COMPANIES ACT,

2013
CHIEF FEATURES
DR. RISHAM GARG
FEBRUARY, 2023
 ENACTMENTS

• Enacted in the Year • Enacted in the Year

1956 by the First 2013 by the Fifteenth
Parliament of the India Parliament of the
elected by General India.
Public of India • 18th Act of Year 2013
• First Act of Year1956 • Enacted on 29 August
• Enacted on 18 January 2013
1956 • Commenced on 1 April
• Commenced on 1 April 2014
1956
 OVERVIEW OF ACTS
COMPANIES ACT, 1956 COMPANIES ACT, 2013

A major standout feature of the Companies Act, 2013

is that it gives substantive procedural powers to
Central Government and hence major prescriptions are
in forms of Rules that have been notified separately
 PRELIMINARY PROVISIONS
The Central Government has vested
powers to enforce different
provisions of the Companies Act,
2013 at different points in time.
No such provision exists
in the Act of 2013 and
the Government cannot
amend the applicability
of the Act based on
Geographical Locations
No such power existed in
the previous Act and the
Act was brought to force
in entirety
The Central Government was vested
with power to amend the
applicability of Act based on
Geographical Locations.
Sec 1(3) – Nagaland
620B – Goa, Daman and Diu
620C – Jammu and Kashmir
WHAT’S IN & OUT

IN
• Key managerial
personnel
• Resident Director
• Auditor Rotation
OUT
• Dormant company • Sole selling agents
• NFRA • Statutory meetings
• Vigil mechanism • Convert share into
• SFIO stock
• Definition of • Qualification shares
Subsidiary • Treasury stocks
• Secretarial Audit
• Recasting of Account
• Private Placement
THE PRELIMINARY PROVISIONS
Introduction of New Definitions &
Concepts in the Act, which were
One Person not existing in the Companies Act, Associate
Company 1956 Company

Small Dormant
Company Company

KMP Promoters

Registered Class
Valuer Action Suit

Auditing Independent
Standards Director

Secretarial
Audit
By incorporation By Liability By Type By Listing status

Statutory Limited Unlimited Public Private Listed Unlisted

Registered

By Shares By Guarantee Small One Person

STATUTORY COMPANY EG. LIC, RBI, UTI,
FCI ETC.
i) Incorporated by a Special Act passed by Central or State
legislature
Ii) Such Companies carry on some business of national
importance
Iii) Exempted from having MOA or using 'limited' word in
their name.
Iv) Their audit supervision and guidance by CAG and
Annual reports are to be placed before Central or State
Legislature
V) Governed by their Special Act but Companies Act is also
applicable in so far as its provisions are not inconsistent
with the provisions of Special Act
REGISTERED COMPANY
i) These are the companies which are registered under the
Companies Act 2013 or earlier Companies Acts.
Ii) Most of the companies are formed this way
Iii) If some Insurance, Banking or Electricity Supply
companies are incorporated under the Companies Act, then on
operational matters they will be governed by their Special Acts
and on other matters by the provisions of Companies Act.
Iv) On the basis of no. of members, registered Companies can
be # private,# public or #one person Company
V) On the basis of liability of members, registered Companies
can be# limited by shares, #limited by guarantee or #unlimited
companies
TPDDL i.e. Tata Power Delhi Distribution Lmt.- it an electricity supply
company
Bhatti Axa Life Insurance Company Lmt.-it is an insurance company. Both
of them are registered companies and therefore end with word limited.
But on operational matters they are governed by the Electricity Act, 2003
or the Insurance Act, 1938 respectively
COMPANIES LIMITED BY SHARES
I. In such companies liability of members is limited by the
memorandum to the amount remaining unpaid on shares held
by them
II. This liability can be enforced at any time during the existence
of the company or during the winding up of company
III. Most of the companies in India belong to this category
IV. Such companies are also known as limited liability companies
V. If shares are fully paid, the liability of members will be nil
 COMPANIES LIMITED BY GUARANTEE
I. In such companies, liability of members is limited by memorandum to
the amount guaranteed by them (such amount as they have respectively
undertaken to contribute to assets of the company to meet the
deficiency at the time of its winding up)
II. This liability/ guarantee can be enforced(demanded) only at the time of
winding up and not before
III. Non- trading companies formed for the promotion of art, science,
commerce, sports, culture etc. are incorporated as guarantee companies.
Eg. Chambers of Commerce, sports clubs, trade associations
IV. Memorandum of Association of such companies states what amount
each member has guaranteed and this amount may differ from member
to member
V. Such companies may or may not have share capital. If it has share capital,
liability of members will be two fold .i.e. they are liable for amount
remaining unpaid on shares as well as amount payable under guarantee
 UNLIMITED COMPANIES sec 2(92)
I. Such companies have no limit on the liability of its
members i.e. their liability may extend to their personal
property to pay off the liabilities of the company
II. Memorandum of such companies must state that liability of
its members is unlimited
III. Liability of members is enforceable only at the time of
winding up
IV. Every member is liable to contribute in proportion of his
interest in the company
V. Such companies are very rare .Eg. Nova Scotia (Canada)
Unlimited Liability Company, Cyber Ventures
 COMPANIES NOT FOR PROFIT/LICENSED
COMPANIES (SEC.8)
I. These companies are meant for promoting
science,art,commerce,sports, religion, charity, social welfare,
environmental protection or other useful objects.
Eg.FICCI,CII,ASSOCHAM , National Sports Club of India etc.
II. Before registration under Company's Act, they have to apply to the
Central Govt. for a license which shall be granted on prescribed terms
and conditions (this licence can be revoked by CG anytime this
company contravenes any prescribed term\ condition)
III. These companies are required to apply its income for promoting its
objects and are not allowed to pay any dividends to its members.Even
on winding up ,if any surplus assets are left after paying off all the
debts and liabilities, those surplus assets will either be transferred to
another Licensed company having similar objects or may be sold and
proceeds shall be credited to Insolvency and Bankruptcy Fund.
IV. These companies have limited liability but are exempted from using
words 'limited' or 'private 'limited' with their name
V. These companies are subject to certain exemptions in form of tax
benefits, procuring land and immovable at concessional rates,
permission to receive donations etc. Further certain notified Sections
of the Companies Act,2013 do not apply to such companies or apply
but with some exceptions, modifications and adaptations.
“Private Company” means a company which by its articles,—
i. restricts the right to transfer its shares;
ii. except in case of One Person Company, limits the number of its
members to two hundred:
Provided that where two or more persons hold one or more shares in a
company jointly, they shall, for the purposes of this clause, be treated as a
single member:
Provided further that—
A. persons who are in the employment of the company; and
B. persons who, having been formerly in the employment of the company,
were members of the company while in that employment and have
continued to be members after the employment ceased,
shall not be included in the number of members; and
iii. prohibits any invitation to the public to subscribe for any securities of
the company;
A private Ltd. Company entered into a Contract or Arrangement with:
a) holding, subsidiary or an associate company of such Pvt. Ltd. company; or
b) a subsidiary of a holding company to which it is also a subsidiary;”

