COMPANY LAW

CORPORATE AND ECONOMIC LAWS:

A CAPSULE FOR QUICK REVISION
At the Final level, the Company Law portion of the subject “Corporate and Economic Laws” largely involves analysis
and application of provisions of the Companies Act, 2013 to solve application-oriented issues. This subject is
very dynamic on account of the large number of amendments/ circulars/ notification as issued by the Ministry of
Corporate Affairs.
In this capsule for students, an attempt has been made to capture the significant provisions of Companies
Act, 2013 (Sections 149 onwards). You are advised to read the August, 2017 edition of the Study Material with
RTP of November 2018 for a thorough understanding of the relevant provisions and the related amendments of
Companies Act, 2013 and solve the illustrations and exercise questions given therein to hone your application skills.
This capsule on Final Paper 4: Corporate and Economic Laws is intended to assist you in the process of revision of
concepts discussed in the Study Material.

CHAPTER 1: APPOINTMENT AND QUALIFICATIONS OF DIRECTORS

1. Company to have Board of Directors (iii) Provision related to Resident director (RD) [Section
(Section 149) 149(3)]

Meaning of Resident Who has stayed in India for a

(i) Number of directors [Section 149(1)] Director total period of not less than 182
days in the previous calendar
year
Number of directors in co.
Number Atleast One

Companies which appoints Every Company

resident director
Minimum Maximum

(iv) Provisions related to Independent Directors [Section 149

Public co. Private co. OPC 15 read with the relevant rules]

(A) Companies requires to appoint Independent Directors (ID)

3 2 1 INDEPENDENT DIRECTORS

* A co. may appoint more than 15 directors after passing special Listed Public Prescribed Classes
resolution (SR) Companies of Companies

(ii) Provision related to Women director (WD) [Proviso to At least one Paid Up Aggregate,
third of total share Turnover: outstanding
section 149(1) + relevant Rule] Number of Capital: ≥ R100 loans,
directors ≥ R10 crore debentures
No. of Women ♣ Atleast one crore and deposits
Director > R 50 crore
Companies which ♣ every listed co.;
are required to
♣ every other public co. having -
have Women
directors ♦ paid–up share capital of one
At least 2 ID
hundred crore rupees or more; or
♦ turnover of three hundred crore
rupees or more. Due to composition of audit committee, higher number of ID shall
be appointed
Filling of ♣ Immediate next Board meeting or three
Intermittent months from the date of such vacancy, Non-Applicability: If company ceases to fulfil any of the 3
Vacancy whichever is later. conditions for 3 consecutive years

The Chartered Accountant Student October 2018 05

COMPANY LAW
(B) Remuneration of Independent Directors
Shall not hold office for a period longer than that permissible to
the original director and shall vacate the office if and when the
Entitled to Not Entitled to original director returns to India.
Fee provided under section Any stock option
Automatic re-appointment shall apply to the original, and not to
197(5) the alternate director.
Reimbursement of expenses for
participation in: 5. Nominee Director [Section 161(3)]
(i) Board Meetings
(ii) Other Meetings
Profit related commission as may
be approved by the members
Nominee Director
2. Provisions related to Small Shareholder
Director (SSD) [Section 151]
♣ Subject to the articles of a company
Is it compulsory to appoint No (not manadatory) ♣ Board may appoint any person as a director
SSD? ♣ nominated by any institution in pursuance of the
Which co. may appoint? Listed co. provisions of any law for the time being in force or
♣ of any agreement or
Number One ♣ by the Central Government or the State
Who is Small Shareholders A shareholder holding shares of Government by virtue of its shareholding in a
Director? nominal value of not more than Government company
R 20,000 or such other sum as
may be prescribed
How SSD is appointed? By notice - of not less than 1000
small shareholders; or one-tenth
of the total number of such 6. Appointment of Director through casual
shareholders whichever is lower vacancy [Section 161(4)]
Occurence of Filling of casual Term
casual vacancy vacancy
3. Provisions related to Additional Director
[Section 161(1)] If office of any The resulting Person appointed
director appointed casual vacancy shall hold office
Additional Director by the co. in GM may be filled only up to the
Appointment Disqualified Term is vacated before by the BoD at a date up to which
♦ AOA of a co. ♦ A person, who ♦ Hold office up his term of office meeting, which the director in
may confer on fails to get to the date of expires in the is to be approved whose place he is
its BoD the appointed as the next AGM normal course by memebers in appointed would
power to- a director in a or the last date
immediate next have held office
♣ appoint any GM, cannot be on which the
person as an appointed as AGM should GM if it had not been
additional an additional have been held, vacated.
director director whichever is
♣ at any time earlier.
7. Appointment of Directors to be voted
4. Provision related to Alternate Director individually [Section 162]
[Section 161(2)]
♦ Two / more persons cannot be elected
Appointed by BoD, if so authorised by AOA or by resolution as directors by a single resolution.
passed by company in GM ♦ Unless the meeting first agreed that
the appointment shall be made by a
Appointed during the absence of original director for a period of single resolution and no vote has been
not less than 3 months from India. Appointment cast against such agreement.
of Directors ♦ Contravention of above shall be void,
Cannot be person who is holding any alternate directorship for any to be voted whether or not objection was raised at
other director in the co. or holding directorship in the same co. Individually the time it was so moved.
♦ A motion for approving a person or for
No person shall be appointed as an alternate director for an nominating a person, for appointment
independent director unless he is qualified to be appointed as an as a director, shall be treated as a
independent director motion for his appointment

06 October 2018 The Chartered Accountant Student

 COMPANY LAW
8. Appointment through proporational 10. Holding of maximum number of
representation [Section 163] directorship [Section 165]
AOA of co. may provide for By single transferable vote /
appointment of not less than by system of cumulative voting /
2/3rd of total number of directors, otherwise Maximum 20 Out of 20, maximum 10
in accordance with (including Alternate public companies
principle of directorship)
proportional Option to adopt
representation, principle of proportional
representation for
appointment of directors

Such appointments may be Casual vacancies of such

made once in every three years directors shall be filled as per
section 161(4).

Number of
9. Disqualifications for appointment of directorship
Director [Section 164 (1)]
(i) General disqualification of directors
He is of unsound mind and stands so declared by a competent
court;
He is an undischarged insolvent;
He has applied to be adjudicated as an insolvent and his application Exclusion(from 20 Company may specify lesser
is pending co.) directorship in number of companies in
He has been convicted by a court for any offence, whether involving dormant co. which a director may act as
moral turpitude or otherwise, and sentenced in respect thereof to directors by passing SR.
imprisonment for not less than 6 months and a period of 5 years
has not elapsed from the date of expiry of the sentence.

However, if a person has been convicted of any offence and

sentenced in respect thereof to imprisonment for a period of 7
years or more, he shall not be eligible to be appointed as a director 11. Duties of Directors [Section 166]
in any company
An order disqualifying him for appointment as a director has been
passed by a court or Tribunal and the order is in force;
Shall act in good faith in order
He has not paid any calls in respect of any shares of the company shall act in to promote the objects of co.,
held by him, whether alone or jointly with others, and 6 months
have elapsed from the last day fixed for the payment of the call;
accordance with for benefit of its members as a
AOA, subject to whole & in the best interests of
He has been convicted of the offence of dealing with related
the provisions of co., its employees, shareholders,
party transactions under section 188 at any time during the last
preceding 5 years; or the Act. community & for protection of
environment.
He has not complied with section 152(3) which requires a director
to have a DIN under section 154.
(ii) Specific disqualifications (Section 164(2)] Shall exercise his duties with due & reasonable care, skill
person who is /has been a director of a company which & diligence & shall exercise independent judgment.
has not filed financial statements or annual returns for any
continuous period of three financial years; or
Shall not involve in a situation in which he may have a
direct or indirect interest that conflicts, or possibly may
conflict, with interest of co.
has failed to repay the deposits accepted by it or pay interest
thereon or to redeem any debentures on the due date or pay
interest due thereon or pay any dividend declared and such Shall not achieve or attempt to achieve any undue gain
failure to pay or redeem continues for one year or more or advantage either to himself or to his relatives, partners,
or associates & if such director is found guilty of making any
shall not be eligible to be- undue gain, he shall be liable to pay an amount equal to that
re-appointed as a director appointed in other company gain to the company
of that company or for a period of five years from
the date on which the said
company fails to do so Shall not assign his office & if any assignment so made, it
*A private company may by its articles provide for any shall be void.
disqualifications for appointment as a director in addition to
those specified in sub-sections (1) and (2).

The Chartered Accountant Student October 2018 07

COMPANY LAW
12. Vacation of Office of Director
[Section 167] 13. Resignation of Director [Section 168]
Director incurs any of the disqualifications specified Resignation shall take effect
in section 164; Director may resign from from the date on which the
his office by giving a notice notice is received by co. or
in writing to co.  the date, if any, specified by
he absents himself from all meetings of BoD held the director in the notice,
during a period of 12 months with or without seeking whichever is later.
leave of absence of the Board;

he acts in contravention of provisions of section 184 Director may also forward a

relating to entering into contracts or arrangements in Board shall on receipt of
such notice take note of the
which he is directly or indirectly interested;
same
he fails to disclose his interest in any contract or
arrangement in which he is directly or indirectly interested,
in contravention of the provisions of section 184;
Co. shall within 30 days
from date of receipt of
he becomes disqualified by an order of a court or the notice intimate the Registrar
Tribunal; & post the information on
its website, if any.
copy of his resignation along
with detailed reasons to
Registrar within 30 days of
resignation
Co. shall also place the fact
of such resignation in BoD’s
Report laid in immediately
following GM.

he is convicted by a court of any offence, whether

involving moral turpitude or otherwise & sentenced
in respect thereof to imprisonment for not less than 6
months. Office shall be vacated by the director even if he 14. Removal of Directors [Section 169]
has filed an appeal against the order of such court; (i) Steps for removal

Director
he is removed in pursuance of the provisions of this
shall be given
Act;
Special opportunity to
notice is be heard
he, having been appointed a director by virtue of his By Ordinary
holding any office or other employment in the holding, required
Resolution
subsidiary or associate company, ceases to hold such
office or other employment in that company.

