BASICS AND INCORPORATION

Min number of Members

 7 in public Co.
 2 in Pvt. Co.
 Only 1 in OPC

Types of Companies
 Co. Limited by shares
 Co. limited by guarantee
 Unlimited Co.

Rules Regarding OPC

 Requires 1 member 1 nominee
 May or May not be small in nature
 Member and Nominee must be Indian Citizen
 May or May not be Indian Resident
 Resident = Stay at India 120 or more days
 1 person can be member in only 1 OPC
 1 person can be nominee in only 1 OPC
 Same person can be member in 1 OPC and nominee in another OPC.
 If same person happens to be member, in 2 OPC, decide in 180 days.
 No financial business.
 Can not be charitable in nature

Small Company
 Must be Private in nature
 Max Paid Up share capital= 4 crore
 Max Turnover= 40 Crore
 Should not be: Holding, Subsidiary, Charitable and Set up by a separate act

Charitable Company
 Can have business as well as profits
 Cannot distribute profits
 License from CG needed to operate
 Can be merged with another charitable company only.
 All reserves and past profits cannot be distributed even upon merger or
winding up, it must be either spent on objects or donated.

Members go Below Minimum

 Increase back in 6 months
 Else, all members become personally liable.
Clauses of MOA
 Name
 Objects
 Registered office For all companies
 Liability
 Capital
 Nominee clause Only for OPC

Format of MOA
 Table A to E

Format of AOA
 TABLE F to J

Entrenchment
 Either do at the time of incorporation OR
 If done later, Shareholders’ approval (100% in Pvt, 75% in Public)

Incorporation
 Spice + (simplified Performa of incorporating Max 3 Directors
companies electronically)
 Spice More than 3 directors

CIN
 21 digits
 Alphanumeric
 Structure is as follows:
First digit : U/L
5 digits : Industry Code
2 digits : State Code
4 digits : Year of Incorporation
3 digits : PTC / PLC / OPC etc
6 digits : Registration No.

Commencement of Business
 Declaration in INC – 20A in 180 days from COI
 Declaration of Registered office

Registered office
 Must be taken in 30 days from COI

Name Change
 Both old and new names to be displayed everywhere for 2 years.
  Name change application in RUN form

Rectification of Name
 Complaints allowed only in first 3 years of incorporation
 CG can order rectification without limitation period
 Name to be rectified in 3 months with or without complaint.

Subsidiary Company Not to Hold Shares in Holding Company

 Generally prohibited
 Only 3 exceptions
a) Representative of deceased member
b) As trustee
c) Holds shares even before becoming subsidiary

Alteration in MOA / AOA

 SR needed

Doctrines
 Constructive notice
 Indoor management
 Corporate veil (Alter Ego)
 Ultra Vires

NIDHI
 Must be public company
 Min 200 members in 1st year
 Min PSC – Rs. 10 lakhs
 Preference shares prohibited
 No other object than main business
 Net owned fund min Rs. 20 lakhs
 Net owned fund to deposit ratio max 1: 20
 FD min 6 months max 60 months
 RD min 12 months max 60 months
 No interest on SB Account beyond Rs. 1 lakh
 Loan only to members
 Director tenure 10 years with cooling off 2 years
 Max DVD 25%
 Prohibited activities: Chit fund, Hire Purchase, Lease Finance, Insurance,
Acquisition of Securities, Preference shares, Debentures, Current a/c, deposit
from non-members, membership to non-individual, advertisement for deposits,
pay brokerage for deposits.
 Locker service can be given but max income 20% of total income.
 Max 3 branches in a district, that too after 3 years consistent profits
Producer Company
 Incorporated by
a) 10 or more individual primary producer
b) 2 or more PP institutions
c) 10 or more individual or institutions as combination
 Min directors 5
 Max director 15 (it can be any no for first 1 year in case of conversion)
 Quorum of GM (1/4th of total members)
 One member one vote
 Quorum of BM ( 1/3rd of total directors or 3 whichever is higher)
 Mutual assistance principles to be followed
 DEPOSITS
Meaning
 Deposit means money received by company.
 Does not include 17 amounts specified by RBI.
 Simply saying, money received and liable to be repaid.

Deposit from members

 Allowed for every company.

Deposit from public

 Allowed only for company eligible u/s 76 after passing SR
 Credit rating mandatory
 Must be secured

Eligible company
 Public company with net worth of Rs. 100 Cr. Or more or
 Public company with turnover of Rs. 500 crore or more.

Secured and unsecured deposits

 Deposits from members may be unsecured.
 Deposits from public always secured, charge must be created in 30 days of
receiving deposits.

Repayment period
 Min 6 months
 Max 36 months
 Min 3 months upto 10% of PSC+FR+Sec Pre.

Joint Depositors
 Max 3

Max Limit of Deposits

 Public company upto 35% of of PSC+FR+Sec Pre.
 Eligible company upto 10% of PSC+FR+Sec Pre. from members and 25%
from public
 Govt. company upto 35% of of PSC+FR+Sec Pre.
 Private company upto 100% of PSC+FR+Sec Pre.
 Exempted Private Company, No limit
 Exempted Private Company means:
a. Start Up Company for first 5 years.
b. Any other private company which fulfills both the following 2 conditions:
1. Should not be associate and subsidiary of other company
 2. Borrowings should be less than twice of paid up share capital or Rs. 50
crore, whichever is less.

Advertisement or Circular
 DPT – 1
 To be advertised after 30 days gap of ROC filing
 Valid for 6 months.
 DIVIDEND
Meaning
 Dividend includes interim dividend.

Final Dividend
 Dividend declared at AGM

Interim Dividend
 Dividend declared anytime between 2 AGM.

Procedure
 Recommended by BOD, at BM
 Approved by shareholders at AGM

Increase / Decrease
 Shareholders can decrease but cannot increase rate of dividend

Sources of Dividend
 Current year profit
 Past year profit / reserves
 Govt. Grant

Dividend from past year profits

 Possible only if following 3 conditions are satisfied:-
o Max dividend ≤ last 3 years average dividend
o Max withdrawal ≤ 10% of PSC + FR
o Min Reserve remaining ≥ 15% of PSC.

Dividend payable
 Transfer to separate account in 5 days.

Payment Period
 30 days from declaration

Unpaid dividend account

 Unpaid amount to transferred to unpaid dividend account in 7 days post 30
days.

Transfer to IEPF
 After 7 years money from unpaid dividend account goes to IEPF.

Dividend in kind
 Not allowed
Revocation of dividend
 Not possible
 Allowed only in war like situations.

Interim Dividend
 Only when company has surplus profit.
 Else restricted to average of last 3 years dividend.

Late payment
 18% simple interest

Non payment
 18% interest + penalty min Rs. 1000 per day per default + imprisonment max
2 years.

No punishment cases
1. Shareholder’s specific instruction cannot be complied with and it has been
communicated.
2. Disputed ownership
3. Operation of law
4. Adjusted with arrears
5. Uncontrollable reasons.

Pending Registration of transfer

 Dividend to be paid to registered shareholder.
 Dividend to be kept in abeyance if transfer papers already filed.
ACCOUNTS AUDIT
Books of Accounts
 Applicable on every company
 Accrual basis
 Double entry system of book keeping
 Maintained at R.O.
 As per Financial Year
 NO other system allowed.
 Shifting by informing ROC in 7 days.
 Branch to maintain its own account.
 Summary to be sent to Registered Office periodically.
 May be physical or electronic
 Audit Trail compulsory for electronic accounts
 Can be inspected by director only and only in business hours
 No inspection of foreign branch.
 Preservation period 8 years.
 Extended preservation period in case of investigation cases.
 Person liable for non-compliance: -
o MD
o WTD (Finance)
o CFO
o Any other person authorized by BOD.

