Bos 48771 Finalp 4

Referencer for Quick
Revision
Final Course Paper-4:
Corporate and Economic Laws
A compendium of subject-wise capsules published in the
monthly journal “The Chartered Accountant Student”
Board of Studies
(Academic)
ICAI
INDEX
Page Edition of Students’
Topics
No. Journal
Company Law – Appointment and Qualifications
1-7 January 2022
of Directors
Company Law – Appointment and Remuneration
8-10 January 2022
of Managerial Personnel
11-20 November 2022 Company Law – Meetings of Board and its Powers
CORPORATE AND ECONOMIC LAWS
CA FINAL - PAPER 4 - CORPORATE AND ECONOMIC LAWS
At the Final level, for the Company Law portion of the subject “Corporate and Economic Laws” involves conceptual understanding,
analysis and application of provisions of the Companies Act, 2013 to solve application-oriented issues. This subject is very
dynamic on account of the amendments on the regular basis.
In this capsule for students, an attempt has been made to comprise the significant provisions of the Companies Act, 2013
covered under Chapter 1 and Chapter 2 of the Part I –Section A of the Corporate Laws. These Chapters are very important from
examination point of view. You students are advised to read the October, 2021 edition of the Study Material with relevant RTP for
a thorough understanding of the relevant provisions and the related amendments of Companies Act, 2013. This capsule will be
giving a quick glance to the significant provisions of the said chapters and illustrative case scenarios followed by MCQs to hone
your application skills. This capsule on Final Paper 4: Corporate and Economic Laws is intended to assist you in the process of
revision of concepts discussed in the Study Material.
CHAPTER 1: APPOINTMENT AND QUALIFICATIONS OF DIRECTORS

(1) Board of Directors No. of Women Director  At least one
Companies which require  every listed co.;
the collective body of to have Women directors
Board  every other public co. having -
the directors of the
company [Section 2(10)]  paid–up share capital of 100
Board of crore rupees or more; or
Directors  turnover of 300 hundred
a director appointed to
the Board of a company crore rupees or more.
Directors
[Section 2(34)] Filling of Intermittent  Immediate next Board meeting
Vacancy or three months from the date of
such vacancy, whichever is later.
(2) Provisions related to appointment of directors in the Of which date the amount As on the last date of latest audited
companies of paid-up capital or financial statements.
turnover shall be taken in
(i) Number of directors [Section 149(1)]
to consideration
(iii) Provision related to Resident director (RD) [Section 149(3)]

Every Co.
Meaning of Resident Director Who has stayed in india for a
total period of not less than 182
days during financial year
shall have
BoD Number Atleast One
Companies which should Every Company
appoint resident director
consisting of
individuals as directors In case of a newly incorporated company, the requirement under
this sub-section shall apply proportionately at the end of the
financial year in which it is incorporated.
Minimum Maximum (iv) Provisions related to Independent Directors (Section 149
read with the relevant rules)
(a) Companies require to appoint Independent Directors (ID)
Public Co. Private Co. OPC 15
INDEPENDENT DIRECTORS (ID)
3 2 1 Every Listed Public Company Prescribed Classes of Companies
Public Public Comapny

At least one Public
Company Aggregate,
A co. may appoint more than 15 directors after passing special third of total Company
Paid Up share outstanding
resolution (SR) Number of Turnover: ≥
Capital: ≥ loans, debentures
Limit of maximum of 15 directors, and their increase in limit by directors as R100 crore;
R10 crore; or and deposits>
special resolution- shall not apply to Government & section 8 ID# or
R50 crore
companies.
(ii) Provision related to Women director (WD) [Proviso to At least 2 directors as ID

section 149(1) + Rule 3 of the Companies (Appointment and
# Any fraction contained in such one-third number shall be rounded
Qualifications of Directors) Rules, 2014]
off as one.
The Chartered Accountant Student January 2022 05
1
Higher number of ID appointed: Due to composition of audit
committee in the prescribed companies, higher number of ID shall who, neither himself nor any of his relatives—
be appointed
• holds / has held the position of a KMP or
Non-Applicability: If company ceases to fulfil any of the 3
conditions for 3 consecutive years • is / has been employee of the company / its holding,
subsidiary or associate company
Exemption from appointment of ID’S in the following class • in any of the 3 FY immediately preceding the FY in which he
of unlisted public companies: a Joint Venture, Wholly Owned is proposed to be appointed;
Subsidiary, and a Dormant Company.
• Provided that in case of a relative who is an employee,
the restriction under this clause shall not apply for his
(b) Who is ID employment during preceding 3 FY.
Other than MD/
WTD/ND is / has been an employee or proprietor or a partner, in any of
the 3 FYs immediately preceding the financial year in which
Means a Director, who he is proposed to be appointed, of—
• a firm of auditors / company secretaries in practice / cost
auditors of the company / its holding, subsidiary or associate
company; or
is a person of integrity and possesses relevant expertise
and experience; • any legal / a consulting firm that has or had any
transaction with the company, its holding, subsidiary
or associate company amounting to 10% or more of the
is /was not a promoter of: gross turnover of such firm;
• the company or holds together with his relatives 2% or more of the total voting

power of the company; or
• its holding, subsidiary or associate company;
not related to promoters /Directors is a Chief Executive / director, of any nonprofit organisation

that receives 25% or more of its receipts from the company,
• in the company, any of its promoters, Directors or its holding, subsidiary or
• its holding, associate company or that holds 2% or more of the total voting
• subsidiary or power of the company; or
• associate company;
who possesses such other qualifications as may be prescribed.
has / had no pecuniary relationship,
• other than remuneration as such director/having transaction (c) Submission of Declaration by the Independent Director (ID)
not exceeding 10% of his total income / such amount as may [Section 149(7)]
be prescribed, with the company, its holding, subsidiary
or associate company, or their promoters, or Directors, Declaration for the
• during the 2 immediately PFY/ during the current FY; Declaration for First
First Meeting of Board
Meeting of the Board
in every Financial Year
none of whose relatives— Every ID is required to

• holding any security of /interest in the company, its Every ID is required file declaration at the
holding, subsidiary or associate company to file a declaration subsequent meeting in
• during the 2 immediately PFY or during the current FY
• The relative may hold security / interest of face value not every Financial Year,
exceeding 50 lakh rupees OR
• 2% of the paid-up capital of the company, its holding, at the first meeting whenever there is
subsidiary or associate company or of Board any change in the
• such higher sum as may be prescribed;
circumstances which
is indebted to the company, its holding, subsidiary may affect his status
or associate company or their promoters, or that he meets the as an ID.
Directors, criteria of independence
• in excess of such amount as may be prescribed as provided in section
• during the 2 immediately PFY /during the current FY; 149(6)
has given a guarantee /provided any security in
connection with the indebtedness of any third (d) Compliance of Schedule IV [Section 149(8)]
person to the company, its holding, subsidiary
or associate company or their promoters, or
Directors of such holding company,
• for such amount as may be prescribed during the 2
immediately PFY or during the current FY; or
has any other pecuniary transaction or relationship Schedule IV Every company and ID shall
with the company, or its subsidiary, or its holding abide by the provisions
or associate company specified in Schedule IV
• amounting to 2% /more of its gross turnover or total
income singly / in combination with the transactions
referred to above;
06 January 2022 The Chartered Accountant Student
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(e) Whether ID can have Stock Options [Section 149(9)] (i) Remuneration of Independent Directors [Section 197(5)]
Entitled to: Not Entitled to:

