the 31st day of March.
 The amount remaining invested or deposited, as the case may be, shall not
at any time fall below 15% of the amount of the debentures maturing during
the year ending on the 31st day of March of that year.

12) ACCEPTANCE OF DEPOSITS BY COMPANY
About Deposits:
 Deposit is one of the sources available with company to raise funds for
meeting its short term and long term fund requirements.
 Chapter V of the Companies Act, 2013 regulate the invitation and acceptance
of deposits from Section 73 to 76 of the Companies Act 2013 read with Rules
Companies( Acceptance of Deposits),2014.
 Deposit/Public Deposit/Fixed Deposit is kind of borrowing made by company
 Deposit may be secured or Unsecured
 These sections and rules provides for Non-Banking ,Non-Financial companies
(Trading, Manufacturing companies)
 These section is not applicable to :
 Banking company
 Non-Banking Financial company
 Housing Financing companies
Kind of Deposits:
KIND OF DEPOSITS
ACCEPTANCE OF DEPOSIT ACCEPTANCE OF DEPOSIT

FROM MEMBERS FROM PUBLIC
(SECTION 73) (SECTION 76)
Private or Public company

can accept deposit from its Only eligible company can
members accept deposit from public

ACCEPTANCE OF DEPOSIT FROM MEMBERS(SECTION 73)
 Company may accept deposit from its members after passing resolution in
general meeting
 Issuance of circular to its members including the statement showing

 Financial position of company
 credit rating obtained
 Total number of depositors
 Any due , if any, to previous depositors
 Copy of such circular along with such statements shall be filed with ROC
within 30 days before the date of issue of circular to members
 The deposit repayment reserve shall be created in order to enable sufficient
fund to repay deposit. For this purpose deposit such sum by 30 the April
each year which shall not be less than 20% of amount of its deposit
maturing during the following financial year, and keep in a scheduled bank
in a separate bank A/C .
 Certify that the company has not committed any default in last 5 years in
repayment of deposits.
 Provide security , if any, for due amount including creation of such charge
on the property or asset of company.
ACCEPTANCE OF DEPOSIT FROM PUBLIC (SECTION 76)
 Only eligible company can accept the deposit from public
 Eligible company: Public company
Net worth >100 cores or Turnover >500 cores

 Pass special resolution in general meeting
 The eligible company shall obtain credit rating from recognized agency
credit rating agency
Note :Every company which accepts secured deposit from public shall within
30 days of such acceptance , create a charge on its assets.

Repayment of Deposit: Every deposit accepted by company shall be repaid
with interest .if company fails to repay the deposit or interest , as case may be,
the depositor may apply to the Tribunal for an order directing the company to
Pay the sum due.
13) GLOBAL DEPOSITORY RECIEPT
Q :WHAT IS A GLOBAL DEPOSITARY RECEIPT?

ANS:
 Securities are offered to depositor/custodian/participant which in turn issue

depository receipts to international investors
 These receipts are traded on international stock exchange
 Its instrument in the form of a depository receipts or certificate created by the
overseas depository bank outside India and issued to Non- resident investors
against the issue of ordinary shares or foreign currency convertible bonds of
issuing company
Conditions for issue of “Global depository receipts”
 Resolution in Board of directors
 Special resolution in General meeting
 The share shall be kept in custody of domestic custodian bank
 The Depository receipt shall be issued by overseas depository bank
 Compliance of “RBI” rules
 Appointment of compliance manager ( Banker or CA OR CMA OR CS) to
oversee all the compliance relating to issue f depository receipts
Manner of issue of “Global depository receipts”
The depository can be issued by way of public offer or Private placement and
may be listed on overseas exchange, GDR can be issued against new or existing
shares
Manner of issue of “Global depository receipts”
Proceed of issue to be remitted to a bank in India
Right to vote to the holder of “Global depository receipts”
 Depository holder get voting right only when convert the depository receipts
into underlying shares
 The overseas depository shall be entitled to vote on behalf of holder of
depository receipts until the conversion of depository receipts to share take
place- For the purpose there shall be agreement between the overseas
depository and holder of depository receipts.
14) DIRECTOR
A director is someone elected or appointed to manage a company's business and

affairs.
Q : MINIMUM NUMBER OF DIRECTORS ?
ANS:
Public company -3
Private company -2
One person company - 1

