SR.

NO PART ONE COMPANY LAW, PRINCIPLES &

CONCEPTS.
1. INTRODUCTION.
2. SHARE CAPITAL.
3. MEMBERS & SHAREHOLDERS.
4. DEBT INSTRUMENT.
5. CHARGES.
6. DISTRICBUTION OF PROFIT.
7. CSR.
8. ACCOUNTS & AUDIT.
9. TRANSPARENY & DISCLOSURE.
10. OVERVIEW IN INTER-CORPORATE LOANS ETC.
11. REGISTER & RECORDS.
12. OVERVEIW OF CORPORATE REORGANIZATION.
13. MCA-21 & FILLING OF XBRL.
14 GLOBAL TRENDS.

SR.NO PART TWO COMPANY ADMINISTRATION & MEETING/

LAW & PRACTICES.
15. BOARD CONSTITUTION & ITS POWER.
16. DIRECTORS.
17. KMP.
18. MEETINGS OF BOARD.
19. GENERAL MEETING.
20. VIRTUAL MEETING.

SR. PART THREE CS AS A PROFESSION SECRETARIES.

NO
21. LEGAL FRAME WORK GOVERNING CS
22. SECRETARIAL STANDARDS BOARD.
23. MEGA FIRMS.
LAW*LOGIC*LOVE INTRODUCTION.

1. Introduction
Applicability
A) Company
B) Banking companies
C) Insurance companies
D) Electricity companies
E) Corporations establish under special act
F) Body corporate.

The word ‘companies’ is derived from the LATIN word ‘com& panis’ com means with or
panis -bread. Company means association of person who took their meal together
Company 2(20):- company means a company registered under companies Act 2013 and any other
previous company law.

EFFECTS OF INCORPORATION; SECTION-9

➢ T-Transferability of shares.
➢ The ownership is represented by shares and shareholder can transfer the shares of the company.
➢ O-Ownership &management both are separate.
Shareholder are the owners of the company where company is managed by BOD.
➢ P-Perpetual succession.
➢ Member, promoter, may come and go but company will remain forever.
➢ Death of member, promoter does not affect the company.
➢ C-contractual capacity
➢ Company can enter into contract on its own.
➢ Common seal.
➢ Official signature of the companyOptional- signed by 2 director and CS if any.
➢ L-Limited liability.
➢ Liability is limited up to unpaid amount on shares
➢ A-Artificial legal person.
➢ Company is created by human but creation will be judicial.
➢ S-Separate legal entity (saloman vs. saloman co. Ltd)
➢ Company and its member both are different.
➢ Company have its own identity distinct from member.
➢ S-Separate property (Macaura vs. northern insurance co. Ltd)
➢ Company have its own identity and can own property on its own property of company and member are
separate.
➢ Can sue& can be sued. Company can sue to third party and third party can also file case against
company.
s
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Body corporate
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Means a company and it includes foreign company and any corporation establish under special Act
however it exclude
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LAW*LOGIC*LOVE INTRODUCTION.
- Registered co-operative society
- Body corporate- specified by central government.

‘Every company is a body corporate but everybody corporate is not a company’.

Company is not a citizen because citizenship can only granted to natural person.Company has residential
status which depends upon place of incorporation/place where governing body meetsplace of control.In
general company cannot claim fundamental right because it is given to citizen however few fundamental
rights which is available to any person, company can claim such rights.

Illegal association-
Any unregistered association or partnership having more than 50 person working for acquisition of gain
shall be treated as illegal association. It does not include Hindu undivided family or partnership formed by
professional who are governed by special Act. If partnership formed by HUF having more than 50 major
member shall be treated as illegal association.

EFFECTS of illegal association

✓ Cannot enter into a contract.
✓ Cannot wound up.
✓ Disregard the entity.
✓ Taxable.
✓ Cannot sue to any member/creditor.
✓ Cannot be sued by members/creditors.

Lifting of corporate veil.

Where the fraudulent intension to misuse the veil for benefit of their own or conducting illegal act, such
person will not get the benefit of acting behind veil.
In simple words if any person committing fraud or illegal activity inside the company then such person shall
held personally liable.
To prevent dishonest practice court can lift corporate veil and look behind the corporate face.
In following cases court can lift corporate veil.
▪ F-Fraudulent application for removal of name.
Company fraudulently file the application to remove the name of the company so that creditors cannot
claim in such situation court can lift the corporate veil.
▪ C-Criminal activity.
If company is carrying any criminal activity under the corporate name then court can lift the veil.
▪ S-Acquisition of SSI.
Company is formed to avail the benefit available to SSI.
▪ C-conflict of public policy religious sentiments.
Company is carrying such activities which is against the public policy or which hurt the religious
sentiments.
▪ A-Avoidance of welfare legislation.
Where the sole purpose of the company was to use it as a device to reduce the amount to be paid by
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way of bonus to workmen, the corporate veil should be pierced to look at the real transaction.
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▪ S-Submission of false information.

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LAW*LOGIC*LOVE INTRODUCTION.
Company is incorporated by submitting the false information
▪ P-Prevention of fraud.
The formation of the company is to do fraud then court can lift the corporate veil
▪ D-Determination of enemy character.
To determine the enemy character of the company court can break the corporate veil.
▪ P-Protection of revenue.
Formation of the company is to evade the taxes then court can lift the veil.

SELF NOTES.

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LAW*LOGIC*LOVE Share capital.

2. Share capital

Types of capital
1. Authorized capital is the maximum share capital issued by company.
2. Issued capital means company issues for the time being for public subscription and allotment.
3. Subscribed capital is that portion of the issued capital at face value which has been subscribed for or
taken up by the subscribers.
4. Called up capital is that portion of the subscribed capital which has been called up or, demanded on
the shares by the company.
5. Paid up capital means the portion of called up capital which has been paid by shareholder.

Issue & allotment.

Prospectus2 (70)
Prospectus means any document issued as a prospectus.
▪ It includes red herring prospectus
▪ Shelf prospectus
▪ And notice, circulars, advertisements which
▪ Invite public
▪ To purchase/subscribe the securities of a body corporate.

Red herring prospectus

❖ RHP is issued in case of book building method
❖ It does not include price and quantum.
❖ It includes price band i.e. Lower price and upper price
❖ Rhp shall file with roc at least 3 days prior to issue opening date.
Shelf prospectus (31)
- Shelf prospectus means a prospect issued for one or more issues over a certain period without the
issue of a further prospectus.
- Validity is one year from the date of opening of first issue.
- Single prospectus for multiple issue
- In case of material change file information memorandum in form no (PAS-2)
- Material changes means it includes new charges created, change in financial information and other
material information.
- Application may withdraw their application.
- Refund within 15 days with interest @15%p. a
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Abridged prospectus 2(1) (chotu).
• Summarized form of prospectus
• It contains silent features of prospectus
• Issued along with the application form
• No need to issue if shares offers to underwriters and securities not offer to public & further issue of
offer of same class.

Premium (sec 52)

- Anything above the face value is known as premium.
- It is transferred to security premium account.
- It is a capital profit.
- Cannot utilized for payment of dividend.
➢ Minimum application money=5% according to the company act- 25% as per SEBI.
➢ Offer period-minimum 3 days maximum 10 days in case of public issue min/ 15 days max. 30 days in
case of right issue.
➢ Minimum subscription-90% of issued capital and it should be received within 30 days from the issue
of prospectus.
➢ If failed received then refund within 15 days from closure of issue.
➢ Failed to pay within 15 days then penalty @ 15%p.a.
➢ The money received from the public is kept in a separate a/c. Known as escrow a/c
➢ File return on allotment in form pas-3 within 30 days to roc.

Deemed prospectus (25)

✓ Inviting public to purchase or subscribe the security through intermediary.
✓ Document issued on behalf of the company to subscribe the security (deemed prospectus).
✓ Condition to be fulfilled for deemed prospectus;
I. Offer for sale within 6 months after the allotment
Or.
II. Whole consideration is not received by the company at the time of offer.
Additional disclosure in deemed prospectus: -
1) Net consideration received or to be received.
2) Time and place for inspection of contract
3) It should signed by 2 director or in case of firm by not less than ½ of the partner.

Criminal and civil liability for misstatement in prospectus

Every person who authorised the issue of prospectus which contain untrue statement or omission of any
material information shall be liable u/s 447 i.e. Liability of fraud

Share certificate.
Share certificate is a documentary evidence of title.
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Form no SH-1
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- Pass board resolution to issue share certificate and it should be issued within specified time.
- In case of incorporation – 2 months
- In case of allotment – 2 months
- In case of transfer – 1 month

Sealing and signing:-

a) Sign by 2 directors and CS if any and common seal.
b) In absence of common seal sign by 2 directors or director and cs if any.

Issue of renewed or duplicate share certificate:-

Company shall not issue any duplicate share certificate in lieu of those lost or destroyed without the
board approval.

Duplicate share certificate shall be issued within 45 days in case of listed company and within 3 months
in case of unlisted company.

Legal effect of share certificate.

Estoppel as to title: share certificate is a declaration by the company to the entire world that the person
in whose name the certificate is made out and to whom it is given is a shareholder in the company. In
other words the company is estopped from denying his title to the shares.

Estoppel as to payment: if the certificate states that on each of the shares full amount has been paid,
the company is estopped as against a bona fide purchaser of the shares, from alleging that they are not
fully paid.

Share and share capital

Issue of differential voting rights (DVR)
• Authorised by AOA.
• Gm-OR
• In case of listed company resolution by postal ballot.
• Maximum-26% of post issue paid up equity share capital.
• Distributable dividend for past 3 years (profitable company).
• No default in filling financial statement & annual returns in preceding last 3 years.
• No default in payment of interest on debenture other deposits.
• No default in redemption of preference shares or debentures.
• No default in payment of dividend on preference shares.
• Not penalise under SEBI, RBI, depository, SCRA act
• No conversation is allowed from DVR to EVR and EVR to DVR.
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• File return on allotment in PAS -3 within 30 days to ROC.

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Issue of preference shares (5.5)

➢ GM-SR (MGT - 14 – 30 days to ROC)

➢ No existing default in case of payment of dividend and redemption of pf shares.
➢ Maximum period 20 years
➢ In case of infrastructure company – 30 years
➢ From 21st year redemption 10% every year.
➢ PAS3 – 30 days – ROC.

Redemption of preference shares (55(2))

• By two ways
A) Proceeds of fresh issue
B) Surplus profit.
• Fully paid up shares can be redeemed.
• Out of profit some equal amount shall be transfer to CRR
(Capital redemption reserve).
• CRR is used to issue fully paid up bonus shares.
• Notice of redemption given to ROC in SH-7

Inability to redeem preference shares.

• Company is not in position to redeem preference shares
• obtain 3/4th consent of preference shares and
• Approval from NCLT.
• Issue fresh preference shares equal to the amount due on redemption including dividend it shall be
considered the deemed redemption.

Right issue / pre-emption right:

• Shares issued to existing shareholder.
• Power to BOD – BR
• Bod approve letter of offer (LOO)
• send letter of offer (LOO) at least 3 days prior to issue opening date to existing share holder.
• Issue open for min 15 days & max 30 days
• Private company – obtain approval from 90% of shareholder - may be open for less than 15 days.
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Offer .
Offer

ACCEPTANCE RENUNCIATION REJECTION.

ALLOTMENT Transfer to other bod may allot to other
Person person in the interest
. of The company.

Exceptions:
Right issue not applies in the following cases
1.Conversation of convertible debentures or pf shares.
2. Conversion of government loan as per the direction given by the government.

Employee’s stock option scheme (ESOP)

it is an option given to the directors, employees or officers of company or its holding company or
subsidiary company which gives right to purchase or subscribe shares at future date at pre-
determined price.

*eligibility:-
Director: - whole time director (WTD) or other directors except independent director.
Employee: - permanent employee working in or outside India
*employee or director of the company its subsidiary company in India or outside India or holding
company in India
Non-eligibility
▪ Employee cum promoter or belonging to promoter group
• a director who either himself or through his relative or through anybody corporate, holds more
than ten percent of the outstanding equity shares of the company
condition
• Public company pass SR
•Private company pass OR
•Vesting period – minimum 1 year
•Till exercise – no voting right & dividend
•If failed to subscribe or exercise the option then the amount paid shall be forfeited.
•Freedom to specify the locking period
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Status of ESOP

Death disable resignation

Given to its heir or vesting on the forfeited/ option expire
nominee same day.
*Disclosure in board report

Issue of shares on preferential basis (62)

Conditions:-
1.) Offer given to selected group of persons.
2.) Authorised by AOA.
3.) Pass SR (mgt-14 -30 days -ROC.)
4.) Completion of preferential allotment within 12 months from passing SR
5.) Failed to complete the procedure within 12 months pass another SR.
6.) Valuation of shares is done by registered value.
7.) Follow section 42 (private placement).

Private placement. (Sec-42)

• Issue private placement offer document (PPOD) (PAS-4) along with application form.
• PPOD is given to selected person whom the offer is made.
• Issue PPOD within 30 days from recording the names.
• Issued to 200 persons in the financial year.
• At a time issued to max.50 persons which exclude qualified institutional buyers and employee under
ESOP.
• The above restriction is considered individually (200 equity shares, 200 debentures, 200 pf shares).
• Minimum investment size (20,000 face value)
• Fund through normal banking channel and not in cash.
• Fund kept in separate account till allotment and return of allotment is filed.
• Allotment within 60 days from receipt of application.
• Failed to allot within 60 days refund within 15 days
• Failed to refund within 15 days pay interest @12% pa from 61st. Day
• Return of allotment (PAS 3) file to ROC within 15 days.
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Bonus issue (sec-63).

➢ known as capitalisation of profit.
➢ Free shares given to existing shareholders (fully paid up)
➢ Sources *profit
*free reserve
* Security premium.
* CRR
Recommended by BOD and approval by shareholder by passing OR
RR (revaluation reserves) cannot be utilized for issue of bonus shares.
No default in payment of interest or principle amount on fixed deposit or other debt security.
No default in payment of statutory dues
No bonus in lieu of dividend
File PAS 3 within 30 days to ROC.

Sweat equity shares. (Sec-54)

- Issued to directors or employees (permanent) at discount or consideration other than cash for
providing technical knowhow or intellectual property rights. (IPR).
- Employee means:-
- A) a permanent employee of the company who has been working in India or outside India, for at
least last one year;
- (b) A director of the company, whether a whole time director or not,
- (c) an employee or a director of a subsidiary, in India or outside India, or of a holding company.
- SR carries.
*no. Of shares issued
*total consideration.
*class of director/employee
*current market price
➢ SR is valid for 12 months.
✓ Limit:-
Financial year: - 15% of paid up equity share capital or issue value of 5 cr whichever is higher.
Aggregate limit of life time: - 25% of paid up equity share capital.
✓ Price is determined by registered value
✓ Lock in period – 3 years
✓ Treated as a part of managerial remuneration if issued to directors or manager and issued for
consideration other than cash
✓ Disclosure in directors report
a) Class of directors or employee
b) No. Of shares issued
c) Terms and conditions
d) Justification of the issue
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e) Class of shares
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✓ Authenticated by CS
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✓ No need to obtain approval from NCLT
✓ Maintain registrar form no. (Sh-3).

Buy back and reduction.

Buy back.
Buy back means purchase of its own shares by company
Objectives of buy back

1. To return the surplus cash to shareholders

2. Increase the current market price
3. To avoid takeover bid

Sec.67 – prohibition on buy back

A) Company shall not directly or indirectly buy back its own shares or give loan, guarantee, security,
to any person for purchase of its own shares or shares in its holding company
Sec.68 buy back subject to certain conditions
Sources;-

a. Free reserve
b. Security premium
c. Proceeds of specified securities .(other than same kind of securities)

Methods:-
1. Existing shareholders
2. Open market – stock exchange
3. Employee where shares issued under ESOP or sweat equity shares.

Limit: - BOD-BR:-up to 10% of paid up equity share capital +free reserve+ security premium.

Gm-SR: - 25% of paid up share capital + free reserve + security premium

Before buy back and after buy back share capital should remain constant
Only fully paid up shares can buy back
Debt equity ratio shall not exceed 2:1.
Before buy back file letter of offers (loo) to ROC
(Form SH-8)
Dispatch to all shareholders within 21 days from filing with ROC
Issue shall remain open for min 15 days and max 30 days
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Completion within 12 months from passing SR/ BR

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No buy back within 1 year from closing of previous buy back

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File declaration of solvency with ROC & SEBI in form (SH-9) sign by 2 director one of whom must be MD
if any
Extinguish and destroy the shares physically within 7 days from completion of buy back
No further issue of same kind of security in next 6 months except by way of bonus issue
File return of buy back within 30 days to ROC which is signed by 2 director including MD.
Maintain register of buy back

Transfer to CRR (69)

In case of buy back out of free reserve and security premium a/c sum equal amount shall be transfer to
CRR.

Sec.70 prohibition of buy back;-

No buy back through subsidiary company including its own subsidiary.
No buy back through Investment Company.
No buyback if default in
A. Repayment of deposit.
B. Redemption of preference shares and debenture.
C. Payment interest on debt security.
D. Repayment on loan.
E. Payment of declared dividend.
No default in;-
a) Filing annul return.
b) Filing financial statement
c) Declaration of dividend.
d) Distribution of dividend.

Reduction of share capital. (66)

Reduction of share capital means reduction in issued, subscribe and paid up share capital.
Following transaction results in reduction of share capital
1) By way of conversion of party paid up shares into fully paid up.
2) Cancellation of paid up share capital which is lost.
3) Pay off the excess amount.

*Procedure for reduction of share capital.

1.) Pass SR.

2.) Application to the NCLT.
3) NCLT forward the application to central government, ROC, SEBI and creditors.
4) Can raise objection within 3 months.
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5) Obtain consent from creditors or discharge the debt.

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6) NCLT will confirm the reduction.
7) Order shall be published by the company as directed by NCLT.
8) Order file with ROC within 30 days.
9) After reduction liability of member is reduced.
10) add to its name the word ‘and reduced’.
11) Registrar issued certificate of reduction which is conclusive evidence.

Diminution of share capital is not a reduction of capital.

Diminution of capital is the cancellation of the unsubscribed part of the issued capital.
It can be effected by an ordinary resolution.
It does not need any confirmation of the tribunal under section 66.
(a) Redemption of redeemable preference shares.
(b) Purchase of shares of a member by the company on order of the tribunal
(c) buy-back of its own securities.
Diminution of share capital is not to be treated as reduction of the capital:
(i) Where the company cancels shares which have not been taken.
(ii) Where redeemable preference shares are redeemed
(iii) Where any shares are forfeited.
(iv) Where the company buys-back its own shares.