Electronic Accounts
1. Accessible in India
2. Audit Trail Software
3. Maintenance in Original Format
4. Original Format of Branch Records
5. Legible Display
6. Proper Storage, Retrieval, Display or Printout
7. Backup Server in India
8. Daily Backup
9. ROC Filing of Outsourcing Details

Financial Statements
 As per schedule III.
 Presented to shareholders at AGM.
 Consolidation compulsory.
 Non-compliance with AS to be disclosed.
 CG can provide exemption.

Periodical Financial results

 As and when ordered by CG.
Reopening of Account on Court or Tribunal Order
 Reopening allowed for last 8 F.Y.
 Upon application from Central Government, the Income-tax authorities, the
Securities and Exchange Board, any other statutory regulatory body or
authority
 If company is under investigation, period will increase.

Voluntary Revision of FS / Board Report

 Allowed only for fast 3 F.Y.
 Only after NOC from authorities
 And approval of NCLT
 Revision only once in 1 FY
 Detailed reasons to be given in Board Report

NFRA
 1 Chairperson + 15 members (1 must be full time)
 3 functions
o Recommendation to CG for accounting and auditing standards
o Monitor and enforce compliance of accounting and auditing standards.
o Oversee quality of service of professionals.
 It has all powers of civil court.
 Part Time members:
(i) one member to represent the MCA, minimum rank of Joint Secretary, ex-
officio;
(ii) one member to represent the CAG, minimum rank of Accountant General
or Principal Director, ex-officio;
(iii) one member to represent the RBI, minimum rank of Executive Director,
ex-officio;
(iv) one member to represent the SEBI, minimum rank of Executive Director,
ex officio;
(v) President, Institute of Chartered Accountants of India, ex-officio;
(vi) Chairperson, Accounting Standards Board, Institute of Chartered
Accountants of India, ex-officio;
(vii) Chairperson, Auditing and Assurance Standards Board, Institute of
Chartered Accountants of India, ex-officio; and
(viii) two experts from the field of accountancy, auditing, finance or law.
 Selection Committee:
(a) Cabinet Secretary-Chairperson;
(b) Additional Principal Secretary to the Prime Minister – Member;
(c) Secretary – Ministry of Corporate Affairs– Member;
(d) Chairperson, National Financial Reporting Authority (for selection of full-
time members) – Member;
 (e) three experts of repute from a panel of experts in the field of accountancy,
auditing, finance, law (to be nominated by the Central Government) –
Members
 Full time members not to get associated with Audit Firm/Consultancy Firm
[+2Years]
 Appeal against NFRA in NCLAT

Signature as F/S
 Chairperson
 2 directors out of which one shall be MD.
 Also be CEO, CFO and CS.

DRS Directors Responsibility Statement.

 Following 6 declarations.
1. AS have been followed
2. Consistent application of accounting policies.
3. Proper and sufficient care has been taken for maintenance.
4. Going concern in annual accounts
5. Internal financial control to be adequate and effective.
6. Compliance of applicable laws.

CSR
 Applies only if any of the following 3 conditions apply:
a) Net worth ≥ Rs. 500 Cr.
b) Turnover ≥ Rs. 1000 Cr.
c) Net profit ≥ Rs. 5 Cr.
 CSR committee should have min 3 directors out of which 1 should be ID.
 No CSR Committee if CSR spend does not cross 50 Lakhs
 Spend on CSR at least 2% of avg net profit of last 3 FY.
 Excess spending can be set off in future for next 3 years.
 Max administrative overhead 5% of CSR expense.
 CSR spending as per schedule VII.
 CSR ongoing project period 3 years.
 Unspent CSR should be transferred in 30 days after 3 years.
 For others, unspent shall be transferred within 6 months.
 One off event is not CSR.
 Preference to local areas.
 Spending outside India is not CSR.
 Earning outside India is not considered in checking turnover for CSR.
 CSR can be implemented by itself or in collaboration with other company or
through a 3-year-old existing NGO
 CSR-1 registration form mandatory
 CSR Report shall be part of Board Report
  Impact assessment mandatory of total CSR spend is 10 cr in last 3 FY, or more
for projects involving 1 cr or more and which are 1 year old.
 Expense in impact assessment shall be max 2% of CSR expense or 50 Lakh,
whichever is higher.

Internal Audit
 Applies only on following companies
1. Listed Co.
2. Public Co. with PSC ≥ Rs. 50 Cr.
3. Public Co. with Turnover ≥ Rs. 200 Cr.
4. Public Co. with O/S ≥ Rs. 100 Cr.
5. Public Co. with deposit ≥ Rs. 25 Cr.
6. Pvt. Co. with T.O ≥ Rs. 200 Cr.
7. Pvt. Co. with O/S ≥ Rs. 100 Cr.
 To be done by anyone, May be CA or CMA

First Auditor
 By BOD within 30 days of COI
 Else by EGM, in next 90 days,
 Remains in office, upto conclusion of first AGM.

Auditor Certificate
1. Eligible for appointment
2. As per the specified term
3. Within the limits
4. Pending proceedings are correctly disclosed

First Auditor of Govt. Co.

 By CAG of India in 60 days from COI.
 Else by BOD, in next 30 days.
 Else by EGM, in next 60 days.

Standard Term of all Auditor

 5 years
 Appointed at first AGM and retirement at conclusion of 6th AGM.

Subsequent Auditor of Govt. Co

 Term 1 year
 Comes in 180 days from commencement of F.Y.
 Works till next AGM.

Rotation
 Individual CA = 5 + 5 –
 Partnership = 5 + 5 + 5 -
Rotation Applies Only On Following Co.
 Listed Co.
 Public Co. with PSC ≥ Rs. 10 Cr.
 Private with PSC ≥ Rs. 50 Cr.
 Any Co. with borrowings and public deposits ≥ Rs. 50 Cr. Except OPC and
small Co.

Casual Vacancy
 To be filled by BOD in 30 days.
 Ratification by shareholders in 3 months in case of resignation.
 Serves only up to next AGM

Disqualifications of being Auditor

 Officer or employee of Co.
 Partner or employee of officer / employee.
 Body corporate other than LLP.
 Person holding investment in Co. but relative can hold inv upto Rs. 100000
 Person indebted to Co. more than Rs. 5 lakhs
 Person given guarantee or security beyond Rs. 1 lakh.
 Person who is relative of director / KMP
 Person convicted for fraud and 10 years are not over.
 Person providing services u/s 144
 Person having business relationship
 Ceiling limit exceeded.

Ceiling Limit
 20 audits per partner
 Exceptions
a) OPC
b) Dormant Co.
c) Small Co.
d) Private Co. with PSC < 100 Cr.

Prohibited Services u/s 144

 Accounting and book keeping.
 Internal audit
 Design and implementation of financial information system
 Actuarial services
 Investment advisory
 Investment banking
 Rendering of outsource financial services
 Management services
  Any other kind as may be prescribed.

Auditor to Attend GM
 Compulsory
 Leave to be granted by Co.
 If leave not granted, any other practicing CA can attend on his behalf

Cost Audit
 Compulsory only if company falls in prescribed category.
 Regulated sector (6)
o Overall turnover ≥ Rs. 50 Cr.
o Individual turnover ≥ Rs. 25 Cr.
 Non regulated sector (33)
o Overall turnover ≥ Rs. 100 Cr.
o Individual turnover ≥ Rs. 35 Cr.
 Exemptions
o Operating from SEZ
o Revenue from export > 75%
o Generation of electricity for captive consumption.
 Comes in 180 days from commencement of financial year.
 Report in 180 days from end of financial year.

