Company Law

Company Law
Unit-I
Corporate Personality                               3Hours
I. Introduction
The word company is derived from the combination of two Latin words namely, ‘com’ and ‘panis’. ‘Com’ means ‘together’ and ‘panis’ means ‘bread’.
II. Definition of Company
Company defined under companies Act, 1956 as “A Company formed and registered under this Act”.
In common law a company is a legal person or legal entity separate from, and capable of surviving beyond the lives of its members.
III. Characteristics of a Company
1. It has independent corporate existence
Salomon V/s Salomon & co
Tata Engineering and Locomotive Co. Ltd. V/s State of Bihar
SC explained the character of a body corporate; the corporation in law is equal to a natural person and has a legal entity of its own. The entity of the corporation is entirely separate from that of its shareholders.
2. It has perpetual succession
3. It can sue and be sued
4. Separate property of the company.
Bacha F. Guzdar V/s CIT, Bombay
5. The members have only a limited liability
J.H. Rayner (Mincing Lane) Ltd V/s Deptt of Trade and Industry
6. The shares of the members are transferable.
7. Professional Management
8. Finances
Lifting the Corporate Veil
When a statue contemplates the lifting of the corporate veil, or when corporate personality of a company is being misused to do something unlawful or improper, e. g. to avoid taxes, to commit fraud etc., the fundamental principle of corporate personality may be disregarded and the courts may look beyond the veil in the interest of justice.
Lee V/s Lee’s Air Faming Ltd,
a.    Determination of Character
Daimler Co V/s Continental Tyre & Rubber Co.
b.    For benefit of revenue
Dinshaw Maneckjee Petit Re
In Bacha F. Guzdar V/s CIT, Bomby.
c.    Fraud or improper conduct
Gilford Motor Co V/s Horne
PNB Finance Ltd. V/s Shital Prasad Jain
d.    Government companies
Personal liability of Directors and Members
a.    Reduction in Membership
b.    Mis-description of Name
c.    Fraudulent Conduct of Business
d.    Holding and Subsidiary Companies (4)
Freewheels Ltd V/s Veda Mitra (Dr)
1.    Formality and Expense
2.    Company is not Citizen
State Trading Corpn of India Ltd V/s CTO
Nationality, Domicile and Residence
Kinds of Company
I. Classification of the Basis of Incorporation
a.    Statutory Company
b.    Registered Company
II. Classification on the Basis of Liability
a.    Companies with limited liability
b.    Unlimited Companies
III. Classification on the Basis of Number of Members
a.    Private Company
b.    Public Company
IV. Classification on the Basis of control
a.    Holding Company
b.    Subsidiary Company
V.  Classification on the Basis of Ownership
a.    Government Company
b.    Foreign Company

Promoters                                         2 Hours
I.    Definition and Importance
Webster’s Dictionary ‘Promoter’ includes “a person who alone or with others sets on foot and takes the preliminary steps in the formation of a company.
Lord Cockburn, CJ in Twycross V/s Grant observed “a Promoter is a person who undertakes to form a company with reference to a given object and to set it in going and who takes the necessary steps to accomplish that purpose”.
Position of the a Promoter (Fiduciary Position)
Lord Cairns in Erlanges V/s New Sombrero Phosphate Co.,
II.    Rights of Promoters
1.    Right to receive preliminary expenses
Malhado V/s Porto Alegre Railway Co.
2.    Right to recover proportionate amount from the co-promoters
3.    Right to Remuneration
III.    Liability of Promoters
IV.    When does liability of Promoters Commence
Ladgwell Mining Co. V/s Brooks