Notwithstanding anything contained in any other provision of
this Act, but subject to the provisions of sections 197 and 198, an Fee provided under section 197(5) Any stock option
Sitting Fee for attending the meeting of [Section 149(9)]
independent director- the Board or its Committees: Maximum
Rs. One lakh per meeting.
Note: The sitting payable to ID and Women
shall not be entitled- may receive - Directors shall not be less than that of the
• to any stock option • remuneration by way of fee sitting fee payable to other directors.
provided under section 197(5),
Reimbursement of expenses for
and • reimbursement of expenses participation in:
for participation in the Board (i) Board Meetings
and other meetings, and (ii) Other Meetings
• profit related commission as may Profit related commission as may be
be approved by the members. approved by the members
Provided that if a company has no profits or its profits are (v) Provisions related to Small Shareholder Director (SSD)
inadequate, an independent director may receive remuneration, [Section 151] read with Rule 7 of the Companies (Appointment
exclusive of any fees payable under sub-section (5) of section 197, and Qualifications of Directors) Rules, 2014.
in accordance with the provisions of Schedule V
Small Is it compulsory No (not mandatory)
Shareholders to appoint SSD?
(f) Tenure of office of ID [Section 149(10) & 149(11)] Director
Which co. may Listed co.
An independent No independent appoint?
director shall hold director shall hold
Explanation- Number One
office for a term office for more than two
up to- consecutive terms, Who is Small A shareholder holding shares
Shareholders of nominal value of not more
• 5 conse cutive • but such independent • For the purposes
years on the Board director shall of sub-sections Director than R20,000 or such other
of a company, be eligible for (10) and (11), sum as may be prescribed
• but shall be appointment after any tenure of
eligible for the expiration an independent How SSD is by notice -
reappointment of three years of director on appointed
on passing ceasing to become an the date of of not less than 1000 small
of a special independent director commencement shareholders; or
resolution by the • Provided that an of this Act shall
company, and independent director not be counted one-tenth of the total number
• disclosure of such shall not, during the as a term under
appointment said period of three those sub- of such shareholders
in the Board's years, be appointed in sections.[Section
report. or be associated with 149(11)] whichever is lower
the company in any
other capacity, either
directly or indirectly. • SSD shall not be liable to retire by rotation
• SSD’s tenure shall not exceed a period of 3
(g) Liability of ID [Section 149(12)] consecutive years and on expiry of the tenure
he shall not be eligible for re-appointment.
Notwithstanding anything contained in this Act, • A person shall not be appointed as SSD if
the person is not eligible for appointment in
terms of section 164.
Parties Shall be held liable only in • SSD shall vacate the office if (i) the SSD
respect of such- incurs any of the disqualification specified
in section 164; (ii) the office of the SSD
(i) an independent director • acts of omission or commission becomes vacant in pursuance of section 167;
(ii) a non-executive director by a company which had occurred (iii) The SSD ceases to meet the criteria of
not being promoter or key with his knowledge, independence as provided in section 149(6).
managerial personnel • attributable through Board processes • SSD shall not hold the position of SSD in
• with his consent or connivance, or Special Features more than two companies at the same time.
• where he had not acted diligently of SSD Moreover, the second company in which he is
appointed as SSD shall not be in the competing
(h) Retirement of ID by rotation [Section 149(13)] business with that of the first company.
• A SSD shall not, for a period of three years
The provisions of from the date on which he ceases to hold office
sub-sections (6) Not applicable to as a SSD in a company, be appointed in or be
and (7) of section appointment associated with such company in any other
152 in respect of independent capacity, either directly or indirectly.
of retirement Directors
of Directors by
rotation
3
(vi) Provisions related to Additional Director [Section 161(1)] (ix) Appointment of director through casual vacancy [Section
161(4)]
Additional Director
Occurence of casual vacancy takes place
Appointment Disqualified Term
where an office of any director (appointed by the co. in GM) is
• AOA of a co. may • A person, who • Hold office up vacated before his term of office expires in the normal course
confer on its BoD fails to get to the date of
the power to- appointed as the next AGM
a director in a or the last date
• appoint any GM, cannot be on which the
person as an Filing of such vacancy
appointed AGM should
additional have been held, the resulting casual vacancy may be filled by the BoD at a
director whichever is meeting (approved by members in immediate next GM)
• at any time earlier.
Term of office
(vii) Provision related to Alternate Director [Section 161(2)]
person appointed shall hold office only up to the date up to
which the director in whose place he is appointed would have
Alternate Appointed by- BoD, if so authorised by held office if it had not been vacated.
Director AOA,
(ALT. DIR) or
(x) Modes of appointment [Section 162 & 163]
resolution passed by
(i) Appointment through single resolution
company in GM
Time of during the absence of

appointment original director for a • Each director shall be appointed by a
period of not less than 3 separate resolution
months from India. • Unless the meeting first agreed that
the appointment shall be made by
Appointment a single resolution and no vote has
Exception: No who is holding any
of Directors been cast against such agreement.
person shall be alternate directorship for
to be voted • Contravention of above shall be void.
appointed as any other director in the
Individually • A motion for approving a person
ALT. DIR- co. / holding directorship
in the same co. or for nominating a person, for
appointment as a director, shall
for an independent director be treated as a motion for his
who is not qualified to be appointment.
appointed as an ID
Term of holding Till the period permissible

office to the original director Non applicability of section 162 to the following companies:
Vacation if & when the original (1) A Government company in which the entire paid up share
director returns to India. capital is held by the Central Government / by any State
Government /Governments / by the Central Government
Automatic re- apply to the original, and one or more State Governments;
appointment and not to the alternate (2) A subsidiary of a Government company, referred above,
director. in which the entire paid up share capital is held by the
Government company.
(3) A Private company
(viii) Nominee Director [Section 161(3)]
(ii) Appointment of Directors through proportional representation
[Section 163]
AOA of co. may provide for by single transferable vote

appointment of not less than / by system of cumulative
Nominee Director 2/3rd of total number of voting /otherwise
directors, in accordance with
principle of proportional
representation,
• Subject to the articles of a company, the Board
may appoint-
Option to adopt
• any person as a director principle of proportional
representation for
• nominated by any institution, or appointment of directors
• of any agreement or
• by the Central Government or the State
Government by virtue of its shareholding in a Such appointments may be Casual vacancies of such
Government company made once in every three directors shall be filled as per
years section 161(4).
4
Non applicability of section 163 to the following companies: A private company may by its articles provide for any
(1) A Government company in which the entire paid up share disqualifications for appointment as a director in addition to
capital is held by the Central Government, or by any State those specified in sub-sections (1) and (2).
Government or Governments or by the Central Government
and one or more State Governments; The disqualifications as mentioned in (d), (e) and (g) of sub-
section (1) of section 164 shall continue to apply even if the
(2) A subsidiary of a Government company, referred to above, in
which the entire paid up share capital is held by the Government appeal or petition has been filed against the order of conviction
company. or disqualification.
Section 164(2) is not applicable to Government company.
(3) Disqualifications for appointment of director [Section 164 (1)]
General (a) of unsound mind and so declared by a (4) Holding of maximum number of directorship [Section 165]
disqualification competent court;
of directors in (b) an undischarged insolvent;
the following Out of 20, Exclude
(c) applied to be adjudicated as an insolvent and his maximum (from 20 co.)
situations: 10 public directorship in
application is pending
companies dormant co.
(d) convicted by a court of any offence, and
sentenced in respect thereof to imprisonment for
minimum 6 months and a period of 5 years has not
elapsed from the date of expiry of the sentence.
However, if a person has been convicted of any company may
offence and sentenced in respect thereof to specify lesser
imprisonment for a period of 7 years / more, he Maximum Number of number of
20 (including directorship companies in
shall not be eligible to be appointed as a director which a director
Alternate
in any company. directorship) may act as
(e) an order disqualifying him for appointment as directors by
a director has been passed by a court or Tribunal passing SR.
and the order is in force;
(f) not paid any calls in respect of any shares of the
Provision related to maximum holding of directorship shall not
company held by him, and 6 months have elapsed
apply to section 8 companies.
from the last day fixed for the payment of the call;
If a person accepts an appointment as a director in
(g) he has been convicted of the offence of dealing
contravention to holding directorship in more than 20
with related party transactions under section 188
companies / more than 10 public companies, he shall be liable
at any time during the last preceding 5 years; or
to a penalty of R2,000 for each day after the first during which
(h) he has not complied with section 152(3) which such violation continues, subject to a maximum of R2 Lakhs
requires a director to have a DIN under section
154.
(i) he has not complied with the provisions of (5) Duties of Directors [Section 166]
section 165(1).
Act in accordance with AOA, subject to the provisions of the
Other disqualifications [Section 164(2)] Act.
person who is / has been a director of a company which

Act in good faith to promote the objects of co. for
has not filed financial statements or annual returns for any benefit of its members & in the best interests of co., its
continuous period of three financial years; employees, shareholders, community & for protection of
environment.
or Exercise his duties with due & reasonable care, skill &
has failed to repay the deposits accepted by it or pay interest
diligence & with independent judgment.
thereon or to redeem any debentures on the due date or pay
interest due thereon or pay any dividend declared and such Not involve in a situation in which he may have a direct /
failure to pay or redeem continues for one year or more
indirect interest that conflicts, or possibly may conflict, with
interest of co.
shall not be eligible to be-
Not achieve / attempt to achieve any undue gain or
re-appointed as a director of appointed in other company for a advantage either to himself or to his relatives, partners, or
that company or period of five years from the date associates & if such director is found guilty of making any
on which the said company fails undue gain, he shall be liable to pay an amount equal to
to do so that gain to the company
Not assign his office & if any assignment so made, it shall be

Provided that where a person is appointed as a director of a void.
company which is in default as above
he shall not incur the disqualification for a period of six months In case of contravention, a director of the company shall be
from the date of his appointment. levied fine from R1,00,000 to R5,00,000.
5
(6) Vacation of Office of Director [Section 167] (ii) Restrictions on removal of certain directors
Director incurs any of the disqualifications specified in sec. 164; Directors appointed by Tribunal u/s 242
In case, he incurs disqualification under section 164(2),

ID: who are re-appointed for second term u/s 149(10)
the office shall become vacant in all the companies, except
can be removed only by passing SR+ opportunity of being
the company in default
heard
on absence from all meetings of BoD held during a period

of 12 months Directors appointed u/s 163
acts in contravention of provisions of sec. 184 relating Case Scenario 1

