([CBCS] Choice Based Credit System
TAXMANN®'S
Corporate
Laws
Anil Kumar
As per
revised
syllabus
10th Edition
2021
1-6
PREFACE TO TENTH EDITION
book building, shares including dividend, general meetings,
management of companies and powers of directors. Chapter 14
contains the concept and modes of winding up of companies.
The Depositories Act contained in Chapter 15 makes the book
relevant not only for under-graduate students but also those
who have an interest in the securities market. The examination
Syllabus
questions and case problems are given at the end of each
chapter to enhance the utility of this book for the students
preparing for their semester examinations.
Feedback from readers is solicited and would be thankfully
acknowledged.
B.COM. (HONS.): SEMESTER-II
PAPER BCH 2.3: CORPORATE LAWS
Course Objective
To impart basic knowledge of the provisions of the Companies Act, 2013
March 15, 2021
ANIL KUMAR
and the Depositories Act, 1996. Case studies involving issues in corporate
laws are required to be discussed.
Course Learning Outcomes
After completing the course, the student shall be able to:
TAXMANN
CO1: understand the regulatory aspects and the broader procedural aspects
involved in different types of companies covering the Companies Act, 2013
and Rules thereunder.
CO2: follow the basic legal documents and their usage essential for oper-
ations and management of company.
CO3: enable the students to synthesis company processes, meetings and
decisions.
CO4: equip the students with framework of dividend distribution and role
of auditors in a company.
CO5: comprehend and evaluate working of depositories and theirfunctions
in stock markets.
Course Contents
Unit I: Introduction
Meaning and characteristics of a company; Lifting of corporate veil;
Administration of Company Law [including National Company Law Tribunal
(NCLT), National Company Law Appellate Tribunal (NCLAT), Special Courts];
Types of companies including private and public company, government
company,foreign company, one person company, smallcompany,associate
company, dormant company and producer company; Association not for
1-7
Got
1-8
SYLLABUS
profit; Illegal association; Formation of company, promoters, their legal
position and pre-incorporation contracts; Online registration of a company.
Unit II: Documents and shares
Contents
Memorandum of Association and its alteration, Articles of Association and
its alteration, doctrine of constructive notice, doctrine of ultra vires and
indoor management; Prospectus, Shelf and Red herring prospectus, misstatement in prospectus; book building; Allotment and Forfeiture of share,
Sweat Equity, ESOPs, Bonus issue, and Further issue of shares, buyback
and provisions regarding buyback; Membership of company.
Unit III: Management and Meetings
directors-Additional, Alternate and Casual directors,
Women directors, Independent director, Small shareholder's director;
Classification of
Director Identity Number (DIN); Appointment, Disqualifications, Removal
of directors; Legal positions, Powers and Duties; Key managerialpersonnel,
Managing director, Manager and Whole Time Director; Board Meetings:
meeting through video conferencing; Shareholder meetings: AGM and
EGM. Convening and Conduct of meetings: Requisites of a valid meeting;
Resolutions; Postal ballot; e-voting.
Unit IV: Dividends, Audit and Winding up
PAGE
Preface to Tenth Edition
1-5
Syllabus
1-7
CHAPTER 1:
COMPANY: MEANING AND FEATURES
1
CHAPTER 2:
ADMINISTRATION OF COMPANY LAW
24
CHAPTER 3:
KINDS OF COMPANIES
32
CHAPTER 4:
FORMATION OF COMPANY
56
CHAPTER 5:
MEMORANDUM OF ASSOCIATION
CHAPTER 6: ARTICLES OF ASSOCIATION
73
90
Provisions relating to payment of Dividend, Company Audit-auditor's
qualification and disqualifications, Auditor's appointment, Rotation of
auditors, Auditor's removal, Auditors' report and Auditor's powers.
CHAPTER 7:
PROSPECTUS
106
CHAPTER 8:
SHARES AND SHARE CAPITAL
132
Winding Up: Concept and Modes of Winding Up; Provisions of winding up
CHAPTER 9:
MEMBERS AND SHAREHOLDERS
166
under Insolvency and Bankruptcy Code, 2016.
CHAPTER 10:
DIRECTORS AND KEY MANAGERIAL PERSONNEL
177
Unit V: The Depositories Act, 1996
CHAPTER 11:
SHAREHOLDERS MEETINGS
222
Definitions; Depositories system; Rights and obligations of depositories;
CHAPTER 12:
AUDIT
255
CHAPTER 13:
DIVIDEND PROVISIONS
273
CHAPTER 14:
WINDING UP OF COMPANIES
286
Participants issuers and beneficial owners; Inquiry and inspections; Penalty.
Teaching Learning Process
The teaching learning processes play a vital role in instilling in the student the curiosity to study the subject law. It includes lectures through
presentations of case laws, expert lectures, case study approach is widely
followed, role plays, seminars, tutorials, project-based learning. Case laws
comprehension and higher-order skills of reasoning and analysis will be
encouraged through teaching strategies.
