KLE LAW ACADEMY BELAGAVI
KLE LAW ACADEMY BELAGAVI(Constituent Colleges: KLE Society’s Law College, Bengaluru, Gurusiddappa Kotambri Law College,Hubballi, S.A. Manvi Law College, Gadag, KLE Society’s B.V. Bellad Law College, Belagavi, KLE LawCollege, Chikodi, and KLE College of Law, Kalamboli, Navi Mumbai)STUDY MATERIALforCOMPANY LAWPrepared as per the syllabus prescribed by Karnataka State Law University (KSLU), HubballiCompiled byReviewed byTanmay Patil, Asst. Prof.Dr. Anita M.J., Asst. Prof.Vivek Narayan, Asst. Prof.K.L.E. Society's Law College, BengaluruThis study material is intended to be used as supplementary material to the online classes andrecorded video lectures. It is prepared for the sole purpose of guiding the students in preparationfor their examinations. Utmost care has been taken to ensure the accuracy of the content.However, it is stressed that this material is not meant to be used as a replacement for textbooksor commentaries on the subject. This is a compilation and the authors take no credit for theoriginality of the content. Acknowledgement, wherever due, has been provided.
CONTENTSl. No.ParticularsUnit - 11.2.3.4.5.6.7.8.Unit - 21.2.3.4.5.6.Unit - 31.2.3.4.5.6.7.Unit - 41.2.3.4.5.Unit - 51.2.3.4.5.SyllabusIntroduction and ConceptCompany - ConceptHistorical developmentNature and characteristics of companyKinds of companyCorporate personalityLimited liabilityLifting of corporate veilPromoters – duties and liability of promotersIncorporationProcedure of incorporationCertificate of incorporationMemorandum of Association (MOA)Articles of Association (AOA)Doctrine of indoor managementProspectusManagement and Control of CompaniesBoard of DirectorsMeetingsResolutionsDistribution of powers between Board of Directors and general meetingDirectorsCorporate social responsibilityPrevention of oppression and MismanagementFinancial structure of companySharesDividendsBuy backDebenturesAcceptance of Deposit by CompaniesReconstruction and amalgamation and winding upReconstruction, rehabilitation, and amalgamationWinding upModes of winding upWho can applyProcedure under different modesBibliographyPage 91251271341351461511611671761761802012022032052
SYLLABUSObjectives:In view of the important developments that have taken place in the corporate sector, thecourse is designed to understand the formation, management and other activities of the companies.Important regulations pertaining to the issue of shares and the capital raising have come into force.This course aims to impart the students, the corporate management, control, possible abuses, theremedies, and government regulation of corporate business and winding up of companies.Course contents:UNIT – IIntroduction and ConceptCompany – historical development – nature and characteristics of company – kinds of company –Corporate personality – limited liability – lifting of corporate veil – promoters – duties and liabilityof promotersUNIT – IIIncorporationProcedure of incorporation – certificate of incorporation – MOA – AOA – Doctrine of indoormanagement – prospectusUNIT – IIIManagement and Control of CompaniesBoard of Directors – powers and functions: Distribution of powers between Board of Directorsand general meetingDirectors: appointment – qualification – position of directors – types of directors – powers andduties of directors – remuneration – removalMeetings: Meetings of Board and Committees – kinds of meetings – procedure relating toconvening and proceedings at General and Other meetings – resolutions – Prevention of oppressionand MismanagementCorporate social responsibilityUNIT – IVFinancial structure of companySources of capital: Shares – types – allotment – transfer of shares – rights and privileges ofshareholders – dividends – declaration and payment of dividends, prohibition of buy back – privateplacement –3
Debentures – floating charge – appointment of debenture trustees and their duties – kinds –remedies of debenture holders – redemptionAcceptance of Deposit by Companies, charge on assetsUNIT – VReconstruction and amalgamation and winding upReconstruction, rehabilitation and amalgamation: concept – jurisdiction and powers of courts andNCLT – vesting of rights and transfer of obligations – takeover and acquisition of minority interestWinding up: concept – modes of winding up – who can apply – procedure under different modes.Prescribed Books:1. Taxman, Companies Act 2013.2. Singh, Avtar, Company Law, (Lucknow: Eastern Book Company,2007)Reference Books:1. Ramaiah,A, Guide to Companies Act, (Nagpur: Wadhwa, 1998)2. Shah, S.M., Lectures on Company Law, (Bombay: Tripathi, 1988)3. Kuchal, S.C, Corporation Finance: Principles and problems, 10th Edition, (ChaitanyaPublishing House, 1973)4. Y. D. Kulshreshta, Government regulation of financial management of private corporatesector in India, Indian Law Institute, (1986)5. S. K. Roy, Corporate Image in India A Study of Elite Attitudes towards Public and PrivateIndustry, (Shri Ram Centre for Industrial Relations and Human Resources ,1974)6. Gower, L.C.B, Principles of Modern Company Law, (London: Sweet & Maxwell, 1997)7. D. L. Majumdar, Towards a philosophy of Modern Corporation. (Asia Publishing House,1967)8. Pennington, Robert R., Pennington’s Company Law, (U.K: Oxford University Press, 2001)9. Rajiv Jain, Guide on foreign collaboration – Policies & Procedures (Vidhi Publication,2007).10. C. Singhania, Foreign collaborations and Investments in India – Law and procedures,(Fred B. Rothman & Co, 1999)11. Joyant M Thakur, Comparative Analysis of FEMA – FEMA Act, 1999 with FERA.12. Sanjiv Agarwal, Bharat’s guide to Indian capital, 2nd Edition, (New Delhi: Bharat LawHouse Pvt Ltd, 2001)Note: The course teachers have to keep track of the notification regarding enforcement of theCompanies Act, 2013 and teach the provisions enforced. For the provisions not enforced, theparallel provisions from the Act of 1956 are to be taught.4