Resignation
 To be addressed to BOD
 ROC filing in 30 days.

Removal
 BR-30 Days-ADT-2-60 Days-SR
 Auditor has right to speak to save himself.
 If removed by NCLT, no appointment possible in any Co. for next 5 years.

Fraud Reporting
 Only if amount involved 1 Cr or more.
 Inform to BOD in 2 days of knowledge
 BOD to reply in 45 days
 CG reporting in next 15 days (ADT-4)
 DIRECTORS
Duties of Director
 Work as per articles
 Act in good faith
 Work with reasonable care
 No conflict of interest
 No undue advantage
 No assigning of office.

Powers of Director
 13 powers are absolute
 4 powers are restricted
 Out of 13, only 3 can be delegated
 Rest all must be done by BOD

Board Meeting
 First BM within 30 days of COI
 Min 4 BM every year
 Max gap between 2 BM – 120 days
 For OPC, small, Dormant Co. Min 2 BM with a min gap of 90 days.
 For charitable company, one BM every 6 calendar months
 No rules of gap in charitable company.

Participation at Board Meeting

 In person or video conferencing
 Proxy not allowed

Matters not allowed for Video Conferencing

 All matters allowed through Video Conferencing

Notice of Board Meeting

 7 days in advance
 Given to every director
 Meeting at shorter notice allowed with presence of ID.

Date Time Venue of Board Meeting

 Decided by BOD
 No restrictions

Quorum
 1/3rd of total or 2 whichever is true
 For charitable Co, ¼ or 8 whichever is less
 Required throughout the meeting
  Interested director not to be counted for quorum in PUBLIC Company.
 He can be counted in Private Company

Resolution by Circulation
 If 1/3rd directors demand, circulation not to be done.

Charitable Contribution
 Voluntarily done by BOD
 Max 5% of last 3-year avg net profit.
 Beyond, OR needed

Political Contribution
 Voluntarily done by BOD
 No limits
 Prohibited for Govt. company and less than 3 years old company.

Defense Contribution
 Voluntarily done by BOD

Additional Director
 Appointed by BOD
 Retires at next AGM or due date whichever is earlier.
 Should not be a person who lost at GM.

Aletrnate Director
 Appointed by BOD when original director is away from India for min 3
months.
 Retires upon arrival of original director back to India.

Nominee Director
 Representative of external agency.
 Equally responsible

Casual Vacancy
 Filled by BOD
 Ratified by shareholders

Number of Directorship
 One person max 20 companies
 Out of 20 companies, public companies max 10.
 Charitable companies & Dormant company not counted in ceiling limit
Right of Person Other Than Retiring Director to Context.
 Rs. 1 lakh security deposit
 Refunded if candidate secures min 25% votes in his favour

Disqualifications for Appointment of Director.

 Person applied for insolvency and application is pending
 Unpaid calls for 6 months
 Disqualified by court / tribunal
 Convicted for 6 months or more + 5 years.
 Convicted for 7 years or more + lifetime

Special Disqualifications
 Non filing of annual account or annual return for 3 years OR Nonpayment of
D / D / D / I for 1 year.
 Disqualification for 5 years
 No need to leave existing company

Automatic Vacation
 Absent in all Board Meeting for consecutive 12 months
 Removal
 Noncompliance of sec 184 or 188 or both.
 Employee director lost employment.

Small Shareholder Director

 Only in listed Co.
 Only if demanded
 Demand from 1000 SS or 1/10th SS, whichever is less
 Tenure max 3 years.
 Same individual as SSD in max 2 companies
 These 2 companies should not be in competition or conflict with each other.
 SSD deemed to be ID.
 No reappointment allowed as SSD or in any other post
 Cooling off period for other posts 3 years.
 SS = Shareholder ≤ Rs. 20,000.

Resignation
 Company shall file DIR – 12
 Director may file DIR – 11

Removal
 By shareholders at GM
 OR but for ID (who has been reappointed) SR.
Non-Cash Transactions
 Prohibited

Contract by OPC
 Must be communicated to ROC

Min Directors
 OPC – 1
 Pvt. Co – 2
 Public Co. – 3

Max Directors
 15 without SR
 Beyond, SR needed.

Woman Director
 Listed Co.
 Public Co. with
o PSC 100 Cr. Or More
o Turnover 300 Cr. Or more

Resident Director
 Compulsory in all companies
 Stay in India for Min 182 days.

Only Individual to Become Director

 Non individual can become shareholder but cannot become director.

First Director
 To be specified in AOA

Subsequent Director
 To be appointed by shareholder by OR

Annual Retirement
 1/3rd of 2/3rd of total, where Total does not include ID

DIN
 DIR – 3 for new
 DIR – 6 for change
 One person only 1 DIN
Audit Committee
 Min 3 directors
 Majority of ID
 Applicability
o Listed Co.
o Public Co. with PSC of Rs. 10 Cr. Or more
o Public Co. with turnover of Rs. 100 Cr. Or more
o Public Co. with O/S of Rs. 50 Cr. Or more.

NRC
 Nomination and remuneration committee
 Applicability; same as audit committee.

SRC
 Stakeholder grievances committee
 Needed if company has 1000 or more shareholders, debenture holders,
depositors and other security holders.

Interested Director
 Not to participate in BM in case of Public Company
 Can participate in case of Private Company
 To disclose his interest
 Else, liable to leave office + penalty

Loan to Director
 Prohibited
 Allowed as a customer with Arm length price.

Loan and Investment by One Company in another Company

 SR needed after limit is crossed.
 Limit
a) 100% of FR + Sec Pre
or
b) 60% of PSC + FR + Sec Pre
Whichever is Higher

Related Party Transaction

 Ordinary Resolution
 Approval of audit committee (only if limit crosses)

Secretarial Audit
 Applicability
a) Listed Company
b) Public company with PSC of Rs. 50 Cr. Or more
 c) Public company with turnover of Rs. 250 Cr. Or more
d) Any company having outstanding loans/borrowings from Banks or PFI
for 100 crores or more.
 Performed by PCS only.

Requirement of whole time CS

 Any Co. with PSC of Rs. 10 Cr. Or more

Appointment of KMP
 Listed Co.
 Public Co. with PSC of Rs. 10 Cr. Or more

Appointment of MD / WTD / Mgr

 MD and Manager are substitute of each other
 Tenure 5 years
 Min age 21 years
 Max age 70 years otherwise SR or OR + CG approval
 Should never have been insolvent
 Not have suspended payments to creditors and No compromise
 No fine of 1000 or more and No jail of any period under specified 19 acts.
 Should be Indian Resident

Managerial Remuneration
 Single WTD – 5%
 Multiple WTD – 10%
 Non executive with WTD – 1%
 Non executive w/o WTD – 3%
 Overall max 11%
 Increase allowed after OR
 Sitting fee extra max 1 lakh per director per meeting
 Professional charges to be paid extra
 Remuneration also possible to all directors including ID, in case of no profit or
low profit on the basis of effective capital.
Computation for law of office
 Equivalent to salary of 3 years or remaining tenure, whichever is less

Recovery of Managerial Remuneration

 Can be done even after retirement.
 INSPECTION INQUIRY INVESTIGAION
Power of ROC
 To call for information and explanation.
 Officers already left will also have to answer.

Person doing inspection

 Has all the powers of civil court.
 Will make report to ROC and CG.

Search and seizure

 It needs order of special court.
 Max period 180 days under inspection and no limitation under investigation.
 Company can take copies before seizure.

Investigation
 To be ordered by CG
 Grounds of order
o Recommendations of ROC
o Passing of BR
o Public interest
o Direction of NCLT / NCLAT.