Shares and share capital.

Transfer
➢ Private company.
➢ Restriction on transfer of shares i.e. Right given to existing shareholders at a price determined by
director or auditor.
➢ Director may refuse the transfer.

Public company.2 (71)

• The shares of public company are freely transferable.
• Two parties – transferor and transferee.
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• Execution of transfer document (SH-4).

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• The instrument shall be duly stamped, dated and properly executed.

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• Deliver transfer document to company within 60 days from the execution.
If the share are partly paid up then company send notice to transferee and transferee shall give no
objection from receipt of notice within 2 weeks.
Delivery of share certificate within 1 month from the date of receipt of SH-4.

*Lost of transfer document.

▪ If the transfer document is lost, transferee submit the indemnity bond

▪ If BOD think fit may register the transfer.
▪ 0.25% stamp duty is payable by transferee on the share value

Between the periods of transfer and register.

a. The company demands call money from transferor and transferor may recover it from transferee.
b. The company pay dividend to transferor.
c. The transferor will vote but with the pre- direction of transferee.

Transferor‘s death

Company has no notice company has notice of his death.

Of this death.

Company will register not to register until legal

The transfer. Representative referred to.

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Transferee’s death.
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Company has no notice of his death. Company has notice of his death.
Register the transfer. Shares cannot be registered.
- Consent of transferor and legal
representative is required.

Appeal against refusal.

*if company refuse transfer then appeal against such refusa

-
Private company. Public company -
1.) Appeal to NCLT within 30 days from Appeal to NCLT within 60 days from receipt of -
receipt of notice of refusal. notice of refusal. -
2.) No notice send by company. No notice send by company.
-
3.) Within 60 days from the deposit of Within 90 days.
-
share transfer instrument (sh-4).
-

Transmission.
- Operation by law
- Death – legal representative or nominee.
- Insolvency – official assigns or receiver.
- Merger or amalgamation—resulting company.
- Lunatic – legal representatives or nominee.

Blank transfer
• Transfer without the name of the transferee
• It is the transfer by mere delivery.
• Objective of blank transfer;-
a.) Avoidance of stamp duty.
b.) Concealment of indemnity of real owner
c.) Evasion of taxes.
d.) Until registration transferor will be the owner.

Forged transfer.

1. Signature of the transferor is forged

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2. Forged transfer are null and void.

3. To avoid forged transfer company intimate to transferor about the lodgement of instrument (SH-4).
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Effects of forged transfer.

❖ Null and void and the original owner continues to be owner and company will restore his name.
❖ No denial of transfer of shares in favour of buyer
❖ Company is liable against the innocent buyer if his name is removed.
Transposition of name;-
- Alteration or arrangement of name or wants to hold shares individual.
- Request to BOD.
- No need to execute transfer deed.
- No stamp duty.

SELF NOTES.

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LAW#LOGIC#LOVE Member & shareholders

3.Members and
shareholders

Member2 (55)
A.)Subscribers to memorandum of association (deemed member)
Note-subscribers cannot rescind the contract even on the ground of fraud by promoter.

B.) Agreement in writing with the company.

• By way of application and allotment.
• Transfer of shares
• By transmission of shares.
• By acquiescence or estoppel
C) Beneficial owner
In the record of depository.

>who can become a MEMBER?

Company—legal entity can be a member.
Subsidiary company cannot become a member in a holding company.
Partnership firm—cannot be a member.However in case of sec 8 company firm may become a
company.
LLP—legal entity can be a member.
Section 8 company—can become a member unless prohibited by AOA/MOA.
Foreigner—foreigner can be amember (follow FEMA.)

Minor:-
1. Cannot be a member.
2. If shares are transferred to minor transferor is liable for all future calls till he attains
majority.
3. Company may refuse the transfer if company knows of his minority.
4. Minor can hold fully paid up shares through guardian.
5. Minor after attaining majority, if he does not want to be a member he must repudiate his
liability on the shares on ground of minority

Insolvent:-
1. He is a member as long ashis name isentered in register of member.

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2. Having voting power.

3. Dividend to official assigneeor receiver.
4. No corporate benefit.

Pawnee-Pawneecannot be treated as member. He never had the absolute ownership

Receiver- Cannot exercise any of his rights till his name is entered in register of members .

Person taking share in fictitious share -Criminal liability for commission of fraud. He is a
member.

Tradeunion-Registered trade union can hold the share.

ADR/GDR holder

• Cannot be treated as member.

• ADR/GDR— not a member till conversion.

Joint member.

• Two or more person applying for shares

• Joint holder treated separately except in case of private company for the purpose of
counting themember.
• In case of notice, dividend, voting rights treated as single member
• Max.4 member can hold one share jointly.

Restrictions on number of members

Opc-1

Pvt. Company- min 2 and max 200.

Public company- min 7 and max unlimited

If number is reduced below the minimum number then the liability becomes unlimited or
NCLT can order the winding up

Cessation of members.

✓ Cessation means cancellation of membership

✓ Occurs in the following situation.
A) Transfer of shares

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B) Transmission...
C) Insolvent -official assignee disclaims
D) Redemption of preference share
E) Surrender of shares
F) Winding up of the company

Register 88
1) Register of members separately for each class
2) Register of debenture holder
3) Register of other securities
4) If there are more than 50 members then maintain index
5) Register of beneficial owner maintained by depository shall be treated as register of
member.
6) Register of foreign members
In register of members entry is made within 7 days fromthe allotment or transfer. Registers
shall keep at register office of the company or such place as may be decided by passingSR

➢ At any place within same city town village where register office is situated
➢ The place in India where more than 10% of the total members resides.
➢ In case of any changes due to bonus, ESOP, right issue is made within 7 days from
approval of board.
➢ Authentication by CS of by authorised person.

Inspection.
➢ Member’s debenture holder’s security holders are beneficial owners without any fees can
inspect.
➢ Any other person wants to inspect may inspect by paying fees not exceeding Rs 50.
➢ Inspection duringthe business hours.

Copies.

• Any person can obtain copies by paying fees not extending RS.10 per page.
• Company shall serve the copies within 7 days deposit of fees.

Foreign register.

• Companiesmay keep foreign registers of members or debenture-holders, other security

holders or beneficial owners residing outside India.

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LAW#LOGIC#LOVE Member & shareholders

• If authorised by its articles, company may keep foreign register in any country outside
India.
Evidence

Content true

name entered in ROM

Treated as deemed member

Unless proved contrary.

Preservation of register
o Register of member-maintain permanently.
o Index of member is preserved permanently. Register of debenture
holderispreservedfor 8 years from redemption.
o Annual return and financial statement-preserved for 8 years from filing with the roc.
o Foreign register is preserved permanently.

Book closure.
i. A company may close the register for any period or periods not exceeding in the
aggregate forty-five days in a year,
ii. Max 30 days at a timeGive 7 days prior notice

Record date
▪ Date on which records of company are closed advance 7days’notice.

SELF NOTES;-

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LAW#LOGIC#LOVE DEBT INSTRUMENT.

4.Debt capital

Borrowing power(180)
Director can borrow up to 100% of PSC + FR except temporary loans.
GM-SR if borrowing exceed 100% of PSC+FR
Not applicable to private company.

Temporary loans means repayable within 6 months.

Ultra wires borrowing.

• Borrowing beyond the authority given in AOA is known as ultra vires borrowing.
• Such contract is void and lender cannot sue the company for repayment of the loan.
• Securities given for such ultra-borrowings are also void.

Remedies to the lender.

• Lender can obtain an injunction order from court and recover any property which
company has bought.
• Lender can sue to director for breach of warranty of authority if director intentionally
misrepresented their authority.
• Ultra wires borrowing is used to pay intra vires debt then lenders substitute the position
of creditors.

Ultra vires to BOD but intra vires to company.

• Company will liable for such borrowing if the borrowing is within the ostensible authority
and lender acted in good faith or transaction was ratified by the company.
• Company would be liable, particularly if the money has been used for the benefit of the
company.
• If MD borrow large sum of money and misappropriated it and if such borrowing is within
limit then company will be liable if lender acted in good faith.

Debenture:-
• Debenture includes debenture stock, bonds, or any other instrument of a company
evidencing a debt, whether constituting a charge or not.
• It exclude instrument such as derivatives and money market instrument.

Features of debenture:-

A) It is in the form of certificate.

B) Acknowledge by the company of its indebtedness to a holder.
C) Fixed rate of interest
D) Company may issue perpetual or irredeemable debenture with no undertaking to pay.
E) Usually contain a charge
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F) No voting rights
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G) Fixed deposit is not debenture.

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Issue of debenture: -.

• Can be issued in same manner as shares in a company.

• Can be issued at discount or at premium.
• No ceiling, maximum, minimum limit for the rate of interest.
• Debentures are issued at pari passu clause which implies that no difference will be
made between the old and new debenture.

Provision of companies Act for issue of debenture.

A) Pass SR
B) Company may issue convertible debenture.
C) Max term- 10 years.
D) Following company may issue debenture for max term of 30 years.
1) Company engaged in setting up of infrastructure projects or
2) Infrastructure finance company or
3) Infrastructure debt fund non banking finance company or
4) Other companies specified by RBI/national housing board, ministry of CG.
E) Create a charge on the assets of the company in case of secured debenture.
F) Appoint debenture trustee before issue of prospectus to public or members exceeding
500 and within 60 days from allotment execute trust deed.
G) Name of trustee must be stated in offer document.
H) Obtain written consent before appointment.
I) Create the charge in favor of debenture trustee on specific immovable property or
movable property (not being in the nature of pledge)
J) Creation of DRR
1) DRR created out of profit available for payment of dividend.
2) No DRR is required to
A) All India financial institution and banking company for both publicly as well as
privately placed debenture.
B) Listed NBFC registered under RBI and national housing company registered
with national housing board for both publicly as well as privately placed
debenture.
C) Other listed company for privately placed debenture.
D) Unlisted NBFC registered with RBI and housing finance company registered
with national housing board for privately placed debenture.
3) Other unlisted company, the DRR should be maintained at least 10% of the value of
outstanding debenture.
4) Every company required to create DRR shall deposit or invest at least 15% of debenture
maturing during the current financial year ending 31st march
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5) Deposit in schedule commercial bank or investment in unencumbered securities of govt/

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trust securities.

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6) Amount invested shall use for the redemption of debenture.

7) In case of partly convertible debenture create DRR for non- convertible options.

Disqualification of debenture trustee

A person shall not be appointed as a debenture trustee, if he-
(i) beneficially holds shares in the company;
(ii) is a promoter/ director/ KMP/officer/ employee of the company/holding/subsidiary or
associate company;
(iii) Entitled to moneys which are to be paid by the company otherwise than as
remuneration.
(iv) is indebted to the company/subsidiary/holding/associate/subsidiary of such holding
company;
(v) has furnished any guarantee in respect of the principal debts secured by the debentures
or interest thereon;
(vi) has any pecuniary relationship with the company amounting to two per cent Or more
of its gross turnover or total income or fifty lakh whichever is lower, during the two
immediately preceding financial years or during the current financial year;
(vii) is relative of any promoter or any person who is in the employment of the company as
a director or key managerial personnel
(d) the Board may fill any casual vacancy provided that in case of resignation the vacancy
shall only be filled with the written consent of the majority of the debenture holders.
(e) any debenture trustee may be removed holders of not less than three fourth in value of
the debentures outstanding, at their meeting.

Duties of debenture trustee

(a) ensure letter of offer does not contain any matter which is inconsistent with the terms
of the issue of debentures or with the trust deed;
(b) condition in the trust deed are not prejudicial to the interest of the debenture holders;
(c) call for periodical status or performance reports from the company.
(e) appoint a nominee director on the Board of the company in the event of-
(i) two consecutive defaults in payment of interest to the debenture holders; or
(ii) default in creation of security for debentures; or
(iii) default in redemption of debentures.
(g) inform the debenture holders immediately of any breach of the terms of issue of
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debentures or covenants of the trust deed;

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(i) ensure that the assets of the company issuing debentures and of the guarantors, if any,
are sufficient to discharge the interest and principal amount at all times and that such
assets are free from any other encumbrances except those which are specifically agreed to
by the debenture holders;
(4) The meeting of all the debenture holders shall be convened by the debenture trustee
on-
(a) requisition by debenture holders holding at least one-tenth in value of the outstanding
debentures.
(b) the happening of any event, which affects the interest of the debenture holders.

DEPOSITE
Deposits

Definition of deposit

Receipt of money by way of deposit or loan or in any other form but does not include

A) Any amount received by CG/SG/local authority/statutory authority or repayment is

guaranteed by CG/SG.
B) Any amount received by foreign Govt/bank/multilateral financial
institution/collaborators/bodies corporate/citizens.
C) Received as a loan or facility from any banking company or from SBI.
D) Received as a loan or financial assistance from public financial institution, regional
financial institution, schedule banks.
E) Amount received against issue of commercial paper or other instrument issued
accordance with RBI.
F) Amount received from other company.
G) Application money or advance received towards allotment if securities not allotted
within 60 days and failed to refund within 15 days after expiry of 60 days.
H) Amount received from director/relative of director of private company if such fund is
not borrowed by director from others.
I) Interest free security deposit from employee not exceeding annual salary.
J) Security deposit for the performance of the contract for supply of goods or services.
K) Amount brought by promoter (unsecured loan)
L) Amount received under collective investment scheme.
M) Amount received by chit fund company/Nidhi company.
N) Amount of 25L or more received by startups, by way of a convertible note (conversion
within 5 years)
O) Amount received from alternate investment fund, domestic venture capital fund,
infrastructure investment trust.
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Acceptance of deposits from public

A) Eligible public company(non govt)

1) Total Deposit from member shall not exceed 10% of aggregate PSC+FR+SP
2) Total Deposit from public shall not exceed 25% of PSC+FR+SP.

B) Eligible public company(government)

1) Total deposit from member as well as public shall not exceed 35% of PSC+FR+SP.
C) Condition-
1) Obtain credit rating agency(required only if deposit accepted from public)
2) In case of secured deposit create charge within 30 days from acceptance.
3) File circular to ROC within 30days before the date of issue of the circular.
4) Issue circular to its member with financial statement.
5) Deposit on or before 30th April at least 20% of deposits maturing in following year
known as deposit repayment reserve account.
6) No default in repayment of deposit or company made good the default and a
period of 5 years had lapsed since making good the default.

Deposit from member

D) Public company other than eligible public company
1) Can accept deposit from member up to 35% of PSC+FR+SP after fulfillment of
condition.
E) Deposit by IFSC public company.
1) Can accept deposit from member up to 100% of PSC+FR+SP from member after
fulfillment of condition
F) Deposit by other private company
1) Can accept deposit from member up to 100% of PSC-FR+SP without compliances of
condition.
G) Deposit by start up private company.
1) Can accept deposit without limit from members without compliances of condition.
H) Private company which satisfy the 3 condition mention below.
A) Which is not an associate or subsidiary company.
B) Borrowing is less than twice of PSC or fifty crore whichever is lower.
C) No default in repayment of such borrowing.

:
Terms of deposit (both from public and member
A) Team- minimum 6 month and maximum 36 months.
B) Can accept deposit for less than 6 month such deposit shall not exceed 10% of
PSC+FR+SP and repayable not earlier than 3 months.
C) Deposits may be accepted in joint names not exceeding three
D) Rate of interest as prescribe by the RBI for NBFC
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E) In case of premature deposit company can reduce the rate of interest by 1%.
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F) Register of deposit
1) Every company shall maintain register of deposit at the register office
2) Entries in the register within 7 days from the issuance of deposit.
3) Entries authenticated by a director or secretary
4) The register shall preserve for 8 years from FY in which the latest entry made
G) File return of deposit on or before 30th of june of every year in form DPT-3

H) Where a company fails to repay the deposit or interest, the depositor concerned may
apply to the Tribunal for an order directing the company to pay the sum due or for any
loss or damage incurred by him and for such other orders as the Tribunal may deem
fit.

I) When company failed to pay deposit or interest or deposited has been accepted for
fraudulent purpose then company and office in default is liable for penalty under
section 447.

Punishment for Fraud.

447. Any person who is found to be guilty of fraud involving an amount of at least ten lakh rupees or one per cent
Of the turnover of the company, whichever is lower, shall be punishable with imprisonment for a term which shall
not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be
less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud:
Provided that where the fraud in question involves public interest, the term of imprisonment shall not be less
than three years.
Provided further that where the fraud involves an amount less than ten lakh rupees or one per cent. Of the
turnover of the company, whichever is lower, and does not involve public interest, any person guilty of such fraud
shall be punishable with imprisonment for a term which may extend to five years or with fine which may extend
to fifty lakh rupees or with both.
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LAW#LOGIC#LOVE CHARGES

5. Charge

1. In order to secure the loan

2. Charge is created on the assets of the company (in or
outside India)
3. Assets may be movable, immovable Tangible, Intangible
4. It includes mortgage, pledge, and hypothecation.

Types of charge.
# fixed charge or specific charge.
1) It cover assets which are ascertained or are capable of being ascertained and defined.
2) Generally created on fixed assets.
3) Cannot deal in that property which has been charged.

# Floating charge / general charge

• It covers those assets which are not capable to ascertained and defined.
• Generally it is created on current assets.It is created on such class of assets which
changing from time to time in the ordinary course of business.
• Company may freely deal in the property which has been charged.Company may
sell, mortgage, or lease such charged property.
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Crystallization of floating charge.

Conversion of floating charge into fixed charge by order.

E- Enforce security by creditor debenture holder (default.)
C-cease to carry out the business.
L- Liquidation.
Any other happening on such other events.

#effects of crystallization.
A) Priority over any subsequent equitable charge and other and unsecured creditors
B) However, preferential creditors like government,employee dues gets priority over the
floating charge.

Postponement of floating charge.

Floating charge leaves the company free to create equitable mortgage on the same property
until crystallized.Where such mortgage has priority over the floating charge which gets
postponed. Situations where floating charges gets postponed

a) Landlord who restrain from rent

b) creditor who obtain a garnishee order
c) judgement creditor attachand sold the property
d) Employee or other preferential creditors
e) Supplierunder the hire purchase agreement under goods are remain the property of
seller.
f) Persons who take mortgage without notice of floating charge has priority over floating
charge.
g) Floating charge created within 12 months immediately preceding the winding up shall
be invalid unless it is proved that the company was solvent after the creation of
charge.
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Difference between mortgage and charge

Mortgage Charge
1) Transfer of interest 1) Security for securing the loan
2) Act of the parties 2) Act of parties or operation by law

3) Charge created by operation by

3) Registration is compulsory
law does not require registration.
4) Fixed term
5) Carries personal liability 4) May be for perpetuity
5) No personal liability unless
default.

