Companies Act 2013

Basic Functions of
Government
1. Legislation

2. Executive

3. Judicial
 Law: Rules and Regulations
• Substantial Law • Procedural Law
• Eg • Eg;
• Business Law • Civil Procedure Code 1908
• Environment Law • Criminal Procedure Code 1973
• Intellectual Property Law • Indian Penal Code 1860
• Corporate Law
• Administrative Law
• Family Law
Offence
• Civil Offence • Criminal Offence
• Civil Law is initiated by the • The Government files the petition
aggrieved individual or in case of criminal law.
organisation or also known as • As per Criminal Law, to start a
‘plaintiff.’ case, a petition cannot be filed
• In case of Civil Law, to start a directly in a court, rather the
case, the aggrieved party needs complaint should be first
to file a case in the Court or registered with the police, and the
Tribunal crime needs to be investigated by
the Police. Thereafter a case can
be filed in the court.
Types of Business
Business: Lawful activity carried by
group of people for earning profit.

1. Sole Proprietorship Business

2. Partnership Business
3. HUF Business
4. Company
The Companies Act
History of Companies Act in India
In England the Joint Stock Companies Act was passed for the first time
in 1844. Under this act, a provision was made for the registration of
companies.
In the year 1850, taking the English Joint Stock Companies Act 1844 as
a base, a provision was made for registration of joint stock companies
in India.
After this the Joint Stock Companies Act was passed in India in the year
1857
Conti…..
• Under this Act the concept of limited liability was introduced for the
first time in India. Thereafter the Companies Act was passed in the
year 1866.
• The Act was later replaced by The Indian Companies Act 1913.
• After independence, the Government appointed a Committee under
the chairmanship of Shri H.C. Bhabha in the year 1950 to revise the
Indian Companies Act of 1913. The committee submitted its report in
the year 1952.
Conti…
• Based on the recommendation of the committee and the provisions
of the English Companies Act 1948, The Companies Act 1956 came
into force on 1st April, 1956.
• The Indian Companies Act 2013 replaced the Indian Companies Act,
1956.
• The Companies Act, 2013 passed by the Parliament on the basis of
recommendations given by Irani Commettee has received the assent
of the President of India on 29th August, 2013.
• The Companies Act, 2013 has been notified in the Official Gazette on
30th August, 2013.
 Company
• Meaning of Company: The fact or condition of being with another or others, especially in a
way that provides friendship and enjoyment.
Eg. "I really enjoy his company"

• The concept of ‘Company’ or ‘Corporation’ in business is not new but was dealt with, in 4th
century BC itself during ‘Arthashastra’ days.
• Company form of business has certain distinct advantages over other forms of businesses like
Sole Proprietorship/Partnership etc.
• It includes features such as Limited Liability, Perpetual Succession etc.
Sec 1- Title, Extent, Commencement &
Application of Act
• Title: The Companies Act, 2013
• Extent: Whole of India means including Jammu & Kashmir
• Commencement: Sec 1 came into force at once and other provisions
on different dates by Notification
• Application: Companies incorporated under this Act, Insurance
Companies, Banking Company, Companies producing and supplying
Electricity, Companies regulated by special Act, Entities as notified by
Central Government
Conti……

Application:
• Companies incorporated under this Act or previous
Company Law, eg Reliance , Bata
• Insurance Companies, eg Max Life, Religare Health Insurance Co.
• Banking Company, Yes Bank, Union Bank of India
• Companies producing and supplying Electricity, eg Reliance, Adani
• Companies regulated by special Act, eg. RBI, SBI, LIC
• Entities as notified by Central Government
Sec 2- Definitions
• Sec 2 of the Act defines various terminology used in the act

• The different words are define under Sec 2(1) to Sec 2(95) (95A)

• We will start with the definition of Company and the remaining words
will define as we go deep in detail of the Act
The word company
derived from
The word 'company' is derived from
the Latin words (com= with or
together; and
panis = bread or meal); and
originally referred to an association
of persons who took their meals
together.
The term 'company' has been
defined under Section 2(20) of the
Companies Act, 2013. As per this,
'company' means a company
incorporated under Companies Act,
2013 or under any of the previous
laws relating to companies.
Definition of Company by Lindley
Definition of Company

