UNIT-3-COMPANIES ACT-2013.pdf (Applicable for India)

Companies Act 2013
https://www.youtube.com/watch?v=5DeLz5mX78M (ALL)
https://www.youtube.com/watch?v=XMJlnpsZEdc (Intro)
https://www.youtube.com/watch?v=5fTjZQUo_i4 (NCLT &NCLAT)
https://www.youtube.com/watch?v=xflrG-8V_r0 (Types of Companies)

Companies Act, 2013: A statistical snapshot
• Number of chapters: 29
• Number of sections: 470

• Definition of Company [Section 2 (20)]:-
“Company” means a company incorporated
under this Act or under any previous company
law.
• Note: Shareholders are not the joint and
private owners of company’s property.
• Case: Macura VS Northern Assurance
Company Limited

Characteristics :
• Incorporate Association (Registration under company act)
• Artificial Person (Created by law other than natural birth)
• Separate Legal Entity (Company can own property, bank
account, raise loan- Company has legal personality)
• Separate Property
• Can sue and be sued
• Separate Ownership & Management
• Common Seal (official signature of company or directors
sign)
• Transferability of shares
• Perpetual Succession (it has continued existence)
• Limited Liability of members (Limited by shares or
guarantee)

Corporate Veil Theory
• Member of a company are shielded from
liability of company’s action.
• Members are not liable for the acts of the
company.

Case 1: Salomon Vs Salomon & Company Ltd.
Solomon
Sole Proprietor
Business (Shoes)
Public Company (Artificial
Person)
Registration (Solomon & Co. Ltd.)
Memorandum of Association(MOA)
Articles of Association (AOA)
Minimum 7 Members (Solomon,
Wife, Daughter, Four Sons)
Purchase
Equity Shares: 20,000
Secured Debenture: 10000
Cash: 8782
Total: 38782
Minimum number
of Directors- 03
Solomon, Son No 1
& Son No. 2

1) Company went into losses
2) Company went into
liquidation
Assets value at the time of
liquidation : 6050
1) Secured Creditors (Solomon)- 10000
2) Unsecured Creditors- 8000
3) Equity Share Holders- (Solomon &
Family)
Solomon filed case
against Solomon &
Company Ltd.
Company has separate legal entity
Company can sue or be sued in its
own name.

Lifting of Corporate Veil
• Corporate veil is said to be have lifted
1) To determine the character of the company
at the times of war that is to find whether
the company is friend or foe (enemy).
Case: Daimler Co. Ltd. VS Continental Tyre &
Rubber company

2) To Protect Revenue or Tax
Case: Dinshaw Maneckjee
Huge Income
10,00000
A B C D

3) To Avoid a Legal Obligation
Case Law: Workman of Associated Rubber
industry Ltd. VS Associated Rubber Industry Ltd.
A Ltd. B Ltd. C Ltd.

4) Formation of subsidiaries to act as agents.
Case Law: Merchandise Transport Limited vs
British Transport Commission
5) Company formed for fraud (Improper conduct
or defect law)
Case: Gilford Motor Co Ltd v E B Horne

CASE 2: LEE VS LEE AIR FARMING LTD. (Artificial Person)
LEE
Air Farming
Company
LEE-
MD
Majority Share Holder
Chief Pilot (Employee)
Plane crashed during
Air Farming and Lee
died
Mrs. Lee Filed case against
company for compensation

CASE 3: GUZDAR VS COMMISIONER OF INCOME TAX
Mrs Guzdar
Investment in
Agricultural
Company
Agricultural
Income
exempted from
tax
Company
gave
dividend to
Mrs Guzdar
Mrs Guzdar refused to pay tax on dividend
Company has separate identity and its share holders have separate identity.

On the Basis of Liability
1) Company Limited by Shares
2) Company Limited by Guarantee
3) Unlimited Company
On the Basis of Members
1) Private Company
2) Public Company
3) One Person Company
On the Basis of Control
1) Holding Company
2) Subsidiary Company
3) Associate Company

On the Basis of Access of Capital
1) Listed Company
2) Unlisted Company
Other Companies
1) Government Company
2) Section 8 Company
3) Foreign Company

UNIT-3-COMPANIES ACT-2013.pdf (Applicable for India)

Types of Company
• Public Limited Company
• Private Limited company
• One Person Company
• Small Company
• Dormant Company
48