#Registration of charge section 77.

1) Company shall register the charge within 30 days from creation.
2) Particulars of charge signed by company and charge holder.
3) Submit CHG. 1 for other than debenture and CHG. 9 for debenture along with
instrument creating charge.
4) Extension- can be granted by ROC.
A) Charge created before commencement of companies act 2019
!) Can be register within 300 days from creation of charge
!) Company shall register within 6 months from commencement of amendment
(2019) act by paying additional fees.
B) Charge created after commencement of companies amendment act (2019)
!) Can be register within 60 days by paying additional fees
!) Further extension of 60 days after payment of advalorem duty
5) ROC issue certificate of registration of charge in form no. CHG. 2
6) Section notapplicable to charge specified by CG after consultation with RBI.

Consequences of non-registration.
A) Liquidator can ignore the charge and treat them as an unsecured creditors.
B) If subsequent charge is created and registered on the same property than later
charge would get priority.

Application for registration by charge holder.

✓ *Company failed to register within 30 days from creation
✓ *charge holder may apply to ROC for registration
*ROC issue 14 days’ notice to company for registration of charge.
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✓ If company failed to register the charge even after notice given by ROC then ROC shall
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✓ Fees paid by charge holder can be recover from company.

Satisfaction of charges
A) Company intimate to ROC within 30 days from satisfaction(CHG. 4).
B) Extension can be granted by ROC for a period of 300 days after payment of
additional fees.
C) ROC shall give 14 days’ notice to charge holder.
D) If no objection is received within 14 days then ROC shall register the
satisfaction of charge and issuecertificate of registration for satisfaction in
form CHG. 5.

Register of charge.

Company’s register of charge.

Keep register of charge in form CHG. 7 containing particulars of charge.
Register of charge shall be kept at register office of the company and preserved
permanently.
Instrument creating charge shall preserve for 8 years from satisfaction.
Register of charge can be inspected by member, creditors (free of cost) and other
person (fees) during business hour.

Registrar’s register of charge

www.mca.gov.in shall be deemed to be register of charge.

Application to central government conditions of delay section 87.

Company fails to register with specified time then company may apply to central government
for extension of time(CHG. 8)Cg may grant extension if satisfied that

C) Non-registration was accidental

D) Inadvertenceor some other sufficient reason
E) Not of a nature to prejudice the position of creditors
F) Just and equitable grounds.
Order of CG shall be filed with ROC in form no. INC. 28 along with the fees.
SELF NOTES-
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LAW#LOGIC#LOVE Distribution of profit

6. Distribution of profit

Introduction
A) Part of net profit distributed to shareholder
B) It is not obligatory but once declared it becomes debt(except preference dividend)
C) Return on the paid up share capital
D) It also include interim dividend.
E) Until and unless dividend is declared, the shareholder has no claim against the dividend.
F) Distribution of dividend coupons shall not treated as deemed dividend.

Types of dividend

1) Final dividend:-
A) Dividend declared at AGM
B) Once declared it becomes debt
C) Recommended by BOD and declared by shareholder by passing OR
D) Mentioned amount of dividend in board report

2) Interim dividend
A) Declared between two AGM
B) Declared by BOD
C) BOD may declare during current financial year or between closing of financial to date of
AGM.
D) In case loss in current FY up to end of previous quarter in which dividend is declared then
rate shall not exceed average of three immediately preceding financial year.
E) All provision relating to payment of dividend shall apply to interim dividend.
F) Interim dividend once declared by BOD cannot revoked except with the consent of
shareholder or if it is declared illegally.

Declaration of dividend (123)

A) Authorized by AOA
B) Out of current year or previous year profit or both or out of fund provided by CG/SG in
pursuance of guarantee.

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C) First set off previous year losses and depreciation (schedule 2).
D) While computing profit exclude notional gain/unrealized gain/revaluation profit.
E) Company may transfer such amount to reserve before declaration.

Dividend in case of loss or inadequacy of profit

A) May declared out of previous year’s accumulated profit.
B) Rate shall not exceed average rate of 3 immediately preceding financial year (not apply if
company has not declared dividend in each preceding 3 year.)
C) Withdrawal from accumulated profit shall not exceed 10% of PSC and FR as per latest
financial statement.
D) Balance in reserve shall be at least 15% of PSC.
E) Before declaration first set off the loss incurred in FY.
F) No dividend from other reserve except free reserve.

Process for approval and payment of dividend

A) Recommendation by BOD and approved/declared by shareholder in AGM by passing BR
B) Interim dividend can be declared by BOD
C) Deposit in a schedule bank within 5 days and payment within 30 days from declaration.
D) If dividend has not paid within 30 days then transfer to unpaid dividend account within 7
days and kept for 7 years. Company shall prepare the list of unpaid dividend account and
placed on the website within 90 days from transfer to unpaid dividend account
E) If failed to transfer within 7 days than liable to pay interest @ 12% on remaining unpaid
amount.
F) After 7 years it should transfer to investor education protection fund account(IEPF)
G) Shareholder and their legal heirs can claim his dividend or shares from IEPF.

Investor education protection fund

A) Established by CG
B) To educate the investor and protect the interest of investor.
C) Amount credited to the fund
! Unpaid dividend
! Unclaimed application money
! Unclaimed matured deposit.
! Unclaimed matured debenture
! Interest thereon
! Grant given by CG/SG/BC/Institution

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! Interest or other income received,

Utilization of investor education protection fund

A) Refund in respect of unclaimed dividend/matured deposit/debenture/application
money/interest thereon.
B) Promotion of investor education
C) Distribution amongst shareholder/debenture holder/deposit holder/ who suffered the
losses if ordered by court.
D) Reimbursement of legal expenses in pursuing to class action suit.

Dividend during registration of transfer of share.

A) Instrument of transfer has been delivered to company but not registered then transfer
such amount to unpaid dividend account unless registered holder authorized to pay to
transferee.
B) Any right issue/bonus issue shall keep in abeyance.

A Punishment for failure to distribute dividend

A) Every Director in default shall be punishable with imprisonment up to 2 years and fine shall
not less than 1000 per day of default.
B) Company shall liable to pay interest @ 18%
C) Exception
! Dividend could not paid because of operation of law.
! If direction is given by shareholder and such direction cannot be complied by company
! Dispute regarding the right to receive dividend.
! Dividend is lawfully adjusted against the sum due from member.
! Dividend warrant is post within with in period

SELF NOTES-

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LAW*LOGIC*LOVE CSR

7. Corporate social responsibility

Applicability:-
Company fulfills any of the following criteria during immediately preceding financial year.
It applies to every company including its holding, subsidiary and a foreign company having
its branch office or project office in India.

A) Net worth 500 Crore or more

B) Turnover 1000 Crore or more
C) Net profit 5 Crore or more

However if company does not satisfy the criteria for 3 consecutive financial year then no
need to follow CSR provision

Composition of CSR committee

A) listed company- 3 director out of one shall be ID
B) Unlisted public or private company- at least 2 director if provision of ID not applies
to such company.
C) Foreign company- 2 person out of one person should be person resident in India.
D) CSR committee shall formulate CSR policy and amount of expenditure recommend
to BOD.
E) CSR shall monitor the implementation of the CSR policy from time to time.

CSR activity
A) By charity- money donate to various charitable trust, society, and NGO etc.
B) By contract- contract with NGO to carry out the CSR activity on behalf of company.
C) By it self- Company can create its own trust for CSR activity.

Eligible social activities

Social welfare work like eradicating poverty, health care, sanitation, making available safe
drinking water.

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A) Promotion of education including special education and employment enhancing

vocational skills
B) Promoter of gender equality, empowering women, setting up homes and hostels for
women
C) Environment protection, ecological balance, animal welfare, conservation of natural
resources etc.
D) Protection of national heritage, art, and culture.
E) contribution to the prime minister’s national relief fund set up by cg/sg
F) Contribution towards combating HIV-aids, or other maternal diseases.

Activities not consider as CSR

Activities undertaken outside India
Activities that benefit only the employee and their families of the company.
A) Contribution to any political party,.
B) Event such as marathon/awards/sponsorship of TV programmed
C) Expenses incurred to fulfillment of any ACT/statue.
D) Expenditure incurred in normal course of business.

Formulation of CSR policy

A) CSR committee shall prepare CSR policy and recommend to the board.
B) BOD shall ensure activities formulate by CSR are duly complied by company.
C) Company shall spend at least 2% of average net profit of 3
Immediately preceding financial year.

A) Where the company has not completed three financial years then
average profit of preceding financial years shall be consider.
B) Net profit shall be calculated as per section 198 of the Act.
C) Give preference to local area.
Failed to spend CSR amount then give reasons in Board report.

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LAW*LOGIC*LOVE CSR

SELF NOTES-

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LAW#LOGIC#LOVE ACCOUNTS & AUDIT

8. Accounts andaudit.

Books of accounts.
➢ Maintain on accrual basis which shows true and fair view and
includes.
A) all some received and expended
B) income and expenditure
C) assets and liabilities
➢ Books of account shall keep at registered office or other place
decided by BOD.
➢ In case of change in place file notice within 7 days to ROC in
form AOC-5.
➢ Books of account of branch office may be kept at that office
however send summarized account at regular interval not
more than 3 month.
➢ Preserve for at least 8 years immediately preceding the current
year.

financial statement
➢ Trading and profit and loss account or income or expenditure
account.
➢ Balance sheet
➢ Cash flow statement
➢ Statement showing changes in equity if applicable
➢ Explanatory notes forming part of financial statement.
➢ It includes consolidate financial statement.(financial statement
of subsidiary and associate company)
➢ Financial statement shall laid before AGM
➢ For OPC, small, and dormant company, financial statement
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➢ Attach along with financial statement a statement containing

salient feature of financial statement of subsidiary company.

Responsible person for keeping books of accounts.

➢ Managing director or manager
➢ Whole time director
➢ CFO
➢ other such person authorised by the board

*inspection of books of accounts.

➢ Director or his agent or representative during business hours.
ROC, SEBI, CG, or person appointed by such authority.
➢ Members if authorised by board of company in GM.
➢ Auditor has the right to access at all time books of account of
company account.

Approval and signing of financial statement.

A) Financial statement shall be approved by BOD before
signing.
B) It should be sign by
1) Chairperson if authorised by BOD
or
2) Two director one should be MD if any
and
3) CEO(if he is director) CFO and CS if any.

C) One person company -signed by only one director before

2

submitting to the auditor.

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D) Auditor report and board report shall be attached to the

financial statement

right to get copies of audited financial statement.

➢ Send copies of the audited financial statement at least 21
days(14 days in case of the section 8 company) before general
meeting to members and debenture trustee and other person
who are so entitled.
➢ Shorter period than 21 days is sufficient of
A) Company having share capital-approval from majority in
number and holding at least 95% of the PSC having voting
power
B) Company not having share capital- 95% of member holding
voting power.
➢ Listed company deemed to complied this section
A) if copies made available for inspection at RO at least 21
days before meeting and
B) Statement containing the salient features of financial
statement is sent at least 21 days before meeting.
C) However send full copy if requested by any member.
➢ Listed company and other public company having net worth
more than 1 crore and turnover of more than 10 crore can
send financial in following manner
A) Electronic form to demat account holder whose email id is
registered
B) Members who hold shares in physical form but consented in
writing to receive in electronic form.
C) In physical form to other member.
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Re-opening of accounts if ordered by court or tribunal

➢ Company can reopen after order of competent court and
NCLT.
➢ Application can be made by
A) CG/income tax authorities/SEBI/regulatory Body/competent
court.
Ground for re-opening

A) Accounts are prepared in a fraudulent manner.

B) Affairs of the company were mismanaged.
C) Doubt on the reliability of the financial statement.

Books of account of past 8 financial year can be re opened

If CG gives direction period of 8 years can be extended.

Voluntary revision of financial statement or board’s report

A) BOD can prepare revised financial statement or board’s
report of any of the three past year after obtaining
approval of the tribunal if
1) If financial statement do not comply with 129
2) Board report do not comply with 134.

Annual compliances of financial statement(private and public

company )

File adopted or un-adopted financial statement with ROC within 30

days from the date of AGM in form AOC-4
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If AGM not held file financial statement along with the reasons of not
holding AGM within 30 days from last of meeting to ROC.

Annual compliances for opc

A) file adopted financial statement within 180 days from closure

of FY.

Audit and auditors

Qualification of statutory auditor

A) Charted accountant or a firm where majority of partner

practicing in India
B) LLP however only CA partner shall be authorised to act and
sign.
Disqualifications of auditors section 141(3)

➢ BODY corporate under than LLP.

➢ Officer or employee of company.
➢ Partner/employee of such officer or employees of the
company.
➢ Persons/ partner /relative hold security or interest in the
company/ holding /subsidiary/ associate company however
relative can hold up to Rs1lakh (face value) corrective action
within 60 days.
➢ Person whose partner/relative indebted to company
/holding/subsidiary / associate/subsidiary of such holding
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company in excess of rupees 5 lac.

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➢ Person /partner/ relative has given guarantee or security in

excess of RS.1 lac to company.
➢ Person or firm has business relationship with the
company except professional services and commercial
transaction as a customer engaged in the business of
telecommunication, airlines, hospitals, hotels at arm's length
price.
➢ Relative is a director or in employment as a director or KMP.
➢ Full time employment elsewhere or appointed as an auditor or
more than 20 companies exclude one person company small
company/dormant company/ private having share capital less
than 100 cr.
➢ Convicted by court offence including fraud and the 10 years
has not elapsed from such conviction.
➢ Can not render certain services under section 144.
➢ Account and bookkeeping
➢ Internal audit
➢ Design and implementation of any financial information
system
➢ Actuarial services
➢ Investment advisory services
➢ investment banking services
➢ rendering of outsourced financial services
➢ management services.
Note:- if auditor incurs any disqualification then he shall
vacant his office and it would result into casual vacancy.

Appointment of 1st auditor other than govt company

A) First auditor shall be appointed within 30 days of registration by
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BOD
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B) Hold office till the conclusion of first AGM.

C) BOD failed to appoint then member shall appoint within 90 days
from incorporation.
D) Inform to ROC in form ADT-1 within 15 days from appointment.

Subsequent auditor other than govt company

A) Appointment at first AGM
B) Individual or firm who shall hold office till the conclusion of
sixth AGM.
C) No need to ratify the appointment.

Appointment of auditor in govt company.

A) First auditor shall be appointed by C&AG within 60 days
from incorporation.
B) C&AG failed to appoint then BOD shall appoint within next
30 days.
C) If BOD failed then member shall appoint within next 60 days
at EGM.
D) Hold office till the conclusion of AGM.

Subsequent auditor in govt company.

A) Appointment within 180 days from the commencement
of financial year by C&AG.
B) Term- till the conclusion of next AGM.

Manner of appointment of auditor

A) BOD consider the qualification of auditor and recommend to the

member.
7

B) If company constitute audit committee

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1) Audit committee consider the qualification of auditor and

recommend to BOD
2) If BOD agrees with the recommendation then BOD further
proposed the name in AGM
3) If BOD disagrees then BOD shall refer back to audit committee.
4) Audit committee shall reconsider the decision and if BOD
agrees then they proposed the name at AGM
5) If audit committee does not reconsider then BOD shall send its
own recommendation to the AGM
6) Member will appoint auditor at AGM by passing or.
Re-appointment of retiring auditor

Retiring auditor can notbe reappointed if

A) If he is disqualified
B) He shows unwillingness to be re-appointed.
C) SR has been passed that some body else is appointed or retiring
director shall not be appointed
D) If auditor is not appointed or re-appointed than existing auditor
shall continue to be auditor.

Rotation of auditor
Applicability
A) Listed company
B) Unlisted public company having PSC 10 crore or more.
C) Private company having PSC 50 crore or more.
D) Any company having public borrowing and public deposit of Rs.
50 crore or more.
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Provision of rotation
A) Individual- 1 tem of 5 consecutive years
B) Firm- 2 terms of 5 consecutive years.
C) Cooling period – 5 continuous years.
D) Member may make voluntary provision in article.

*Appointment of auditor other than retiring auditor

• Special notice by member at least 14 days before the meeting.

• Special notice is not required if provision of cooling period applies .
• Company forward a copy to retiringauditor .
• Auditor may make a representation in writing.
a) State the facts of representation in the notice.
b) Send the copy of representation to all the members.
c) If copy of representation is not sent the same shall file to
ROC.
* auditor may require the company to read out the representation in
the meeting if not notified to member.
• Hold GM pass OR.

*Removal of auditor ;-
✓ .Hold BM -BR
✓ Application to CG within 30 days from passing BR in form no ADT-2
✓ Within 60 days pass SR from the date of receipt of order
✓ Opportunity of being heard shall be given before removal.
Resignation of auditor
• Auditor may resign from office by giving notice to company in
writing.
• Non government company
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• Within 30 days from resignation file reasons of resignation to

company and ROC
• Government company –
• Within 30 days from resignation file statement to the company ROC
,C&AG
• File ADT-3 to ROC indicating the reasons of resignation.

Casual vacancy
Non govt company

A) BOD with 30 days expect in case of resignation.

B) In case of resignation appointed by BOD and approved by
member within 3 month.
C) Term- till the conclusion of next AGM

Govt company
A) C&AG within 30 days from vacancy.
B) If C&AG failed than BOD shall appoint within next 30 days.
C) Term- till the conclusion of next AGM

• Power ofNCLT to remove the auditor

• NCLT many remove any auditor suo moto or an application by CG or
other concern person
• Removal if director acted in fraudulent manner.
• NCLT pass the order within 15 days from application
• If application made by CG then CG shall appoint new auditor
• Once removed further disqualified for further 5 years
• Penalty under section 447(fraud)
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Powers and duties of auditors.

A) Access the books of account.
B) Inquiry about the loans and advances/assets.
C) Verify the assets
D) Charging of personal expenses to revenue account.

Audit report

A) Auditor shall make a report to the member on financial

statement.
B) Audit report shall consider the provision of companies
act/accounting and auditing standard.
C) Audit report shall state that to the best of his information and
knowledge
D) Auditor shall sign the audit report.
E) Adverse opinion of auditor shall read out in the general meeting.
F) It should remain open for inspection.

branch audit
Branch audit can be performed by–
✓ Auditor of the company or
✓ Any other qualified person
✓ Foreign branch-company’s auditor/ other competent person under
foreign laws.
✓ Branch auditor shall submit his report to the company’s auditor.
✓ Follow auditing standard.
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Report on fraud byauditor

• amount involved is 1 crore or more than he shall report to
CG
• Report to BOD or audit committee within 2 days of his
knowledge.
• BOD should reply within 45 days
• Auditor shall forward his report to CG along with his
comment within 15 days.
• If BOD failed to reply within 45 days than auditor shall
forward his report to CG.

