Companies Law - Chapter III -

Prospectus and Allotment of

Securities

SI. no. Section No. Section Deals with Important Fact/Information

Section 23-Public Offer
A public company may issue securities through Public Offer, Private Placement and Right Issue and
1 23 Public Offer Bonus Issue.
A private company may issue securities through Private Placement and Right Issue and Bonus Issue.

Section 24-Power of SEBI to regulate issue and transfer of securities

Power of SEBI to regulate
1 24 issue and transfer of This section provides the power of SEBI to regulate issue and transfer of securities.
securities
 Section 25-Document containing Offer of Securities for sale to be deemed prospectus
Document containing
Offer of Securities for Deemed Prospectus shall be signed by two directors of issuing house company(in case of a company)
1 25
sale to be deemed and by at least half of the partners of the issuing house firm (in case of a firm).
prospectus

Section 26-Matters to be stated in prospectus

No prospectus shall be valid if it is issued more than ninety days after the date on which a copy is
delivered to the Registrar.
Matters to be stated in If a prospectus is issued in contravention of the provisions of this section:
1 26
prospectus The company shall be punishable with fine Minimum- fifty thousand rupees; Maximum -three lakh
rupees, AND Every person who is knowingly a party to the issue of such prospectus shall be
punishable: with fine Minimum- fifty thousand rupees; Maximum- three lakh rupees.

Section 27-Variation in Terms of Contract or Objects in Prospectus

If the company wants to vary terms or objects, it needs to pass a SPECIAL RESOLUTION in a general
Variation in Terms of meeting.
1 27 Contract or Objects in
The advertisement of the notice for getting the resolution passed shall be in Form PAS-1.
Prospectus
A prospectus shall be issued within 90 days of its delivery to ROC.

Section 28-Offer for Sale

Offer for Sale of Shares
The members whose shares are proposed to be offered to the public shall collectively authorise the
1 28 by Certain Members of
company, whose shares are offered for sale to the public.
Company

Section 29-Public Offer of Securities to be in Dematerialised form

This rule shall not apply to an unlisted public company which is a Nidhi, a Government company or a
wholly owned subsidiary.
Public Offer of Securities
Every unlisted public company shall submit Form PAS-6 to the Registrar within sixty days from the
1 29 to be in Dematerialised
conclusion of each half year.
form
The grievances of security holders of unlisted public companies under this rule shall be filed before the
Investor Education and Protection Fund Authority.
 Section 30-Advertisement of Prospectus
Advertisement of
1 30 Advertisement must contain the contents of the memorandum.
Prospectus

Section 31-Shelf Prospectus

Shelf Prospectus shall be valid for maximum one year
During the validity period, ONE MONTH prior to the subsequent offer, the company shall file an
1 31 Shelf Prospectus INFORMATION MEMORANDUM in Form PAS-2
If applicants express a desire to withdraw their application, the company or other person shall refund all
the monies received as subscription within fifteen days.

Section 32-Red Herring Prospectus

It is issued prior to issue of main prospectus (It is an incomplete prospectus)
1 32 Red Herring Prospectus It shall be filed with ROC and SEBI at least 3 days prior to opening of subscription list & the offer.
Red Herring Prospectus is used in book building process/ Price Discovery method

Section 33-Issue of Application Forms for Securities

Every application form must be accompanied by an abridged prospectus.
Exception to the above provision :- No need for abridged prospectus with the application form in case of
• Bonafide underwriting agreement
Issue of Application
1 33 • Securities which are not offered to public
Forms for Securities
• where offer is made only to existing members of the company
If a company makes any default in complying with the provisions of this section, it shall be liable to a
penalty of fifty thousand rupees for each default.

Section 34 Criminal Liability for mis- statements in Prospectus

Criminal Liability for mis- Every person who authorizes the issue of such prospectus shall be liable under Section 447.
1 34
statements in Prospectus If any person proves that such statement or omission was immaterial, he shall not be punished.

Section 35 Civil Liability for mis- statements in Prospectus

Civil Liability for mis- No person shall be liable, if he withdrew his consent before the issue of prospectus or the prospectus
1 35
statements in Prospectus was issued without his knowledge or consent.
 Section 36 Punishment for Fraudulently Inducing Persons to Invest Money
Punishment for
1 36 Fraudulently Inducing Such person will be liable under Section 447
Persons to Invest Money

Section 37 Action by Affected persons

Action by Affected Any Person affected by any misleading statement in the prospectus u/s 34,35,36 may file a suit against
1 37
persons the company or the person concerned.

Section 38 Punishment of Personation for Acquisition etc. of Securities

Such person shall be iable under Section 447.

Punishment of
If a person has been convicted under this section, the Court may order disgorgement of gain made and
Personation for
1 38 seizure and disposal of the securities in possession of, such person.
Acquisition etc. of
Securities The amount received by disgorgement or disposal of securities shall be credited to Investor Education &
Protection Fund

Section 39 Allotment of Securities by Company

The minimum subscription in case of equity share capital (as per SEBI) shall be not less than 90% of the
issue size.
The amount payable on application on every security shall not be less than five per cent of the nominal
amount of the security.
If the minimum amount has not been subscribed and the application money is not received within a
period of thirty days from the date of issue of the prospectus,the received amount shall be returned
Allotment of Securities by within 15 days from closure of issue.
1 39
Company If money not repaid within period, directors in default shall jointly and severally be liable to repay
money with interest @15% per annum.
Whenever a company makes any allotment of securities, it shall file with the Registrar a return of
allotment within thirty days.
In case of any default under this section,
Penalty on the company and its officer in default: For each default, One thousand rupees for each day
during which such default continues or one lakh rupees, whichever is less.
 Section 40 Securities to be dealt with in Stock Exchanges
In case of any default under this section:Penalty on the company
• Minimum – 5 lakh Rupees, • Maximum – 50 Lakh rupees
Officer in Default:
• Minimum – 50 Thousand Rupees, • Maximum – 3 Lakh Rupees
Securities to be dealt A company may pay commission to any person in connection with the subscription of shares,
1 40 • Five percent of the Issue price or
with in Stock Exchanges
• A rate authorised by the articles whichever is less
A company may pay commission to any person in connection with the subscription of debentures,
• Two and a half per cent of the Issue price or
• A rate authorised by the company’s articles whichever is less

Section 41 Global Depository Receipt

Global Depository A company may, after passing a special resolution in its general meeting, issue depository receipts in any
1 41
Receipt foreign country in such manner, and subject to some conditions.

Section 42 Private Placement

The private placement offer and application shall not carry any right of renunciation.
For the purpose of sub-section of 42, an offer or invitation to subscribe securities under private
placement shall not be made to persons more than two hundred in the aggregate in a financial year.
Allotment of securities must be done within 60 Days from receipt of application money.
If allotment not done, Refund application money within 15 Days.
If company fails to refund application money, it shall pay money with interest @12 % p.a. starting from
expiry of the 60th day.
A company making any allotment of securities, shall file with the Registrar a return of allotment within
1 42 Private Placement fifteen days from the date of the allotment in Form PAS 3.
If a company defaults in filing the return of allotment, then • the company, • its promoters and •
directors : shall be liable to a penalty for each default of one thousand rupees for each day during
which such default continues but not exceeding twenty-five lakh rupees.
If a company makes an offer or accepts monies in contravention of this section,
• the company, • its promoters and • directors: shall be liable for a penalty. Penalty shall be lower of
amount raised through private placement or Rs 2 Crore.
The company shall also refund all monies with interest @ 12% p.a. to subscribers within a period of
thirty days of the order imposing the penalty.
 Companies Law - Chapter IV - Share
Capital and Debentures

SI. no. Section No. Section Deals with Important Fact/Information

Section 43 Kinds of share capital
Ths section also provides provisions for issuing Shares with differential Voting rights.

Voting Power in respect of shares with differential voting rights of the company shall not exceed 74% of
total voting power.
1 43 Kinds of Share Capital
To issue shares with DVR, a company should not be penalized under RBI Act, FEMA Act etc. during
the last 3 years
A company may issue equity shares with differential rights upon expiry of five years from the end of the
financial Year in which such default was made good.