Q. 2. Whether provision Section 188 (Related

Party Transaction) applicable or not?

Ans: According to Sr. No. 1. of Notification dated 5th June 2015 issued by
Ministry of Corporate Affairs, Section188 is not applicable on to the body
corporates defined under clause viii of the Section 2(76) of the Companies
Act 2013.
Q. 3 How many types of shares can have in a Private ltd
Co.?
Ans. Sr. No. 2 of Notification Dated 5th May
2015
1. A private company MAY have only one kind of share capital
say preference share capital OR can issue equity shares with
differential rights without compliance of following conditions
as specified under Rule 4 of the Companies (Share Capital
and Debentures) Rules, 2014

2. The private companies can determine voting rights of its

equity and preference shareholders in any manner it desires
by incorporating suitable provision in its memorandum or
articles of association.
 Q. 5. Can a Pvt. Ltd. Co. Accept
Deposits from its members ?
Ans. S. No 6 of Notification Dated 5th June 2015

A Private Company may accept from its members

deposits up to 100% of aggregate of the paid up share
capital and free reserves without fulfilling conditions (a)
to (e) u/s 73(2).
But,
The Private Company shall file details of deposits so
accepted to the Registrar.
Q.6.Whether Pvt. Ltd. Co. included in the limits of 20
u/s 141(3) or not?
Ans. S. 9 of Notification Dated 5th June 2015

Section 141(3)(g) limits the number of audits by an auditor to twenty

companies.
Now the words “other than One person companies, dormant companies, small
companies and private companies having paid-up share capital of less than Rs
100 crores” have been inserted after twenty companies.

Now While computing the limit of 20 companies, the one

person companies, dormant companies, and the private
companies with the paid up share capital of less than
rupees 100 crores will be excluded.
 Q. 7 Can an interested Director of
Pvt. Ltd. Co. participate in the BM?
Ans: S. No 13 of Notification Dated 5th June 2015

Now in a private company an interested director may participate in

a board meeting after disclosing his interest.

Although, this provision will certainly lead to ease of decision

making by private companies, there seems to be some anomaly.
Such an interested director may participate in a Board meeting of a
private company after disclosure of his interest but he cannot be
counted for the purpose of ascertaining quorum under section
174(3).
Q.8. Can a Pvt. Ltd. Company advance any loan to any of its
directors or to any other person who is related to the
director ?
Ans. S.No 14. Notification Dated 5th June 2015
Section 185 shall not apply to a private company if the following conditions
are fulfilled:

(a) in whose share capital no other body corporate has invested any money;

(b) if the borrowings of such a company from banks or Financial Institutions is

less than twice of its paid up share capital or Rs. 50 crores, whichever is
lower;and

(c) such a company has no default in repayment of such borrowings subsisting

at the time of making transactions u/s 185.
 “Public Company” means a company which—
a) is not a private company;
b) Share capital as may be prescribed:
Provided that a company which is a subsidiary of a company, not
being a private company, shall be deemed to be public company for
the purposes of this Act even where such subsidiary company
continues to be a private company in its articles ;

"Public Company" means a company which –

a) is not a private company ;
b) has a minimum paid-up capital of five lakh rupees or such
higher paid-up capital, as may be prescribed ;
c) is a private company which is a subsidiary of a company
which is not a private company.