(ii) Restrictions on removal of certain directors

Directors appointed ID: who are re-appointed for second term under section 149(10) Directors appointed
by Tribunal under can be removed only by passing SR+ opportunity of being heard under section 163
section 242

CHAPTER 2: APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL

1. Appointment of Managing Director, Whole- (ii) Tenure [Section 196(2)]
Time Director or Manager (Section 196)
(i) Appointment of MD and Manager [Section 196(1)]
Tenure of MD, WTD
or Manager

Managing Director Manager

Maximum
5 years
Shall not be appointed
at the same time in the
company.

08 October 2018 The Chartered Accountant Student

 COMPANY LAW

(iii) Disqualifications for MD, WTD or Manager S. Conditions Maximum Conditions when
[Section 196(3)] No. remuneration in remuneration
any financial year can exceed
as referred in
below the age of 21 years or has attained the age of 70 column (b)
years; or
(a) (b) (c)
(ii) If there is one 5% of the net profits With the approval
is an undischarged insolvent or has at any time been
adjudged as an insolvent; or M a n a g i n g of the company for of the company in
director/ Whole that year general meeting
time director/ this limit may be
manager exceeded.
has at any time suspended payment to his creditors or makes,
or has at any time made, a composition with them; or (iii) If there is 10% of the net With the approval
more than profits of the company in
one Managing general meeting
director/ Whole this limit may be
has at any time been convicted by a court of an offence and time director/ exceeded.
sentenced for a period of more than six months.
manager
(iv) If there is 1% of the net profits Approval of
Additional conditions prescribed through Schedule V (for
appointment without approval of Central Government) directors who of the company if the company in
are neither there is a managing general meeting
Managing director or a whole is required.
director nor time director
whole time
(iv) Procedure of appointment of MD, WTD or Manager directors
[Section 196(4)]
(v) If there are 3% of the net Approval of
directors who profits of the the company in
Subject to provisions of Section 197 and Schedule V are neither company if there general meeting
Managing is no managing is required.
Terms and conditions and remuneration payable be approved by director nor director or whole
BOD at meeting whole time time director
directors
Approval of shareholders in next GM
* In case of Government Company, Section 197 shall not
Approval of Central Government (if appointment is at variance apply.
with Schedule V)
3. Appointment of KMP [Section 203]
Return in prescribed form shall be filled with Registrar within 60 (i) KMP [section 2(51)]
days of such appointment.

*In case of private company - Section 196(4) shall not apply. Managing
Director/
**In case of government company -Section 196(2) & (4) shall not Chief
apply. Executive
Officer /
Manager
2. Overall maximum Managerial Other Whole-time
Remuneration [Section 197(1)] prescribed Director
officer (in absence
of MD/
S. Conditions Maximum Conditions when CEO/M)
No. remuneration in remuneration
any financial year can exceed Who are
as referred in
column (b) Such other
KMPs?
officer not more
(a) (b) (c) than one level
below the directors Company
(i) Overall limit 11% of the net Company in (in whole time Secretary
profits of the general meeting employment
company for that with approval designated
financial year of Central as KMP)
Government Chief
subject to Financial
provisions of Officer
Schedule V

The Chartered Accountant Student October 2018 09

COMPANY LAW

4. Functions of the Company Secretary

(ii) Companies which are mandatorily required to appoint
[Section 205]
whole time KMP [Section 203(1) + relevant Rule ]
Functions of the CS includes

to report to the Board about compliance

companies every listed co. & to ensure that the co. complies with the applicable secretarial
mandatorily every other public co. having standards;
required to appoint a paid-up share capital of R 10
whole-time KMP to provide to the directors of the co. guidance as they may require,
crore or more with regard to their duties, responsibilities and powers;

to facilitate the convening of meetings and attend Board,

committee and general meetings and maintain the minutes of
these meetings;
(iii) Provisions related to appointment of whole time KMP
[Section 203(2) &(3)] to obtain approvals from the Board, general meeting, the
government and other authorities as required

to represent before various regulators, and other authorities in

Appointment of KMP as director
Restriction on holding of office

connection with discharge of various duties under the Act;

Mode of Appointment

by means of Whole time KMP can be

to assist the Board in the conduct of the affairs of the co.;
resolution KMP shall not appointed as a
of Board hold office in director in any to assist and advise the Board in ensuring good corporate
containing more than one company with governance and compliance & best practices
terms & co. at the same the permission
to discharge such other duties as have been specified under the
conditions & time except its of the Board. Act or rules; &
remuneration subsidiary co.
such other duties as may be assigned by the Board from time to
time.

(iv) Managing Director / Manager in more than one

company [Third proviso to Section 203(3)] 5. Secretarial Audit [Section 204]

♦ Co. may appoint a person as its ♦ Every Listed co.

MD, if he is MD / manager of one, Companies ♦ Every public company
& of not more than one, other co. that are having a paid up share
Appointment ♦ Approved by resolution passed required capital of R 50 crore or
of person as at meeting of Board with consent
of all directors present at the
to conduct more; or
MD in more
than one meeting Secretarial ♦ Every public company
♦ Specific notice of such meeting Audit having a turnover of
company
& of the resolution to be moved R 250 crore or more.
thereat has been given to all the
directors then in India.

(v) Vacancy in office of KMP [Section 203(4)] 6. Penalty [Section 203 (5)]

{ On company Every Director & where the

Vacancy ♦ filled up by the board KMP in default contravention is a
of KMP ♦ within 6 months from date of vacancy continuing one

♦ fine not be ♦ fine extending ♦ with a further

In case of government Company, as per section 4A, the provisions less than 1 to fifty fine which
of sub-sections (1), (2), (3) and (4) of section 203, shall not apply to a lakh rupees thousand may extend to
managing director / Chief Executive Officer / manager and in their extending to rupees one thousand
absence, a whole-time director of the Government Company. five lakh rupees rupees for every
day

10 October 2018 The Chartered Accountant Student

 COMPANY LAW
CHAPTER 3: MEETINGS OF BOARD AND ITS POWERS

1. Board Meeting (BM) [Section 173] (iv) Notice of the BM [Section 173 + Relevant Rule]

(i) Frequency of holding of BM Period & mode of serving of notice

Holding of BM [(173(1)] at least 7 days’ to all the directors sent by hand

notice in writing at registered delivery/
First BM Subsequent BMs address by post/ by
♦ shall be held within ♦ hold minimum of 4 meetings electronic means
30 days of the date of every year
its Incorporation ♦ gap between two consecutive
board meetings shall not be Shorter notice less than 7 days may be served
more than 120 days
to to atleast one In absence, decisions taken shall
transact independent be circulated to all the directors
Proviso an urgent director, if and shall be final only on
to section business any, shall be ratification thereof by at least
173(1) present one independent director, if any

may by exempt any class,

notification or descriptions of
companies, or Option to participate through video conferencing mode/
Central other audio visual means (Rule 3)
Government apply provisions
notice of the meeting shall inform the directors regarding
subject to the option available to them to participate through video
exceptions, conferencing mode or other audio visual means, and shall
modifications or provide all the necessary information to enable the directors
conditions to participate through video conferencing mode or other
audio visual means

Exemption to Section 8 companies from compliance On receival of notice

of section 173(1)
Applicable to the extent that the Board of Directors, of
Section 8 companies shall hold at least one meeting within
every six calendar months.
a director intending to participate through video conferencing
or audio visual means shall communicate his intention to
the Chairperson or the company secretary of the company

(ii) Exceptions to section 173 [Section 173(5)] No intimation from director of his participation through the
electronic mode
Companies deemed to have been complied with the
provisions of section 173 it shall be assumed that the director shall attend the meeting
in person
*One Person small dormant private start
Company company company ups
(OPC) 2. Quorum (Section 174)
(i) Quorum
if at least one meeting of the BoD has been conducted-

in each half of a calendar the gap between the two Quorum of a BM

year, and meetings is not less than
90 days.

*In case of OPC, in which there is only one director on its 1/3rd of Total or 2 Directors
Board of Directors, it shall not be required to hold at least strength
one Board meeting in each half of a calendar year.

(iii) Participation in BM [Section 173 (2)]

Which ever is higher
♦ in person
Directors may ♦ Through video conferencing
♦ other audio visual means as prescribed For section 8 Companies, quorum for the BM, either 8 members or
attend board
under Rule 3 of the Companies (Meetings
meeting - 25% of its total strength whichever is less. Provided that quorum
of Board and its Powers) Rules, 2014
shall not be less than two members.

The Chartered Accountant Student October 2018 11

COMPANY LAW
(ii) Quorum when directors participate through Video 3. Powers of Board (179)
Conferencing
The BoD of a company Exception to Board’s Power:
shall be entitled to
In case of participation of directors through video
conferencing or by other audio visual means, such directors The Board shall not exercise any
exercise all such
power or do any act or thing which is
♦ shall also be counted for the purpose of determining powers, and to do all
directed or required,
such acts and things,
the quorum at the meeting, ♦ whether under this Act or
as the company is
♦ unless he is to be excluded for any items of business ♦ by the memorandum or
authorised to exercise
♦ articles of the company or
under any provisions of the Act or the rules and do
♦ otherwise, to be exercised or
(Explanation as given in Rule 3 of the Companies done by the company in general
(Meetings of Board and its Powers) Rules, 2014 ) meeting

(iii) Section 174(3)

♦ the continuing directors
or director may act for the
Where the quorum purpose of increasing the
of continuing number of directors to
directors is reduced
that fixed for the quorum,
(as fixed by article) or
♦ for summoning a general
meeting of the company
* Where at any the number of directors who
time the number of are not interested directors
interested directors and present at the meeting,
exceeds or is equal being not less than two, shall
to 2/3 of the total be the quorum during such
strength of the time
BOD
Board may exercise its powers by
means of the resolution passed at a duly
convened Board meeting
Powers of Board
make calls on shareholders in respect of money unpaid
authorise buy-back of securities
issue securities
borrow monies
invest the funds of the company
grant loans or give guarantee or provide security
diversify the business
approve financial statement and the Board’s report
approve amalgamation, merger or reconstruction
take over a company or acquire a controlling or substantial stake
in another company
any other matter which may be prescribed in Rule 8 of the
Companies (Meetings of Board and its Powers) Rules, 2014

*In case of Private Company - Section 174(3), shall apply with

the exception that the interested director may also be counted
towards quorum in such meeting after disclosure of his interest
Additional
pursuant to section 184. powers prescribed
(iv) Where a meeting of the Board could not be held for want under Rule 8 of
the Companies
of quorum [174(4)] (Meetings of Board
and its Powers)
Unless the articles of the company otherwise provide, Rules, 2014

the meeting shall automatically stand adjourned

♦ to the same day ♦ to make political contributions;
♦ at the same time and place ♦ to appoint or remove KMP
♦ in the next week, ♦ to appoint internal auditors and
secretarial auditor;
if that day is a national holiday, till the next
succeeding day, which is not a national holiday, at
the same time and place
12 October 2018 The Chartered Accountant Student
 COMPANY LAW

4. Restrictions on powers of Board [Section 180]

The BoD of a company shall exercise the following powers only with the consent of the company by a special resolution

To sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking
To sell, lease or dispose of the of the company or where the company owns more than one undertaking, of the whole or
undertaking of the company substantially the whole of any of such undertakings

To invest the amount of To invest otherwise in trust securities the amount of compensation received by it as a result of
compensation received as a result of any merger or amalgamation;
any merger or amalgamation;

to borrow money, where the money to be borrowed, together with the money already
Limit to borrow money, borrowed by the company will exceed aggregate of its paid-up share capital, free reserves and
securities premium apart from temporary loans obtained from the company’s bankers in the
ordinary course of business

Settlement of amount from To remit, or give time for the repayment of, any debt due from a director
director

*Section 180, is not applicable to private company.