SFIO
 Set up by CG on 21-7-2015
 Headed by director, min rank joint secretary.
 Investigations are to be handed over only by CG.
 Arrest only by assistant director or officer above.
 Arrest must be authorized by CG.
 Will furnish interim and final report.
 Investigation report works as charge sheet.

Investigation upon complaints

 100 members or
 1/10th shareholders (Co. with shares) or
 1/5th members (Co. with guarantee)

Security deposit with complaint

 Turnover upto 50 Cr. – Rs. 10000
 Turnover upto 200 Cr. – Rs. 15000
 Turnover more than 200 Cr. – Rs. 25000

Only individual can be inspector.

Investigation into ownership
 To find out who are the real beneficial owners of company and not revealing
their identities.

Disobey to Inspector
 Vacation of office
 Disqualification from all companies
 Fine 25000 – 100000
 Imprisonment upto 1 year.

International co-operation
 To be routed through central government and courts.

Protection of employees during investigation

 Termination & demotion needs NCLT approval
 Can go ahead, if no response in 30 days.

Investigation of related companies

 Can be ordered by CG.

Freezing of assets
 During inspection and investigation
 Transactions need NCLT approval.

Imposition of securities
 Can be done by NCLT
 Max period 3 years.

Expenses of investigations
 To be recovered from guilty.
 First paid by CG.

Voluntary winding up
 Not to stop investigation proceedings.

Legal advisors and bankers

 Not to disclose certain privileged information.

Foreign company
 Can also be investigated.
 AMALGAMATION COMPROMISES ARRANGEMENT

Compromise
 Before dispute

Arrangement
 After dispute

Compromise & arrangement

 Can be demanded by company, members, creditors, liquidator.
 Need approval of NCLT
 Need consent of shareholders.
 Shareholders include preference.
 Creditors should also agree.

Who can apply

 Company itself
 Members
 Creditors
 Liquidator

Consent
 75% in normal cares
 90% in transferor Co, and
 75% in transferee company.

NOC objection
 Can be raised by 10% shareholders or 5% creditors.
 Notice to all statutory authorities who can raise objection in 30 days.

Creditors meeting
 Not needed if 90% creditors already agree.

Amalgamation
 Purchase (A + B = A or B)
 Merger (A + B = C)
 Can take place either as a solution to compromise arrangement or
independently.
 Generally completed in 1-year, else annual certification from auditor is
necessary within 210 days from annual closure.
 Needs approval of NCLT.
Fast Track Merger
 Without approval of NCLT.
 Facility is available: -
o Holding company with wholly owned subsidiaries.
o 2 or more small companies.
o 2 or more start-up companies
o One or more start-up company with one or more small company

Indian company & foreign company

 Can be amalgamated
 RBI approval is also needed.

Preparation of books & papers

 All books and papers of Transferor Company shall be preserved by transferee
company.
 Disposal needs CG permission.

Liability
 Of past officers who do not join new entity or transferee company will
continue.
 PREVENTION OF OPPRESSION AND
MISMANAGEMENT
Oppression
 Influence (undue) by someone on someone.
 Not necessarily by majority.
 Can be vice versa also.

Mismanagement
 Common wrong
 Affecting everyone at large.

Relief application
 Either by CG
 Or by specified number of applicants.

Specified number of applicants

 100 members or
 1/10th members in person or Co. with shares
 1/10th shareholders or
 1/5th members Co. with guarantee

Application goes to
 NCLT
 Copy goes to ROC within 30 days.

Various orders of NCLT

 Prescribe manner to regulate Co.
 Order buy back
 Order transfer of shares
 Order reduction of share capital
 Restrict allotment of shares
 Restrict transfer of shares
 Terminate or modify any agreement
 Stop transaction / payment
 Remove manager / officer / director / KMP
 Order payment of damages
 Make appointments
 Impose fines.

No effect on petition
 Even if some or more or all take names back.
 Even if their membership percentage come down below eligibility criteria.
Class action suit
 Complaint by members / depositors
 Complaint against company as a whole and not just directors.
 FOREIGN COMPANY
Meaning
 Company incorporated outside India
 Has a place of business and business activity in India.
 Place of business may be physical or electronic.
 Business can be conducted by itself or through agent.

Place of Business
 Covers share transfer or registration office.

Application of Act
 If 50% or more equity and preference is held by Indian citizens or Indian Co.,
such Co. will follow Co. law.

Documents to be Delivered
 Within 30 days of establishing place of business
 Only to ROC new Delhi irrespective of Registered office.
 Documents must be in English or translated into English.

Service of Documents
 Handover to authorized rep.
 Physical / electronic mail.

Accounts
 As per calendar year
 ROC filing in 6 months + 3 months

Annual Return
 FC – 4
 Within 60 days from closure.

Director
 Includes any person in accordance with whose directions or instructions, BOD
is accustomed to act.

Display outside office

 Own Name, Country Name, Limited Liability

Contract to continue even in case of default by Foreign Company

 It can be sued but cannot sue
 OFFENCES AND PENALTIES
Bailable offence
 Bail can be demanded as a matter of right
 Offences specified in schedule I of IPC.

Non bailable offence

 Bail can be granted by court.
 Non bailable becomes bailable in following situations:-
o Accused is sick or infirm
o Accused < 16 years of age
o Accused is woman.

Cognizable offence
 Police can arrest without complaint.

Non cognizable offence

 Complaint compulsory for action.

Compoundable offences
 Settlement possible

Non compoundable offence

 Settlement not possible

Types of penalties
a) Fine only
b) Imprisonment or fine Compoundable
c) Imprisonment or fine or both
d) Imprisonment and fine
Non compoundable
e) Imprisonment only

Compounding approval
 By regional director if max fine involved is Rs. 25 lakhs.
 By NCLT in all other cases.

Compounding prohibited
 For repeat offence
 Which are repeated in 3 years.

Nature of Co. law offences

 All offences are non cognizable except section 212(6) SFIO.
 NCLT / NCLAT
NCLT
 1 president and other member.
 Members = Judicial and Technical.

President
 Present or past judge of SC or
 Present or past judge of HC with 5 years of experience.

Judicial member of NCLT

 Present or past judge of HC or;
 Present or past judge of DC with 5 years experience or;
 Present or past advocate with 10 years experience

Technical member of NCLT

 ICLS / ILS with 15 years experience or;
 Practicing CA / CS / CMA with 15 years experience or;
 Practicing officer of labour court, Industrial Tribunal or National Tribunal of
IDA with 5 years experience or;
 Any person having ability, integrity, standing, special knowledge and
experience of 15 years in specified field.

Specified Field
 Industrial finance
 Industrial management
 Industrial reconstruction
 Investment or;
 Accountancy

NCLAT
 1 chairperson + Max 11 members

Member
 Judicial and Technical

NCLAT to take appeals

 Against NCLT, NFRA and CCI

Chairperson
 Present or past judge of SC or;
 Chief Justice of High Court.
Judicial member of NCLAT
 Present or past judge of HC or;
 Judicial member of NCLT with 5 years experience.

Technical member of NCLAT

 25 years experience in specified fields.

Appointments
 By central Government.
 President / chairperson need consultation with CJI.
 Others need recommendation from selection committee.

Selection committee
1. Chief justice of India / his nominee.
2. Senior judge of SC or chief justice of HC.
3. Secretary MCA
4. Secretary Ministry of law & justice.

Team of office
 5 years

Max age
 President = 67 years
NCLT
 Members = 65 years
 Chairperson = 70 years
NCLAT
 Members = 67 years

Min age
 50 years for all

Appointees of NCLT and NCLAT

 Who get transferred from some Govt. post to NCLT / NCLAT can keep both
profile for max 1 year.