Section 44
Movable Property The shares or debentures or other interest of any member in a company shall be movable property
1 44
Transferable transferable in the manner provided by the articles of the company.
 Section 45
Every share shall be having a distinctive number. (No need of distinctive number if shares held in
1 45 Distinctive number
dematerialised form)

Section 46 Certificate of Shares

Fees for duplicate share certificate --> Maximum Rs. 50 per certificate

The books and documents related to issue of shares shall be preserved for
• 30 years, • Permanently, in case of disputed cases

1 46 Certificate of Shares The certificates surrendered shall be immediately defaced by stamping ‘cancelled’ in bold letters
AND Be destroyed after expiry of 3 years from date of surrender.
If a company issues a duplicate certificate of shares with intent to defraud, the company shall be
punishable with fine ‘five times the face value of the shares involved, which may extend to ten times
the face value of such shares or rupees ten crores whichever is higher.
And every officer of the company who is in default shall be liable for action under section 447.

Section 47 Voting Rights

Members (Equity shareholders) of the company shall have a right to vote on every resolution placed
1 47 Voting Rights
before the company.

Section 48 Variation of shareholders’ Rights

If a share capital of the company is divided into different classes of shares, the rights attached to the
shares of any class may be varied with the consent of the 3/4th shareholders of that class.
If the 10% or more holders of the issued shares of a class did not consent to such variation or vote in
Variation of shareholders’
1 48 favour of the special resolution for the variation, they may apply to the Tribunal (within 21 days) to
Rights
have the variation cancelled.
The company shall, within 30 days of the date of the order of the Tribunal, file a copy thereof with the
Registrar.
 Section 49 Calls on shares of same class to be made on Uniform basis
Calls on shares of same
Where any calls for further share capital are made on the shares of a class, such calls shall be made on a
1 49 class to be made on
uniform basis on all shares falling under that class.
Uniform basis

Section 50 Company to accept Unpaid share capital, although not called up

Company to accept
A company may accept from any member, the whole or a part of the amount remaining unpaid on any
1 50 Unpaid share capital,
shares held by him, even if no part of that amount has been called up.
although not called up

Section 51 Payment of Dividend in Proportion to Amount Paid-Up

Payment of Dividend in
A company may, if so authorised by its articles, pay dividends in proportion to the amount paid- up on
1 51 Proportion to Amount
each share.
Paid-Up

Section 52 Application of Premiums received on issue of shares

Application of Premiums
If a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate
1 52 received on issue of
amount of the premium received on those shares shall be transferred to a ―securities premium account
shares

Section 53 Prohibition on Issue of Shares at Discount

Company shall not issue shares at a discount. If the company does so, that share is void.
Exception
1) Sweat equity shares issued to employees
2) Shares issued to creditors where their debt is converted into shares under any scheme as per RBI
Prohibition on Issue of regulations.
1 53
Shares at Discount
If a company contravenes the provisions of this section, the Company shall be liable to refund all
monies received with interest at the rate of 12% per annum from the date of issue.
Penalty on company & every officer in default-->
Lower of--> • Amount raised through such issue at discount OR • Rs.5 Lakh

Section 54 Issue of sweat equity shares

The issue of sweat equity shares shall be valid for making the allotment within a period of not more than
Issue of sweat equity 12 months from the date of passing of the special resolution.
1 54
shares The company shall not issue sweat equity shares for more than Higher of 15% of paid up equity
capital or Rs. 5 crores (in a Financial Year)
 The company shall not issue sweat equity shares for more than 25 % of paid up equity capital (at any
time).
The sweat equity shares issued to directors or employees shall be locked in/ non transferable for a
period of three years from the date of allotment.
Exception: A start up company, may issue sweat equity shares not exceeding 50% of its paid up capital
Upto 10 years from the date of its incorporation or registration.
The company shall maintain a register of sweat equity shares in Form No. SH 3.

Section 55 Issue and Redemption of Preference shares

Irredeemable Preference shares cannot be issued.
Preference shares can be issued for a maximum period of 20 years.
Exception: In case of company involved in infrastructure projects, the maximum period is 30 years but
Issue and Redemption of from in this case, from 21st year every year atleast 10% shares shall be redeemed.
1 55
Preference shares Only fully paid shares can be redeemed.
Preference shares shall be redeemed out of
• Out of profits or free reserves of the company
• Proceeds of fresh issue of shares

Section 56 Transfer and Transmission of Securities

Every company shall deliver the certificates of all securities allotted, transferred or transmitted:
> within a period of two months from the date of incorporation, in the case of subscribers to the
memorandum
> within a period of two months from the date of allotment, in the case of any allotment of any
of its shares
Transfer and > within a period of one month from the date of receipt by the company of the instrument of transfer,
1 56
Transmission of Securities in the case of transfer or transmission of securities
> within a period of six months from the date of allotment in the case of any allotment of debenture

If any default is made in complying with the provisions of this sections penalty on Company & Officer in
default --> Rs.50000/-
If any depository or depository participant, with an intention to defraud a person, has transferred
shares, it shall be liable under section 447.
 Section 57 Punishment of Personation of shareholder
Punishment of Such person shall be punishable with
1 57 Personation of ❑ Imprisonment--> • Minimum one year & • Maximum three years and
shareholder ❑ Fine--> • Minimum one lakh rupees & • Maximum five lakh rupees.

Section 58 Refusal of Registration and Appeal Against Refusal

If a private company limited by shares refuses to register the transfer of any securities or interest
of a member in the company, it shall send notice of the refusal to the transferor and the transferee
within a period of 30 days from the date on which the instrument of transfer was delivered to the
company.

The transferee may appeal to the Tribunal against the refusal within a period of 30 days from
the date of receipt of the notice or in case no notice has been sent by the company, within a period
of 60 days

Refusal of Registration
1 58 and Appeal Against If a public company, without sufficient cause, refuses to register the transfer of securities within a
Refusal period of 30 days from the date on which the instrument of transfer or the intimation of transmission,
as the case may be, is delivered to the company, The transferee may appeal to the Tribunal against the
refusal Within a period of 60 days from the date of receipt of the notice (Notice sent by the company)
and Within a period of 90 days from the date on which the instrument of transfer or the intimation of
transmission was delivered to the company(Notice not sent by the company).

If a person contravenes the order of the Tribunal under this section, he shall be punishable with
imprisonment for a term which shall not be less than one year but which may extend to three years
and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

Section 59 Rectification of Register of Members

If the name of any person is, without sufficient cause, entered in the register of members of a company,
or after having been entered in the register, is without sufficient cause, omitted therefrom, or if a
Rectification of Register
1 59 default is made, or unnecessary delay takes place in entering in the register, the fact of any person
of Members
having become or ceased to be a member the person aggrieved or any member of the company or the
company may appeal to the Tribunal.
 Section 60 Publication of Authorised, Subscribed and Paid Up Capital

Publication of If any default is made in complying with the requirements of this section, the company shall be liable to
1 60 Authorised, Subscribed pay a penalty of ten thousand rupees and every officer of the company who is in default shall be liable
and Paid Up Capital to pay a penalty of five thousand rupees, for each default.

Section 61 Power of Limited Company to Alter its Share Capital

Power of Limited
1 61 Company to Alter its The scope of the power provided by section 61 is wide and helps make the business world more flexible.
Share Capital

Section 62 Further Issue of Share Capital

In case of Nidhi company, Section 62 shall not apply

New shares shall be issued in proportion to the existing paid-up share capital by sending a letter of
offer.
• The offer shall be made by notice limiting a time not being less than seven days and not exceeding
thirty days from the date of the offer.
Further Issue of Share • The notice shall be dispatched through registered post or speed post or through electronic mode or
1 62 ourier or any other mode having proof of delivery to all the existing shareholders at least three days
Capital
before the opening of the issue.
Unlisted company shall not offer shares to its employees under ESOP unless it complies with the certain
requirements.
If the allotment of securities is not completed within twelve months from the date of passing of the
special resolution, another special resolution shall be passed for the company to complete such
allotment.

Section 63 Issue of Bonus Shares

No issue of bonus shares shall be made by the revaluation of assets.
1 63 Issue of Bonus Shares Bonus issue can be out of: free reserves, securities premium account or capital redemption reserve
account.
 Section 64 Notice to be given to Registrar for alteration of share capital
The company shall file a notice in the Form No. 7 with the ROC within a period of 30 days of such
Notice to be given to alteration.
1 64 Registrar for alteration of If a company and any officer of the company who is in default contravenes the provisions of this section,
share capital it shall be punishable with fine which may extend to 500 rupees for each day during which such default
continues, or five lakh rupees(for company) and one lakh rupees (for officer) , whichever is less.

Section 65 Unlimited Company to provide for Reserve Share

Capital on Conversion into Limited Company
Unlimited Company to
An unlimited company having a share capital may, by a resolution for registration as a limited
provide for Reserve Share
1 65 company,may increase the nominal amount of each of its shares or provide that a specified portion of
Capital on Conversion
its uncalled share capital shall not be called up except in the event of winding up.
into Limited Company

Section 66 Reduction of share capital

If any officer of the company Knowingly conceals the name of creditor, Knowingly misrepresents
Reduction of share
1 66 the nature of amount of claim of the creditor, Abets (assists) to such concealment then he shall be
capital
punishable under section 447.