Q : MAXIMUN NUMBER OF DIRECTORS ?
ANS: 15 Directors, however, company may appoint more than 15 directors
after passing a special resolution in the general meeting of shareholders.
TYPES OF DIRECTORS
1. FIRST DIRECTOR
2. WOMEN DIRECTOR
3. INDEPENDENT DIRECTOR
4. NOMINEE DIRECTOR
5. MANAGING DIRECTOR
6. WHOLE TIME DIRECTOR
7. SMALL SHAREHOLDER DIRECTOR
8. ADDITIONAL DIRECTOR
9. ALTERNATE DIRECTOR
1. FIRST DIRECTOR
First directors are the directors who hold office from the date of incorporation
of the company. That means
Public company -3
Private company -2
One person company – 1
2. WOMEN DIRECTOR
Company: @ All listed company
@ Public company having paid-up capital of Rs. 100 crore or
more OR with a turnover of Rs 300 cr or more
are mandatorily required to appoint a woman director in their company.
3. INDEPENDENT DIRECTOR

An independent director means a director other than a managing director or a
whole-time director or a nominee director having no material or financial
interest in the company or with the directors. This type of director is gaining
enormous attention these days because of the frauds done by the board of the
companies in India.
Q :WHEN IS A COMPANY REQUIRED TO APPOINT INDEPENDENT

DIRECTOR?
Listed Company Unlisted company
Mandatory Mandatory at least 2 director as

(at least 1 /3rd of total director independent
needs to be independent director)  Paid up share capital of 10
For E.g. : Total Director 6, then at Crores or more or
least 2 director needs to be  Turnover of 100 Crores or more
independent director or
 Aggregate outstanding loans,
debentures and deposits
exceeding 50 Crores
Note:
No mandatory requirement for appointment of Independent Director in
private company

Q :WHO IS QUALIFIED TO BE AN INDEPENDENT DIRECTOR ?
Sr. Individual None of his/her Relative

No
1 Person of integrity Holding security or interest in
company, holding, subsidiary,
associate during 2 immediately
preceding financial year or during
the current year
2 Possesses relevant expertise Provided that relative may hold
and experience security or interest in the company
of face value <50 Lakhs or 2% of its
holding, subsidiary or associate
company
3 Neither is or was a promoter Indebted to company, its holding,
in associate, holding or subsidiary, associate or their
subsidiary company nor promoters, or directors, in excess
related to promoter of any of such amount as may be
company prescribed during immediately
preceding 2 financial year or
current year
4 No pecuniary relationship Has given a guarantee or security in
except remuneration or connection with indebtedness of
transaction not exceeding third person to company, during
10% of ID total income with immediately preceding 2 financial
its holding, subsidiary, year or current year
associate company, or their
promoter during
immediately preceding 2
financial year or current yea
5 Any other pecuniary transaction or
relationship with subsidiary,
holding, associate company :- 2% or
more of its gross turnover or total
Income

None of the – INDIVIDUAL AS WELL AS RELATIVE OF THE
INDIVIDUAL
6 Holds a position of KMP, or been an employee of company or,
holding, subsidiary or associate company during 3 IPFY (relative
being an employee than the above would not be applied during
IP3FY)
7 Holds 2% or more along with the relative of Total Voting Power of

the company
8 Is a Chief Executive or Director of any non-profit organization that
receives 25% or more of its receipts from company, its promoter,
holding, subsidiary or associate company
9 Employee or proprietor or partner in 3 immediately previous FY of
 Auditor Firm, CS in Practice, Cost auditor of company holding,
subsidiary or associate company or
 Legal or consulting firm which have a transaction of more than
10% of gross T/O of the firm.
In which he is proposed to be independent director
4. NOMINEE DIRECTOR
A Nominee Director is a Director appointed to the Board to represent the
interest in the Company. The Appointment of Nominee Director is made by any
law for the time being in force or by agreement or by Central or State
Governments by its shareholding in Government Company.

5. MANAGING DIRECTOR
The Managing Director of a company oversees the function and performance
of different departments. They also look after the daily performance and
functioning of the departments or managers under them. Oftentimes the
Managing Director is part of the board of directors
6. WHOLE TIME DIRECTOR
A director who is appointed by company under a special contract of service as
a full-time employee is called a whole- time director
 A company can’t appoint or re-appoint any

person as Managing Director or Whole Time
Director for a term exceeding five years at a time.
 The minimum age for appointment for these
APPOINTMENTOF
positions is 21 years and normal retirement age
MANAGING DIRECTOR
is 70 year.
AND WHOLE TIME
 The appointment of a person having age of
DIRECTOR
above 70 years may be made by the approval
of members by special resolution.
 A company can’t appoint or employ at the
same time a Managing Director and a Manager.
Disqualification for the appointment of a “MD” AND “WD”

 If the person is an undercharged insolvent or has at any time been adjudged
an insolvent.
 If he has at any time suspended payments to his creditors or makes, or has
at any time made a composition with them.
 If he has any time been convicted by a court for an offence and sentenced for
more than a period of six months.
 If he has been sentenced to imprisonment for any period, or to a fine
exceeding one thousand rupees, for the conviction of an offence under
various Acts as mentioned under section 196 (3) of the Companies Act, 2013.

