COMPANY LAW

THE COMPANIES ACT,1956.

Scope of the Act.
Incorporation of companies
Memorandum of Association & Articles of
Association.
Membership Prospectus etc.
Issue of Capital
Meetin!s
Accounts Auditin! in"esti!ations
Mana!ement of Companies.
Misc. Clauses and amendments in act.
Introduction to the concept of compan#
Liabilit#
Capital
$ormation of Act.
Indian Companies Act%&%'
After World War based on recommendations of
(habha Committee Companies Act %&)*.
Post amendments Companies +Amendment, Act
%&&& and finall# Companies +Amendment,
Act-... from '%/%-/-....
O(01C2S
to encoura!e in"estments
to ensure proper administration
to pre"ent malpractices
to allo3 for in"esti!ations.
What is a company?
A company means a company formed and registered
under this Act or an existing company. (Sc.3)
A joint Stock Company means a company having a
permanent paid up or nomina share capita fixed
amount divide into shares aso of fixed amount! or
hed and transfera"e as stock or divided and hed
party in one #ay and party in other! such a
company #hen registered #ith imited ia"iity under
this act sha "e deemed to "e a company imited "y
shares (sc. $%%).
C4A5AC215IS2ICS.
%. 5e!istration
-. 6istinct person // separate entit#
'. Perpetual succession
7. Artificial person but not a citi8en
). 2ransferable shares
*. Limited Liabilit#
9. Common seal
:. Separate propert#
&. Capacit# to sue and be sued
2#pes of Companies
%. 5o#al Charter or Chartered Companies
-. Statutor# Companies
'. 5e!istered companies under the act
+i, Companies limited b# shares
+a, Public companies
+b, Pri"ate companies
+ii, Companies limited b# !uarantee
+iii, ;nlimited companies.
&rivate 'imited Companies ( defined
&rivate Company means a company #hich has a
minimum paid up capita of one ac rupees or
higher and "y its artices)*
(i) restricts the right to transfer its shares
(ii) imits the num"er of mem"ers to $+, not
invoving
(a) empoyees of company
(") persons #ho #ere formery the empoyees
have "een mem"ers after incorporation.
(iii) prohi"its any invitation to pu"ic to su"scri"e
for any shares
(iv) &rohi"its any invitation or acceptance of
deposits from externa parties.
(Sc. 3 (-) (iii)
...........................................
&/0'1C '121345 C62&A78 5491745
A company #hich is not a private company is a
pu"ic company! #hen seven or more persons
join hands to form a pu"ic company #hose
ia"iity is unimited.
0y companies (Amendment) Act! :+++! a pu"ic
company means a company! #hich ***
(a) is not a private company,
(") has minimum paid up capita of five ac
rupees or such higher paid up capita
(c) is a private company! #hich is a su"sidiary of
a company #hich is not a private company.
Specia privieges of a private company over a
pu"ic company.
%. minimum number of members.
-. Minimum subscription pro"isions are not
applicable.
'. No need to file a prospectus or statement in
lieu of prospectus
7. No need of certificate of commencement.
). Pri"ate compan# need not <eep an inde= of
members
*. Pri"ate compan# need not hold statutor#
meetin!
9. Minimum number of directors
:. 6irectors consent to act is not re>uired
&. $e3 restrictions on appointments of directors
%.. Pro"isions re!ardin! loans to directors do not
appl#
%%. No need of !o"ernment appro"al for
remuneration to directors.
%-. Prohibition re!ardin! appointment of
mana!in! director for more than fi"e #ears at
a time do not appl#
%'. 5estrictions on ad"ancin! loans to other
companies do not appl#.
&rocedure for converting a private company into a
pu"ic company
(i) Ater the artices of company "y a specia
resoution
(ii) 1f the num"er of mem"ers is ess than ;!
raise it to ;
(iii) 1f num"er of directors is ess than three!
raise it to three
(iv) 9ie a prospectus or statement in ieu of
prospectus and resoution #ithin 3+ days
#ith registrar.
&rocedure for converting a pu"ic company into a
private company
(i) &ass a specia resoution authorising
conversion of company and atering the
artices
(ii) Change the name of the company "y a
specia resoution
(iii) 6"tain the centra government approva
(iv) 9ie the atered artices #ith the registrar
#ithin 3+ days of receiving approva.
<oding Company
When one company contros another company it
is caed hoding company! the other company is
caed su"sidiary company.
Contro)*
(i) #here it contros the composition of the
0oard of directors of another company
(ii) #here it contros more than haf of the tota
voting po#er of the other company,
(iii) #here it hods more than haf of the nomina
vaue of e=uity share capita of other
company
(iv) #here it is a su"sidiary of any company
#hich is the su"sidiary of some other
company.