to entering into contracts /arrangements in which he is Sukesh Web Developers Ltd. (for short SWD) is a public limited
interested; company, which was incorporated in December, 2018. Sukesh is
the Managing Director of the company. The company is engaged
in the business of developing Websites, Mobile App, providing of
fails to disclose his interest in any contract / arrangement
in which he is interested, in contravention of the On-line Platform for conducting Business Meetings, Class Room
provisions of sec. 184; Teachings and providing of pre-filled educational Tablets as per
syllabus prescribed by the respective Central / State Boards, of
Classes 6th to 12th.
becomes disqualified by an order of a court / the Tribunal; At the time of incorporation, the company was formed by 7
members, who were actually classmates when they all were
doing B. Tech (Electronics) from IIT, Mumbai. Initially they
contributed the capital from their own resources and the paid up
convicted by a court for any offence & sentenced to capital at the time of incorporation was R50 crores. Among the
imprisonment for not less than 6 months.
7 members, 3 members occupied the position of director in the
company. In addition to this, 2 other persons were also appointed
as Independent Directors. One is a Professor (Finance) in IIM,
removed in pursuance of the provisions of this Act; Ahmedabad and another is an Advocate on Record at Supreme
Court.
The popularity and user friendly features of ON-Line Products,
having been appointed a director by virtue of his holding
increased the demand, and the turnover of the company
any office / other employment in the holding, subsidiary
or associate company, ceases to hold such office or other dramatically increased from R100 crores in March 2019 to R350
employment in that company. crores by the end of March 2020.
The Company Secretary in full time employment of the company,
apprised the Board that, company should now appoint at least one
(7) Resignation of Director [Section 168]
woman director on the Board. The Board agreed and the name
of Sudha (the wife of Sukesh) was proposed and approved in the
Director may by giving a notice in writing to co.
General Meeting of the company. Sudha was appointed as woman
director in the Board of the Company with effect from 10th April,
Board shall on receipt take note of the same 2020.
Now, the Board of SWD consists of the following persons:
Co. shall within 30 days from receipt, intimate the S. Name Designation Group
Registrar & post the information on its website, if any. No.
1. Sukesh Managing Director Promoter
Co. shall also place the fact of such resignation in
BoD's Report laid in immediately following GM. 2. Rahul Director Promoter
3. Parmeshwar Director Promoter
Director may forward a copy of his resignation with 4. Independent
reasons to Registrar within 30 days of resignation Kamal Director Professor (Finance)
5. Independent Advocate on Record
(8) Removal of Directors [Section 169] Damodar Director at Supreme Court
(i) Steps for removal 6. Sudha Woman Director Wife of MD
On receipt
of the During this pandemic situation, Rahul, one of the member
director and director in the company passed away due to Corona in
notice of a concerned
resolution December 2020. Rahul was the key person in procuring
director is entitled
for removal, thereto make new business relations and was having good connections
By Special the company shall be with various schools, in which the company’s pre-loaded
given representation
Ordinary notice is shall in writing to educational Tablets were being supplied. It was a great set-
Resolution required forthwith opportunity back to the company.
send a copy to be heard the co. and
thereof to requests its
notification to However, the company went on doing business inspite of the
the
concerned members fact that the minimum requirement of members in SWD (a
director public company) reduced from 7 to 6. The Company Secretary
6
apprised to the Board that Arundhati (the wife of deceased A. Sudha is the wife of MD, and hence cannot be considered
Rahul) has applied for transmission of shares in her name, to be appointed as woman director. So her appointment is
which were held in the name of Rahul. The Board accepted the not valid.
transmission request, and the Board Secretariat of the company B. There is no prohibition/ restriction in the Companies
entered the name of Arundhati as member of the company. Act, 2013 to appoint any woman to fill up the vacancy of
Now again the minimum requirement of seven members of this woman director even she is a relative of any of the director.
public company fulfilled. C. Woman director should be chosen only from the Databank
maintained by the Indian Institute of Company Affairs
During the Financial Year 2020-21 the five meetings of the Board (IICA), New Delhi.
of Directors were held, but Sudha, being a woman director, D. Sudha should immediately break the relationship with
never ever attended any meeting of the Board of Directors due her husband, who is MD in the company, if she wants to
to her shy nature and always sought leave of absence of the continue as woman director, in order to maintain the
Board. The Company Secretary apprised in the Board Meeting independent status.
held in April 2021, about the vacation of the post of woman Answer: (B)
director on account of continuous absence of Sudha in the Board Reason:
Meetings held during the FY 2020-21 and requested the Board Refer, Second Proviso of Section 149(1)(b) read with Rule 3(ii) of
to again propose for the appointment of new woman director the Companies (Appointment and Qualifications of Directors)
and also other director (in replacement of the demise of Rahul, Rules, 2014.
Ex-Director). The Board accepted the recommendation of the Please note that, the requirement is to fill post of woman director
Company Secretary and was advised to move ahead to complete only and not the Independent Director.
4. A public company should have minimum of:
the legal formalities. A. 3 Members and 3 Directors
Based on the above scenario, answer the following questions: B. 3 Members and 7 Directors
C. 7 Members and 3 Directors
1. The SWD was incorporated as public company. At which D. 7 Members and 7 Directors
stage, the company is required to have at least one woman Answer: (C)
director in its Board: Reason:
A. It is not required to appoint any woman director, since the Refer, section 3(1) (a) and 149(1)(a)
company is not a listed entity. 5. Rahul passed away in December, 2020. He was a member and
B. It is not required to appoint one woman director, since also a director in the company. After his death the number
of members as required for a public company fell short of
the paid-up capital of the company is only R50 crores, the minimum requirement of seven. If the company carries
which is below the threshold limit of R100 crore. on business for ____________________ while the number
C. It is required to appoint at least one woman director, of members is so reduced every person who is a member of
since the turnover of the company has crossed R300 the company during the time that it so carries on business
crore, which is actually R350 crores as on 31st March, ___________ shall be severally liable for the payment of the
whole debts of the company contracted during that time:
2020.
A. more than 3 months / after those 3 months
D. If both the conditions i.e. paid-up capital of R100 or more; B. more than 4 months / after those 4 months
AND turnover of R300 crore or more, are fulfilled, then C. more than 5 months / after those 5 months
such public company is required to have at least one woman D. more than 6 months / after those 6 months
director. Answer: (D)
Answer: (C) Reason:
Reason: Refer, Section 3A
Refer, Second Proviso to Section 149(1)(b) read with Rule 3(ii) 6. Sudha being a woman director did not attended any meeting
(a) & (b) of the Companies (Appointment and Qualifications during FY 2020-21. However she always sought leave of
of Directors ) Rules, 2014. If any of the parameter, viz: Paid- absence of the Board. Sudha argued that when leave of absence
up capital of 100 crore OR Turnover 300 crores is achieved, have been sought, she may continue to be on Board by holding
the Office of Woman Director. What is your opinion?
the public company have to appoint at least one woman
A. No, a woman director is given a special treatment under the
director. Law, so the post of woman director shall not be treated as
2. The company is not a listed entity, even then it has appointed vacant.
two Independent Directors. Why? B. Since in the given she has sought leave of absence of the Board,
A. By appointing independent director(s), the company is so the office of woman director shall not be treated as vacant.
benefitted of their expertise and wisdom. C. The office of a director shall become vacant in case he
B. The company was required to appoint independent absents himself from all the meetings of the Board of
directors since its paid-up capital is R50 crore, (at the time Directors held during a period of 12 months with or
of incorporation) which is above the threshold limit of R10 without seeking leave of absence of the Board.
crores. D. In option (C) above, words used are ‘he’ and ‘himself ’,
which are used for a male person, so the intention of the
C. Appointing of Advocate on Records, Supreme Court as law makers are very clear and the office of woman director
Independent director is beneficial to address the legal cannot be treated as vacant. If the intention of the law
issues. maker would have been to include a woman director, the
D. The company was used to get the financial advice, hence words in the above sentence [Option C] should have been
it appointed a Financial Professional as an Independent used as ‘she’ and ‘herself ’.
Director. Answer (C)
Reason:
Answer (B)
Refer section 167(1)(b) which provides that office of a director shall
Reason: become vacant in case he absents himself from all the meetings of
Refer Rule 4(1) of the Companies (Appointment and Qualifications the Board of Directors held during a period of twelve months with
of Directors) Rules, 2014. or without seeking leave of absence of the Board.
The words [‘he’ / ‘himself’] used in above section should not be
3. In the above case Sudha (the wife of Sukesh, Managing construed in strict sense of using for male only, rather the spirit is of,
Director) was appointed to fill up the vacancy of woman to narrate the automatic vacancy of the office of director ( whether
director. Whether appointment of relative of Managing male director or female director), if certain points of law are not
Director to fill up the vacancy of woman director is permissible adhered by the concerned director.
as per the provisions of the Companies Act, 2013:
7
CHAPTER 2: APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL
(1) Appointment of Managing Director, Whole-Time Director or In case of Private company – given Section 196(4) shall not apply
Manager [Section 196] In case of Government company – given Section 196(2) and (4)
shall not apply
(i) Appointment of MD and Manager [Section 196(1)]
(2) Overall maximum Managerial Remuneration [Section 197(1)]
Company shall not S. Conditions Maximum Conditions when
appoint/ employ at the • So, appoint either No. remuneration in remuneration can
same time a MD and a MD or Manager any financial year exceed as referred in
Manager column (b)
(a) (b) (c)
(ii) Tenure [Section 196(2)] (i) Overall limit 11% of the net Company in
profits of the general meeting
company for that may authorize
Tenure of MD, financial year the payment of
WTD or Manager Maximum 5 years remuneration
exceeding 11% of
the net profits of the
company subject
(iii) Disqualifications for MD, WTD or Manager [Section 196(3)] to provisions of
Schedule V.
No company shall appoint or continue the employment of any person (ii) If there is one 5% of the net With the approval
as MD, WTD or Manager who- Managing profits of the of the company in
director/ Whole company for that general meeting by
*below the age of 21 years or has attained the age of 70 time director/ year Special Resolution,
years; or manager this limit may be
exceeded.
is an undischarged insolvent or has at any time been (iii) If there is more 10% of the net With the approval
adjudged as an insolvent; or than one Managing profits of the company in
director/ Whole general meeting by
has at any time suspended payment to his creditors or time director/ Special Resolution,
makes, or has at any time made, a composition with manager this limit may be
them; or
exceeded.
has at any time been convicted by a court of an offence (iv) If there are 1% of the net Approval of the
and sentenced for a period of more than six months. directors who are profits of the company in general
neither Managing company if there meeting by Special
director nor is a managing Resolution is
Additional conditions prescribed through Schedule V (for
appointment without approval of Central Government) whole time director or a whole required.
directors time director
(v) If there are 3% of the net profits Approval of the
directors who are of the company if company in general
*Provided that appointment of a person who has attained the age neither Managing there is no managing meeting by Special
of 70 years may be made by: director nor whole director or whole Resolution is
(1) passing a special resolution with an explanatory statement time directors time director required.
indicating the justification for appointing such person.
(2) where no such special resolution is passed but votes cast Where the company has defaulted in payment of dues to any bank
in favour of such motion, and the Central Government / PFI/ non-convertible debenture holders / any other secured
is satisfied, on an application made by the Board, that creditor, the prior approval of the bank / PFI concerned / the non-
such appointment is most beneficial to the company, the convertible debenture holders / other secured creditor, as the case
appointment of the person who has attained the age of 70 may be, shall be obtained by the company before obtaining the
years may be made. approval in the general meeting.
In case of Government Company, Section 197 shall not apply.
(iv) Procedure of appointment of MD, WTD or Manager [Section
196(4)]
(3) Appointment of KMP [Section 203]
Subject to provisions of Sec. 197 and Schedule V
(i) KMP [Section 2(51)]
Terms and conditions and remuneration payable
be approved by BOD at meeting
• MD/ CEO / Manager
Approval of shareholders in next GM • WTD (in absence of MD/CEO/Manager )
• CS;
Approval of Central Government (if appointment is at Who are • CFO.
variance with Part I of Schedule V) KMP's? • Officer not more than one level below
Return in prescribed form shall be filled with Registrar the directors (in whole time employment
within 60 days of such appointment. desigated as KMP)
• Other prescribed officer
8
(ii) Companies which mandatorily required appointment of (4) Functions of the Company Secretary [Section 205]
whole time KMP [Section 203(1) + Rule 8 of the Companies
Functions to report to the Board about compliance
(Appointment and Remuneration of Managerial Personnel)
of the CS to ensure that the co. complies with the
Rules 2014]
includes applicable secretarial standards;
to provide to the directors of the co. guidance
companies as they may require, with regard to their duties,
mandatorily required responsibilities and powers;
to appoint whole- to facilitate the convening of meetings and attend
time KMP every listed co. &
Board, committee and general meetings and
every other public co. having
maintain the minutes of these meetings
a paid-up share capital of R10
to obtain approvals from the Board, general
crore or more
meeting, the government and other authorities
as required
(iii) Provisions related to appointment of whole time KMP
to represent before various regulators, and other
[Section 203(2) & (3)] authorities in connection with discharge of
various duties under the Act;
Whole time
Mode of Appointment
Restriction on holding
of office
Appointment of
KMP as director
by means of to assist the Board in the conduct of the affairs

