COMPANY ACT 2013

AMENDMENT FOR NOV-2014-CA-IPCC

SECTION TO BE USED IN THIS CHAPTER
SECTION SECTIONS PARA No of Book Any new change/Modification from Company
As per 1956 As per 2013 Act 1956

Section 4 Section 2(87) & Yes, use of total share capital rather than Equity
22.2
19 share capital
Section 23 New Para NA
Section 24 New Para NA
Section 30 New Para NA
Section 41 Section 2(55) 25.1 No
Section 60A Section 31 Yes, Now such companies as authorized by SEBI
27.6
can issue such prospectus
Section 60B Section 32 The new Act, 2013 only says about the filing of
red herring prospectus and final prospectus and
27.7
removes the filing of information memorandum as
given under the 1956 Act.
Section 62 Section 35 27.12 No
Section 63 Section 34 27.15 No
Section 64 Section 25 27.8 No
Section 68 Section 36 The 2013 Act prescribes punishment for falsely
inducing another person to enter into an agreement
27.16
to obtain credit facilities from any bank or
financial institution has also been provided.
Section 37 New Para NA
Section 38 New Para NA
Section 69 Section 39 Remaining rules as provided under such para (as
26.4
per Company Act 1956) are same
Section 73 Section 40 Remaining rules as provided under such para are
26.4
same
Section 77B Section 70 Under the Companies Act, 2013 now the company
can buy-back even if it has defaulted in the
repayment of deposit or interest thereon,
redemption of debentures or preference shares or
30.11 payment of dividend or repayment of any term
loan or interest thereon to any financial institution
or bank, provided the default has been remedied
and a period of 3 years have elapsed after such
default ceased to subsist. Whereas under the 1956
Act, prohibition on buy- back is ceased

By CA Amit Popli-Faculty ICAI & ETEN Satellite Classes for IPCC & Final
2

immediately when default ceased to subsist.

• The 2013 Act added a default under section 123

related to declaration of dividend in addition to the
default related to the filing of the annual return,
failure to distribute dividend and Financial
statement provided under the Companies Act,
1956 where a company will not be able to
directly/indirectly purchase its own shares or other
specified securities.
Section 91 Section 49 29.14 No
Section 92 Section 50 29.15 No
Section 65 New Para NA
Section 111 Section 58 The new law under the 2013 Act,
& 111A  Reduces the period within which private
company has to intimate refusal to register
the transfer from 2 months to 30 days.
 In case of a public company, the time-limit for
registration of transfer has been reduced to
30 days.
 The power of making the appeal has now
been limited for the transferee only.
31.3  The time period of making an appeal to the
tribunal has been reduced from 2 months to
30 days.
 Where no notice is served there the appeal
should be filed within 60 days.
 In case of a public company the time period of
making an appeal to the tribunal has been
simplified to 60 days. Where no notice
received, the appeal should be filed within 90
days.
Section 111 Section 59 No
31.3
& 111A
Section 86 New Para NA
Section 60 New Para NA
Section 154 Section 91 25.9 No
Section 169 Section 100 28.3 No
Section 173 Section 102 The 2013, Act states that in case of special
28.7 business to be transacted at the AGM then
explanatory statement shall specify the extent of
share holding interest of promoters, directors,
 managers, and KMP, if their shareholding is 2% or
more of the paid up share capital. Whereas extent
of such shareholding interest mentioned in the
1956 Act is not less than twenty per cent of the
paid-up share capital of that other company.
Section 174 Section 103 28.8 Change in Quorum for public limited company
Section 175 Section 104 28.9 No
Section 181 Section 106
28.12 No
& 183
Section 177 Section 107 28.12 No
Section 176 Section 105 28.10 No
Section 187A Section 112 28.11 No
Section 187 Section 113 28.11 No
Section 188 Section 111 28.16 Eligibility criteria has changed
Section 189 Section 114 28.14 No
Sec 408 New Para Constitution of NCLT
Sec 410 New Para Constitution of Appellate Tribunal
4

Chapter-1-Basic Concepts
1.1 PRIVATE COMPANIES [Section 2 (68)]
Meaning  A private company is one
 which has a minimum paid up capital of rupees one lakh or such higher paid
up capital as may be prescribed and
 which by its Articles of Association, puts the following restrictions
Restriction-AOA 1 Restricts the right to transfer its shares, if any.
2 Limits the maximum number of its members to 200 (excluding the present
or past employees of the company).
3 Prohibits any invitation to the public to subscribe for any securities

PRACTICAL QUESTION
Quest Fortune Traders Ltd. Was registered as a private limited company. There are 224 members in
the company as noted below:
(i) Directors and their relatives 54
(ii) Employees 100
(iii) Ex-employees (shares were allotted when they were employees) 50
(iv) 5 couples holding shares jointly in the names of husband and wife (5 x 2) 10
(v) Others 15
The Board of Directors of the company proposes to convert it into a Public company. Only
because of the fact that its member has exceeds minimum prescribed criteria. Advise the Board
of directors?

1.2 PUBLIC COMPANIES [Section 2 (71)]

Meaning A public company is one
 Which is not a private company

 Has a minimum paid up capital of rupees five lakh or such higher paid up
capital as may be prescribed
Provided that, a company which is a subsidiary of a company, not being a private
company, shall be deemed to be public company for the purposes of this Act even
where such subsidiary company continues to be a private company in its articles.