>overnment Company
Any company in #hich not ess than $- per cent o
the paid up share capita is hed "y the Centra
government or "y any State government or
>overnments or party "y the Centra government
and &arty "y state government is caed a
>overnment company.
A company su"sidiary of a government company
is aso government company (Sc.%-;)
Com"ination
the centra government and one or more
government companies
any state >overnment or >overnment and one
or more >overnment companies,
the centra >overnment! one or more State
governments and one or more >overnment
companies.
3he centra government! one or more state
governments and one or more corporations
o#ned "y the Centra government.
6ne or more corporations o#ned or controed
"y the Centra >overnment or state
government,
2ore than one >overnment company.
9oreign company
A company incorporated outside 1ndia is a foreign
company.
-) 5ocuments
:) Aterations
3) Accounts
?) 7ame and country of incorporation
$) 6ther provisions
%) &rospectus
;) Winding up
1ega Associations. ( meaning.
9ormation of Company
M1MO5AN6;M O$ ASSOCIA2ION
Meanin! and character ? 3hether unalterable
$orms and contents
Sc. %' re>uires the memorandum of a limited
compan# to contain the follo3in!@
+a, the name of the compan# 3ith limited or
pri"ate limited as the last 3ords
+b, the name of the state in 3hich the re!istered
office of the compan# is to be situatedA
+c, the obBects of the compan# statin! separatel#@
+i, the main obBects to be pursued on
incorporation
+ii, obBects incidental or ancillar# to the
attainment on main obBectsA
+iii, Other obBects of the compan#
+d, the declaration that the liabilit# of the
members is limited
+e, the amount of authorised share capital
+f, in case of companies +other than tradin!
corporations, 3ith obBects not confined to one
state the state to 3hose territories the obBects
e=tend.
241 NAM1 CLA;S1
9oo#ing names are considered undesira"e and
a company is not ao#ed to "e registered #ith
such names "y 54&A@32473 69 C62&A78
A99A1@S)
%, If the name is identical 3ith or too nearl#
resembles the name b# 3hich a compan# is
alread# re!istered
-, If the proposed name is identical 3ith the
name of a compan# in li>uidation
', If the proposed name is mere addition or
subtraction of 3ord in name of e=istin!
compan#
7, If the proposed name closel# resembles a
popular or abbre"iated description
), It attracts the pro"isions of emblem and
names.
*, If it connotes Co"ernment participation or
patrona!e
9, If it implies association or connection 3ith
national hero or a person of hi!h esteem
:, If it includes 3ord li<e co/operati"e ban<
ban<in!.
&, If it includes the name of a re!istered trade
mar<
%., If it is intended or is li<el# to produce a
misleadin! impression about the scope of the
acti"ities of compan#
%%, If the name su!!ests a business 3hich is not
proposed b# the compan#
%-, If the proposed name is the e=act 4indi
translation of the name of an e=istin!
compan#.
;se of certain <e# 3ords
De# Words 5e>uired
Authorised
Capital
Corporation ) crores
International Clobe ;ni"ersal
Continental Inter/continental
Asiatic Asia bein! first 3ord
% crore
If an# of the 3ords abo"e is used
3ithin the name
). la<hs
4industan India (harat bein! the
first 3ord
). la<hs
If an# of the 3ords abo"e is used
3ithin the name
) la<hs
IndustriesE;d#o! % crore
1nterprises products (usiness
Manufacturin!
%. la<hs
Publication of name and penalt# for not doin! the
same
+Penalt# 5s.).. per da# till the default continues,
2he obBect clause and doctrine of ;ltra "ires
A compan# 3hich o3es its incorporation to a
statutor# authorit# cannot effecti"el# do
an#thin! be#ond the po3ers e=pressl# or
impliedl# conferred upon it b# the statute or
memorandum of association.
An# purported acti"it# be#ond such po3ers
3ill be ineffecti"e e"en if a!reed to b# all the
members.
Implied po3ers
Po3ers that are not implied
to ac>uire an# business similar to compan#Fs
o3n
enterin! into an a!reement 3ith other persons
or companies for carr#in! on business in
partnership or for sharin! fromfs.
2a<in! shares in other companies ha"in!
similar obBects
2a<in! shares of other companies 3here such
in"estment authorises doin! indirectl#
Promotin! other companies or helpin! them
financiall#
A po3er to use funds for political purposes
A po3er to !i"e !ift and ma<e donations or
contributions for charities
A po3er to sell and dispose of the 3hole of ca
compan#Fs underta<in!
1nterin! into contracts of suret#ship or
!uarantee.