Section 67 Restrictions on Purchase by Company or Giving of Loans by it for Purchase of its Shares
No company shall have power to buy its own shares unless it’s the case of capital reduction.
Restrictions on Purchase If a company contravenes the provisions of this section, it shall be punishable with fine which shall not
by Company or Giving of be less than one lakh rupees but which may extend to twenty-five lakh rupees
1 67
Loans by it for Purchase And every officer of the company who is in default shall be punishable with imprisonment for a term
of its Shares which may extend to three years and with fine which shall not be less than one lakh rupees but which
may extend to twenty five lakh rupees.
Section 68 is an exception section to Section 67

Section 68 Power of Company to Purchase its own securities

No buy-back of any kind of shares or other specified securities shall be made out of the
Power of Company to proceeds of an earlier issue of the same kind of shares or same kind of other specified securities.
1 68 Purchase its own
securities If the buyback is for 10 % or less of the paid up equity capital and free reserves of the company, then No
need of Special Resolution. Only Board Resolution is sufficient.
 Conditions for buyback: 1. Buyback is 25% or less of the aggregate paid up capital and free reserves of
the company; 2. Maximum equity shares that can be bought back in a finanncial year can be maximum
of 25% of total no. of outstanding shares.; 3. Post buyback the company's debt equity ratio should not
exceed 2:1. (the least of the above three shall be the no. of shares company can buyback)
Buyback shall be completed within 1 year of the date of passing of Special Resolution or Board
Resolution as the case maybe.
Buyback can be done from: Existing security holders on proportionate basis, Open Market, The
employees of the company to whom security issues under ESOP or sweat equity
Before buyback company shall file Declaration of Solvency with ROC and SEBI in Form No. SH 9.
Securities bought back shall be extinguished and physically destroyed within 7 days of last day of
completion of buyback.
Where a company completes a buy-back of its securities, it shall not make a further issue of the same
kind of securities within a period of six months. Also, it shall maintain a register of the shares so nought
in Form No. SH 10.
The offer for buy-back shall remain open for a period of not less than fifteen days and not exceeding
thirty days from the date of dispatch of the letter of offer.
The letter of offer (Form No. SH 8) shall be dispatched to the shareholders or security holders
immediately after filing the same with the Registrar of Companies but not later than twenty days from
its filing.
If a company makes any default in complying with the provisions of this section
Penalty on Company:
• Minimum - one lakh rupees & • Maximum - three lakh rupees
Penalty on officer in default:
• Minimum - one lakh rupees & • Maximum - three lakh rupees

Section 69 Transfer of Certain Sums to Capital Redemption Reserve Account

If a company purchases its own shares out of free reserves or securities premium account, a sum equal
Transfer of Certain Sums
to the nominal value of the shares so purchased shall be transferred to the capital redemption reserve
1 69 to Capital Redemption
account.
Reserve Account
Utilisation of CRR A/c – For issuing FULLY PAID bonus shares to members of the company.

Section 70 Prohibition of buy back in certain circumstances

Prohibition of buy back in
1 70 No company shall directly or indirectly purchase its own shares or other specified securities.
certain circumstances
 Section 71 Debentures
Debentures cannot carry any voting rights.
DRR shall be made on or before the 30th day of April in each year. Invest, a sum which shall not be less
than 15%, of the amount of its debentures maturing during the year.
Provided that the amount remaining invested shall not any time fall below fifteen percent of the
amount of the debentures maturing during the year ending on 31st day of March of that year.
Form for Trust Deed of Debenture shall be in form No. SH 12.
1 71 Debentures
If the company wants to issue debentures to more than 500 persons, it shall not issue a prospectus or
make offer to public until and unless it has appointed a Debenture Trustee.
An issue of secured debentures may be made, provided the date of its redemption shall not exceed ten
years from the date of issue.
For Infrastructure companies or companies allowed by Government or statutory authority may issue
debentures with redemption period more than 10 years but not more than 30 years.

Section 72 Power to Nominate

Every holder of securities of a company may, at any time, nominate in Form SH 13 any person to whom
his securities shall vest in the event of his death.
1 72 Power to Nominate
The request for nomination should be recorded by the Company within a period of two months from
the date of receipt of the nomination form.

Companies Law - Chapter VIII

Declaration and Payment of Dividend
SI. no. Section No. Section Deals with Important Fact/Information
Section 123 Declaration of Dividend
Sources of paying Dividend by a company: Current Year Profits,Free reserves of the company, Money
provided by CG or SG, if they have given such guarantee.
In case the company has incurred loss during the current financial year upto the end of the quarter
immediately preceeding the date of declaration of interim dividend, such interim dividend shall not be
declared at a rate higher than the average dividends declared by the company during the immediately
1 123 Declaration of Dividend preceding three financial years.
A company which fails to comply with the provisions of sections 73(Acceptance of Deposits) and 74
(Repayment of Deposits) can not declare any dividend on its equity shares.
Within 5 days of declaration of dividend, the money shall be deposited in a separate account in a
scheduled bank.

Section 124 Unpaid Dividend Account

Unpaid Dividend Account of a company which remains unpaid or unclaimed for a period of 7 years shall
be transferred by the company to the Investor Education and Protection Fund.
If a company fails to comply with any of the requirements of this section,
Company -->
• One lakh rupees & In case of continuing failure, with a further penalty of five hundred rupees for each
1 124 Unpaid Dividend Account
day subject to maximum of ten lakh rupees.
Every officer in default -->
• Twenty five thousand rupees& In case of continuing failure, with a further penalty of one hundred
rupees for each day after the first during which such failure continues, subject to a maximum of two
lakh rupees.
 Section 125 Investor Education and Protection Fund

1 125 Investor Education and The accounts of the Fund shall be audited by the Comptroller and Auditor- General of India
Protection Fund

Section 126 Right to Dividend, Right shares and bonus shares to be held in Abeyance Pending registration of transfer of shares
Right to Dividend, Right
If any instrument of transfer of shares has been delivered to any company for registration, and if the
shares and bonus shares
transfer of such shares has not been registered by the company, then company shall transfer the
1 126 to be held in Abeyance
dividend in relation to such shares to the Unpaid Dividend Account OR keep in abeyance any offer of
Pending registration of
rights, issue of fully paid-up bonus with respect to such shares.
transfer of shares

Section 127 Punishment for failure to Distribute Dividends

If a dividend has been declared by a company but has not been paid within thirty days from the date
of declaration of the dividend, then every director shall be punishable with imprisonment of upto two
years and with fine of one thousand rupees for every day during which such default continues.
Punishment for failure to
1 127 The company will be liable to pay simple interest at the rate of 18% per annum during the period for
Distribute Dividends
which such default continues.
In case of Nidhi Company, where the dividend payable to a member is one hundred rupees or less, It is
sufficient if the declaration of dividend is announced in the local language in one local newspaper.

Companies Law - Chapter X -

Auditors
SI. no. Section No. Section Deals with Important Fact/Information
Section 139 - Appointment of Auditors
Every company Shall Appoint an Individual or Firm as an Auditor at its first Annual General Meeting
Audit Committee/Board shall consider and recommend an individual or a firm as auditor
1 139(1) Appointment of Auditors The Auditor appointed shall hold the office till the conclusion of its sixth annual general meeting
Company Shalll file a notice of Auditor's appointment with the Registrar within fifteen days. Notice to
registrar shall be in Form ADT 1
In case of Non-Government Companies, except One Person and Small Companies, an individual
appointed as auditor for more than one term of five consecutive years shall not be eligible for
Appointment of Auditors Reappointment for 5 years from the date of completion of his term
2 139 (2) – Non-Government
Companies - Term In case of Non-Government Companies, except One Person and Small Companies, an audit firm
appointed as auditor for more than two terms of five consecutive years shall not be eligible for
Reappointment for 5 years from the date of completion of such term
Manner of rotation of A break in the term for a continuous period of five years shall be considered as fulfilling the
auditors by the requirement of rotation
3 139 (3 & 4)
companies on expiry of In the audit firm appointed, the auditing partner and his team shall be rotated at such intervals as may
term be resolved by members
Appointment of Auditors The Comptroller and Auditor-General of India shall appoint an auditor within a period of 180 days from
4 139 (5) – Government the commencement of the financial year
Companies The auditor shall hold office till the conclusion of the annual general meeting
The first auditor of a company shall be appointed by the Board of Directors (B.o.D) within 30 days from
First Appointment of the date of registration of the company and in the case of failure of the Board to appoint such auditor, it
5 139 (6) Auditors - Non- shall inform the members of the company, who shall within 90 days at an extraordinary general
Government meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual
general meeting.
First Appointment of The first auditor shall be appointed by the Comptroller and Auditor-General of India within 60 days
6 139 (7)
Auditors - Government from the date of registration of the company
 Companies In case the Comptroller and Auditor-General of India does not appoint such auditor, the Board of
Directors of the company shall appoint such auditor within the next thirty days
In the case of failure of the Board to appoint such auditor within the next thirty days, members of the
company who shall appoint such auditor within the sixty days at an extraordinary general meeting
For Non-Government Companies - Vacancy shall be filled by the Board in consultation with audit
Committee (if there is Audit Committee) within thirty days
Casual Vacancy of For Government Companies - Vacancy shall be filled by the Comptroller and Auditor-General of India
7 139 (8)
Auditor within thirty days
In case the Comptroller and Auditor-General of India does not fill the vacancy within the said period, the
Board of Directors shall fill the vacancy within next thirty days.