• Prof. L.H. Haney defines company as “an artificial person created

by law having a separate entity with a perpetual succession and a
common seal.”
• Chief Justice Marshall defines a corporation as “an artificial being,
invisible, intangible, and existing only in the contemplation of
law.
Characteristics of Company
Features/Advantages of Incorporation
1. Separate Legal Entity-
In the landmark decision of Salomon v Salomon (1897) AC 22, it was

held that a company has a corporate personality which is distinct

from its members or subscribers.
In case of Tata Engineering & Locomotive Co. Ltd. v State of Bihar,
the Supreme Court described the legal status of a company
as “An incorporated association” before law is equal to a natural
person and has a legal identification of its own.
2. Perpetual succession
In Punjab National Bank v Lakshmi Industrial & Trading co ltd.
It was held by the Allahabad High court that perpetual
succession means that membership of a company may keep on
changing from time to time, but that does not affect the companies’
continuity. A company has a perpetual existence i.e. it has no soul to
be saved or body to be kicked.
3. Common Seal
It is considered as the official signature of a company. But now by the
virtue of 2015 amendment to the Companies Act, a company may or
may not have a common seal. As per Sec 21- any key managerial
person or officer authorised by Board
Sec 22- the authorisation shall be made by two directors or
by director and company secretary.
4. Limited Liability of Members
3 types of liability-- Limited, Unlimited & By Guarantee
5. Transferability of shares
Section 44 Companies Act of the Act, declares that “the shares or
debentures or any other interest of any member in a company shall
be a movable property that can be transferred in the manner
provided in the article of the company.”
6. Capacity to sue and be sued
7. Company, not a citizen
According to Citizenship Act 1955, only a natural person can be a citizen
of India, not a juristic person will be considered as citizen same stated by
the Supreme Court in case of
The State Trading Corporation Of India Ltd. vs The Commercial Tax Officer.
Even though the company does not get the citizenship status of a country, it
still can get a residential status.
A. Royal Chartered Company
• The company which have formed and incorporated under a special
charter granted by the king or queen. Eg East India Company, Bank of
England.
B. Statutory Company
• These are companies which are created by means of a special Act of
Parliament or any state legislature. Eg RBI, Railway, National Highway
Authority of India
C. Registered Company
• Company formed and registered under companies Act 2013 is called
registered companies.
• Registered companies are further classified as under –
• On the basis of Constitution
a. Associate – An Associate company is a corporation in which a parent
company possesses a stake. Thus an associate company
may be partly owned by another company or group of
companies. A company will be treated as an associate
company of another company, if the former is having –
• i. At least 20% of the total share capital of the latter; or
• ii. Having significant influence over the latter’s decision making process
under an agreement ; or
• iii. Both are joint venture companies
b. Dormant – Dormant company is formed and registered under this
Act, for a future project or to hold an asset or
intellectual property. Dormant company has no
• significant accounting transaction, for the last 2 years such a company or an inactive
company may make an application to the Registrar for obtaining the status of a dormant
company. However, a dormant company is still required to have minimum directors, hold
minimum two board meetings.
C. One Person Company (OPC) –
Means a company which has person as a member.
OPC requires one person who is natural person, who is citizen and
resident of India.
OPC enjoys the benefits of a private company, no board meeting is necessary.
It encourages entrepreneurship.
D. Private – A private company is one –
• i. Minimum two (except OPC) and maximum 200 members.
• ii. No minimum paid up capital required.
• iii. Restricts transfer of shares.
• iv. Prohibits invitation to the public for subscription.
E. Public- is a company which –
• i. Is not a private company
• ii. Whose minimum number are seven and maximum is unlimited
• iii. No minimum paid up capital required.

F. Small – “small company” means a company, other than a public

company,—
(i) paid-up share capital of which does not exceed fifty lakh rupees; and
(ii) turnover of which as per its profit and loss account for the
immediately preceding financial year does not exceed two crore rupees
• On the basis of Liability of Members:

• a. Limited Company by Shares

• Majority of registered companies will be company limited by shares.
In case of limited companies liability of members will be limited to the
amount unpaid on the shares.
• b. Limited Company by Guarantee
• Here liability of each member is limited by the memorandum to such
amount as he may guarantee by the memorandum to contribute to the
assets of the company in the event of its winding up.
• Such companies are formed for the promotion of art science, culture,
sports etc.