1ffects of ultra "ires transactions
+i, Goid ab initio
+ii, InBunction
+iii, Personal liabilit# of 6irectors
+i", Ac>uisition of propert# that is ultra "ires
+", 6irectors personall# liable to third part#
Alteration of memorandum
Change of name
Appication to @egistrar in form no.-A #ith fee of
@s.$++! communication "y fiing form no.:3
Change of registered office
7otice in form no. -A! #ithin the same to#n.
Change of registered office from one to#n to
another.
(i) Specia resoution
(ii) Confirmation of @egiona 5irector
(iii) Copy of specia resoution and confirmation "y
regiona 5irector to "e fied #ith @oC.
(iv) 7otice of ne# ocation #ithin 3+ days.
Change of registered office from one state to another
Change of o"ject cause *** reasons
to carr# on its business more economicall#
to attain its main purpose b# ne3 or impro"ed
means
to enlar!e or chan!e the local area of its
operations
to combine 3ith the e=istin! businesses of the
compan#
to amal!amate 3ith an# other compan#
Ateration of Capita Cause
%, to increase its authorised share capital b# such
amount as it thin<s e=pedient b# issuin! fresh
shares
-, to consolidate and di"ide all or an# of its share
capital into shares of lar!er amount than its
e=istin! sharesA
', to con"ert all or an# of its full# paid up shares
into stoc<
7, to sub di"ide its shares or an# of them into
shares of smaller amount
), to cancel shares 3hich ha"e not been a!reed to
be ta<en up b# an# one.
Practical problem
Ad"ice Asiatic !o"ernment Securit# Life Insurance
co. Ltd. 3hether it can see< an inBunction a!ainst
H2he Ne3 Asiatic Insurance co. ltd. 3hich 3as
subse>uentl# formed restrainin! it from ha"in! its
name the 3ord HAsiaticF
A52ICL1S O$ ASSOCIA2ION
Contents
%, Share capital includin! sub di"ision thereof
-, 5i!hts of "arious shareholders
', Lien on shares
7, Call on shares
), 2ransfer of shares
*, $orfeiture of shares
9, Surrender of shares
:, Con"ersion of shares into stoc<
&, Alteration of capital
%., Share 3arrants
%%, Ceneral meetin!s and proceedin!s thereat
%-, Gotin! ri!hts of the members
%', Information about the directors first directors
or directors for life
%7, 6i"idends and reser"es
%), Accounts and audit
%*, (orro3in! po3ers
%9, Windin! up.
No article compan#
A compan# limited b# shares ma# either frame
its o3n set of articles or ma# adopt all or an#
of the re!ulations contained in 2able A.
If it does not re!ister articles 2able A applies
Alteration of articles
%, the alteration must not e=ceed the po3ers
!i"en b# the memorandum
-, 2he alteration must not be inconsistent 3ith
an# pro"isions of the companies act
', 2he altered articles must not include an#thin!
3hich is ille!al or opposed to public polic# or
unla3ful
7, 2he alteration must be bona fide and for the
benefit of the compan#
), 2he alteration must not constitute a fraud on
the minorit#
*, An alteration of articles to effect a con"ersion
of a public compan# into a pri"ate compan#
cannot be made 3ithout the appro"al of the
central !o"ernment.
9, Articles cannot be altered to breach third part#
contracts.
Problems
%, A limited compan# is formed 3ith its Articles
statin! that one Mr. Sri"asta"a shall be solicitor
for the compan# and that he shall not be remo"ed
e=cept on !round of misconduct. Can the
compan# remo"e Mr. Sri"asta"aI
-, 2he articles of a compan# pro"ided that the
shares of a member 3ho became ban<rupt 3ould
be offered for sale to other share holders. Is this
pro"ision "alidI
Irre!ular Allotment and its effects
%, Cop# of prospectus not deli"ered to 5e!istrar
1ffect on allotment@/ Galid
Liabilit# of compan#Edirectors@/ a fine to the e=tent
of 5s.)....E/
-, Application mone# bein! less than )J of
nominal "alue of Share
1ffect on allotment@/ Goidable
Liabilit# of compan#Edirectors@/
%, 6irectors liable to the compan# and allottee
for the dama!es
-, Compan# and e"er# officer of the compan#
shall be punishable 3ith fine upto 5s.)...E/
', Minimum subscription not subscribed for
1ffect on allotment@/ Goidable
Liabilit# of compan#Edirectors@/
%, After *. da#s from the closure of issue refund
all mone# to applicants 3ithout interest.
-, If not directors shall be liable to pa# mone#
3ith interest K %) J.
', 6irectors shall be liable for dama!es to the
compan# and allottee.