Private company
• Section2(68) “private company” means a company
having a minimum paid-up share capital of one lakh
rupees or such higher paid-up share capital as may be
prescribed, and which by it articles,—
• (i) restricts the right to transfer its shares;
• (ii) except in case of One Person Company, limits the
number of its members to two hundred;

• Provided that where two or more persons hold
one or more shares in a company jointly, they
shall, for the purposes of this clause, be treated
as a single member
• Provided further that—
(i) persons who are in the employment of the
company; and
(ii) persons who, having been formerly in the
employment of the company, were members of
the company while in that employment and have
continued to be members after the employment
ceased, shall not be included in the number of
members; and
(iii) prohibits any invitation to the public to
subscribe for any securities of the company

Public Company
Section 2(71) “public company” means a
company which—
• (a) is not a private company;
• (b) has a minimum paid-up share capital of five
lakh rupees or such higher paid-up capital, as
may be prescribed:
• Provided that a company which is a subsidiary
of a company, not being a private company,
shall be deemed to be public company for the
purposes of this Act even where such
subsidiary company continues to be a private
company in its articles

• Mr.Kumar is director of a private company
(XYZ) situated in Delhi which is subsidiary of
ABC limited.As the articles of association
clears that the XYZ is purely private
company.But there is some penal actions on
XYZ company considering as deemed public
company.The XYZ filed against penal action
stating to MCA that it is a purely private
company & the charges levied on it is
considering it as Public company. Is XYZ is
correct?

One Person Company
• Section2(62) “One Person Company” means a
company which has only one person as a member.
• Waives a number of compliance requirements.
• ‘Lives on’ even after the death/disability of the sole
member.
• OPC registered with one member.
• Appointment of another person as a nominee
member in the event of the subscriber’s death or his
incapacity
• Only natural person who is an Indian citizen and
resident in India is eligible to incorporate OPC.
53

Small Company
2(85) ‘‘small company’’ means a company, other than a
public company,—
(i) paid-up share capital of which does not exceed fifty lakh
rupees or such higher amount as may be prescribed
which shall not be more than five crore rupees; or
(ii) turnover of which as per its last profit and loss account
does not exceed two crore rupees or such higher amount
as may be prescribed which shall not be more than
twenty crore rupees:
• Provided that nothing in this clause shall apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special
Act

Dormant Company
• Dormant company: The 2013 Act states that a
company can be classified as dormant when it
is formed and registered under this 2013 Act
for a future project or to hold an asset or
intellectual property and has no significant
accounting transaction. Such a company or an
inactive one may apply to the ROC in such
manner as may be prescribed for obtaining the
status of a dormant company.[Section 455 of
2013 Act]
55

Dormant company
• Who can attain status of a dormant company? –
Companies;
– Formed for a future project, or to hold and asset /
intellectual property and has no significant accounting
transactions
– Not carrying out any significant business or operation, or
has not made any significant accounting transaction, or
has not filed financial statements / annual returns for 2
years
• Special resolution in AGM / confirmation from at least 3/4th
shareholders (by value) required to apply for being dormant
company
• Certain additional conditions prescribed for company to be
eligible to make application to be dormant company
56

Appointment of directors
• Articles of a company may provide for the appointment
of the first directors
• If articles are silent then the subscriber to the
memorandum who is an individual shall be deemed to
be the first director of the company
• May have a single director
• Maximum-15 directors more than 15 after passing
Special Resolution
• Director must have stayed in India for a total period of
not less than 182 days in the previous calendar year

Meetings of Board
• At least one meeting of the Board of Directors
to conducted in each half of a calendar year
• Gap between the two meetings should not be
less than ninety days
• Exemption – if company has only one director.

Small Company
• The concept of “Small Company” has been
introduced for the first time by the Companies
Act, 2013.
• The Act identifies some companies as small
companies based on their capital and turnover
for the purpose of providing certain
relief/exemptions to these companies.
• Most of the exemptions provided to a small
company are same as that provided to a One
Person Company.