Resignation
 3 months advance notice

Removal
 By CG after consultation with chief justice of India.

Review of order
 In 2 years
Appeal against NCLT
 45 days + 45 days

Appeal against NCLAT

 60 days + 60 days

Disposal of matter
 3 months + 90 more days.

Contempt of court
 Equivalent to contempt of HC.

Role of civil court

 No role of civil court.

Legal representation
 CA
 CMA
 CS
 Lawyers
 Person authorized by Co.

Benches of NCLT
 Established by CG
 Principle bench at New Delhi
 Presently 16 benches
 Each bench = 2 members (1judicial 1 technical)

Benches of NCLAT
 Established by CG in consultation with Chairperson
 Principle bench at New Delhi
 Presently 2 benches
 Each bench = 2 members (1judicial 1 technical)
 WINDING UP
Circumstances for compulsory winding up
1. SR by Co.
2. Working against integrity of India, National security, relationship with foreign
states, civil order, decency and morality.
3. When company operations are fraudulent.
4. Non filing of annual accounts or annual returns for consecutive 5 F.Y.
5. When it is just and equitable.

Who can file petition?

 Company after passing SR
 Contributory (6 out of 18 months)
 ROC after taking CG approval
 Person authorized by CG
 CG or SG itself.

NCLT orders
 Within 90 days after petition.

Overriding preferential payments

1. Workmen dues.
2. Dues of secured creditors

Preferential Payments
1. Tax and other dues payable to Govt. in last 12 months.
2. Employee dues of maximum 4 months out of last 12 months
3. Accrued holiday remuneration.
4. ESI contribution of last 12 months
5. Employee compensation
6. PF, Pension, Gratuity and other funds for employee welfare.
7. Investigation expenses.

Fraudulent preference
 Void
 Last 6 months
 Not on banking

Onerous property
 To be disclaimed by liquidator in 1 year.

Disposal of books and papers

 Preservation period of 5 years after dissolution.
Winding up taking more than 1 year
 Liquidator to file progress report within 2 months from completion of 1 year.

Fast track liquidation

 Without involvement of NCLT.
 Only if book value of total assets do not exceed Rs. 1 crore.
 IBC 2016
Insolvency
 Inability to pay debts after claim of creditors.

Bankruptcy
 Self-declaration of insolvency

Applicability
 Following organization: -
a) Companies
b) Companies set up by special act
c) LLP
d) Body corporate
e) Personal guarantor of corporate
f) Partnership firms
g) Proprietorship firms Not for J&K even after restructuring
h) Individual

Non-Applicability
 Does not apply on financial service providers.
 But applies on NBFC including Housing Finance Companies with asset size
>= Rs. 500 crore.

IBBI
 Governing body of IBC 2016
 Chairman + 10 members
 3 whole time members

Adjudicating Authority
 NCLT

Appellate Authority
 NCLAT

CIRP (Corporate Insolvency Resolution Process)

Default Approval of resolution place by COC

Appointment of Insolvency Professional No Yes

Moratorium Period Goes to Liquidation Implement Plan

Creditors committee formation

Default
 Default of Rs. Rs. 1 Crore or more in case of Corporate Default
 Default of Rs. 10 Lakhs in case of Pre-Packaged Insolvency Resolution
Process.

Petition Filing
 Financial creditors (Fee Rs. 25,000)
 Person on behalf of financial creditors like Guardian, Executor or
Administrator, Trustee including Debenture Trustee and Person authorized by
BOD (Fee Rs. 25,000)
 Operational creditors (Fee Rs. 2,000)
 Company itself. (Fee Rs. 25,000)

When Petition cannot be filed

 Petitioner disqualified
 Company already under CIRP
 Last CIRP completed and 12 months are not over.
 Creditors themselves guilty
 Liquidation has been ordered.

Disqualifications of Petitioner
1. Undischarged insolvent
2. Willful defaulter of Banking industry.
3. Having NPA loan account for 1 year or more
4. Person convicted for 2 years or more and 2 years are not over from expiry of
sentence. (2 years are for specified offence and for others, it is 7 years)
5. Person disqualified to become director
6. Person restrained from securities market by SEBI.
7. Past promoter / manager / controller of Co. guilty of preferential transactions,
undervalued transactions, extortionate credit transactions or fraudulent
transaction.
8. Guarantor of insolvent Co.
9. Person connected to ineligible person.

Petition by Financial Creditor

 100 or 10% of numbers (Whichever is less)
 Real estate allottees are also covered.
 Subscription money for purchase of shares is not a financial debt.

Petition by Operational Creditor

 Petition only after 10 days demand notice.

Withdrawal of Petition
 CoC to consider application in 7 Days.
  IRP/RP to apply to NCLT in 3 Days of COC approval

Time of Limit of CIRP

 180 Days + 90 days
 Extension after CoC approval with 66% majority.
 Max duration permitted 330 days.

Insolvency Professional

 2 types: Interim resolution professional and resolution professional.

 IRP is appointed at the time of petition.
 RP is appointed by COC.

COC
 Consists of financial creditors only.
 First meeting within 7 days of establish.
 Appoints RP either fresh or appoints same IRP as RP.
 Suspended BOD can sit, not participate.
 Operational creditors can also sit if their dues ≥ 10% total dues.

CIRP Cost
Consist of –
1. Interim finance required.
2. Amount required to arrange interim finance.
3. Fee of IRP and RP.
4. Amount required for operational activities
5. Govt. fees
6. Any other costs

Resolution Plan
 Requires approval of COC with 66% majority and NCLT

Liquidation
Start if: -
1. Resolution plan not submitted
2. Resolution plan rejected
3. Resolution plan not workable

Immunity from prosecution of corporate debtor after approval of CIRP

 If a prosecution had been instituted during the corporate Insolvency resolution
process against such corporate debtor, it shall stand discharged from the date
of approval of the resolution plan.
 The immunity is only to corporate debtor and not to individual director or
designated partner of LLP who is being prosecuted for personal vicarious
 liability, for offence committed when he was in-charge of affairs of corporate
debtor

Disposal of applications under section 54C and under section 7 or section 9 or

section 10.
1. First PPIRP, Then CIRP, PPIRP will prevail.
2. First CIRP, then PPIRP within 14 days of CIRP, PPIRP to prevail.
3. First CIRP, then PPIRP after 14 days of CIRP, CIRP to prevail.

Personal Insolvency (Only for New Syllabus)

 It covers Individual and Partnership
 Adjudicating Authority (AA) shall be Debt Recovery Tribunal
 Appellate authority shall be DRAT
 Appeal period 15 days
 Appeal against DRAT in SC
 Application can be filed by any creditor
 Application can be withdrawn without permission of adjudicating authority
 Application may or may not have Proposed Bankruptcy Trustee (BT) Details
 Process is called Bankruptcy
 During bankruptcy, bankrupt person suffers from following disqualifications:
1. No overseas travel
2. No appointment as trustee, public servant, elections
3. No appointment as director
4. No involvement in any capacity in incorporation
 If BT is not proposed by petitioner, AA shall request to IBBI in 7 days
 IBBI shall nominate in 10 days.
 COC may replace IP with 75% majority
 AA to send notice to creditors in 10 days.
 Creditors to file claim in 7 days
 Bankruptcy trustee shall make a list of creditors in 14 days
 BT shall hold a meeting to constitute COC in 21 days
 BT shall also hold a COC meeting after completion of distribution of assets
with detailed report in 7 days
 BT shall present himself before AA after everything is completed to ask for his
release.
 SEBI ACT, 1992
Establish
 12.04.1998

Independent Regulator Since

 May 1992

Structure
 7 chapters and 35 sections
 Body corporate
 Headquarters at Mumbai.