KMP can be
resolution KMP shall not of the co.;
appointed as a
of Board hold office in to assist and advise the Board in ensuring good
director in any
containing more than one corporate governance and compliance & best
company with
terms & co. at the same practices
the permission
conditions & time except its to discharge such other duties as have been
of the Board.
remuneration subsidiary co. specified under the Act or rules; &
such other duties as may be assigned by the
(iv) Managing Director / Manager in more than one company Board from time to time.
[Third proviso to section 203(3)]
(5) Secretarial Audit (Section 204)
• Co. may appoint a person as • Every Listed co.

its MD, if he is MD / manager
of one, & of not more than one • Every public company having
other co. a paid up share capital of R50
Appointment of • Approved by resolution passed crore or more; or
Companies that
person as MD in more at meeting of Board with • Every public company having
consent of all directors present are required a turnover of R250 crore or
than one company
at the meeting to conduct more.
• Specific notice of such meeting Secretarial Audit • Every company having
& of the resolution to be moved outstanding loans or
thereat has been given to all borrowings from banks or
the directors then in India. public financial instituions of
100 crore rupees or more.
(v) Vacancy in office of KMP [Section 203(4)]
{
The above companies shall annex with its Board's report made
• filled up by the board in section 134(3), a secretarial audit report (in Form No. MR.3),
Vacancy of KMP
• within 6 months from date of vacancy given by a company secretary in practice.
In case of Government Company, as per section 4A, the provisions

of sub-sections (1), (2), (3) and (4) of section 203, shall not apply to a Case Scenario 2
Managing Director / Chief Executive Officer / Manager and in their Saraswati Golden Beverages Ltd. is an unlisted public company
absence, a Whole-Time Director of the Government Company. engaged in the business of manufacturing and selling of soft
drinks. For the financial year ended on 31st March, 2020, its
(vi) Penalty [Section 203(5)] paid-share capital was R15 crores.
On company where the
Every Director & Sourabh is the Managing Director of the company, whose term is
contravention is a
KMP in default going to expire by the end of June 2021.
continuing one
The Board of Directors of the company approved the re-
• fine of 5 lakh •
fine extending to • with a further fine
rupees R50000/-. appointment of Sourabh as Managing Director in meeting of the
from R1000/- for Board held on 5th April, 2020 and was subsequently approved
each day after by the shareholders in the Extra-ordinary General Meeting held
the first during
on 25th April, 2020. The term of appointment was made for
which such default
continues to R5 lakh 7 years.
9
Subsequently, Sourabh was selected for the post of CEO in another
3. After joining as Managing Director on 1st June, 2020, the
company in same business line. He resigned from the post of Managing
Mayank celebrated his 69th Birthday on 10th June, 2020. His
Director from the present company on 25th May, 2020. He demanded
appointment was made for 5 years effective from 1st June,
compensation from the present company for the period (i) from the
2020 which will be completed on 30th June, 2025. Mayank
date of resigning and leaving the services up to 30.06.2021 on the
will attain the age of 70 years on 10th June, 2021. Whether
present remuneration basis and (ii) from 1st July, 2021 to 30.06.2028
his appointment is valid?
on the basis of remuneration fixed at the time of re-appointment.
A. Mayank will automatically vacate the post of Managing
After the resignation of Sourabh, the Nomination and Remuneration Director after attaining the age of 70 years.
Committee of Board recommended the name of Mayank (as MD), B. Mayank’s present appointment is not valid since his
which the Board of Directors approved in its meeting held on 1st June, appointment is for 5 years and just after one year of his
2020, which was also approved by the shareholders in the General joining, he will attain the age of 70.
Meeting held on 28th June 2020. The appointment was made for 5
years effective from 1st June 2020. The Board also celebrated the 69th C. Mayank’s appointment is valid since at the time of
birthday of Mayank after his joining, on 10th June 2020. appointment he has not attained the age of 70 years.
However, to be on the safer side, before reaching the age of
Deepak, who was designated as Company Secretary in the company 70 years, the shareholders may pass special resolution for
died on 25th August, 2020 due to COVID-19. The company’s AGM continuation of Mayank for the post of Managing Director.
was also scheduled to be held on 5th September, 2020. The AGM was
convened in the absence of the Company Secretary. The Company D. Mayank’s appointment is valid as he has appointed as
made an advertisement in the news paper about the vacancy of the Managing Director for the first time.
the Company Secretary but no one was ready to join during the Answer: (C)
COVID-19. Ultimately the appointment was made in the month of Reason:
March 2021.
Section 196(3)(a) provides that no company shall appoint
Based on the above scenario, answer the following questions: or continue the employment of any person as managing
director, whole-time director or manager who is below the age
1. Whether the re-appointment of Sourabh for the post of of 21 years or has attained the age of 70 years.
Managing Director with effect from 1st July, 2021 is valid:
A. Sourabh’s re-appointment is valid. The Bombay HC in the case of Sridhar Sundararajan v.
B. Sourabh’s re-appointment is not valid as per the provisions Ultramarine & Pigments Ltd., [2015] 59 taxmann.com 249 has
of the Companies Act, 2013. opined that there is no mid-tenure cessation of the Managing
C. There should be a cooling period of 3 years between the Directorship as a result of section 196(3)(a). All that section
retirement and re-appointment of Managing Director. 196(3)(a) does, is to sound a note of caution in the public
interest and to demand from the company a special resolution
D. There should be a cooling period of 5 years between the
when a person who has already crossed the age of 70 years on
retirement and re-appointment of Managing Director.
certain date is proposed to be appointed or re-appointed. [2016]
Answer: (B) 66 taxmann.com 67 (Article)]
Reason: 4. The vacancy arrived due to sudden demise of company
Section 196(2) provides that no company shall appoint or secretary can be filled up by the Board of Directors:
re-appoint any person as its managing director, whole-time A. Before the convening of the AGM
director or manager for a term exceeding five years at a time:
B. After the convening of the AGM.
The proviso to section 196(2) provides that no re-appointment
shall be made earlier than one year before the expiry of his term. C. within a period of three months from the date of such vacancy.
In the given case, the Sourabh’s re-appointment for Managing D. within a period of six months from the date of such vacancy.
Director was made for 7 years. Further, his term as Managing Answer:(D)
Director was expiring by the end of June 2021, whereas, the re-
Reason:
appointment exercise has already been made before the expiry
of his term. Section 203(4) provides that if the office of any whole-time key
managerial personnel is vacated, the resulting vacancy shall
2. Sourabh after resigning from the services from the present be filled-up by the Board at a meeting of the Board within a
company demanded compensation for the period (i) from period of six months from the date of such vacancy.
the date of resigning and leaving the services to 30.06.2021 on
the present remuneration basis and (ii) from 1st July, 2021 to 5. What are the consequences if a whole-time company
30.06.2028 on the basis of remuneration fixed at the time of secretary is not appointed?
re-appointment. Will he is entitled to get the compensation: A. The company is not liable to pay penalty since it
A. Yes, he is entitled to get the compensation for the advertised but no one was ready to join the company
period from the date of resigning the present company due to COVID-19 situation.
i.e. 25.05.2020 to 30.06.2021 at the rate of present B. Only the company is liable to pay the penalty as
remuneration. prescribed under the Company Act, 2013
B. Sourabh will also be entitled to get the compensation, C. Only the directors of the company are liable to pay
as mentioned at para (A) above PLUS from 1st July, penalty as prescribed under the Company Act, 2013
2021 to 30.06.2028 on the basis of remuneration fixed D. The company, every director and KMP all are liable to
at the time of re-appointment. pay penalty as prescribed under the Company Act, 2013.
C. Sourabh will not get any compensation from the present Answer: (D)
company as per the provisions of the Companies Act, Reason:
2013.
D. Sourabh can be given compensation, subject to the Section 203(5) provides that if any company makes any
approval of the shareholder in the General Meeting. default in complying with the provisions of this section, such
Answer: (C) company shall be liable to a penalty of five lakh rupees
and every director and key managerial personnel of the
Reason: company who is in default shall be liable to a penalty of fifty
Section 202(2)(b) provides that no payment of compensation thousand rupees and where the default is a continuing one,
shall be made where the director resigns from his office with a further penalty of one thousand rupees for each day
otherwise than on the reconstruction of the company or its after the first during which such default continues but not
amalgamation as aforesaid. exceeding five lakh rupees.
10
CA Final - Paper 4: Corporate and Economic Laws
At the Final level, the Company Law portion of the paper “Corporate and Economic Laws” involves conceptual understanding,
analysis and application of provisions of the Companies Act, 2013 to solve application-oriented issues. In this capsule for
students, an attempt has been made to comprise the significant provisions of the Companies Act, 2013 covered under the Chapter
3, in continuation to earlier published capsule covering Chapter 1 and Chapter 2 of the Company Law part of the study material.
Before referring the capsule, you students are advised to read the October 2021 edition of the Study Material with relevant
RTP for a thorough understanding of the relevant provisions and the related amendments of Companies Act, 2013. This will
supplement your reading and recapitulating the important aspect of the relevant legal provisions. In fact, by giving a quick glance
to the significant provisions of the said chapter and illustrative case scenario followed by MCQs will hone your application skills
and understanding and revising the same. This capsule is intended to assist you in the process of revision of concepts discussed
in the Study Material.
Chapter 3: Meetings of Board and its Powers