Preparation of the Memorandum of Association (MOA) and
Articles of Association (AOA)
• Drafting of the MOA and AOA is generally a step subsequent
to the availability of name made by the Registrar. It should be
noted that the main objects should match with the objects
shown in e-Form INC.1. These two documents are basically
the charter and internal rules and regulations of the company.
Therefore, it must be drafted with utmost care and with the
advice of the experts and the other object clause should be
drafted in a very broader sense.
• As per section 4(6) the memorandum of a company shall be in
respective forms specified in Tables A, B, C, D and E in
Schedule I as may be applicable to such company.
• As per section 5(6) the articles of a company shall be in
respective forms specified in Tables F, G, H, I and J in

Application for incorporation of a company
• application for incorporation of a private and Public company,
with the Registrar, within whose jurisdiction the registered
office of the company is proposed to be situated, shall be filed
in Form no. INC 7 [Rule 12 to 18] along with Form no. INC.22
for situation of registered office of the Company,
• · Declaration in Form No. INC-8 by Professionals. (As per
Rule-14 of Companies (Incorporation) Rules, 2014, A
declaration in the prescribed form by an advocate, a CA, CMA
or CS in practice who is engaged in the formation of the
company, and by a person named in the articles as a director,
manager or secretary of the company, that all the requirements
of this Act and the rules made there under in respect of
registration and matters precedent or incidental thereto have
been complied with;)

Memorandum & Articles of
Association

• The Memorandum of Association is the charter of a
company. It is a constitution document, which amongst
other things, defines the area within which the company
can operate.
• As per section 2(56) “memorandum” means the
memorandum of association of a company as originally
framed or as altered from time to time in pursuance of any
previous company law or of this Act.
• The company cannot depart from the provisions of the
memorandum. If it enters into a contract or engages in any
trade or business which is beyond the powers conferred on
it by the memorandum, such a contract or the act will be
ultra-vires (Beyond Powers) the company and hence void.
Memorandum of Association
https://www.youtube.com/watch?v=MmNu1D7Acsk

Model Forms of Memorandum
• Table A is applicable in the case of companies limited
by shares;
• Table B is applicable to companies limited by
guarantee not having a share capital;
• Table C is applicable to the companies limited by
guarantee having a share capital;
• Table D is applicable to unlimited companies not
having a share capital;
• Table E is applicable to unlimited companies having a
share capital.

Name Clause
• A company being a legal entity must have a name of its
own to establish its separate identity.
• The name of the company is a symbol of its independent
corporate existence.
• The first clause in the memorandum of association of the
company states the name by which a company is to be
known.
• The company may adopt any suitable name provided it is
not undesirable.
• It should be published & engraved in all documents along
with the CIN No.
• In case of One Person Company, the words ‘‘One Person
Company’’ shall be mentioned in brackets below the name
of such company, wherever its name is printed, affixed or
engraved.

• Rectification of name of a company (Section 16):-
• Section 16 provides that if by inadvertence or
otherwise a name has been registered which is
identical to or too nearly resembles the name of an
existing company whether registered under this Act
or the previous company law, the Central
Government may direct the company to change its
name.
• The company shall change its name within a period
of 3 months from the issue of the above direction
after passing an ordinary resolution for the purpose.

Situation Clause (Situated)
• The name of the State in which the registered office
of the company is to be situated must be given in the
memorandum. But the exact address of the registered
office is not required to be stated therein. Within 15
days of it incorporation, and at all times thereafter,
the company must have a registered office to which
all communications and notices may be sent.

Objects Clause
• Under section 4(1)(c)of the Companies Act,
2013, all companies must state in their
memorandum the objects for which the
company is proposed to be incorporated and
any matter considered necessary in furtherance
thereof.

Liability Clause
• The fourth compulsory clause must state that liability of
the members is limited, if it is intended that the company
be limited by shares or by guarantee. The effect of this
clause is that, in a company limited by shares, no
member can be called upon to pay more than what
remains unpaid on the shares held by him.
• The fifth compulsory clause which must state the
amount of the capital with which the company is
registered, unless the company is an unlimited liability
company. The shares into which the capital is divided
must be of fixed value, which is commonly known as the
nominal value of the share. The capital is variously
described as “nominal”, “authorised” or “registered”

• Declaration for Subscription:- (INC-13)
The statutory requirements regarding
subscription of memorandum are that:
— each subscriber must take at least one share;
— each subscriber must write opposite his name
the number of shares which he agrees to take.
• Signing & Stamping of Memorandum

Articles of Association
https://www.youtube.com/watch?v=aebYX3aZ3Qo
• The articles of a company shall be in respective
forms specified in Tables, F, G, H, I and J in
• In terms of section 5(1), the articles of a company
shall contain the regulations for management of
the company. The articles of association of a
company are its bye-laws or rules and
regulations that govern the management of its
internal affairs and the conduct of its business.
• They are subordinate to and are controlled by the
memorandum of association.