Registration and Incorporation                         2 Hours
I.    Procedure of Registration
1.    Application in the Prescribed Form 1A of the Companies General Rules & Forms, 1956.
2.    MOA and AOA should be prepared and printed and stamped
3.    MOA and AOA Signed by Subscribers
4.    Documents should be filed with the Registrar of Companies
a.    MOA
b.    AOA
c.    The agreement, if any, which the company proposes to enter into with any individual for appointment as managing or whole time director or manager,
5.    The following document, though not required for the purpose of registration of the company, are usually filed along with the aforesaid documents,
a.    The address of the registered office of the company, in Form 18 (30 days of incorporation)
b.    Particulars of directors, managers and secretary in form 32 in duplicate (30 days of appointment)
6.    A filing fee as per Schedule X of the Companies Act has also to be deposited along with the aforesaid documents
II.    Certificate of incorporation (34)
a.    Certificate as conclusive evidence
Moosa Goolam Ariff V/s Ebrahim Goolam Ariff
b.    Pre-incorporated contracts
c.    Company cannot be sued on Pre incorporation Contract
Re Colonial Produce Co.
d.    Company cannot sue on Pre incorporation Contract
Natal Land & Colonisation Co V/s Pauline Colliery Syndicate
e.    Ratification of Per-incorporated contract
f.    Personal Right and Liability of Contracting Agent
Kelner V/s Baxter
III.    Commencement of business (149)
a.    Main object
b.    Other object


MOA (Memorandum of Association)                     6 Hours
Contents of Memorandum
1.    Name Clause
2.    Registered Office Clause
3.    Objects Clause
4.    Liability Clause and
5.    Capital Clause

1.    Name Clause
a.    Legal requirements as to name
b.    Resembling names not allowed (20)
Society of Motor Manufacturers and Traders Ltd V/s Motor Manufacturers and Traders Mutual Insurance Co Ltd.
c.    Use of the Word Limited and Publication of Name
Dermatine Co Ltd V/s Ashworth
d.    Venture Capital Companies
Licence to Drop “Limite” (25)
e.    Change of Name (21)
2.    Registered Office
a.    Change of registered office situation
b.    Duty and power of Central Government
3.    Objects and Powers
i.    Main object
ii.    Other objects
iii.    States to which objects extends
Why objects
Doctrine of ultra vires
Ashbury Railway Carriage and Iron Co Ltd V/s Riche
Attorney General V/s Great Eastern Railway Co.
a.    Objects, Powers and Charitable Contributions
Re Introductions Ltd
Lee, Behrens & Co Ltd, Re
b.    Main Objects Rule of Construction
Cotman V/s Brougham
German Date Coffee Re
c.    Consequences of ultra vires transactions
i.    Injunction
ii.    Personal liability of directors
Jehangir R.Modi V/s Shamji Ladha
iii.    Breach of warranty of authority
Weeks V/s Propert
iv.    Ultra vires acquired property
Selangor United Rubber Estates V/s Cradock
v.    Ultra vires contracts
Beauforte (Jon) (London)Ltd, Re
vi.    Ultra vires torts
Alteration of objects
1.    Substantive limits
a.    To enable the company to carry on its business more economically or more efficiently
In Scientific Poultry Breeder’s Association, Re
b.    To enable the company to attain its main purpose by new or improved means
c.    To enlarge or change the local area of the company’s operation
Indian Mechanical Gold Extracting Co. Re
d.    To carry on some business which under existing circumstances may conveniently or advantageously by combined with the business of the company
Cyclists Touring Club, Re
e.    To restrict or abandon any of the object specified in the memorandum
f.    To sell or dispose of the whole, or any part of the undertaking, of the company
g.    To amalgamate with any other company or body of persons
2.    Procedure of alteration
a.    Alteration of objects
b.    Alteration of provisions of memorandum other than conditions
Registration of alteration (18)
4.    Liability
5.    Capital
Subscription