(1) Board Meeting (BM) [Section173] Option to participate through video conferencing
(1) Meetings of Board mode/ other audio visual means (Rule 3)
• notice of the meeting shall inform the directors regarding
(i) Holding of BM [Section 173(1)]- the option available to them to participate through video
conferencing mode or other audio visual means, and shall
Every company shall hold Board meeting of its Board of Directors in provide all the necessary information to enable the directors
the following manner: to participate through video conferencing mode or other audio
visual means
First BM
Subsequent BMs
within 30 days
thereafter hold minimum
of the date of its On receival of notice
4 meetings every year
Incorporation • a director intending to participate through video conferencing
with not a gap of more
than 120 days between or audio visual means shall communicate his intention to the
two consecutive board Chairperson or the company secretary of the company
meetings
(ii) Participation in BM [Section 173 (2)] No intimation from director of his participation
through the electronic mode
• it shall be assumed that the director shall attend the meeting in
lin person person
lthrough video conferencing
Directors may lo
ther audio visual means as
attend board prescribed under Rule 3 of the
meeting in
either of the way Companies (Meetings of Board and
its Powers) Rules, 2014 In case of failure to serve the notice -Every officer of the company
whose duty is to give notice, shall be liable to a penalty of `25,000.
(iv) Exemption/relaxation from applicability of section 173(1)

(iii)
Notice of the BM [Section 173(3) & (4) + Rule 3 of the
Companies (Meetings of Board and its Powers) Rules, 2014] Proviso to
section 173(1)
exempt any class,
A meeting of the Board shall be called by giving or descriptions of
• not less than seven days' notice in writing companies
• to all the directors at registered address may by notification
Central or
• sent by hand delivery/ by post/ by electronic means Government
apply provisions
subject to exceptions,
modifications or
conditions
Shorter notice less than 7 days may be served Relaxation to companies from compliance of section 173
• to transact an urgent business
• atleast one independent director, if any, shall be present Section 8 companies- OPC, Small Co., Dormant Co.
Applicable to the Private start ups- deemed to have
• in his absence, decisions taken shall be circulated to all the been complied with the provisions of
extent that the Board
directors and shall be final only on ratification thereof by at least of Directors, shall hold section 173, if at least one meeting of
one independent director, if any at least one meeting the BoDs has been conducted-
within every six calendar • in each half of a calendar year, and
months. • t he gap between the two meetings is
not less than 90 days.
The Chartered Accountant Student November 2022 07

11
In case of OPC, in which there is only one director on its Board (3)Powers of Board [Section 179]
of Directors, it shall not be required to hold even a single Board (i) Powers to be exercised by the Board [Section 179(1)]
meeting during the year.
The BoD of a company shall be entitled to
(2) Quorum [Section 174]
• e xercise all such powers, and to do all such acts and things, as the
(i) Quorum
company is authorised to exercise and do
quorum for a Board
Meeting shall be -
Exception to Board’s Power:
one-third of its
total strength • Th
e Board shall not exercise any power or do any act or thing
Whichever which is directed or required,

OR is higher •w hether under this Act or by the memorandum or articles of the
company or otherwise,
two directors • to be exercised or done by the company in general meeting
For section 8 Companies, quorum for the BM, either 8 members (ii) Illustrative Powers of Board [section 179(3)]
or 25% of its total strength whichever is less, however, quorum
shall not be less than two members. Board may exercise its (a) make calls on shareholders in respect
powers by means of the of money unpaid on shares
(ii) Quorum when directors participate through Video Conferencing resolution passed at a
duly convened Board (b) authorise buy-back of securities
In case of participation of director through video
conferencing or by other audio visual means meeting
(c) issue securities
• shall also be counted for the purpose of determining the (d) borrow monies
quorum at the meeting,
• unless he is to be excluded for any items of business under (e) invest the funds of the company
any provisions of the Act or the Rules [Explanation as given
in Rule 3 of the Companies (Meetings of Board and its (f)
grant loans or give guarantee or
Powers) Rules, 2014] provide security in respect of loan
(iii) Where quorum is less than prescribed under the Act [Section (g)
approve financial statement and the
174 (2) & (3)] Board’s report
Where the quorum of Where at any time the number (h) diversify the business
continuing directors is reduced of interested directors exceeds (i)
approve amalgamation, merger or
(as fixed by Act) or is equal to 2/3 of the total reconstruction
strength of the BOD
(j)
take over a company or acquire a
controlling or substantial stake in
another company
the continuing directors/ the number of directors who
director may act for the are not interested directors (k)
any other matter which may be
purpose of- and present at the meeting, prescribed in Rule 8 of the Companies
• i ncreasing the number of being not less than two, shall (Meetings of Board and its Powers)
directors to that fixed for the be the quorum during such Rules, 2014
quorum, or time
• of summoning a general
meeting of the company
The Board may, by a resolution passed at a meeting, delegate
the powers specified in clauses (d) to (f) on conditions as it may
In case of Private Company - Section 174(3), shall apply with specify to-
the exception that the interested director may also be counted • any committee of directors, the managing director, the manager
towards quorum in such meeting after disclosure of his interest or any other principal officer of the company, or
• in the case of a branch office of the company, the principal officer
pursuant to section 184. of the branch office
(iv) Where a meeting of the Board could not be held for want of
quorum [Section 174(4)]
Additional powers prescribed under Rule 8 of the Companies
Unless the articles of the company otherwise provide, (Meetings of Board and its Powers) Rules, 2014
the meeting shall automatically stand adjourned to make political contributions;
• to the same day
• at the same time and place
• in the next week, to appoint or remove KMP;
if that day is a national holiday, till the next succeeding day, which to appoint internal auditors and secretarial auditor;
is not a national holiday, at the same time and place
08 November 2022 The Chartered Accountant Student
12
(4)
Restrictions on powers of Board Restriction as to borrowing of money under Clause(c) [Section
180(2) & (5)]
[Section 180(1)]
Every special resolution
No debt incurred by the
passed by the company in
The BoD of a company shall exercise the following powers company in excess of the
general meeting in relation
only with the consent of the company by a special resolution limit imposed -
to the borrowing of money-
• s hall specify the total • s hall be valid or effectual,

amount up to which unless the lender proves
monies may be borrowed that he advanced the
by the Board of Directors. loan in good faith and
without knowledge that
the limit imposed had
(a)To sell, lease or dispose of the undertaking(whole/substantially been exceeded.
of the whole) of the company, or it owns more than one, of the
whole/substantially the whole of any of such undertakings
Section 180 is not applicable to private company.
(b)
To invest in trust securities the amount of compensation (5) Powers of BoD of a Company to make
received as a result of any merger or amalgamation; contributions [Section 181, 182, & 183]
• a ny amount the aggregate of which, in any
(c) borrow money, together with the money already borrowed by financial year, exceed 5% of its average net
the company exceeding aggregate of its paid-up share capital,free To Bona fide
charitable and profits for the three immediately preceding
reserves and securitries premium apart from temporary loans financial years.
obtained from the company’s bankers in the ordinary course of other funds
•p rior permission of the company in general
business meeting shall be required
(d) To remit, or give time for the repayment of, any debt due from • a company
a director •m ay contribute any amount to any political
party,
•w ith a resolution authorising the making of
Exemption to Clause (a) and conditions for such transaction such contribution is passed at a meeting of
To Political the Board of Directors,
[Section 180(3) & (4)] • and such resolution shall, subject to the
Contributions
other provisions of this section, be deemed
to be justification in law for the making of
the title of a buyer / other OR the sale / lease of any the contribution authorised by it.
person who buys /takes property of the company •E xcept a Government company, and a
on lease any property, where the ordinary business company which has been in existence for
investment / undertaking as of the company consists of / less than three financial years
is referred to in that clause, comprises, such selling or
in good faith; leasing
BoD or any person or authority exercising
l
the powers of the Board of Directors of a
To National company in general meeting, may-
Defence Fund, lc
ontribute such amount as it thinks fit to the
etc. National Defence Fund or any other Fund
approved by the Central Government for
Conditions for transaction referred to in clause the purpose of national defence
(a) of sub-section (1)
(6)
Disclosure of interest by director
[Section 184]
Any special resolution passed by the company consenting to the (i) Applicability:
transaction -
may stipulate such conditions as may be specified in such resolution, l all directors of
Section 184 the company and
including conditions regarding the use, disposal or investment of the is applicable l a
ll types of
sale proceeds which may result from the transactions on Companies
provided that this shall not be deemed to authorise the company

to effect any reduction in its capital except in accordance with the
provisions contained in this Act.

