The Companies Act 2013 is the law covering incorporation, dissolution and the running of

companies in India. The Act came into force across India on 12th September 2013 and has a few
amendments to the previous act of 1956. It has also introduced new concepts like a One Person
Company.

Meaning and Features of a Company

With a phenomenal change in the domestic and international economic landscape, the Government
of India decided to replace the Companies Act, 1956 with a new legislation. The Companies Act,
2013, endeavours to make the corporate regulations in India more contemporary. In this article, we
will focus on the meaning and features of a Company.

Meaning of a Company
There are many definitions of a Company by various legal experts. However, Section 2(20) of the
Companies Act, 2013, defines the term ‘Company’ as follows: “Company means a company
incorporated under this Act or under any previous company law.”

Hence, in order to understand the meaning of a Company, it is important to look at the distinctive
features that explain the realm of a Company.

Features of a Company

A Company is a Separate Legal Entity

One of the most distinctive features of a Company, as compared to other organizations, is that it
acquires a unique character of being a separate legal entity. Hence, when you register a company,
you give it a legal personality with similar rights and powers as a human being.

The existence of a company is distinct and separate from that of its members. It can own property,
bank accounts, raise loans, incur liabilities and enter into contracts. According to Law, it is
altogether different from the subscribers to the Memorandum of Association.

Also, it has a distinct personality which is different from those who compose it. Member can also
contract with the Company and acquire a right against it or incur a liability to it. However, for any
debts, the creditors can sue the Company but the members cannot.

A Company can own, enjoy, and dispose of a property in its own name. While the shareholders
contribute to the capital and assets, the company is the rightful owner of such assets and capital.
Further, the shareholders are not private or joint holders of the company’s property.

Perpetual Succession

Another important feature of a Company is that it continues to carry on its business

notwithstanding the death of change of its members until it is wound up on the grounds specified
by the Act. Further, the shares of the company change hands infinitely, but that does not affect the
existence of the company.
 In simple words, the company is an artificial person which is brought into existence by the law.
Hence, it can be ended by law alone and is unaffected by the death or insolvency of its members.

Limited Liability

One of the important features of a company is the limited liability of its members. The liability of a
member depends on the type of company.

• In the case of a limited liability company, the debts of the company in totality do not become
the debts of its shareholders. In such a case, the liability of its members is limited to the extent
of the nominal value of shares held by them. The shareholders cannot be asked to pay more
than the unpaid value of their shares.
• In the case of a company limited by guarantee, members are liable only to the extent of the
amount guaranteed by them. Further, this liability arises only when the company goes into
liquidation.
• Finally, if it is an unlimited company, then the liability of its members is unlimited too. But
such instances are very rare.

Artificial Legal Person

Another one of the features of a company is that it is known as an Artificial Legal Person.

• Artificial – because its creation is by a process other than natural birth.

• Legal – because its creation is by law, and
• Person – because it has similar rights to a human being.
Further, a company can own property, bank accounts, and do everything that a natural person can
do except go to jail, marry, take an oath, or practice a learned profession. Hence, it is a legal person
in its own sense.

Since a company is an artificial person, it needs humans to function. These humans are Directors
who can authenticate the company’s formal acts either on their own or through the common seal of
the company.

Common Seal

While a company is an artificial person and works through the agency of human beings, it has an
official signature. This is affixed by the officers and employees of the company on all its
documents. This official signature is the Common Seal.

However, the Companies (Amendment) Act, 2015 has made the Common Seal optional. Section 9
of the Act does not have the phrase ‘and a common seal’ in it. This provides an alternative mode of
authorization for companies who do not wish to have a common seal.
 According to this amendment, if a company does not have a common seal, then the authorization
shall be done by:

• Two Directors or
• One Director and the Company Secretary (if the company has appointed a Company
Secretary).

Memorandum Of Association

The Memorandum of Association or MOA of a company defines the constitution and the scope of
powers of the company. In simple words, the MOA is the foundation on which the company is
built. In this article, we will look at the laws and regulations that govern the MOA. Also, we will
understand the contents of the Memorandum of Association of a company.

Object of registering a Memorandum of Association or MOA

• The MOA of a company contains the object for which the company is formed. It identifies the
scope of its operations and determines the boundaries it cannot cross.
• It is a public document according to Section 399 of the Companies Act, 2013. Hence, any
person who enters into a contract with the company is expected to have knowledge of the
MOA.
• It contains details about the powers and rights of the company.
Under no circumstance can the company depart from the provisions specified in the memorandum.
If it does so, then it would be ultra vires the company and void.

Format of Memorandum of Association (MOA)

According to Section 4 of the Companies Act, 2013, companies must draw the MOA in the form
given in Tables A-E in Schedule I of the Act. Here are the details of the forms:

• Table A: Form for the memorandum of association of a company limited by shares.