PRACTICAL QUESTION
Quest A Pvt Ltd is a company subsidiary to XYZ Ltd. Discuss the position in following cases:-
1. How much Paid up capital A Pvt Ltd shall have
2. Whether members of A Pvt Ltd can transfer their shares
3. A Pvt Ltd want to issue prospectus, will it be possible’
4. A Pvt Ltd provided a loan of Rs 1.0 :Lacs to Ajay for acquiring its shares
1.3 HOLDING AND SUBSIDIARY COMPANIES [Section 2(87)]
Meaning of A holding company is one which has the control over the other company
Holding & Holding Company which exercise control.
Subsidiary
Subsidiary Company A company on which said control is exercised.
As per the law there exist an holding and subsidiary relations between 2 companies
in following circumstances:-
As per the law there exist an holding and subsidiary relations between 2 companies in following
circumstances:-
1. Control over the Where one company controls the composition of the Board of Directors of another
composition of company. In such case former becomes the holding and the latter become a
board of directors : subsidiary company
When a company shall be considered to have control over the composition of
the Board of Directors of another company:-
If said company has the powers to appoint or remove all or majority of the
directors of the other company.
2. Holding of exercises or controls more than one-half of the total share capital either at its own or
majority of shares together with one or more of its subsidiary companies:

PRACTICAL QUESTION
Quest-1 The paid-up Share Capital of AVS Private Limited is `1 crore, consisting of 8 lacs Equity
Shares of `10 each, fully paid-up and 2 lacs Cumulative Preference Shares of `10 each, fully
paid-up. XYZ Private Limited and BCL Private Limited are holding 3 lacs Equity Shares and
1,50,000 Equity Shares respectively in AVS Private Limited. XYZ Private Limited and BCL
Private Limited are the subsidiaries of TSR Private Limited.
With reference to the provisions of the Companies Act, 2013, examines whether AVS Private
Limited is a subsidiary of TSR Private Limited? Would your answer be different if TSR
Private Limited has 8 out of total 10 directors on the Board of Directors of AVS Private
Limited?
Quest-2 A Ltd hold shares in B Ltd in fiduciary capacity i.e. as trustees for beneficiary. C Ltd. Discuss
the relationship between
A Ltd and B Ltd
A Ltd and C Ltd
Quest-3 Discuss about the position of Holding and Subsidiary in following cases
H Ltd S Ltd H Ltd has a right to appoint
D1 D2 D3 D4 D5 3 directors of S Ltd

H Ltd S Ltd H Ltd has a right to appoint

H1 H2 H3 D1 D2 D3 D4 D5 2 Directors of S Ltd,
whereas S Lts has a right to
appoint 1 director of H Ltd
H Ltd S Ltd
Total Paid Up Shares Capital
Shares=10,00,000
H Ltd holds Entire Equity
6

Share Capital of Rs 3,50,000

and rest of capital is held by Z
Ltd

1.4 HOLDING AND SUBSIDIARY COMPANIES TRANSACTION [Section 19]

Subsidiary According to section 19 of the Companies Act, 2013, no company shall, either by
company not to itself or through its nominees-
hold shares in its (i) hold any shares in its holding company, and
holding company-
(ii) no holding company shall allot or transfer its shares to any of its
subsidiary companies, and any such allotment or transfer of shares of a
company made to its subsidiary company shall be void.
Exceptions (a) where the subsidiary company holds such shares as the legal representative of a
deceased member of the holding company; or

(b) where the subsidiary company holds such shares as a trustee; or

(c) where the subsidiary company is a shareholder even before it became a subsidiary
company of the holding company.
Special Note The subsidiary company referred to in the above exceptions shall have a right to
vote at a meeting of the holding company only in respect of the shares held by it as
a legal representative or as a trustee, as referred to in clause (a) or clause (b) of the
said exceptions.

1.5 NATIONAL COMPANY LAW TRIBUNAL

Constitution [Section 408]
Power to constitute  According to section 408 of the Companies Act, 2013, the Central
Government shall, by notification, constitute, a Tribunal to be known as the
National Company Law Tribunal
Members  It shall consist of a President and such number of members, as the Central
Government may deem necessary.
Qualification of  According to section 409 of the Companies Act, 2013, the President shall be
President and a person who is or has been a Judge of a High Court for five years.
Members of  A person shall not be qualified for appointment as a Judicial Member unless
Tribunal he is or has been—
 a judge of a High Court; or
 a District Judge for at least five years; or
 an advocate of a court for at least ten years.

1.6 APPELLATE TRIBUNAL

Constitution [Section 410]
Power to constitute  As per section 410 of the Companies Act, 2013, the Central Government
shall constitute, an Appellate Tribunal to be known as the National
Company Law Appellate Tribunal
Members  It shall consist of a chairperson and number of Judicial and Technical
Members, not exceeding eleven, to be appointed for hearing appeals against
the orders of the Tribunal.
Qualifications of  Section 411 of the Companies Act, 2013 says that the chairperson shall be a
Chairperson and person who is or has been a Judge of the Supreme Court or the Chief Justice
members of of a High Court.
Appellate Tribunal
 A Judicial Member shall be a person who is or has been a Judge of a High
Court or is a Judicial Member of the Tribunal for five years.

 A Technical Member shall be a person having special knowledge and

experience, of not less than twenty-five years in various disciplines related
to management, conduct of affairs, revival, rehabilitation and winding up of
companies.

1.7 PUBLIC OFFER AND PRIVATE PLACEMENT [Section 23]

1. Modes of issue by (a) to public through prospectus , or
Public Company (b) through private placement; or
(c) through a rights issue or a bonus issue, and
(d) in case of a listed company or a company which intends to get its securities
listed, with the provisions of the Securities and Exchange Board of India Act,
1992 and the rules and regulations made there under.
2. Modes of issue by  By way of Right issue or Bonus issue
Private Company  Through Private Placement

1.8 POWERS OF SEBI [Section 24]

Power to regulate Any issue and transfer of securities etc of the listed companies / companies which
issue of securities intend to get their securities listed, shall be administered by SEBI and the Central
Government, as required.
Power of Securities Any issue and transfer of securities etc of the listed companies / companies which
and Exchange intend to get their securities listed, shall be administered by SEBI, in other words
Board SEBI may exercise its powers in relation to:-

(i) issue and transfer of securities; and

(ii) non-payment of dividend, by listed companies or those companies

which intend to get their securities listed on any recognised stock
exchange in India, be administered by the Securities and Exchange
Board by making regulations in this behalf
Power of CG In any other case, be administered by the Central Government.
8

1.9 PROSPECTUS [Section 2 (70)]

Meaning Means any document described or issued as a prospectus and includes a red herring
prospectus referred to in section 32 or shelf prospectus referred to in section 31 or
any notice, circular, advertisement or other document inviting offers from the
public for the subscription or purchase of any securities of a body corporate.