Unit- II
AOA (Articles of Association)                             6 Hours
AOA of Association is a document containing rules and regulations for the administration of the company.
I. Contents of Articles
II. Alteration of Articles
III. Articles and Memorandum differences
IV. Legal effect of Memorandum and Articles
V. Constructive note of Memorandum and Articles
VI. Doctrine of Indore Management
VII. Exceptions to the Doctrine of Indore Management
Prospectus                                         4 Hours
I. Introduction
II. Meaning and definition
Any document inviting deposits from the public or inviting offers from the public for the purchasing shares or debentures of a company is a prospectus.
Sec.2(36)defines a Prospectus as “ any document described or issued as a prospectus and includes any notice, circular, advertisement  or other document inviting deposits from the public for the subscription or purchased of ay shares in or debentures of a body corporate”.
Pramatha Nath Sanyal V/s Kali Kumar Dutta
III. Objectives Prospectus
1.    It informs the company about the formation of a new company.
2.    It serves as written evidence about the terms and conditions of issue of shares or debentures of a company.
3.    It induces the investors to invest in the shares and debentures of the company.
4.    It describes the nature, extent and future prospectus of the company.
5.    It maintains all authentic records on the issue and makes the directors liable for the misstatement in the prospectus.
IV. SEBI Guidelines on Prospectus
    Cover page
    Table of contents
    Definitions and abbreviations.
    Risk factors
    Introduction
    About the issuer company
    Financial statements
    Legal and other information
    Other regulatory and statutory disclosures
    Offering information
    Description of equity shares & terms of the Articles of association
    Other information
V. Contents of Prospects
1.    Every Prospectus to be dated [sec 55]
2.    Every Prospectus to be registered [sec 60]
3.    Section 61
4.    Expert’s consent [Sec 58]
5.    Disclosures to be made [Sec 56]
VI. Statement in Lieu of Prospectus
The promoters may obtain the required capital through private contacts. In such case the company is only required to prepare a draft prospectus containing the information required to be disclosed by schedule III of the Act. This document is known as a “Statement in Lieu of Prospectus”.
VII. Issuing House and Deemed Prospectus (Sec.64)
The whole of the capital of a company was allotted to an intermediary known as an “Issuing House”.
Every such advertisement sponsored by an “Issuing House” is known as an “offer for sale” and is deemed to be a prospectus issued by the company.
VIII. Mis-Statement in Prospectus
Untrue statements;
Statements which produce wrong impression;
Statements which are mis-leading;
Concealment of material facts;
Omission of facts
IX. Liability (Sec. 62)
Director, Promoter, Authorized person to issue Prospectus.
a. Civil liability
    Compensation
McConnel V/s Wright
    Damages for deceit or Fraud
Derry V/s Peek
    Recession of the contract for misrepresentation
    Liability for non-compliance with sec. 56
    Liability under general law
    Penalty for contravening Sec. 57-58
    Penalty for issuing the prospectus without delivering for registration.
b. Criminal liability
Imprisonment extended to 2 years or with fine extend to Rs. 50,000/-. Or with both
Directors                                         4 Hours
I. Introduction
II. Definition (2(13))
Director includes any person occupying the position of director, whatever name called
III. Number of Directors
IV. Position of Directors
1. Directors as Agents
Gopal Khaitan V/s State
2. Directors as Trustees
Romilly M.R. in York & North Midland Rly V/s Hudson
3. Directors as an Organ of the Company
4. Directors as a employees
5. Directors as Officers
V. Appointment of Directors
1. Appointment of First Directors (254)
2. Appointment of directors by the members in General Meeting (255)
a. Voting on Director’s appointment (263)
b. Appointment by Proportional Representation (265)
c. Right to increase the number of members (258-259)
3. Appointment of directors by the Board
a. Additional Directors (260)
b. Alternate Directors (313)
c. Casual vacancy (262)
4. Appointment of Directors by the central Government (408)
5. Appointment of directors by third parties (Nomine directors)
VI. Disqualifications of Directors (274)
a. Unsound mind
b. Insolvent
c. Applied to be adjudicated as an insolvent
d. Convicted by the Court
e. Not paid any call
f. Disqualified by the Court
VII. Vacation of Office (283)
a. Fail to hold the qualification share
b. Declared as unsound mind by Court of Competent Jurisdiction
c. Applies to be adjudicated an insolvent
d. He is adjudged an insolvent
e. Convicted for an offence
f. Fails to pay calls on shares
g. Absents himself from three consecutive meetings
VIII. Removal of Directors
a. Removal by Shareholders (284)
b. Removal by central government (388B-388E)
c. Removal by National Company Law Tribunal (402)
IX. Powers of Directors
1. General powers vested in the Board of Directors (291)