.C. Unlimited Company

• A company not having any limit on the liability of its members is termed
as unlimited company.
• The members are liable for the debts of the company at the time of
winding up.
On the basis of control:
• a. Government Company
• A company is said to be Government Company when 51% of the paid up
capital is held by the Central Government or by any State Government
or partly by Central Govt or partly by one or more State Govt.
• b. Foreign Company
• A foreign company is a company incorporated outside India and having
a place of business in India.
• c. Holding and Subsidiary Company
• A company which controls another company is known as the holding
company and the so controlled company is known as subsidiary
company.
Others:
• a. Investment Company – It means a company whose principal
business is the acquisition of shares, debentures or other securities.
• b. Non-Trading Company – This is also called ‘association not for profit
or charitable companies The objects of these companies shall be
promotion of commerce, art, science, sports, education, research,
social welfare, religion, charity, protection of environment or any such
other work.
• c. Producer Company – The object of these companies is one or more
of the following – production, harvesting, procurement, grading,
pooling, handling, marketing, selling, export of primary produce of the
members or import of goods and services for their benefit. . The share
capital of the Producer Company shall consist of equity shares only.
 Steps in Formation of a Company under Sec
7
1. Promoters

2. Pre Incorporated Contracts

3. Registration
Promoter
• According to section 2(69) of the Companies Act, 2013 the term
'Promoter' can be defined as :
• A person who has been named as such in a prospectus or is identified
by the company in the annual return in section 92; or
• A person who has control over the affairs of the company, directly or
indirectly whether as a shareholder, director or otherwise; or
• A person who is in agreement with whose advice, directions or
instructions the Board of Directors of the company is accustomed to
act.
• Pre-Incorporation Contracts ?

Who is liable under the pre-incorporated contract?

• Company

• Promoters or

• Both are liable under pre-incorporated contract ?

Registration procedure

1. Application for obtaining Director Identification Number (DIN) from the Ministry of
Corporate Affairs.

2. Search for a company name – This step requires search of company name and the
availability of names can be checked at the website of Ministry of Corporate Affairs
(MCA). Availability of company names can be checked at
http://www.mca.gov.in/DCAPortalWeb/dca/MyMCALogin.domethod=setDefaultProperty&mode=16

3. Application of proposed name – An application for proposed company name is to be

filed with the Registrar of Companies (ROC) – after approval for 21 days it can be
reserved and reserved for 60 days for company already registered

4. Drafting of Memorandum of Association (MOA) and Articles of Association (AOA) –

MOA covers the fundamental provisions involves in the company’s formation
and an AOA covers the rules and regulations governing the internal management of a
company.
5. Filling of forms with the ROC – The procedure for incorporation of
company requires filing of some essential Forms with the ROC, like
Form INC -& (form for incorporation of Company), Form INC – 22
(form for notice of situation of registered office), Form DIR -12
(providing information about particulars of appointment of
Directors)
6. ROC fees and Stamp Duty payment.
7. Thereafter, documents filed for incorporation of company will be

verified by ROC.
8. Pursuant to verification of documents, the ROC will issue a
“Certificate of Incorporation” to the Company. Thereafter, the
company can commence functioning
Conti…..
• Certificate of Incorporation:
Certificate of incorporation is issued when the registrar is satisfied
with the documents provided. This certificate validates the
establishment of the company in the records.

• Corporate Identity Number (CIN)

• The Registrar also allocates a Corporate Identity Number (CIN) to the
company which is a distinct identity for the company. The allotment
of CIN is on and from the company’s incorporation date. The
certificate carries this date.
• Promoters are generally held personally liable for pre-incorporation
contract.
• If a company does not ratify or adopt a pre-incorporation contract
under the Specific Relief Act, then the common law principle would
be applicable and the promoter will be liable for breach of contract.

• Company is not liable for the pre-incorporation contract when it come

in existence, but under the arrangement of section 15(h) and 19(e) of
the Specific Relief Act 1963, company can take the rights and liability
of promoter
Memorandum of Association (MOA) of a
Company
• Section 2 (56) of Companies Act, 2013“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”
• Contents of MOA
• Name clause
• Registered office clause
• Object clause
• Liability clause
• Capital clause
• Subscription/ Association clause
Forms of MOA

• The forms available in Schedule I for different kinds of companies are as

follows:
• The Form in Table A applies to the companies limited by shares.
• The Form in Table B applies to the companies limited by guarantee and not
having a share capital.
• The Form in Table C applies to the companies limited by guarantee and
having a share capital.
• The Form in Table D applies to unlimited companies not having a share
capital.
• The Form in Table E applies to the unlimited companies having a share
capital.
• Process for Change in Name Clause