Contents of Articles
 Adoption of preliminary contracts.
 Number and value of shares.
 Issue of preference shares.
 Allotment of shares.
 Calls on shares.
 Lien on shares.
 Transfer and transmission of shares.
 Nomination.
 Forfeiture of shares.
 Alteration of capital.
 Buy back.
 Share certificates.
 Dematerialisation.
 Conversion of shares into stock.

Alteration of MOA
1) Alteration of Name Clause:-
• Special resolution to be filed by company Form
No. MGT-14(Special resolution)
• Approval from central government in writing
• Once approval granted within specific time period
the form no. INC-25(Certificate of incorporation
pursuant to name change) will be issued.
• Its not applicable to those company who default
in filing annual returns or deposit or debentures or
interest thereon.

2)Alteration of Registered Office Clause:-
Change within the local limits of same town-
• Board Resolution filed by company.
• Notice to ROC in form No. INC-22
Change from one city to another within the same State-
• Special Resolution filed by company(MGT-14)
Change within the same State from the jurisdiction of
one Registrar of Companies to the jurisdiction of
another Registrar of Companies-
• Confirmation by Regional Director.

Change of Registered office from one State to
another-
• Application by Central Government.

Alteration of Objects Clause & Liability
Clause:-
• By passing an special resolution (Form
No.MGT-14)
Alteration of Capital Clause:-
• By passing an ordinary Resolution

Alteration of AOA
• A company has a statutory right to alter its
articles of association.
• But the power to alter is subject to the
provisions of the Act and to the conditions
contained in the memorandum.

• XYZ limited is shifting their registered office
from Mumbai to Pune. The company took
approval from shareholders & filed MGT-14
along with INC-22 with ROC.But ROC has not
approved the form mentioning that they did
not took approval from authority.Is any
remedy available to Company?

Certificate of Incorporation?
https://www.youtube.com/watch?v=IVUaTt0NHbM
• When you complete your company
formation with Companies House you’ll be
sent a certificate of incorporation. This
can either be electronic or you can choose
to have an official printed one that you
could frame and hang at your business
premises. This will serve to show that your
business is properly and legally formed.

10 Principal Features of an
Incorporated Company
• 1. Registration:
• 2. Voluntary Association:
• 3. Legal Personality:
• 4. Management:
• 5. Permanent Existence or Perpétuel Succession:
• 6. Common Seal:
• 7. Limited Liability:
• 8. Control:
• 9. Taxation:
• 10. Divorce between Ownership and Management:
• (Source for details:
https://www.yourarticlelibrary.com/company/features-
company/10-principal-features-of-an-incorporated-
company/75890)

Companies Act 2013
https://www.youtube.com/watch?v=Jx77uhMlhEw
(Classification of Directors)
• Definition of Director:
“Director” means a director appointed to the Board of a company
Interpretation:
Director is the person which is being appointed by the board members unanimously with the
help of poll.
1. Residential Director
• According to Act – “Every company shall have at least one director who has stayed in
India for a total period of not less than one hundred and eighty-two days in the
previous calendar year.” The Definition says that the director should be resident of India
which shows the director is responsible for the company and has not been making trips
without any worry about the company.
• 2. Additional Director
• According to the Act – “The articles of a company may confer on its Board of Directors the
power to appoint any person, other than a person who fails to get appointed as a director in
a general meeting, as an additional director at any time who shall hold office up to the date
of the next annual general meeting or the last date on which the annual general meeting
should have been held, whichever is earlier.” This definition says that the articles of the
company has authorized the board of directors to appoint the additional directors whenever
needed, this additional director would hold the office up to the date of next AGM.