7, Application mone# not <ept deposited 3ith a
Scheduled (an<
1ffect on allotment@/ Goidable
Liabilit# of compan#Edirectors@/
%, 1"er# promoterE person responsible shall be
punishable 3ith fine upto 5s.)....E/
-, 6irector# 3illfull# !uilt# of contra"ention shall
be liable for dama!es to the compan# as 3ell as
allottee.
), A statement in lieu of prospectus not deli"ered
to the 5e!istrar
1ffect on allotment@/ Goidable
Liabilit# of compan#Edirectors@/
%, Compan#Ee"er# director in"ol"ed shall be
liable for a fine upto 5s. %....
-, 6irector 3ho 3illfull# authorises such
contra"ention shall be liable to the compan#
and allottee.
*, 2ime limit as to openin! of the subscription
list not obser"ed.
1ffect on allotment@/ Galid
Liabilit# of compan#Edirectors@/
$ine upto 5s.)....E/
;nder3ritin!
Meanin!
Cuidelines issued b# S1(I
%. for e"er# under3ritten issue the lead
merchant ban<er shall underta<e a minimum
under 3ritin! obli!ation of )J of total
under3ritin! commitment or 5s. -) lacs
3hiche"er is less.
-. 2he outstandin! under3ritin! commitments of
a merchant ban<er shall not e=ceed -. times
its net3orth at an# time.
'. In case issue is proposed to be closed at the
earliest closin! date the Lead
merchantEban<er shall satisf# himself that the
issue is full# subscribed.
7. In case of de"ol"ement on under3riters the
Lead merchant (an<er shall ensure that the
under 3riters honour their commitments
3ithin *. da#s from the date of closure of the
issue.
;nder3ritin! commission
%, 2he commission pa#able should not e=ceed )
per cent in case of shares and -.) percent in
case of debentures.
-, ;nder3ritin! commission ma# be paid in cash
or <ind or as lump sum or b# 3a# of
percenta!e.
', ;nder3ritin! commission should be disclosed
in prospectus or statement in lieu of
prospectus.
7, A cop# of the contract relatin! to the pa#ment
of the commission should be deli"ered to the
5e!istrar.
Purchase of its o3n shares b# a compan#
Authorised b# amendment "ide sc. 99A 99AA
99(
Sources of bu# bac<@
%. its free reser"es
-. securities premium account
'. the proceeds of an# shares or other specified
securities. + bu#bac< from earlier issue not
possible.
In case shares are bou!ht from free reser"es a
sum e>ual to bu# bac< has to be transferred to
Capital 5edemption 5eser"e Account.
Conditions for bu# bac<
+a, the bu# bac< is authorised b# its articlesA
+b, a special resolution has been passed in
!eneral meetin! of the compan# authorisin!
the bu# bac<A
+c, the bu# bac< is less than -) J of the total paid
up capital and free reser"es of the compan#.
+d, 2he ratio of the debt o3ed b# the compan# is
not more than t3ice the capital and its free
reser"es after bu# bac<
+e, All the shares or the securities are full# paid
up
+f, A notice of meetin! at 3hich special
resolution is proposed shall be passed 3ith
necessar# details.
+!, 1"er# bu# bac< shall be completed 3ithin %-
months from the date of passin! of special
resolution.
+h, (u# bac< shall be permissible @
+i, from the e=istin! share holders on a
proportionate basis
+ii, from open mar<et
+iii, from odd lot holders
+i", b# purchasin! the securities issued to
the emplo#ees of the compan# pursuant
to a scheme of stoc< option or s3eat
e>uit#.
+i, A declaration of sol"enc# in form prescribed
to 5OC AN6 S1(I to be filed
+B, Where compan# bu#s bac< its o3n securities
it shall e=tin!uish and ph#sicall# destro# the
securities so bou!ht bac< 3ithin 9 da#s.
+<, 2he compan# shall not ma<e further issue of
the same <ind of shares includin! b# the 3a#
of ri!hts or other specified securities 3ithin a
period of -7 months e=cept b# 3a# of bonus
issue or in the dischar!e of subsistin!
obli!ations
+l, 2he bu# bac< offer shall remain open for not
less than %) da#s and not more than '. da#s.
+m, Within - da#s of completion of bu# bac< a
public ad"ertisement shall be !i"en in a
national dail#.
Issue of securities at a premium
premium cannot be treated as profit and
distributed as di"idend
amount recei"ed as premium has to be
credited in separate account called securities
premium AEc.
;tili8ation for@/
+a, issuin! full# paid bonus shares to members
+b, 3ritin! off the balance of the preliminar#
e=penses of the compan#
+c, 3ritin! off the commission paid or discount
allo3ed or share issue e=penses
+d, pro"idin! for the premium pa#able on
redemption of an# redeemable securit#.