o Act of 2013 clearly states that the Private Company subsidiary of the Public
Company shall be deemed to be Public Company though it may be Private
Company by the virtue of its Articles. Act of 1956 was ambiguous in this
regard
 “Body Corporate” or “Corporation” includes a company
incorporated outside India, but does not include—
i. a co-operative society registered under any law relating
to co-operative societies; and
ii. any other body corporate (not being a company as
defined in this Act), which the Central Government may,
by notification, specify in this behalf;

"Body Corporate" or "Corporation" includes a company

incorporated outside India but does not include -
a) a corporation sole ;
b) a co-operative society registered under any law relating
to co-operative societies ; and
c) any other body corporate (not being a company as
defined in this Act), which the Central Government
may, by notification in the Official Gazette, specify in
this behalf;

o The Definition is more or less similar just the

Corporation Sole which was specifically excluded
in Act of 1956 is now included in the Act of 2013
“Associate Company”, in relation to another company, means
a company in which that other company has a significant
influence, but which is not a subsidiary company of the
company having such influence and includes a joint venture
company.
Explanation.— For the purposes of this clause, “significant influence”
means control of at least twenty per cent. of total share capital, or of
business decisions under an agreement;
❖ Associate Company is a Related Party [2(76)]
❖ Accounts of Associated Company should be consolidated
with Accounts of Investing Company [129(3)]
❖ Transaction with Associate Companies included in
Transactions under Section 188 [Related Party
Transactions]
❖ If the Directors are concerned or interested in such
associate companies, such director will not be
regarded as independent director
❖ A Chartered Accountant is not eligible to be appointed as
Statutory Auditor of the Company, if he is holding any security,
interest, is indebted to or has a business relation with the
associate company
❖ The Auditor is barred from providing specified non-audit
services to Associate Companies
❖ Annual return of every company shall contain particulars of
associate companies
❖ Register of Directors and KMP kept under section 170
shall now include the details of securities held by each of
them in Associate Companies as well
❖ Act of 2013 prohibits Forward Dealing of Securities of
Associate Companies by the Directors and KMP of the
Companies [194]
“Holding Company”, in relation to one or more other companies, means a
company of which such companies are subsidiary companies;

“Subsidiary Company” or “Subsidiary”, in relation to any other company (that

is to say the holding company), means a company in which the holding
company—
i. controls the composition of the Board of Directors; or
ii. exercises or controls more than one-half of the total share capital either at its
own or together with one or more of its subsidiary companies:
Provided that such class or classes of holding companies as may be prescribed
shall not have layers of subsidiaries beyond such numbers as may be prescribed.
Explanation.—For the purposes of this clause,—
a) a company shall be deemed to be a subsidiary company of the holding
company even if the control referred to in sub-clause (i) or sub-clause (ii) is of
another subsidiary company of the holding company;
b) the composition of a company’s Board of Directors shall be deemed to be
controlled by another company if that other company by exercise of some
power exercisable by it at its discretion can appoint or remove all or a majority
of the directors;
c) the expression “company” includes any body corporate;
d) “layer” in relation to a holding company means its subsidiary or subsidiaries;
 Rule 2(1)(r) of Companies (Specification of definition details) Rules 2014

TOTAL PAID UP EQUITY CONVERTIBLE PREFERENCE

=
CAPITAL SHARE CAPITAL + SHARE CAPITAL

For the purposes of this Act, a company shall, subject to the provisions of sub-
section (3), be deemed to be a subsidiary of another if, but only if, -
a) that other controls the composition of its Board of directors ; or
b) that other -
i. where the first-mentioned company is an existing company in respect of
which the holders of preference shares issued before the commencement
of this Act have the same voting rights in all respects as the holders of
equity shares, exercises or controls more than half of the total voting
power of such company;
ii. where the first-mentioned company is any other company, holds more
than half in nominal value of its equity share capital; or
c) the first-mentioned company is a subsidiary of any company which is that
other's subsidiary.
o Control shall include the right to appoint majority of the directors
or to control the management or policy decisions exercisable by
a person or person acting individually or in concert, directly or
indirectly , including by virtue of their shareholdings or
management rights or shareholders agreement or voting
agreement or in any other manner. Section 2(27) , this definition
is broader then definition of control given in AS 21. in AS21 only
board control and control over voting rights are considered.

o Act of 2013, unlike Act of 1956 does not provide When Indian
Companies who are subsidiary of Foreign Companies shall be
treated as subsidiary of Public Companies

o Act of 2013 put a bar on Companies to invest or create

subsidiary than in excess of 2 layers of Investment

o Act of 2013 makes it compulsory to consolidate the

Financial Statements of the Subsidiary with the Holding
Company
‘‘Small Company’’ means a company, other than a public
company,—
i. Paid-up Share Capital of which does not exceed fifty lakh rupees or
such higher amount as may be prescribed which shall not be more
than five crores rupees; or and
ii. Turnover of which as per its last profit and loss account does not
exceed two crores rupees or such higher amount as may be
prescribed which shall not be more than twenty crores rupees:
Provided that nothing in this clause shall not apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special Act;
❖ Relatively new concept and provides to classify companies on the
basis of Capital and Turnover
❖ Small Companies are exempted to comply or have relaxed
application of Laws, e.g. 1. Relaxation to prepare CFS for FY. 2.
two board meeting in a calendar year, provided gap between two
meeting shall not be more then 90 days. 3. fast track merger
without the requirement of court process.
❖ The company which does not fall under Small Company category as per
amended definition will have to prepare the cash flow statement as a part of
their financial statement.