• 3. Alternate Director
• According to the Act – “The Board of Directors of a company may, if so
authorized by its articles or by a resolution passed by the company in
general meeting, appoint a person, not being a person holding any alternate
directorship for any other director in the company, to act as an alternate
director for a director during his absence for a period of not less than
three months.” This director is to be specifically appointed when the
original director or the whole time director is not present in the office due to
any of the factors.
• 4. Women Director
• According to the Companies Act 2013, some companies have been
compulsory ordered to get at least 1 director as the women director.
The list of companies who are required to get there director as women are:
 A listed Company
 Any Public (Govt) company having –
 Turnover of Rs. 300 crore or more
 Paid up capital of Rs. 100 crore or more

• 5. Independent Director
• Independent director basically means the director other than Whole time
director, Managing Director, or Nominee Director. There are certain reserved
criteria for companies to appoint independent directors. The following
companies need to have at least 2 independent directors:
 Public limited companies having outstanding loans, deposits of Rs. 50 Crores
or more.
 Public limited company having turnover of Rs. 100 Crore or more.
 Public limited share capital of Rs. 10 Crores or more.
• 6. Nominee Director
• The nominee directors are the directors which are appointed in case of any
of the non-executive director is not able to continue. Generally they are
appointed by the shareholders, but in some cases it may also be appointed
by banks or Central government as the case may be.

• 7. Shadow Director
• Shadow director is the new term which has
been arrived which means that the person
who is not officially appointed by the
board but he/she gives such advice to the
directors which they are accustomed to
follow except when such shadow director
provides the same in his professional
capacity.

According to Section 2(51) “Key Managerial Personnel”, in
relation to a company, means—
• (i) The Chief Executive Officer or the Managing
Director or the Manager;
• (ii) The Company Secretary;
• (iii) The Whole-Time Director;
• (iv) The Chief Financial Officer;
• (v) Such other officer, not more than one level
below the directors who is in whole-time
• employment, designated as key managerial
personnel by the Board; and
• (vi) Such other officer as may be prescribed

Company Meetings and Resolutions
• Board meetings
• Company directors collectively form a board. A board meeting is, therefore,
any official meeting of the directors of a limited company. There is no legal
requirement to hold any board meetings in a private limited company, but it
is common practice to hold such meetings at regular intervals if a company
has more than one director. Furthermore, it is beneficial to hold a meeting of
the directors within one month of company formation. This enables the
directors to clarify the objectives of the new business and determine their
individual duties and responsibilities.
• Board meeting agenda
• Directors will usually convene at a board meeting to discuss business
matters that need to be addressed. During the first board meeting, such
matters may include:

• Decision-making
• Directors normally have an equal say in matters
pertaining to company business and policy. When a
decision is put to a vote at a board meeting, each
director is usually entitled to one vote, unless the
articles states otherwise. When a consensus - a
majority agreement for or against a proposed
resolution - is obtained, a decision has been reached.
If no consensus is reached, the chairman of the board
is usually given a second or casting vote in order to
reach a decision. Many companies adopt a manual
outlining the rules and procedures of board meetings.

• Calling a board meeting
• Board meetings can be called at any time by the chairman of the
board or an individual director. Reasonable notice of the meeting
must be provided to all directors, but there is no provision in the
Companies Act regarding a minimum notice period for board
meetings. This is one of the points that can be set out in the board
meeting manual. One week is usually sufficient.
• The notice should state the following details:
 Time, date and location of the meeting
 Purpose of the meeting
 Any proposed resolutions
 Schedule of proceedings

Minutes of board meetings
• It is a legal requirement that minutes be taken of all board meetings.
This is usually the responsibility of the company secretary. Minutes
are simply a record of the proceedings of the meeting, and they will
usually include:
 Company name
 Names of those present
 Chairman of the meeting
 Apologies for any absences
 Time, date and location of meeting
 Details of proposed resolutions
 Result of any votes
 Objections raised
 Record of those for and against any proposed resolution
 Summary of other items of business discussed
 Chairman’s signature

• General meetings
• A general meeting is a meeting of the members of a limited
company. This type of meeting is more formal than a board
meeting of directors, because the calling and conduct of
general meetings is regulated by the Companies Act 2006.
Private limited companies are no longer legally required to
hold Annual General Meetings (AGM) unless a provision to
the contrary is included in the articles. Most private
companies will only call general meetings when extraordinary
decisions have to be made by the members, though it is good
practice to hold an AGM to review the company’s
performance, annual accounts and plan ahead for the
forthcoming year.