1.10 ADVERTISEMENT OF PROSPECTUS [Section 30]

Content of a. the contents of its memorandum as regards the objects, the liability of members
Advertisement and the amount of share capital of the company, and
b. the names of the signatories to the memorandum and the number of shares
subscribed for by them, and
c. its capital structure.

1.11 ABRIDEGED PROSPECTUS [SECTION 2(1)]

1. Meaning A memorandum containing such salient features of a prospectus as may be specified
by the Securities and Exchange Board by making regulations in this behalf.
2. It shall No application form for shares in or debentures of a company can be issued unless it
accompany is accompanied by an abridged prospectus containing all the prescribed features
Application Form
(Sec 33)
Exception 1 Where the form of application is issued to person who is bona fide invited to
enter into an underwriting agreement.
2 Where form of application is issued in relation to shares or debentures which
were not offered to the public.
3 Where the application is issued to existing members or debenture holders of
the company whether with or without the right of renunciation.
4 Where the application is issued in relation to shares or debentures which are
(i) Uniform in all respects with shares or debentures previously issued, and
(ii) Dealt in or quoted at a recognized stock exchange.

1.12 SHELF PROSPECTUS [Section 31]

1. Why Shelf  A public company is required to issue a prospectus for raising finance from
Prospectus the public.
 Every time a fresh issue of securities is made, issuing a fresh prospectus is
a costly and time consuming process.
 In order to minimize such burden, the concept of 'shelf prospectus' is
introduced which will be valid for a period of one year.
2. Document For any subsequent offering within the validity period only an 'information
required along with memorandum' for updating the information under the specified heads is required to
Shelf Prospectus be filed.
3. Meaning of Shelf Any class or classes of companies as prescribed by the Securities and Exchange
Prospectus Board of India may file a shelf prospectus with the registrar of companies at the
 stage of the first offer of securities for a period of one year.
4. Benefit of Filing  A company filing a shelf prospectus with the Registrar shall not be
Shelf Prospectus required to issue prospectus afresh at every stage of offer of securities by it
within a period of validity of such shelf prospectus.
 Thus at the time of making any subsequent offer, company shall-
 File an updated Information memorandum
 Issue to the public, updated information memorandum along with shelf
prospectus
5. Information  Creation of New Charge; and
Memorandum shall  Changes in Financial position of company which has occurred between the
contain material first offer of security, previous offer of security and the succeeding offer of
facts which pertains security.
to

1.13 RED HERRING PROSPECTUS [SECTION 32]

1. Meaning of Red- "Red-herring prospectus" means a prospectus which does not have complete
herring Prospectus particulars on the price of the securities offered and the quantum of securities
offered.
2. Provisions 1 Any variation between the red-herring Prospectus and prospectus shall be
regarding Red highlighted as variations by the issuing company.
Herring
2 The applicant can exercise his right to withdraw from the application on
Prospectus
any intimation of variation within seven days from the date of such
intimation
3 According to section 32 of the Companies Act, 2013, red herring
prospectus may be issued by a company prior to the issue of a prospectus
and shall be filed with the registrar at least 3 days prior to the opening of
the subscription list and the offer.
3. When the Final Upon the closing of the offer of securities, a final prospectus shall be filed
Prospectus shall be  In a case of a listed public company with the SEBI and ROC; and
filled
 In any other case with the ROC only.
4. Final Prospectus Upon closing of the offer of securities, the details of information which are not
shall contain included in the red herring prospectus is to be filed with the registrar and the SEBI.

1.14 DEEMED PROSPECTUS OR PROSPECTUS BY IMPLICATION OR OFFER FOR SALE

[SECTION 25]
1. Meaning  Where the company allots or agrees to allot any shares or debentures to
any issuing house or others
 With a view that such shares or Debentures would be offered to public for
sale
 Any such document by which this offer for sale to public is made
 shall be deemed to be a prospectus issued by a company and
 All provisions applicable to prospectus shall be applicable to it with
specified modification.

2. Presumption It will be presumed that an allotment or an agreement to allot shares or debentures

10

with Deemed to the issuing houses was made with a view to offer them to public in case:-
Prospectus (a) Shares were offered to the public for sale within 6 months after they were
allotted or agreed to be allotted to issuing house, or
(b) Whole consideration in respect of shares/debentures had not been received by
the company.
3. Matters to be Contents of prospectus
Stated in Deemed  Liability in respect of mis -statements, in and omissions from prospectus,
Prospectus or otherwise relating to prospectus,
 shall apply with the modifications

1.15 CRIMINAL LIABILITY FOR MIS STATEMENT [Section 34]

Liability According to Sections 34 of the Companies Act, 2013, where any prospectus is
issued or circulated or distributed containing any statement which is untrue or
misleading in form in which it is included, then every person who authorizes the issue
of such prospectus shall be liable for fraud.
Defense available He can escape his liability under this section if he can prove that:-
(a) Statement was immaterial; or
(b) He had reasonable ground to believe the statement to be true.

1.16 CIVIL LIABILITY FOR MIS STATEMENT [Section 35]

Liability Where any person subscribes for securities on the basis of misleading statements or
inclusion or omission of any matter in the prospectus resulting in any loss or
damages, then the company and every person who has authorized the issue of such
prospectus or a director, promoter and the other, whosoever is liable- shall have to
compensate every person who has sustained such loss or damage.
Defense available No person shall be liable, if he proves that—
(a) having consented to become a director of the company, he withdrew his
consent before the issue of the prospectus, and that it was issued without
his authority or consent; or

b) the prospectus was issued without his knowledge or consent, and that on
becoming aware of its issue, he forthwith gave a reasonable public notice
that it was issued without his knowledge or consent.