5. Powers of BoD of a Company to make contributions [Sections 181, 182 & 183]
To Bonafide ♦ any amount the aggregate of which, in any financial year, exceed 5% of its average net profits for the three
charitable and immediately preceding financial years.
other funds ♦ prior permission of the company in general meeting shall be required

♦ a company, other than a Government company and a company which has been in existence for less than
three financial years-
To Political
Contributions ♦ may contribute any amount directly or indirectly to any political party, unless a resolution authorising the
making of such contribution is passed at a meeting of the Board of Directors,
♦ and such resolution shall, subject to the other provisions of this section, be deemed to be justification in
law for the making of the contribution authorised by it.
To National ♦ BoD authorised in general meeting, may, contribute such amount as it thinks fit to the National Defence
Defence Fund, etc Fund or any other Fund approved by the Central Government for the purpose of national defence

6. Disclosure of interest by Director [Section 184]

(i) Applicability of section:
Disclosures
♦ on all
directors of
Applicabilty the company
of section General Disclosure
and ♦ Every director shall disclose his concern or interest in
184 ♦ all types of any company or companies or bodies corporate, firms, or
Companies other association of individuals which shall include the
shareholding,
(ii) When to disclose concern/interest in a contract or arrangement ♦ the directors shall disclose his concern or interest, by giving a
notice in writing
& what following disclosures shall be made

When to disclose
Specific Disclosure
♦ Whenever any director of a company who is in any way,
Every director shall: whether directly or indirectly, concerned or interested
♦ At the First meeting of the Board in which he participates as in a contract or arrangement or proposed contract or
a director, and arrangement entered into or to be entered into shall disclose
♦ Thereafter, at the first meeting of the Board in every financial the nature of his concern or interest at the meeting of the
year, or Board in which the contract or arrangement is discussed and
♦ Whenever there is any change in the disclosures already shall not participate in such meeting.
made, then at the first Board meeting held after such change.

The Chartered Accountant Student October 2018 13

COMPANY LAW
(iii) Consequences of non-disclosure
Section 184 shall not apply to any
Consequences of non disclosure of concern or contract or arrangement entered into
interest in any contract or arrangement - or to be entered into between two
♦ It shall be voidable at the option of companies or between one or more
company companies and one or more bodies
♦ Penalty to a director of the company corporate where any of the directors
♦ with imprisonment for a term of the one company or body corporate
Exceptions or two or more of them together holds
extending to 1 year, or
♦ with fine upto 1 lakh rupees, or or hold not more than two per cent. of
♦ with both. the paid-up share capital in the other
company or the body corporate

* In case of private company - Section 184 (2) shall apply; with the exception that the interested director may participate in such meeting after
disclosure of his interest.
* Whereas with respect to the companies covered under section 8 of the Companies Act, 2013, the Section 184(2) shall apply only if the
transaction with reference to section 188 on the basis of terms and conditions of the contract or arrangement exceeds one lakh rupees.

7. Loan to Directors, etc. [Section 185] (iii) Contravention

In contravention of section
(i) Providing loan / guarantee / security 185, penalties levied-

No company shall, directly or indirectly, advance

any loan to any of its give any provide any On Company On defaulting director
directors or to any other guarantee or security and other person
person in whom the
director is interested, or
Minimum- 5 lakh Imprisonment- Maximum
and maximum- 25 6 months, or,
lakh
in connection with any loan taken by him or such
other person Fine- Minimum- 5 lakh and
maximum- 25 lakh, or,

(ii) Exceptions to section 185 Both imprisonment and

fine.

as a part of the conditions of service

(iv) Exemptions
giving of any loan to a extended by the company to all its
managing director or employees; or Exemptions to following companies from application of
whole-time director— pursuant to any scheme approved by section 185 –
the members by a special resolution; or
Nidhis Private company Government
a company which in the due repayment of any loan and
♦ Provided ♦ In whose share company
the ordinary course of
the loan is capital no other ♦ Such company
its business provides
in respect of such loans an interest is given to a body corporate has o b t a i n s
loans/ gives guarantees /
charged at a rate not less than the bank director or invested any money; approval of the
securities for-
rate declared by the Reserve Bank of his relative ♦ If the borrowings of Ministry or
India in their such a company from Department
capacity as banks or financial of the Central
members institutions or Government
any loan made by a holding and such anybody corporate is which is
company to its wholly owned transaction less than twice of its administratively
subsidiary company / any is disclosed paid up share capital in charge of the
guarantee given/ security in the or fifty crore rupees, company, or, as
provided by a holding a n n u a l whichever is lower, the case may
company in respect of any Provided loans made accounts by and be, the state
loan made to its wholly owned are utilised by the a note. ♦ Such company has no Government
subsidiary company; or subsidiary company for default in repayment before making
its principal business of such borrowings any loan or
Any guarantee given or activities
security provided by a holding subsisting at the giving any
company in respect of any loan time of making guarantee or
made by any bank or financial transactions under providing any
institution to its subsidiary this section security under
company: the Section

14 October 2018 The Chartered Accountant Student

 COMPANY LAW
8. Loan and Investment by Company (iii) Maintenance of register [Section 186(9) & (10)]
[Section 186(1)]
♦ keep a register
(i) Investment by company
Every company ♦ containing such particulars and
giving loan maintained as per Rule 12 of the
Investment by company Companies (Meetings of Board and
/a guarantee
a company shall unless otherwise prescribed, make / providing its Powers) Rules, 2014
investment through not more than 2 layers of investment security / ♦ be kept at the registered office of the
companies making an company
acquisition shall ♦ be open to inspection at such office
and extracts may be taken therefrom
Exemption by any member
♦ However, above provisions shall not affect,—
♦ a company from acquiring any other company
incorporated in a country outside India (iv) Non-applicability of section 186 [Section 186(11)]
♣ if such other company has investment subsidiaries
beyond two layers as per the laws of such country; Except sub-section (1)
♦ a subsidiary company from having any investment of section 186
subsidiary for the purposes of meeting the requirements
under any law / under any rule / regulation framed Section 186 shall not apply
under any law for the time being in force.

(ii) Ceiling on the investment [Section 186(2) & (3) Read with to a loan made, to any acquisition-
Rule 13 of the Companies (Meetings of Board and its Powers) guarantee given / ♦ made by a non-banking financial
Rules, 2014] security provided company registered under the
by- Reserve Bank of India Act, 1934
♦ a banking and whose principal business is
Transactions /investment made by co.
company or acquisition of securities: However,
(in the form of )
♦ an insurance exemption to NBFC shall be in
company or respect of its investment and
♦ a housing lending activities;
Loan Guarantee/ Acquire by way f i n a n c e ♦ made by a company whose principal
security in of subscription, company business is the acquisition of
connection purchase or
securities;
with the loan otherwise the
securities of any
♦ of shares allotted in pursuance of
other body corporate section 62(1)(a)
♦ made by the banking company
or an insurance company or a
housing finance company, making
Company shall make such investment acquisition of securities in the
ordinary course of its business.

exceeding 60% of its paid-up share capital, free reserves and (v) Penalty [Section 186(13)]
securities premium account or 100% of its free reserves and
securities premium account, whichever is more on prior approval
by means of a special resolution passed at a general meeting In contravention to In contravention to
section 186 section 186

company shall be ♦ every officer of the

A resolution passed at a general meeting to give any loan / punishable with fine - company who is
guarantee / investment / providing any security / the acquisition- ♦ Min.- R 25,000 in default shall be
• shall specify the total amount up to which the Board of ♦ Max.- R 5 lakh And punishable-
Directors are authorised to give such loan or guarantee, to ♦ with imprisonment
provide such security or make such acquisition -extending upto 2
• the company shall disclose to the members in the financial years, and
statement the full particulars with fine -
• Resolution sanctioning passed at a meeting of the Board with ♦ Min.- R 25,000
the consent of all the directors present at the meeting. ♦Max.- R 1,00,000

* Section 186 shall not apply to a Government company engaged in

company in default in the repayment of any deposits, or in
payment of interest thereon, shall not –
• give any loan or give any guarantee or provide any security or
make an acquisition
• till such default is subsisting
defence production.
* In case of a Government company, other than a listed company,
such company shall obtain obtains approval of the Ministry or
Department of the Central Government which is administratively
in charge of the company, or, as the case may be, the State
Government before making any loan or giving any guarantee
or providing any security or making any investment under the
section.

The Chartered Accountant Student October 2018 15

COMPANY LAW

9. Investments of company to be held in its own name [Section 187]

All investments

made or held by a company in any-

property or other assets

security

Shall be made and held by it in its own name

* However, the company may hold any shares in its subsidiary company in the name of any nominee or nominees of the company, if
it is necessary to do so, to ensure that the number of members of the subsidiary company is not reduced below the statutory limit.