Section 140 - Removal, Resignation of Auditor and Giving of Special Notice

Auditor may be removed from his office before the expiry of his term only by a special resolution of the
company, after obtaining the previous approval of the Central Government in the prescribed manner
Application to the Central Government for removal of auditor shall be made in Form ADT-2.
1 140 (1) Removal of Auditor Application shall be made to the Central Government within thirty days of the resolution passed by the
Board
The company shall hold the general meeting within sixty days of receipt of approval of the Central
Government
In case of Govt. Companies and Non-Govt. Companies -> The auditor who has resigned from the
company shall file within a period of thirty days from the date of resignation, a statement (using Form
ADT-3) with the company and the Registrar indicating the reasons and other facts related to his
Resignation of Auditor resignation
In case of Govt. Companies -> In case of government company, the auditor shall additionally also file a
2 140 (2 and 3)
statement within a period of thirty days from the date of resignation with the Comptroller and Auditor-
General of India
Fifty thousand rupees or an amount equal to the remuneration of the auditor, whichever is less
Penalty for non-
In case of continuing failure, an additional penalty of five hundred rupees for each day subject to a
compliance by auditor
maximum of 2 lakh rupees
The auditor, whether individual or firm, against whom final order has been passed by the Tribunal
Removal on Orders by
3 140 (5) (NCLT) shall not be eligible to be appointed as an auditor of any company for a period of five years from
Tribunal
the date of passing of the order
4 141 (1, 2 and 3) Eligibility of Auditor A person shall be eligible for appointment only if he is a Chartered Accountant.
 If a person or partner of firm is already holding appointment of more than twenty companies. (20
Companies shall not include one person companies, small companies and private companies having
Disqualifications of paid-up share capital less thanone hundred crore rupee)
Auditor
A person who himself or his relative or partner is (holding securities of more than 1 lakh) or
(Indebted/Owes more than 5 lakh to the company ) or (has given a guarantee of more than 1 lakh for a
third person who owes money to the company or its subsidiary)
The remuneration for auditors may be fixed in the general meeting
Remuneration of Auditor The remuneration to the auditor shall be in addition to the fee payable to an auditor or expenses to be
reimbursed to the auditor

Section 143 - Powers and Duties of Auditors and Auditing Standards

Auditor would always have a right of access to the books of account and vouchers of the company and
1 143 (1) Power of Auditors
to inquire into related matters.
The auditor should make a report to the company on the accounts examined by him and in respect of
2 143 (2,3 and 4) Duties of Auditors
the financial statement that are required to be laid before the company in general meeting.
Duties of Auditor (In case
3 143 (5,6 and 7) of Government This section provides for the duties of auditor in case of the government companies.
Companies)
Duties of Auditor – The branch auditor should prepare a report on the books of accounts of the branch audited by him and
4 143 (8)
Branch Office send a copy of such audit report to the company auditor.
5 143 (9 and 10) Auditing Standards Every auditor shall comply with the auditing standards
Central government in consultation with NFRA can direct that auditor's report should include
6 143 (11) Auditing Standards
information related to certain matters.
Frauds >= 1 crore are reported to Central Government
7 143 (12) Reporting Frauds
Frauds < 1 crore are reported to Audit Committee (if there is one) or to the Board
Penalties for not In case of Listed Company – 5 lakh rupees
8 143(15)
reporting Frauds Other Company – 1 lakh
Power and Duties of
Financial Auditor Applies The provision of this section shall apply to the cost auditor conducting cost audit and the company
9 143(14)
to Cost Auditor and secretory doing secretarial audit
Secretarial Auditor
 Section 144- Auditor not to Render Certain Services
Auditors shall not provide the following services directly or indirectly to the company or its holding or
Auditor not to Render subsidiary company: accounting and bookkeeping services, internal audit, design and implementation of
1 144
Certain Services any financial information system, actuarial services, investment advisory services, any financial service,
management service.

Section 145- Auditor to Sign Audit Reports, etc.

Auditor to Sign Audit
1 145 The person appointed as an auditor of the company shall sign the auditor’s report
Reports, etc.

Section 146- Auditor to attend General Meeting

All notices of, and other communications relating to, any general meeting shall be forwarded to the
Auditor to attend General
1 146 auditor of the company. In general meeting auditor shall have right to be heard or put across his view
Meeting
on any part of the business which concerns him as the auditor.

Section 147- Punishment for Contravention

If any of the provisions of Sec 139 to Sec 146 is contravened then the company shall be punishable with
a fine which shall not be less than Rs. 25,000 but which may extend to Rs. 5,00,000.
Every officer of the company who is in default shall be punishable with Fine which shall not be less than
ten thousand rupees, but which may extend to one lakh rupees
If the auditor contravenes any of the provisions of Sec 139 , 143 , 144 and 145 then he shall be
Punishment for
1 147 punishable with a fine which shall not be less than Rs. 25000 but which may extend to Rs. 5,00,000 or
Contravention
four times the remuneration of the auditor, whichever is less.
If auditor has contravened such provisions willfully with the intention to deceive the company or its
shareholders or creditors or tax authorities , he shall be punishable with imprisonment for a term which
may extend to one year and with fine which shall not be less than Rs. 50,000 but which may extend to
Rs. 25,00,000 or eight times the remuneration of the auditor, whichever is less.

Section 148- Cost Records and Audit

The Central Government may direct companies (having an overall turnover >= 35 crore from all its
Central Government to products and services the immediately preceding financial year) that Cost data for specific items related
Specify Audit of Items of to the utilization of material or labor shall also be included in the books of account
1 148 Cost in Respect of Certain
The audit shall be conducted by a Cost Accountant.
Companies
The Companies Company shall within thirty days from the date of receipt of a copy of the cost audit report should send
the report to Central Government
 All the sections (139 to 148) in Chapter X – Audit and Auditors became effective on 1/4/2014

Companies Law - Chapter XI

Appointment and Qualifications of
Directors
SI. no. Section No. Section Deals with Important Fact/Information
Section 149 Company to have Board of Directors
Every company shall have a Board of Directors consisting of individuals as directors and shall have—
(a) a minimum number of three directors in the case of a public company, two directors in the
case of a private company, and one director in the case of a One Person Company; and
Company to have board (b) a maximum of fifteen directors (Except in case of government Companies and section 8 company)
1 149(1)
of directors
Directors can be increased beyond 15 by passing a special resolution
Listed Companies and Unlisted Public companies (Paid up Share Capital >= 100 Crore OR Turnover >=
300 Crore) must have atleast one woman director ( except IFSC Public Companies)
Every company existing on or before the date of commencement of this Act shall comply with the
2 149(2) Enforcement Time
requirements of subsection(1) within one year from such commencement of this Act
3 149 (3) Stay In India At least one director should stay in India for a total period of >= than 182 days during the financial year