❖The company which does not fall under Small Company category as per
amended definition or which is not a One Person Company (OPC has one
shareholder), will have to get their annual returns signed both by the
Director and the Company Secretary. In the case of Small Company, One
Person Company or Unlisted Company, either the Company Secretary or
the Director can sign the Annual Returns.
❖The company which does not fall under Small Company category as per
amended definition will have to ensure the mandatory rotation of
auditor, which is 5 years in the case of individual auditor and 10 years
in the case of a firm of auditors. This is exempted for Small Company as
per amended definition.
❖The company which does not fall under Small Company category is
required to hold at least 4 meetings every year and the gap
between two consecutive meetings should not be more than 120
days. Small Company, One Person Company or Dormant Company
may hold only two board meetings in a year, i.e. half-yearly board
meetings with a minimum gap of 90 days between two meetings.
“One Person Company” means a company which has only one
person as a member;
❖ Now Private Company of Special Character can now have only one
Member and Director
❖ Only one Person can now Form a Company
❖ No such provision existed in Act of 1956, in fact it did not
even recognize Foreign OPC as Corporates
❖ The Act provides certain exemptions to OPCs like relaxation
in convening Board Meeting, no requirement to convene
AGM, relaxation in maintenance of Annual Accounts, etc.
❖ A new provision of Nominee of lone Shareholder of the
Company, in case of his/her death or insanity
OPC may be of three types :
1. A company limited by shares; or
2. A company limited by guarantee; or
3. An unlimited company
❖ A One Person Company is incorporated as a Private Limited
Company

❖ The Member and Nominee should be Natural Persons, Indian

Citizens and Resident in India
‘Resident of India’ is a person who has stayed in India for a period of
not less than 182 days during immediately preceding Calendar Year

❖ One Person cannot incorporate more than one OPC or become

Nominee in more than one OPC

❖ Person who becomes member of another OPC by virtue of

being nominee in that OPC shall within 180 days meet the
eligibility criterion of being member in one OPC
❖ COMPULSORY CONVERSION:
OPC loses its status, if PSC exceeds Rs. 50 Lac or Average Annual Turnover
exceeds Rs. 2 Crore in immediate three preceding years
❖ ADULTS ONLY:
No minor is eligible to become Nominee or Member of OPC or hold share in
Beneficiary Interest
❖ ONLY COMMERCIAL ACTIVITIES
OPC cannot be incorporated or converted into a Company under Section 8 of
the Act of 2013

❖ NO NBFC OR BANKING CORPORATION

OPC cannot carry out the Banking or Non-Banking Financial Investment
activities including Investment in Securities of any Body Corporate
❖ COMPULSORY LOCK-IN PERIOD
An OPC cannot voluntarily convert into other forms of Company until
two years have elapsed from Incorporation except for operation of Law

An existing private company other than a company registered under section 8 of

the Act which has paid up share capital of Rs. 50 Lakhs or less or average annual
turnover during the relevant period is Rs. 2 Crore or less may
convert itself into one person company by passing a
special resolution in the general meeting.
PRIORITY SECTOR LENDING
The Reserve Bank of India under its Master Circular No. RBI/2013-14/107
RPCD.CO. Plan.BC9/04.09.01/2013-14 dated July 01, 2013 has instructed all
Scheduled Commercial Banks (excluding Regional Rural Banks) to increase their
involvement in financing of priority sectors, viz., agriculture and small scale
industries. The Master Circular provides for the following activities as being
eligible for priority sector lending:

Investment in Plant and Machinery

Enterprises
Manufacturing Sector Service Sector
Do not exceed Rupees 25
Micro Does not exceed Rupees 10 Lac
Lac
More than Rs. 25 Lac but
More than Rs. 10 Lac but does
Small does not exceed Rs. 5
not exceed Rs. 2 Crore
Crore

One Person Company coming under any of the above categories may fall
under priority sector lending. There is enormous scope for One Person
Companies to leverage benefits of priority sector lending.
Where a company is formed and registered under this Act for a future
project or to hold an asset or intellectual property and has no significant
accounting transaction, such a company or an inactive company may
make an application to the Registrar in such manner as may be
prescribed for obtaining the status of a Dormant Company.
Explanation.—For the purposes of this section,—
i. “Inactive Company” means a company which has not been carrying on any
business or operation, or has not made any significant accounting
transaction during the last two financial years, or has not filed financial
statements and annual returns during the last two financial years;
ii. “Significant Accounting Transaction” means any transaction other than—
a) payment of fees by a company to the Registrar;
b) payments made by it to fulfil the requirements of this Act or any other
law
c) Allotment of shares to fulfil the requirements of this Act; and
d) payments for maintenance of its office and records.
➢ No Significant Accounting Transactions in last two Financial Years, or
➢ Inactive Company as per Explanation to Section 455(1) of Act of 2013
AND
➢ No inspection, inquiry or investigation has been ordered or taken up or
carried out against the Company; and
➢ no prosecution has been initiated and pending against the company under
any law; and
➢ the company is neither having any public deposits which are outstanding
nor the company is in default in payment thereof or interest thereon; and
➢ the company is not having any outstanding loan, whether secured or
unsecured:
Provided that if there is any outstanding unsecured loan, the company may
apply after obtaining concurrence of the lender...; and
➢ there is no dispute in the management or ownership of the company and a
certificate shall be enclosed with the Application; and
➢ the company does not have any outstanding statutory taxes, dues, duties
etc. payable to the Central Government or any State Government or local
authorities etc.; and
➢ the company has not defaulted in the payment of workmen’s dues; and
➢ the securities of the company are not listed on any stock exchange
➢ Not mandatory to prepare Cash Flow Statement for the Years under
Dormancy
➢ Eased norms in convening Board Meeting and only two meetings are
required per Financial Year to comply with the relevant provisions
➢ Provision of Rotation of Directors are not applicable on Dormant Companies