1.17 PENALTY FOR FRAUDULENTLY INDUCING PERSONS TO INVEST MONEY

[Section 36]
When this Section is attracted where any person who, induces or attempts to induce another
Provision shall person to enter into, or to offer to enter some agreement by making any false,
apply deceptive or misleading statement, promise or forecast or by any dishonest
concealment of material:
Attempt to induce 1 Any agreement for, the acquisition, disposal, subscribing for, or underwriting
must be to enters Shares or debentures
into any of 2 Any agreement for the purpose of securing any profit to any of the parties from
following the yield of shares or debentures, or from fluctuations in the value of shares or
agreement debentures
3 Any agreement for obtaining credit facilities from any bank or financial institution.

1.18 ACTIONS BY AFFECTED PERSON [Section 37]

When this The section 37 of the Companies Act, 2013, provides that a suit may be filed or any
Provision shall other action may be taken by any person, group of persons or any association of
apply persons who have been affected by any misleading statement or the inclusion/
omission of any matter in the prospectus.

1.19 PENALTY FOR ACQUISITION OF SECURITIES [Section 38]

Punishment for According to this section 38 of the Companies Act, 2013, those persons who apply
Personation for in a fictitious name or make multiple applications or otherwise induce a company to
acquisition, etc., of allot or register any transfer of securities in fictitious name shall be liable for fraud.
securities And the amount so received through disgorgement of gain, seizure and disposal of
such securities, shall be credited to the IEPF(Investor Education and Protection
Fund).

1.20 LEGAL RULES

1. Minimum Minimum No allotment of any securities of a company shall be offered to the
subscriptions and Subscription public for subscription unless the minimum amount (stated in the
application money prospectus) has been subscribed.
[Section 39] Application It the amount which is payable on each share along with the
money application for purchase or shares.
This amount must not be less than 5% of the nominal value of
shares.
2. Consequences in Within a period of thirty days from the date of issue of the prospectus, or such other
case of failure to period as may be specified by the Securities and Exchange Board, the amount
received Minimum received shall be returned within such time and manner as may be prescribed.
Subscription
3. Listing of public  Every company making public offer, before making such offer, shall, make an
issue with application to one or more recognized stock exchange to obtain permission for
recognized stock the securities to be dealt with.
exchange
[Section 40]
 Any allotment made without permission shall be void.

 All the moneys received on application from public for subscription to the
securities shall be kept in a separate bank account. In case of default, the
company and every officer who is in default shall be punishable with fine/with
imprisonment/both.

1.21 PROHIBITION ON BUY BACK OF SHARES OR OTHER SPECIFIED SECURITIES-

Whether directly or Indirectly [Section 70]
12

1. No Buy Back A company cannot purchase its own shares through any subsidiary company
from Subsidiary including its own subsidiary company.
2. No buy Back A company cannot purchase its own shares through any investment company.
through a
Investment
company
3. No Default of  Repayment of deposit or interest thereon,
 Redemption of debentures or preference shares or
 Payment of dividend or
 Repayment of any term loan or interest thereon to any financial institution or
bank.
Special Note: - The prohibition is lifted if the default has been remedied and a
period of 3 years has elapsed after such default ceased to subsist.
4. No Non-  filing of Annual Return (section 92),
Compliance of  declaration of dividend (section 123) or
 punishment for failure to distribute dividend (section 127) and
 Preparation of financial statement (section 129)

1.22 MEANING [Section 2(55)]

Meaning Person whose name has been entered in the register of members are called as
members of the company. Membership may be taken by:
 Subscribing in the memorandum of the company or
 by agreeing in writing to become member of the company or
 by entering his name in the records of depository as beneficial owner of the
shares in a company.
Every company has to maintain a register of members containing detailed
particulars of each member, to be kept at the registered office of the company or any
other place.

1.23 CLOSURE OF REGISTER OF MEMBERS or DEBENTURE HOLDERS or OTHER

SECIRITY HOLDERS [Section 91]
1.Applicable This section is applicable in case of closure of register of member , register of
debenture holders as well as other security holders
2. Maximum 1. At one time-30 Days
Closure allowed 2. For Entire Year- 45 Days
upto
3. Publication of Company shall publish notice intimating such closure atleast 7 days before such
Notice closure in a vernacular newspaper
4. Penalty for non- If the register of members or of debenture-holders or of other security holders is
compliance closed without giving the notice or after giving shorter notice than the company and
every officer of the company who is in default shall be liable to a penalty of 5,000/-
for every day subject to a maximum of one lakh rupees during which the register is
 kept closed.

1.24 PUBLICATION OF AUTHORISED, SUBSCRIBED AND PAID UP SHARE CAPITAL

[Section 60]
Provision According to the section 60 of the Companies Act, 2013, where any notice,
advertisement or other official publication, or any business letter, etc. of a company
contains a statement of the amount of the authorized capital of the company, there
such mentioned documents shall also contain the amount of the capital which has
been subscribed and the amount paid-up.

Penalty for non- If any default is made, there the company shall be liable to pay a penalty of ten
compliance thousand rupees and every officer of the company who is in default shall be liable to
pay a penalty of five thousand rupees, for each default.