Number of Independent Each company shall have at least 1/3 rd of its directors as independent directors (except section 8
4 149(4)
Directors company and IFSC Public company)
Independent Directors Every company existing on or before the date of commencement of this Act shall comply with the
5 149 (5)
Enforcement Time requirements of subsection(4) within one year
Independent directors is the one who must be different from managing director or a whole-time
director or a nominee director. He must not be now or in past promoter of the company or its holding,
Qualification of subsidiary or associate company.
6 149(6)
Independent Directors
He must not be related to promoters or directors in the company, its holding, subsidiary or associate
company.
Every independent director shall at the first meeting of the Board in which he participates as a director
Declaration of Meeting and thereafter at the first meeting of the Board in every financial year shall give a declaration that he
7 149(7)
the Criteria meets the criteria of independence discussed under Qualifications of Independent Director in
subsection (6).
Code for Independent The independent directors of the company shall hold at least one meeting in a financial year without
8 149(8)
Directors the attendance of non-independent directors and members of management
Independent Directors Independent directors may receive remuneration as sum of following components: Fee; Reimbursement
9 149(9)
Remuneration of expenses for participation in Board Meetings; . Profit Related Commission as approved by the board.
An independent director shall hold office for a term up to five consecutive years on the Board of a
company.
No independent director shall hold office for more than two consecutive terms,
Independent Directors
10 149 (10 and 11) Independent director shall be eligible for appointment after the expiration of three years of ceasing
Term
to become an independent director.
Provided that an independent director is NOT associated with the company in any other capacity during
the three years period.
Liability of Independent Any independent director shall be liable for any fraud or wrongdoing only if such an act had occurred
11 149 (12)
Directors with his knowledge, consent or connivance

Section 150 Manner of selection of independent directors and maintenance of databank

of independent directors.
Every individual with in 13 months of appointment as independent director or Every individual who
Data bank Inclusion wants to get appointed as independent director Shall apply online for inclusion of his name in the data
1 150 (1,2,3 and 4)
Details bank for a period of one year or five years or for his life-time. He Shall apply for renewal for with in 30
days after expiry period of his name being included in data bank
 Every individual whose name is so included in the data bank shall pass an online proficiency self-
assessment test with 50% marks conducted by the institute within a period of TWO years from the
date of inclusion of his name in the data bank
Exception: Individual who has served as director for 3 years or more as director on the date of inclusion
of his name in the databank need not pass the test.

Section 151 Appointment of Director Elected by Small Shareholder

A listed company may have one director elected by small shareholders.
Appointment of Director Tenure as small shareholders’ director shall not exceed a period of three consecutive years
1 151 Elected by Small A small shareholders’ director shall not be appointed in or be associated with such company in any
Shareholder other capacity, either directly or indirectly, for a period of three years from the date on which he ceases
to hold office as a small shareholders’ director in a company

Section 152 Appointment of Directors

1 152(1 and 2) Appointment of Directors Every director shall be appointed by the company in general meeting.
Director Identification No person shall be appointed as a director of a company unless he has been allotted the Director
2 152 (3 and 4)
Number Identification Number or any other number as specified by Central government
A person appointed as a director shall not act as a director unless he gives his consent to hold the office
as director using form DIR- 2
3 152(5) Consent by Director Such consent must be filed with the Registrar within thirty days of his appointment in such manner
Exception: In case of IFSC Public Company, it shall be 60 days and not 30 days within which consent
need to filed with registrar
If articles does not provide for the retirement of all directors at every annual general meeting
Rotation/Term of
At least 2/3rd of the total number of directors (except independent directors and small shareholder
Directors
4 152 (6 and 7) director) shall be such that their term shall be decided by rotation.
other than Independent
In every annual general meeting after the general meeting to appoint first directors, 1/3rd of directors
Directors
among these whose tenure is based on rotation shall retire by rotation

Section 153 Application for allotment of Director Identification Number

Application for allotment Every individual intending to be appointed as director of a company shall make an application for
1 153 of Director Identification allotment of DIN to Central Government using form DIR-3 and fees of 5000 which shall be available on
Number the website of the Ministry of Corporate Affairs
 Section 154 and 155 Allotment of DIN
The Central Government shall allot a Director Identification Number to an applicant, within one
month from the receipt of the application.
1 154 and 155 Allotment of DIN In case application is rejected,The applicant shall resubmit the same with in 15 days
The Director Identification Number so allotted under these rules is valid for the life-time
No Individual shall apply for or obtain another DIN if he/she already has one DIN

Section 156 Director to Intimate his DIN

Director to Intimate his Once the DIN is allotted the director shall inform the company within one month of the receipt of
1 156
DIN Director Identification Number

Section 157 Company to Inform Director DIN to Registrar

Every company with in 15 days of the receipt of DIN by the director shall inform the Registrar using
FORM DIR 3B
If any company fails to furnish the Director Identification Number with in 15 days then such company
shall be liable to a penalty of minimum of twenty-five thousand rupees and in case of continuing
Company to Inform
1 157 failure, with further penalty of one hundred rupees for each day subject to a maximum of one lakh
Director DIN to Registrar
rupee
Every officer of the company who is in default shall be liable to a penalty of minimum of twenty-five
thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for
each day to a maximum of one lakh rupees.

Section 158 Obligation to share DIN

Whenever any information is to be shared in relation to a director then his DIN must be shared as part
1 158 Obligation to share DIN
of that information since it is his unique identification number

Section 159 Penalty

Violation of section 152, 155, 156

Penalty: Director of the company shall be liable to a penalty up to fifty thousand rupees and If the
1 159 Penalty
default is on continuous basis then a further penalty up to to five hundred rupees for each day of
violation
 Section 160 Right of Persons Other than Retiring Directors to Stand for Directorship

Right of Persons Other

A person who is not a retiring director will be eligible for appointment to the office of a director at any
than Retiring Directors to
1 160 general meeting. If a person proposes to be a director, the intention behind such proposal along with
Stand for
the deposit of one lakh rupees, needs to be submitted.
Directorship

Section 161 Appointment of Additional, Alternate and Nominee Director

1 161(1) Appointment of Additional Director shall hold office up to the date of the next annual general meeting
Additional Director
Alternate director shall not hold office for a period longer than that permissible to the director in whose
Appointment of Alternate
2 161(2) place he has been appointed. Alternate Director shall vacate office when the director in whose place he
Director
has been appointed returns to India
Appointment of Nominee Nominee Directors are normally appointed by large shareholding institutions like Investment bank to act
3 161(3)
Director as their representative
Appointment in case of If the office of any director of the public company is vacated before his tenure expires, the resulting
4 161(4)
Vacancy casual vacancy may be filled by the Board of Directors at a meeting of the Board.

Section 162 Appointment of Directors to be Voted Individually

At a general meeting of a company, a motion for the appointment of two or more persons as directors
Appointment of Directors
1 162 of the company by a single resolution shall not be moved i.e. the voting for approval for appointment of
to be Voted Individually
2 or more directors should not be done in one go, it should be done separately for each director

Section 163 Option to Adopt Principle of Proportional Representation for Appointment of Directors
Option to Adopt Principle
of Proportional
The articles of a company may provide for the appointment (every three years) of more than two-thirds
1 163 Representation for
of the total number of the directors as per the principle of proportional representation.
Appointment of
Directors.
 Section 164 Disqualifications for appointment of director
This section states disqualification like: unsound mind, undischarged insolvent, convicted for an offences
1 164(1) involving moral turpitude, not paid call money, offences relating to related party transaction, not
obtained DIN etc.
A person who is (or has been) a director of such a company which has not filed financial statements for
Disqualifications for any continuous period of three financial years (or has failed to repay the deposits accepted by it) shall
2 164(2) appointment of director NOT be eligible for the re-appointed (or appointed in other company) for a period of five years from the
date of default.
This states that private companies may by its Articles provide some additional ground for
3 164(4)
disqualification.

Section 165 Number of directorships

A person can be a director (including alternate directorship) in maximum of 20 companies subject to
1 165(1)
that he can be a director in maximum of 10 Public companies
The members of a company may, pass a special resolution to specify any lesser number of companies in
2 165(2)
which a director of the company may act as directors.
At the time of commencement of this act if any director is violating provisions related to this then
with in one year
1. He should resign from directorship in certain companies
3 165(3 and 4) Number of directorships
2. He should intimate regarding this to the Registrar and other companies where he intends to continue
3. He should not be director anymore as soon as he dispatches the information to the concerned
company regarding his resignation
Penalty for violation of subsection (1) of 165: The person shall be liable to a penalty of two thousand
4 165(5 and 6) rupees for each day after the first day during which such contravention continues, subject to a
maximum of two lakh rupees.

Section 166 Duties of Director

Director duties are outlined in this section.
1 166 Duties of Director If a director of the company contravenes the provisions of this section such director shall be punishable
with fine which of one lakh rupees but which may extend to five lakh rupees.

Section 167 Vacation of Office of Director

If a person, functions as a director even when he knows that the office of director held by him has
Vacation of Office of
1 167 become vacant, he shall be punishable with fine of one lakh rupees which may extend to five lakh
Director
rupees.
 In case all the directors of the company vacate office for disqualification: The promoter shall become
the director or if promoter is not there then central government shall appoint required number of
directors till new directors are appointed by the company in general meeting.