Issue of shares at a discount
Conditions)*
%, 2he issue must be a class of shares alread#
issued
-, Not less than % #ear has elapsed since the
date on 3hich the compan# became entitled to
commence business
', 2he issue of shares at a discount is
authorised b# a resolution passed b# the
compan# in !eneral meetin! and sanctioned
b# the Central Co"ernment
7, 2he ma=imum rate of discount must not
e=ceed %. J or such hi!her rate as the
compan# la3 (oard ma# permit in an# special
case.
), 2he shares to be issued at a discount must be
issued 3ithin - months of the sanction b# the
Compan# la3 (oard.
*, Such discounts should be mentioned in
prospectus.
S3eat e>uit# shares
Meanin! @/ 1>uit# shares issued b# the compan#
to emplo#ees directors at a discount or for
consideration other than cash.
Such shares must be issued for pro"idin! <no3
ho3 or <no3led!e
Conditions
+a, S3eat e>uit# shares must be of a class of
shares alread# issued b# the compan#
+b, Issue must be authorised b# a special
resolution passed b# the compan#
+c, 2he resolution must specif# the number of
shares current mar<et price consideration
class of directors or emplo#ees
+d, Not less than one #ear must ha"e passed
since the date on 3hich the compan# 3as
entitled to commence business.
+e, Listed Shares shall be issued accordin! to
!uidelines of S1(I
+f, All limitations restrictions and pro"isions
relatin! to e>uit# shares shall be applicable to
such s3eat e>uit# shares.
Con"ersion of loans or debentures into shares
Such con"ersion should not "iolate pro"ision
of Sc. :% +%,
Con"ersion allo3ed onl# if the same has been
appro"ed before the issue of debentures or
raisin! of loan b# a special resolution.
When the compan# has ta<en an# loans from
Central Co"t. Co"t. ma# in public interest
con"ert such debentures or loans into shares
of compan#.
$ollo3in! factors 3ill be considered b# !o"t.@/
+a, the financial position of the compan#
+b, the ori!inal terms of the issue
+c, the rate of interest
+d, the capital of the compan#
+e, liabilities and reser"es
+f, the profits durin! the precedin! fi"e #ears
+!, the current mar<et price of the shares of
the compan#.
5eduction of Share Capital
3ypes
+i, b# reducin! or e=tin!uishin! the liabilit# of
the members for uncalled capital
+ii, b# pa#in! off or returnin! capital 3hich is
in e=cess of the 3ants of the compan#
+iii, pa# off paid up capital on the
understandin! that it ma# be called up
a!ain.
+i", A combination of the precedin! methodsA
+", Write off or cancel capital 3hich has been
lost or is not represented b# a"ailable
assets.
Procedure for reduction of capital
%. Special resolution for the reduction of
capital has to be passed
-. 2he compan# has to appl# to the court b#
3a# of petition to confirm the resolution
under section %.%
'. Creditors are entitled to obBect 3hen
reduction in"ol"es@/
+a, the diminution of liabilit# in respect of
unpaid capital
+b, the pa#ment to an# shareholder of an#
paid up share capital or in an# other
case if the court so directs.
$inall# after all formalities ha"e been complied
3ith the court directs and confirms reduction.
Words Land reducedM are added to the
compan#Fs name for a specific period.
Penalt#
Sc.%.)@/ Punishment 3ith imprisonment
e=tendin! to one #ear or 3ith fine both if an#
officer of the compan# conceals the name of a
creditor.
5eduction of share capital 3ithout the sanction
of the Court.
+i, $orfeiture of shares
+ii, Surrender of Shares
+iii, 5edemption of redeemable preference
shares
+i", Purchase of shares of a member b# the
compan# under section 7.-
+", 6iminution of capital
NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN
(onus Shares
>uideines
+a, 2hese !uidelines are applicable onl# to
e=istin! listed companies
+b, 2he bonus issue shall onl# be made out of
free reser"es
+c, 5eser"es should be built out of !enuine
profits or share premium colected in cash
+d, 5eser"es created b# re"aluation of fi=ed
assets are not to be capitalised
+e, 2he declaration of bonus issue in lieu of
di"idend is not made
+f, 2he bonus issue is not made unless the
partl# paid shares if an# e=istin! are made
full# paid.
+!, 2he compan# has not defaulted in pa#ment
of interest or principal on fi=ed deposits or
debentures
+h, It has not defaulted in statutor# dues of the
emplo#ees
+i, Such implementation of the proposal
should be 3ithin si= months from the date
of appro"al.
+B, 2here should be a pro"ision in the Articles
of association of the compan# for
capitalisation of reser"es.
+<, No compan# shall pendin! con"ersion of
$C6sEPC6s issue bonus shares.
NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN
Calls on shares
@e=uisites of a vaid ca
%. 2he directors ma<in! it are dul# appointed
and dul# >ualified.
-. 2he meetin! of the board of directors has
been dul# con"ened
'. 2he proper >uorum is present
7. 2he resolution ma<in! the call is dul#
passed
). A proper entr# is made in minutes.
*. Calls on shares of same class must be
made on uniform basis
9. Call to be made bona fide in the interest of
the compan#
:. 2ime 3ithin 3hich shares are to be made
full# paid up @/ 3ithin %- months of the
date of allotment 3here si8e of the issue is
upto 5s. ).. crores
&. Notice of a call.
$orfeiture of shares
%, In accordance 3ith the articles
-, Proper notice
', 5esolution for forfeiture
7, Po3er of forfeiture must be e=ercised bona
fide and in !ood faith
), Mis representations should not be a cause
of forfeiture.
1ffect@/ Cessation of membership and liabilit#
but liabilit# as a past member
51CIS215S AN6 512;5NS
Statutory "ooks to "e kept "y a company
%. 5e!ister of In"estments not held in
compan#Fs name
-. 5e!ister of $i=ed 6eposits
'. 5e!ister of Char!es
7. 5e!ister and Inde= of Members
). 5e!ister and Inde= of 6ebenture holders
*. $orei!n 5e!ister of members and
6ebenture holders if an#
9. Minute boo<s of Ceneral Meetin!s and of
meetin!s of the (oard and its Committees
:. (oo<s of Account
&. Cost Account 5ecords for companies
en!a!ed in industries specified b# Central
!o"ernment
%.. 5e!ister of Contracts in 3hich directors are
interested
%%. 5e!ister of 6irectors mana!in! 6irector
mana!er and secretar#
%-. 5e!ister of 6irectorsF holdin!s in Shares
and 6ebentures
%'. 5e!ister of Loans !i"en or Securities
pro"ided to companies under the same
mana!ement
%7. 5e!ister of In"estments in shares of other
bodies corporate
%). 5e!ister of 5ene3ed and 6uplicate
Certificates.
Optional (oo<s
%. Share Application and Allotment (oo<
-. Share Calls (oo<
'. 6ebenture Application and Allotment (oo<
7. 6ebenture Calls (oo<
). 5e!ister of Share 2ransfers
*. Share holdersA 6i"idend (oo<
9. 6ebenture Interest (oo<
:. 5e!ister of Certification and balance tic<ets
&. 6ebenture 2ransfer 5e!ister
%.. 5e!ister of Share Certificates
%%. 5e!ister of Probates
%-. 5e!ister of Share Warrants
%'. 5e!ister of 6i"idend Mandates
%7. A!enda (oo<
%). 5e!ister of Sealed 6ocuments
%*. 5e!ister of Pro=ies
%9. 5e!ister of Po3ers of Attorne#
%:. 5e!ister of Lost Share Certificates.
Compan# Mana!ement
6irector ? definition
An# person occup#in! the position of a director b#
3hate"er name is called HdirectorF
Who ma# be appointed as a 6irectorI
No bod# corporate association or firm can be
appointed director of a compan#. Onl# an indi"idual
can be appointed as a director.
Oualifications for 6irectors
No >ualifications prescribed b# the compan# Act
Also the Act imposes no share >ualification on
the directors
A director should hold at least one share of
compan#
1ach director must ta<e his >ualification shares
3ithin - months after his appointment
2he nominal "alue of the >ualification shares
must not e=ceed 5s. )...E/ or the nominal "alue
of one share if it e=ceeds 5s.)...E/
Share 3arrants 3ill not count for purposes of
share >ualification.
If the director fails to obtain his >ualification
shares 3ithin - months he "acates the office
automaticall# on the e=pir# of - months. If he
continues a fine of 5s.))..E/
6is>ualifications of a 6irector
%. A person found b# a competent court to be of
unsound mind and such findin! remainin! in
forceA
-. An undischar!ed insol"entA
'. A person 3ho has applied to be adBud!ed an
insol"ent
7. A person 3ho has been con"icted b# a court of
an offence in"ol"in! moral turpitude
). 4e has been sentenced in respect thereof to
imprisonment for not less than si= months and
period of fi"e #ears has not elapsed
*. A person 3ho has not paid an# call in respect of
shares of the compan# held b# him 3hether
alone or Bointl# 3ith others and si= months ha"e
elapsed from the last date fi=ed for the pa#ment
of calls
9. A person 3ho has been dis>ualified b# the court
as fraudulent person
:. A person 3ho is alread# a director of a public
compan# 3hich @/
+i, has not filed the annual accounts and annual
returns for an# continuous three financial #ears
+ii, has failed to repa# its deposit or interest
thereon on due date or redeem its debentures on
due date or pa# di"idend and such failure
continues for one #ear or more.