*if amount of fraud involved is less than rs1crore.

Auditor shall report to BOD or audit committee within 2 days from
his knowledge of the fraud.
Disclose in directors report
*Internal audit sec ( 138)
✓ Applicable to all listed company.
✓ Every unlisted public company having
✓ outstanding deposit of Rs.25cr or more
✓ PSC 50cr or more
✓ Outstanding loan 100 cr. Or more
✓ Turnover 200 crore or more.

* every private company having

Outstanding loan 100crore or more or
Turnover 200 crore or more.
*internal auditor may or may not be a CA
*employee of the company can act as a internal auditor.
*statutory auditor cannot act as a internal auditor.
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*Internal auditor should have knowledge of legal and regulatory

framework, accounting.
*cost audit sec(148).
➢ Conducted by cost accountant.
➢ Cost audit report submitted toBOD
➢ Company within 30 days from the receipt of cost audit report shall
furnish to CG
➢ Maintain cost record in form no (CRA-1)
➢ Appoint cost auditor within 180 days from commencement of FY
➢ Qualification of cost audit report along with his observation or
suggestion in from CRA-3
➢ CG may direct the cost audit of certain class of company eg.
Manufacturing drugs telecommunication fertilizers .etc.

Secretarial audit(204)
A) Secretarial audit is also known as compliances report.
B) It is part of total compliances management.
C) Conducted by PCS
D) Secretarial auditor is appointed by BOD.
E) Secretarial report will form part of board report.

Applicability
1) Listed company
2) Unlisted public company having PSC of Rs. 50 crore or more or
3) Turnover of Rs 250 crore or more.
Objective of secretarial audit

1) Check & report on compliances of applicable laws and SS.

2) Point out non compliances
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3) Protect the interest of various stakeholder.

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4) Avoid the unwarranted legal action.

SELF NOTES-

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LAW#LOGIC#LOVE TRANSPARENCY & DISCLOSURE.

9. Transparency
And disclosure
Annual report
• Comprehensive report issued by the company to its shareholders
About the financial and other aspects
• Disclosure file within 21 days meeting to stock exchange

Content of annual report

• Audited financial statement
• Consolidated financial statement
• Cash flow statement
• Directors report
• Management discussion and analysis report listed company
• Business responsibility report top 500 listed company.

Additional disclosure in annual report.

Related party disclosure
Management and discussion analysis
Industry structure and development
Opportunities and threats
Segment wise or product wise performance
Risk and concern
Internal control system and their adequacy
Discussion of financial performance with operational performance.

Corporate governance report

Code of governance
Details of BOD and board meeting
Details of AC and meeting.
Details of NRC and SRC committee and meeting.
Remuneration to directors.
Details of General Meeting.
Declaration by so about code of conduct.
Compliance certificate from auditor orPCS.

Distribution of annual report to the stakeholders.

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Listed entities send annual report to all stakeholders at least 21 days before the Annual
General Meeting.
Annual report may be in soft copy if the email ID is registered.
If the email is not registered then submit hard copy of report.
If requested for full annual report then provide full copy.

Boards report
Report attached to financial statement laid before any General Meeting
It includes.
Extract of annual return in MGT 4
number of board meetings
Director’s responsibility,
report declaration by ID
Policy on appointment and remuneration of directors
Particulars of low investment guarantee
Related party transaction
Material changes if any
Conservation of energy Technology

Director’s responsibility statement

Statement about setting standards have been complied.
Books of account shows true and fair view.
Proper and sufficient care for the maintenance of adequate accounting record.
Annual accounts on a Going Concern.
Internal financial control are adequate.
Independent director should hold office for 5 consecutive years past SR for further
reappointment of 5 years.

SIGNING and dating of boards report.

if authorised by board of directors what are who should be a Managing Director if any
fore by one director where the one director.
Signed copy of financial statement including consolidated financial statement along with.
Notes and next to financial statement.
Auditor's report.
Board report.
File with ROC within 30 days from AGM.
2

Annual return MGT 7.

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File with ROC within 60 days from Annual General Meeting or date of AGM.
Sign by director and CS.
OBC and small company signed by CS.

Abridged annual return.

Government may prescribe abridge format annual return for small company and
prescribed company.

Certification of annual return.

Listed company.
Company having paid up share capital 100c or turnover than 50 CR or more.
Certified by pcs stating compliances with all the provisions of this act.
Whistle blower policy.
Accept deposit from public borrowed money bank in excess of 50 CR.

Disclosure under sexual harassment of women.

Applicable to all companies having more than 10 women employee.
It was also disclose the following.
Complaints received in a year.
Complaints disposed of during the year.
Complain pending for more than 90 days.
Number of workshop against sexual harassment carried out.
Number of action taken by the employer or district officer discuss in board meeting.
Liability For statement section 448.
Liable under Section 447 if
Report certificate prospectus file.
Any material know is to be false or women’s any material facts to it is to be material.
Penalty for section 447.
Imprisonment for 6 months to 10 years.
Find up to three times of the amount of fraud.

SELF NOTES-
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10. Loan and Investment By

Company (186)

CONDITION-
➢ Investment through not more than two layers of investment company.
➢ Exclude wholly owned subsidiary.
➢ However, acquisition of company incorporated outside India having more than
two layers of subsidiary is allowed.
➢ Subsidiary company is required to have further layer of subsidiary for meeting
the requirements of law
➢ No company shall directly or indirectly give loan, guarantee security,
investment to any person
➢ Any person does not include employee of the company.

LIMIT-
• BOD by passing UR can invest or give loan, or guarantee or security to any
person except employee up to
A) 60% of PSC + free reserve+ security premium or
B) 100% of free reserve and security premium
C) Pass SR if existing and proposed investment +loan +guarantee +security
exceeds such limit
Investment means subscription, purchase of securities of a body corporate.

Exemption if i+ l + g+ s provided to wholly owned subsidiary, joint venture

company.

• Approval from public financial institution if default in repayment of loan and

interest thereon and the existing and proposed loan, investment, guarantee,
security, exceeds the limit of 60% of PSC+FR+SPor 100% of FR+SP.
• Rate of interest on such loan shall be at least the yield return 1 year 3 year 5
year 10 year of government security.
• No default in deposit and interest.
• Disclosure the details in financial statement.
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• 186 shall not apply to.

Banking company
Insurance company
Housing finance company
Business of financing industrial enterprises or infrastructure facility.
B. Investment madeby
Investment company in right issue.
NBFC in business of acquiring securities.
Exemptions.
>Government company engaged in defence produce.
>Government unlisted company with the approval of central government.
Investment in the name of the company(187) -
a) All investment shall be made and held by the company on its own name.
b) Company may hold any shares in its subsidiary in the of any nominee if it is
necessary to do so.
c) Any share or securities not held by it in own name, then company shall
maintain a register which contain the particular of such investment and
kept open for inspection during business hours.

related party transaction section 188.

Related party2(76)
✓ Director or his relative.
✓ KMP or his relative.
✓ A firm in which director, manager or his relative is a partner
✓ Private company in which director, manager or his relative is a director or
member.
✓ Public company in which director or manager is a director and holds more than
2% of his paid up share capital along with his relatives.
✓ Body corporate whose board, MD or manager is accustomed to act as per the
directions given by the director or manager.
✓ Any person on whose advice or director or manager is a customised to act.
✓ Any body corporate which is holding, subsidiary, associate company of such
company.
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✓ Body corporate which is a subsidiary company of a holding company to which

it is also a subsidiary company.
✓ Any body corporate which is an investment company or the venture of the
company.
The investing company or the venture of a company” means a body
corporate whose investment in the company would result in the company
becoming an associate company of the body corporate.]

Relative :-
(i) they are members of a hindu undivided family;
(ii) they are husband and wife; or
Following person as may be prescribed
A person shall be deemed to be the relative of another, if he or she is
related to another in the following manner, namely:-
(1) father:(includes step-father)
(2) mother(includes the step-mother)
.
(3) son:( includes the step-son.)
(4) son’s wife.
(5) daughter.
(6) daughter’s husband.
(7) brother:(includes the step-brother)
(8) sister:(includes the step-sister)

Related party transaction with the approval of BOD.

A) Contract regarding goods and services
B) Contract of immovable property
C) Leasing of property of any kind
3

D) Availing or rendering of any services

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E) Appointment of any agent for the purchase or sale of goods, material,

services or property
F) Appointment of any related party as employee (holding place of profit)
of the company, its subsidiary, or associate company
G) Underwriting for any securities or derivatives of the company.
Related party transaction by passing OR if the value exceeding the lower of
following limit.

A) Sale/supply/purchase of goods – 10% of turnover or Rs. 100 cr.

B) Selling/disposing/buying any property- 10% of net worth or Rs.100 cr.
C) Leasing of property - 10% of net worth or Rs.100 cr.
D) Availing or rendering of services- 10% of turnover or Rs. 50 cr.
E) Any regarding appointment at office or place of profit- Rs 2.5 lacs per
month.
F) Underwriter where remuneration to underwriter- 1% of net worth.
Note:- transaction shall be considered individually or cumulatively for entire
fY.
Turnover or net worth shall be based on audited financial statement of
preceding year.
Section 188 shall not apply retrospectively i.e. Person becomes related party
after entering into contract.
exceptions

• Transaction in ordinary course of business at an arms length price

• Transaction between holding or wholly owned subsidiary company.
• Transactions between government companies.
• Unlisted government company with the related party, approval from central or
state government.
Emergency contract.
• Directors on employees enter into related party transaction without approval
• can be rectified within 3 months by passing BR or OR as the case may be.
• Such contract shall be voidable at the option of the BODor company as the
case may be.
•
4

Director shall indemnify such contract.

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Interested member
a. Interested member shall not vote at the meeting, such restrictions shall not
apply if 90% or more members are relative of promoter or related party.
Interested director.
Interested director shall not participate in such resolution, not be counted for
quorum and shall not vote on such resolution.
Role of audit committee.
*all RTP shall require prior approval of the audit committee.
*audit committee can grant omnibus approval.
SELFNOTES-

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LAW#LOGIC#LOVE REGISTER & RECORDS.

11. Register and records

Statutory books/register

A) Register of charges
B) Register of member
C) Register of debenture holder
D) Register of security holder
E) Register of deposit
F) Register postal ballot
G) Register of KMP
H) Register of buy back.

1) Register of charges
- Every company shall keep register of charges at its register office in CHG-7.
- It includes particular of all charges including floating charges.
- Entries shall made after creation, modification or satisfaction of charges.
- All entries shall be authenticated by a director or CS or other authorised person.
- Preserve permanently.

2) Register of member
Every company shall maintain following register along with index
- Register of member for each class separately.
- Register of debenture holder
- Register of other security holder
- Foreign register of member and debenture holder.
- Maintain register in MGT-1

3) Place of keeping books of account.

- Prepare and keep at its registered office.
- However books of account may be kept at such other place approved by BOD
- In case of change in place give notice to ROC within 7 days.
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4) Maintenance of books of account in electronic form

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- Books can be maintain in electronic form

- It remains accessible in India.
- It should retained in the format in which they were originally generated.
- Information received from branch office shall not be altered
- Electronic record of the document shall be capable of being displayed in legible
form.

5) Right to inspect the register of director & KMP.

- Member can inspect and take extract within 30 days from request to company.
- Kept open for inspection at every AGM.
- If any inspection is refused or failed to send copies within 30 days then ROC on
application can order to company to provide the same.
- Non applicability- 100% Govt. company
SELFNOTES-

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12. Corporate reorganization

Introduction-
Corporate restructuring is a comprehensive process by which company can consolidate its
business operation and strengthen its position for achieving long term and short term
objective.

Merger
Fusion and absorption of one or more company by another.

Amalgamation-
Two or more companies are joined together to form a new entity or one or more
companies are to be absorb or blended with another .

Compromise or arrangement with member or creditors.(230)

A) BM-BR
B) Application to NCLT by following person
- Company
- Member and creditors
- Liquidator(before or after wound up)
C) Applicant should provide affidavit containing
- All material facts
- Latest financial position.
- Reduction of share capital shall be included in scheme
- Scheme shall approved by at least 75% of the secured creditors in
value.
- Creditors responsibility report
- Valuation report
D) Tribunal may give direction for holding the meeting
E) Notice of the meeting
- Notice send to all creditors, member and debenture holder.
- Notice send accompanied by the complete details of the scheme, copy
of valuation report, effect of the scheme.
- Notice shall also placed on the website of the company.
F) Notice send to all regulators
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- Notice send to CG, Income tax authorities, SEBI, CCI, Stock exchange or
other regulatory authorities.
- Such authorities can make representation within 30 days from the
receipt of the notice.
G) Approval of the scheme
- Scheme shall be approved by majority in number representing the
3/4th in value of the creditor or member presented and voted.
- Scheme once approved shall be binding on the company, creditors,
members, liquidator, contributories as the case may be.
H) File certificate by the auditor that proposed scheme is in conformity
with the AS.
I) Objection-
- Person who holds at least 10% of the shareholding or
- Person having outstanding debt amounting to not less than 5% of total
debt

Merger and amalgamation of companies (sec. 232)

A) Tribunal’s power to call meeting
- If compromise or arrangement involve merger and amalgamation of
any two companies than on application tribunal may order the
meeting of member/creditors as the case may be.
B) Circulation of documents
- Draft of proposed schemed, statement showing effects of merger,
report of expert shall be circulated to all members or creditors as the
case may be
- Draft scheme shall be filed with ROC.
C) Approval from shareholder and member.
- Scheme shall be approved by majority in number representing the
3/4th in value of the creditor or member presented and voted.
D) Sanctioning of scheme by tribunal
- Tribunal after satisfying confirm the compromise and make provision
for the following
A) Transfer of whole or part or undertaking, property, or liabilities
B) Allotment of share, debenture by transferee company
2

C) Continuation of legal action against the transferee company.

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D) Dissolution without winding up of transferor company.

E) Provision for dissented shareholder.
F) If transferor company is listed company and transferee company is
unlisted company than transferee company remain unlisted until it
becomes a listed company.
G) Transferee company cannot hold shares in its own name or under
any trust as a result of merger.

E) Auditor’s certificate
- File certificate by the auditor that proposed scheme is in conformity
with the AS
F) Transfer of property or liabilities.
- By virtue of the order of tribunal, all the properties and liabilities of
transferor company shall be transferred to transferee company.
G) Certified copy of order shall be filed with ROC for registration.
H) Effective date
- Scheme shall clearly indicate an appointed date .
I) Every company shall file annual statement duly certified by
CA/CS/CWA in practice until the completion of the scheme indicating
scheme is being complied with the accordance with the order of
tribunal.

Merger and amalgamation of certain companies (233)

# simplified procedure for M&A of A of
- 2 or more small companies or
- Between holding and its wholly owned subsidiary or
- Such other class of companies specified by CG

Procedure
A) Issue of notice to ROC and official liquidator of respective company or
person affected by the scheme
B) Objection within 30 days from receipt of notice
C) Objection shall be considered by the company
D) Schemed shall be approved by at least 90% of the total number of
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shares
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LAW#LOGIC#LOVE C, A&A

E) Each companies shall file declaration of solvency with ROC

F) Approval from 90% of the creditor(valve)
G) Transferee company shall file a copy of the scheme so approved with
the CS/ROC/official liquidator
H) CG shall issue the confirmation if no objection is received from
ROC/official liquidator within 30 days.
I) CG if received the objection or if the scheme is not in public interest
than CG may apply to NCLT within a period of 60 days from receipt of
observation.
J) On receipt of an application tribunal may modify or confirm the
scheme
K) Copy of order confirming the scheme shall be filed with ROC by
transferee company.
L) Transferee company shall file an application indicating the revised
authorized capital with the ROC

Cross border merger

A) Foreign company with the RBI approval merge with into Indian
company
B) Consideration may be in the form of cash/ depository receipt.

Merger and amalgamation of companies in public

interest
A) If CG may by notification can pass the amalgamation order of two or
more companies if it is in public interest
B) Companies can make suggestion or modification within 2 month from
the date of receipt of draft copy of scheme
C) Right of member, debenture holder, creditor shall nearly remain the
same after amalgamation
D) Any aggrieved party may appeal to tribunal within 30days from the
date of order.
E) Condition of the order
- Send draft copy of the scheme to each companies concerned.
- Appeal shall be disposed off by the CG
4

- Copies of the order to be laid before each house of parliament.

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SELFNOTES

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LAW#LOGIC#LOVE OPRESSION & MISMANAGMENT.

OPRESSION &
MISMANAGEMENT

Cases on operation.
• Contrary to the law may not necessarily be in violation of the law .
• An unwise or careless act does not imply oppression.
• Single act oppression having continuous impact.
• Illegal invalid and irregular acts amounts to oppressive
• Non declaration of dividend not amount to oppression.
• Illegal issue of shares turning the majority in the minority is
oppressive itself.
• Selling of the asset of the company without complying with the
requirements us 180 at low price amounts to mismanagement
• Dispute among director resulting in serious prejudice.
• Mismanagement shall be present and continuous.

Foss vs Harbottle
• Decision- if alleged wrong is confirmed or ratified by company by simple
majority than court will not interfere.
• It preserve the right of majority to decide how the affairs of the
company shall be conducted.
• It is fair that the wishes of the majority should prevail.

Exception
• Ultra vires act to company
• Fraud on minority
• Wrongdoers in control
• Resolution require special majority but approved b y simple majority.
• Personal actions
• Breach of duty
Note- in the above cases minority can seek protection against majority
Application against oppression and mismanagement
• Application made to tribunal
• Application by member if affairs of the company have been or are being
conducted in prejudicial to public/member/company interest
• application shall be made by lowest of the following in case company having
share capital

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A) 100 member
B) 1/10th of total member
C) Member holding 1/10th of the issued capital
• Company not having share capital than by 1/5th of total member
• Joint member counted single member
• All call money should be paid
• Application can be made by CG if public interest is involved.

Order of tribunal(242)
❖ If affairs of the company is oppressive to the member or company then
tribunal may pass following order
A) Regulate the affairs of the company
B) Purchase of share by other company
C) Purchase of share by company
D) Modification of agreement with MD/Director/Manager.
E) Modification of agreement with any other company
F) Removal of MD/Manager/Director
G) Appointment of new director
❖ Certified copy of tribunal shall file with ROC within 30 days fromthe
date of order

Class action suit(245)

❖ Class action suit means suit filed by group of people who are represented
collectively by a member of that group
• application shall be made by lowest of the following in case company having
share capital
D) 100 member
E) 1/10th of total member
F) Member holding 1/10th of the issued capital
• Company not having share capital than by 1/5th of total member
• Application can also made by 100 deposit holder or such onter numbers as
may be prescribed.