➢ Registrar after issue of notice may tag a Company as Dormant Company, if

the Company has not filed the Annual Returns for two consecutive Financial
Years
➢ Registrar, may after giving reasonable opportunity of being heard, may strike
off a Company which has a Dormant Status for more than 5 consecutive
Financial Years
➢ Registrar, may also, tag a Dormant Company as Active if he has reasonable
reason to believe that the Company is carrying on Business as an Active
Company
Prohibition of association or partnership of persons exceeding certain
number

The 2013 Act puts a restriction on the number of partners that can be
admitted to a partnership at 50. To be specific, the 2013 Act states that
no association or partnership consisting of more than the given number of
persons as may be prescribed shall be formed for the purpose of carrying
on any business that has for its object the acquisition of gain by the
association or partnership or by the individual members thereof, unless it
is registered as a company under this Act or is formed under any other
law for the time being in force:
As an exception, the aforesaid restriction would not apply to the following:
1. A Hindu undivided family carrying on any business
2. An association or partnership, if it is formed by professionals who are
governed by special acts like the Chartered Accountants Act, etc.[section
464 of 2013 Act]
INCORPORATION OF A COMPANY

Promotion Incorporation Capital Raising

Commencement
of Business
 STEP I: PROMOTION STAGE

a. Promotion means discovery of business opportunities and the

subsequent organization of funds, property, management ability to run
a business concern for the purpose of making profit therefrom.
b. Promotion begins when a promoter discovers an idea regarding some
business and ends up with the launching of an enterprise as a going
concern.

PROMOTER SEC 2(69)

a. A promoter is one who conceives the idea of a business enterprise. He

analyses its prospects and works out a tentative scheme of
organization.‘
b. A promoter is a businessman who gives birth to a company after
securing knowledge of the business world.
STEP II: INCORPORATION STAGE Sec 7

The following documents are required to be filed with the Registrar of

Companies for the incorporation of a joint stock company:
1. Memorandum of Association (Sec 4)
2. Articles of Association (Sec 5)
3. List of Directors
4. Written consent of Directors
5. Declaration Regarding Qualification of shares
6. Notice of Registered Office
7. Statutory Declaration

Along with the above documents, the necessary stamp duty, registration
fee and filing fees are to be deposited with the Registrar. If all the
document are found to be correct and in order, the Registrar will enter the
name of the company in the register of companies and will issue a
certificate known as Certificate of Incorporation. The Certificate of
Incorporation bears the serial number, date of incorporation and the
signature and seal of the Registrar of Companies. It is conclusive proof
that all legal formalities required for incorporation of a company have
been duly fulfilled.
STEP III: CAPITAL RAISING
A public company can raise the required funds from
public by means of issue of shares and debentures..
For doing the same, it has to issue prospectus which
is an invitation to the public to subscribe to the
capital of the company and undergo various other
formalities. Following steps are required for raising
funs from public:
1. SEBI Approval for Raising Capital
2. Filing of Prospectus
3. Appointment of Bankers, Brokers and underwriters
4. Minimum Subscription
5. Application to stock exchange
6. Allotment of Shares
STEP IV: COMMENCEMENT OF BUSINESS
A private company can commence business immediately after incorporation
but a public company having share capital ha s to comply with some
formalities before it can commence business.
First it must complete all formalities concerned with the raising of capital.
Second, it should allot shares and apply to the Registrar of Companies for
the issue of Certificate of Commencement of Business.

In this context few declarations have to be made

i) a declaration that shares payable in cash have been subscribed for and
allotted up to the minimum subscription mentioned in the prospectus.
Ii) a declaration that every director has paid in cash, the application and
allotment money on his shares in the same proportion as others.
Iii) a declaration that no money is payable or liable to become payable to the
applicants because of the failure of the company to either apply for or obtain
permission to deal in its securities.
Iv) a statutory declaration that the above requirements have been complied
with

The declaration can be signed by the Director or Secretary of the Company.