• Step 1: Notice of Board Meeting to be sent at least 7 days prior to date of

BM
• Step 2: Conduct BM and pass BR proposing change of name of company
and authorization to apply with Registrar, Central Registration
Centre.
• Step 3: Apply two names in RUN web service on MCA Website
www.mca.gov.in
• Step 4: Approval Letter will be issued by Registrar, CRC after analysing
application and name allocated will be valid for a period 60 days
from the date of application
• Step 5: Issue notice of another BM 7 days in advance and Conduct BM for
taking note of approval letter and calling of General Meeting and
approval of notice of such GM
• Step 6: Dispatch Notice of GM along with explanatory statement and
amended set of MOA (at least 21 clear days prior to date of GM)
• Step 7: Conduct GM and pass SR
• Step 8: File MGT-14 w.r.t SR as per Section 117
• Step 9: File INC-24 with Registrar
• Step 10: Approval from the Registrar of Companies and Issuance of new
certificate of incorporation [INC-25]
• When ROC Approval is not required?
• If only addition or deletion of word Private is happening

• When application for change of name will not be allowed?

• Annual returns or financial statements due to be filed has not been
• filed
• Company has failed to pay or repay matured deposits or debentures
• or interest thereon
Process for alteration in Object Clause

• Step 1: Notice of Board Meeting to be sent at least 7 days prior to date of

BM
• Step 2: Conduct BM and pass BR for-
proposing alteration of object clause and considering amended set of MOA,
 calling of General Meeting and approval of notice of such GM
• Step 3: Dispatch Notice of GM along with explanatory statement and
amended set of MOA (at least 21 clear days prior to date of GM)
• Step 4: Conduct GM and pass SR approving object clause change and taking
note of new memorandum of association
• Step 5: File MGT-14 w.r.t SR as per Section 117
• Step 6: Approval from the Registrar of Companies and Issuance of new
certificate of incorporation.
Process for change in Authorized Capital clause [Section 61]

• Step 1: Notice of Board Meeting to be sent at least 7 days prior to date of

BM
• Step 2: Conduct BM and pass BR for-
 Alteration of Capital Clause, as required and considering amended set of MOA,
calling of General Meeting and approval of notice of such GM
• Step 3: Dispatch Notice of GM along with explanatory statement and
amended set of MOA (at least 21 clear days prior to date of GM)
• Step 4: Conduct GM and pass Ordinary Resolution approving object clause
change and taking note of new memorandum of association
• Step 5: File e-Form SH-7 within 30 days from the day of passing of OR
• Step 6: Approval from the Registrar of Companies
Shifting of Registered Office and Approvals
• Within same city, town or village ---Only BR -----Form INC-22

• From one city to another within State--- BR + SR -----Form MGT-14 +

INC-22
• From One ROC to ROC ----BR + SR + RD Approval ----FORM MGT-14 +
INC-23 + GNL-2 + INC-28 + INC-22
• From one State to another State-- BR + SR + RD Approval----- FORM
MGT-14 + INC-23 + GNL-2 + INC-28 + INC-22
Process for change of Registered Office from One State/UT to Another State/UT
[Section 13]

• Step 1: Notice of Board Meeting to be sent at least 7 days prior to

date of BM
• Step 2: Conduct BM and pass BR for-
 Alteration of Registered Office Clause from one State to Another
Approval of Notice of EGM and decision regarding conducting GM
• Step 3: Dispatch Notice of GM along with explanatory statement and
amended set of MOA (at least 21 clear days prior to date of
GM)
• Step 4: Conduct GM and pass SR approving change of registered office clause and
taking note of new
• memorandum of association

• Step 5: File e-Form MGT-14 within 30 days from the day of passing of SR

• Step 6: Publish an advertisement in two vernacular language newspapers

(not later than 30 days prior to filing of application before RD) and
finalization of list of creditors (not older than 1 month)

• Step 7: Filing of form GNL-2 within 30 days from publication and then
after form INC-23 with Regional Director containing application
and requisite annexures. Also serve the physical copy at office of
Chief Secretary, and RD. In case of listed company to Stock
exchanges and SEBI also.
• Step 8: Obtain the Approval Order from RD

• Step 9: File e-form INC-28 within 30 days from the date of approval

• Step 10: Notice of BM to be sent 7 days prior to date of board meeting

Board Resolution for deciding or approving registered office address in
new State

• Step 11: Conduct BM and pass BR.