• Table B: Form for the memorandum of association of a company limited by guarantee and
not having a share capital.
• Table C: Form for the memorandum of association of a company limited by guarantee and
having a share capital.
• Table D: Form for the memorandum of association of an unlimited company.
• Table E: Form for the memorandum of association of an unlimited company and having share
capital.

Content of the MOA

The following information is mandatory in an MOA:
 Name Clause

1. For a public limited company, the name of the company must have the word ‘Limited’ as the
last word
2. For the private limited company, the name of the company must have the words ‘Private
Limited’ as the last words.
This is not applicable to companies formed under Section 8 of the Act who must include one of the
following words, as applicable:

• Foundation
• Forum
• Association
• Federation
• Chambers
• Confederation
• Council
• Electoral Trust, etc.

Registered Office Clause

It must specify the State in which the registered office of the company will be situated.

Object Clause

It must specify the objects for which the company is being incorporated. Further, if a company
changes its activities which are not reflected in its name, then it can change its name within six
months of changing its activities. The company must comply with all name-change provisions.

Liability Clause

It should specify the liability of the members of the company, whether limited or unlimited. Also,

1. For a company limited by shares – it should specify if the liability of its members is limited
to any unpaid amount on the shares that they hold.
2. For a company limited by guarantee – it should specify the amount undertaken by each
member to contribute to:
i. The assets of the company when it winds-up. This is provided that he is a member of the
company when it winds-up or the winding-up happens within one year of him ceasing to be
a member. In the latter case, the debts and liabilities considered would be those contracted
before he ceases to be a member.
ii. The costs, charges, and expenses of winding up and the adjustment of the rights of the
contributors among themselves.
 Capital Clause

This is valid only for companies having share capital. These companies must specify the amount of
Authorized capital divided into shares of fixed amounts. Further, it must state the names of each
member and the number of shares against their names.

Association Clause

The MOA must clearly specify the desire of the subscriber to form a company. This is the last
clause.

For One-Person-Company

The MOA must specify the name of the person who becomes a member of the company in the
event of the death of the subscriber.

Keep in mind the following aspects before submitting the MOA:

1. Print the MOA

2. Divide it into paragraphs
3. Number the pages in sequence
4. Ensure that at least seven people sign it (2 in the case of a private limited company and one in
case of a One Person company).
5. Have at least one witness to attest the signatures
6. Enter particulars about the signatories and witnesses like address, description, occupation, etc.

A few things to remember

• A company can subscribe to an MOA through its agent

• A minor cannot sign an MOA. However, the guardian of a minor, who subscribes to the MOA
on his behalf, will be deemed to have subscribed in his personal capacity.
• Companies can attach additional provisions as required apart from the mandatory ones
mentioned above.

Difference between Memorandum and Articles of Association

Parameter MOA AOA

It defines and delimits It lays down the rules

Objectives
the objectives of a and regulations for the
company. Further, it internal management of
 specifies the conditions the company. Hence, it
of incorporation. also contains the bye-
laws of the company.

It defines the It defines the

relationship of the relationship between the
Relationship
company with the company and its
outside world. members.

It can be altered only

under special
circumstances. Also, it It can be altered by
Alteration usually requires the passing a special
permission of the resolution.
Regional Director or the
Tribunal.

Acts beyond the scope Acts which are ultra

of the MOA are ultra vires the AOA can be
vires and void. ratified by a special
Ultra Vires Furthermore, even resolution of the
unanimous consent of shareholders. However,
all shareholders cannot such acts should not be
ratify it. ultra vires the MOA.

Corporate Veil Theory

The separate legal entity of a company is one of its most unique features.

What is the Corporate Veil Theory?

The Corporate Veil Theory is a legal concept which separates the identity of the company from
its members. Hence, the members are shielded from the liabilities arising out of the company’s
actions.

Therefore, if the company incurs debts or contravenes any laws, then the members are not liable
for those errors and enjoy corporate insulation. In simpler words, the shareholders are protected
from the acts of the company.

This brings us to some important questions:

 1. If lifting or piercing the corporate veil possible?

2. If yes, then what are the scenarios and the rules that govern piercing the corporate veil?

Piercing the Corporate Veil means looking beyond the company as a legal person. Or,
disregarding the corporate identity and paying regard to humans instead.

In certain cases, the Courts ignore the company and concern themselves directly with the
members or managers of the company. This is called piercing the corporate veil. Usually, Courts
choose this option when the case involves a question of control rather than ownership.

Piercing the Corporate Veil

Scenarios under which the Courts consider piercing or lifting the corporate veil are as below,

1] To Determine the Character of the Company

There are cases where the Courts need to understand if the company is an enemy or friend. In
such cases, the Courts adopt the test of control. The Courts usually avoid piercing the corporate
veil, unless the public interest is in jeopardy. However, to ascertain if a company is an enemy
company, the Court might choose to do so.