Relief under a class action

A) Restrain the company from committing ultra vires act to company
B) Declare a resolution as void if resolution is passed by suppressing material
facts
C) Restrain the company and director fron acting on such resolution.

Sec: 243 Termination or modification of agreements

1. If an order u/s 242, terminates, sets aside or modifies an agreement.

a. No compensation shall be paid to any such director or officer of the
company;

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b. Such MD, director or manager of the company shall not be eligible to be

appointed as the director of the same company unless approved by
tribunal.
2. Tribunal shall not grant leave under this clause until notice of the intention to
apply for leave has been given to Central Government and that Government
has been given a reasonable opportunity of being heard in the matter.
3. Contravention: Imprisonment < 6 months or Fine < Rs 5 Lac or Both.
SELFNOTES-

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LAW#LOGIC MCA-21 & XBRL.

13. An introduction to MCA 21 &

filling in XBRL.

INTRODUCTION.
❖ MCA-21 has made things easier by connecting the companies with ROCs,
RDs & even MCA.
❖ It has saved the time of the representative & helped them to focus on
other tasks.
Benefits.
❖ Enables to register documents quickly & easily.
❖ Gives easy access of public documents.
❖ Faster & effective resolution of public grievance.
❖ Registration & verification of charges only.
❖ Ensures proactive & effective compliance.
❖ Enables the MCA employees to deliver best of breed services.
SERVICES OFFERED.
❖ Obtain digital signature certificate-The information technology act
2000 has permitted to use Digital signature on the documents
submitted in electronic form to ensure the security & authenticity of
the documents filled electronically.
❖ LLP Services for business User- A business can enter or update
partner details of an LLP. In form 3 or form 3 & 4.
❖ Complaints-User can raise service-related complaints, track thee
complaints created& can also give feedback or suggestion to MCA-
21.
❖ Fee & Payment services – User can avail services through enquire
fees, pay later, link NEFT payment etc.
❖ Investor services-User can upload investor details& confirm
uploaded files.
CENTRAL REGISTRATION CENTRE (CRC).
▪ CRS is an initiative of MCA with specific objective of providing speedy
incorporation related services.
CORPORATE IDENTITY NUMBER (CIN).
▪ Every company get a Corporate identity number (CIN).
▪ CIN is found from MCA-21 based on the following; -
➢ ROC Registration no.
➢ Existing company name.
➢ Old name of company
➢ Inactive CIN.
▪ All Indian company gets a unique 21-digit CIN.
▪ This is required to be quoted on all e-form.
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▪ The CIN given to the company indicates listing status, economic

activity& state, year of incorporation, ownership& sequential number
assigned by ROC.
FOREIGN COMPANY REGISTRATION NUMBER(FCRN).
▪ Every foreign company is allotted with FCRN.
▪ Every Indian company is allotted with CIN.
DIRECTOR IDENTIFICATION NUMBER. (DIN).
▪ DIN is mandatory for directors of Indian companies who are not citizen
of India.
▪ DIN is not mandatory for directors of foreign company having branch
office in India.
▪ DIN no. once obtained is valid for life time of a director.
▪ A single DIN is only required irrespective of the no. of directorship.
RUN FACILITY.
▪ Reserve Unique Name is a way of reserving a name for a company or for
a change of name of the company.
▪ Only MCA portal user can use this facility
▪ In case of change of name of a company (CIN) should be submitted at
the time of application through RUN process.
INTREGATED PROCESS OF NAME RESERVATION, COMPANY
INCORPORATION, DIN TAN THROUGH SPICe( FORM INC-32) BY MCA-21.
▪ An INTREGATED PROCESS OF NAME RESERVATION, COMPANY
INCORPORATION, DIN TAN THROUGH form INC- 32(SPICe).
▪ After filling the form & making the payment user is required to visit MCA
portal & submit application for PAN & TAN.
▪ Download form 49A(PAN) &49B ( TAN).upload them along with DSC.
▪ HE has to fill the form within 2 days. Or it would be invalid.
▪ As soon as the e-form is found complete, company would be registered
& CIN would be given
▪ DIN gets issued to the proposed directors who do not have a valid din.
▪ MAX.3 DIN is allowed. For the filling of form SPICe-32.
▪ On approval a COI is issued with PAN as allotted by income tax
department.
▪ In case of non-receivable of PAN. Track the status on
www.TINNSDL.COM.
DIGITAL SIGNATURE CERTIFICATE. (DSC).
a. E-forms are required to be authenticated by the authorized signatories
using digital signatures as defined under the Information technology act,
2000
b. It is duly issued by a certifying authority.
c. It is equivalent of a written signature.
The following are 4 types of users which are identified as users of
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digital signatures.
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MCA (govt.) employees

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Professionals.
Authorized signatory of the company.
Representative of bank & financial institutes.
Foreign directors are required to obtain digital signature
certificate from an Indian company.
IMPORTANT TERMS USED IN E-FILLING.
❖ PRE-FILL- It is used for filling automatically the repeated question in e-
form.
❖ ATTACHMENT-A document which needs to be sent along with the form
in adobe PDF format. & my MCA portal has a facility to convert a
document it into pdf. (not more than 2.6 mb).
❖ MODIFY-After selecting check form you cannot do any editing on it. If
any modify is to be done click on modify n edit the form.
❖ RADIO BUTTON- This is used most while filling the e-form. It helps select
the option of the two.
❖ CHECK BOX- Applicable check box is required to tick out of the two or
more boxes wherever it appears in the form.
❖ DROP-A drop down appears n gives you the option to select the required
highlight.
❖ TEXT BOX- It provides detail information of the person. Space given I
enough for the info to be written. If space is less continuing in annexure
given.
❖ COUNTRY CODE-Some times this is to be filled as per the info given
❖ STOCK EXCHANGE CODE-All stock exchange is required to select their
respective stock exchange code from the given options (A OR B).
❖ CHECK FORM- By clicking on this user will come to know of mandatory
details not filled. Or size of the document is not proper.
❖ PRE- SCRUTINY-This is an option where checking of core aspects has
been filled or not & pdf is attached properly. Also allows to affix sign
digitally
❖ SUBMIT- E-form can be submitted after it is digitally signed. the
submission is given below; -
❖ Log in into MCA-21 portal & uses e-form upload services.
❖ Browses the e-form & click on ‘submit’.
❖ Errors will be shown if any.
❖ If successfully filled n submit user will be takin to fee payment page.
❖ A digital certification will be provided to ensure that certificate has not
expired or suspended.

SERVICE REQUEST NUMBER- Each transaction gets a unique service request

number. After filling e form a e- character alpha numeric string starting with
Alphabets(A-Z), called a SRN.
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❖ User can track the status by SRN number.

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Digital signature certificate

- e-form shall be digitally verified by authorised signatory by using DSC
- it is equivalent to written signature
- user of DSC
1) MCA employee
2) Professionals
3) Authorised signatory of the company including
MD/director/manager/secretary
4) Representative of bank and financial institution
- Authority can issue DSC for one or two year however registration is
one time activity.
- Foreign director are required to obtain DSC from an Indian certifying
authority.
XBRL.
➢ XBRL stand for extensible business Reporting language.
➢ XBRL is a language for the electronic communication.
➢ The most common language for transmitting information via internet is
XBRL
➢ It was made to communicate between business and other users
➢ XBRL provides a common electronic format for business reporting
➢ XBRL is a world wide standard
BENEFITS OF XBRL.
❖ It offers major benefits to business
❖ The benefits are automation, cost saving faster more reliable and more
accurate in handling of data and in better quality of decision making
❖ All types of organisation can use XBRL to save cost and improve
efficiency.
❖ It is extensible and flexible.
SELFNOTES
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14. GLOBAL TREND.

Q.1 Discuss director’s remuneration report in the light of Companies Act, 2006 of the United
Kingdom?

Duty to prepare director’s remuneration report under UK Companies Act, 2006

The directors of a quoted company shall for each financial prepare a director’s
remuneration report which shall contain the information specified in the schedule to act and
comply with any requirement to that schedule as to how the information is to be set out in the
report. The director’s remuneration report shall be approved by the Board of Directors and
signed on behalf of the Board by a director or the secretary of the company. Every copy of said
report which is laid before the company in General Meeting or which otherwise circulated,
published or issued, shall state the name of the person who signed it on the behalf of the
Board. The copy of the directors remuneration report which is delivered to the registrar shall be
signed on behalf of the Board by a Director or the Secretary of the Company.

Q.2 State the requirement for audit of the financial accounting statements under the UK
Companies Act, 2006 ?

Answer:-

Requirement for audited accounts

A company’s financial statements for a financial year must be audited in accordance with this
part unless the company-

a) It is exempt from audit under Section 477 (small companies) or Section 480 (Dormant
Companies) or,
b) It is exempt from the requirements of this part under Section 482 (Non Profit making
companies subject to public sector audit)
A company is not entitled to any such exemption unless its balance sheet contains a
statement by the directors to that effect.
A company is not entitled to exemption under any of the provisions mentioned in Sub-
Section(1)( a)unless
Its balance sheet contains a statement by the directors to that effect that-
a) The members have not required the company to obtain an audit of its accounts for
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the year in question in accordance with Section 476, and

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b) The directors acknowledge their responsibilities for complying with the

requirements of this Act with respect to accounting records and the preparation of
accounts.

Q.3 During a period of about past one and a half decades a number of countries in the world
have engaged themselves in modernizing their respective company laws. Can you identify the
motivating factors underlying this effort ? Mention Indian scene in particular-

A various no. of countries such as India, Australia, Canada, Hong Kong and U.K. have
initiated comprehensive effort to modernize their respective company laws. The need to
become more:-

a) More competitive
b) Simple to understand
c) Interpret to facilitate greater compliance
d) Economic to operate
e) Attractive as a worth while investment destination to accelerate economic growth’
f) Corporate Social responsibility and,
g) Better regulation and greater transparency in corporate governance.

In India, the process has started to evolve the modern the modern, transparent, investor
friendly, well governed company law i.e. company bill 2009. Modernization of corporate
regulation governing setting up and running of enterprises, governance and accountability
to the investor and other stake holders. By putting in place, a best legal frame work would
unable the Indian Corporate Sector to operate in an environment of best international
practices in a global competitive market.

Q.4 Account for the significance of Hong Kong as a vibrant business centre, having some special
advantage. Name the law that governs companies in Hong Kong ?

Hong Kong is an international city with advanced information, and the free harbor for
trading in the world. It is a wonderful business situations for entrepreneurs and business men.
The advantage for setting up Hong Kong company are as follows.

i. Free to choose the name of the company:-

The Hong Kong government allows to choose the name of the company to include
2

the words such an international, chamber of commerce, united group, foundation,

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ii. Little Restriction of the Business Areas:-

Jewelry, Treasury, Shipment, Transportation, Import & Export, House Estate, Website,
Research Institution and other hi-tech industry. All these can be business.
iii. Great Development in Low Taxation Environment:-
The Taxation in Hong Kong is very low.
iv. Easy to get International Credit:-
Hong Kong is economic and financial center in asia, every street of which has
banks. Credit is the basis to develop international business and is easily available.
v. Doing Best to get the Inhabitant Right in Hong Kong:-
If your enterprises have done contributions to Hong Kong. You can apply to the
people’s inbound affairs office of the Hong Kong to arrange the advice for Doing
Business. If people have inhabitanted in Hong Kong for 7 years, they can get the eternal
inhabitation right in Hong Kong.

Q.5 a) Mention the provisions of the Singapore Companies Act relating to formation of
companies

b) “The Provision of the Hong Kong Companies Ordinance relating to formation of an

incorporated company are broadly similar to the provisions of the Companies Act, 2013”

A.) Formation of the Companies under the provisions of Singapore Companies Act. Any person
may, whether alone or together with another person, by subscribing his name or their names to
a memorandum and complying with the requirements as to registration from an incorporated
company.
A company may be:
a) A company limited by share
b) A company limited by guarantee on unlimited company.

Provisions :-

A company must have at least one members- the first consideration is to decide on the right
business entity that will meet the business needs. The most common three business entities
available in Singapore are:-

a) Sole Proprietorship
b) Limited Liability Partnership
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c) Private Limited Company

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a) Sole Proprietorship: The following requirements are given below:-

• Minimum one owner
• A Singapore registered office-address
• For foreign individual and companies only : one manager who must be a Singapore
resident

Following documents are needed for registration of a sole proprietorship

• Proposed sole proprietorship name

• Copies of NRIC
• Brief description of business activities
• Registered office address for the sole proprietorship

Limited Liability Partnership:- A LLP gives owner the flexibility of operating as a partnership
while having a separate legal entity in Singapore. It has a separate legal entity from its
shareholders and directors, who have limited liability for the debt and losses of the company. It
usually has the words Pvt. Ltd. as parts as its name.

Q.6 a) Explain the salient features of the Australian Corporations Act, 2001 relating to
appointment of auditors.

The following may be appointed as auditor of a company for the purposes of the
Australian Corporations Act , 2001

(a) An individual
(b) A firm
(c) A Company

1. In case Proprietary company, the directors may appoint an auditor for the company.
2. The company may have more than one auditor. The appointment of a firm as auditor of
a company is taken to be an appointment of all persons who, at the date of the
appointment, are
a) Members of the firm; and
b) Registered company auditors. This is so weather or not those persons are resident in
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Australia.
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3. The directors of a public company must appoint an auditor of the company within one
month after the day on which a company is registered as a company unless the
company at a general meeting has appointed an auditor.
4. A public company must appoint an auditor of the company at its first AGM and appoint
an auditor of the company to fill any vacancy in the office of auditor at each subsequent
AGM.

Q.7 What are the special features of the Corporations Act, 2001 of Australia, which are
distinct and different from the provisions of the Companies Act, 2013 in India.

Corporations Act, 2001 and the Corporate Regulations, 2001 framed under the
Corporations Act, 2001 govern the functioning of the companies in a Australia. Following
are the special and distinct features of the corporate laws in Australia as compared to the
Indian Companies Act, 2013:

1. The Australian Corporations Act imposes duties on directors and officers of

incorporated bodies. Breach of statutory duties draws penalties under the act which
range upto $ 2,20,000. Defaulting officers or directors may also be required to pay
compensation or to account for profits. In some cases, directors may also be disqualified
from office.
2. It distinguishes proprietary company and public company. A public company must have
at least 3 directors out of whom at least 2 directors must ordinarily reside in Australia.
3. Australian securities and Investment Commission (ASIC) controls and regulates the
affairs of companies. A person who is not disqualified from managing corporations may
only be appointed as director of company if the appointment is made with permission
granted by Australian Securities and Investments Commission under the leave granted
by the Tribunal.
4. A person who is the only director and only shareholder of a proprietary company can
exercise all the powers of the company.
5. A company secretary’s obligations may continue even after the company has been
deregistered.
6. The company secretary must notify ASIC about changes:-
i.) To the identities, names and addresses of the company’s directors and company
secretaries; and
ii.) To the register of members; and
iii.) To any ultimate holding company;
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Q.8 The concept of treasury shares in United Kingdom is same as buy-back of shares in
India. Examine.

Section 124 read with chapter 6 of U.K Companies Act, 2006 deals with treasury
shares. Treasury shares are purchased by the company out of the distributable profits of the
company and the company is allowed to hold such shares. The aggregate nominal value of
shares held as treasury shares must not exceed 10 percent of nominal value of issued share
capital.

In India, the section 68 of companies Act, 2013, provides that the buy back of its own shares
but does not allow a company to hold shares. Bought back shares are to be cancelled within
seven days, thus in India, bought back shares cannot exceed 25% of total paid capital in any
Financial year.

SELF NOTES-

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15.Board Constitution and Its Powers.

Section 179 powers of board.

• A-amalgamation and reconstruction.
• B-buyback or borrow money.
• C-calls on shares for contribution to political party.
• D-debenture security issued in or outside India.
• E-investment.
• F-financial statement and board report.
• G-grant loan guarantee or security.
• H-holding or acquisition of substantial stake.
• I-internal auditor and secretarial auditor

• Board made delegate powers to any committee, managing director

manager or principal officer.
• Banking company is not covered under this section.
• In case of section 8 company following matters may be decided by
circulation.
A. Borrow company.
B. Investment.
C. Grant loan guarantee or security.
Restriction on powers of board section 180.
• Board can exercise following powers by passing SR only.
• Sale of whole undertaking or substantially the whole undertaking.
(undertaking means investment in such unit exceeds 20% of net
worth or it generate 20% or more of the total income , substantially
whole undertaking means 20% or more value of the undertaking)
borrowing power.
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• Money already +proposed borrowing –(if exceeds PSC+FR+SP)

Borrowed (excluding temporary loan)
. (up to 6 months.)
• To invest compensation received due to merger for amalgamation
except specified security of trust act.
• To remit or give time for the repayment of any debt due from
director.
• Section 180 is not applicable to private company.

Charitable contribution section 181.

Pass OR to contribute in excess of 5% of average net profit for last
three immediately preceding years.
Political contribution section 182.
• Non government company which has been existence from not less
than three financial year can contribute without any limit by passing
BR
• Disclosure in P&L account.
• Contribution through normal banking channel or through any
instrument notified by law.
• It includes direct or indirect contribution.
Defence contribution section 183.
• Board can contribute without any limit if fund is approved by central
government.
• Disclosure in profit and loss account.

• Audit committee section 177.

Applicability.
• Listed company
• Unlisted public company having paid up share capital 10cr or more
2

• Turnover 100 crore or more

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• Outstanding loan, deposit, borrowings, debenture 50 crore or more.

• Not applicable to unlisted public company which is
A) Joint venture
B) Dormant company
C) Wholly owned subsidiary.
No. Of directors
Listed company Unlisted company.
A. Chairman shall be Chairman shall be independent
independent director. person.
B. All members shall be Chairman shall be financially
financially literate. literate.
C. At least 4 board meeting gap -
shall not exclude -120 days b/w
two audit committee meeting.
a. Quorum 2 directors or 1/3 of Quorum min no. Of meeting
total director which ever is may be decided by bod.
higher (min-2-ID)
b. Cs shall act as a secretary. -
c. Minimum 3 director out of Minimum 3 director- majority
2/3rd shall be independent shall be independent director.

Function of audit committee.

A) Recommendation the appointment, terms and remuneration of
auditor except in case of govt company.
B) Review auditor’s performance
C) Approving and modify related party transaction.
D) Scrutinise the inter-corporate loan and investment.
E) Approve and modify the transaction with related party
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1) make omnibus approval for related party transaction.

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2) in other transaction which is not approved by audit committee

shall make its recommendation to the board.