Functions
 Quasi Legislative
 Quasi Judicial
 Quasi Executive.

People at SEBI
 One chairman
 2 from finance ministry and MCA
 1 from RBI
 5 more members out of which 3 shall be whole time.
 Resignations / removal need 3 months notice

Securities appellate tribunal

 Appeal in 45 + 45 days.
 Further appeal to SC in 60 + 60 days
 Presiding officer + 2 more members
 Max age for presiding officer = 68 and for members = 62.
 Member of SEBI cannot go to SAT during tenure + 2 years post retirement.
 ICDR – SEBI Regulations
IPO Conditions
1. NTA ≥ Rs. Cr. In each of the preceding full F.Y. out of which max monetary
assets 50%.
2. Min pre-tax average operating profit of Rs. 15 Cr. In last 3 most profitable
years out of last 5 years.
3. Min net worth of Rs. 1 Crore in each of the last 3 full F.Y.
4. If and only if company has changed its name in last year, 50% or more revenue
should come from new name.

FPO Conditions
Same as condition 4 of IPO.

Alternative Route
 Book building + 75% allotment to QIB.

Promoter Contributor
 20%
 Lock in period of PC for 3 years.
 Excess contribution lock in 1 year.
 No lock in for excess contribution in FPO.

Pricing Band
 Base price ± 20%

Pricing Rule
 If issue price < Rs. 500, F.U. = 10.
 If issue price ≥ Rs. 500, F.U. = 1 to 20.
 LODR – SEBI Regulations (Only for Old Syllabus)
Compliance Officer
 Should be CS
 CS other than PCS.
 Compliance certificate within 1 month of half year completion.

Grievance Redressal
 Compulsory registration on SCORES.
 Quarterly filing with SE and SEBI in 21 days post quarter.
 SEBI complaints redressal system

BOD
 Min 50% directors to be non Ex,
 One woman director
 Top 1000 Listed companies to have Woman ID
 1/3rd ID (if chairman is related than ID to be half).
 Not to be director of more than 7 listed companies

Vigil Mechanism
 Direct control of audit committee
 Work for directors and employees

Related party Transactions

 To be approved by audit committee
 Material RTP to be approved by OR
 Material RTP = Previous +proposed transaction during FY exceeds 10% of
annual consolidated turnover
 Formulation of policy on “materiality” and on dealing with RPT which will be
reviewed every 3 years

Material subsidiaries
 One ID of holding Co. to be put in subsidiaries.
 Audit committee of H to review S.
 MoM of BOD of S to be reviewed by H.
 SR required if-
◦disposal of shares resulting in reduction of its shareholding to less than 50%
or cessation of control over the subsidiary
◦Selling, disposing and leasing of assets amounting to more than 20% of the
assets of the material subsidiary on an aggregate basis during a financial year

ID
 One individual to be ID in max 7 listed Co.
 1 minimum meeting where ID to be absent
  Familiarization programme for ID
 Not to become member in more than 10 committees.
 Not to become chairman in more than 5 committee.

BOARD OBLIGATION
 Listed entity shall submit a quarterly compliance report on corporate
governance within fifteen days from close of the quarter
 Annual report to be submitted within 21 days of adoption at AGM
 Business Responsibility Report is applicable to top 500 listed companies as on
March 31 every financial year.
 Annual Information Memorandum to be submitted as specified by SEBI.
 Insider Trading : SEBI Regulations
Insider
 Person connected with company
 Person who has UPSI.

Duties of Insider
 To submit a trading plan.
 Trading plan is irrevocable.
 If value > Rs. 10 lakhs, it must be submitted to SE in 2 days.
 Trading plan to be disclosed in F/S by BOD.
 Also to be uploaded on company website.
 BANKING REGULATION

Banking Sector in India

 Scheduled Banks
 Non-Scheduled Banks

Disposal of Non-banking Asset

 Must be done in 7 years.
 Extension by RBI for 5 more years.
 No disposal needed if kept for own use.

Board of Directors
 51% should be experienced in specified fields.
 Fields are A/c, agri, rural economy, Banking, Co-operative, financé, law,
SSI, etc.
 Min 2 should be from agri, Rural, Co-operative, SSI.
 No substantial interest with commercial org.
 Connection with charitable and SSI allowed.
 Director tenure 5 years (WTO).
 Director tenure 8 years (Non-Ex)

Chairman
 Must be WTD
 Person appointed by RBI is deemed director.
 5 years tenure at a time
 Part time chairman also possible but then MD will take care of routine
matters.

Capital Requirements
 Paid up capital ≥ Rs. 5 Billion
 Net worth ≥ Rs. 5 Billion
 FDI Max 74%
 Authorized – Subscribed - Paid-up
 Adjustment period of 2 years when authorized alters.
 Max voting power 10%, can be increased to 20% in phased manner
Promoters of Bank
Category A – Individual Promoter
Resident Indian + 10 years Banking experience in Senior Management.
Category B – Organisation
Organization

NBFC Others
10 years old 10 years old
+ +
Total assets Total assets
≥ ≥
Rs. 50 Billion Rs. 50 Billion
+ +
Max Non Financial Max Non financial
40% 40%

Corporate Structure
 Non operative financial holding Co. will run bank.
 Promoter group will have 51% of this Co.
 51% to be brought down to 15% in 15 years.
 40% lock in for first 5 years.

Commission Brokerage Discount

 Max Permissible 2.5%

Dividend
 Allow only if there is no deferred Revenue Expenditure.

Reserve Fund
 25% of Net Profit
 Not needed if Reserve Fund including securities premium become equal to
PSC.

Control over Opening of New Business

 Every new branch needs RBI approval.
 RBI approval not needed
o Another Branch in same City Town Village.
o Temporary Branch for max 1 month.
Maintenance of Assets
 75% or more of total liabilities should remain as asset in India,

Unclaimed Deposits
 Dead A/c after 36 months.
 Reporting to RBI after 10 years of Non operation.

Maintenance of A/c and B/s

 As per schedule III.
 CG can alter with 3 months advance notice.
 Filing with RBI in 3 months from the end of F.Y., RBI can extend for 6
more months.

Inspection
 RBI can do it.

Giving direction to banking companies

 RBI can do it.

Giving direction to banking companies Power of Central Government to

authorize RBI for issuing direction to bank for initiating resolution process

 RBI can do it.

Power of RBI to issue direction in respect of stressed assets

 RBI can do it.

Removal of Director by RBI

 Removal by RBI
 Appeal to CG in 30 days.
 Final order of CG
 Person removed cannot be reappointed for next 5 years in same bank.

Additional Director
 Tenure of 3 years, expendable up to 3 more years by RBI.

Suspension of Business
 Moratorium can be applied to High Court for max 6 months
  RBI Recommendations and report is compulsory

Winding Up
 Compulsory winding up applied by RBI
 Voluntary winding up approved by RBI

Amalgamation
 Requires 2/3rd majority
 RBI Approval
 Dissenting shareholders to get refund
 Can be initiated without imposing moratorium

Acquisition of Bank by CG
 Allowed after payment of compensation

Submission of Returns of unclaimed Deposits

 Reporting for deposits unclaimed for 10 years or more
 To be submitted in 30 days upon closure of calendar year.

Return of assets and liabilities

 On last Friday of every month

Half yearly return

 Regarding the investments of banking company and the classifications of
advance given in respect of industry, commerce and agriculture.

Annual Return to RBI

 3 copies to RBI in 3 months from annual closure
 Extendable to 3 more months.