So, how can a company be an enemy? It does not have a mind or consciousness and cannot be a
friend or foe, right? However, if the affairs of a company are under the control of people from an
enemy country, then the company might be an enemy too. In such cases, the Court may examine
the character of the humans who are at the helm of affairs of the company.

2] To Protect Revenue or Tax

In matters concerning evasion or circumvention of taxes, duties, etc., the Court might disregard
the corporate entity.

Imagine a company that is used to evade tax. In such cases, piercing the corporate veil allows the
Court to understand the real owner of the income of the company and make the said person liable
for legitimate taxes.

3] If trying to avoid a Legal Obligation

Sometimes the members of a company can create another company/subsidiary company to avoid
certain legal obligations. In such cases, piercing the corporate veil allows the Courts to
understand the real transactions.

Imagine a company liable to share 20 percent of its profits with its employees as a bonus. This is
a legal obligation. To avoid this, the company opens a wholly owned subsidiary company and
transfers its investment holdings to it.
The new company formed has no assets of its own and no business income either. It is
completely dependent on the principal company.

By doing so, the principal company reduced the amount of bonus liable to be paid to its
employees. The Courts, by piercing the corporate veil, can understand the real intention of the
principal company and ensure that it fulfils its legal obligations.

4] Forming Subsidiaries to act as Agents

Sometimes, the basis of the formation of a company is to act as an agent or trustee of its
members or of another company. In such cases, the company loses its individuality in favour of
its principal. Also, the principal is liable for the acts of such a company.

5] A company formed for fraud or improper conduct or to defeat the law

In cases where a company is formed for some illegal or improper purposes like defeating the
law, the Courts might decide to lift or pierce the corporate veil.

Types of Shares

A share or the proportion of interest of a shareholder is equal to the proportion of the amount paid
to the total capital payable to the company. Let us look at the various types of shares a company
can issue – equity shares and preferential shares.

Shares
A share in the share capital of the company, including stock, is the definition of the term ‘Share’.
This is in accordance with Section 2(84) of the Companies Act, 2013. In other words, a share is a
measure of the interest in the company’s assets held by a shareholder. In this article, we will look
at the different types of shares like preferential and equity shares. Further, we will understand
certain definitions and regulations surrounding them.

The Memorandum and Articles of Association of the company prescribe the rights and obligations
of shareholders. Further, a shareholder must have certain contractual and other rights as per the
provisions of the Companies Act, 2013.

Section 44 of the Companies Act, 2013, states that shares or debentures or other interests of any
member in a company are movable properties. Also, they are transferable in the manner prescribed
in the Articles of the company. Further, Section 45 of the Act mandates the numbering of every
share. This number is distinctive. However, if a person is a holder of the beneficial interest in the
share, then this rule does not apply (example: share in the records of a depository).

Kinds of Share Capital

 According to Section 43 of the Companies Act, 2013, the share capital of a company is of two
types:

1. Preferential Share Capital

2. Equity Share Capital
Preferential Share Capital
The preferential share capital is that part of the Issued share capital of the company carrying a
preferential right for:

• Dividend Payment – A fixed amount or amount calculated at a fixed rate. This might/might
not be subject to income tax.
• Repayment – In case of a winding up or repayment of the amount of paid-up share capital,
there is a preferential right to the payment of any fixed premium or premium on any fixed
scale. The Memorandum or Articles of the company specifies the same.
Equity Share Capital – Equity Shares
All share capital which is NOT preferential share capital is Equity Share Capital. Equity shares are
of two types:

1. With voting rights

2. With differential rights to voting, dividends, etc., in accordance with the rules.
In 2008, Tata Motors introduced equity shares with differential voting rights – the ‘A’ equity
shares. According to the issue,

• Every 10 ‘A’ equity shares have one voting right

• ‘A’ equity shares get 5 percentage points more dividend than the ordinary shares.
Due to the difference in voting rights, the ‘A’ equity shares traded at a discount to ordinary shares
with complete voting rights.
 Deeming of Capital as Preferential Capital
In certain cases, capital is deemed as preferential capital even though it is entitled to either or both
of the following rights:

1. For dividends, apart from the preferential rights to amounts specified above, it can participate
(fully or to a certain extent) with capital not entitled to the preferential rights.
2. In case of a winding up, apart from the preferential right of the capital amounts specified
above, it can participate (fully or to a certain extent), with capital not entitled to preferential
rights in any surplus remaining after repaying the entire capital.
Remember, Section 43 is not applicable to private companies if the Memorandum or Articles of
Associates specifies it.

Doctrine of Ultra Vires

A Memorandum of Association of a company is a basic charter of the company. It is a binding

document which describes the scope of the company among other things. If a company departs
from its MOA such an act is ultra vires. Let us further understand the Doctrine of Ultra Vires.

The Doctrine of Ultra Vires

The Doctrine of Ultra Vires is a fundamental rule of Company Law. It states that the objects of a
company, as specified in its Memorandum of Association, can be departed from only to the extent
permitted by the Act. Hence, if the company does an act, or enters into a contract beyond the
powers of the directors and/or the company itself, then the said act/contract is void and not legally
binding on the company.