• Step 12: File INC-22 within 30 days of passing of BR

Alteration of Liability & Capital Clause
• A limited company can alter its capital clause by an ordinary
resolution to increase or reduce its share capital by issuing new
shares or by reducing the liability on share capital not paid up, as has
been prescribed under Sections 61, 62 and 66 of the 2013
Act respectively.
• Such alterations need to be notified to the ROC within 30 days of
passing the resolution. However, intimation to the Company Law
Board is not necessary.
Articles of Association (Sec 5) Content
• Interpretation • Issue of Shares In Kind
• General Meetings
• Private Company
• Proceedings at General Meetings
• Share Capital and Variation Of Rights • Voting Rights and Proxy
• Preference Shares • Directors
• Alteration to Memorandum • Proceedings of The Board
• Control of Shares • Chief Executive Officer, Manager, Company Secretary or Chief Financial
Officer.
• Shares held Jointly • Common Seal
• Increase of Capital • Borrowing Powers
• Lien on Shares • Operation of Bank Accounts

• Calls on Shares And Transfer Of Shares • Dividends and Reserve

• Transmission of Shares • Accounts

• Audit
• Forfeiture of Shares
• Winding Up
• Alteration of Capital • Secrecy
• Capitalisation of Profits • Indemnity
• Buy-Back of Shares • Execution Clause
ALTERATION OF ARTICLES
[SECTION 14]
• Section 14 of the Companies Act, 2013, vests companies with power to alter
or add to its articles. A
• Alteration by special resolution: Subject to the provisions of this Act and the
conditions contained in its memorandum, if any, a company may, by a special
resolution alter its articles.
• Alteration to include conversion of companies: Alteration of articles include
alterations having the effect of conversion of—
• a private company into a public company; or
• a public company into a private company.
• Filing of alteration with the registrar: Every alteration of the articles and a
copy of the order of the Central Government approving the alteration, shall
be filed with the Registrar, together with a printed copy of the altered articles,
within a period of fifteen days in such manner as may be prescribed, who shall
register the same.
Doctrine of Ultra Vires
• The term Ultra Vires means ‘Beyond Powers’.
• A Memorandum of Association of a company is a basic charter of the
company.
• It is a binding document which describes the scope of the company
among other things.
• If a company departs from its MOA such an act is ultra vires.
Origin of the doctrine
• The doctrine of ultra-vires first time originated in the
classic case of Ashbury Railway Carriage and Iron Co. Ltd.
v. Riche, (1878) L.R. 7 H.L. 653, which was decided by the
House of Lords.
• In this case the company and M/s. Riche entered into a
contract where the company agreed to finance construction
of a railway line.
• Later on, directors repudiated the contract on the ground of
its being ultra-vires of the memorandum of the company.
• Riche filed a suit demanding damages from the company.
• Void ab initio

• Estoppel or ratification cannot convert an ultra-vires act into an intra-

vires act.
• Injunction

• Personal liability of Directors

• Any borrowing which is made by an act which is ultra-vires will be

void-ab-initio.
• It will not bind the company and company and outsiders cannot get
them enforced in a court.
Doctrine of Constructive Notice

• Memorandum and Articles of Association are public documents.

• Section 399 allows any person to electronically inspect, make a record,
or get a copy/extract of any document of any company which the
Registrar maintains.
• Before any person deals with a company he must inspect its documents
and establish conformity with the provisions.

• However, even if a person fails to read them, the law assumes that he is
aware of the contents of the documents.

• Such an implied or presumed notice is called Constructive Notice.

Doctrine of Indoor Management

• The doctrine of “indoor management” is also known as

“TURQUAND’S RULE”.
• The doctrine of “indoor management” protects outsiders, who have
entered into any contract with the Company, by placing the parties in
first place and company’s policy, behind it.
• TURQUNAD’S RULE:

• Turquand’s Rule arose from the case; Royal British Bank vs

Turquand The facts of the case are as follows:

• The directors of the Company borrowed a sum of money from the

Royal British Bank (Plaintiff).

• The company’s articles provide that, the directors of the company

might borrow such sums with bonds, as may be authorized by a
resolution passed at a general meeting of the Company.
• The shareholders of the company deny repaying the loan, borrowed by the
directors, as no such resolution was passed by the Company, in authorising the
borrowed sum as loan.

• The shareholders also claim that the amount was borrowed, without their authority.

• The Court held that the Company is bound by the loan, whatever, the company’s
articles provide. As director of a company is in the authorised position, as per the
outsider.

• Thus, the Royal British Bank is entitled in a position to recover its money lent to
the Defendant. The Court observed that “Outsiders are bound to know the external
position of the company, but are not bound to know its indoor management.”
Exceptions To The Rule
• The rule of doctrine of indoor management is however subject to certain
exceptions.

• Where the outsider has knowledge of Irregularity

• Suspicion of Irregularity
• Forgery
• Representation through Article
• Acts outside apparent authority
Corporate Veil Theory

• The Corporate Veil Theory is a legal concept which separates the identity
of the company from its members.