Role of RBI
 Inspection of Banks
 Regulator
 Approval and monitoring of appointments
 Licensing of branches
 Banking Policy
 Issue of directives
 Collection and dissemination of information
 Monitoring operations of Indian banks abroad
 Authorization for dealing in precious metals
 Monitoring off shore banking units
 Monitoring and policy making industrial and export credit
 Interpretation of regulations
 Granting exemptions
 Management of foreign exchange
 Banker’s Bank
 Banker to Government
 Oversee Payment and Settlement System
 PMLA
Objectives
1. Prevent and control money laundering.
2. Confiscate and seize property obtained.
3. Deal with any other issue.

Scheme
10 chapters / 75 Section / 1 Schedule

Steps of Money Laundering

1. Placement
2. Layering
3. Integration

Offence of Money Laundering

a) Attempt to do
b) Knowingly assist
c) Knowingly partner
d) Indirect beneficiary
e) Knowingly connected with proceeds of crime.

Schedule Offence
 Predicate offence
 Schedule has 2 parts (part A and part C)
 Part A – 28 paragraph
 Part C – cross Border Transactions.

Punishment
 Min Jail 3 years
 Max Jail 7 years (10 years in case of drugs.)
 Max Fine Rs. 5 Lakhs

Reciprocal Arrangement
India and other countries will facilitate each other.

Enforcement Directorate
 Responsible for enforcement of FEMA and PMLA.
 Established in 1956
 Headquartered in Delhi.

FIU
 Work on suspect financial transactions.
 Setup in Nov 2004.
Obligations of Banking Companies, Financial Institutions & Intermediaries
 Record Maintenance.
 Furnish information to FIU.
 Verify identify of clients.
 Identify beneficial owner.
 Maintain correspondence and records for 5 years.

Adjudicating authority
 Central Govt. established it.
 3 members (law / admin / finance A/c)
 Situated at New Delhi.

Appellate Tribunal
 Consists of a Chairperson and two other Members
 The Chairman and one Member of Appellate Tribunal for Forfeited Property
(ATFP) holds additional charge of the post of Chairman and Member of
Tribunal under PMLA

Special Court
 Established by central Govt.
 Speedy trial takes place.
 Equivalent to session court.
 Appointment needs consultation with chief justice of High Court.

How to tackle Money Laundering (Only Old Syllabus)

 Black money undisclosed foreign income and assets and imposition of tax act,
2015.
 Sharing of information with other countries.
 Tax treaties with other countries.
 Common reporting standards by 83 countries.

Recent Govt. Initiatives. (Only Old Syllabus)

 SIT where chairman and VC are SC Judge.
 Emphasis on high impact cares
 FATCA
 DTAA and TIEA with other countries
 PMLA
 Benami Transactions prohibition act 2015.
 IT based project INSIGHT

Rate of cost accountant in money laundering (Only Old Syllabus)

 National institute of public finance and policy.
 National institute of financial management.
  National council of applied economic research.
 Cost audit
 Anti money laundering audit.

Causes and method adopted for generation of black money. (Only Old Syllabus)
1. Suppression of receipts
2. Real estate
3. Corruption
4. Financial market transactions
5. Jewelry and bullion
6. Parallel cash economy
7. Counterfeit currency
8. Not for profit organization
9. Trade based money laundering.

TBML (Trade Based Money Laundering) (Only Old Syllabus)

 Breaking money into small value transitions.
 Multiple forex transactions
 Misrepresentation of price and Qty.
 Increasing complexity of a transaction through various steps.
 False import export.
 SARFAESI
Relevance of SARFAESI
 With the introduction of Insolvency Code, the relevance of this Act has
diminished.

Basics
 W.e.f. 21/6/2002.
 Amended several times.
 Objective to regulate business of Securitization & Reconstructions of Financial
Assets

Securitization
 Conversion of NPA into PA by using debt securities.

Asset Reconstruction
 Conversion of NPA in asset side into performing assets.

Enforcement of security interest.

 Borrower of bank becomes borrower of SRC / ARC Co. and then SRC/ARC
can enforce their rights.

SRC
 Securitization and Reconstruction Co.

ARC
 Asset Reconstruction Company.

Default
 Means default declared by bank / NBFC.

Financial Asset
1. Secured / unsecured
2. Receivables based on moveable property
3. Receivable based on immovable property
4. Partial or complete right / intt.
5. Beneficial interest
6. Any other financial assistance.

Registration of SRC / ARC

 RC granted by RBI.
 Net owned fund ≥ Rs. 2 Cr.
 Max increase in this = 15% of total assets acquired or to be acquired.
Prior Approval of RBI
 Change of Name
 Change of Registered office
 Substantial change in management.

Conditions of Registration
 No loss in 3 years prior to Reg.
 Ability to recover and make payment.
 Directors professionally experienced.
 Sponsor Co. directors max 50%
 Sponsor Co. cannot be holding Co.
 Compliance of prudential norms.
 Directors should not be convicted.

Other Functions of SRC / ARC

 Prior approval of RBI needed.
 Not needed for following

Manager for acquired

Recovery agent Liquidator
assets

Resolution of Disputes
 Arbitration and conciliation.

Manner effect of takeover of Management

 Advance notice
 Management to be restored after recovery
 No powers with shareholders / BOD
 No winding up unless approved by SRC / ARC

Appeal (30 Days)

 Appeal to be filed in DRT and then DRAT
 For J&K, district court and high court.
 Appeal before Deposit – 50%, can be 25%
 Insurance Act, 1938
Principles of Insurance

1. Good Faith: - Correct Disclosure

2. Misrepresentation: - False statement makes policy voidable.
3. Warranties: - If warranties are not fulfilled, policy cannot be challenged.
4. Conditions: - If conditions are not fulfilled, policy can be challenged.
5. Indemnity & subrogation: - When compensation is paid, remains of asset
insured belong to insurer.
6. Proximate cause: - Reasons of loss should be specified in policy else
compensation not possible.
7. Insurance & Consumer Protection: - Consumers cannot go consumer
forum, they will go to IRDA.
8. Insurance Interest: - Belongingness must be there between buyer of policy
and insured person or object. (Marine Insurance is exception).

Commencement of Policy

2 Things are Compulsory

Collection of Premium Processing of Documents

Insurance of Properties in India

1. Property = Immovable property + ship + aircraft

2. Purchase of property insurance can be from Indian insurer only.

Records of Polices and claims: - Lifetime maintenance compulsorily.

Multilevel Marketing: - Prohibited but still policy remains valid.

Policy not to be questioned after 3 years: -

 Applies only on nonlife policies.
 DOB and intentional wrong entries are exceptions.

Capital Requirements: - Health ≥ Rs. 100 Cr.

 General ≥ Rs. 100 Cr.
Life ≥ Rs. 100 Cr.
Reinsurance ≥ Rs. 200 Cr. + NOF ≥ 5000 Cr.
No preference shares
Maximum FDI 74%

Actuarial Valuation: -
 Applies only on life segment
 Valuation of liabilities must.
 Once in 1 year.
 IRDA can permit once in 2 years.

Investment of Assets: -
Segment

Life Non Life

Min 25% Min 10%

Min 25% Min 25%
Govt Bal any Govt Bal
Govt. Govt
recognized where recognized anywhere
Securities Securities
securities securities

Agent not to become director in same Co.: - allowed only after IRDAI approval
in exceptional circumstances.

Dividing Business Principle: - Not Allowed

Insurance Councils: - General Insurance council and life insurance council

Loan on Policy: - Policy should be 3 years old.

Surveyor & Loss assessors: - Certified from Indian Institute of Insurance

surveyors & Loss assessors.
 IRDA Act, 1999

1. 1 chairman, 5 whole time members and 4 part time members.