3 ) any transaction not exceeding 1 crore is entered by director or

office without approval and is not rectified within 3 month by audit
committee shall be voidable at the option of audit committee and
transaction is with related party to any director or is authorised by
any director then the concerned director shall indemnify the
company against any loss incurred by it.

4 Not applicable in case of transaction between holding company

and wholly owned subsidiary company.
F) Evaluation of inter-corporate loans and investments.
G) Oversee the vigil mechanism
Audit committee and vigil mechanism.
*Applicable to every listed company.
*Companies which accept deposits from public.
* Companies who borrow money from bank and financial institute in
excess of 50 crore.
*Audit committee shall oversee the vigil mechanism.
*In case of repeated complaints filed by director or employee audit
committee may take suitable action.
*Details of vigil mechanism to be disclosed on the website and board
report.

Audit committee shall mandatory review the following info.

*Management decision and analysis of financial condition.
*Statement of significant related party transaction.
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*Internal audit report.

*Appointment removal and terms of internal auditor.

Nomination and remuneration committee

* Applicability to listed company.

*Other public company.
A. Paid up share capital 10 crore or more.
B. Turnover 100 crore more.
C. Aggregate loan, borrowing, deposits, debenture 50 crore more.
Non applicability.

Unlisted public company.

A. Joint venture.
B. Wholly owned subsidiary company.
C. Dormant company.
D. Section 8 company.
Minimum 3 or more non executive directors.
Majority independent director.
Chairman shall be independent director.
Chairperson of the company shall not be chairman of the such
committee.
Main function is to identify the person qualified to become director of
the company.
NRC shall recommend appointment and removal.
Quorum
*One third of the total members or two members which ever higher.
*Minimum one independent director.
*Meeting once in a year.
5

*Chairman of the committee may be present at the AGM

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Stakeholders relationship.
*More than 1000 shareholder, or 1000 debenture holder, or 1000 any
other security holder during the financial year .

*Chairperson shall be non executive director.

*Main function is to resolve the complaint of stakeholder.

*Chairman of such committee shall attend the AGM .
*Listed company having less than 1000 stakeholder shall required to
constituted SRC
Risk management committee.
*Applicable to top 500 listed company.
Based on market capitalisation.
CSR committee
1.Every company shall constitutes CSR committee having net worth 500
crore more or turnover 100 crore or more or net profit 5cr or more.
2. It shall consists of three directors one shall be independent director.

Selfnotes-

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16. Directors.

Number of directors
OPC-minimum one director
Public company-minimum 3 director
Private company-minimum 2 director
Maximum 15 director and max limit can be extended by GM-SR,
for govt co. by passing OR
Top 500 listed company shall have one woman independent
director.
BOD of top 1000 listed company shall have at least 6 directors on the
board

Number of directorship
1) Maximum 20 directorship(max 10 public company) including
alternate directorship
2) Max 8 listed company after 1-4-2019
3) Max 7 listed company after 1-4-2020
4) ID maximum 7 company
5) If ID becomes MD then max m company
6) Holding or subsidiary company of public company is treated as
public company
7) Directorship in dormant company and section 8 co. shall not be
included.
8) The number of directorship can be reduce by passing SR.
Director identification number
Every directors shall mandatory hold DIN
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Central government may prescribe any other identification number

which can be use as a DIN

Din is valid for life time

procedure.
Obtain DSC
Application in form DIR 3.
Sign by applicant using own DSC and digitally verified by
CS/MD/Director/CEO/CFO of the company in which such applicant is to
be appointed as a director.
Within one month CG shall approve or reject the application and
communicate to concern person

Within one month intimate din to all companies where he is a director.

Company shall within 15 days shall intimate to ROC regarding the DIN.
Change in particulars of directors.
Filed DIR6 within 30 days from such changes.
Attach copy of the proof.
Pre certification from CA/CS/CWA in practice.
CG confirms the change and imitates to director.
Directors shall intimate to company within 15 days of such change.

cancellation of DIN
DIN is found to be duplicate.
DIN obtained in wrongful manner.
Death/insolvency/insanity of director
Before cancellation opportunity of being heard shall be given.
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Appointment of first directors 152.

• Name mention in AOA or follow the procedure given in the
articles.
• If AOA does not provide a manner, all subscribers who are
individuals shall be the first directors.
• On or before his appointment obtain consent in DIR-2
• Company shall file consent to ROC within 30 days in form DIR-
12. (60 days in case of IFSC )

Disqualifications of director.
* individual disqualification section 164(1)

1. Unsound mind.
2. Undisrcharged insolvent.
3. Applied to be insolvent adjudicated as an insolvent and his
application is pending.
4. Convicted by court and sentenced for 6 months and 5 years has
not elapsed from expiry of such sentence. If sentenced for 7 years
and more, he becomes ineligible for lifetime.
5. Disqualified by NCLT or court and order is in force.
6. Convicted under related party transaction during last 5 preceding
years.
7. Not paid call money for a period of 6 months from due date.
8. Not got the din.

Default in last three points will be continue even the appeal is filed.
Company Disqualification164(2)
1)Not filed financial statements or annual returnfor continuous 3 years.
2) Fail to pay deposit, declared dividend, debentures and interest
3

thereon and such failure to pay continues for one year or more
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3) All directors of such company shall not be eligible to be reappointed

as a director of the company or appointed in other company for a
period of next 5 years from such failure.

4) Continue in the defaulting company until the compliances is done.

5) All director shall vacant the office in all the companies expect for
defaulting companies.

6) If a person is appointed as a director of a defaulting company shall

not incur such disqualification until a period of 6 months from the date
of his appointment.
7) Directors information to company before appointment for
reappointment about his company disqualification in DIR-8
company is in default u/s 164(2) shall inform to ROC in DIR-9

Vacation of office section 167.

A) Disqualified under section 164

Disqualified u/s 164 (2)(company disqualification) vacation from all

companies except company in default.

B)Absent from all board meeting during 12 months with or without

notice
c) Convicted under section 184 – voting on such resolution in which
he is interested
d)Failed to disclose interest.
E) Disqualified by order court or tribunal.
F) Converted by court and sentenced for not less than 6 months.
G) Removal of director u/s 169 or by CG/NCLT.
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H) Cease to hold such employment by virtue of which was appointed

as director
.Note- office shall not vacated under clause (e) and (f) above;-
For 30 days from such order
And if appeal or further appeal is filed until the expiry of 7 days from
disposal of such appeal or further appeal as the case may be.
In case of vacation of all director then promoter or in absence of
promoter,CG shall appoint required no. of directors who shall hold
the office till the directors are appointed by company in general
meeting.
Appointment of subsequent director section 160.(other than retiring
director)
1.Appointment of director other than for retired director

2.Candidate or any member shall give 14 days advance notice to the

company at registered office with fees of Rs.1,00,000.

Refund of deposit.
A. In case of appointment of such director or
b. Who get more than 25% of total vote.
Provided that no need to deposit Rs. One lakh in case of

1.Independent director

2. Director recommended by nomination and remuneration(NRC)

committee, or director recommended by BOD if no need to constitute
NRC.
3.Company shall inform to all members at least 7 days before the
meeting by way of individual notice or through email, or by
advertisement in newspaper one in English and one in regional.
4.Forward copy to stock exchange in case of listed company.
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5.Obtain consent of director in form no. DIR-2.

6.Company shall file DIR-12 within 30 days roc

Non applicability:-

A) Private company
B) 100% govt company or
C) Wholly owned subsidiary of govt company
Rotational or non rotational director section 152(6)(7).
1. Minimum two third of total number of directors are liable to retire by
rotation.
2. Maximum one third can be non rotational directors.
3. Article may provide higher number of rotational director.
4. One third of rotational director shall compulsory retire at each AGM.
who have been longest in the office.
6. Appointment on same day then they shall retire by mutual
agreement and if there is no agreement then by lot system.
7. Retiring director shall be eligible for reappointment.

Note- retiring director shall not include proportional representational

director, nominee director appointed by CG/NCLT/bank/FI/BIFR, small
shareholder director, additional director, nominee director of BOD and
independent director.
8. Company may reappoint the same director or appoint new director
on the place of retired director or pass the resolution not to full fill the
vacancy.
9. If vacancy not filled and meeting has not resolved for not filing the
vacancy the meeting shall be adjourned to same day, same time, same
place in the next week.
6

10. In adjourned meeting also vacancy is not filled and resolution for
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not filing the vacancy is not passed then retiring director shall gets
automatically appointed unless,
a. Resolution put and lost.
B. Director express his unwillingness.
C. Disqualified section 164.

D. Separate resolution required for appointment.

E. Original appointment in contravention of section 162.

If vacancy is not filled by automatic reappointment then it result into
casual vacancy( filled out by board).

Note- If AGM is not held then retiring director shall vacant office on the
last date of AGM.

If MD/WTD are rotational then they shall vacant office as per the
provision of 152(6) i.e. Max 3 years. However, on reappointment they
can continue their remaining term as MD/WTD i.e. For 2 years.
Non applicability.
Unlisted government company.

Subsidiary of such govt. Company.

Private company.

Small shareholder director section 151.

1. listed company may have one small shareholder director by passing
OR
2.small shareholders(equity as well as preference) means holding
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shares up to Rs. 20000 nominal value.

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3. Application is by 1,000 small shareholders or one tenth of total small

shareholders whichever is lower.
4. 14 days advance notice along with consent to act as a director
5) Fulfill condition of ID.
6. Term three consecutive years.
7. Not eligible for reappointment for next 3 years.
8. Not liable to retire by rotation.
9. Serve the post of SSD in maximum 2 company.
10. Second company shall not be in competitive business.
11. Shall not associate with company for next 3 years.

12. SSD should be qualified to be independent director and also give

such declaration in such regard.

13. shareholder can remove SSD by passing OR even though they are
note small shareholder.

14. Vacation of SSD.

A) Ceases to be small shareholder.
B) Disqualified.
C) Vacation u/s 167.
D) Ceases to meet the criteria of independent director.

Appointment by system of proportional representation section 163.

Representative of minority shareholder.

Article may provide minimum two third of total directors in accordance

with the principle of proportional representation.
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Proportional representation can also be adopted in case of CG order

appointments can be single transferable voting or cumulative voting or
any other method.

Term- 3 years

Not eligible for retire by rotation.

independent director section 149.

Applicability
*all listed companies shall appoint at least one third of the total
directors.
*other public company having

A) Paid up share capital of rupees 10cr or more.

B) turnover rupees 100cr or more
c) Aggregate outstanding loan, debentures, deposits of Rs. 50cr or
more.
Shall appoint at least two independent director.
Non applicability.
1. Unlisted company which is joint venture, wholly owned subsidiary
company or dormant company.
3.Vacancy fill up by the board of directors within 3 months or
immediate next board meeting whichever is later.
4.cease to fulfill the above three conditions for three consecutive years
no need to appoint ID
5.due to audit committee if higher ID needed appoint such higher
number of ID.
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Independent director
Conditions.
*Other than managing director WTD or nominee director.
*Does not have any material on Pecuniary relationship with the
company or its director.
*He is a non executive director.

Conditions.
A. Person of integrity, ability and relevant expertise.

B. shall not be a promoter or related with the promoter of the company

holding, subsidiary, associate company.

C. Does not have any material of pecuniary relation during the two
immediately preceding financial year and during current financial year
with the company promoter/director/holding/subsidiary and associate
amounting to more than 10% of his total income except by way of
remuneration.

D. Relative of such person shall not hold any security or interest in the
company, holding/subsidiary/associate company during two
immediately preceding financial year or current financial year however
relative may hold up to 2% of the paid up share capital or 50 lacs face
value whichever is lower.

E. None of his relative indebted to the company, holding/subsidiary/

associate company or promoter or director of the company
none of the relatives has given guarantee or provide security in
connection with the indebtedness of any third person to company
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holding, subsidiary, associate, promoter, director of the company.

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F. None of his relative has any pecuniary transaction amounting to 2%

or more of the gross turnover or total income in the individually or
combination with the above transaction.

G. He or his relative shall not be a KMP or employee of the company its

holding, subsidiary, associate company in proceeding 3 financial years.

H. Who himself or his relatives cannot be employee, proprietor, partner

in the firm of a CA/CS/CMA which provide services to the company
holding, subsidiary, associate in any of three preceding financial years
or employee, promoter, partner in legal from whose income from the
company, holding, subsidiary, associate company constitute 10% or
more of the gross turnover of such firm.

I. He or his relative or together holds 2% or more of the total voting

power of the company

J. He or his relative is a chief executive or director or any non profit

organization that receives 25% on more receipt from the company
holding, subsidiary, associate company or from promoter or director of
the company or his 2% or more voting powers of the company.

Declaration of independent director.

At the first board meeting appointed by independent director.
First board meeting of every financial year.
First board meeting after the changes in the status of independent
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director.
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Remuneration of independent director.

Not eligible for stock option or sweat equity shares.
Remuneration by way of sitting fees.
Reimbursement of expenses and profit related commission.

Term of independent director.

Five consecutive years.
Reappointment for the 5 years by passing SR.
After completion of 2 terms cooling period of 3 years and shall not
associate with the company directly or indirectly.
Appointment for less than 5 years treated as one term.
Not liable to retire by rotation.
Hold at least one meeting of independent director only.
Independent director shall review the performance of the non
independent directors.

Director appointed by board of director.

Additional director. Section 161(1)

• If AOA authorised BOD can appoint additional director by passing

BR
• If AOA is silent then appointment by passing OR
• To reduce the workload additional director is appointed by BOD
• Additional director shall continue till the conclusion of AGM or
last date of AGM whichever is earlier.
• Person fail to appoint as a director in general meeting , board of
director cannot appoint such person as additional director.
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• Appointment within maximum limit fixed by AOA.

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• AD can be appointed as MD or WTD and shall hold office till the

AGM.
• Can be appointed by resolution by circulation.
• Director file DIR-2 and company shall fileDIR-12.

Alternative directors section 161(2)

➢
➢ Appointed by the board of directors if authorised by articles of
association or pass ordinary resolution.
➢
➢ Original directors absent himself from India for at least three
months but not more than 12 months, an alternate director in his
place shall be appointed.
➢
➢ One person cannot act as alternate director for more than one
director.
➢
➢ An existing director cannot act as a alternate director.
➢
➢ If original director is ID then ALD shall satisfy the condition of ID.
➢
➢ Can be appointed by passing a resolution by circulation.
➢
➢ Term:- original director returns to India or expiry of the term of
the original director whichever is earlier.
➢
➢ Provision of automatic reappointment applies to original director.
➢
➢ Alternate directorship is counted to determine the total number
of directorship.
➢
➢ Rights and liability of ALD are same as original director.
➢
➢ Can act as a alt for the same person for two or more different
companies.
➢
➢ File DIR-2 by director and DIR-12 by company.
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Nominee director section 161(3).

➢
➢ Subject to provision in AOA board may appoint a person
nominated by bank, financial institute, private equity partners ,CG
or SG.
➢
➢ Nominee director appointed to protect the interest of the bank
financial institution.
➢
➢ Nomination cannot be rejected by board of director.
➢
➢ CG/SG by virtue of holding shares in the co. can appoint CVD
➢
➢ Even third party can appoint nominee director as per the
agreement with co.

Casual vacancy director section 161(4)

➢
➢ Casual vacancy director can be appointed by BOD in the following
cases.
A) If original director is on leave for more than 12 month
B) OD resign u/s 168
C) OD’s office is vacated by casualty.
D) Appointment shall be subject to the approval at next AGM by
passing OR.
E) Term:- remaining term of original director.

F) CVD cannot be appointed by resolution by circulation.

Duties of directors section 166

❖ Acts as per AOA
❖ Act in good faith.
❖ Avoid conflict of interest.
❖ Shall not achieve any undue gain or advantages.
❖ Shall not assign his office.
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❖ Exercise due care

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❖ Protect the interest of members.

Resignation of director section 168.

❖ May resign by giving notice to the company.
❖ Company within 30 days from the date of notice file DIR-12 and
post on its website.
❖ Director within 30 days from his resignation may file DIR-11 along
with the reasons.
❖ Effective date:- on which notice is received by company or the
date specified in the notice whichever is later.
❖ All directors resign due to 167 than directors shall be appointed
by promoter or central government.
❖ Place the facts of resignation in next general meeting.
❖ Remain liable for acts when he was director

Removal of director section 169.

❖ Special notice given by members as per section 115(1% of total
voting power or Rs. 5 lakh paid up having voting power)
❖ Company send copy of notice to concern director.
❖ Company send notice of general meeting to all members along
with the representation made by the director.
❖ If representation is received to late it shall be read out at the
meeting.
❖ Representation used to secure needless publicity, on application
by the company, the tribunal shall confiscate such right and
demand the cost incurred by the company.
❖ Company by passing OR can remove the director.
❖ If ID is appointed for second term, can be removed by passing SR.
❖ Company file DIR-12 within 30 days from the removal.
15

❖ General notice in newspaper.

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❖ Appointment of director in place of removed director, process u/S

160 shall be followed and this director shall hold office till the
completion of remaining period of removed director.
❖ If company failed to fill vacancy then such vacancy can be filed by
BOD u/s 161(4)(CVD)
❖ Removed director shall receive the compensation as per the
terms of agreement or the terms of appointment.
Following director cannot be reappointed by member

A) Director appointed by tribunal

B) proportional representational director.

C) nominee director appointed by fI/bank

Disclosure of interest by director(184)

• Disclosure of interest at first board meeting in which he
participate as director.
• First meeting of the board in every financial year.
• In case of changes in interest, first BM after such changes.
• If director becomes interested after the contract then disclose his
interest when he becomes interested or at the first board meeting
after the contract.
• Director shall disclose interest in any company body corporate
form in form number MBP-1.
Director is interested in
• Any body corporate in which director or directors holds more
than 2% of share holding or he is a promoter, manager, CEO of
that company.
16

• Firm/entity in which such director is partner, owner, member.

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• Interested director shall not participate in such meeting and he is

not counted as for quorum.
• If disinterested director fall below quorum then remaining
disinterested director shall form the quorum only if they are 2 or
above
• If disinterested director fall below 2 then resolution automatically
becomes void.

184 shall not apply if.

Contract is between two company or between one or more
company and one or more body corporate where any of the
directors (individually or jointly) of the company hold not more
than 2% of paid up share capital.

Notes:- contract entered in contravention shall be voidable at the

option of company.
Interested director of private company can participate in meeting
after disclosure and counted for the quorum as well as can vote.