• Hence, the members are shielded from the liabilities arising out of the
company’s actions.

• Therefore, if the company incurs debts or contravenes any laws, then the
members are not liable for those errors and enjoy corporate insulation.

• In simpler words, the shareholders are protected from the acts of the
company.
 Piercing the Corporate Veil
• Piercing the Corporate Veil means looking beyond the company as a legal
person.

• Or, disregarding the corporate identity and paying regard to humans instead.

• In certain cases, the Courts ignore the company and concern themselves
directly with the members or managers of the company.

• This is called piercing the corporate veil.

• Usually, Courts choose this option when the case involves a question
of control rather than ownership.
Piercing the Corporate Veil

1] To Determine the Character of the

Company

2] To Protect Revenue or Tax

3] If trying to avoid a Legal Obligation

4] Forming Subsidiaries to act as Agents

5] A company formed for fraud or

improper conduct or to defeat the law
Doctrine of Lifting the Corporate Veil

• There are two circumstances under which the corporate veil of the
company may be lifted are:

• Statutory Provisions
• Judicial Interpretation
 Statutory Provisions: The Companies Act, 2013

• Reduction in Membership [Section- 3A]:

• If at any time, the minimum requirement of members in a company as
prescribed in section 3(1) is reduced below its statutory requirement,
the remaining members need to fulfil the criteria of minimum
requirement within six months.
• Otherwise, the remaining members shall be severely liable for all the
debts taken after the expiry of six months from the date of reduction.
Misrepresentation in the prospectus:
Under sections 34 and 35 of the Act, there is civil and criminal liability for false
representation in the prospectus. Every director, promoter, and every other person who
is in charge of the issue of prospectus shall be held liable for such misrepresentation.
Misdescription of name [Section-147]:
If an officer of a company signs any document such as bill of exchange, promissory
note, hundi, cheque, etc., on behalf of the company and the name of the company is not
mentioned in such document in a manner prescribed, then the person signing shall be
held personally liable to the holder of such instrument.
Failure to return Application money [Section-39]:
If the minimum subscription as stated in the prospectus has not been subscribed within
the prescribed time, the company must refund the entire application money to the
applicants. If the company fails to do so, the directors shall be jointly or severely held
liable to return interest and the application money.
Fraudulent conduct [Section-339]:

If at the time of winding-up of a company, it come into view that

any business of the company has been carried on with intent to
defraud creditors of the company, the person, who is or has been a
director, manager, or officer of the company or any other person
shall be personally responsible, without any limitation of liability,
for all the debts of the company as the Tribunal may direct.

Ultra-vires Acts:

In case, if any action is done beyond the powers (MOA) of the

company, the directors or officers intended to do so will be held
personally liable for their acts.
Judicial Interpretations

• Corporate façade only an agency instrumentality [Jones v. Lipman

(1962)]:
• In the given case, Lipman transferred his property in the name of the
company to avoid fulfillment of the contract. Therefore, he was held
liable for the non-fulfillment of the specific performance of the contact.
Lipman and the company shall be treated the same by creating an
exception to the principle of corporate personality.
• Public Policy [Re R.G. Films Ltd. (1953)]:
• In this case, the Board of Trade refused to register a film in India in the
name of a British company. The film was actually produced by an
American company in the name of a British company and this was in
conflict with the public policy.
• Tax Evasion [Re. Sir Dinshaw Maneckjee Petit (1927)]:

• In the given case, the assessee divides his income into four parts to
reduce his tax liability. He formed four companies as a means of
avoiding super tax and did no business at all. Therefore, the court
disregarded the corporate entity and held the assessee liable for tax
evasion.
Daimler Co. Ltd. v. Continental Tyre and Rubber Co. (Great Britain) Ltd

• This is an instance of determination of the enemy character of a company.

• In this case, there was a German company. It set up a subsidiary company in
Britain and entered into a contract with Continental Tyre and Rubber Co.
(Great Britain) Ltd. for the supply of tyres.
• During the time of war, the British company refused to pay as trading with an
alien company is prohibited during that time.
• To find out whether the company was a German or a British company,
• the Court lifted the veil and found out that since the decision making bodies,
the board of directors and the general body of share holders were controlled
by Germans, the company was a German company and not a British company
and hence it was an enemy company.
Prospectus
• In Company Law, prospectus plays a significant role,
• where it contains all the material information (General, Financial &
Statutory) of the company i.e., prices and shares detail of the specific
company,
• which helps the public who wishes to buy a share in that specific
company.
• As the prospectus is a legally mandated document it must be
registered under Register of companies.
DEFINITION OF PROSPECTUS:
As per dictionary definition Prospectus means –

“A Prospectus is an offer document or information, booklet issued by a public

company used for inviting offers from the general public for subscribing of shares”.