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CHAPTER 15: THE DEPOSITORY SYSTEM
301
B.Com (Hons.) Paper - May-June 2016
317
B.Com (Hons.) (CBCS) Paper
May 2017
320
B.Com (Hons.) (CBCS) Paper - May 2018
323
B.Com (Hons.) (CBCS) Paper - May 2019
326
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1-9
Go fo M
1
CHAPTER
COMPANY: MEANING AND FEATURES
Meaning of Company
Characteristics of Company
Doctrine of Lifting the Corporate Veil
together, panis means bread, and originally referred to an association of
persons who take their meals together. Company as a form of business
is traditionally called 'joint-stock company'. "By a company is meant an
association of many persons who contribute money or money's worth
to a common stock and employ it for a common purpose. The common
stock so contributed is denoted in money and is capital of the company.
The persons who contribute it or to whom it belongs are members. The
proportion of capital which each member is entitled is his share. Shares
are
always transferable, although right to transfer them is often more or
less restricted.""
However,joint contribution ofcapital is not sufficient to describe a company.
In partnership firms² also, the capital is brought jointly by the partners.
Company different from partnership firms, is not merely an association
of persons, it is an incorporated association of persons created by law to
carry on the expressly laid down objects. A company exists only in the
1. Lord Justice Lindley.
2. In fact, one may come across a partnership firm or sole proprietorship firm using the word
'Company' as a part of its name, e.g, Frank Brothers & Company, Gokuldass & Company.
Legally such firms are not companies.
1
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TAXMANN
Meaning of Company
COMPANY: MEANING AND FEATURES
2
contemplation of law. Law creates it and law alone can dissolve it. It may
be formed by an Act of Parliament, or by Royal Charter, or by registration
under company law.
The essential feature of company is that it is an incorporated association
created by the law. Chief Justice Marshal of U.S.A. has defined a company
as "a person, artificial, invisible, intangible and existing only in the eyes of
the law. Being a mere creature of law, it possesses only those properties
which the charter of its creation confers upon it, either expressly or as
incidental to its very existence."
Company as a form of doing business has its origin in 1600 A.D. when the
East India Company was established by way of a Royal Charter in England.
Subsequently, the legislative developments in the mid-nineteenth century
in the UK give rise to the modern form of company. At present, company
has become a pre-dominant form of doing the business. This is on account
of numerous advantages which a company has. Corporate laws world over
have regulations regarding formation and functioning of companies.
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In India, the Companies Act of 2013 (known as the Indian Companies Act,
2013) contains the law relating to companies. The Companies Act being
the Act of the Central Legislature (i.e. Parliament) applies to companies
unifoeANN
chroughost lndia o a
Indian Companies Act, 2013
The Companies Act, 2013 was passed to consolidate and amend the law
relating to companies. The Act comprises of 7 schedules, 29 chapters and
470 sections. The Act extends to the whole of India. The Act of Parliament
received the assent ofthe President on the 29th August, 2013. The Act has
become applicable from financial year 2014-15.
Nature and Scope of Act
The Companies Act is the Act of the Central Legislature which applies to
companies throughout India on a uniformbasissubject to special provisions
in specified states and UTs made and notifications issued by the Central
Government.
The provisions of this Act apply to:
(a) Companies incorporated under this Act or under any previous company law;
(b
Insurance companies, except insofar as the said provisions are inconsistentwith the provisions of the InsuranceAct, 1938 or the Insurance
Regulatory and Development Authority Act, 1999;
COMPANY: MEANING AND FEATURES
3
(c) Banking companies, except insofar as the said provisions are inconsistent with the provisions of the Banking Regulation Act, 1949;
(d) Companies engaged in the generation or supply of electricity, except
insofar as the said provisions are inconsistent with the provisions of
the Electricity Act, 2003;
(e) Any other company governed by any special Act for the time being
in force, except insofar as the said provisions are inconsistent with
the provisions of such special Act; and
(f) Such body corporate, incorporated by any Act for the time being in
force, subject to such exceptions, modifications or adaptation, as may
be specified in the notification issued by the Central Government.
Machinery for Administration of the Act
The Central Government has the overall responsibility for administration
and enforcement of the Companies Act. The Ministry of Corporate Affairs
(MCA) of the Government of India is the nodal agency/authority which has
been given various powers under the Act. Most of the powers are vested
to the authorities created under the Act:
1. Tribunal: National Company Law Tribunal (NCLT) and the National
Company Law Appellate Tribunal (NCLAT) are quasi-judicial bodies
to administer the provisions of the Companies Act. The Tribunal
exercises such powers which are conferred on it by the Companies
Act, 2013 and any other law for the time being in force.
2. Regional Directors: The Regional Directors are appointed by the
Central Government who are in-charge of the respective regions, each
region comprising a number of States and Union Territories. They
supervise the working of the offices of the Registrars of Companies
and the Official Liquidators working in their regions. They also
maintain liaison between the respective State Governments and the
Central Government in matters relating to the administration of the
Companies Act, 2013.
3. Registrar of Companies (ROC): Registrars of Companies (ROCs)
appointed by the Central Government under the Companies Act,
2013 are the full-time officers appointed in various States and Union
Territories who are vested with the primary duty of registering com-
panies floated in the respective States and the Union Territories and
ensuring that such companies comply with statutory requirements
under the Act. The offices of ROC function as registry of records
relating to the companies registered with them,which are available