1.25 CALLS ON SHARES

1. Meaning A ‘call’ may be defined as a demand made by a company on its shareholders to pay
the whole or a part of the balance, remaining unpaid on each share at any time
during the continuance of a company
2. Resolution of the The call must be made by a resolution Passed of board of directors. The resolution
Board must specify the amount of the call, and the time and place of payment of calls.
3. Uniform basis Section 49 of the Companies Act, 2013 provides that where any calls for further
[Section 49] share capital are made on the shares of a class, such calls shall be made on a
uniform basis on all shares falling under that class.
The shares of the same nominal value on which different amounts have been paid-
up, shall not be deemed to fall under the same class.
4. Bona fide The call must be made bona fide in the best interest of the company. Power to call
should not misused by directors to make calls for their personal benefits
5. Compliance of The call must be made strictly in accordance with the provisions of the articles of
AOA the company
6. Notice to be Proper notice shall be served on members stating the date, time and last date for
Served Properly payment of call. Any irregularity in issuance of notice will invalidate the notice, in
spite of the fact that such irregularity was not material.

1.26 PAYMENT OF CALLS IN ADVANCE [Section 50]

1. Provision As per section 50 of the Companies Act, 2013 a company may accept from any
member the whole or a part of the amount remaining unpaid on any shares, even if
no part of that amount has been called up.
2. Voting Power A member of the company limited by shares shall not be entitled to any voting rights
in respect of the amount paid by him until that amount has been called up.

1.27 PAYMENT OF PROPORTIONATE DIVIDEND [Section 51]

Provision As per section 51 of the Companies Act, 2013, a company may, if so authorised by
14

its articles, pay dividends in proportion to the amount paid-up on each share.

1.28 CONVERSION OF UNLIMITED COMPANY INTO LIMITED COMPANY [Section 65]

1. Procedure for Section 65 of the Companies Act 2013, lays down the procedure for the conversion
conversion of the unlimited company into a limited company by increasing the nominal amount
of each share or/ and by providing that the company cannot call unpaid portion of
share capital except in the event of winding up.
2. Steps for (a) increase the nominal amount of its share capital by increasing the nominal
Conversion amount of each of its shares, but that no part of the increased capital shall be
capable of being called up except in the event and for the purposes of the
company being wound up;
(b) by providing that a specified portion of its uncalled share capital shall not be
capable of being called up except in the event and for the company being
wound up.
3. Default in If any default is made in complying with the order of the Tribunal under this section,
Compliance the company shall be punishable with fine which shall not be less than one lakh
rupees but which may extend to five lakh rupees and

Every officer of the company who is in default shall be punishable with

imprisonment for a term which may extend to one year or with fine which shall not
be less than one lakh rupees but which may extend to three lakh rupees, or with
both.

1.29 REFUSAL TO REGISTER THE TRANSFER OF SHARES [Sec 58]

IN CASE OF If a private company limited by shares refuses, to register the transfer of, or the
PRIVATE transmission of the right to any securities or interest of a member in the company,
COMPANIES the company shall send notice of the refusal to the transferor and the transferee or
to the person giving intimation of such transmission, within a period of thirty days
from the date on which the instrument of transfer, or the intimation of such
transmission, was delivered to the company.
Right of Appeal to Transferee may prefer an appeal to Tribunal. The appeal should be in writing and
transferee should be filed within the prescribed time.
Meaning of Where the Appeal should be filed within 30 days of the receipt of
Prescribe Time company gives a such notice, and
notice of refusal
Where the Appeal should be filed within 60 days from the date on
company does not which the instrument of transfer was delivered to the com
give any notice of
refusal
IN CASE OF If a public company without sufficient cause refuses to register the transfer of
PUBLIC securities within a period of thirty days from the date on which the instrument of
COMPANIES transfer or the intimation of transmission, is delivered to the company, the
transferee may submit an appeal to tribunal, within a period of
  sixty days of such refusal or
 where no intimation has been received from the company, within ninety days
of the delivery of the instrument of transfer or intimation of transmission

Power of Tribunal The Tribunal, while dealing with an appeal may, after hearing the parties, either
dismiss the appeal, or by order—
o direct that the transfer or transmission shall be registered by the company and
the company shall comply with such order within a period of ten days of the
receipt of the order; or

o direct rectification of the register and also direct the company to pay
damages, if any, sustained by any party aggrieved.

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

1.30 RECTIFICATION OF REGISTER OF MEMBERS [Sec 59]

Remedy to the Appeal to Tribunal may be submitted by aggrieved party if the name of any
aggrieved for not person is, without sufficient cause,
carrying the changes  entered in the register of members of a company, or
in the register of  after having been entered in the register, is, omitted there from, or
members:
 if a default is made, or unnecessary delay takes place in entering in the
register

Order of the The Tribunal may, after hearing the parties to the appeal by order, either
Tribunal  dismiss the appeal or

 direct that the transfer or transmission shall be registered by the company

within a period of ten days of the receipt of the order, or

 direct rectification of the records of the depository or the register and direct
the company to pay damages, if any, sustained by the party aggrieved.
16

Other Points 1. The provisions of this section shall not restrict the right of a holder of
securities, to transfer such securities and any person acquiring such
securities shall be entitled to voting rights unless the voting rights have
been suspended by an order of the Tribunal.

2. Where the transfer of securities is in contravention of any of the

provisions of the Securities Contracts (Regulation) Act, 1956, the
Securities and Exchange Board of India Act, 1992 or this Act or any other
law for the time being in force, there the Tribunal may, on an application
made direct any company or a depository to set right the contravention
and rectify its register or records concerned.

1.31 REGISTRATION OF CHARGE [Section 65]

1. Meaning Every company is under an obligation to keep at its registered office a register of
charges and enter therein all charges specifically affecting property of the company
and all floating charges on the undertaking or any property of the company.
2. Punishment for As per section 86 of the Companies Act, 2013, if a company makes any default with
contravention respect to the registration of charges covered under Chapter VI, there penalty shall
be levied, ranging from 1 lakh to 10 lakhs.