According to the Companies Act 2013: – Prospectus is defined under section 2(70).
Prospectus can be defined as:

“prospectus” means any document described or issued as a prospectus and

includes a red herring prospectus referred to in section 32 or shelf prospectus
referred to in section 31 or any notice, circular, advertisement or other document
inviting offers from the public for the subscription or purchase of any securities of a
body corporate
ESSENTIALS FOR A DOCUMENT TO BE CALLED AS A PROSPECTUS:

• To consider the certain document like a prospectus following essentials

are must:
1. The document should invite the general public for the subscription of
shares.
2. It must be made to the general public.
3. It must be made by the company.
4. It should relate to shares, debentures, and such other information
pertaining to the company.
• Every public company must issue a prospectus
• Statement in lieu of prospectus--when the private company is
converted onto a public company
ISSUE OF PROSPECTUS

• The issue of the prospectus is defined under section 26 of Companies

Act, 2013
• If a company does not issue prospectus before 90 days from the date
from which a copy was delivered before the registrar, then it is
considered to be invalid.
• If a prospectus was issued in contravention under section 26 of
Companies Act, 2013 then the company can be punished with a fine
of 50,000/- which may exceed up to 3,00,000/-.
KINDS OF PROSPECTUS
• Kinds of prospectus are:

• Red Herring Prospectus

• Shelf Prospectus

• Abridged prospectus

• Deemed Prospectus
SHELF PROSPECTUS
• Provisions related to shelf-prospectus has been discussed under
section 31 of Companies Act, 2013.
• Issued by the public financial institutions, company, or bank.
• When a shelf prospectus is issued then the issuer does not need to
issue a separate prospectus for each offering, he can offer and sell
without issuing a further prospectus as it is valid for 1 year
• The Company that is filing a shelf prospectus is required to file the
information memorandum.
• Information Memorandum consists of all the facts regarding the new
charges created, what changes have undergone in the financial
position of the company since the first offer of the security or
between the two offers
RED HERRING PROSPECTUS: Sec 32

• The prospectus which lacks the complete particulars about the price
and quantum of the securities offered.
• RHP is issued prior to the issue of prospectus when it is proposing to
make an offer of securities.
• It may give a band or minimum figures of issue size and issue price
• Red Herring prospectus needs to be filed with the registrar at least
three days prior to the opening of the subscription list or the offer.
ABRIDGED PROSPECTUS

• Abridged prospectus section 2(1)---means a memorandum containing

salient features of prospectus.
• It is prepared as per format specified by SEBI
• Every application form issued to subscribe securities shall be
accompanied with abridge prospectus
• Abridge prospectus and the share application form should bare the
same printed number
DEEMED PROSPECTUS

• Provisions related to Deemed prospectus has been discussed under

section 25(1) of Companies Act, 2013.
• Provided that any company to offer securities for sale to the public,
allots or agrees to allot securities, the document will be considered as
a deemed prospectus through which the offer is made to the public
for sale.
• A company is deemed (presumed) to have allotted or agreed to allot
securities to Issue House for sale within 6 months
Civil liability for mis-statement in prospectus
Criminal liability for mis-statement in
prospectus
Procedure of Private Placement
•
The Companies Act 2013 has formulated Section 135 and is landmark
legislation that makes Indian companies answerable to the
government about their CSR expenditure.
• India is the first country to make the incorporation of Corporate
Social Responsibility activities mandatory for qualifying companies.
• It is a remarkable step towards growth, overall development and
humanity.
Conti…..
• Be it a private sector company or a public sector
company, Corporate Social Responsibility CSR has to be adhered to
by all listed companies.
• If a company falls in either of the following criteria for compulsion,
they need to form a CSR committee. Companies:
• That has a net worth of Rs. 500 crores or more, or
• That have an annual turnover of Rs. 1000 crores or more, or
• That generate a profit of Rs. 5 crores or more.
THE CSR COMMITTEE AND POLICIES

• The qualifying companies are required to form a CSR committee.

• They are needed to spend at least 2% of its average net profit for the 3
previous consecutive financial years on CSR initiatives.
• Mandatorily, a CSR committee has to be formed by the qualifying
company.
• It also has to appoint at least 3 Board of Directors (Board).
• This Committee is responsible for preparing and recommend to the
Board, a policy and a plan that will specify the CSR activities to be
undertaken (CSR Policy).
Conti……

• They would also suggest (and protect) the amount of expenditure to be

incurred on the activities referred.