10. Related Party Transactions [Section 188 read with Rule 3 of the Companies
(Specification of Definitions Details) Rules, 2014]
(i) Meaning of Related Party

Related Party (Section 2 clause 76) with reference to a company, means-

a director a KMP a firm, a private a public any body any person such other
/ his in company company corporate on whose person as
/ his
prescribed in
relative; relative; which a in which in which whose BoD, advice,
any body corporate which is— Rule 3 of the
director, a director a director MD or directions or
manager /manager /manager manager is instructions Companies
/ his / his is a accustomed a director or (Specification
relative relative director to act in manager is of Definitions
is a is a and holds accordance accustomed a holding, a subsidiary an investing Details) Rules,
partner; member along with the to act: 2014 ;
subsidiary of a holding company or
or with his advice, or an company venturer of
director; relatives, directions associate to which the company
more or company it is also a
than 2% instructions of such subsidiary;
of its of a director company;
paid-up / manager; or
share
capital;

(ii) Contracts with related parties (RP) which are covered under section 188 [Section 188(1)]
Company shall enter into any contract or arrangement with a RP with respect to the transactions (given below)
with the consent of the Board of Directors given by a resolution at a meeting of the Board and subject to such conditions as prescribed
under rule 15(1) of the Companies (Meetings of Board and its Powers) Rules, 2014
Transactions

A sale, purchase or supply of any goods or materials; appointment of any agent for purchase or sale of
E
goods, materials, services or property;

selling or otherwise disposing of, or buying, property

B of any kind; such related party's appointment to any office
F or place of profit in the company, its subsidiary
company or associate company; and
C leasing of property of any kind;

underwriting the subscription of any securities or

D availing or rendering of any services; G derivatives thereof, of the company:

*However, no contract or arrangement, in the case of a company having a paid-up share capital of not less than such amount, or transactions
not exceeding such sums, as prescribed under Rule 15(3) of the Companies (Meetings of Board and its Powers) Rules, 2014, shall be entered into
except with the prior approval of the company by a resolution. [First proviso to section 188(1)]
16 October 2018 The Chartered Accountant Student
 COMPANY LAW

(iii) Prescribed limits for the transactions to be entered into (v) Relevant particulars to disclose in the notice of a general
as contracts or arrangements with the prior approval of meeting and consequences on being a related party/or in
the Company [Rule 15(3) of the Companies (Meetings of relation to a related party, in a transaction. [Proviso &
Board and its Powers) Rules, 2014] explanation to Section 188]
(A) Transaction/s to be entered into as contracts or arrangements
with respect to clauses (a) to (e) of section 188(1), are with Where any director
The explanatory No voting by is interested in
criteria as mentioned below - statement to be related member any contract /
annexed to the ♦ no member of arrangement with
Prescribed limits for the notice of a general the company
Transactions to be entered a related party,
transactions to be entered into meeting as per shall vote
into with the prior approval
as contracts or arrangements
such director shall
section 101, shall on such not be present
sale, purchase or supply Amounting to 10% or more of contain- resolution, to at the meeting
of any goods or materials, the turnover of the company or ♦ name of the approve any during discussions
directly or through rupees 100 crore, whichever is related party; contract or on the subject
appointment of agent lower, as mentioned in clause (a) ♦ name of the arrangement matter of the
and clause (e) respectively of sub- director / which may be
section (1) of section 188 resolution relating
KMP who is entered into by to such contract
selling or otherwise disposing Amounting to 10% or more of net related, if any; the company, if or arrangement.
of or buying property of any worth of the company or rupees ♦ nature of such member [Rule 15(2)]
kind, directly or through 100 crore, whichever is lower, as relationship; is a related
appointment of agent mentioned in clause (b) and clause ♦ n a t u r e , party.
(e) respectively of sub-section (1) of material terms,
section 188 monetary
leasing of property of any Amounting to 10% or more of value and
kind the net worth of the company or particulars of
10% or more of turnover of the the contract /
company or rupees 100 crore, arrangement;
whichever is lower, as mentioned ♦ any other
in clause (c) of sub-section (1) of
information
section 188
relevant /
availing or rendering of Amounting to 10% or more of important for
any services, directly or the turnover of the company the members
through appointment of or rupees 50 crore, whichever to take a
agent is lower, as mentioned in clause decision on
(d) and clause (e) respectively of the proposed
resolution.”
sub-section (1) of section 188:

* It is hereby clarified that the limits specified above, shall

apply for transaction/s to be entered into either individually
or taken together with the previous transactions during a (vi) Passing of resolution is not necessitated [Proviso to
financial year. Section 188(1)]
(B) Transaction/s to be entered into as contracts or arrangements
is for appointment to any office or place of profit in the
company, its subsidiary company or associate company at a No resolution
monthly remuneration exceeding 2.5 lakh rupees; or required to be
(C) Transaction/s to be entered into as contracts or arrangements passed under
is for remuneration for underwriting the subscription of any first proviso
securities or derivatives thereof, of the company exceeding to section 188
1% of the net worth as mentioned in section 188(1)(g)

for transactions entered into between a

(iv) Concept of “Arm’s length transaction” holding company and its wholly owned
subsidiary,
Meaning
a transaction between two conducted as so that there is
related parties if they were no conflict of whose accounts are consolidated with
unrelated, interest such holding company, and

Applicability of section 188 on transactions on arm's length basis

are placed before the shareholders at the
Section 188(1) shall not apply to any Except the general meeting for approval.
transactions transactions which
♦ entered into by the company in are not on an arm’s
its ordinary course of business length basis

The Chartered Accountant Student October 2018 17

COMPANY LAW
(vii) Consequences of Related party transaction [Section 188(3) & (4)]

if it is not ratified by Such act shall be open to the

Where any contract /
arrangement is entered
into without obtaining the
consent of the Board or
approval by a resolution in
the general meeting by-
♦ a director, or
♦ any other employee, and
company to proceed against-
♦ the Board, or
♦ the shareholders at ♦ a director or any other
employee
a meeting within 3
♦ who had entered
months from the date into such contract or
on which such contract arrangement
or arrangement was ♦ in contravention of the
entered into. provisions of this section
for recovery of any
loss sustained by it as a
result of such contract
or arrangement.
Further, if the contract
or arrangement is with a
related party to any director,
or is authorised by any other
director,
♦ the directors concerned
shall indemnify the
company against any
loss incurred by it.

A contract or arrangement shall be voidable at the option of the

Board/ shareholders

(viii) Penalty for contravention [Section 188 (5)]: (i) Audit Committee [Section 177]
(A) Formation & composition of an Audit Committee:
In the case of a- Liability
Audit Committee shall be
listed company Any director or any other employee of a
constituted by the BoD of-
company, who had entered into or authorised
the contract or arrangement in violation of the
provisions of this section shall-
Such other class or classes of companies
be punishable with imprisonment for a term Every listed company as prescribed under Rule 6 of the
which may extend to 1 year or with fine which Companies (Meetings of Board and its
shall not be less than 25,000 rupees but which Powers) Rules, 2014
may extend to 5 lakh rupees, or with both; and
any other Any director or any other employee of a
company company, who had entered into or authorised public public public companies,
the contract or arrangement in violation of the companies with companies having in aggregate,
a paid up capital having turnover outstanding loans /
provisions of this section shall-
of R 10 cr / of borrowings /debentures
be punishable with fine which shall not be less R 100 cr /more /deposits exceeding
more;
than 25,000 rupees but which may extend to R 50 cr/ more.
5 lakh rupees.
* The paid up share capital or turnover or outstanding loans,
* Exemption from applicability of section 188 for transactions or borrowings or debentures or deposits, as the case may be, as
arising out of Compromises, Arrangements and existing on the date of last audited Financial Statements shall be
taken into account for the purposes of this rule.
Amalgamations dealt with under specific provisions of the
Companies Act, 2013.
(B) Composition of Audit Committee
11. Committees Disclosure in Board’s Report-
• Composition of committee
Committees Composition of an • Non- acceptance of any
Audit committee recommendation with reasons

♦ Minimum -3 directors
♦ independent directors forming a majority
♦ members of Audit Committee including its Chairperson
shall be persons with ability to read and understand the
Audit Nomination Stakeholders
financial statement
Committee and Relationship
Remuneration Committee * ‘Independent Directors forming a majority’ is omitted in
Committee constitution of audit committee for the Companies covered under
Section 8 of the Companies Act, 2013.

18 October 2018 The Chartered Accountant Student

 COMPANY LAW
(C) Responsibilities of an Audit Committee (E) Rights of others in Audit Committee

Every Audit Committee shall act in have a during the No right to

accordance with the terms of reference Auditors of right to be consideration vote
specified in writing by the Board which shall, a company heard in the of the
inter alia, include + KMP meetings of auditor ’s
the Audit report
Committee
the recommendation for appointment, remuneration
and terms of appointment of auditors

*In the case of Listed company formation, composition,

review and monitor the auditor’s independence , responsibilities and rights of Audit committee shall be governed
performance, and effectiveness of audit process; by SEBI (LODR) Regulations issued under SEBI Act, 1992.

examination of the financial statement and the
auditors’ report thereon;
approval or any subsequent modification of transactions
Responsibilities
(ii) Vigil mechanism [Section 177(9) read with Rule 7 of the
Companies (Meetings of Board and its Powers) Rules,
2014]
(A) Formation of vigil mechanism

of the company with related parties;

♦ Provided that the Audit Committee may make Vigil mechanism shall be formed by-
omnibus approval for related party transactions
proposed to be entered into by the company  as per
the Rule 6A of the Companies (Second Amendment)
Every listed company,
Rule, 2015;

scrutiny of inter-corporate loans and investments; the Companies which accept deposits from the public,

valuation of undertakings or assets of the company, the Companies which have borrowed money from banks and
wherever it is necessary; public financial institutions in excess of 50 crore rupees.