Every defaulting officer is punishable with imprisonment for a term not exceeding 6
months or fine which shall not be less than 25,000 rupees, but not exceeding 1 lakh
rupees or both.
 Chapter-2-General Meeting
2.1 EXTRA ORDINARY GENERAL MEETING [Section 100]
1. Who can call? Extraordinary General Meeting may be called by
 Board,
 Requisitionists or
 CLB.
2. EGM by Board 1. Suo motu The Board may, whenever it thinks fit, call an extraordinary
of Directors i.e. on their general meeting.
own
2. On Board on the requisition of the required number of the
Requisition of members can call an extraordinary general meeting. Required
the Members number of members will be as follows:
3. Meaning of Case A Members holding at least 10% of the paid up share capital of the
Required Numbers For company company,
having share
capital
CaseB Members having at least 1/10 of the total voting power
For company
having no
share capital
4. Requirement as 1 The requisition must contain all the matters for consideration of which the
to Requisition meeting is to be called.

2 If any special resolution is intended to be passed at the requisitioned meeting,

the Board shall be deemed not to have duly convened the meeting if they do
not give such notice thereof as is required.
4 Requisition must be signed by all the Requisitionists. In case of joint
shareholders, a requisition signed one or some of them for the purpose of this
section is also sufficient.
5 The requisition must be deposited at the registered office of the company.
5. Action to be The Board of Directors must proceed within 21 days of the deposit of the
taken by Board requisition to convene a meeting which must be held within 45 days of such
upon receipt of deposit of the requisition with the company.
Requisition
6. EGM by If the board fails to call an EGM, than such a meeting shall be called by the
Requisitionists Requisitionists themselves. Every effort should be made in conducting the meeting
themselves in similar manner as it is called by BOD
7. Time limit for Where the meeting is called by the Requisitionists, such meeting must be held
holding EGM as before the expiry of 3 months from the date of deposit of requisition.
per
8. Consequences of If the Quorum is not present within half an hour from the time appointed for holding
Absence Quorum of the meeting the meeting, shall stand dissolved if it is called on the requisition of
the members. But if the articles provide otherwise then articles will apply.
9. Right of If default is made in calling the meeting by the board and Requisitionists themselves
Requisitionists proceed to call an EGM. They shall be entitled to claim all reasonable expenses
18

incurred by them for convening a meeting from the company.

10. Consequences Any such expenses shall be bear out of remuneration of directors who are at fault.
for Director who
are at default

PRACTICAL QUESTION
May-06 To remove the Managing Director, 40% members of Global Ltd. Submitted requisition
for holding extra-ordinary general meeting. The company failed to call the said meeting
and hence the requisitionists held the meeting. Since the Managing Director did not
allow the holding of meeting at the registered office of the Company, the said meeting
was held at some other place and a resolution for removal of the Managing Director
was passed. Examine the validity of the said meeting and resolution passed therein in
the light of the companies Act, 2013.
Hint It was held by the SC in case of LIC v Escorts that, Every shareholder of a company
has a right to requisition for an extraordinary general meeting. He is not bound to
disclose the reasons for the resolution to be proposed at the meeting.
Section 100 of the companies Act contains provisions regarding holding of
extraordinary general meetings. It provides that if directors fail to call a properly
requisitioned meeting, the requisitionists or such of the requisitionists as represent not
less than 1/10th of the total voting rights may call a meeting to be held on a date fixed
within 3 months of the date of the requisition.
Where a meeting is called by the requisitionists and the registered office is not made
available to them, still meeting will remain a valid meeting and Further, resolutions
properly passed at such a meeting, are binding on the company.
Thus, in the given case, since all the above mentioned provisions are duly complied
with. Hence the meeting with the resolution removing the managing director shall be
valid.

2.2 STATEMENT TO BE ANNEXED TO THE NOTICE [Section 102]

When According to section 102 of the Companies Act, 2013 , a statement setting out all the
material facts concerning each item of special business to be transacted at a general
meeting, shall be annexed to the notice calling such meeting.
It includes 1. All material facts concerning each item of business.
2. The nature of interest of
 every director and the manager, if any;
 every other key managerial personnel; and
 relatives of the persons mentioned in point (i) and (ii).

3. where any item of special business to be transacted at a meeting of the

company, relates to or affects any other company, the extent of shareholding
interest in that other company of every promoter, director, manager, if any, and
of every other key managerial personnel of the first mentioned company shall, if
the extent of such shareholding is not less than two per cent of the paid-up
share capital of that company, also be set out in the statement.
2.3 PROPER CHAIRMANSHIP [Section 104]
1. Appointment of Option-1 Unless the article of a company provides otherwise, the members
Chairman personally present at the meeting shall elect one of them to be the
chairman thereof on a show of hands.
Option-2  If a poll is demanded on the election of the chairman (whether
before/after the election of chairman on a show of hand) then it
shall be taken forthwith and the person elected as chairman on
show of hands shall exercise all the powers of chairman.
 If some other person is elected chairman as a result of poll he
shall be the chairman for the rest of the meeting.
2. Voting Rights of Chairman is entitled to exercise one vote as a member of a company and
a Chairman second/casting vote as a Chairman in case of equality of votes (if articles provides)
on a show of hands or a poll. As he is not a member Chairman is entitled to exercise
only second/casting vote as a chairman in case of equality of votes on a show of a
hand or a poll.