13
(ii) When to disclose & what are the disclosures [Section 184(1)
& (2)] They shall be kept in the •C
ompany Secretary or any other
custody of the person authorised by the Board
When to disclose
•E
very director shall disclose his concern or interest in any
company or companies or bodies corporate, firms, or other
association of individuals which shall include the shareholding, (iv) Consequences of non-disclosure [Section 184(3) 184(4)]
in manner as prescribed in Rule 9 the Companies (Meetings of
Board and its Powers) Rules, 2014:
•A t the First meeting of the Board in which he participates as a
director, and Consequences of non-disclosure of concerned or
• Th
ereafter, at the first meeting of the Board in every financial interest in any contract or arrangement:
year, or • It shall be voidable at the option of company
•W henever there is any change in the disclosures already made,
• Penalty levied on a director of the company
then at the first Board meeting held after such change.
• With fine of `1 lakh
Disclosures
•E
very director of a company who is concerned or interested in
a contract or arrangement /proposed contract or arrangement
entered into /to be entered into: Section 184 shall not apply to any
•w ith a body corporate in which such director or such director contract or arrangement entered
in association with any other director,holds more than two per into or to be entered into between
cent shareholding of that body corporate, or is a promoter, two companies or between one or
manager, Chief Executive Officer of that body corporate; or more companies and one or more
•w ith a firm or other entity in which, such director is a partner, bodies corporate where any of the
owner or member, as the case may be, directors of the one company or
• t he directors shall disclose his concern or interest, by giving body corporate or two or more
a notice in writing at the meeting of the Board in which the of them together holds or hold
contract or arrangement is discussed and shall not participate not more than two per cent of the
in such meeting. Exceptions paid-up share capital in the other
company or the body corporate
Exceptions to following companies from application

of section 184(2):
• s hall apply to private companies with the exception that the
interested director may participate in such meeting after (7) Loan to directors, etc. [Section 185]
disclosure of his interest
• s hall apply to Section 8 Companies, only if the transaction with (i)
No providing of loan / guarantee / security-General Law
reference to section 188 on the basis of terms and conditions of [Section 185(1)]
the contract or arrangement exceeds `1 lakh
No company shall, directly or indirectly, advance
Provided that where any director who is not so concerned
or interested at the time of entering into such contract or any loan, provide any
arrangement, he shall, if he becomes concerned or interested after including any loan give any or security in
represented by a or connection with
the contract or arrangement is entered into, disclose his concern guarantee
or interest forthwith when he becomes concerned or interested book debt to any loan
or at the first meeting of the Board held after he becomes so
concerned or interested.
(iii) Manner of Disclosure [Rule 9 of the Companies (Meeting of

Board and its Powers) Rule, 2014]
• to any director of company/ or of a company which
Every director shall is its holding company, or
disclose his concern / l by written notice • any partner or relative of any such director, or
interest • any firm in which any such director or relative is a
partner.
in Form l MBP-1
(ii) Conditions when company may advance loan/give guarantee/
provide security [Section 185(2)]
l cause it to be disclosed at the

Such Director shall meeting held immediately after the A company may advance any loan / give any guarantee / provide any
date of the notice security in connection with any loan taken by any person in whom
any of the director of the company is interested, only when-
All notices shall be kept l at the registered office of the company

a Special Resolution is passed
by the company in general the loans are utilised by the
meeting along with the borrowing company for its
l for eight years from the end of the principal business activities.
Preserved financial year to which they relate Explanatory statement
14
(iii) Who will be “any person in whom any of the director of the (vi) Exemptions
company is interested” [Explanation to section 185(2)]
Exemptions to following companies from application of
"Any person in whom any of the director of the company is section 185 –
interested" means—
Nidhis Private company Government
•P
rovided the • I n whose share company
any body corporate, loan is given to capital no other •S
uch company
any body corporate a director or body corporate obtains approval
the Board of
at a general meeting his relative in has invested any of the Ministry
directors, managing
of which not less their capacity as money; or Department
director or
any private than 25% of the members and • I f the borrowings of the Central
manager, whereof
company of which total voting power such transaction of such a company Government which
is accustomed to
any such director may be exercised / is disclosed in the from banks is administratively
act in accordance
is a director / controlled by any annual accounts or financial in charge of the
with the directions
member; such director, / by a note. institutions or company, or, as the
/ instructions of
by 2 or more such anybody corporate case may be, the
the Board, or of any
directors, together; is less than twice state Government
director/s, of the
or of its paid up share before making
lending company.
capital or `50 crore any loan or giving
rupees, whichever any guarantee
(iv) Exceptions to section 185 [Section 185(3)] is lower, and or providing any
•S uch company security under the
Exceptions giving of any loan to a as a part of the conditions has no default Section.
to section managing director or of service extended by in repayment of
185 whole-time director— the company to all its such borrowings
employees; or subsisting at the
time of making
pursuant to any scheme transactions under
approved by the members this section
by a special resolution; or
a company which in the due repayment of any
the ordinary course of loan and Above exemption is applicable to a private and government
its business provides company if it has not committed a default in filing its financial
loans/ /gives guarantees in respect of such loans statements under Section 137 or Annual Return under Section 92
/securities for- an interest is charged at a with the Registrar.
rate not less than the rate
of prevailing yield of one
year, three years, five years
(8)
Loan and Investment by Company
or ten years Government [Section 186]
security closest to the
tenor of the loan; or (i) Investment by company [Section 186(1)]
any loan made by a Investment by company

holding company to its
wholly owned subsidiary • a company shall unless otherwise prescribed, make investment
company / any guarantee through not more than 2 layers of investment companies
given/ security provided
by a holding company
in respect of any loan Provided loans
made to its wholly owned Exemption
made are utilized
subsidiary company; or by the subsidiary However, above provisions shall not affect,—
company for its • a company from acquiring any other company incorporated in
Any guarantee given principal business a country outside India if such other company has investment
or security provided activities subsidiaries beyond two layers as per the laws of such country;
by a holding company • a subsidiary company from having any investment subsidiary
in respect of any loan for the purposes of meeting the requirements under any law /
made by any bank or under any rule / regulation framed under any law for the time
financial institution to its being in force.
subsidiary company:
(v) Contravention [Section 185(4)]

In contravention
of section 185,
penalties levied-
On Company On defaulting On defaulting director /

officer the other person
Minimum- 5
lakhs and Imprisonment- Fine- Minimum- Imprisonment- Fine- Minimum- Both
maximum- Maximum 6 5 lakhs and Maximum 6 5 lakhs and imprisonment
25 lakhs months, or, maximum- 25 months, or, maximum- 25 and fine.
lakhs, lakhs, or,

15
(ii) Ceiling on the investment [Section 186(2) & (3) Read with Rule
13 of the Companies (Meetings of Board and its Powers) Rules, *Provided that prior approval of a PFI shall not be required –
2014]
• where the aggregate of the loans and investments so far
made, the amount for which guarantee or security so
No company shall far provided to or in all other bodies corporate,
• along with the investments, loans, guarantee or security
proposed to be made or given
acquire by way
give any *person of subscription, does not exceed the limit specified under section 186(2)
/body corporate- purchase or and there is no default in repayment of loan instalments or
give any *person any guarantee / payment of interest thereon as per the terms and conditions of
/body corporate- otherwise, the
provide security in securities- of such loan to the PFI.
Any loan connection with a any other body
loan corporate
(v) Maintenance of register [Section 186(9) &(10)]
Whichever
is more • keep a register
Exceeding: • containing such particulars and
• 60% of its paid-up share capital, free reserves and Every company maintained as per Rule 12 of the
securities premium account or giving loan /a Companies (Meetings of Board and
• 100% of its free reserves and securities premium guarantee / its Powers) Rules, 2014
account, providing security • be kept at the registered office of the
unless previously authorised by a special resolution /making an company
passed in a general meeting acquisition shall • be open to inspection at such
office and extracts may be taken
therefrom by any member
Exemption from SR as
per section 186(3)
Where a loan or guarantee is given or where a security
has been provided by a company to- (vi) Non-applicability of section 186 [Section 186(11)]
• its wholly owned subsidiary company or a joint
venture company, or
• acquisition is made by a holding company, by Except sub-section
way of subscription, purchase or otherwise of, (1) of section 186
the securities of its wholly owned subsidiary
company, Section 186 shall not apply
Previous approval by SR is not required in a general
meeting. to a loan made, guarantee to any investment-
given /security provided or • made by an investment
investment made by- company;
*Word "person" does not include any individual who is in the • a banking company or • of shares allotted in pursuance
employment of the company. • an insurance company or of section 62(1)(a) or in shares
• a housing finance company allotted in pursuance of
in the ordinary course of its rights issues made by a body
(iii) Disclosure to members [Section 186(4)] corporate;
business or
Company shall disclose to the members in the financial statement • or a company established • made, in respect of investment
the full particulars of- with the object of and or lending activities, by a NBFC
engaged in the business registered under Chapter
the purpose for of financing industrial III-B of the RBI Act, 1934 and
which the loan / enterprises or whose principal business is
investment made guarantee / security • of providing infrastructural acquisition of securities.
loan given, or guarantee is proposed to be facilities.
given or security utilized by the
provided, recipient of the
loan / guarantee /
security.
(iv) Requirements for the process of investment/ loan/guarantee/providing of security [Section 186(5)]
No company and where any