Loans to directors(185)
• no company shall directly or indirectly advance any loan or give
guarantee or provide security

(prohibited category)
A) Director of the company and its holding company
B) Partner or relative of such director
C) Firm in which such director or relative is partner
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• Restricted category
- Company may advance loan or can give guarantee or
provide security to any person in which director is interested
- Condition – pass SR and such loans are utilised by the
borrowing company for its principal business activity.
- Any person in whom any of the director of the company is
interested means
A) Private company of which any such director is a director or
member
B) Any body corporate in which 25% or more voting power is
controlled by director or directors.
C) Any body corporate, BOD/ MD/ manager is accustomed to
act in accordance with the direction given by director or
directors of the lending company.
Permitted category.

Section 185 does not apply to following categories

A) Loan to MD/ WTD

- Loan is given as part of the condition of services extended to
all its employees
- such scheme is approved by sr.
B) Loan/guarantee/security in ordinary course of business and
interest rate shall not be less than the rate of prevailing yield of
one year, three year, or ten year government security.
C) Loan/guarantee/security to wholly owned subsidiary for its
principal business activities.
D) Guarantee/security provided to subsidiary company in respect
loan provided by bank or financial institution however such loan
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shall be utilise for the purpose of principal business activities.

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Note – if company sells flat to one of its director on receipt of 50% cash
and 50% agrees to receive by instalment does not amount to loan.

Members right to inspect register of director or KMP(171)

- Member can inspect register of director or KMP during

business hours and member can take extract
- Company shall provide copies within 30 days(free of cost)
- Registers shall kept open for inspection at every AGM
- If inspection during business hours is refused or copies not
send within 30 days than on request the registrar shall on
an application made to him order immediate inspection and
supply of copies.
Self notes-

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17. Key Managerial Personnel

Key managerial personnel 2(51

• CEO/MD/manager
• CS
• WTD
• CFO.
• Any person who is in whole time employment and not more than one level below
the rank of director.
• Such officer as may be prescribed.

Md 2(54)
A. Director who is by virtue of AOA or
B. Agreement with the company or
C. Resolution passed in GMor BOD
D. Entrusted with substantial power and include the director occupying the
position of MD

Manager

• An individual
• Who manage or substantially whole affairs of company.
• Includes any person holding such position.

Appointment of md/ whole time director/ manager (section 196).

• MD or manager.
• Term cannot exceed 5 years reappointment not earlier than one year before the
expiry of term.(last year)
• Age 21 years to 70 years if after 70 years pass SR/OR + CG approval
• Not insolvent
• Not suspended the payment of creditor
• Not convicted by court and sentenced for more than 6 months.
• Appointment by passing ordinary resolution
• If appointed by passing BR then rectify by passing OR
• If disapproved by member then any act done before disapproval shall be valid.(Act
between BR and OR)
1

• File MR-1 within 60 days from appointment

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File DIR. 2 by director and DIR. 12 by company.

Schedule v part 1 in addition to section 196.

• He had not been sentence for any period and or to a fine exceeding rupees 1000
under 19 act.
• Shall not be detained under conservation of foreign exchange and preservation of
smuggling activity act 1974.
• Age 21 years to 70 years above 70 pass special resolution.
• Resident in India.
A. Staying in India for continuous period of 12 months before his appointment.
B. Who comes to stay in India for taking unemployment or carrying business in India
(this condition not apply to SEZ).

Exemptions to specified company.

Private company.
- No need to ratify the appointment in general meeting.
- Can pay remuneration above limits
Government company.
- The provision relating to term of MD/manager.
- No need to rectify the appointment in general meeting
IFSC (international finance service centre company)
- No need to ratify the appointment in general meeting.
- Can pay remuneration above limits

Managerial remuneration adequate profit section 197.

Adequate profit.

• Total remuneration by public company shall not exceed 11% of the net profit to all
its directors.(executive as well as NED)
• Remuneration to any one executive director shall not exceed 5% of the net profit.
• Remuneration to all executive director shall not exceed 10% of net profit.
• Remuneration to all NED shall not exceed 1% of net profit if there is ed.
• Remuneration to all NED shall not exceed 3% if there is no ed
• Above such limit pass SR.
• Default in repayment to any bank, public financial institution and non-convertible
2

debenture holder or secured creditors then obtain prior approval before passing
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• Remuneration for services rendered in professional capacity and having equal

qualification shall be excluded from above mentioned limit.
• Sitting fees may be paid for board meeting or committee meeting subject to
maximum of rupees 100000 per director per meeting even in case of loss, company
can pay sitting fees.
• Equal sitting fees to independent director and women director.
• Remuneration either by way of monthly payment or specified percentage of net
profit or combination.
• If director withdraws excess remuneration without approval the same shall be
refunded to the company within 2 years or lesser period specified by the articles till
that hold it in trust.
• Company shall not waive the recovery unless SR is past and obtain approval from
bank financial institution non convertible debentures or secured creditors in case of
default.
• Premium paid on insurance taken by company on behalf of
MD/manager/CFO/CEO/CS for indemnify the company against liability in respect of
negligence, fraud shall not treated as part of managerial remuneration unless if the
person proved guilty.
• Auditor shall make statement whether remuneration paid to director is in
accordance of section 198.

Managerial remuneration in two companies.

Managerial person may draw total remuneration up to the maximum limit of 5%
from any one of the companies in which he is a managerial person. However
director can receive remuneration from holding and subsidiary company.

Non applicability
• private company
• government company
• IFSC company individual limit shall not apply.

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Inadequate profit follow schedule V part II

A):
(1) (2)
Limit of yearly remuneration payable shall
Where the effective capital is
not exceed (Rupees)
(I) Negative or less than 5 cores 60 Lakhs
(ii) 5 cores and above but less than 100
84 Lakhs
cores
(iii) 100 cores and above but less than 250
120 Lakhs
cores
120 lakhs plus 0.01% of the effective capital
(iv) 250 cores and above
in excess of Rs. 250 cores:

A) The above limit can be exceeded by Passing SR

Period less than one year, the limits shall be pro-rated and
Effective capital: - PSC+FR+SP+ Long term loan and deposit+debenture-investment-
preliminary expense-accumulated losses.
(B) In case of a managerial person who is functioning in a professional capacity and
• Not having any interest in the capital of the company or its holding company
or any of its subsidiaries company and
• not having any, direct or indirect interest or related to the directors or
promoters of the company or its holding company or any of its subsidiaries at
any time during the last two years before or on or after the date of
appointment and
• possesses graduate level qualification with expertise and specialised
knowledge in the field in which the company operates:
• Provided that any employee can hold up to 0.5% of its paid up share capital
under Employees Stock Option Plan or by way of qualification shares shall be
deemed to be a person not having any interest in the capital of the company;

• Remuneration shall be approved by NRC committee and there is no default on

payment of debenture, debt, deposits, and interest for 30 days in preceding FY of
appointment.

• The OR/SR shall be valid for 3 years.

• Newly incorporated company for a period of 7 years, or sick company whom a

scheme of revival has been ordered by board for industrial and financial
reconstruction or NCLT may pay any remuneration without any limit.
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Perquisite not included in managerial remuneration

A) contribution to provident fund, superannuation fund or annuity fund

B) gratuity payable at a rate not exceeding half a month’s salary for each
completed year of service; and
(c) encashment of leave at the end of the tenure.
C) Children’s education allowance
D) Holiday passage for children studying outside India.
Compensation for loss of office of managing director whole time director
manager section 202.
a) Company may pay compensation for loss of office to managing director or whole time
director manager.
b) Remuneration not exceed: - remuneration which he could earn if he had been in the office
for the remaining term or 3 years whichever is lower.
c) Salary calculated as average remuneration during past 3 years
no payment shall be made if he.
A) He resigns due to the reconstruction and he is appointed as a manager director
whole time director manager of resulting company.
B) Resign otherwise than amalgamation.
C) Vacation under section 167.
D) Winding up of the company due to negligence or default of such director
e) Director has been guilty of fraud or mismanagement the affairs of the company
its holding, subsidiary company.
• Termination of office.
• No remuneration if commencement of winding up before or at the time of within 12
months from the date of which he cease to hold office.

Appointment of KMP section 203.

Applicability.
Every listed company.
Other public company having paid up share capital of RS. 10cr or more.

condition.
company shall appoint the following

A) MD or manager or CEO and in their absence, WTD.

B) CS
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C) CFO
MD or CEO shall not be appointed as chairman of the company unless
A) Authorised BY AOA
B) Company does not have multiple business
C) In case of multiple business, only company having different CEO for each business
Public company having PSC 100cr or more and turnover 1000cr or more that are engaged
in multiple business can appoint different CEO for each business.

Appointment by passing board resolution.

1) Whole time KMP shall not hold office in more than one company except
subsidiary company, however can hold directorship with the permission of
the board.
2) Company may appoint managing director if he is managing director or
manager of not more than one other company if unanimous resolution is
passed in board meeting.
3) Casual vacancy filled out by the board within 6 month

Secretarial audit (204)

Applicability.

• Listed company
• Every public company having paid up share capital of 50 crore or more
• Turn over 250 crore or more.
• Secretarial audit reports inform number MR-3.
• Secretarial audit report attached to board report.
• Board of directors explain in full any qualification mark by PCS.

Appointment of a company secretary section 205.

• Company having PSC 5 crore or more, appoint whole time CS.

• CS shall report to board of director about compliances.
• Ensure that the company complies with the applicable standard.

Other duties.

• Guidance to director with regard to duties, responsibilities, and power.

• facilitate the convening the meeting and attend board meeting, committee meeting and
GM
• Obtain approval from board, shareholders, government as required under the act.
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• Give representation before various regulatory authority.

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Appointment of CS.
BM-BR
file DIR-12 within 30 days to ROC.
File MGT-14 within 30 days to ROC.
Entry in register of KMP.
Inform stock exchange in case of listed company.

Removal of company secretary.

Can be removed like any other employee.
BM-BR.
File DIR-12 and MGT-14 within 30 days to ROC.
Entries in the register of KMP.
Inform stock exchange in case of listed company.

SELFNOTES-

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 LAW#LOGIC#LOVE Board meeting

18.Board meeting
s(173)
*First board meeting within 30 days from the incorporation.
*subsequent four board meetings in financial year in addition to first board
meeting
• Gap between two BM should not be more than 120 days.
• 1 meeting in each quarter-ss 1.
Gap shall not exceed 120 days.
In case opc/small Company/dormant company /start up private company /section 8
company/ifsc company
One meeting in half calendar year.
• Gap minimum 90 days.
Opc having single director- no need to hold board meeting.

Notice 173.
• At least seven clear days’ notice to all director before the meeting.
Exclude day on which notice is served and date of board meeting.
• Notice given to all directors including alternate director and interesting director at
their registered address.
• Give notice by hand delivery or post or electronic mode.
• Shorter notice is allowed if one id is present in the meeting or decision taken in
the meeting is ratified by at least one id.
Mode of participation in BM
a. In person
b. Video conferencing
c. Audio visual means

Imp note:-
If meeting is called within 120 days but adjourned due to lack of quorum,
it would still be considered in counting the number of meeting to be
1

held in a year.
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Notice to a director staying aboard shall be given at his foreign address, it

can also given by electronic mode.

UNIQUE ACADEMY CS SHUBHAM ABAD-

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 LAW#LOGIC#LOVE Board meeting

Where adjourned meeting will be held as per AOA or at the same time,
place in the next week of original meeting, no notice is required.
If notice is not sent to even one director, the meeting shall be considered
invalid however director attends the meeting then the meeting is
valid.

Quorum section 174.

• Quorum should be present throughout the meeting.

• Director should present themselves by permissible mode.
• No quorum no meeting.
• Quorum:-one third of total director or two director whichever is higher.
• Interested director cannot be counted for the purpose of quorum
• If more than 2/3rd director are interested then remaining director shall form the
quorum, provided they are at least 2 in number.
• Is disinterested director is less than 2 then resolution shall be void.
• When quorum is not sufficient then continuing director can act to bring the
quorum to requisite number or summon a gm and appoint director to meet the
quorum.
• Lack of quorum: - adjournment of meeting on the same day, time, and place in
next week which is not a national holiday or if such day is national holiday then till
the succeeding day which is not a national holiday.
• Video conference, audio visual mode shall be counted for quorum.

Attendance register.

*maintain separate register.

*loose leaf and serial number bound periodically.
*maintain at registered office or other approval place by director.
*may be taken to any place where board meeting is held.
*open for inspection by the director even after ceased to be a director if meeting
is held during the period of his directorship.
*preserve for 8 financial years from last entry.

Chairman of the meeting.

2

A. Chairman of the meeting shall be the chairman of the board.

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B. Company does not have chairman BOD shall elected one of themselves as
chairman.

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LAW#LOGIC#LOVE Board meeting

Resolution passed by circulation:-

Resolution paper circulated to all the directors as well as committee members in
India.
• Send draft resolution by following means
• Speed post /Courier /Electronic mode
• Resolution must be passed by majority of directors.
• If request by one third of director that the resolution must be decided at the
meeting chairman shall put the resolution at meeting.
• Resolution passed by circulation shall be part of subsequent meeting and made
part of the minutes of such meeting.
• Respond within 7 days from the circulation of draft
• effect date.(last date for signing or assent has been received or date on which
assent is received by requisite majority.)

Whichever is earlier?
Minutes.

Prepare within 30 days from meeting.

• Shall prepare sign and keep minutes of meeting.
• Circulated among all the directors within 15 days from date of board meeting in
writing or electronic mode.
• Every director who attend the meeting shall confirm or give comment about
accuracy within 7 days after receipt of draft minutes.
• Entry in minutes book and signed by chairperson within 30 days from conclusion
of board meeting.
• Signed by chairman of the meeting or chairman of the next meeting.
• All pages initiated and last page to be signed and dated.
• Preservation permanently.
SELF NOTES-
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LAW#LOGIC#LOVE GENERAL MEETING.

19. General meeting

A) AGM (96)-compulsory, ordinary as well as special business
B) EGM (100) - voluntary, only special business.

AGM: -first AGM.

1. Within 9 months from closing of financial year.

2. No extension by any authority.

3. Financial year- incorporation before 31st December- next year.

4. Financial year-incorporation between 1stjan to 31st march- subsequent year.

5. No need to call annual general meeting in the year of incorporation.

Subsequent AGM.

• Once in a calendar year within 6 months from closing of financial year

• Extension for a period not exceeding 3 months by ROC on special ground. (like natural
calamities, registered office is locked or books seized by authority)
• Gap between 2 AGM shall not exceed 15 month.

Day- any day except national holiday. Or other day specified by central government as a
national holiday, however if company already send notice of the meeting then such day
declared by CG shall not be treated as national holiday.

Time: - during business hours i.e. 9 to 6 may continue even after business hours.

Place: - a) registered office, orany place within city, town, village where RO is situated.

GM of unlisted company- any place in India with prior approval of all members. (approval in
writing or by electronic means)

C) AGM of govt company- any place with the approval of CG

Business: - ordinary as well as special business

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AGM by NCLT (97)

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A) Any default is made in holding AGM or

B) Application is made by any member
C) The tribunal may call AGM
D) Tribunal may give such ancillary direction as may necessary.
E) Direction include any single member by person or proxy may hold valid meeting.
F) AGM hold by NCLT shall deemed to be AGM of the company

EGM by NCLT (98)

A) Impractical to hold EGM

B) Application is made by any member(having voting power) or director
C) Tribunal may suo moto call EGM if necessary
D) The tribunal may call EGM
E) Tribunal may give such ancillary direction as may necessary.
F) Direction include any single member by person or proxy may hold valid meeting.

Default in complying section 96 to 98 (99)

A) One time default- rs 100000

B) Continuing default- rs 5000 per day for the defaulting period.

EGM (100)

EGM may be called by following methods.

A) BOD
B) Requisition
C) Member
D) NCLT.

EGM by BOD:-
BOD by passing BR may call EGM to transact special business.
A) EGM by requisition
1) Requisition by 1/10th of paid up share capital having voting power in case company
having share capital.
2) 1/10th of total voting power if company not having share capital.
3) Deposit reacquisition at registered office of the company.
4) Board of directors shall proceed within 21 days and shall hold meeting within 45
days from the date deposit of requisition.
5) If BOD failed to called meeting then member may called meeting within 3 month
2

from date of deposit of requisition

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6) Reimbursement of expenses to requisitions by company.

7) Fails to call meeting if company-
*fails to proceed within 21 days.
*hold meeting after 45 days.
*part of business is pending.

• Day- any day including national holiday.

Time- any time even after business hours.
Place- any place in India.
• Meeting called by the acquisition-register office or such other place within city town,
village where registered office is situated.
• Meeting of wholly owned subsidiary of a company incorporated outside india- any place
in or outside India.

One person company

>no need to hold general meeting.
>resolution is communicated to company and recorded in minutes book.
>class meeting. Can hold if required.

Notice (101)
Clear 21 days’ notice.
1) Either in writing or electronic mode.
2) Exclude the day on which notice is served and date of meeting. (exclude 2 days)
3.) If notice is send by post then it deemed to be served after the expiry of 48 hours from
post.(exclude total 4 days to count 21 clear days)
5.) Omission to send notice on mistaken ground that he is not member will not be considered
as accident omission.

Shorter notice-
➢ AGM- approval from not less than ninety-five per cent of the members entitled to
vote thereat; and
➢ EGM (company having share capital) - majority in number of members entitled to vote
and who represent not less than ninety-five per cent. Of such part of the paid-up share
capital of the company as gives a right to vote at the meeting; or
➢ EGM (company not having share capital) -not less than ninety-five per cent. Of the
total voting power exercisable at that meeting:
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101(2) contacts of the notice.

#specified day, date, time, place, proxy form, agenda.
# member by person or proxy can attend GM.

101(3) entitlement of notice.

#m-member or his legal representative (equity and preference)
#a-auditor statutory.
#d-directors.

SS-2
-additional entitlement of notice give to.
-secretarial auditor.
-debenture trustee.
-other specified member.

-mode of notice.
-writing, by hand, ordinary post, registered post, speed post, and fax .

-Section 102 explanatory statement.

-in case of special business attach explanatory with notice.
- it includesthe nature of interest in respect of each item of every director, manager, KMP and
relatives of such person.

Ordinary business: -

A) Adoption of financial statement

B) Declaration of dividend
C) Appointment of retiring director
D) Appointment of, and the fixing if the remuneration of auditor.

Special business: -

Any business other than ordinary business.

Section 103 quorum.

1. minimum number of members required to be present in the general

2. Meeting to constitute valid general meeting.
4

3. No quorum no meeting.
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4. Private company: - two members personally present

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5. Proxy are not counted for the purpose of quorum.