Le!al Position of directors
L5irectors are descri"ed sometimes as agents!
sometimes as trustees and sometimes as managing
partners. 0ut each of these expressions is used not
as exhaustive of their po#ers and responsi"iities
"ut their utiityB * 0o#en! '.C.
5irectors as agents
5irectors sha incur a persona ia"iity in the
foo#ing cases)*
%. 3here the# contract in their o3n names
-. 3here the# use the compan#Fs name incorrectl#
e!. (# omittin! the 3ord HlimitedF
'. 3here the contract is si!ned in such a 3a# that it
is not clear 3hether it is the principal or the
a!ent 3ho is si!nin!
7. 3here the# e=ceed their authorit#.
6irectors as trustees
2adras <igh Court )* D3he directors of a company
are trustees for the company! and #ith reference to
their po#er of appying funds of the company and for
misuse of the po#er they coud "e rendered ia"e as
trustees and on their death the cause of action
survives against their ega representativesB
Are directors empoyees of the company?
When a director accepts emplo#ment under the
compan# under separate contract of ser"ice in
addition to the directorship he becomes an
emplo#ee
6irectors are also treated as officers of the
compan# for certain matters
4e shall be entitled to remuneration and other
benefits admissible to emplo#ees in addition to
remuneration of 6irector under the Act.
Appointment of directors
Appointment of first directors
Appointed accordin! to the articles of the
compan#
Other3ise the subscribers in memorandum b#
default become first directors
2he first directors can hold office until the
directors are dul# appointed.
Appointment of directors at !eneral meetin!
Of all directors -E' rd the number of directors
shall retire e"er# #ear at the time of ACM. 2hese
are rotational directors
2hese directors can be reappointed.
If these directors do not hold a meetin! in time
still the# retire b# rotation and must "acate office
at latest on the last da# on 3hich an annual
!eneral meetin! out to ha"e been held.
Appointment of a director other than a retirin!
director
A person 3ishin! to be a director must si!nif#
his intention to do so b# !i"in! %7 da#sF notice to
the compan# before the ACM
2he compan# must inform the members not later
than se"en da#s before the !eneral meetin!
either b# indi"idual notice or b# ad"ertisement in
at least t3o ne3spapers
An# additional directorE director appointed for
casual lea"e shall fulfil formalities as of
rotational director.
Consent of directors sha "e fied #ith registrar
#ithin 3+ days of his appointment.
<o#ever such consent is not necessary #henE
%. a director re appointed after retirement b#
rotation or immediatel# on the e=pir# of his term
of office
-. an additional or alternate director or a person
fillin! a casual "acanc# in the office of a director.
'. a person named as director of the compan#
under its articles as first re!istered.
Appointment of directors b# proportional
representation
Ordinaril# directors are appointed b# simple
maBorit# "ote.
-E'
rd
of the directors are appointed b# sin!le
transferable "ote or some s#stem of cumulati"e
"otin! or other3ise.
Sin!le transferable "ote
A >uota of "otes is fi=ed. A person !ets elected if he
!ets the re>uired number of first preference "otes
fi=ed as >uota.
1=. In an election *.. "otes are cast and there are
fi"e seats. 2he >uota 3ill be calculated as follo3s@/
+*..E)P%, P % Q %.% "otes.
Cumulati"e "otin!
4ere total number of "otes cast 3ill be e>ual to the
total number of shares multiplied b# the number of
directors to be elected.
Appointment of directors b# the Central Co"ernment
Appointment done after a reference b# atleast
%.. share holders or of members holdin! not
less than %E%. of the total "otin! po3er.
5emuneration pa#able b# companies ha"in!
profits@
5emuneration pa#able b# companies ha"in!
profits
b# the 3a# of salar# dearness allo3ance
per>uisites commission and other allo3ances
Sum total of the abo"e shall not e=ceed ) per
cent of its net profits for one such mana!erial
position
In case of more than one positions %. per
cent ma=imum.
5emuneration pa#able b# companies ha"in! no
profits or inade>uate profits ?
a ceilin! limit of -7..... per annum or 5s.
-.....E/ per month.
Where the capital of the
compan# is
Monthl# remuneration
pa#able shall not e=ceed
Less than 5s. % crore 5s.9)...E/
5s. % crore or more but
less than 5s. ) crores
5s. %.....E/
5s. ) crore or more but
less than 5s. -) crores
5s. %-)...E/
5s. -) crores or more
but less than 5s. %..
crores
5s. %)....E/
5s. %.. crores or more 5s. -.....E/
Mana!in! director@/ A director 3ho b# "irtue of
an a!reement 3ith the compan# or of a resolution
passed b# the compan# in !eneral meetin! or b#
its (oard of directors or b# "irtue of its
Memorandum or Articles of Association is
entrusted 3ith substantial po3ers of mana!ement
3hich 3ould not other 3ise be e=ercisable b# him.