Resolutions
• Resolutions
• A resolution is a legally binding agreement or decision made by company members or
directors. The outcome of a resolution is determined by the votes cast for and against the
decision. If the required majority is reached, the resolution is ‘passed’. If the necessary
majority is not reached, the proposed resolution fails.
• Different types of resolutions
• Any decision made by the directors of a company is called a resolution, but there are two
types of members’ resolutions: ordinary and special.
• An ordinary resolution is passed when a simple majority vote is reached (above 50%). This
type of resolution can be used for all decisions unless the Companies Act or articles of
association specifies the need for a special resolution for any other matter.
• A special resolution is passed when a 75% majority vote is reached.
• Both types of resolutions can be passed at a general meeting or in writing (a written
resolution), apart from a resolution to dismiss a director or remove an auditor before the
expiration of his or her contract. If a member is unable to attend a general meeting, he or
she can appoint a proxy.

All about Principle of Lifting of Corporate Veil under
Companies Act, 2013
https://www.youtube.com/watch?v=SJfjbdLIRAk
• Meaning of Corporate Veil
• A legal principle of corporate veil distinguishes the
conduct of corporations and companies from the
actions of shareholders. It safeguards the
stockholders from liability for the company’s
conduct. It is not an absolute right; the court might
decide whether the shareholder is responsible or
not based upon the facts and circumstances of the
case.
• “Shareholders may shelter behind the principle
of corporate veil, certain that their obligation does
not extend beyond the value of their shares,”
according to the Cambridge Dictionary.

Company: A Separate Legal Entity
• Corporate personality is the legal fact that a company is
recognised as a legal entity apart from its individuals. A
corporation with such recognition and personality would
be treated as a distinct legal entity with its own legal
identity apart from the members of the firm. A corporation
has its own name and its own set of rights, duties,
obligations, and liabilities. As a result, the corporation and
its members are clearly distinguishable, which is usually
referred to as a Corporate Veil.

The Principle of Lifting of Corporate Veil
• A company is seen as a distinct legal entity apart from its
members, however in reality, it is an association of people
who are the beneficial company owners and its corporate
property. This illusion is established through a veil, which
is referred to as the Corporate Veil. Piercing /lifting of
corporate veil entail disregarding the notion that a
corporation is a separate legal entity with its own identity
(Corporate personality). This idea disregards the
business’s distinct identity & focuses behind the actual
owners or real people in control of the organisation.

• 1. Misstatement in Prospectus of the Company –
Companies offer securities for sale by publishing
prospectuses. The prospectus produced u/s 26
provides essential notes about the firm, like facts
about shares and debentures, the names of
directors, the company’s principal goals and current
activity. If someone attempts to provide misleading
or untrue/ inaccurate representations in a
prospectus of the Co., he is liable to the penalty,
imprisonment, or both stipulated u/s 26 (9), 34, and
35 of the Act, depending on the circumstances.

• 2. Reduction of No. of members below the
statutory minimum – If the minimum number no.
of members of a company falls below 2 (for private
companies), or below 7 (for public companies), the
company can continue to operate for a period of
6 months while the number is so reduced, and
every person who is a member of the company
during that time, knowing that the minimum
number of members has been reduced. If the
grace period of 6 months has expired, the
corporation and its members will be held
accountable and can claim for the sum they
earned during those 6 months, or the firm may be
sued severally.

• 3. Failure to refund application fees –
According to Section 39 (3) of the Act, if
the directors of the company fail to repay
the application money (without
interest) within 120 days when the
Co. fails to allot shares, they will be jointly
and severally accountable to pay back the
money alongwith interest of 6% p.a. from
the date of expiry of 130 days.

• 4. Misperception of the name of the company
– According to section 12, an officer of an
corporation which signs any bill of trade,
hundi, promissory note, or check where the
name of the organisation is not referenced in
the recommended way could be held
personally accountable to the holder of the
bill of trade, hundi, etc. unless it is
appropriately paid by the company.

• 6. For investing ownership of the company – According to
Section 216 of the Act, the Central Government may appoint
Inspectors to examine and report on the company’s membership in
order to determine the real persons who are financially engaged in
the firm and who influence its policies. As a result, the Central
Government might ignore the corporate veil.
• 7. Inducing persons to invest funds in the company – According
to Section 36 of the Act, anyone who makes false, fraudulent,
misleading, or inaccurate representations or promises to another
person or hides relevant material from another person in order to
induce him in doing any of the following:-
 An agreement to acquire, disposes of, subscribe to, or underwrite securities.
 An agreement to guarantee gains to any of the parties based on the return of securities or on changes in the value of securities.
 An agreement to receive credit from any bank or financial organisation.