• Monitor the implementation of CSR Policy and activities.

• The Board will analyze the recommendations and suggestions made

by the CSR Committee and support the CSR Policy and activities of
the company.
TYPES OF CSR ACTIVITIES UNDER SCHEDULE VII
• The following are the types of CSR activities in India that the
qualifying listed companies under the Companies Act 2013 can
contribute to:

• (I) Eradicating Hunger, Poverty And Malnutrition

• (II) Promoting Education
• (III)Promoting Gender Equality
• (Iv) CSR Initiatives Related To The Environment
• (V) Protection Of National Heritage, Art And Culture
Conti…..
• (Vi) Measures Can Be Taken Towards The Benefit And Support Of
Armed Forces Veterans, War Widows And Families.
• (Vii) Contributions To The Prime Minister’s National Relief Fund Or
Any Other Fund Set Up By The Central Government, For Welfare,

Development And Relief Of The Schedule Caste, Tribes, Other

Backward Classes, Women And Minorities.
• (Viii) Contributions Or Funds Provided To The Development Of
Technology Located Within The Central Government Approved
Academic Institutions.
• (Ix) Contributions Can Be Made Towards Rural Development Projects
And Slum Area Development.
COMPANIES IN INDIA DOING CSR
ACTIVITIES
• ITC
• ITC has been doing impactful CSR activities in India for years now. ITC
has educated about 2,52,329 children through its 2,334 Supplementary
Learning Centres. They have also supported empowered about 15378
women members through 1183 self – help groups.

• Tata Power
• Tata Power has made it its topmost priority to empower women
through its Self Help Groups in Kutch Region of Gujarat. This initiative
provides financial aid and loans for housing, purchasing cattle, capital
for business, education, marriage and medical purposes.
Conti……
• Infosys
• Infosys is one of the early adopters of Corporate Social Responsibility. They have
takes up projects like the restoration of water bodies in Karnataka and metro
station construction in partnership with Bangalore Metro Rail Corporation
Limited. Also, they are making a contribution in Sports through their GoSports
Foundation. Their CSR initiative also includes a relief fund for Tamil Nadu,
Karnataka and Kerala.

• Reliance
• Reliance has taken up the initiative of securing the life of villagers of Balangir
district. They have a life insurance programme for them. The “Education for All”
initiative was launched to provide access to quality education in India to
everybody. They work to protect the right to education of underprivileged
children, girl-child and differently-abled. They also contribute to disaster relief
funds.
Conti……
• Tata Steel
• Tata Steel, for the last 100 years, has been committed to the social development
and upliftment of Jharkhand. The agenda of their CSR committee is to improve the
quality of life of the communities it operates in. They also launched a train called
“Lifeline Express” in 1991, a running hospital, that serves the needy regions of
India. They have done numerous done AIDS awareness programmes.

• AMUL
• Over the years, Amul has contributed to rural health and development through
Tribhuvandas Foundation. They have also established Swarnjayanti Gram
Swarozgar Yojana, a holistic self-employment programme in Kheda district. They
also successfully run tree plantation drives, blood donation camps and rural
sanitation programmes. They also provide scholarships through their Amul Scholar
schemes.
Conti……
• Cafe Coffee Day
• The beloved coffee shop, Cafe Coffee Day, employs 50 speech and hearing
impaired people at their various outlets as staff. They do this as a part of their
CSR activity as a move towards equal employment. They called them the ‘Silent
Brew-masters’. CCD also has tie-ups with NGO Enable India to empower
differently-abled people. Their biggest CSR initiative is the SVGH Vocational
Training College in Chikmagalur, Karnataka.

• P&G
• “Shiksha – Padhega India, Badhega India” is a crucial part of Procter & Gamble’s
CSR. THE Shiksha initiative has, till date, helped about 280,000 underprivileged
children to get access to their right to education. They have also built &
supported over 140 schools across India.
Conti…….
• Wipro
• Wipro makes its contribution to education and upliftment through Wipro
Care. Not just education, Wipro addresses disaster relief and rehabilitation
and health and wellness programmes for the needy as well through Wipro
Care. They have also launched Wipro Eye that promotes ecological
sustainability in its operations.

• DLF
• DLF is India’s largest real estate company. Initiated in the interest of educating
children of construction workers, Swapana Sarthak Informal School was
established. They have also set up employable vocational training centres
under the banner of DLF LIFE. They’ve also set up DLF Inspire to improve the
quality of life of underprivileged children.