Q.1. is it compulsory to have a
common seal ?
Ans: After coming into force of the clause
3 of Companies (Amendment) Act 2015,
the requirement of a common seal of a
company is no longer mandatory
requirement. It has been made optional.
 “Financial Year”, in relation to any company or body
corporate, means the period ending on the 31st day of
March every year, and where it has been incorporated on
or after the 1st day of January of a year, the period
ending on the 31st day of March of the following year, in
respect whereof financial statement of the company or
body corporate is made up:

"Financial Year" means, in relation to any body

corporate, the period in respect of which any profit and
loss account of the body corporate laid before it in
annual general meeting is made up, whether that period
is a year or not.
Further section 210(4) provide that financial year may be less or more the
calendar year but shall not exceed 15 months. Which may extend to 18
month with special permission of ROC.
o Act of 2013 makes it necessary for Company to have a March 31st
Closing of Financial Year
o All existing Company or body corporate shall align it
Financial Year as per the provision of his clause within
two years.
o An application can made by a Company or Body Corporate which is
Subsidiary of a Company incorporated outside India and is required
to follow a different Financial Year for consolidation of its account
outside India, the tribunal may, if it is satisfied, allow any period as
its financial year, whether or not that period is a year

o A Company with foreign subsidiary will be allowed to adopt

different Financial Year only for consolidation of account out side
India.
“Auditing Standards” means the standards of auditing or any
addendum thereto for companies or class of companies
referred to in sub-section (10) of section 143;

In Act of 2013, Auditing Standards are now recognized and

have an authoritative value
National Financial Reporting Authority to be constituted under
Section 132 of the Act to advise Central Government regarding
Accounting Standards
❖ Auditor has to adhere the norms as prescribed in the Auditing
Standards
❖ Auditing Standards would be notified by Central Government
on recommendation of NFRA

❖ Auditing Standards issued by Institute of Chartered

Accountants of India to apply till the time NFRA come into
the existence and Central Government notifies the same.
“Financial Statement” in relation to a company, includes—
i. a Balance Sheet as at the end of the financial year;
ii. a Profit and Loss Account, or in the case of a company
carrying on any activity not for profit, an Income and
Expenditure Account for the Financial Year;
iii. Cash Flow Statement for the Financial Year;
iv. a Statement of Changes in Equity, if applicable; and
v. any explanatory note annexed to, or forming part of, any
document referred to in sub-clause (i) to sub-clause (iv):
Provided that the financial statement, with respect to One
Person Company, small company and dormant company, may
not include the cash flow statement;

❖ Clear Definition of Financial Statements required to be maintained

by a Company
❖ Adds Cash Flow Statement to the list of Financial Statement
❖ Gives relief to smaller Companies by exempting to prepared CFS
“Key Managerial Personnel”, in relation to a company, means-
i. the Chief Executive Officer or the managing director or the
manager;
ii. the company secretary;
iii. the whole-time director;
iv. the Chief Financial Officer; and
v. such other officer as may be prescribed;
❖ Section 203 read with Rule 8 of Companies (A&R of MP) Rules 2014
Listed Company and Company with min. paid up Capital of
Rs. Ten Crore shall have following full time KMP.
1. MD, CEO, Mgr and in their absence a WTD
2. CS; and
3. CFO
Same person can not be appointed as Chairman and MD/CEO except
AOA provide otherwise or company is in multiple business.
❖ In the amendment rules, (Rule 8A) Central Government made
it mandatory for a Company with Min. Capital of Rs. Five
Crore to appoint a whole time Company Secretary
“Serious Fraud Investigation Office” means the office referred
to in section 211;
SEC 211(1) - The Central Government shall, by notification, establish
an office to be called the Serious Fraud Investigation Office to
investigate frauds relating to a company:
Provided that until the Serious Fraud Investigation Office is established
under subsection (1), the Serious Fraud Investigation Office set-up by
the Central Government in terms of the Government of India Resolution
No. 45011/16/2003-Adm-I, dated the 2nd July, 2003 shall be deemed
to be the Serious Fraud Investigation Office for the purpose of this
section.
❖ Act of 2013 provides Statutory Recognition to SFIO
❖ SFIO can now initiate investigation into affairs of the Company,
prepare and submit the report to special court in the same
manner like a Police Officer under CrPC
❖ SFIO can now try the cases in special court who shall
take cognizance of the case only on application of SFIO
CG may by an order assign the Investigation of a Company to SFIO and
its Director in following cases:
❑ On receipt of a Report of the Registrar or Inspector under Section 208
[Investigation Report by ROC / Inspector]
❑ On intimation of a special resolution passed by a company that its
affairs are require to be investigate
❑ On intimation of a Special Resolution passed by a company that its
affairs are require to be investigate
❑ In Public Interest; or
❑ On request of any Department of State of Central Government
If any case assigned to SFIO then no other agency of CG/SG shall
proceed with investigation in such case in respect of any offence under
this Act and in case if any such investigation has already been initiated, it
shall not be proceed further with and the concern agency shall transfer
the relevant documents and records in respect of such offence under this
Act to SFIO [Section 212(2)]
Explanation to Section 447
i. “Fraud” in relation to affairs of a company or any body corporate, includes
any act, omission, concealment of any fact or abuse of position committed
by any person or any other person with the connivance in any manner, with
intent to deceive, to gain undue advantage from, or to injure the interests of,
the company or its shareholders or its creditors or any other person, whether
or not there is any wrongful gain or wrongful loss;
ii. “Wrongful Gain” means the gain by unlawful means of property to which the
person gaining is not legally entitled;
iii. “Wrongful Loss” means the loss by unlawful means of property to which the
person losing is legally entitled.