Section 168 Resignation of Director

Board of the company shall inform the registrar within thirty days from the date of receipt of notice of
resignation from a director using form DIR 12
1 168(1) Procedure
The director who has resigned can himself also forward a copy of his resignation along with detailed
reasons for the resignation to the Registrar within thirty days of resignation using form DIR 11
Effective Date of The resignation of a director shall take effect from the date on which the notice is received by the
2 168(2)
Resignation company or the date if any, specified by the director in the notice, whichever is later
In case all the directors of the company resign from office for any reason: The promoter shall become
3 168(3) All Directors Resigning the director or if promoter is not there then central government shall appoint required number of
directors till new directors are appointed by the company in general meeting.

Section 169 Removal of Director

A company may, by ordinary resolution, remove a director.
Exception:
>appointed by Tribunal
> An independent director re-appointed for second term under sub-section (10) of section 149 shall be
1 169(1 and 2) removed by the company only by passing a special resolution and after giving him a reasonable
Certain Exceptions
opportunity of being heard
> Nothing contained in this sub-section(1) of section 169 shall apply where the company has availed
itself of the option given to it under section 163 to appoint not less than two thirds of the total number
of directors according to the principle of proportional representation.
A special notice shall be required to remove a director under this section, or to appoint somebody in
2 169(3 and 4) Procedure
place of a director so removed.
A vacancy created by the removal of a director under this section may be filled by the appointment of
3 169(5, 6 and 7) Filling up of Vacancy another director in his place at the meeting at which he is removed subject to that special notice was
served for the same.

Section 170 Registration of Directors and Key Management Personnel

A return containing the particulars of appointment shall be filed with the Registrar in Form DIR 12
1 170
Registration of Directors within thirty days of such appointment or change, as the case may be.
 and Key Management In case of IFSC public company or IFSC private company, the details shall be filed in 60 days instead of
Personnel 30 days.

Section 171 Member Right to Inspect

Not applicable in case of government company
If access to register(Section 170) is refused or if copy on request is not provided with in 30 days, then
1 171 Member Right to Inspect
aggrieved party can make a request to the Registrar and registrar can then direct the company to
comply immediately

Section 172 Penalty where no penalty is provided

Generic Punishment for violation of sections 149 to 171:
The company and every officer of the company who is in default shall be liable to a penalty of fifty
Penalty where no penalty thousand rupees, and in case of continuing failure, with a further penalty of five hundred rupees for
1 172
is provided each day during which such failure continues, subject to a maximum of
1. Three lakh rupees in case of a company
2. One lakh rupees in case of an officer who is in default

Companies Law - Chapter XII -

Meeting of Board of Directors and its
Powers
SI. no. Section No. Section Deals with Important Fact/Information
Section 173 – Meeting of Board
Every company shall hold the first meeting of the Board of Directors within thirty days of the date of its
incorporation.
1 173(1) Number of Meetings After the first meeting Board of directors shall hold a minimum number of four meetings every year in
such a manner that not more than one hundred and twenty days shall intervene between two
consecutive meetings of the Board
The meeting can be conducted through video conferencing, but such means shall able to record and
store the proceedings of such meetings along with date and time
Meeting through Audio- The draft minutes of the meeting shall be circulated among all the directors within fifteen days
2 173(2)
Visual Means Every director who attended the meeting shall confirm about the accuracy of recording of the
proceedings within seven days or some reasonable time as decided by the Board after receipt of the
draft minutes.
A meeting of the Board shall be called by giving a notice minimum of 7 days before meeting
Notice for Board
3 173 (3 and 4) Every officer of the company whose duty is to give notice under this section and who fails to do so shall
Meetings
be liable to a penalty of twenty-five thousand rupees.
One Person Company:
> If one Director is there, then nothing mentioned in this section 173 shall apply to them
> If more than one Director is there, they can comply with provisions of section 173 by just having at
least one meeting of the Board of Directors in each half of a calendar year and the gap between the two
Meeting of Board in meetings is not less than ninety days
4 173 (5)
Special Cases
Dormant Company, Small Company and Private Company (in case private company is startup)
> at least one meeting of the Board of Directors in each half of a calendar year and the gap between the
two meetings is not less than ninety days
In the above two cases the requirement of subsection 2, 3,4 shall not be applicable

Section 174– Quorum for Meetings of Board

The quorum for a meeting of the Board of Directors of a company shall be one-third of its total strength
or two directors, whichever is higher.
Quorum for Meetings of
1 174(1) Exception: In case of section 8 company The quorum for a meeting of the Board of Directors of a
Board
company shall be 8 members or 25 per cent, of its total strength whichever is less subject to that is
should not be less than 2
 If number of directors are reduced below Quorum due to vacancy then remaining directors will not be
able to take any decision. So, They can increase the directors to constitute a quorum by appointing
2 174(2)
alternate Directors or additional directors OR Summon a general meeting and appoint new directors in
general meeting.
Quorum for Meetings of In case number of Interested Directors >= 2/3 rd of the total strength of the Board of Directors, Then
3 174(3) Board in case of the quorum shall be minimum of 2 directors who are not interested directors i.e. minimum of 2 non-
Interested Directors interests director shall be present at the meeting.
When a board meeting of the Board could not be held because quorum was not there then unless the
4 174(4) Adjournment of Meeting
articles of the company otherwise provide, the meeting shall automatically stand adjourned

Section 175– Passing of Resolution by Circulation

No resolution shall be deemed to have been duly passed by the Board, unless the resolution has been
Passing of Resolution by
1 175 circulated in draft, together with the necessary papers to all the directors at their addresses registered
Circulation
with the company in India.

Section 176– Defects in appointment of directors not to invalidate actions taken

Defects in appointment
No act done by a person as a director shall be invalid, if it was subsequently noticed that his
1 176 of directors not to
appointment was invalid by reason of any defect or disqualification.
invalidate actions taken

Section 177– Audit Committee

Every Listed Public Company AND Non-listed Public companies as per last date of latest audited financial
statements having:
1. Paid up share capital >= 10 crores or
Who shall constitute 2. Turnover >= 100 Crore or
1 177(1)
Audit Committee 3. outstanding loans, debentures and deposits >= 50 crore
Except following Public Companies: Unlisted Joint Venture Companies, Unlisted wholly owned
subsidiary; Unlisted Dormant company
Formation of Audit The Audit Committee shall consist of a minimum of three directors with independent directors
2 177(2)
Committee forming a majority.
 This section provides for the functions that the Audit Committee has to follow.
> Omnibus approval shall be valid for a period not exceeding one financial year and shall require fresh
Functions of Audit approval after the expiry of such financial year
3 177(4)
Committee > Omnibus approval shall not be made for transactions in respect of selling or disposing of the
undertaking of the company > Omnibus approval without getting details can be given for max of 1 crore
per Transaction
Powers of Audit The Audit Committee shall have authority to investigate into any matter in relation to the items
4 177(6)
Committee specified in sub-section (4) or referred to it by the Board
Power to Vote in
The auditors of a company and the key managerial personnel shall have a right to be heard in the
5 177(7) Meetings of Audit
meetings of the Audit Committee but shall not have the right to vote.
Committee
Inclusion of Composition The Board’s report shall disclose the composition of an Audit Committee and If the Board had not
6 177(8) of Audit Committee in accepted any recommendation of the Audit Committee, the same shall be disclosed in such report along
the Board’s Report with the reasons for not accepting the recommendation
The Companies which accept deposits from the public or The Companies which have borrowed money
Vigil Mechanism (Whistle
7 177(9) from banks and public financial institutions in excess of fifty crore rupees shall establish a vigil
blower)
mechanism for directors and employees to report genuine concerns

Section 178– Nomination and Remuneration Committee and Stakeholders Relationship Committee.
Every Listed Public Company AND Non-listed Public companies as per last date of latest audited financial
statements having:
1. Paid up share capital >= 10 crores or
2. Turnover >= 100 Crore or
Formation of Nomination 3. outstanding loans, debentures and deposits >= 50 crore
1 178(1) and Remuneration
Committee There must be:
> 3 or more Non-Executive Directors
> Among non-executive directors at least ½ should be independent directors
> Chairperson can be appointed member of this committee irrespective of whether he is executive or
non-executive but he shall not chair this committee
Not applicable to government company
The Nomination and Remuneration Committee shall shall specify the manner for effective evaluation of
Functions of Nomination performance of Board, its committees and individual Directors to be carried out either by the Board, by
2 178(2,3 and 4) and Remuneration the Nomination and Remuneration Committee or by an independent external agency and review its
Committee implementation and compliance
Recommend to the Board a policy relating to the remuneration for the directors, key managerial
personnel and other employees.
 Who shall Constitute The Board of Directors of a company which consists of more than one thousand shareholders,
3 178(5) Stakeholder Relationship debenture-holders, deposit-holders and any other security holders at any time during a financial year
Committee shall constitute a Stakeholders Relationship Committee.
Function of Stakeholder The Stakeholders Relationship Committee shall consider and resolve the grievances of security
4 178(6)
Relationship Committee holders of the company.
Chairperson of various The chairperson of each of the committees constituted under this section (Nomination and
Committees to attend Remuneration Committee and Stakeholder Relationship Committee) shall attend the general meetings
5 178(7)
General Meetings of of the company. If chairman is not available, then any other member of the committee authorized by
Company him shall attend the general meetings of the company.
In case of any contravention of the provisions of section 177 and this section, The company shall be
6 178(8) Penalty liable to a penalty of five lakh rupees and Every officer of the company who is in default shall be liable
to a penalty of one lakh rupees.