2.4 QUORUM for GM (Section 103)

1. Meaning of It means minimum number of members that must be present in order to constitute a
Quorum valid meeting.
2. Quorum (a) in case of a public company,—
Required for
Number of members as on date of a
General Meeting
Quorum for the meeting meeting
5 members personally
present not more than one thousand
15 members personally more than one thousand but up to five
present thousand
30 members personally
present exceeds five thousand

(b) in the case of a private company, two members personally present, shall be the
quorum for a meeting of the company
3. Who will be (i) A member of the company
considered as (ii) Authorized representative of a body corporate.
Member Personally
(iii) Representative of President/Governor of the state.
Present
20

4. Who will not be (i) Proxy appointed by the member.

considered as (ii) Proxy appointed by authorized representative of a body corporate/
Member Personally Representative of President/Governor.
Present
5. When Quorum Quorum must be present at the time of commencement of GM.
Required?
7. Effect of Absence If the Quorum is not present within half an hour from the time appointed for
of Quorum holding of the meeting, following shall be applied:
Priority Step need to be taken
1 Provision contained under AOA shall apply
2 Meeting shall be adjourned at a place and time as board may determine.
3 Meeting shall be Adjourned to the same day in the next week at the
same time and same place
Note If at adjourned meeting quorum is not present within half an hour, members present
shall form quorum. A single member shall not constitute quorum at an adjourned
meeting.
Notice of an Where the meeting stands adjourned to the same day in the next week at the same
adjourned meeting time and place, or to such other date and such other time and place as the Board
may determine, there the company shall give at least 3 days notice to the
members either individually or by publishing an advertisement in the newspapers.

2.5 VOTING [Sec 106]

1- Restriction on 1 In case of non payment of Calls due on shares
voting rights
2 In case of non payment of other dues against the members
3 Where right of lien is exercised by the company in respect of shares
2.Right to use the On a poll taken at a meeting of a company, a member entitled to more than one
Voting Right vote, or his proxy, where allowed, or other person entitled to vote for him, as the
Differently case may be, need not, if he votes, use all his votes or cast in the same way all the
votes he uses.
3. Voting by a show Section 107 of the Companies Act, 2013 provides that at general meeting a
of hands resolution put to the vote of the meeting shall, unless a poll is demanded or the
voting is carried out electronically, be decided on a show of hands.

PRACTICAL QUESTIONS
May-09- The articles of ABC Limited provided that only those shareholders would be entitled to vote
Modified whose names have been there on the Register of Members for two months before the date of
the meeting. X' a member, of the ABC Limited was holding 200 equity shares of the company. X
transferred his shares to Y before one month form the date on which the meeting was due. The
name of Y could not be entered in the Register of Members as the application of transfer of
shares was pending. Y attended the meeting but he was prohibited by the company from
exercising his voting right on the ground that he has not hold his shares for specified period as
 provided in the articles before the date of the meeting.
State whether Y can exercise his voting right in the meeting? State also the grounds upon which
Y may be excluded from exercising his voting rights in the meeting of the shareholders.
Hint A public limited company can not impose any restriction on voting right of its members on any
ground other than those specified under section 106.
Since above ground of restriction is not covered under section 106, thus restriction so imposed
shall be invalid
Nov-05 C, a member of LS & Co. Ltd., holding some shares in his own name on which Final call money
has not been paid, is denied by the company voting right at a general meeting on the ground
that the articles of association do not permit a member to vote if he has not paid the calls on the
shares held by him. With reference to the provisions of the Companies Act, 2013, examine the
validity of company's denial to C of his voting right.
Hint Since restriction is imposed as per the ground as specified u/s 106, thus company is justified
May-10 J held 100 partly paid up shares of LKM Limited. The company asked him to pay the final call
money on the shares. Due to some unavoidable circumstances he was unable to pay the
amount of call money to the company. At a general meeting of the shareholders, the chairman
disallowed him to caste his vote on the ground that the articles do not permit a shareholder to
vote if he has not paid the calls on the shares held by him. J contested the decision of the
Chairman. Referring to the provisions of the Companies Act, 2013 decide whether the
contention of J is valid
Hint Since restriction is imposed as per the ground as specified u/s 106, thus company is justified

2.6 PROXIES [Section 105]

1. Who Appoint a Every member who is entitled to attend and vote at a meeting of the company shall
Proxy be entitled to appoint another person (whether a member or not) as his proxy to
attend and vote instead of himself.
2. Duties of Proxy Proxy is Bound to Vote According to the Directions of the Member Appointing Him
since relationship between a member and his proxy is that of principal and agent.
3. Limitations of a  A proxy (if not member) shall not be entitled to speak at the meeting.
Proxy  A proxy is not counted for the purpose of quorum
 shall not be entitled to vote except on a poll.
4. Who can be Any Person (whether member or not)
appointed as a
Proxy
5. Statement Notice calling a meeting shall contain a statement that member can appoint proxy
authorizing and proxy need not necessarily be a member of a company.
appointment of
Proxy in Notice
6. Deposit of Proxy It should be submitted to the company
Form  48 hours before the meeting
 In case Article provides any further shorter period than it should be complied
with
7. Appointment of  Should be as per the AOA
22

Proxy in Case of  In absence thereof, first named joint holder should sign the proxy.
Joint Holdings?
8. Relationship The relationship between a member and his proxy is that of a principal and agent.
Between Member The proxy is bound to vote according to the directions of the member appointing
and Proxy him.
9. Inspection of Every member entitled to vote at a meeting of the company, or on any resolution to
Proxy be moved thereat, shall be entitled during the period beginning twenty-four hours
before the time fixed for the commencement of the meeting and ending with the
conclusion of the meeting, to inspect the proxies lodged, at any time during the
business hours of the company,

provided not less than three days’ notice in writing of the intention so to inspect is
given to the company.
10. Situation where Every officer of the company who knowingly issues the invitations as aforesaid or
an invitation are wilfully authorises or permits their issue shall be punishable with fine which may
issued at extend to one lakh rupees.
company’s However, an officer shall not be punishable whereby reason only of the issue to a
expenses member at his request in writing of a form of appointment naming the proxy, or of a
list of persons willing to act as proxies, if the form or list is available on request in
writing to every member entitled to vote at the meeting by proxy.
11. Revocation of 1 When a member appointing a proxy, personally attend the meeting.
Proxy
2 When a member appointing a proxy, appoint another proxy at a later date, in
such a case person appointed proxy subsequently shall be treated as proxy
3 Where intimation of death or insanity is received prior to commencement of
meeting (whether original or adjourned)
4 Where intimation of transfer of shares is received by company prior to
commencement of meeting (whether original or adjourned)
12. Rights of a 1 A proxy shall be entitled to vote in case of voting by poll even if an article does
Proxy not provide so
2 Proxy can vote on show of hand only of such power is expressly provided by
Article.
3 A proxy may demand for poll