(B) Objective of formation of vigil mechanism (VM)

evaluation of internal financial controls and risk
management systems;

Objective for formation of VM

* In case of Government companies, for point 1st, for the word
“recommendation for appointment, remuneration and terms of
appointment” the words “recommendation for remuneration” shall be
substituted.
for directors and employees
(D) Rights of Audit Committee to report genuine concerns

Rights of Audit committee

provide adequate safeguards
empowered Investigation power to obtain against victimisation of
to[Section by Audit professional advice persons who use such
177(5)] - committee from external mechanism, and
sources and have full
access to information
contained in the
records of the
company.
make provision for direct
access to the chairperson
call for the discuss the manage- on of the Audit Committee in
referred
comments any related ment of the matters appropriate or exceptional
issues by the
of the company specified cases
with the board
auditors in 177(4),
about- internal
and or
statutory
auditors,
and
company to disclose the
details of the establishment
of vigil mechanism on the
internal control the scope of audit, review of financial
website of the company and
systems, including the statement before
in Board’s report
observations of their submission
the auditors, to the Board,

The Chartered Accountant Student October 2018 19

COMPANY LAW
(C) Working of VM
Who may use
employees and directors
Mechanism
Who will (i) an audit committee (where company is
regulate the VM required to constitute Audit Committee)
(ii) BoD shall nominate a director to play the
role of audit committee (In case of other
companies)
How VM may (i) Directors and employees may report their
work concerns to VM.
(ii) They may have direct access to the
Chairperson of the Audit Committee or
the director nominated to play the role of
Audit Committee, in exceptional case.
(iii) In case of repeated frivolous complaints
being filed by a director or an employee,
the audit committee or the director
nominated to play the role of audit
committee may take suitable action
against the concerned director or
employee including reprimand.
(iv) Stakeholders Relationship Committee (SRC) [Section
(iii) Nomination and Remuneration Committee (N&R C)
[Section 178 (1) -178(4)]]
identify persons who are qualified to become directors who
may be appointed in senior management in accordance with the
criteria laid down.
recommend to the Board the appointment and removal of
directors and senior management carry out evaluation of every
director’s performance
According to section 178(4), the Nomination and Remuneration
Committee shall, while formulating the above policy ensure
that—
♦ the level and composition of remuneration is reasonable
and sufficient to attract, retain and motivate directors of the
quality required to run the company successfully;
♦ relationship of remuneration to performance is clear and
meets appropriate performance benchmarks; and
♦ remuneration to directors, KMP and senior management
involves a balance between fixed and incentive pay reflecting
short and long-term performance objectives appropriate to
the working of the company and its goals.
* It is imperative to disclose such a policy in Board’s Report.
** In the case of Listed company formation, composition,
responsibilities and rights of Nomination and Remuneration
committee shall be governed by SEBI (LODR) Regulations
issued under SEBI Act, 1992.
178(5)-178(6)]

(A) Formation of nomination & remuneration committee by The BoD of a company consisting of more
than 1000 shareholders, debenture-holders,
Formation and deposit-holders and any other security
Unlisted constitution of holders during a financial year.
public SRC
Unlisted Unlisted public company
public company having in
company having aggregate, headed by a chairperson (a non-executive
with a paid turnover of outstanding director) and such other members as
Every one hundred
Listed up capital loans or Members of decided by the Board.
of ten crore crore rupees or borrowings
company more; or SRC
rupees or or debentures
more; or or deposits
exceeding fifty
crore rupees consider and resolve the grievances of
or more security holders of the company.
Objective of the
SRC protect the interests of all security holders,
* The paid up share capital or turnover or outstanding loans, or
borrowings or debentures or deposits, as the case may be, as existing
on the date of last audited Financial Statements shall be taken into
account for the purposes of this rule.
* In the case of listed company formation, composition,
responsibilities and rights of Stakeholder Relationship
(B) Composition of nomination & remuneration committee committee shall be governed by SEBI (LODR) Regulations
(N&R C) issued under SEBI Act, 1992.
** This section 178 shall not apply to the Companies covered
under section 8 of the Companies Act
N&R C consist of *** In case of Government company- Sub-sections (2), (3) and
3 or more non-executive directors (4) of Section 178 i.e. relating to the N&R C, shall not apply
out of which not less than one-half shall be independent directors. except with regard to appointment of 'senior management'
and other employees.
Restriction on The Chairman (whether executive or
Chairman of Co. non-executive) of the company shall not (v) Penalty for contravention of section 177 & 178
chair such a committee

However, he may be appointed as a member to the committee Penalty for contravention of section 177 & 178
(C) Functions of the nomination and remuneration
company officer in default
committee (N&R C)
formulate the criteria for determining qualifications; positive
attributes and independence of a director, punishable with punishable with with fine with
fine (1 lakh to 5 imprisonment (25,000 to 1 lakh both.
recommend to the Board a policy, relating to the remuneration lakh rupees), (upto 1 year), or rupees), or
for the directors, KMP and other employees

20 October 2018 The Chartered Accountant Student

 COMPANY LAW
CHAPTER 4: INSPECTION, INQUIRY AND INVESTIGATION
1. Power to call for information, inspect books and conduct inquiries [Section 206]
Concerned authorities In the following circumstances Have following Powers
Registrar under section • On a scrutiny of any document filed by a company, or He, may by a written notice require the
206 (1) • on any information received by him, company—
-the Registrar is of the opinion that any further information / (a) to furnish in writing such information or
explanation /any further documents relating to the company explanation; or
is necessary (b) to produce such documents

Registrar under section (a) If no information or explanation is furnished within time,
206 (3) or
(b) If on an examination of the documents furnished, he is of
the opinion that the information or explanation furnished
is inadequate; or
(c) If he is satisfied on a scrutiny of the documents furnished
that an
unsatisfactory state of affairs exists in the company and the
information or documents do not disclose a full and fair
statement of the information required.
Registrar under section (1) on the basis of information available with or furnished; or
206(4) (2) on a representation made to him by any person that the
business of a company is being carried on for a fraudulent
or unlawful purpose or not in compliance with the
provisions of this Act; or
(3) the grievances of investors are not being addressed,
Central Government if it is satisfied that the circumstances so warrant
[Section 206(4)]
Central Government if satisfied that the circumstances so warrant
[Section 206 (5)]
Central Government having regard to the circumstances
[Section 206 (6)]
He, may by another written notice call on the
company to produce for his inspection such
further books of account, books, papers and
explanations as he may be required at such
place & time as specified in the notice
He may call on the company to furnish in
writing any information or explanation on
matters specified in the order (within specified
time) and carry out such inquiry after
providing the co. a reasonable opportunity of
being heard
direct the Registrar / an inspector to carry out
the inquiry under this section 206(4)
direct inspection of books and papers of a
company by an inspector appointed by it for
the purpose
by general or special order, authorise any
statutory authority to carry out the inspection
of books of account of a company or class of
companies

* If a company fails to furnish any information /explanation /production of any document, the company and every officer in default shall be
punishable with a fine upto to one lakh rupees and in the case of a continuing failure, with an additional fine upto to five hundred rupees per day.

2. Search and Seizure [Section 209]

(i) Circumstances for search & seizure

Where, upon information,
the Registrar /inspector
has reasonable ground to
believe that
the books & papers
of a co. / relating
to the KMP /any
director /auditor /CS
in practice if the co.
has not appointed a
CS,
are likely to be
destroyed, mutilated,
altered, falsified /
secreted, he may, after
obtaining an order
from the Special Court
for the seizure of such
books and papers,—
(a) enter, with / (b) seize such books and
assistance and search, papers as he considers
the place /s where such necessary after allowing
books or papers are the co. to take copies of,
kept; and or extracts from, such
books or papers at its
cost.

(ii) Period of Seizure

Registrar/Inspector shall Original period of Further period of

return the book & papers as soon as may be seizure: not later than seizure: call for a further
seized 180th day after such period of 180 days by an
seizure. order in writing if they
are needed again.

The Chartered Accountant Student October 2018 21

COMPANY LAW
3. Investigation into affairs of company Offences covered u/s 447 shall be cognizable and person
[Section 210] accused shall not be released on bail or on bond except under
certain circumstances
(i) By Central Government
the concerned officers of SFIO may arrest the guilty person if
has reason to believe and inform him of the grounds for
On the receipt of a such arrest.
report of the Registrar
or inspector under
section 208; or
the concerned officers of SFIO shall immediately after arrest
forward a copy of order to SFIO

The CG may order an

investigation into affairs Every person arrested shall within 24 hours be taken to JM or
of co. MM having jurisdiction

on intimation of SR
in public interest. passed by a co. that the Submission of interim report and Investigation report to CG
affairs of the co. ought
to be investigated; or
CG may order the SFIO to initiate prosecution against the
company and its officers and employees

(ii) By Court/Tribunal 5. Investigation into company’s affairs in

other cases (Section 213)

Court/Tribunal CG shall order CG appoints 1/ not less than 1/5th

pass an order an investigation more person as of the persons on the
that affairs of into affiars of inspector for company’s register of
a company that co. investigation. members, in the case of
ought to be a company having no
investigated share capital, and

4. Investigation into affairs of Co. by SFIO not less than

[Section 212] 100 members /s
any other person/
holding not less
otherwise
CG consider it necessary to investigate into affairs of company than 1/10th of
under the
by SFIO, may by order assign its investigation to SFIO the total voting
circumstances
power, in the case
on receipt On intimation In Public on request stated in section
of a company
of report of of SR by Interest from any dept. The Tribunal 213(b)
having a share
Registrar or company of CG or SG may order for
capital; or
inspector u/s investigation
208 into affairs of the
company on an
application by-
On recipt of such order, SFIO may designate inspectors

If investigation is pending with other investigating 6. Powers of inspector

agency, such concerned agency shall transfer the
relevant documents and records to SFIO
To conduct investigation into affairs of
related companies, etc. (Section 219)
Powers of inspector

SFIO shall conduct the investigation according to

chapter XIV and submit its reprot to CG within such
Seizure of documents by inspector
period as specified in order
(section 220)

the investigating officer shall have the power of the

inspector u/s 217 Freezing of Assets of Company on Inquiry
and Investigation (section 221)

the company and its officers and employees shall be Imposition of Restrictions upon
responsible to provide assistance to investigating Officer as Securities (section 222)
may be required
22 October 2018 The Chartered Accountant Student
 COMPANY LAW
CHAPTER 5: COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS
1. Power to Compromise or make 2. Power of Tribunal to enforce Compromise
arrangements with Creditors and or Arrangement [Section 231]
Members [Section 230]
Where the Tribunal makes an order u/s 230 sanctioning a
Where a compromise or arrangement is proposed between— compromise or an arrangement in respect of a co., it—
a company and its creditors a company and its members
or any class of them; or or any class of them,
shall have power give such directions as it
to supervise the may consider necessary for
the Tribunal may, on the application of the- implementation of the proper implementation
Company, creditor, member of the Liquidator in case the compromise or of the compromise or
or or company, or of company is into arrangement; & arrangement.
voluntary liquidation
3. Circulation of information for the meeting
order a meeting of the creditors or class of creditors, or of the by the merging companies / the companies
members or class of members, as the case may be, to be called, in respect of which a division is proposed
held and conducted in such manner as the Tribunal directs.
draft of the proposed terms of the scheme
The company or any other person, by whom an application is drawn up and adopted by the directors of the merging
made, shall disclose to the Tribunal by affidavit— company;
all material facts reduction of share any scheme of
relating to the capital corporate debt confirmation of filing of draft scheme
company restructuring
a copy of the draft scheme has been filed with the Registrar;