Section 179– Powers of the Board

The Board of Directors of a company shall be entitled to exercise all powers the company is authorised
to exercise and do.
1 179(1 and 2)
If a regulation has been passed in general meeting, then the decisions taken by the board in the past
Powers of the Board
violating that regulation shall still be valid.
The Board of Directors of a company shall exercise the powers(mentioned in the Act) on behalf of the
2 179 (3)
company by means of resolutions passed at meetings of the Board (certain exceptions)

Section 180– Restriction on powers of Board

Restriction on powers of This section provides that the Board of Directors of a company shall exercise some powers only with the
1 180(1)
Board consent of the company by passing a special resolution.

Section 181– Company to contribute to bona fide and charitable funds, etc.
Company to contribute to The Board of Directors of a company may contribute to bona fide charitable and other funds. Provided
1 181 bona fide and charitable that prior permission of the company in general meeting shall be required if aggregate amount in a
funds, etc. financial year exceeds 5 percent of its average net profits for the 3 preceeding financial years.

Section 182– Prohibitions and Restrictions Regarding Political Contributions

Prohibitions and A company, other than a Government company and a company which has been in existence for less
1 182 Restrictions Regarding than three financial years, may contribute any amount directly or indirectly to any political party only if
Political Contributions a resolution authorizing the same is passed at a meeting of the Board of Directors
 Penalty for Violation of Section 182
1. The company shall be punishable with fine which may extend to five times the amount so
contributed and
2. Every officer of the company who is in default shall be punishable with
I. imprisonment for a term which may extend to six months and
II. with fine which may extend to five times the amount so contributed

Section 183– Contributions to National Defence Fund, etc.

Contributions to National The Board of Directors of any company may contribute to the National Defence Fund or any other Fund
1 183
Defence Fund, etc. approved by the Central Government for the purpose of national defense.

Section 184– Disclosure of Interest by Director

Director should disclose his interest in any company or association

Disclosure of Interest by
1 184(1) All such notices given by directors disclosing his interest shall kept for a period of eight years from the
Director
end of the financial year
If a contract is entered by violating the conditions then Contract can become void if company wants to
2 184(3) Cancellation of Contract
cancel the contract
Penalty for Non-
If director violates either of the conditions in subsection 184(1) and 184 (2), director shall be punishable
3 184(4) Disclosure of Interest by
with fine of rupees one lakh rupees
Director

Section 185– Loans to Directors

No company shall advance any loan to any of its directors or to any other person in whom the director is
1 185(1) Loans to Directors
interested
Loans to Interested This allows a company to give loans to any person/entity in whom any of the directors are interested in
2 185(2)
Parties with Directors subject to certain conditions.
Loan can be given to a managing or whole-time director (whole-time director” includes a director in the
whole-time employment of the company) when
3 185(3) Exceptions
1. That is being given as part of scheme introduced for the employees of the company
2. As part of any scheme passed by special resolution
Punishment in case To the Company: Fine which shall not be less than five lakh rupees, but which may extend to twenty-
4 185(4)
violation of 185 five lakh rupees
 To the Officer of the company who is in default
I. Imprisonment for a term which may extend to six months or
II. with fine which shall not be less than five lakh rupees, but which may extend to twenty-five lakh
rupees
To the Director the director or the other person to whom any loan is advanced or guarantee or security
is given
I. Imprisonment which may extend to six months or
II. with fine which shall not be less than five lakh rupees, but which may extend to twenty-five lakh
rupees, or both

Section 186– Loans and Investment by Companies

1 186(1) A company shall not make investment through more than two layers of investment companies
No company shall directly or indirectly —
(a) give any loan to any person or other body corporate ;
Loans and Investment by (b) give any guarantee or provide security in connection with a loan to any other body corporate or
2 186 (2 and 3) Companies person; and
(c) acquire by way of subscription, purchase or otherwise, the securities of any other body corporate,
exceeding sixty per cent. of its paid-up share capital , free reserves and securities premium account or
one hundred per cent. of its free reserves and securities premium account, whichever is more.
Rate at which Loans or
No loan shall be given under this section at a rate of interest lower than the prevailing yield of that
3 186(7) Investments are
number of years as the duration of the loan
transacted
Every company giving loan or giving a guarantee or providing security or making an investment under
Maintaining Register for this section shall keep a register
4 186 (9 and 10) Loans and Investment by
Companies The entries in the register shall be made chronologically and within seven days of doing such
transactions
Certain Exceptions for
This provides Loan or guarantee or security provided, or investment made by some entities shall be
5 186(11) Loans and Investment by
exempted AND Any investment done by some entities shall also be exempted
Companies
To the Company: Fine which shall not be less than twenty-five thousand rupees, but which may extend
6 186(12) Punishment
to five lakh rupees
 To the officer who is in default
I. Imprisonment for a term which may extend to two years and
II. with fine which shall not be less than twenty-five thousand rupees but which may extend to one
lakh rupees.

Section 187– Investments of Company to be Held in its Own Name

Investments of Company
All investments made or held by a company in any property, security or other asset shall be made and
to be Held in its Own
held by it in its own name.
Name
1 187
To Company: the company shall be liable to a penalty of five lakh rupees
Punishment To Officer of Company: every officer of the company who is in default shall be liable to a penalty of fifty
thousand rupees.

Section 188– Related Party Transactions

Limits for Related Party
Transactions Requiring
1 188(1) Refer Concept Notes
Boards Approval or
Shareholder Approval
Related Party
Transactions to be Every contract or arrangement entered into under sub-section (1) shall be referred to in the Board’s
2 188(2)
included in Board’s report to the shareholders along with the justification for entering into such contract or arrangement.
Report
Related Party If any related party contract is entered into by a director or any employee without obtaining the consent
Transactions by Directors of the Board or approval by a resolution in the general meeting as per requirement under sub-section
3 188(3 and 4)
if not done through (1) then it can be ratified by the board or as the case may be, by the shareholders at a meeting within
Proper channel three months from the date on which such contract or arrangement was entered
A director or employee who had entered or authorised the contract or arrangement in violation of the
Punishment for Violation
provisions of this section
4 188(5) of Related party
in case of listed company, be liable to a penalty of twenty-five lakh rupees
Transactions
In case of any other company, be liable to a penalty of five lakh rupees

Section 189– Register of Contracts or Arrangements in Which Directors are Interested

1 189 Register of Contracts or Company shall maintain register(s) using MBP 4 for details of transactions exceeding 5 lakh in a year
 Arrangements in Which Every director or key managerial personnel shall, within a period of thirty days of his appointment, or
Directors are Interested relinquishment of his office must disclose to the company relating to his concern or interest in the other
associations which are required to be included in the register
Penalty:
Director who fails to comply with the provisions of this section and the rules made thereunder shall be
liable to a penalty of twenty-five thousand rupees

Section 190 – Contract of Employment with Managing or Whole-Time Directors

Every company shall keep at its registered office a copy of the contract; and where such a contract is
Contract of Employment not in writing, a written memorandum setting out its terms.
1 190 with Managing or Whole- Penalty:
Time Directors To Company: penalty of twenty-five thousand rupees for each default
To Officer in default: penalty of five thousand rupees for each default

Section 191 – Payment to Director for Loss of Office, etc., in Connection with Transfer of
Undertaking, Property or Shares
Payment to Director for The payment made to the director shall not exceed the remuneration which he would have earned if he
Loss of Office, etc., in had been in office for the remainder of his term or for three years, whichever is shorter
1 191 Connection with Transfer
of Undertaking, Property If a director of the company makes any default in complying with the provisions of this section, such
or Shares director shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees.