Automatic Self Cleansing Filter Syndicate Co. Ltd V/s Cunninghame 
Exceptions
a. Mala fide
b. Board being incompetent
B.N. Vishwanathan V/s Tiffins B.A. & P. Ltd.
c. Deadlock
Barron V/s Potter
2. Power to be exercised at Board meeting (292)
3. Powers to be exercised with the approval of company in general meeting (293)
X. Duties of Directors
a. Fiduciary Duties and Obligations of Directors
b. Director’s duty of care and skill
c. Duty to attend board meetings
d. Duty not to delegate
e. Duty to disclose interest
XI. Political Contributions (293-A)
XII. Meetings of Directors
a. Number of Board Meetings (285)
b. Notice of Board Meetings
c. Quorum (287)
d. Proceedings of Board’s Meeting
e. Minutes (193)
XIII. Registers
a. Register of Directors (303)
b. Register of Director’s shareholdings (307)
c. Register of Contracts; Companies and Firms in which Directors are Interested (301)
XIV. Loans to Directors (295)
XV. Remuneration of Directors (198 &309)
XVI. Liabilities of Directors
Managing Directors
    Appointment Managing Directors
    Disqualification Managing Directors
    Numbers of Managing Directors
Manager
Previsions of the Act Regarding Manager
Meeting                                         4 Hours
I. Meetings
II. General Meetings of Shareholders
i.    Statutory Meeting
ii.    Annual General Meeting
iii.    Extraordinary General Meeting
III. Requisites of Valid Meeting
i.    Proper Authority
ii.    Notice of Meeting
iii.    Quorum for Meeting
iv.    Chairman of Meetings
v.    Minutes of Meeting
IV. Proxies
V.  Voting and Poll
VI. Resolutions
i.    Ordinary Resolution
ii.    Resolutions Requiring a Special Notice
Role of Company Secretary                             1Hour
I. Definition (Sec. 2(45))
II. Status of Company Secretary in Corporate Sector
III. Particulars of Secretary (Sec. 303)
IV. Duties of Secretary
V. Removal of secretary from office
VI. Company Secretary in preactice
Dividends                                         3 Hours
I. Meaning
Dividends mean the share of profit that falls to the share of each individual member of a company.
II. Sources to pay dividends
1.    Profits of the company
2.    Undistributed profits of the previous financial years
3.    Moneys provided by the central or a state government for payment of dividends.
    Resolution at the annual general meeting
    Payment of dividend in proportion to paid up capital
    Dividend to be paid out of profits
    Unpaid dividend Account
    Establishment of investor education and protection fund
    Payment to registered shareholders 
    Interim dividend
    Payment of interest out of capital (Sec. 208)
    Reserve fund
    Bonus shares
Brief analysis of corporate ethics 1 Hour
Unit- III
Issue of Shares                                     6 Hours
Definition
Stock and shares
Call on shares
Share certificate
Share warrant (Sec. 114 & 115)
Transfer of shares
Lien on shares
Surrender of shares
Forfeiture of shares
Nomination of shares
Transmission of shares
Purchase by company of its own shares (Sec.77)
Buy-back of securities
Issue of shares at a premium (Sec. 78)
Issue of shares at a discount (Sec. 79)
Issue of sweat equity shares
Types of Shares                                     4 Hours
I. Preference shares
II. Equity shares
I. Kinds of preference shares
1.    Cumulative preference shares
2.    Non-Cumulative preference shares
3.    Participating preference shares
4.    Non-Participating preference shares
5.    Convertible preference shares
6.    Non-Convertible preference shares
7.    Redeemable preference shares
8.    Irredeemable preference shares
Debentures                                         4 Hours
I. Definition (Sec. 2(12))
II. Characteristic features of a debenture
III. Kinds of debentures
1.    Bearer debentures
2.    Registered debentures
3.    Secured debentures
4.    Un-Secured debentures or naked debentures
5.    Redeemable debentures
6.    Irredeemable or perpetual debentures
7.    Convertible debentures
8.    Non-Convertible debentures
IV. Remedies of debenture-holder
Procedure for allotment of Shares and Debentures                 2 Hours
1.    Application and allotment of shares
2.    Minimum subscription
3.    Application money
4.    Effects of irregular allotment (Sec.71)
5.    Opening of the subscription list (Sec. 72)
6.    Shares and debentures to be listed in on a stock exchange (Sec. 73)
7.    Return as to allotments
Share Capital                                     3 Hours
I. Meaning of capital
II. Different forms of capital
1. Nominal or Authorized or Registered Capital
2. Issued Capital
3. Subscribed Capital
4. Called Up Capital
5. Uncalled up Capital
6. Paid up and unpaid Capital
7. Reserve Capital
8. Debenture Capital
Rights and Privileges of the Share Holders                     5 Hours
Prevention of Oppression and Mismanagement
    The principal of majority rule
o    Advantages of rule as Foss V/s Harbottle
o    Exceptions to the Rule of Foss V/s Harbottle
    Prevention of Oppression
    Prevention of Mismanagement
    Who may apply for Relief under Sec. 397/398?
    Powers of company law board
    Powers of central government