Where a meeting is proposed to be called in pursuance of an report adopted by the directors

order of the Tribunal, a notice of such meeting shall be sent to-
a report of the merging companies explaining effect of
all the to all the and the Sectoral compromise on shareholders, KMP, promotors and non-
creditors members debenture- regulators u/s promoter shareholders laying out in particular the share
or class of or class of holders of the 230(5) exchange ratio, specifying any special valuation difficulties;
creditors, and members, company,
report of the expert
Notice of meeting shall be accompanied by a statement with regard to valuation
disclosing the details of the compromise or arrangement, a copy
of the valuation report, if any, explaining their effect, the effect supplementary accounting statement
of the compromise or arrangement on any material interests of
the directors of the company or the debenture trustees if the last annual accounts of any of the merging company
relate to a financial year ending more than six months
before the first meeting of the company summoned for the
purposes of approving the scheme.
Notices to sectoral regulators to make representation, if likely to
be affected by the compromise or arrangement
4. Order of Tribunal on the agreement of
compromise or arrangement
Meeting can be dispensed by Tribunal if atleast 90% value
of creditors agree & confirm to scheme of compromise or
arrangement. Certificate Date of Transfer
by Transfer of
Company's Instruments
Objection to the compromise/arrangement shall be made by Auditor
Fees in
persons- Authorised
having outstanding debt 5 % or Share Legal
holding 10% or more Proceedings
more of total outstanding debt Capital
of shareholding
Order of
Listed Tribunal
Where, at a meeting , majority of persons representing three- Company
fourths in value agree to any compromise or arrangement and if to Unlisted
Dissolution
such compromise or arrangement is sanctioned by the Tribunal Company
by an order, the same shall be binding
Employee Provision
Transfer for Dissent
Filing of order of Tribunal with registrar within thirty days of NRI Holder Persons
the receipt of the order.

The Chartered Accountant Student October 2018 23

COMPANY LAW
5. Requirements as to acquisition of shares of Shareholders dissenting from Scheme or Contract
Approved by Majority [Section 235)

The scheme involving
the transfer of shares in a
company (the transferor
company) to another
company (the transferee
company) has been approved
by the holders of not less than
9/10th in value of the shares
whose transfer is involved.
The approval from 9/10th
shareholders in value shall
be received within 4 months
after making of an offer in
that behalf by the transferee
company.
The shares already held
at the date of the offer by
Transferee Company, or by
a nominee of the transferee
company or its subsidiary
companies shall not be
counted for this purpose.
The transferee company
shall express his desire to
acquire the remaining shares
of dissenting shareholders
within 2 months after the
expiry of the said 4 months
and shall give notice in the
prescribed manner to any
dissenting shareholder that it
desires to acquire his shares

6. Purchase of Minority Shareholding [Section 236] 7. Power of CG to provide for amalgamation of

an acquirer, or a
person acting in
concert with such
acquirer
becoming registered
holder of ninety per
cent. or more of the
issued equity share
capital of a company
any person or group
of persons
becoming ninety per
of Companies in
cent. majority or holding
ninety per cent. of the
issued equity share
capital of a company
companies in Public interest (Section 237)
♦ Central Government may by order
provide for amalgamation in the public
interest
Power of CG ♦ Continuation by or against the
to Provide for transferee company of any legal
Amalgamation proceedings
♦ Same Interest Rights or Compensation
Public Interest
♦ Appeal by aggrieved person on
[Section 237]
assessment of compensation
♦ Requirements for passing of an order
♦ Copies to be presented to Parliament

8. Fast Track Mode Of Merger Or Amalgamation Of

Such acquirer, person or group of persons, shall notify the Certain Companies [Section 233]
company of their intention to buy the remaining equity shares
Preparation of proposed scheme

The acquirer, person or group of persons shall offer to the minority Notice of the proposed scheme to Registrar and OL
shareholders of the company for buying the equity shares held by
such shareholders at a price determined on the basis of valuation by Consider their objections/suggestions, if
a registered valuer in accordance with Rule 27. any and amend the scheme accordingly

Approval of scheme in respective General meeting

The minority shareholders of the company may offer to the majority of transferor company and transferree company
shareholders to purchase the minority equity shareholding of the
company at the price determined in accordance with Rule 27.
Filing of declaration of solvency with Registrar by company

The majority shareholders shall deposit an amount equal to
the value of shares to be acquired by them in a separate bank
account to be operated by company whose shares are being
transferred for at least 1 year for payment to the minority
shareholders and such amount shall be disbursed to the entitled
shareholders within sixty days.
Company whose shares are being transferred to act as a
transfer agent in the event of purchase.
convening meeting of creditors by giving 21 days notice
Approval of scheme by majority representing 9/10th
in value of creditors
Filing of the approved scheme by transferee
company with a Central Govermment (power
delegated to Regional Director) Registrar and OL
RD to consider objections or suggestions of ROC and
OL if any

Passing of an application to Tribunal for approval of

Right of shareholders to make an offer for sale of minority scheme
equity shareholding
Confirmation by Tribunal
24 October 2018 The Chartered Accountant Student
 COMPANY LAW
Merger/ Amalgamation Between

2 or more small companies a holding company and its wholly-owned such other class or classes of
subsidiary company companies as may be prescribed

If 100% of its share capital is held by the holding company, except the shares held by the nominee or nominees to ensure that the
number of members of subsidiary company is not reduced below the statutory limit as provided in section 187.

9. Merger or Amalgamation of Company with Foreign Company [Section 234]

A foreign company incorporated outside India may merge with an Indian

company after obtaining prior approval of RBI and after complying with the
provisions of sections 230 to 232 of the Act and relevant rules.
Foreign Company with
Indian Company
the scheme of merger may provide for the payment cash, or
of consideration to the shareholders of the merging
company as per the drawn scheme, in-
in Depository Receipts, or

Indian Company with A company may merge with a foreign company partly in cash and partly in
Foreign Company incorporated in any of the jurisdictions specified by Depository Receipts
the CG in consultation with RBI and after complying
with provisions of sections 230 to 232 of the Act and
relevant rules.

CHAPTER 6: PREVENTION OF OPPRESSION AND MISMANAGEMENT

1. Application to Tribunal for Relief in cases of 2. Right to Apply under Section 241 [Section
Oppression, etc. [Section 241] 244]
(i) Right to apply to Tribunal: Rights of Members to Apply:
Members of affairs of the public interest
the co. may company Right of members to apply u/s 241
apply to the have been him or any other member /s
Tribunal / are being
(provided has conducted the interests of the company
a right to apply prejudicial to- Company having Company not
under  section the material has taken place in the share capital having share capital
244) where- change management /control of the
company (in case of share
capital)
in its membership, or
'Which ever is At least 1/5th of
in any other manner
less' of: the total number of
affairs of the interests or members
company will members/
be conducted any class of
in a manner members
prejudicial to its
At least 1/10th of the total
Atleast 100 members;
members or any member
(ii) Central Government suo moto to apply the Tribunal: OR
holding 1/10th of issued
share capital

Central that the in a it may

Government, affairs of the manner itself apply Subject to the condition that the applicant or applicants has or
of the company prejudicial to the have paid all calls and other sums due on his or their shares
opinion conducted to public Tribunal
interest

The Chartered Accountant Student October 2018 25

COMPANY LAW
3. Powers of Tribunal [Section 242] 4. Consequences of Termination or Modification
of Certain Agreements [Section 243]
♦ on any application , if the Tribunal is of the No MD/ other Penalty to
Where an Such passed
opinion— order passed  order shall D / M whose MD/D /M of a
♦ that the company’s affairs have been /are not give rise agreement is so company and
being conducted in a manner prejudicial or to- terminated or every other
Order to be oppressive to set aside shall, director of
passed by the
Tribunal ♦ any member /s or
the company
♦ terminates, ♦ to any claims ♦ for a period knowingly
♦ to public interest or ♦ sets aside or against the of five years acts in
♦ the interests of the company; and ♦ modifies an company by from the date contravention
♦ that to wind up the company would unfairly agreement any person for of the order
prejudice such member/s, referred damages or terminating or ♦ shall be
♦ the making of a winding-up order on just and in section ♦ for setting aside the punishable with
equitable ground 242(2) compensation agreement, imprisonment
♦ the Tribunal may, with a view to bringing to an for loss of ♦ without the for a term
office or leave of the extending to 6
end the matters complained of, make ♦ in any other Tribunal, months or
♦ such order as it thinks fit. respect either ♦ be appointed, ♦ with fine
in pursuance of or act, as the extending to 5
the agreement managing lakh rupees, or
♦ regulation of conduct of affairs of the or director or ♦ with both.
company in future ♦ otherwise; other director
♦ purchase of shares or interests of any or manager of
members of the company by other members / the company
company
♦ purchase of its shares consequent to reduction PROVIDED THAT THE TRIBUNAL SHALL GRANT LEAVE ONLY
of its share capital WHEN NOTICE OF THE INTENTION TO APPLY FOR LEAVE
♦ restrictions on the transfer /allotment of the HAS BEEN SERVED ON THE CENTRAL GOVERNMENT AND
Nature of shares THAT GOVERNMENT HAS BEEN GIVEN A REASONABLE
orders that can ♦ termination, setting aside or modification, of OPPORTUNITY OF BEING HEARD IN THE MATTER.
be passed by
the Tribunal any agreement
♦ setting aside of any transfer, delivery of goods,
payment, execution or other act relating to
5. Class Action (Section 245)
property made or done by or against the (i) Filing of application before the Tribunal on behalf of the
company within three months before the date
of the application members /depositors:
♦ removal and recovery of undue gains made