2. Min 1 person should be experienced in insurance.

3. Tenure 5 years.

4. Max age 65 years.

5. Reappointment always allowed.

6. Resignation allowed with 3 months notice.

7. Removal by CG.

8. Decisions cannot be invalidated by defects.

9. Insurance advisory committee:

 Established by IRDAI
 25 members including 10 from IRDAI.
 IRDAI chairman and committee chairman cannot be same.
 Competition Act, 2002
Competition
A situation in a market where all sellers compete or strike to achieve patronage of
buyer.

Objectives of Act
1. Prevent anti-competitive 3. Protect interest of consumers
practices 4. Ensure freedom of trade.
2. Promote and sustain competition

Ingredients of Competition Law

1. Prevention of anti-competitive agreements
2. Prevention of abuse of dominant position
3. Regulation of Combinations in the market.

Agreement
 Agreement, arrangement, understanding or action in conceal.
 May be expressed or implied.
 May be oral or written.
 May be formal or informal.

Cartel
Association of producers, sellers, distributors, traders or service providers who
control or attempt to control market factors.

Already declared anti-competitive agreements

1. Tie in arrangement 4. Exclusive distribution
2. Refusal to deal. 5. Resale price maintenance
3. Exclusive supply. 6. Bid rigging

CCI
 Body corporate, perpetual succession.
 Head office at New Delhi.
 One chairperson, min 2 members max 6 men.
 Appointment done by CG.
 Min 15 years of experience.
 All shall be whole time members
 Appointments after recommendations from selection committee.
 Selection committee = CJI + Secretary MCA + Secretary law ministry + 2
experts
 Tenure 5 years
 Unlimited reappointments allowed
 Max age 65 years
  Resignation with 3 months’ notice
 Removal after SC inquiry
 Not to join Pvt sector org whose case was dealt by CCI for 2 years post
retirement
 Has power to call experts
 Decisions not to be invalidated because of any irregularity.

Factors to evaluate anti comp agreements

1. Creation of barriers 4. Accrual of benefit to customers
2. Driving existing competitors out 5. Increasing market share by not
3. Foreclosure of competition allowing others.

Factors to evaluate abuse of dominant position

1. Market share 8. Entry barrier
2. Size of resources available 9. Buyer purchasing power
3. Size and level of competition 10.Market structure
4. Economic power 11.Social obligations
5. Vertical integration 12.Contribute to economic
6. Dependence on consumers development
7. Monopoly level

Competition advocacy
 CCI to advise
In 60 days
 CCI to get advise

Appeal
 Before NCLAT against CCI – 60 days.
 Before SC against NCLAT – 60 days.

Share
 Are goods after allotment

Govt
 Is enterprise if takes charges

Regulation of Combination limits

 FEMA
Purpose of FEMA
 to consolidate and amend the law relating to foreign exchange
 to facilitate external trade and payments
 to promote the orderly development and maintenance of forex market in India.

PRI (Individual)
 Residing in India for more than 182 days during P.Y.

Deemed PRI
Came to India in P.Y. and must Purpose of stay should be
PROI + +
stay here upto 31st March indefinite.

PRI (organization)
 Org should be either set up in India or controlled from India.

Voluntary Vs. forceful Stay

 Counting should not include forceful stay.

PROI (Individual)
 Could not complete more than 182 days.

PROI (organization)
 Org set up as well as controlled from outside India.

Deemed PROI
Gone outside India in P.Y. and did Purpose going should be
PRI + +
not come back indefinite.

Capital A/c Transaction

Transaction which alters

Asset and liabilities (include contingent Asset and liabilities (exclude contingent)
liabilities) of PRI, outside India of PROI, inside India

Current A/c Transaction

 All transactions other than CAT.
 Following are also current: -
o Payment made in ordinary course
o WC financing
o Interest on loans Operating Investments
 o Living expenses
o Foreign Travel, education, medical care.

Authorized person
= AD + MC + OSBU + Others

Forex Holding
 Allowed up to USD 2000 per person.

Prohibited current A/c Transaction

 Lottery + Horses + commission on export through equity Inv + banned
magazines + prescribed magazines + tour to Nepal and Bhutan.

Current A/c Transaction needing CG approval

 Cultural tour + payment of freight for vessel chartered by PSU + payment of
import through ocean transport by Govt. Deptt or PSU on CIF + Hiring of
Transponder + container detention + P&I Club + Ad in foreign print media by
PSU beyond USD 19000 except tourism, FDI, International Bidding + Prize
money or sponsorship of sports activity beyond USD 100000 except sport
bodies + payment to multi modal transport agents.

Current A/c Transaction which need RBI approval

 All other current transactions which are beyond USD 2.5 lakhs.

Current A/c Transaction by Org.

1. Donation made to educational and technical institution upto USD 50 Lakhs or
1% of Last 3 years forex earnings whichever is less.
2. Commission to agents abroad for sale of immovable property upto USD 25000
or 5% of sales whichever is higher.
3. Consultancy charges upto USD 10 Lakhs for general projects or USD 1
Crore for Infrastructure projects.
4. Pre-incorporation expenses upto 5% of Inv. Or USD 1 Lakh whichever is
higher.

Prohibited capital A/c Transactions

1. Lottery business
2. Gambling including casino
3. Chit fund
4. Nidhi
5. TDR
6. Farm House
7. Real estate sector
8. Tobacco and
9. Atomic energy
 10.Railway

Permitted Capital A/c Transactions

1. Property held by foreign citizens resident in India.
2. Lease of property outside India for max 5 years.
3. Property acquired all or before 8/7/1947
4. Gift or inheritance
5. RFC A/c

FDI Routes
1. Automatic
2. Approval
 MSME
Primary responsibility of MSME promotion and Development
State Government

Objectives of MSME Development Act, 2006

1. To address policy issues
2. To address coverage and investment ceiling
3. To facilitate their development
4. To enhance their competitiveness

Definition of MSME
1. Nature: Manufacturing or Service
2. Not for traders
3. Plant & Machinery and Turnover must be within limits

Limits

Important Clarifications
 Plant & machinery includes only Tangible Assets
 Plant & machinery excludes intangibles, land, furniture, and fittings
 Turnover excludes export
 Benefits will continue for 3 years even if limits get crossed

National Board for MSME

 Set up by CG
 H.O. at New Delhi
 Meeting once in every 3 months
 Functions:
1. Examine relevant factors impacting MSME
2. Make recommendations
3. Advise CG
Micro and Small Enterprises Facilitation Council
 For dispute redressal
 Decision in 90 days

Delayed Payments to MSME

 Payment in maximum 45 days
 Else interest 3 times of bank rate
 Duty of auditors to disclose
 Interest disallowed as deduction
 CYBER LAW
Objectives of IT Act 2000
1. Legal recognition to electronic transactions
2. Facilitate electronic filing
3. Consequent amendment to other acts
4. Set up licensing, monitoring and certifying authority

Offences
1. Tampering with source documents
2. Hacking
3. Misrepresentation to Controller or Certifying Authorities
4. Breach of Confidentiality and Privacy
5. Publishing false DSC

Settlement of Disputes
1. No role of civil court
2. Separate Adjudicating Authority set up by CG
3. Appeal to Cyber Regulations Appellate Tribunal in 45 days
4. Appeal in HC in 60 days

Types of BI tools
 Ad hoc analysis
 Online Analytical Processing
 Mobile BI
 Real time BI
 Operational Intelligence
 Open-Source BI
 Embedded BI
 Collaborative BI
 Location Intelligence

Types of Cyber Crime

 Category A- Against Persons
 Category B- Against Property
 Category C- Against Government