6. Public company: -
Up to 1000 members -minimum five members.
1001 to 5000 member- minimum 15 members
Member exceeding 5000- minimum 30 member
7. Representative of governor, president, or body corporate
treated as member.
8. Joint shareholders are counted separately for purpose of quorum.
9. Interested members are counted for the purpose of quorum but cannot vote on that
particular business.
10. One person can be representative of more than one body corporate he will be
counted separately if one more individual present at the meeting.

Adjournment of meeting: -

If the quorum is not presented within half an hour then

A) Meeting shall stand adjourned to the same day, time, place in the next week or such
other place, time, date decided by BOD
B) Meeting shall stand cancelled if called by requisitions.

Notice of adjourned meeting.

In case of any changes in time, day, place by BOD then the company shall give notice of
not less than 3 days either individually or by way of advertisement in newspaper.

Quorum in case of adjourned meeting.

a) If adjournment is because of lack of quorum- the presented member shall form the
valid quorum. (at least 2)
b) If meeting is adjourned because of other reasons- original quorum is required
c) Resolution is passed at an adjourned meeting shall be treated as passed on the day it
was actually pass and not on any earlier date.
d) Even a single member by person and proxy can hold valid meeting if directed by NCLT.
Chairperson (104).
- The name of chairman or procedure to appoint chairperson is mentioned in article of
association.
- If AOA is silent then member shall be elected by members by show of hand.
- Generally members elect the chairperson but if articles of association provide then
directors can elect the chairperson.
- If poll is demanded taken immediately.
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- The chairman elected on a show of hands shall continue to be the chairman of the
meeting.
- Poll can be demanded by members or proxy.
- If chairman is not present within 15 minutes, one of the director can act as a
chairperson.
- Directors are unwillingness to act as a chairman then selectone ofthe members as a
chairman of the general meeting.

Proxy section—105.

• Proxy means a person appointed by member to attend the general meeting.

• Proxy need not be member accept section 8 company
• Company not having share capital cannot appoint proxy accept AOA permit.
• Proxy is not counted for the purpose of quorum.
• Not allowed to speak and vote unless poll is demanded.
• Deposit proxy form at least 48 hours before the meeting at the registered office of the
company

Article cannot prescribe longer period than 48 hours.

A person can act as a proxy on behalf of maximum 50 member and holding 10% of total share
capital.

If a single member holds 10% or more capital than proxy can act on behalf of such member
only.
Proxy must be in writing and signed by member his duly authorized.
If appointer is body corporate affix a common seal.

Company cannot send invitation to appoint proxy at company’s expenses, however if a

member has requested in writing then company can send the invitation.

Revocation of proxy;-

• Person himself attend the meeting and voted.

• Deposit of new proxy form within specified time.
• Written notice has been given before commencement or adjournment of meeting.
• Notice of revocation signed by a member who signed the proxy form.
•
6

Inspection of proxy.
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• Inspection by members entitled to vote.

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LAW#LOGIC#LOVE GENERAL MEETING.

• 3 days advance notice should be given to the company.

• Inspection between 24 hours before the commencement of meeting till the conclusion
of meeting. Inspection between business hours.

Restriction on voting rights 106.

The holder of partly paid up shares cannot vote.

Section 107 voting by show of hands.

• Voting firstly taken by show of hands.
• Count the hands raised in favor or against the motion.
• Chairman announces the resolution whether it is carried or lost and entered in minute
book.
• One member one vote.

Voting through electronic mode section 108.

Applicability.
Listed company. (equity shares are listed)
company having more than 1000 or more members.
Non applicability
whether debenture/ preference shares are only listed.
Listed on SME platform.
Listed on institutional trading platform.
Nidhi company.

• Notice is send to all members, auditors, directors

• Notice shall specify the details about the e voting facility.
• Notice also post on the website.
• Also published in newspaper at least 21 days before GM one in english and one regional
language.
• E-voting shall remain open for minimum 3 days and close at 5 pm on the day preceding
the general meeting.
• Members can physically attend general meeting but can vote through one mode only.
• Once voted cannot change subsequently.
• BOD shall appoint scrutinizer who is not in employment.
• Scrutinizer shall declare result within 3 days from the conclusion of meeting.
• Result should be displayed at register office, head office, corporate office and website of
the company.
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Voting by poll (109)

Poll can be demanded before or on the declaration of the result by show of hands.

Poll can be demanded by member or proxy or chairperson.

A poll demanded may be withdrawn at any time.

Who can demand poll:-

Company having share capital:-member by person or proxy having 10% of the total voting
power or aggregate holding not less 5, 00,000

Company not having share capital: - member or proxy having 10% of total voting power.

Time of poll:-
A) Adjournment of meeting and appointment of chairman-taken immediately.
B) Other cases- within 48 hours
• Poll paper shall be given to all members having voting rights.
• Chairman will appoint the scrutinizers, person other than inemployment.
Scrutinizer will submit the report to chairman.
Chairman declared the result. Result of the poll shall be deemed to be the decision of
the meeting.

Voting by postal ballot (110)

Business compulsory transacted by postal ballot

A) Alteration of object clause, alteration of AOA to determine private company.

B) Buy back
C) Change in the register office outside local limits.
D) Demerger/ merger/takeover/acquisition
E) Election of small shareholder director
F) For selling whole or substantially whole of the undertaking.
G) Giving loan or extending guarantee or provide security in excess of the limit
H) Variation of right attached to shareholder and debenture holder.

Business compulsory transacted at general meeting.

A) Ordinary business
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B) Transaction where director or auditor have right to be heard.

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Procedure.
1) optional for OPC and other company having up to 200members.
1) Send notice to all member along with draft resolution.
2) Notice shall be send by registered post, speed post, through electronic mode,
courier service.
3) Advertisement in newspaper one in english and one in regional language.
4) Notice shall also post on the website of the company.
5) Members shall give assent or dissent within 30 days from dispatch of notice.
6) Vote received after 30 days shall not be consider.
7) BOD shall appoint one scrutinisers who is not in employment.
8) Scrutinisers shall submit report within 7 days from last date of voting or last ballot
paper received, whichever is earlier.
9) The result shall be declared by posting on the website of thecompany.
10) Business transacted by postal ballot, may be transacted by electronic means under
section 108.

Circulation of member’s resolution: -

A) Requisition made in writing by 1/10th of paid up equity share capital in case company
having share capital
B) If company not having share capital then requisition by 1/10 th of total voting power.
C) Notice shall be deposited at least 6 weeks before the meeting in case requisition
proposing the resolution.
D) However, meeting is called within 6 weeks then the notice shall deem to be deposited
within time.
E) Notice shall be deposited at least 2 weeks before the meeting if requisition wants to
circulate any statement with respect to proposed resolution.
F) The company shall circulate the notice to all member.
G) However, company is not bound to circulate any statement if CG is satisfied that
member wants to secure needless publicity.

➢ Minutes section 118.

➢ Recorded within 30 days.
➢ Serially number.
➢ Fair and correct summary of proceeding.
➢ All appointments made shall be included in minutes.
➢ In case of board meeting includes name of the directors present at the meeting
➢ And the names of directors who dissented the resolution.
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➢ Distinct minutes book for different meeting.

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➢ Can be in loose leaf form but bound periodically.

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➢ Can kept at registered office or such other place approved by board.

Preserved permanently with the custody of CS.
➢ Can be in physical or electronic mode.
➢ Signed by chairperson of the meeting or duly authorised director.

Report on annual general meeting section 121

Applicable to every listed company.
Prepare a report on each annual general meeting and filed with the ROC within 30 days
from conclusion of annual general meeting in form MGT-15.
Signed by chairman of the meeting or by two directors one of whom shall be a managing
director.
It contains fair and correct summary of the proceedings.

Resolution requiring special notice section 115.

1) Specialnotice is required to move resolution.
2) Notice shall be signed individually or collectively.
3) Members holding not less than one percent of total voting power or
4) Aggregate sum of not less than rupees 500000 paid up.
5) Notice not earlier than 3 months but at least before 14 days before meeting.
6) Company shall send notice to members at least 7 days before the meeting.
7) If it is not practicable to give notice then published in newspaper one in english and one in
vernacular language at least 7 days before the meeting.

(114) types of resolution

Ordinary resolution- vote casted in favour is more than votedcasted against the motion.
(simple majority)

Special resolution- vote casted in favour is three times more then vote casted against the
motion. (75% or more).

Self notesz
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LAW#LOGIC#LOVE VIRTUAL MEETING.

20. VIRTUAL MEETING.

• Requirement of virtual meeting.

I. Meeting room
II. Software
III. High quality, mike system.
IV. Hardware equipment like monitor LED screen
V. Projector
VI. Leased lines
VII. High speed wireless internet.
• Virtual board meeting.
I. Any director may participate through electronic mode.
II. Notice of meeting shall be send to all directors. & inform the directors about the option of
video conferencing.
III. Director shall prior intimate to chairperson or company secretory.
IV. Chairman or CS shall make suitable arrangements
V. Director may intimate at the start of the calendar year, which shall be valid for such calendar
year.
VI. Counted for the purpose of the quorum.
VII. Attendance register shall be deemed to be signed.
• Matters not to be dealt within a meeting in video conference.
I. Approval of annual financial statement.
II. Approval of boards report.
III. Audit committee meeting for consideration of financial statement.
IV. Demerger, merger acquisition & takeover.
V. Approval of prospectus.
• Virtual general meeting(Advantages).
I. Increase shareholders participation in meeting.
II. Save time on travel & cost.
III. Encourages more participation by investors across the world.
IV. Reduce the cost of conducting & holding shareholders meeting.
V. Save time of company’s personal.
• Difficulties in holding virtual GM.
I. Security of the system used
II. Streaming with quality without interruption.
III. Providing with secure login id.
IV. Customised instant result & detailed audit reporting
V. Data security.
• Role of chairperson & CS
I. Safeguard the integrity of the meeting
II. Record proceeding& prepare minutes.
III. To store safekeeping marketing the tape recording.
IV. Ensure no unauthorized access
1

V. Other necessary measures.

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UNIQUE ACADEMY CS SHUBHAM ABAD.

LAW#LOGIC#LOVE VIRTUAL MEETING.

SELF NOTES-

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UNIQUE ACADEMY CS SHUBHAM ABAD.

LAW#LOGIC#LOVE LEGAL FRAMEWORK.

21. LEGAL
FRAMEWORK.
Company secretary.
• Means a person who is a member of ICSI.
• Associate member

• Name entered in register of member maintained by ICSI

Fellow member FCS.

• Continuous practicing in India for at least five years and processes the prescribed qualification.

• Paid prescribed fees.

• Name enter in register of members as fellow member of institute

. • Certificate of practice

• Obtain COP.

• Deemed to be in practice.

• If an individually or in partnership with other member or partnership with other recognise

member

. • Register of member.

• Council shall maintain ROM

. • It includes particular of members.

• Full name date of birth residential or professional address date on which his name is entered
qualification holding COP or not.

• Removal from register of member.

• Dead.

• Requested for name removal.

• Not paid described fees.

• Disabilities mention under Section 8

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LAW#LOGIC#LOVE LEGAL FRAMEWORK.

• Misconduct under Companies Act 1980 1ST schedule.

Part one-- CS in practice is going to be guilty if.

• Allow any person to practice in his name except partner and employee.

• Accept or page any share Commission or brokerage to any member other than.

• Members partners legal representatives of deceased and member of other recognised Institute
Partner.

• Entered into partnership in or outside India with any person accept PCS/ PCA/ PCWA /an advocate
or other specified person.

• Secures any professional business which is not open to CS.

• Advertise is professional or use any designation other than CS.

• Accept the position of PCS held by another PCS without first communication with him in writing.

• Charge for accept fees which is based on percentage of profit accept permitted.

Part-2 misconduct of CS in service.

• Pay any share for employment.

• Accept any fees /profit /gain from lawyer ,CS, broker, agent of company customer.

Part 3 general misconduct.

• Not a fellow member but act as a fellow member.

• Does not supply the info called by authority.

• Provided for info

. • General misconduct.

• Guilty by civil or Criminal Court for an offence which involves imprisonment for a term not
exceeding 6 months

. • 2nd Schedule.

Part 1. Misconduct for CS in practice.

• Disclose the information of his client without consent except required by law.

• Certified or submit the report without examination.

• Express is opinion on any business enterprise in which he his partner of firm has a substantial
interest.

• Failed to disclose a material fact known to him.

2

• Does not exercise due diligence.

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UNIQUE ACADEMY SHUBHAM ABAD-8149221250.

LAW#LOGIC#LOVE LEGAL FRAMEWORK.

• Failed to obtain sufficient and for which is necessary for expression of an opinion.

• Failed to keep money of his client in a separate bank account.

• Both for PCS as well as CS.

• Contravenes any provision or regulation of the act.

• Disclose confidential information.

• Submit false information to reporting authority

. • Embezzles money in preferential capacity.

Part –3 General

• Guilty by any civil or Criminal Court for an offence involving punishment for a term exceeding 6
months.

• Discipline mechanism and appeal authority.

• Disciplinary directorate.

• Established by the act.

• Discipline director is the head and have other employees.

• Received complaint against misconduct and investigate and arise at a Prime facie opinion.

• Miss conduct under 1st schedule the matter shall place before Board of discipline.

• Misconduct under second schedule refer to disciplinary committee

• Board of discipline.

• Follow summary disposal procedure to dispose the case.

• Deal with misconduct under first schedule.

• Board May pass following articles after giving Oobh

. • Reprimand the members.

• Remove the name from register up to 3 months.

• Impose find up to 100000.

• Established by Council.

• Disciplinary committee.

• Established by Council.

• President of vice president of Council will be the proceeding officer along with two members
depressing CG and 2 Council members.

• Deal with misconduct and second schedule.

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• Committee can pass following order after giving o0bh.

UNIQUE ACADEMY SHUBHAM ABAD-8149221250.

LAW#LOGIC#LOVE LEGAL FRAMEWORK.

• Required the member.

• Remove the name from register permanently.

• Impose the find up to 5 Lacs.

Appeal authority

• AA established under ICAI at shall be deemed for this at ICAI act.

• Appeal against the order of board of Disciplinary or disciplinary committee

• Appeal can be filed by aggrieved party or discipline director if authorised by Council with 90 days
from the decision

• May Grant extension

• Complaint relating to the profession or other misconduct

• Enquiry shall be held by disciplinary committee

• Complaint shall contain act or omission and oral or documentary evidence

• Send particular of emission to the members of his address

• Within 14 days are specified time members shall forward a written statement

• Disciplinary committee shall give the Complaints and respond a notice of meeting

• Disciplinary committee shall after investigation submit report to council

• Council after receiving report May pass necessary Orders and communicate to both.

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UNIQUE ACADEMY SHUBHAM ABAD-8149221250.

LAW*LOGIC*LOVE. SECRETARIAL BOARD.

22. SECRETARIAL BOARD

Composition of SSB. (SS board.)

• Representatives from major industries.
• Federation of Indian chambers of commerce & industries.
• Confederation of Indian industries.
• The association of chambers& commerce & industry of India.
• PHD chamber of commerce & industry
• Representative of regulatory authority such as MCA, SEBI, RBI, SIX, BSE, NSE, ICAI, ICSI,
ICWAI.
Function of SSB
• Formulate secretarial standard.
• Clarifying issues arising out of ss
• Issuing guidance notes&
• Reviewing & updating the ss
• Note- SS do not substitute any existing law or rules but only supplementary of such act
rules.
• In case if the SS is inconsistent with any law the provision of the said law shall prevail.
Procedure for formulation and issue of SS.

• SSB in consultation with Council determine the areas of Need and priority
• SSB main constituent working group to formulate draught of proposed standard.
• Draft Circulated among the members of working group for discuss and shall be
modified appropriately.
• Draft also circulated to regulatory authorities for their views.
• Prepare and publish in the chartered secretary the journal of ICSI and placed on
the website of ICSI.
• SSB shall finalize & submit to council
• Council will consider the final draught an issue SS
SS issued by ICSI (complementary) (compulsory.)
SS1—BM
SS2—GM
SS3—DIVIDEND
SS4--- REGISTER & RECORD.
Meeting.
Class meeting.
1. Meeting of separate class is known as class meeting.
2. In case of variation of the right attached to class Holder Company shall hold separate
meeting and obtain consent of class holders (SR).
1

3. Quorum--Two persons are representing by proxy one third of issued capital

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LAW*LOGIC*LOVE. SECRETARIAL BOARD.

SELF NOTES.

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UNIQUE ACADEMY. CS SHUBHAM ABAD-

8007916622/33.
LAW#LOGIC#LOVE Mega firm

23.MEGA FIRM.

➢ Partnership firm with more than 25 partners.

Provide core professional services and other ancillary services
➢ Partners should be member of
ICAI
ICSI
ICWAI
Engineers
Architecture
Actuaries
Other The professional bodies outside India
➢ Pre- requisites.
All mind work together
Say go to ego
Mutual faith
unanimity shall be rule of policy decision -
Financial discipline
Equal status to founder partner
Income distributed at short regular intervals
➢ Process of constitution.
Series of meetings before mov is reached
Work under MOU for one year
mutual faith and understanding
After initial stage form partnership deed
Intellectual level shall be at par
Revenue sharing models
Partner May adopt simple model to share profit and losses equally
In reality sharing based on performance contribution and efficiency.
Ideal revenue model people are following
15% of the fees given to the partner who introduce new client.
15% person shall retain for common pool
70% fees given to partners who actually work on assignment
➢ After meeting all expenses result in profit.
SELF NOTES-
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8007916622/33.
TIPS & TRICKS TO REMEMBER DURING
EXAM.
 Do not use examples or illustrations as they would make the answer
unnecessarily lengthy.
 However, if the content is very limited, you may use examples or
illustrations so that the answer does not appear to be too short, or you may
elaborate the same point again by restating the provision in different
words.
 Underline the important keywords, time limits, monetary limits, names of
the case laws, section numbers, etc. as you write the answers. If you plan to
underline after writing all the answers, it would consume more time, and
you might not be left with the time to underline; so, keep on underlining as
you write. Do not use pencil or scale or a different coloured pen to
underline as it would result in, wastage of time. Underlining would help in
proper evaluation of your answers and, may help you score some bonus
marks.
 Use headings and sub-headings, wherever possible.
 Try to attempt the entire paper. Even if you don't know the answer of a
particular question, try to attempt it by applying the knowledge of some
related.
 In case of a case study / practical problem, the given case is compared with
the provisions contained in the Act, the given case study / practical problem
is analysed, and the answer ends with a clear conclusion.
 If a student obtains the certified copies from ICSI after the result is
declared, he would get to know that good marks have been allotted to him
in all such answers where he has written the 'proper answer' a explained
above, even though the language used is not of the Bare Act and
not of any `ICSI Publication'.

ALL THE BEST.