{
by any MD, M /D during the period of his number of
♦ the management or
appointment member /s,
♦ conduct of the affairs of the company
♦ appointment of MD /M subsequent to an depositor /s
order removing the existing MD /M or any class of
♦ appointment of directors to report to Tribunal them are of the
♦ imposition of costs opinion that
♦ any other matter
are being

Filing of
♦ certified copy of the order of the Tribunal
shall be filed by the company with the
conducted in
a manner- { ♦ prejudicial to the interests of the
company or its members / depositors,

copy of
Order of Registrar within 30 days of the order of the
Tribunal Tribunal May file an application before the Tribunal on behalf of the
members or depositors

♦ Where an order of the Tribunal makes any

Alteration alteration in the MoA /AoA , the company (ii) Order of tribunal: Members/depositors may seek the
through shall, permitted in the order, to make,
following orders –
order of the without the leave of the Tribunal, any
Tribunal alteration
restrain the company from committing an ultravires act

♦ the company with fine varying from 1 lakh
rupees -25 lakh rupees and
Punishment ♦ every officer of the company who is
in case of in default shall be punishable with
contravention imprisonment for a term which may extend
to six months or with fine which shall not
be less than 25,000 rupees but which may
extend to 1 lakh rupees, or with both.
to restrain the company from committing breach of any
provision of the company’s AoA/MoA
to declare a resolution altering the memorandum or
articles of the co. as void if
♦ the resolution was passed by suppression of material facts, or
♦ obtained by mis-statement to the members or depositors;

26 October 2018 The Chartered Accountant Student


to restrain the co. and its directors from acting on such
resolution;
to restrain the co. from doing an act contrary to the
provisions of this Act / any other law
to restrain the company from taking action contrary to
any resolution passed by the members;
to claim damages /compensation /demand /any other
suitable action from or against— 
♦ the co. / its directors for any fraudulent, unlawful /
wrongful act / omission /conduct / any likely act /
omission / conduct on its /their part;
♦ the auditor including audit firm of the co. for any
improper /misleading statement of particulars made in his
audit report / for any fraudulent, unlawful / wrongful act /
conduct; or
♦ any expert or advisor or consultant / any other person
for any incorrect / misleading statement made to the
company / for any fraudulent, unlawful / wrongful act /
conduct / any likely act / conduct on his part;
to seek any other remedy as the Tribunal may deem fit.
(iii) Required number of members to apply:
whichever is less
in the case of a company having a share capital
atleast 100 members, or
such percentage of the total number of its members as
prescribed undre respective rules or
any member or members holding not less than such
percentage of the issued share capital of the company as
may be prescribed
in the case of a company not having a share capital
not less than one-fifth of the total number of its
members
(iv) Required number of depositors to apply:
No. of
depositors who
may apply atleast 100 or such % of the total
number of depositors as may be
prescribed, whichever is less, or
any depositor/s to whom the company
owes such % of total deposits of the
company as may be prescribed
COMPANY LAW
(v) Consideration of application by Tribunal under section
245(1):
member /depositor is acting in good faith in making the
application
any evidence as to the involvement of any person (other than
directors) or officers of the company on any of the matters
under 245(1)
same cause of action which the member / depositor could
pursue in his own right rather than through an order
any evidence as to the views of the members / depositors of
the company who have no personal interest, direct / indirect,
in the matter being proceeded
where the cause of action is an act / omission that is yet
to occur, whether the act or omission could be, and in the
circumstances would be likely to be—
authorised by the
ratified by the company
company before it
after it occurs;
occurs; or
where the cause of action is an act / omission that has already
occurred, whether the act or omission could be, and in the
circumstances would be likely to be, ratified by the company.
(vi) In case of admission of application
When an application is admitted, the Tribunal shall
♦ serve public notice on admission of the application to all
the members / depositors
♦ all similar applications prevalent in any jurisdiction
should be consolidated into a single application
♦ the class members or depositors should be allowed to
choose the lead applicant
♦ the class members /depositors should be allowed to
choose the lead applicant
♦ the members or depositors of the class are unable to
come to a consensus, the Tribunal shall appoint a lead
applicant, who shall be in charge of the proceedings from
the applicant’s side
♦ two class action applications for the same cause of action
shall not be allowed;
♦ the cost / expenses connected with the application for
class action shall be defrayed by the company or any
other person responsible for any oppressive act
(vii) Order to be binding on the parties:
order passed by the Tribunal shall be binding
on the
♦ company and all its members,
♦ depositors and
♦ auditor including
♦ audit firm or
♦ expert or
♦ consultant or
♦ advisor or
♦ any other person associated with
the company.
The Chartered Accountant Student October 2018 27
COMPANY LAW
(viii) Punishment for non-compliance of section 245 (x) Application may be filed on behalf of affected persons:

Company which fails to every officer of the

comply with an order company who is in
of Tribunal shall be default In compliance
punishable with- of this section,
application may any person
fine - minimum 5 lakh and Imprisonment for a term be filed or any
rupees to maximum 25 extending to 3 years action may be
lakh rupees, + fine not be less than taken by the
25 thousand rupees following-
extending to 1 lakh
rupees.
any association
(ix) Exemption from application of section: of persons
representing the
group of
persons affected as
persons
stated in section
Section Not applicable 245(1)
245 to banking
company

CHAPTER 7: WINDING UP (WU)

1. Definition of Winding Up [Section 2(94A)] 3. Petition for Winding up [Section 272 (1)]
(i) Presentation of Petition

Winding Up Includes
Petition for
Winding up to
Tribunal can be
made by
Liquidation under
Winding up under
Insolvency and ♦ The Company
Companies Act, 2013 Bankruptcy Code, 2016 ♦ Any Contributory or Contributories
♦ All or any of the persons specified in clauses
(a) and (b) (stated above)
2. Circumstances in which Company may be ♦ The registrar
♦ Any person authorised by Central
wound up by Tribunal [Section 271] Government in that behalf
♦ the CG/SG , in case falling u/s 271(b)
If the co. by SR
resolving that
company be Copy of petition shall also be filed with the registrar
wound up

Company has acted

against the national Registrar submit his views to Tribunal within 60
On just and interest (sovereignity days of receipt of petition.
equitable ground & integrity, security
etc.)
Company may (ii) Petition filed by contributory [Section 272(2)]
wound up by ♦ He may be the holder of fully paid-up shares.
Contributory can file

Tribunal on
♦ The company may have no assets at all.
petition , though

petition filed
If the co. has ♦ The company may have no surplus assets left for
u/s 272-
defaulted in distribution among the shareholders after the
filing financial On application by satisfaction of its liabilities.
statements/
annual returns
the Registrar or ♦ Shares in respect of which he is a contributory/
any other person alloted to him/held by him & regsitered in his name
for immediately authorised by
preceding 5 the CG for atleast 6 months during 18 months immediately
consecutive FY before commencement of Winding up

28 October 2018 The Chartered Accountant Student

 COMPANY LAW
(iii) Petition filed by Registrar [Section 272(3)] 6. Company Liquidator (CL) & their
appointments [Section 275]
after shall appoint an Official Liquidator
Registrar reasonable Tribunal , at the time or a liquidator (from the panel
can present on previous of passing of order of
petition for opportunity maintained as the Company
sanction of of winding up Liquidator)
WU under CG
scetion 271 reprsentation
shall be appointed by the
Tribunal from amongst the
The provisional insolvency professionals registered
*Registrar cannot file petition for winding up on the grounds given liquidator /the under the Insolvency and Bankruptcy
u/s 271(a) & 271(e) Company Liquidator Code, 2016;

(iv) Petition presented by Co. for winding up

Powers, terms
and conditions of
shall be presented admitted only if appointment of a
before the Tribunal accompanied by a provisional liquidator
statement of affairs or Company
Liquidator, and
their removal and shall be regulated by Tribunal as per
4. Powers of Tribunal [Section 273] replacement section 275 & 276

(i) Order passed by Tribunal

7. Intimation of order of Tribunal [Section 277]
Dissmiss the
order, with / (i) Intimation of order of Tribunal of an appointment of
without cost
provisional liquidator or winding up of a company [Section
277 (1)]
Make any
Any other order interim order as
as it thinks fit it thinks fit Within 7 days from intimate to
the date of passing of company liquidator/
an order, Tribunal provisional liquidator
+ registrar
Orders by
Tribunals
Appoint a (ii) On receipt of order of appointment /winding up [Section
Make an order provisional 277(2)]
for the winding liquidator of the
up of the co. till the making
company with / of a winding up Registrar shall
without cost order
Listed Company All Companies

Intimate about such Make an endorsement to that

(ii) Time period for passing of an order effect in his records relating to
appointment/order to the stock
exchanges where the securities the company and notify in the
Order u/s 273 shall be made of the company are listed. Official Gazette that such an
order has been made.
within 90 days from the date of presentation of petition.
8. Submission of report by Company Liquidator
5. Tribunal may order company to file a statement [Section 281]
of its affairs (SOA) [Section 274(1)]

Tribunal report can be

by an submit report
if order Director/ to Tribunal (as inspected by any
Where in case
person describing
Petition satisfied, direct the Tribunal may of failure any officer The appointed to details of
for that company in filing in default himself in writing
prima to file its further extend for such liquidator shall assets, liabilities,
winding of S.O.A, to be 
facie objections time period Tribunal non- within 60 days debts etc. +co.
up filed
case for + by 30 days shall compliance (from date of promoted/ ♦ creditor,or
by any
person winding statement under special forfeit shall be
order) formed+ vilability ♦ contributory
up of the of its circumstances right to liable for
other of business +any by himself or by his
than the company affairs oppose punishment
other report, it agent 
company is made within 30 the u/s 274(4)
out days of the petition required)
order.