Different Modes of Winding up of a Company                     6 Hours
I. Introduction
II. Meaning
III. Modes of Winding up
a. Winding up by Court (Compulsory winding up)
b. Voluntary Winding up
c. Voluntary Winding up under the Supervision of Court

a. Compulsory winding up
1. Special resolution
2. Default in holding statutory meeting
3. Failure to commence business
Murlidhar V/s Bengal Steamship Co.
Re Orissa Trunks & Enamel Works Ltd.
4. Reduction in Membership Below Statutory Limit
5. Inability to Pay Debts
P. Satya Raju V/s Guntru Cotton, Jute and Paper Mills,
Pawan Kumar Khullar V/s Kaushal Leather Board Ltd.
6. Just and Equitable Clause
Mohanlal Dhanjibhai Mehta V/s Chunilal B. Mehata
a. Deadlock in the management of a company
Re Yenidje Tobacco Co. Ltd.
b. Where the company has lost its substratum
Malabar Industrial Co. V/s A.J. Anthrapper
Loknath Gupta V/s Credits P. Ltd.
Anantha Krishanan V/s Burdwan Kutwa Rly Co.
Virendra Singh V/s Nandlal & Sons
c. Losses
Vijay Laxmi Talkies V/s Kotilingeswara
Vanaspati Industries Ltd. V/s Prabhu Dayal Hari Ram
d. Opprssion of minority shareholders be the majority
R. Sabapathy Rao V/s Sabapathi Press Ltd
Loch V/s John Blackwood Ltd
e. Fraudulent or illegal purpose
Universal Mutual Aid and Poor Houses Association V/s A.D Thippa Naidu
f. Where a private company is in essence a partnership
Re American Pioneer Leather Co.
g. Default in filing balance sheet etc.
h. Acts of company against sovereignty and integrity on India
i. Winding up under circumstances of S. 424-G