UNIT – 1INTRODUCTION AND CONCEPTSynopsis Introduction Meaning of a Company Definition of Company Historical Development Nature and Characteristics of a Company Kinds of Company Corporate Personality Limited Liability Lifting of corporate veil Promoters Duties of Promoter Liabilities on PromoterIntroductionThe concept of ‘Company’ or ‘Corporation’ in business is not new but was dealt with, in 4thcentury BC itself during ‘Arthashastra’ days. Its’ shape got revamped over a period according tothe needs of business dynamics. Company form of business has certain distinct advantages overother forms of businesses like Sole Proprietorship/Partnership etc. It includes features such asLimited Liability, Perpetual Succession etc.After reading this lesson, you would be able to understand the historical development in theevolution of corporate law in India and England, emerging regulatory aspects including CompaniesAct, 2013, besides dealing with basic characteristics of the company and how it differs from otherforms of businesses.5
Meaning of a CompanyThe word ‘company’ is derived from the Latin word (Com with or together; panis bread), and itoriginally referred to an association of persons who took their meals together. In the leisurely past,merchants took advantage of festive gatherings, to discuss business matters.Nowadays, business matters have become more complicated and cannot be discussed at festivegatherings. Therefore, the company form of organization has assumed greater importance. Itdenotes a joint-stock enterprise in which the capital is contributed by several people. Thus, inpopular parlance, a company denotes an association of likeminded persons formed for the purposeof carrying on some business or undertaking.A company is a corporate body and a legal person having status and personality distinct andseparate from the members constituting it.It is called a body corporate because the persons composing it are made into one body byincorporating it according to the law and clothing it with legal personality. The word ‘corporation’is derived from the Latin term ‘corpus’ which means ‘body’. Accordingly, ‘corporation’ is a legalperson created by a process other than natural birth. It is, for this reason, sometimes called anartificial legal person. As a legal person, a corporation can enjoy many of the rights and incurringmany of the liabilities of a natural person.An incorporated company owes its existence either to a special Act of Parliament or to companylaw. Public corporations like Life Insurance Corporation of India, SBI etc., have been brought intoexistence by special Acts of Parliament, whereas companies like Tata Steel Ltd., RelianceIndustries Limited have been formed under the Company law i.e. Companies Act, 1956 which isbeing replaced by the Companies Act, 2013.Definition of CompanyIn the legal sense, a company is an association of both natural and artificial persons (and isincorporated under the existing law of a country). In terms of the Companies Act, 2013 (Act No.18 of 2013) a “company” means a company incorporated under this Act or under any previouscompany law [Section 2(20)].6
In common law, a company is a “legal person” or “legal entity” separate from, and capable ofsurviving beyond the lives of its members. However, an association formed not for profit alsoacquires a corporate character and falls within the meaning of a company by reason of a licenseissued under Section 8(1) of the Act.A company is not merely a legal institution. It is rather a legal device for the attainment of thesocial and economic end. It is, therefore, a combined political, social, economic and legalinstitution. Thus, the term company has been described in many ways. “It is a means of cooperationand organization in the conduct of an enterprise”.It is “an intricate, centralized, economic and administrative structure run by professional managerswho hire capital from the investor(s)”.Lord Justice Lindley has defined a company as “an association of many persons who contributemoney or money’s worth to common stock and employ it in some trade or business and who sharethe profit and loss arising therefrom. The common stock so contributed is denoted in money andis the capital of the company.The persons who contributed in it or form it, or to whom it belongs, are members. The proportionof capital to which each member is entitled is his “share”. The shares are always transferablealthough the right to transfer them may be restricted.”From the foregoing discussion, a company has its own corporate and legal personality distinctwhich is separate from its members. A brief description of the various attributes is given here toexplain the nature and characteristics of the company as a corporate body.Historical DevelopmentAs we all know that India has drawn a lot of legislation from England. Similarly, in the case ofCompanies law, India enacted company law based upon the company law enacted in England. Thethree phases which influenced the Company legislations may be divided as i) Colonization era; ii)Period after World War II & iii) the Opening up of Indian markets in the year 1990.7