shall invest, the resolution with the term loan is
give loan/ sanctioning it consent of all subsisting,the
unless is passed at a the directors *prior approval
guarantee/
provide meeting of the present at the of the PFI
security Board meeting concerned is
obtained
16
(vii) Restriction on company registered under SEBI on inter-corporate loans [Section 186(6)]
A company shall not take

registered under inter-corporate pursuant to which such company
Section 12 of loan /deposits
in consultation it has obtained shall furnish
the SEBI and in excess of the
with the certificate of in its financial
such class/s limits specified
Securities and registration from statement the
of companies under the
Exchange Board, the SEBI. details of the loan
as notified by regulations or deposits.
the Central applicable to this
Government- kind of company,
(viii) Penalty [Section 186(13)] (ii) Following investment is allowable to the company [Section
In contravention to In contravention to 187(2)]
section 186 section 186
• every officer of the (a) d

epositing of shares /securities with a bank, for the collection
• c ompany shall be of any dividend / interest payable thereon;
punishable with company who is
fine - in default shall be
punishable- or
• Min.- `25,000
• Max.- `5 lakh And • with imprisonment
-extending upto 2 years, (b) depositing /transferring to / holding of shares /securities in
and the name of, the SBI or a scheduled bank (Banker), in order
• with fine - to facilitate the transfer thereof
• Min.- `25,000
• Max.- `1,00,000 or
(c)
depositing with /transferring to, any person any shares /
Non-applicability of Section 186 to a Government company securities, by way of security for the repayment of any loan
advanced to the company / the performance of any obligation
-to a Government company engaged in defence production. undertaken by it;
-A Government company, other than a listed company, in case
such company obtains approval of the Ministry or Department
of the Central Government which is administratively in charge of (d) holding investments in the form of securities held as a
the company, or, as the case may be, the State Government before beneficial owner.
making any loan or giving any guarantee or providing any security
or making any investment under the section.
Such exception is applicable to a Government company which
has not committed a default in filing its financial statements
under Section 137 or Annual Return under Section 92 with the
Registrar.
(9) Investments of company to be held in its

own name [Section 187]
(i) Investment made by company in its own name [Section
187(1)]
All investments
made or held by
a company in any
property security or other assets
Shall be made and held by it in its own name
However, the company may hold any shares in its subsidiary

company in the name of any nominee or nominees of the company,
if it is necessary to do so, to ensure that the number of members of
the subsidiary company is not reduced below the statutory limit.

17
(10) Related Party Transactions [Section 188 read with Rule 3 of the Companies (Specification of
Definitions Details) Rules, 2014]
(i) Meaning of Related Party
Related Party (Section 2 clause 76) with reference to a company, means-
a director a KMP a firm, in a private a public any body any person such other
/ his / his which a company company corporate on whose person as
relative relative; director, in which in which whose BoD, advice, prescribed in
manager a director a director MD or directions any body corporate which is— Rule 3 of the
/ his /manager /manager manager is or Companies
relative / his is a accustomed instructions (Specification
is a relative director to act in a director of Definitions
partner; is a and accordance or Details)
member holds with the manager is Rules, 2014;
or along advice, accustomed
director; with his directions or to act: a holding, a an
relatives, instructions subsidiary subsidiary investing
more of a director or an of a company
than 2% / manager; associate holding or
of its company company venturer
paid-up of such to which of the
share company; it is also a company
capital; or subsidiary;
(ii) Contracts with related parties (RP) which are covered under
However, no contract or arrangement, in the case of a company
section 188 [Section 188(1)] having a paid-up share capital of not less than such amount, or
transactions not exceeding such sums, as prescribed under Rule
Company shall enter into any contract or arrangement with a RP 15(3) of the Companies (Meetings of Board and its Powers) Rules,
with respect to the below transactions, with the consent of the 2014, shall be entered into except with the prior approval of the
Board of Directors given by a resolution at a meeting of the Board company by a resolution. [First proviso to section 188(1)]
and subject to such conditions as prescribed under rule 15(1) of the
Companies (Meetings of Board and its Powers) Rules, 2014
(iii) Prescribed limits for the transactions to be entered into as
contracts or arrangements with the prior approval of the
Company [Rule 15(3) of the Companies (Meetings of Board
and its Powers) Rules, 2014]
(A)
Where the transaction/s to be entered into as contracts or
Transactions arrangements with respect to clauses (a) to (e) of section 188(1),
with criteria as mentioned below -
(a) sale, purchase or supply of any goods or materials;
Conditions with respect to Prescribed limits for the
transactions to be entered into transactions to be entered into
(b) selling or otherwise disposing of, or buying, with the prior approval as contracts or arrangements
property of any kind;
sale, purchase or supply of any Amounting to 10% or more of
goods or materials, directly or the turnover of the company,
(c) leasing of property of any kind; through appointment of agent as mentioned in clause (a) and
clause (e) respectively of sub-
section (1) of section 188
(d) availing or rendering of any services; selling or otherwise disposing of Amounting to 10% or more of
or buying property of any kind, net worth of the company, as
directly or through appointment mentioned in clause (b) and
of agent clause (e) respectively of sub-
(e) appointment of any agent for purchase or sale section (1) of section 188
of goods, materials, services or property;
leasing of property of any kind Amounting to 10% or more of
the turnover of the company, as
(f) such related party's appointment to any office mentioned in clause (c) of sub-
or place of profit in the company, its subsidiary section (1) of section 188
company or associate company; and
availing or rendering of any Amounting to 10% or more of
services, directly or through the turnover of the company,
(g) underwriting the subscription of any securities or appointment of agent as mentioned in clause (d) and
derivatives thereof, of the company clause (e) respectively of sub-
section (1) of section 188
It is hereby clarified that the limits specified above, shall apply

for transaction/s to be entered into either individually or taken
together with the previous transactions during a financial year.
18
(B) Transaction entered is for appointment to any office or place (vii) Consequences of Related party transaction [Section 188(3) & (4)]
of profit: Where the transaction/s to be entered into as contracts
or arrangements is for appointment to any office or place of profit
in the company, its subsidiary company /associate company at a A contract or arrangement shall
monthly remuneration exceeding `2.5 lakh; or be voidable at the option of the
Board/ shareholders
(C) Transaction entered is for remuneration for underwriting the
subscription of any securities etc.: Where the transaction/s to
be entered into as contracts or arrangements is for remuneration
for underwriting the subscription of any securities or derivatives
thereof, of the company exceeding 1% of the net worth as Where any contract /arrangement is entered into without
mentioned in section 188(1)(g). obtaining the consent of the Board or approval by a resolution
(iv) Concept of “Arm’s length transaction” in the general meeting by-
• a director, or
Meaning • any other employee, and
a transaction between two conducted as so that there is

related parties if they were no conflict of if it is not ratified by
unrelated, interest • the Board, or
• the shareholders at a meeting within 3 months from the date
on which such contract or arrangement was entered into.
Applicability of section 188 on transactions on arm's length basis

Such act shall be open to the company to proceed against-
Section 188(1) shall not apply to Except the transactions which • a director or any other employee
any transactions are not on an arm’s length • who had entered into such contract or arrangement
basis, with the appropriate • in contravention of the provisions of this section for
• entered into by the company in approval.
its ordinary course of business & recovery of any loss sustained by it as a result of such
at an arm's length basis with no contract or arrangement.
approval
(v)
Relevant particulars to disclose in the notice of a general Further, if the contract or arrangement is with a related party
meeting and consequences on being a related party/or to any director, or is authorised by any other director,
in relation to a related party, in a transaction. [Proviso & • the directors concerned shall indemnify the company against
explanation to Section 188] any loss incurred by it.
company may proceed against such a director / any other

• Th
e explanatory No voting by member employee for recovery of any loss who had entered into such
statement to be who is related party contract /arrangement in contravention of the provisions of
annexed to the notice Section 188
of a general meeting as • no member of the
per section 101, shall company shall vote Where any
contain- on such resolution, director is
to approve any interested in (viii) Penalty for contravention [Section 188 (5)]:
• name of the related contract or any contract /
party; arrangement which arrangement In the case of a- Liability- Any director or any other
may be entered into with a related employee of a company, who had entered
• name of the director by the company, if party, such
/ KMP who is related, into or authorised the contract or
such member is a director shall
if any; related party. not be present arrangement in violation of the provisions
at the meeting of this section shall-
• nature of relationship; • the above shall during Listed company liable to be penalty of `25 lakh; and
• nature, material not apply to a discussions
terms, monetary company in which on the subject Any other company liable to a penalty of `5 lakh
value and particulars ninety per cent or matter of the
of the contract / more members, in resolution
number, are relatives relating Exemption from applicability of section 188 for transactions
arrangement; arising out of Compromises, Arrangements and Amalgamations
of promoters or are to such
• any other information related parties. contract or dealt with under specific provisions of the Companies Act, 2013.
relevant / important arrangement.
for the members to Case scenario
[Rule 15(2)]
take a decision on the Atlantic Garments Ltd., a company engaged in the business of
proposed resolution. manufacturing of garments for all seasons. The certificate of
incorporation of the company bears the date 15th January, 2021. The
company have in all 14 directors.
The first meeting of the Board was held on 15th February, 2021. Thereafter,
(vi) Passing of resolution is not necessitated [Proviso to Section 188(1)] the subsequent meetings of the Board were held on 29th February, 2021,
25th March, 2021, 30th August, 2021 and on 25th December, 2021.
No resolution for transactions entered into between a holding
company and its wholly owned subsidiary, In these meetings of the full strength of the Board was present except
required to in the meeting of 25th March, 2021. In this meeting only 4 persons were
be passed by whose accounts are consolidated with such present.
members holding company, and
under first are placed before the shareholders at the One of the director’s address, as mentioned in the DIN, is of Mumbai,
proviso general meeting for approval. but he actually resides at Pune with his son. He insisted the Company
Secretary to send the physical agenda papers to his Pune address