Who may petition for Winding up
a. Petition by the Company (439 (1) (a))
Re Patiala Vanaspati Co.
Re Emmadart Ltd.
b. Petition by Creditors (439 (1) (b))
Central Bank of India V/s Sukhani Mining Industries
D.C. Kapoor V/s New Rialto Cinema P. Ltd
Eurometal Ltd V/s Aluminium Cavles & Conductors P. Ltd.
c. Petition by contributors (439 (1)(c))
Re Gattopardo Ltd.
d. Petition by Registrar of Companies (439 (5))
f. Petition by Central Government (243)
    Power of the Tribunal on hearing petition (443)
    Commencement of winding up
    Appointment of Provisional Liquidator (450)
    Procedure of Winding up by Tribunal
    Suits Stayed After  Making of a Winding up Order (446)
    Responsibility of a Director to Submit to Tribunal Audited Books and Accounts (446A)
    Statement of Affairs by Directors (454)
Official Liquidator V/s Jagannath Das
Union Bank of India V/s Official Liquidator
    Appointment of Official Liquidator and his fees
Himachal Grameen Snchayka Ltd. V/s Reserve Bank of India
    Report of official liquidator (445)
    Powers of the official liquidator (457)
a. Power to exercisable with the sanction of the tribunal
Industrial Credit & Investment Corporation of the India Ltd and others V/s the official liquidator
b. Power to exercisable without the sanction of the tribunal
c. Power to exercisable with the leave of the tribunal in case of onerous contracts
    Committee of inspection (464)
General Power of the Court in Relation to Winding Up
1. Power to stay Winding up (466)
2. Settlement of the list of Contributories (467)
3. Compel delivery of Property (468)
Maruti Ltd. V/s P.R. Sasidharan
4. Right of set off (469)
5. Power to Deposit in Reserve Bank (471)
6. Power to exclude creditors (474)
7. Adjustment of Rights of Contributories (475)
8. Power to arrest absconding contributory (479)
9. Public Examination of Promoters, Directors, Etc. (478)
10. Saving of Existing Powers (480)
11. Power to Order Dissolution of Company (481)
12. Power of the Court to Declare Dissolution Void (559)
b. Voluntary Winding up
I. Meaning
S.P. Sood V/s Company Registrar Delhi
II. Resolutions for Voluntary Winding Up
a. By Ordinary Resolution
b. By Special Resolution
III. Publication of Resolution
IV. Kinds of Voluntary Winding Up
a. Member’s Voluntary Winding up
b. Creditor’s Voluntary Winding up
a. Member’s Voluntary Winding up (489)
I. Declaration of Solvency (488)
II. Provisions applicable to member’s voluntary winding up
1. Appointment and Remuneration of Liquidator (490)
2. Board’s power to cease on appointment of a Liquidator (491)
3. Power to fill the vacancy in official of liquidator (492)
4. Notice of appointment of liquidator to be given to Registrar (493)
5. Power of liquidator to accept shares etc. (494)
6. Duty of liquidator to call creditors meeting in case of insolvency (495)
7. Duty to call general meeting at the end of each year (496)
8. Final Meeting and Dissolution (497)
9. Provisional as to annual and final meeting in case of insolvency (498)
b. Creditor’s Voluntary Winding up
    Appointment of Liquidator (502)
    Committee of Inspection (503)
    Meeting of the company and the creditors (508)
    Final meeting and dissolution (509)
Provisions applicable to both kinds of Voluntary Winding up (510)
    Statement of Affairs (511-A)
    Powers of Liquidator (512)
    Removal of Liquidator (515)
Dr. Hari Singh V/s Registrar of Companies
    Arrangement with creditors and member (517)
    Cost in case of Voluntary winding up (520)
    A body corporate not to be a Liquidator (513)
    Corrupt Inducement for becoming liquidator made punishable (514)
    Court may declare dissolution void (559(1))
Unit- IV
SEBI Act, 1992                                     4 Hours
I. Introduction
II. Objectives SEBI Act, 1992
III. Establishment of Securities and Exchange Board of India
IV. Powers and Functions of the Boards
V. Penalties and Adjudication
VI. Establishment, Jurisdiction, Authority and Procedure of Appellate Tribunal
VII. Miscellaneous
a. Power of Central Government to issue directions (16)
b. Power of Central Government to supersede the Board (17)
Security Contracts (Regulations) Act, 1956 & Rules                 1 Hours
I. Definitions
II. Power of recognized stock exchanges to make buy-laws (9)
III. Power of Securities and Exchange Board of India to make or amend bye-laws of recognized stock exchanges (10)
IV. Power of central Government to supersede governing body of a recognized stock exchange (11)
a. Power to suspend business of recognized stock exchanges (12)
Unit-V
FEMA Act, 1999                                     4 Hours
I. Definition
II. Adjudication and Appeal
a. Appointment of Adjudicating Authority (16)
b. Composition Appeal Tribunal (20-35)
III. Directorate of Enforcement (36-38)
Competition Act, 2002                                 2Hours
I. Definition (2)
II. Prohibition of Agreements (3)
III. Regulation of Combinations
a. Combination (5)
b. Regulation of Combinations (6)
IV. Duty, Powers and Functions of Commission
a. Duties of Commission (18)
b. Inquiry into certain agreements and dominant position of enterprise (19)
c. Inquiry into combination by commission (20)
V. Penalties
a. Penalty for making false statements or omission to furnish material information (44)

BPO                                             1Hour

LPO                                                                                                                             1 Hour