PUNISHMENT
Without prejudice to any liability including repayment of any debt under this Act
or any other law for the time being in force, any person who is found to be guilty
of fraud, shall be punishable with imprisonment for a term which shall not be
less than six months but which may extend to ten years and shall also be
liable to fine which shall not be less than the amount involved in the fraud,
but which may extend to three times the amount involved in the fraud:
Provided that where the fraud in question involves public interest, the
term of imprisonment shall not be less than
three years.
Notwithstanding anything contained in the Code of Criminal Procedure, 1973,
the offences covered under following :

Section Particular
False information, suppress any information at the time of
7 (5)(6)
Incorporation or found false any time in future
8(11) Affair of section 8 company conducted fraudulently
34 Criminal liabilities misstatement in prospectus
36 Fraudulently inducing person to invest money
38(1) For making multiple application by fictitious name for shares
46(5) Issue of duplicate share certificate with intent to defraud
56(7) Transfer of shares by DP or depository with intent to defraud
If Auditor of company directly or indirectly acted in fraudulently
140(5)
manner

And many more

448. Punishment for false statement
Save as otherwise provided in this Act, if in any return, report,
certificate, financial statement, prospectus, statement or other document
required by, or for, the purposes of any of the provisions of this Act or
the rules made there under, any person makes a statement,—
a. which is false in any material particulars, knowing it to be false; or
b. which omits any material fact, knowing it to be material, he shall be
liable under section 447

449. Punishment for false evidence

Save as otherwise provided in this Act, if any person intentionally gives
false evidence—
a. upon any examination on oath or solemn affirmation, authorized
under this Act; or
b. in any affidavit, deposition or solemn affirmation, in or about the
winding up of any company under this Act, or otherwise in or about any
matter arising under this Act, he shall be punishable with
imprisonment for a term which shall not be less than three years but
which may extend to seven years and with fine which
may extend to ten lakh rupees.
2% of average net profits* made during the 3 immediately preceding
financial years Every Financial Year to be calculated in accordance
with provisions of section 198
 Net Worth ≥ Rs.500 crore

To constitute
CSR
EVERY COMPANY * Turnover ≥ Rs.1,000 crore Committee of
the Board

Net Profit ≥ Rs.5 crore

* during any financial year

 Min. 1 CSR 3 or more
Independent Committee
Director Directors

The Board Report to disclose the

composition of CSR Committee
▪ Formulate and recommend to the Board, a
CSR Policy **

▪ Monitor CSR Policy of the Company

▪ Recommend the amount of expenditure to

be incurred on CSR activities

**activities to be undertaken as specified in Schedule VII of the

Companies Act, 2013
APPLICABILITY
❑ Every listed company; and

❑ A company belonging to other class of companies as may

be prescribed
✓ Every Public Company having PSC ≥ 50 crore

✓ Every public Company having turnover ≥ 250 Crore

REQUIREMENT OF REGISTERED VALUERS`

Where a valuation is required to be made in respect of –

❑ any property, stocks, shares, debentures, securities,

goodwill or any other asset of the Company (“Assets”); or
❑ net-worth of a company; or
❑ its liabilities under the provisions of the Companies Act,
2013
 REGISTERED VALUERS (S. 247)
❑ Eligibility: Valuation shall be done by a person having such qualifications
and experience and registered as a Valuer in such manner, on such terms
and conditions as may be prescribed.

❑ Appointment: Such valuer to be appointed by the Audit Committee or in

its absence, by the Board of Directors of the Company
 REGISTERED VALUERS (S. 247)
Duties of Valuer

❑ To make an impartial, true and fair valuation of

any assets, required to be valued;
❑ To exercise due diligence;
❑ To make valuation in accordance with such rules
as may be prescribed;
❑ Not to undertake valuation of any asset(s) in
which he has a direct or indirect interest; or
becomes so interested at any time during or
after the valuation of the assets.
 REGISTERED VALUERS
Penal Provisions u/s 247(3)
For contravention of provisions of the section or the rules made
thereunder
❑ Fine –Minimum Rs.25,000, but which may extend to Rs.1,00,000; or
In case of intention to defraud the company or its members
❑ Imprisonment up to 1-years; or
❑ Fine – Min. Rs.1,00,000. Max. Rs.5,00,000
NATIONAL FINANCIAL REPORTING AUTHORITY
❖National Financial Reporting Authority (NFRA) to be
constituted by Central Government to provide for dealing
with matters relating to accounting and auditing policies and
standards to be followed by companies and their auditors

A new quasi-judicial body comes up–NFRA

To oversee quality of
To recommending,
service of professionals
monitoring and enforcing
associated with
compliance of accounting
preparation of financial
and auditing standards
statements

It is a complete new quasi judicial body – complete with

Appellate Authority, having powers of a civil court SRA
MANAGEMENT, ADMINISTRATION AND CORPORATE
GOVERNANCE
 “Director” means a director appointed to the Board of
a company;