The term Ultra Vires means ‘Beyond Powers’. In legal terms, it is applicable only to the acts
performed in excess of the legal powers of the doer. This works on an assumption that the powers
are limited in nature. Since the Doctrine of Ultra Vires limits the company to the objects specified
in the memorandum, the company can be:

• Restrained from using its funds for purposes other than those specified in the Memorandum
• Restrained from carrying on trade different from the one authorized.
The company cannot sue on an ultra vires transaction. Further, it cannot be sued too. If a company
supplies goods or offers service or lends money on an ultra vires contract, then it cannot obtain
payment or recover the loan.

However, if a lender loans money to a company which has not been extended yet, then he can stop
the company from parting with it via an injunction. The lender has this right because the company
does not become the owner of the money as it is ultra vires to the company and the lender remains
the owner.

Further, if the company borrows money in an ultra vires transaction to repay a legal loan, then the
lender is entitled to recover his loan from the company.
 Sometimes an act which is ultra vires can be regularized by the shareholders of the company. For
example,

• If an act is ultra vires the power of directors, then the shareholders can ratify it.
• If an act is ultra vires the Articles of the company, then the company can alter the Articles.
Remember, you cannot bind a company through an ultra vires contract. Estoppel, acquiescence,
lapse of time, delay, or ratification cannot make it ‘Intravires’.

Summing up the Doctrine of Ultra Vires

1. An act, legal in itself, but not authorized by the object clause of the Memorandum of
Association of a company or statute, is Ultra Vires the company. Hence, it is null and void.
2. An act ultra vires the company cannot be ratified even by the unanimous consent of all
shareholders.
3. If an act is ultra vires the directors of a company, but intra vires the company itself, then the
members of the company can pass a resolution to ratify it.
4. If an act is Ultra Vires the Articles of Association of a company, then the same can be ratified
by a special resolution at a general meeting.

The Flip-side

While the main advantage of the Doctrine of Ultra Vires is the protection of shareholders and
creditors, it has disadvantages too. This doctrine prevents the company from changing its activities
in a direction agreed by all members. Further, a special resolution can alter the object clause of the
Memorandum. This defeats the core purpose of the doctrine.

Classification of Capital

The word ‘Capital’ has different meanings in different professions and contexts. If a company is
limited by shares, then the term capital means share capital. Let us see the various classifications of
capital like nominal capital. paid up capital etc.

Capital
In simple words, the total contributions made by people to the common stock of the company is the
capital of the company. Further, a share is the proportion of the capital to which each member has
entitlement. Remember, a share is not an amount of money. It is an interest including different
rights in the contract.

In this article, we will look at five ways in which the term capital is used in Company Law:
nominal capital, issued capital, subscribed capital, called up capital and paid up capital.

Nominal or Authorized or Registered Capital

Section 2(8) of the Companies Act, 2013, defines Nominal Capital as the amount of capital that the
Memorandum of the company authorizes as the share capital of the company. Hence, it is the
registered amount authorized that can be raised by issuing shares.

The company also pays stamp duty in this amount. Typically, you can calculate nominal capital by
taking into consideration the working and reserve capital needs of the company.

Issued Capital

Issued capital is a part of the Authorized capital, offered by the company for the subscription. This
includes the allotment of shares. Section 2(50) of the Companies Act, 2013, offers this definition.
Further, it is mandatory for companies to disclose its issued capital in the balance sheet (Schedule
III of the Act).

Subscribed Capital

Section 2(86) of the Companies Act, 2013, defines Subscribed capital as the part of the capital
being subscribed by the members of the company. It is the number of shares that the public takes.

Further, if the company states Authorized Capital in any communication like notice, advertisement,
official/business letter, etc., then it has to also specify subscribed and paid up capital in equally
conspicuous characters.

Also, Section 60 of the Act specifies that defaulters in this regard, the company and all officers
who default, will be fined around Rs. 10,000 and Rs. 5,000 respectively.

Called up Capital

According to Section 2(15) of the Companies Act, 2013, Called up Capital is the part of the capital
which the company calls for payment. This is the total amount that the company calls-up on the
issued shares.

Paid Up capital

Paid up capital is the part of called up capital actually paid or credited by shareholders on the
issued shares. Mathematically, Paid up capital = Called up capital – Calls in Arrears.

Paid up capital represents the money that the company has not borrowed. Also, it is the total
amount of money that the company receives from shareholders in exchange for shares of stock.

Registration and Incorporation of a Company

The Companies Act, 2013 details the regulations and company registration papers essential for the
incorporation of a company. In this article, we will understand all such rules and documents listed
in the Act. To begin with, let’s define the promoters of a company.