Section 192 – Restriction on Non-cash Transactions Involving Directors

Restriction on Non-cash No company shall enter into an arrangement by which a director of the company (or its holding,
1 192 Transactions Involving subsidiary or associate company or a person connected with him) acquires assets for consideration
Directors other than cash, from the company. However, board meeting may allow such transactions.

Section 193 – Contract by One Person Company

Contract by One Person The company shall inform the Registrar about every contract entered into within a period of fifteen
1 193
Company days of the date of approval by the Board of Directors.

Section 194 – Prohibition on Forward Dealings in Securities of Company by Director

Prohibition on Forward
1 194 Dealings in Securities of SCRAPPED NOW
Company by Director
 Section 195 – Prohibition on Insider Trading of Securities
Prohibition on Insider
1 195 SCRAPPED NOW
Trading of Securities

Companies Law - Chapter XXVII NCLT

and NCLAT
SI. no. Section No. Section Deals with Important Fact/Information
Section 408 – Constitution of National Company Law Tribunal.
The Central Government shall constitute a Tribunal to be known as the National Company Law Tribunal
Constitution of National consisting of a President and such number of Judicial and Technical members, as the Central
1 408
Company Law Tribunal Government may deem necessary to exercise and discharge powers and functions conferred under this
Act.

Section 409 – Qualification of Members and President of NCLT

Judicial Member shall be a person who is or has been a judge of a High Court; or has been, a District
Judge for at least five years; or has been an advocate of a court for 10 years or more.
Qualification of Members Technical Member shall be a person who has been a member of the Indian Corporate Law Service
1 409 or Indian Legal Service , for at least fifteen years. Or has been in practice as chartered accountant or cost
and President of NCLT
accountant or company secretary for atleast fifteen years or who has professional experience of not less
than fifteen years, or has been, for at least five years, a presiding officer of a Labour Court, Tribunal or
National Tribunal constituted under the Industrial Disputes Act, 1947.
 Section 410 – Constitution of Appellate Tribunal also known as NCLAT
Constitution of Appellate The Central Government shall constitute an Appellate Tribunal to be known as the National Company
1 410 Tribunal also known as Law Appellate Tribunal consisting of a chairperson and Judicial and Technical Members, for hearing
NCLAT appeals against the orders of the Tribunal.

Section 411 – Qualification of Members of NCLAT

Chairperson shall be a person who is or has been a Judge of the Supreme Court or the Chief Justice of a
High Court
Qualification of Members Judicial Member must be the Judge of a High Court or is a Judicial Member of the Tribunal for five years.
1 411
of NCLAT
Technical Member must have Professional experience of not less than twenty-five years in industrial
finance, industrial management, industrial reconstruction, investment and accountancy.

Section 412 – Selection of Members of Tribunal and Appellate Tribunal

Selection of Members of
The Members of the Tribunal and the Technical Members of the Appellate Tribunal shall be
1 412 Tribunal and Appellate
appointed by Govt. of India after consultation with the Chief Justice of India.
Tribunal

Section 413 – Term of office of President, chairperson and other Members

The President and every other Member of the Tribunal shall hold office for a term of five years and
shall be eligible for re-appointment for another term of five years
NCLT:
President can hold office till age of 67 years
Term of office of Other Members can hold office till Age of 65 Years
1 413 President, chairperson For president and Member the min age to be appointed is 50 years
and other Members The chairperson or a Member of the Appellate Tribunal shall hold office for a term of five years
and shall be eligible for re-appointment for another term of five years
NCLAT :
Chairperson can hold office till age of 70 years
Other Members can hold office till Age of 67 Years
For Chairperson and Member the min age to be appointed is 50 years
 Section 414 – Salaries and Allowances of Members
In case of NCLAT
1. Chairperson – 90000 + other Allowances
Salaries and Allowances
1 414 2. Judicial and Technical Member – 80000 + other allowances
of Members
In case of NCLT
There is no mention of salary and allowances

Section 415 –Acting President of NCLT and Chairperson of NCLAT

Acting President of NCLT
During occurrence of any vacancy in the office of the President or the Chairperson, the senior-most
1 415 and Chairperson of
Member shall act as the President or the Chairperson
NCLAT

Section 416 –Resignation of Members

The President, the Chairperson or any Member may resign from his office. Provided that the President,
the Chairperson, or the Member shall continue to hold office until the expiry of three months from the
1 416 Resignation of Members
date of receipt of such notice by the Central Government or until a person duly appointed as his,
whichever is earliest.

Section 417 Removal of Members

The Central Government may, after consultation with the Chief Justice of India, remove from office
1 417 Resignation of Members
the President, Chairperson or any Member.

Section 418 Staff of NCLT and NCLAT

The Central Government in consultation with the Tribunal and the Appellate Tribunal must provide
1 418 Staff of NCLT and NCLAT them with such officers and other employees as may be necessary for the exercise of the powers and
discharge of the functions of the Tribunal and the Appellate Tribunal.

Section 419 Benches of Tribunal

1 419 Benches of Tribunal Each bench shall have at least 2 members (one judicial and one technical).

Section 420 Orders of Tribunal

The Tribunal may, at any time within two years from the date of the order, amend any order passed
1 420 Orders of Tribunal
by it, if the mistake is brought to its notice by the parties.
 Section 421 Appeal to NCLAT Against orders of Tribunal
Appeal to NCLAT Against Every appeal shall be filed within a period of forty-five days (with additional forty-five days under
1 421
orders of Tribunal exception) from the date on which a copy of the order of the Tribunal is made available to the person.

Section 422 Expeditious Disposal by NCLT and NCLAT

Expeditious Disposal by Every application or petition presented before the Tribunal, and every appeal filed before the Appellate
1 422
NCLT and NCLAT Tribunal shall be disposed within three months (which may be given an extention of 90 more days).

Section 423 Appeal to Supreme Court

Any person aggrieved by any order of the Appellate Tribunal may file an appeal to the Supreme Court
1 423 Appeal to Supreme Court within sixty days(with additional sixty days under exception) from the date of receipt of the order of
the Appellate Tribunal sixty days.

Section 424 Procedure Before Tribunal and Appellate Tribunal

Procedure Before
Tribunal shall not be bound by the procedure laid down in the Code of Civil Procedure, 1908 but it shall
1 424 Tribunal and Appellate
be guided by the principles of natural justice and it can make its own procedure to deal with cases.
Tribunal

Section 425 Power to Punish for Contempt

Power to Punish for Tribunal and the Appellate Tribunal shall have same powers and authority as with High court in
1 425
Contempt dealing with contempt.

Section 426 Delegation of Powers

The tribunal or Appellate Tribunal can direct or authorize any of its offices or employees to inquire into
1 426 Delegation of Powers
any matter concerned with the proceeding.

Section 427 President, Members, Officers, etc., to be Public Servants

President, Members,
1 427 Officers, etc., to be Public All the clauses applicable to public servants shall be applicable to them
Servants

Section 428 Protection of Action Taken in Good Faith

Protection of Action No Legal action shall be taken against any member or employee of tribunal for any damage caused by
1 428
Taken in Good Faith the action taken by them in good faith under the law.
 Section 429 Power to seek Assistance of Metropolitan Magistrate
The Tribunal may request the assistance from Chief Metropolitan Magistrate, Chief Judicial Magistrate
Power to seek Assistance
or the District Collector, in any proceeding relating to a sick company or winding up of any other
1 429 of Metropolitan
company, in order to take into custody or under its control all property, books of account or other
Magistrate
documents.

Section 430 Civil Court not to have any Jurisdiction

Civil Court not to have No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which
1 430
any Jurisdiction the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act.

Section 431 Vacancy in Tribunal or Appellate Tribunal Not to Invalidate Acts or Proceedings
Vacancy in Tribunal or No act or proceeding of the Tribunal or the Appellate Tribunal shall be questioned/invalid merely on the
1 431 Appellate Tribunal Not to ground of the existence of any vacancy or defect in the constitution of the Tribunal or the Appellate
Invalidate Acts or Tribunal.
Proceedings

Section 432 Right to legal representation

A party to case being heard before the Tribunal or the Appellate Tribunal can appear in person or can
Right to legal
1 432 authorize one or more chartered accountants or company secretaries or cost accountants or legal
representation
practitioners or any other person to present his case.

Section 434 Transfer of Certain Pending Proceedings

Transfer of Certain
1 434 This section provides of certain pending proceedings which will be transferred to the tribunal.
Pending Proceedings
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