The Chartered Accountant Student October 2018 29

COMPANY LAW
9. Direction of Tribunal on report of Company 12. Dissolution of Company by Tribunal
liquidator [Section 282] [Section 302]
When affairs Tribunal Copy of the If the CL
The Tribunal of a company order shall, makes a
shall on an
may pass have been within 30 days default in
application from the date,
The Tribunal such other completely forwarding
filed by the be forwarded a copy of the
may order for order or give wound up CL, or when
fix time taking such such other by the CL to order within
limt for the Company the Tribunal the Registrar the period
steps and directions as
On completion measures, Liquidator (CL) is of the specified
it considers shall make an
consideration of proceeding as may be opinion that Registrar shall
fit. application to record in the the CL shall
of report, + co. be necessary, it is just and
the Tribunal for register relating be punishable
Tribunal shall dissolved to protect, reasonable
dissolution of to the company with fine which
preserve or in the may extend
such company circumstances a minute of the
enhance the to R 5,000
value of the that an dissolution of
the company for every day
assets of the order for the during which
company dissolution of the default
the company continues
should be
10. Payment of Debts by Contributory and made
Extent of Set-off [Section 295]
Tribunal
(i) Payment of debts by contributory shall make an
order that the
company be
The Tribunal may, after passing of a winding up dissolved from
order, the date of the
order, and the
company shall
pass an order requiring any contributory on the list be dissolved
of contributories to pay, accordingly

in the manner directed by the order, any money due

to the company, from him or from the estate of the
13. Overriding Preferential Payments [Section
person whom he represents, 326]

exclusive of any money payable by him / the estate Debts to be paid in priority
by virtue of any call in pursuance of this Act.

(ii) Setoff of amount due to any contributory where a secured creditor has
workmen's dues; and
realised a secured asset,
The Tribunal, in making an order, may
in the case of allow to the contributory, by –
an unlimited • way of set-off, any money due to him, or so much of the amount of whichever
company • to the estate which he represents, the debts due the workmen's is less, pari
from the company, on any independent dealing or to such secured portion in his passu with the
contract with the company. creditor as security (if workmen's
But not any money due to him as a member of the could not be payable under dues
company in respect of any dividend or profit; realised by him, the law),
in the case allow to any director or manager whose liability is or
of a limited unlimited, or to his estate, such set-off.
company

11. Arrest of Person trying to Leave India or Abscond [Section 301]

Any time either before or after passing is about- the Tribunal may cause—
a winding up order, if the Tribunal is ♦ to leave India or ♦ the contributory to be detained
satisfied that - ♦ otherwise to abscond, or until such time as the Tribunal
♦ a contributory, or ♦ is about to remove or conceal may order; and
♦ a person having property, any of his property, for evading ♦ his books and papers and
accounts or papers of the payment of calls, or movable property to be seized
company in his possession ♦ of avoiding examination and safely kept until such time as
respecting the affairs of the the Tribunal may order.
company,

30 October 2018 The Chartered Accountant Student

 COMPANY LAW
14. Power of Tribunal to Assess Damages against (ii) Time limit for filing of an application for assessing of
Delinquent Directors, etc. [Section 340] damages

(i) Power of Tribunal to assess damages Time Period for making Application
(Whichever is Longer)
If it appears that any person who has taken part in the
promotion /formation of the company, or any person, who
is / has been a director, manager, Company Liquidator or
officer of the company
5 years from 5 years from first 5 years from
the date of the appointment misapplication,
has misapplied, or retained, has been guilty of any winding up of the company retainer,
or become liable or misfeasance or breach order liquidator misfeasance or
accountable for, any money of trust in relation to the breach of trust.
or property of the company; company,
or

15. Preferential Payments [Section 327]

on an application made by

Official Company Government

Liquidator Liquidator Any creditor Contributory
Taxes
Expenses of
Investigation

Tribunal may Salary and

Wages

inquire into the conduct of the person, director,

manager, Company Liquidator or officer aforesaid PF, Pension Preferential
Fund and
♦ order him to repay or restore the money or Gratuity Fund Payments
property or any part thereof respectively, with
interest at such rate as the Tribunal considers just Holiday
and proper, Remmuneration
♦ or to contribute such sum to the assets of the
Compensation
company by way of compensation in respect in respect
of the misapplication, retainer, misfeasance or of death or
breach of trust, as the Tribunal considers just and disablement Contribution
under ESI Act
proper.

CHAPTER 10: MISCELLANEOUS PROVISIONS

1. Registered Valuer (Section 247) (ii) Duties of Registered valuer

(i) Valuation Duties of Registered valuer

Where a valuation is required to be made in respect of
any property, stocks, shares, debentures, securities or
goodwill or any other assets or net worth of a company or
its liabilities
make an impartial, true and fair valuation of any
assets which may be required to be valued;
exercise due diligence while performing the
functions as valuer;

it shall be valued by a person having such qualifications and

make the valuation in accordance with such
experience and registered as a valuer, on such terms and rules as may be prescribed; and
conditions as prescribed in the relevant rules and

not undertake valuation of any assets in which

he has a direct or indirect interest or becomes so
interested at any time during a period of 3 years
appointed by the audit committee or in its absence by the
prior to his appointment as valuer or 3 years after
Board of Directors of that company. the valuation of assets was conducted by him.

The Chartered Accountant Student October 2018 31

COMPANY LAW

2. Power of Registrar to Remove Name of Company 4. Fraudulent Application for Removal of Name
from Register of Companies [Section 248] [Section 251]
(i) Removal of name by registrar
Where it is found that an application by a
Registrar shall send a notice to the co. and to all company has been made with the-
the directors for removal of name from register of
companies on reasonable cause to believe that
object of
evading the
a company is not carrying liabilities of the
on any business or operation company, or
a company has failed to
for a period of 2 immediately
commence its business
preceding F/Y and has not made
within 1 year of its with the
any application within such
incorporation, or; to defraud any intention to
period for obtaining the status
other persons, deceive the
of a dormant company u/s 455,
creditors, or

the persons in charge of the management of the

company shall,—
♦ be jointly and severally liable
requesting them to send their representations ♦ be punishable for fraud
Registrar may also recommend prosecution of the
along with copies of the relevant documents, responsible persons
if any, within a period of 30 days from the date
of the notice.

(ii) Removal of name by company 5. Appeal to Tribunal [Section 252]

Person aggrieved by an order of the registrar, may file an appeal
A company may file an application , after to-
extinguishing all its liabilities, by-
Tribunal

Within 3 years from date of order of registrar

consent of seventy-five per
a special resolution, or cent. members in terms of Tribunal is of the opinion-
paid-up share capital,
removal of name from register is not justified

to Registrar for removing the name of the it may order restoration of the name in the register
company from register of companies
reasonable opportunity may be given to registrar

3. Restrictions on making application under Copy of order of Tribunal shall be filed with-
section 248 in certain situations [Section 249]
Registrar within 30 days from the date of order

Application ♦ changed its name or shifted its Registrar shall cause the name of the company to be restored
made by co. registered office
u/s 248 is ♦ made a disposal for value of property
restricted, or rights held by it Company/member/creditor/workman aggrieved by the
if at any ♦ engaged in any other activity except the struck off of name from register, Tribunal on an application
time in the one which is necessary or expedient of them-
previous ♦ made an application to the Tribunal
three for the sanctioning of a compromise or
months, the arrangement order the name of company to be restored
company- ♦ is wound up
give such other directions as deemed to be just for placing
all the above in the same position , as the name has not
been struck off.

32 October 2018 The Chartered Accountant Student

 COMPANY LAW
6. Nidhi Company (Section 406) 7. Dormant company [section 455]
(i)
Where a company is formed and registered
under this Act
of cultivating the
habit of thrift and
savings amongst for a future project; to hold an asset or has no significant
its members or intellectual property accounting
and transaction

such a company or an inactive company may make an application

to the Registrar as prescribed under the relevant rules for
obtaining the status of a dormant company.
Nidhi company
incorporated as Registrar on consideration of application allow the status of
nidhi with an dormant co. to an applicant + issue certificate
which complies
with such rules object
as are prescribed receiving (ii) Meaning of inactive company
by the Central deposits from,
Government and lending to, has not made any significant
for regulation its members only, accounting transaction during the last
of such class of for their mutual two financial years, or
companies. benefit, and
has not filed
which has not financial statements
been carrying on Inactive and annual returns
any business or company during the last two
operation, or financial years

Residential Programme on Professional Skills Development at

Centre of Excellence, Hyderabad and Jaipur
The Board of Studies is pleased to announce the next two batches of ICAI’s ‘Four Weeks Residential Programme’ on Professional
Skills Development as below:
Venue Participant Fees Date Online Registration
Centre of Excellence Women R 48,000/- 25th November, 2018 to https://resource.cdn.icai.org/
(CoE), Hyderabad 22nd December, 2018 50872bos40499main.pdf
Centre of Excellence Men R 48,000/- 26th November, 2018 to https://resource.cdn.icai.org/
(CoE), Jaipur 23rd December, 2018 50874bos40500main.pdf
This programme aims to help the Chartered Accountancy students and newly qualified Chartered Accountants in imbibing
the professional skills required for effective functioning in business organisations and the profession. The Programme
environment focuses on development of communication skills, personal qualities, interpersonal and teamwork skills, problem
solving skills, leadership skills etc.
Salient Features of the Programme:
Students who have passed
♣ Emphasis on Soft Skills, Communication Skills and Personality Development. Chartered Accountancy IPCC/ PCC/
♣ Exemption from payment of Fees to Top 10 Rank holders. PE- II examination and pursuing
♣ Part of Practical Training. last year of Practical training or
♣ No need for Separate Management and Communication Skills (MCS) forming
completed Practical training are
part of Advanced Integrated Course on Information Technology and Soft Skills
(AICITSS). invited to join the course for this
♣ Special Session on Group Discussion & Interview. batch. Recently qualified Chartered
♣ Preparation of Project and Presentation Skills. Accountants are also welcome to join
♣ Building Team Spirit. the course.

Student’s opinion
CoE is a place to learn from best of speakers who It was an amazing experience and the faculties were
fill the session with loads of earnings and bundle exceptionally good. It bridges the gap between a CA student
of creativity. It is a great place to learn from and a professional. It influences us to be creative and think
students and professional with diverse background. out of the box.
A must-do course for all CA Students. - Ms. Parnika Poddar
- CA. Kevin Dharmesh Gandhi from Eastern Region
from Western Region (Participant of 40th batch)
(Participant of 37th batch)
For online registration, you can proceed with ‘Board of Studies Announcements’ https://www.icai.org/new_category.
html?c_id=345 under the ‘Students’ tab on the Home Page of the ICAI’s website www.icai.org. For any query, you can write
us at ashokdua@icai.in or may also contact us on 0120-3045935 and Mobile No. 9868879548.
Director, Board of Studies

The Chartered Accountant Student October 2018 33