Promoters
 Section 2(69) of the Companies Act, 2013, defines promoters as an individual who:-

• Is named as a promoter in the prospectus or in the annual returns of the company.

• Controls the affairs of a company, directly or indirectly.
• Advises, directs, or instructs the Board of Directors.
Hence, we can say that promoters are people who originally come up with the idea of the company,
form it and register it. However, solicitors, accountants, etc. who act in their professional capacity
are NOT promoters of the company.

Formation of a Company
Section 3 of the Companies Act, 2013, details the basic requirements of forming a company as
follows:

• Formation of a public company involves 7 or more people who subscribe their names to the
memorandum and register the company for any lawful purpose.
• Similarly, 2 or more people can form a private company.
• One person can form a One-person company.

Registration or Incorporation of a Company

Section 7 of the Companies Act, 2013, details the procedure for incorporation of a company. Here
is the procedure:

Filing of company registration papers with the registrar

To incorporate a company, the subscriber has to file the following company registration papers
with the registrar within whose jurisdiction the location of the registered office of the proposed
company falls.

1. The Memorandum and Articles of the company. All subscribers have to sign on the
memorandum.
2. The person who is engaged in the formation of the company has to give a declaration
regarding compliance of all the requirements and rules of the Act. A person named in the
Articles also has to sign the declaration.
3. Each subscriber to the Memorandum and individuals named as first directors in the Articles
should submit an affidavit with the following details:
i. Declaration regarding non-conviction of any offence with respect to the formation,
promotion, or management of any company.
ii. He has not been found guilty of fraud or any breach of duty to any company in the last five
years.
iii. The documents filed with the registrar are complete and true to the best of his knowledge.
4. Address for correspondence until the registered office is set-up.
5. If the subscriber to the Memorandum is an individual, then he needs to provide his full name,
residential address, and nationality along with a proof of identity. If the subscriber is a body
corporate, then prescribed documents need to be provided.
6. Individuals mentioned as subscribers to the Memorandum in the Articles need to provide the
details specified in the point above along with the Director Identification Number.
7. The individuals mentioned as first directors of the company in the Articles must provide
particulars of interests in other firms or bodies corporate along with their consent to act as
directors of the company as per the prescribed form and manner.

Issuing the Certificate of Incorporation

Once the Registrar receives the information and company registration papers, he registers all
information and documents and issues a Certificate of Incorporation in the prescribed form.

Corporate Identity Number (CIN)

The Registrar also allocates a Corporate Identity Number (CIN) to the company which is a distinct
identity for the company. The allotment of CIN is on and from the company’s incorporation date.
The certificate carries this date.

Maintaining copies of Company registration papers

The company must maintain copies of all information and documents until dissolution.

Furnishing false information at the time of incorporation

During the formation of a company, an individual can:

• Furnish incorrect or false information

• Suppress any material information in the documents provided to the Registrar for the
incorporation, on purpose
In such cases, the individual is liable for action for fraud under section 447.

The company is already incorporated based on false information

If a company is already incorporated but it is found at a later date that the information or
documents submitted were false or incorrect, then the promoters, first directors, and persons
making a declaration is liable for action for fraud under section 447.

Order of the National Company Law Tribunal (NCLT)

If a company is incorporated by furnishing false or incorrect information or representation or

suppressing material facts or information in the documents furnished, the Tribunal can pass the
following orders (if an application is made and the Tribunal is satisfied with it):
• Pass an order to regulate the management of the company. It can include changes in its
Memorandum and Articles if required. This order is either in public interest or in the interest
of the company and its members and creditors.
• Make the liability of its members unlimited
• Order removal of the name of the company from the Registrar of Companies
• Order the company to wind-up
• Pass any other order as it deems fit
Before passing an order, the Tribunal has to give the company a reasonable opportunity to state its
case. Also, the Tribunal should consider the transactions of the company including obligations
contracted or payment of any liability.

Effect of Registration of a Company

 According to Section 9 of the Companies Act, 2013, these are the effects of registration of a
company:

• From the date of incorporation, the subscribers to the Memorandum and all subsequent
members of the company are a body corporate.
• A registered company can exercise all functions of a company incorporated under the Act.
Also, the company has perpetual succession with power to acquire, hold, and dispose of
property of all forms. Also, it can contract, sue and be sued by the said name.
• Further, the company becomes a legal person separate from the incorporators from the date of
incorporation. Also, a binding contract comes into existence between the company and its
members as mentioned in the Memorandum and Articles of Association. Until the company
dissolves or the Registrar removes it from the register, it has perpetual existence.

Preferential Allotment of Shares

As per Companies Act, 2013, a Company can raise funds via right issue, preferential allotment,
employee stock option plans and sweat equity shares. However, the best way to raise funds for
an unlisted Company is by way of preferential allotment of shares. Section 62 along with Rule
13 of the Companies (Share Capital and Debentures) Rules, 2014 and Section 42 along with Rule
14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014 prescribes the
procedure and provisions for preferential allotment of shares.