Points to be noted: A return FORM NO: MR-11 shall be filed indicating
appointment of Managing director or Whole time director within 60 days
7. SMALL SHAREHOLDER DIRECTOR
A small shareholder is one who holds shares having nominal value of not more
than Rs. 20,000 or such other sum as the Government may prescribe. The Act
provides for appointment of Small Shareholders Director (“SSD”) either suo
motto by the company or on an application by small shareholders
8. ADDITIONAL DIRECTOR
An alternate director is a director appointed as a substitute for a director who
is not present in India for a minimum period of 3 months. But a director of the
same company and a person holding an alternate directorship for any other
director in the same company cannot be appointed as an alternate director
9. ALTERNATE DIRECTOR
Additional Director is a director who is appointed in a board meeting (except a

person who fails to get appointed in the general meeting) who shall hold office
up to the next annual general meeting or the due date on which the AGM
should have been held, whichever is earlier.
DIRECTOR
APPOINTMENT RE-APPOINTMENT DISQUALIFICATION

OF DIRECTORS OF DIRECTORS OF DIRECTORS

DUTIES OF RESIGNATION OF REMOVAL OF
DIRECTORS DIRECTORS DIRECTORS
VACATION OF OFFICE REMUNERATION POWER OF BOARD OF

OF DIRECTORS DIRECTORS DIRECTORS
APPOINTMENT OF DIRECTORS
 Every factory shall be appointed by company in general meeting by passing
ordinary resolution
 It is mandatory for any individual who is to be added as a Director of the
company for the first time to get DIN or Director Identification Number
issued by the Ministry of Corporate affairs after submitting necessary
documents.
 Furnish “DIN "and declaration that he is not disqualified to become a director.
 File consent to hold office as director in FORM –DIR-2 with “ROC” within 30
days of his appointment.
 Company shall intimate such consent in FORM-DIR- 12 with “ROC” within 30
days from the date appointment of director
Procedure for Obtaining DIN

 Any person intending to become a director in an existing company shall
have to make an application in eForm DIR-3 for allotment of DIN to Central
government.
 The Central government shall process an application and decide whether
application shall be approved and allot the “DIN” or rejected and same shall
be intimated with applicant within 30 days from the date of receipt of
application

 The director ‘on allotment’ of DIN, shall intimate to the company in FORM
DIR-3C within 15 days from the date of intimation by “CG”
 Every company shall furnish such intimation with “ROC” within 15 days of
receipt of intimation by director
 DIN allotted shall be valid up to the life time of Director.
 If any defect is found in the application the “CG ”shall give intimation of
such defect to the applicant to rectify the such defect within 15 days from the
date of such intimation.
RE-APPOINTMENTOF DIRECTORS
 The director retired may be re-appointed as director.

 If he ,as director, has fails to file any financial statement or Annual return ,
or, fails to repay any amount due , shall not be eligible to re-appointment
as director in that company and also other company for the period of 5 year
from the date on which the said company fails to do so.
DISQUALIFICATION OF DIRECTORS
A person shall not be eligible for appointment as a director of company, if

 He is unsound mind
 He is un discharged insolvent
 He has applied to be adjudged as an insolvent and his application is pending.
 He has not obtained DIN
 He has not paid any calls
 He has been disqualified by order of court or Tribunal for appointment as
director
 He has been convicted by court for any offence of dealing with related party
transaction during last preceding 5 years

 He has been convicted for any offence and sentenced to imprisonment
for a minimum period of six months and five years have not passed from
the last date of his sentence (A person who has been convicted and
sentenced for seven years or more becomes ineligible for all time).
DUTIES OF DIRECTORS
 To act in good faith
 To act as per the articles of the company
 To exercise due care and diligence
 To avoid any conflict of interest and make no undue gain
 Not to assign his office to any other person
RESIGNATION OF DIRECTORS
 A director is required to give notice to the company intimating his

resignation
 After taking note of this, the company shall inform the registrar about this
within 30 days of his resignation
 Director is required to forward to the registrar a copy of his resignation along
with reason for his resignation in FORM-DIR-11 within 30 days from the
date of resignation
 if the director gives any written representation to the notice, then the said
representation shall be given to all members.
 If the representation could not be given to all members, then the Director
can request the said representation to be read out in the meeting.
 The members can pass an ordinary resolution, by simple majority and
remove the director.