PRACTICAL QUESTION
Nov-04 Annual General Meeting of a Public Company was scheduled to be held on 15.12.2003. Mr. A, a
shareholder, issued two Proxies in respect of the shares held by him in favour of Mr. 'X' and Mr.
'Y'. The proxy in favour of 'Y' was lodged on 12.12.2003 and the one in favour of Mr. X was
lodged on 15.12.2003. The company rejected the proxy in favour of Mr. Y as the proxy in
favour of Mr. Y was of dated 12.12.2003 and thus in favour of Mr. X was of dated 15.12.2003.
Is the rejection by the company in order?
Hint  As per Section 105 of the Companies Act, 2013 a proxy should be deposited 48 hours before
the time of the meeting. In the given case, the proxies should have, therefore, been deposited
on or before 13.12.2003 (the date of the meeting being 15.12.2003). X deposited the proxy
on 15.12.2003.
  Therefore, proxy in favour of Mr. X has become invalid. Thus, rejecting the proxy in favour
of Mr. Y is unsustainable. Proxy in favour of Y is valid since it is deposited in time.
May-08 The Chairman of the meeting of a company received a Proxy 54 hours before the time fixed for
the start of the meeting. He refused to accept the Proxy on the ground that the Articles of the
company provided that a Proxy must be filed 60 hours before the start of the meeting. Decide,
under the provisions of the Companies Act, 2013 whether the Proxy holder can compel the
Chairman to admit the Proxy?
Hint As per Section 105 of the Companies Act, 2013 proxy shall be deposited with the company
within 48 hours before the meeting.
Any provisions contained in the Articles of a company that requires a longer period than 48
hours before a meeting of the company for depositing a proxy shall be void. Thus contention of
Mr X is valid
May-10 K, a member of MNO Limited, appoints L as his proxy to attend the general meeting of the
company. Later he (K) also attends the meeting. Both K (the member) and L (the proxy) voted
on a particular resolution in the meeting. K's vote was declared invalid by the chairman stating
that since he has appointed the proxy and L's vote has been considered as valid. K objects to the
decision of the Chairman. Decide, under the provisions of the Companies Act, 2013 whether K's
objection shall be taxable.
Hint Decision by Chairman is invalid. Since K i.e. a member himself attended a meeting and voted on
resolution, it will amount to revocation of proxy. Thus any vote put by L i.e. proxy shall be
invalid

2.7 APPOINTMENT OF REPRESENTATIVE

1. Representation of  Where a company is a member of another company, it may attend the meeting of
Company [Section any other company through a representative.
113]  The representative must be appointed by a resolution of the board of directors.
 The person so appointed is entitled to exercise the same rights and powers
(including the right to vote by proxy) on behalf of the company as the member
personally present may exercise.
2. Representation of  Where a president or Governor is a member of any company, they may appoint a
the President and person to attend meeting in their place as their Representative.
Governors [Section  Said Representative shall be treated as a member personally present thus he
112] avails all power thereof.

2.8 RESOLUTION [ Sec 114]

Ordinary A resolution shall be an ordinary resolution when
Resolution  The notice of general meeting required under the Act has been duly given,
 The votes cast including the casting vote if any of the chairmen (whether on
show of hand or on a poll as the case may be) exceed the votes if any cast
against the resolution.
Meaning of A resolution shall be an ordinary resolution when
Special Resolution  The notice of general meeting required under the Act has been duly given,
 The votes cast including the casting vote if any of the chairmen (whether on
show of hand or on a poll as the case may be) are at least 3 times the number of
votes if any cast against the resolution).
 The intention to propose the resolution as a special resolution has been duly
24

specified in the notice calling the general meeting or other intimation given to
the members.

PRACTICAL QUESTION
Nov-05 At a General meeting of a company, a matter was to be passed by a special resolution. Out of
40 members present, 20 voted in favour of the resolution, 5 voted against it and 5 votes were
found invalid. The remaining 10 members abstained from voting. The Chairman of the meeting
declared the resolution as passed.
With reference to the provisions of the Companies Act, 2013, examine the validity of the
Chairman's declaration.
Hint In the given problem, the votes cast in favour (20) being more than 3 times of the votes cast
against (5), if other conditions of Section 114 are satisfied, the decision of the Chairman is in
order.
Nov-07 For a special resolution in a Company's general meeting, 10 voted in favour, 2 against and 4
abstained. The chairman declared the resolution as passed. Is it a valid resolution as per the
provisions of the Companies Act, 2013
Hint The Resolution which is passed is a valid Special Resolution.

2.9 CIRCULATION OF MEMBERS' RESOLUTION [Section 111]

1. Options Available Option-1-To move a Resolution in Meeting
to Members Option-2-To Send any other requisition
2. Number of  Members/Members holding at least 1/10 of the voting power
Members required
to move an
application
3. Duty of Company Company shall
(a) Give notice to members entitled to have notice of meeting of any resolution
which is intended to be moved at Meeting.[For Option-1]
(b) Circulate to members entitled to have notice of meeting any statement with
regard to any proposed resolution to be dealt with at general meeting [For
Option-2]
4. No liability to (a) a copy of the requisition signed by the member is deposited at the registered
send Notice unless office of the company
 At least 6 weeks before the meeting in case of requisition proposes a
resolution.
 At least 2 weeks before the meeting in case of any other requisition.
(b) Requisitionists has deposited a sum reasonably sufficient to meet the
company's expenses in giving effect to the requisition
5. No Circulation by If Central Government is satisfied on basis of application of the company or any
Company other aggrieved person, that the right is being abused to secure needless publicity
for defamatory matter.