The basic difference between Section 62 of the Companies Act, 2013 i.e. preferential allotment
and Section 42 of the Companies Act, 2013 i.e. private placement is that Section 62 deals with
allotment of shares only whereas Section 42 deals with allotment of securities [as defined in
Securities Contract (Regulation) Act, 1956] as well. Comprehensively, when we issue shares
both the sections needs to be complied with whereas when we issue securities only the
provisions of Section 42 needs to be complied with. Further, in this article, we shall discuss
about the procedure for issuance and allotment of shares on preferential basis.

Debentures

The definition of a debenture is a long-term bond issued by a company, or an unsecured loan

that a company issues without a pledge of assets. An interest-bearing bond issued by a power
company is an example of a debenture.

Types of Debenture
1. Secured and Unsecured:
Secured debenture creates a charge on the assets of the company, thereby mortgaging the assets of
the company. Unsecured debenture does not carry any charge or security on the assets of the
company.
 2. Registered and Bearer:
A registered debenture is recorded in the register of debenture holders of the company. A regular
instrument of transfer is required for their transfer. In contrast, the debenture which is transferable
by mere delivery is called bearer debenture.

3. Convertible and Non-Convertible:

Convertible debenture can be converted into equity shares after the expiry of a specified period. On
the other hand, a non-convertible debenture is those which cannot be converted into equity shares.

4. First and Second:

A debenture which is repaid before the other debenture is known as the first debenture. The second
debenture is that which is paid after the first debenture has been paid back.

Advantages and Disadvantages of Debentures

Advantages of Debentures

• Investors who want fixed income at lesser risk prefer them.

• As a debenture does not carry voting rights, financing through them does not dilute control of
equity shareholders on management.
• Financing through them is less costly as compared to the cost of preference or equity capital
as the interest payment on debentures is tax deductible.
• The company does not involve its profits in a debenture.
• The issue of debentures is appropriate in the situation when the sales and earnings are
relatively stable.

Disadvantages of Debentures

• Each company has certain borrowing capacity. With the issue of debentures, the capacity of a
company to further borrow funds reduces.
• With redeemable debenture, the company has to make provisions for repayment on the
specified date, even during periods of financial strain on the company.
• Debenture put a permanent burden on the earnings of a company. Therefore, there is a greater
risk when the earnings of the company fluctuate

Essentials of a Valid Meeting

Company Law

Requisites of a Valid Meeting

If the business transacted at a meeting is to be valid and legally binding, the meeting itself must
be validly held. A meeting will be considered to be validly held, if:
a) It is properly convened by proper authority.
b) Proper notice must be served. (Sec. 101 and Sec. 102 of the Companies Act, 2013)
c) Proper quorum must be present in the meeting. (Sec. 103 of the Companies Act, 2013)
d) Proper chairman must preside the meeting. (Sec. 104 of the Companies Act, 2013)
e) Business must be validly transacted at the meeting.
f) Proper minutes of the meeting must be prepared. (Sec. 118 and 119 of the Companies Act,
2013)

Proper Authority to Convene Meeting: A meeting must be convened or called by a proper

authority. Otherwise it will not be a valid meeting. The proper authority to convene general
meetings of a company is the Board of Directors. The decision to convene a general meeting and
issue notice for the same must be taken by a resolution passed at a validly held Board meeting.

Notice of Meetings: A meeting in order to be valid must be convened by a proper notice issued
by the proper authority. It means that the notice convening the meeting be properly drafted
according to the Act and the rules, and must be served on all members who are entitled to attend
and vote at the meeting. For general meeting of any kind at least 21days notice must be given to
members. A shorter notice for Annual General Meeting will be valid, if all members entitled to
vote give their consent. The number of days in each case shall be clear days, i.e. the days must be
calculated excluding the day on which the notice is issued, a day or so for postal transit, and the
day on which the meeting is to he held. Every notice of meeting of a company must specify the
place and the day and hour of the meeting, and shall contain a statement of the business to be
transacted thereat.

Quorum of Meetings: Quorum is the minimum number of members who must be present at a
meeting as required by the rules. Any business transacted at a meeting without a quorum is
invalid. The main purpose of having a quorum is to avoid decisions being taken at a meeting by a
small minority which may be found to be unacceptable to the vast majority of members. The
number constituting a quorum at any company meeting is usually laid down in the Articles of
Association. In the absence of any provision in the Articles, the provisions as to quorum laid
down in the Companies Act, 2013 (under Sec.103) will apply. Sec. 103 of Companies Act
provides that the quorum for general meetings of shareholders shall be five members personally
present in case of a public company if the number of members as on the date of meeting is upto
1000, 15 quorum if number of members as on the date of meeting is more than 1000 but upto
5000 and if number of member exceeds 5000 than 30 quorum is required; and two members
personally present for any private company or articles may provide otherwise.