VACATION OF OFFICE OF DIRECTORS
 When director incurs any of disqualification u/s 164

 He absents himself from all meetings of the board held during a period
of 12 months(date to date ) with or without seeking the leave of absence
of BOD
 He fails to disclose his interest in any contractor arrangement in which he
is directly or indirectly interested.
 He contravenes the provisions the section 184 i.e. entering into contracts
or arrangements directly or indirectly
 He becomes disqualified by an order of a court or the tribunal
 He is convicted by court of any offence ,whether moral turpitude or
otherwise and sentenced to imprisonment for not less than six months.
Important point to be noted:If all the director vacate their office under
section the promoter or in his absence the CG shall appoint the required numbers
of directors who shall hold office till the directors are appointed by the company
in the general meeting
REMUNERATION DIRECTORS
overall remuneration paid by the public company to

Over all its directors including managing director and whole
remuneration time director and its manager in relation to the
financial year shall not exceed 11 % of net profits of
the company
Remuneration remuneration payable to any one managing director or

to Managing whole time director or manager shall not exceed 5 % of the
Director and net profit of the company and if there are more than one
Whole time such director then the remuneration shall not exceed 10 %
director of the net profit to all such directors taken together.

Remuneration remuneration payable to directors who neither managing
to other director or whole time director or manager
directors other  One percentage of net profit, if there is a managing
than “MD” director or whole time director or manager.
and “WTD”  Three percentage of net profit, if there is no managing
director or whole time director or manager.
 Director may receive fee for attending meeting

 Such fees shall not exceed one lakh rupees per meeting
Sitting fees  The independent directors and women director may
receive the fees not less than the fees payable to other
directors
POWER OF BOARD OF DIRECTORS
Board of Directors of a company shall exercise the following powers on behalf

of the company by means of resolutions passed at meetings of the Board,
 to make calls on shareholders in respect of money unpaid on their shares
 to authorize buy-back of securities
 to issue securities, including debentures, whether in or outside India;
 to borrow monies;
 to invest the funds of the company;
 to grant loans or give guarantee or provide security in respect of loans;
 to approve financial statement and the Board’s report;
 to diversify the business of the company;
 to approve amalgamation, merger or reconstruction;
 to take over a company or acquire a controlling or substantial stake in
 another company;
 any other matter which may be prescribed

RESTRICTION ON POWER OF BOARD OF DIRECTORS
 Matters related to sale, lease, or otherwise disposal of the undertaking;

 Investing otherwise in trust securities the amount of compensation
received as a result of any merger or amalgamation;
 Borrowing in excess of the paid-up share capital and free reserves
 Remit or give the time to the repayment of any debt due to a director.
END

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TOPICS OF COMPANIES ACT , 2013

1) INTRODUCTION OF THE ACT .

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

7) Forfeiture of shares and Surrender of shares

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

TO REGULATE THE COMPANY COMPANIES ACT, 2013

A) WHAT IS THE MEANING OF COMPANY ?

The term “COMPANY” is derived from Latin word “COM+PANY”

SEPARATE LEGAL ENTITY: Company is separate legal person and artificial

COMMON SEAL : the common seal is used by company for affixing it in

C) LIFTING OF CORPORATE VEIL

The separate personality of a company is a statutory privilege and it must be used

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

2) Protection of welfare legislation

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

REGISTRED STATUTORY COMPANY

B) ON THE BASIS OF NUMBER OF MEMBERS

ONE PERSON PRIVATE COMPANY PUBLIC COMPANY

ONE PERSON COMPANY

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

Private company is company which by its articles of association

Note: Joint share holder are to be regarded as single member

A company which is not a private company . A private company which is the

C) ON THE BASIS OF LIABILITY OF MEMBERS

A company having liability of its members limited by “MEMORANDUM “ to such

A company having liability of its members unlimited

Holding company means company which has subsidiary

Company is deemed subsidiary of another if the other company

A small company is private company,

PROFIT MOTIVE NON-PROFIT

PROFIT MOTIVE COMPANY

A company other than non- profit motive company

NON-PROFIT MOTIVE COMPANY (SECTION 8 COMPANY)

A company is referred to as Section 8 Company when it registered as a Non-Profit

STEP NO1:SELECTION OF NAME

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

STEP NO4: PREPARETION AMD SUBMISSION OF AOA AND MOA DULY

STEP NO3: DECLARATION IN FORM NO: INC-8 FROM THE PROFESSIONALS

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

Such affidavit shall be submitted in FORM NO :INC- 9 with registrar of company.

STEP NO5: Submission of particulars of every subscribers to MOA along with

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

2) The number of shares held .

STEP NO6: Submission of particulars of persons mentioned in the article as first

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

STEP NO: 8: Registration by ROC

Section 2(56) of companies act ,2013

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

INCIDENTAL OR ANCILLARY OBJECT

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

 Only the state in which the registered office is situated is mentioned.

C) AOA (ARTICLES OF ASSOCIATION)

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

BOARD MEETING At Least One Meeting in Every

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)

VOLUNTRY CHANGE COMPULSORY CHANGE

SUHAIL POTTAYIL( FACULTY OF LAW AND ETHICS)