19
instead of the Mumbai address. He also requested to provide the air
traveling expenses to him for attending the Board Meeting from the 3. Whether the meeting of the Board held on 30th August,
Pune to Mumbai & back. 2021 was valid:
A. If the quorum in this meeting was present, it may
Based on the above scenario, answer the following questions: be treated as valid.
1. The first meeting of the Board was conducted on 15th B. The gap between the previous meeting and the
February, 2021. Whether this meeting was convened in present meeting should not be more than 120 days.
time, as prescribed under the Companies Act, 2013: Since previous meeting was held on 25th March,
2021 (adjourned meeting held on 1st April 2021)
A. Yes, as the first meeting of the Board may be there is a gap of more than 120 days, hence this
convened at any time. meeting is not valid.
B.
Yes, as the first meeting of the Board shall be C. The gap of more than 120 days between the two
convened within 30 days of the date of incorporation. meetings can be extended by the Registrar.
Here the d ate of incorporation is 15th January 2021
and the meeting should have been convened within D. It is valid as it can convened within 180 days, i.e., till
30 days, i.e., on or before 14th February, 2021. 30th September, 2021.
C. Yes, as the first meeting of the Board may be convened Answer: (B)
within a quarter of the date of incorporation.
Reason:
D. Yes, as the convening of first meeting within 30
days of its incorporation is not mandatory. Section 173(1) provides that every company shall hold the first
Answer: (B) meeting of the Board of Directors within thirty days of the date of
its incorporation and thereafter hold a minimum number of four
Reason: meetings of its Board of Directors every year in such a manner
that not more than one hundred and twenty days shall intervene
Section 173(1) provides that every company shall hold the first between two consecutive meetings of the Board.
meeting of the Board of Directors within thirty days of the date of Since gap exceeded between the two consecutive meetings is more
its incorporation and thereafter hold a minimum number of four than 180 days, so its not valid.
meetings of its Board of Directors every year in such a manner
that not more than one hundred and twenty days shall intervene 4. One of the director, who is actually residing at Pune, but his
between two consecutive meetings of the Board. address as recorded with the company and in the DIN is of
From 15th January, 2021 (leaving this day) to 14th February, 2021 Mumbai. The director wish to receive the notice / agenda
(including this day) 30 days are completed. Hence the first meeting papers at Pune. At which address the notice for Board
of the Board should be convened between 16th January to 14th meeting and agenda papers may be sent?
February, 2021 (both days inclusive). But in this case the meeting of
Board was convened on 15th February, 2021 which is beyond the 30 A. The notice/ agenda papers be sent as per the wish
days as prescribed under the Companies Act, 2013. of the concerned director.
B. The notice / agenda papers be sent at Pune address.
2. Whether the meeting of the Board held on 25th March,
2021 was valid: C. The notice / agenda papers be sent at Mumbai
address.
A. The meeting of the Board held on 25th March,
2021 was valid since it was convened after the last D. The notice/ agenda papers be sent at both the
meeting held on 29th February, 2021 i.e. within addresses, i.e., at Pune as well as at Mumbai.
the period of 120 days as prescribed under the Answer: (C)
Companies Act, 2013.
B.
The meeting of the Board was valid since the Reason:
required quorum was present in the meeting.
Section 173(3) provides that a meeting of the Board shall be called
C. The meeting of the Board was not valid since the by giving not less than seven days’ notice in writing to every director
required quorum was not present in the meeting. at his address registered with the company and such notice shall be
D. There is no need to have quorum in the meetings sent by hand delivery or by post or by electronic means.
of the Board.
Answer: (C) 5. Whether such director, whose official address is recorded
Reason: with the company is of Mumbai, but actually comes from
Pune. Whether his air fare from Pune to Mumbai and back
Section 174(1) provides that the quorum for a meeting of the Board can be / provided / reimbursed?
of Directors of a company shall be one third of its total strength
or two directors, whichever is higher, and the participation of the A. The actual air fare from Pune to Mumbai and back
directors by video conferencing or by other audio visual means shall may be given.
also be counted for the purposes of quorum under this sub-section. B. No air fare should be given to him. However, he may
Section 174(4) provides that where a meeting of the Board could be reimbursed the actual taxi fare (if incurred) from
not be held for want of quorum, then, unless the articles of the Mumbai address to place of meeting in Mumbai (if
company otherwise provide, the meeting shall automatically stand Board meeting is held in Mumbai.)
adjourned to the same day at the same time and place in the next C. The air fare from Pune to Mumbai and back can be
week or if that day is a national holiday, till the next succeeding given, if other directors do no object.
day, which is not a national holiday, at the same time and place. D. The air fare from Pune to Mumbai and back can be
Further explanation to section 174(4) provides that for the purposes of given if approved by the shareholders in the general
this section, (i) any fraction of a number shall be rounded off as one; meeting.
(ii) “total strength” shall not include directors whose places are vacant.
Answer: (B)
Total Strength of directors =14
One-third of 14 = 4.67 Reason:
Rounded off to = 5 (Five) Section 173(3) provides that a meeting of the Board shall be called
Where as in the meeting only 4 persons were present, hence due by giving not less than seven days’ notice in writing to every director
to want of required minimum quorum, the meeting shall have to at his address registered with the company and such notice shall be
adjourned to the same day at the same time and place in the next sent by hand delivery or by post or by electronic means.
week or if that day is a national holiday, till the next succeeding day,
which is not a national holiday, at the same time and place. Since the address in the company’s record is of Mumbai, hence
In the absence of the any information, it is presumed that adjourned no air fare is permissible, if the board meetings are being held in
meeting was held on 1st April, 2021. Mumbai itself.
20

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CHAPTER 1: APPOINTMENT AND QUALIFICATIONS OF DIRECTORS

(iii) Provision related to Resident director (RD) [Section 149(3)]

3 2 1 Every Listed Public Company Prescribed Classes of Companies

Public Public Comapny

(ii) Provision related to Women director (WD) [Proviso to At least 2 directors as ID

• the company or holds together with his relatives 2% or more of the total voting

not related to promoters /Directors is a Chief Executive / director, of any nonprofit organisation

none of whose relatives— Every ID is required to

Entitled to: Not Entitled to:

The Chartered Accountant Student January 2022 07

Time of during the absence of

Term of holding Till the period permissible

AOA of co. may provide for by single transferable vote

08 January 2022 The Chartered Accountant Student

person who is / has been a director of a company which

Not assign his office & if any assignment so made, it shall be

The Chartered Accountant Student January 2022 09

In case, he incurs disqualification under section 164(2),

on absence from all meetings of BoD held during a period

acts in contravention of provisions of sec. 184 relating Case Scenario 1

10 January 2022 The Chartered Accountant Student

The Chartered Accountant Student January 2022 11

12 January 2022 The Chartered Accountant Student

by means of to assist the Board in the conduct of the affairs

• Co. may appoint a person as • Every Listed co.

(v) Vacancy in office of KMP [Section 203(4)]

In case of Government Company, as per section 4A, the provisions

The Chartered Accountant Student January 2022 13

14 January 2022 The Chartered Accountant Student

Chapter 3: Meetings of Board and its Powers

(iv) Exemption/relaxation from applicability of section 173(1)

The Chartered Accountant Student November 2022 07

Whichever which is directed or required,

08 November 2022 The Chartered Accountant Student

• s hall specify the total • s hall be valid or effectual,

provided that this shall not be deemed to authorise the company

The Chartered Accountant Student November 2022 09

Exceptions to following companies from application

(iii) Manner of Disclosure [Rule 9 of the Companies (Meeting of

l cause it to be disclosed at the

All notices shall be kept l at the registered office of the company

10 November 2022 The Chartered Accountant Student

any loan made by a Investment by company

(v) Contravention [Section 185(4)]

On Company On defaulting On defaulting director /

The Chartered Accountant Student November 2022 11

No company and where any

12 November 2022 The Chartered Accountant Student

A company shall not take

• every officer of the (a) d

(9) Investments of company to be held in its

property security or other assets

Shall be made and held by it in its own name

However, the company may hold any shares in its subsidiary

The Chartered Accountant Student November 2022 13

It is hereby clarified that the limits specified above, shall apply

14 November 2022 The Chartered Accountant Student

a transaction between two conducted as so that there is

Applicability of section 188 on transactions on arm's length basis

company may proceed against such a director / any other

The Chartered Accountant Student November 2022 15

16 November 2022 The Chartered Accountant Student

• s hall specify the total • s hall be valid or effectual,

(iii) Manner of Disclosure [Rule 9 of the Companies (Meeting of

• every officer of the (a) d

(9) Investments of company to be held in its