Chairman of a Meeting: ‘Chairman’ is the person who has been designated or elected to
preside over and conduct the proceedings of a meeting. He is the chief authority in the conduct
and control of the meeting.
Agenda of Meetings: The word ‘agenda’ literally means ‘things to be done’. It refers to the
programme of business to be transacted at a meeting. Agenda is essential for the systematic
transaction of the business of a meeting in the proper order of importance. It is customary for all
organisations to send an agenda along with the notice of a meeting to all members. The business
of the meeting must be conducted in the same order in which the items are placed in the agenda
and the order can be varied only with the consent of the meeting.

Minute: Minute of a meeting contains a fair and correct summary of the proceedings of a
meeting. Minutes must be prepared and signed within 30 days of the conclusion of the meeting.
The minute books of meetings must be kept at the registered office of the company or at such
other place as may be approved by the board.
Proxy: The term ‘proxy’ is used to refer to the person who is nominated by a shareholder to
represent him at a general meeting of the company. It also refers to the instrument through which
such a nominee is named and authorised to attend the meeting

What are resolutions?

A resolution is a legally binding decision made by limited company directors or shareholders. If

a majority vote is achieved in favour of the decision, a resolution is ‘passed’. Shareholders can
pass ordinary resolutions or special resolutions at general meetings, or they can pass written
resolutions. All types of collective decisions of directors are simply referred to as ‘resolutions’.
These decisions can be made at board meetings or in writing.

Types of resolutions

There are 3 types of resolutions available to limited company shareholders:

 • Ordinary resolutions – Passed by a simple majority of shareholders’ votes. Used for all
matters, unless the Companies Act, the articles of association, and/or a shareholders’
agreement stipulates the need for a special resolution. The majority of ordinary
resolutions must be filed with Companies House.

• Special resolutions – Passed by a 75% majority of shareholders’ votes at a general

meeting. Used for extraordinary matters that cannot be passed by an ordinary resolution.

• Written resolutions – Used when a general meeting is not required to pass an ordinary
resolution or special resolution. Any written ordinary resolution must be passed by a
simple majority of shareholders’ votes; written special resolutions require a 75% majority
vote. Shareholders must sign a written resolution to cast their votes.

What decisions require an ordinary resolution?

An ordinary resolution is passed if a simple majority (above 50%) of the votes cast are in favour
of the resolution. This type of resolution can be used by shareholders and directors for all day-to-
day matters, such as:

• Appointing and removing directors.

• Appointing and removing secretaries.

• Matters pertaining to directors’ employment contracts.

• Amending directors’ powers.

• Approving dividend payments.

• Authorising directors’ loans.

• Authorising the transfer of shares.

The types of decisions that company directors can make will depend on the powers they are
granted by the shareholders. Their rights and powers will be outlined in the articles of association
and shareholders’ agreement.

Do I need a company secretary?

What is a special resolution?

In the context of limited companies, a special resolution is a motion or proposal that requires the
approval of at least 75% of shareholder votes. This kind of resolution is reserved for important
and rare decisions, such as:

• Changing a company name.

 • Reducing share capital.

• Allotting more shares.

• Issuing different share classes.

• Altering the articles of association.

• Removing pre-emption rights.

• Re-registering a company.

• Changing a private company to a public company, or vice versa.

• Winding up a company by members’ voluntary liquidation.

The Companies Act 2006 specifies the types of decisions requiring a special resolution. Where
no type of resolution is specified, shareholders may pass an ordinary resolution with a simple
majority of over 50% of the votes.

How to pass a special resolution

In order to pass a special resolution, 14 days’ notice must be given to all members about the
proposed resolution and its intention, unless the Articles states otherwise. If a general meeting is
held, a vote will be taken by a show of hands or using a poll. Alternatively, these decisions can
be passed by written resolution. If 75% of the shareholders agree to pass a proposed resolution,
the decision is legally binding in accordance with the Companies Act 2006.

Special resolutions must be delivered to Companies House by post within 15 days of being
passed. A copy must also be given to all shareholders and the company auditor. Furthermore, a
company must keep a copy of all resolutions at its registered office address or SAIL address for a
minimum period of 10 years.

Managerial Persons covered are Managing Director, Whole-time Director, Part time
Directors and managers who shall be paid remuneration subject to and in accordance with
provisions of Section 197 of the Companies Act, 2013. As compared to various sections and
chapters viz section 198, 309, etc of Companies Act, 1956 which deals with Managerial
remunerations separately, the new Act has solved this issue by consolidating all provisions under
a single provision of 197.
APPLICABILITY OF PROVISIONS TO WHOM:

Section 196 deals with appointment of Managerial Personnel an d is applicable to private

companies and public companies both while section 197 which deals with remuneration payable
to managerial personnel is applicable to public companies only. Schedule V is partly applicable
to private companies (i.e. in relation to Part I that deals with appointment) and partly not
applicable to private companies (i.e. Part II that deals with remuneration)