• 8. To furnish false statements – Under Section 448 of the
Act, if any person makes false or untrue representations in
any necessary return, report, certificate, financial statement,
prospectus, statement, or other document, or hides any
relevant or material truth, he is responsible u/s 447 of the Act.
The corporate veil must be lifted in order to find the true guilty
individual who authorised such documents to be disclosed in
the name of the firm.
• 9. Repeated defaults – According to Section 449 of the Act, if
a company or an officer of a company commits an offence
shall be punished by fine or imprisonment and commits the
same offence within three years, the company and officer
must pay twice the penalty in addition to any custodial
sentence imposed for such offence.

Winding up of a Company
• Winding up is the liquidation of Company’s assets which are collected and
sold in order to pay the debts incurred. When the company winding up takes
place firstly the debts, expenses and costs are paid away and distributed
among the shareholders.
• Once the Company is liquidated it is formally dissolved and the Company
ceases to exists.
• Winding up is the legal mechanism to shut down a company and cease all
the activates that re carried on. After the Company winding up the existence
of the Company comes to an end and the assets are monitored so that the
stakeholders interest is not hampered.
• A Private Limited Company is an artificial judicial person and requires
various compliances if the company fails to maintain these compliances
there are fines and penalties or even disqualification of the Directors from
further incorporating a Company. It is always a better to wind up a company
that has become inactive or where there are no transaction.

Types of Company windup
• A company can be wound up in two different ways-
• Voluntary winding up of a Company
• Compulsory winding up of a company
• 1. Voluntary Winding up of a Company
• The Winding up of a Company can be done voluntarily by the members of
the Company, if :
 The company passes a special resolution for winding up the Company.
 The Company in general meeting passes a resolution which requires a
company to wind up voluntarily as a result of the expiry of the period of its
duration, any as per the Articles of Association or on the occurrence of any
event in respect of which the articles of association provide that the
company should be dissolved.

Procedure for Voluntary winding up of a Company
 Organize a board meeting with the Directors in which a resolution should be passed with a
declaration by the directors that they have made an enquiry in the affairs of the Company
and the company no debts or the Company will pay from the precedes of the assets sold in
the voluntary wind up of the company.
 Notices should be issued in writing to call for the general meeting of the Company
proposing the resolutions, with a suitable explanatory statement.
 Pass the ordinary resolution for winding up of the Company in the generally meeting by
ordinary majority or special resolution by 3/4 majority. The Winding up of the Company
shall commence from the date of passing the resolution.
 A meeting of the creditors should be conducted on the same day or the next day of passing
the resolution regarding winding up. If the 2/3rd value of the creditors are of the opinion
that it is in interest of all parties to windup the Company, the Company can windup
voluntarily.
 Within 10 days of passing the resolution for company winding up, a notice for appointment
of liquidator must be filed with the registrar.
 Within 30 days of the general meeting for the winding up the certified copies of the ordinary
or special resolution passed in the general meeting for the winding up of the Company.

• 2. Compulsory winding up of a Private
Limited Company
• Tribunal is responsible for this kind of wind up of Companies.
• Here are the reasons for the same:
 Unpaid debts of a Company
 When a special resolution is passed for winding up
 An unlawful act by a company or the management of the Company
 If the company is involved in fraudulent acts or misconduct
 If the annual returns or financial statements are not filed for five consecutive
years with the ROC
• The Tribunal is of the view that the company should windup

• Procedure for compulsory winding up of a Company
• Is to File a petition to the tribunal along with the statement of the affairs of
the Company that is to wind up.
• The tribunal will either accept or reject the petition if the person other than
company files a petition then the tribunal may ask the company to file
objection. it goes along with the statement of affairs within 30 days.
• Liquidator needs to be appointed by the tribunal for the winding up process.
The liquidator carries out the function of assisting and monitoring the
liquidation proceedings.
• Liquidator is supposed to prepare a draft report for approval. when the draft
report gets approved he shall submit the final report to the tribunal for
passing the winding up order.
• It is necessary of the liquidator to forward a copy to the ROC within 30 days,
If he fails to do so then he will get a penalty.
• If the ROC finds the draft satisfactory he then approves the winding up of
the Company and the name of the Company is striked from the register of
Companies.
• ROC sends notice for Publication in the official gazette of India

UNIT-3-COMPANIES ACT-2013.pdf (Applicable for India)

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UNIT-3-COMPANIES ACT-2013.pdf (Applicable for India)