Legislation EnactedIn the year 1850, the first Company enactment for the registration of the joint-stock company wasintroduced in India. This enactment as mentioned before was based upon the English CompaniesAct, 1844.Later in the year 1857, the concept of limited liability was recognized in the companies legislationbut the said limited liability was not extended to the banking company. The concept of limitedliability into the Companies Act was introduced earlier in the English Companies Act of 1856. Butby the year of 1858, the concept of limited liability was extended to banking company even inIndia.In the year 1866 Companies Act was yet again passed for consolidating and amending the lawsrelating to incorporation, regulation and winding up of trading companies and other associations.This Act was based upon the Companies Act 1862 of England. This Act was recast in the year1882 and was in use until 1913.In the year 1913 another Indian Companies Act was enacted based upon English CompaniesConsolidation Act, 1908. Companies Act of 1913 was amended in the year 1914, 1915, 1920,1926, 1930 and 1932. But the major amendment to the Companies Act of 1913 who was made inthe year 1936 this amendment was based upon the English Companies Act. 1929. The act of 1913regulated the Indian business company until 1956.By the end of 1950, Bhabha committee was set up under the chairmanship of H. C. Bhabha. Forthe difference of Indian Companies Act with reference to the development of Indian trade andindustry.The committee submitted its report on 1952, this report of Bhabha committee was acceptedCompanies (Amendment) Act, 1956. This legislation was made keeping in mind the Englishlegislation of Companies Act in 1948.Act of 1956The period of the Second World War and the post-war years witnessed an upsurge of Industrialand commercial activity on an unprecedented scale in India and large profits were made bybusinessmen through incorporated companies. The Government of India took up the revision of8
Company Law immediately after the termination of the last war. Two company lawyers— onefrom Bombay and the other from Madras— were successively appointed to advise Governmenton the broad lines on which, the Indian Companies Act, 1913, should be revised and recast in thelight of the experience gained during the war years. Their reports were considered by Governmentand a memorandum embodying its tentative views was circulated towards the end of 1949 foreliciting an opinion.On 28th October 1950, the Government of India appointed a Committee of twelve membersrepresenting various interests under the chairmanship of Shri H. C. Bhabha, to go into the entirequestion of the revision of the Companies Act, with particular significance to the development oftrade and industry of India. This Committee, popularly known as the Bhabha Committee,submitted its report in March, 1952, recommending comprehensive changes in the Companies Actof 1913. The report of the Bhabha Committee was again the subject of discussion and commentby Chambers of Commerce, Trade associations, professional bodies, leading industrialists,shareholders and representatives of labour. The Bill, which eventually emerged as the CompaniesAct, 1956, was introduced in Parliament on 2nd September 1953. IT was a comprehensive andconsolidating as well as amending piece of legislation. The Bill was referred to a Joint Committeeof both Houses of Parliament in May 1954. The Joint Committee submitted its report in May 1955,making some material amendments to the Bill. The Bill, as amended by the Joint Committee,underwent some further amendments In Parliament and was passed in November 1955. The newCompanies Act (I of 1956) came into force from 1st April 1956.Major Changes brought forth by the Companies Act 1956 Promotion and growth of Companies. Capital structure of the Companies. Company meetings and procedures. Company accounts and its presentation & powers and duties of the auditors of thecompany. Inspection and investigations of the affairs of the Company. The constitution of the Board of Directors, Powers and functions of directors, ManagingDirectors and Managers; and Administration of the Company Law.9
The Amendments in the Companies Act, 1956As any other legislation various amendments were made to the Companies Act 1956 as mentionedbelow:Timeline of 198519881991Opening of the market gates to the Globe-1990The Era of liberalisation, privatization and globalisation saw the anachronistic Companieslegislation made in time of closed market and hence inadequate to handle the global entry. Thisnon-conducive legislation would have obstructed the Indian Corporate Sector. In pursuance to thisnecessity the Companies Bill, 1993 was formed but was later withdrawn. The Depositories Act,1996 was introduced in India and later a working Group was constituted to rewrite the CompaniesAct, 1956. In pursuance to above made effort the Companies Bill, 1997 was introduced in RajyaSabha on August 14, 1997 in order to replace the prior legislation.The President of India promulgated the Companies (Amendment) Ordinance, 1998 on October 31,1998. But this promulgated the Companies (Amendment) Ordinance, 1998 was soon replaced bythe Companies (Amendment) Act, 1999.The objectives of the Companies (Amendment) Act, 1999: To surge the capital market by boosting the morale of the National business houses. Fostering the FITs and Foreign Direct Investments in the country.The changes brought by the Companies (Amendment) Act, 1999 are: A facility was introduced to allow the Corporate Sector to buy-back company’s own share. Provisions relating to investments and loans were liberalised and rationalised. Requirement of prior approval of the Central Government on investment decisions wasdone away with and companies were allowed to issue “sweat equity” in lieu of theintellectual property. The compliance of the Indian Accounting Standard was made mandatory and the NationalCommittee on Accounting Standard was also incorporated.10
The benefit of the investors was looked into by setting up “Investor Education andProtection Fund”. Introduction of the nomination to shareholders, debenture holders, etc.Later, the Companies (Amendment) Act, 2000 was enacted, which was followed by the Companies(Amendment) Act, 2001 wherein the Section 77A was introduced in relation to buy-back of theshares. This amendment allowed the Board of Directors to buy-back the shares upto 10% of thepaid-up capital and free reserves provided not more than one such buy-back is made during theperiod of 365 days. Then, the Companies (Amendment) Act, 2002 was enacted which wasfollowed by the Companies (Second Amendment) Act, 2002. The first amendment introduced thesetting-up and regulation of the Cooperatives as a body corporate under the Companies Act, 1956to be called ‘Producer companies. The Second Amendment was to expedite the winding-upprocess of the companies to facilitate rehabilitation of the sick companies and protection ofworkers interest.The Companies (Amendment) Act, 2006, was brought into force on 1.11.2006 wherein itintroduced the Director Identification Number (DIN) and also introduced electronic filing ofvarious returns and forms.The New Enactment of the New SocietyThe Companies Act, 2013 replaced the Companies Act, 1956. The legislators introduced ideas ofthe likes of: Corporate Social Responsibility (CSR) Class action suits Fixed term for the Independent Directors The provision of raising money from the public was made little stringent Prohibition on insider trading by company directors or key managerial personnel bydeclaring such activities as a criminal offence It permits shareholder agreements providing for the ‘Right of First Offer’ or ‘Right of firstRefusal’ even in the case of Public Companies11
The Companies (Amendment) Act, 2015: It received the presidential assent on May 2015 andbecame operate on 29th May 2015. It is designed to address the issues of the stakeholders such asChartered Accountants and other professionals.Key Amendments brought in by the Companies (Amendment) Act, 2015 may be explained asfollows:No minimum Paid-up share CapitalNo minimum paid-up share Capital requirements will now apply for incorporating private as wellas Public Companies in India.Relaxation in relation to related party transactionIn the case of related party transactions which requires stake-holders approval relaxation has beengiven wherein earlier required special resolution has been replaced by the ordinary resolution.Inspection of the resolution filed with the RegistrarThis Act has limited public access of such resolutions relating mainly to the strategic businessmatters. Such documents will no longer be available for the public to review or permitted to takecopy of.Common Seal O
KLE LAW ACADEMY BELAGAVI &RQVWLWXHQW&ROOHJHV ./(6RFLHW\¶V/DZ&ROOHJH %HQJDO uru, Gurusiddappa Kotambri Law College, XEEDOOL 6 0DQYL/DZ& ROOHJH *DGDJ ./(6RFLHW\¶V% 9 %HOODG/DZ&ROOHJH %HODJDYL ./(/ DZ College, Chikodi, and KLE College of Law, Kalamboli, Navi Mumbai) STUDY MATERIAL for COMPANY LAW Prepared as per the syllabus prescribed by Karnataka State Law University (KSLU), Hubballi .
KLE LAW ACADEMY BELAGAVI (Constituent Colleges: KLE Society’s Law College, Bengaluru, Gurusiddappa Kotambri Law College, Hubballi, S.A. Manvi Law College, Gadag, KLE Society’s
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University, Vidyasangama, PBNH-4, Belagavi-591156, Karnataka, India Dr.S M Hurakadli Professor and Chairman, Department of Geography, Rani Channamma University, Vidyasangama, PBNH-4, Belagavi-591156, Karnataka, India ABSTRACT The modern period witnessed the increased gender disparity reflected in sex-ratio, literacy and education, .
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22. M. Kle man, The general theory of disclinations 243 23. Y. Bouligand, Defects and textures in liquid crystals 299 24. M. Kle man, Dislocations, disclinations and magnetism 349 VOLUME 6. Applications and Recent Advances 1983; ISBN -444-86490-3 25. J.P. Hirth and D.A. Rigney, The application of dislocation concepts in friction and wear 1 .
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of branched rough paths introduced in (J. Differential Equations 248 (2010) 693–721). We first show that branched rough paths can equivalently be defined as γ-Hölder continuous paths in some Lie group, akin to geometric rough paths. We then show that every branched rough path can be encoded in a geometric rough path. More precisely, for every branched rough path Xlying above apathX .