"director" includes any person occupying the position of

director, by whatever name called

o Act of 2013 excludes the concept of de-facto Director. Only a

person who is appointed on the Board of Directors to be called a
Director of the Company
o Act of 1956 provided for the Directors who could be called as a
Director of the Company without being appointed on the Board

o Act of 2013 lays emphasis on the Director being the member of

the Board, while act of 1956 laid the emphasis on the being the
director of the Company by the virtue of control and occupation of
the post of Director
NEW CONCEPTS RELATING TO DIRECTORS
❑ WOMAN DIRECTOR [Proviso to S. 149(1)]
1. Listed Company 2. Other public Company
having PSC ≥100 crore or turnover ≥ 300 crore

❑RESIDENT DIRECTOR [S. 149(3)]

Every company shall have resident director who
have stay in India for a total period of not less
then 180 days
❑ SMALL SHAREHOLDERS’ DIRECTOR [S. 151]
Every listed company may appoint a director of
small share holders small share holders means a
share holder who holding shares of nominal value
not exceeding Rs. 20000.
• Such director shall be consider as independent
director
• Such director shall not non rotational director
• Tenure shall not exceed three consecutive year.
• Such person can not be director of small
shareholders in more then two company .
 Independent
Director

Every Listed Other PUBLIC

Company Company having

One third of
Having in
total Number of
Director Paid-up Turnover of aggregate
share capital Rs.100 cr or outstanding loans
of Rs.10 cr more or Borrowings or
or more Debentures or
Deposits exceeding
SRA
Rs. 50 Crores
 WINDING UP
I. “Winding up is a means by which the dissolution of a company is
brought about and its assets are realized and applied in the payment
of its debts. After satisfaction of the debts, the remaining balance, if
any, is paid back to the members in proportion to the contribution
made by them to the capital of the company.”
II. Winding up of a company may be required due to a number of
reasons including closure of business, loss, bankruptcy, passing
away of promoters, etc.,
III. As per Section 2(94A) of the Companies Act, 2013, “winding up” means
windingup under this Act or liquidation under the Insolvency and
BankruptcyCode,2016.
IV. Thus, winding up ultimately leads to the dissolution of the company.
In between winding up and dissolution, the legal entity of the
company remains and it can be sued in aTribunal of law.
 MEANING OF DISSOLUTION OF A
COMPANY
I. A company is said to be dissolved when it ceases to exist as a
corporate entity.
II. On dissolution, the company’s name shall be struck off by the
Registrar from the Register of Companies and he shall also get this
fact published in the Official Gazette.
III. The dissolution, thus puts an end to the existence of the company.
DIFFERENCEBETWEENDISSOLUTION&WINDING
UP OFACOMPANY

S. No. Winding Up Dissolution

1. Winding up is one of the
methods by which dissolution
of a company is brought about.
2. Legal entity of the company
continues at the
commencement of the
winding up.
3. Acompany may be allowed to
continue its business as far it
is necessary for the beneficial
winding up of the company
Dissolution is the end result of
winding up.
Dissolution brings about an end
to the legal entity of
the company
Company ceases to exist on
its dissolution.
SECTION270:MODES OFWINDINGUP OFA
COMPANY

Compulsory winding up of a company by

tribunal

Voluntary winding up of a company

 COMPULSORYWINDINGUPOFA
COMPANY
Winding up a company by an order of theTribunal is known as
compulsory winding up.
Section 271: Circumstances in which companymaybewoundupbyTribunal
(a) if the company is unable to pay its debts;
(b)if the company has, by special resolution, resolved that the company
be wound up by theTribunal;
(c)if the company has acted against the interests of the sovereignty
and integrity of India, the security of the State, friendly relations with
foreign States, public order,decency or morality;

(d)if the Tribunal has ordered the winding up of the company under
Chapter XIX;
(e)if on an application made by the Registrar or any other person
authorized by the Central Government by notification under this
Act, the Tribunal is of the opinion that the affairs of the company
have been conducted in a fraudulent manner or the company
was formed for fraudulent and unlawful purpose or the persons
concerned in the formation or management of its affairs have been
guilty of fraud, misfeasance or misconduct in connection
therewith and that it is proper that the company be wound up;
(f)if the company has made a default in filing with the Registrar
its financial statements or annual returns for immediately
preceding five consecutive financial years; or
(g)if the Tribunal is of the opinion that it is just and equitable
that the company should be wound up.
PETITION FOR WINDINGUP
A petition for compulsory winding up of a company may be filed in the Tribunal
by any of the following persons. (Sec. 272):
(a) the company;

(b)any creditor or creditors, including any contingent or prospective creditor or

creditors;
(c) any contributoryor contributories;
(d) all or any of the persons specifiedin clauses (a),(b)and (c)together;
(e) the Registrar;
(f) any person authorizedby theCentralGovernment in that behalf;or

(g)in a case falling under clause (c) of sub-section (1) of section 271, by the Central
Government or aStateGovernment.
VOLUNTARYWINDINGUPOFACOMPANY Sec 304
A company may be wound up voluntarily,—

(a) if the company in general meeting passes a resolution requiring

the company to be wound up voluntarily as a result of the expiry
of the period for its duration, if any, fixed by its articles or on the
occurrence of any event in respect of which the articles provide
that the company should be dissolved;or

(b) if the company passes a special resolution that the company be

wound up voluntarily