Appointment of a managing director
b# the "irtue of an a!reement 3ith the
compan#
b# the "irtue of a resolution passed b# the
compan# in !eneral meetin!
b# "irtue of a resolution passed b# the (oard
of directors
b# "irtue of the MemorandumE Articles of
Association.
Appro"al of the Co"ernment
Su"ject to foo#ing conditions)*
(i) <e had not "een sentenced to imprisonment
for any period or to fine exceeding @s.-+++F*
(ii) <e had not "een detained for a period under
Conservation of 9oreign 4xchange and
&revention of Smugging Activities Act!-G;?
(iii) <e has competed the age of t#enty five
years and has not attained the age of
seventy years.
(iv) <e is not a managing director or manager in
more than one company
(v) <e is resident in 1ndia
(vi) 3he company appointing him is not a sick
company
Compan# Secretar#
Meanin!@/ a person 3ho is a member of the
Institute of compan# Secretaries of IndiaM
Characteristics@/
%, Onl# indi"iduals can be appointed as
secretar# of the compan#. A firm or a bod#
corporate cannot be appointed as compan#
secretar#.
-, 4e should possess the prescribed
>ualification as ma# be applicable to different
circumstances of appointment of the compan#
secretar#.
', 4e performs functions performed b# a
secretar# under the Companies Act includin!
an# other ministerial or administrati"e duties.
Oualifications of a compan# secretar#
Companies #ith a paid up share capita of @s. $+
akhs or more)*
3he #hoe time secretary must "e a mem"er of the
1nstitute of company secretaries of 1ndia.
1n case of other companies)*
Secretary must possess one or more of the
foo#ing =uaifications)*
-. mem"ership of the 1nstitute of Company
Secretaries of 1ndia
:. &ass in the 1ntermediate 4xamination
conducted "y the 1nstitute of Company
Secretaries of 1ndia
3. &ost graduate degree in commerce
?. 5egree in a# granted "y any university
$. 2em"ership of the 1nstitute of Chartered
Accountants of 1ndia
%. 2em"ership of the 1nstitute of Cost and #orks
Accountants of 1ndia
;. &ost graduate degree or dipoma in
management
A. 5ipoma in Corporate 'a#s and management
granted "y the 1nstitute of Commercia
practice! 7e# 5ehi,
G. &> dipoma in CS
-+. 2em"ership of Association of Secretaries and
2angers! Cacutta
--. &> dipoma in company a# and Secretaria
practice granted "y /niversity of /daipur.
6ther =uaifications
(i) Sound genera education
(ii) proficiency in anguage
(iii) Wide kno#edge
(iv) Hno#edge of company a#
(v) Hno#edge of other a#s
(vi) Hno#edge of office organisation and
methods
(vii) Hno#edge of economics! "anking and
finance
(viii) >ood personaity.
Appointment of Company Secretary
Compusory for every company #ith paid up
capita of @s. $+ akhs or more.
7either of its t#o #hoe time directors shoud "e
CS
5uties of secretary
-) 3o verify and sign any document of
proceedings re=uiring authentication of the
company
:) 3o deiver for registration return of aotment
and contracts reating to aotment
3) 3o give notice to the registrar for increase of
share capita
?) 3o deiver the share certificates #ithin three
months of aotment or #ithin t#o months of
registration of transfer
$) 3o make entries in the @egister of mem"ers
on issue of share #arrants
%) 3o make avaia"e trust deed for inspection to
every mem"er #ithin seven days of re=uest
;) 3o deiver for registration to the registrar
particuars of mortgages and charges
A) 3o get painted or affixed the name pate of the
company outside every office or pace of its
"usiness.
G) 3o make statutory decaration for o"taining
the certificate of commencement
-+) 3o sign the annua return and certify the
documents annexed
--) 3o make avaia"e for inspection ad furnish
copies of the @egister of the mem"ers.
-:) 3o send notices of genera meetings to
mem"ers as #e as of 0oard meetings to
directors.
-3) 3o fie resoutions and agreements re=uiring
registration #ith the @egistrar
-?) 3o record the minutes of proceedings of every
genera meeting and of every "oard meeting
-$) 3o make avaia"e for inspection the minutes
"ook of genera meetings.
-%) 3o make avaia"e for inspection the @egister
of directors
-;) 3o maintain statutory "ooks ike )* register of
investments! register of charges etc. (@ef.
Statutory "ooks)