DEFINITION AND COMPOSITION OF WORD MANAGERIAL REMUNERATION :

The managerial remuneration shall be payable to a person appointed within the meaning of
section 196 of the Companies Act, 2013. Under the Companies Act, 2013 the provisions of
payment of managerial remuneration are governed by Section 197, 198,199 and Schedule V. The
word remuneration is defined under section 2 (78) of Companies Act,
2013 which says that “remuneration” means any money or its equivalent given or passed to any
person for services rendered by him and includes perquisites as defined under the Income Tax
Act, 1961. Section 17(2) of Income Tax Act, 1961 has given an inclusive definition of the term
“perquisite”. This clause comprises of eight sub-clauses followed by two provisos,and they deal
with the following perquisites:

1. Value of rent-free accommodation provided to the assessee by his employer.

2. Value of any concession in respect of rent respecting any accommodation provided to the
assessee by his employer.

3. The value of any benefit or amenity granted or provided free of cost or at a concessional rate
to employee directors; or to employees who have substantial interest and certain specified
employees with some exceptions.

4. Sums paid by the employer in respect of any obligation which, but for such obligation, would
have been payable by the assessee.

5. Sums payable by the employer to effect an assurance on the life of the assessee– employee or
to effect a contract for an annuity.

6. W.E.F assessment year 2010-11, value of securities / sweat equity shares allotted or
transferred by the employer or former employer to the employee.

7.W.E.F assessment year 2010-11 a contribution made by an employer to an approved

superannuation fund to the extent it exceeds Rs 1 lakh.

8. Value of any other fringe benefit or amenity as may be prescribed.

9. The first proviso states that certain medical benefits are not treated as perquisites in certain
specific situations.

Any expenditure incurred by the Company to affect any insurance on the life of, or to provide
any pension, annuity or gratuity for, any of the persons aforesaid or spouse or child shall be
included in managerial remuneration.

We can say that definition of remuneration as well as perquisites are inclusive in nature and
hence it covers every amount that the company pays or spends for or for the benefit of a
Director, in whatever form and by whatever name.

Moreover, any remuneration for services rendered by any such director which are of professional
nature shall not be included in the managerial remuneration. Further, a director may receive
remuneration by way of a fee for each meeting of the Board, or a committee thereof attended by
him.

Where if insurance is taken by a company on behalf of its Key Managerial Personnel for
indemnifying against any liability in respect of any negligence, default, misfeasance, breach of
duty or breach of trust for which they may be guilty in relation to the company, the premium
paid on such insurance shall not be treated as part of remuneration. But if such Key Managerial
Personnel is found guilty then such insurance shall be treated as income part of remuneration.

If a manager or any director enjoys benefit or amenity without the company incurring any
expenditure therefor , such benefit or amenity may not be included in the managerial
remuneration.
An Independent director shall not be entitled to receive stock option. However, in case of other
directors, Stock options would be part of remuneration.

THREE WAYS TO MANAGERIAL REMUNERATION:

1.
Automatic Route by Profits.

2. Shareholders’ Approval Route for more.

3. Shareholders’ and Central Government for even more.

REMUNERATION ALLOWED TO MANAGERIAL PERSON:

Section 197 of the Companies Act, 2013 provides a way to pay managerial remuneration in case
of Company’s having adequate profits. A Public Company can pay remuneration to its directors
including Managing Director s and Whole-time Directors, and its managers which shall not
exceed 11% of the net profit as calculated in a manner laid down in section 198 of the
Companies Act, 2013. Wherein a Company in which there is one Managing Director; Whole-
time Director or manager the remuneration to be payable shall not exceed 5% of net profits and
where there are more than one of such Directors remuneration payable shall not exceed 11 % of
the net profit.
MAXIMUM REMUNERATION PAYABLE BY A COMPANY TO ITS MANAGERIAL
PERSONNEL:

If a Company wants to pay remuneration in excess of the above limit payable then a Company
shall have to follow Schedule V of the Companies Act, 2013.

Part II of Schedule V (earlier Schedule XIII) – Remuneration Payable by a company in case

where is no profit or inadequacy of profit without central government is detailed below

A company with inadequate profit may pay to its managing director or whole-time director 200%
of the above mentioned managerial remuneration if shareholders have given their approval
through a special resolution.

Where the managerial person who is not holding Rs 5 lacs worth of shares or more or an
employee or a director of the company not related to any director or promoter at any time during
the two years prior to his appointment as a managerial person, In such cases, the company can
pay to him up to maximum of 2.5% of the “current relevant profits” and up to 5% with the
approval of shareholders by a special resolution.

For the purpose of this section, “current relevant profit” means profit calculated under section
198 but without deducting the excess of expenditure over income as defined in section 4(1) of
section 198 relating to all usual working charges in respect of those years during which the
managerial person was not an employee, director or shareholder of the company or its holding
and subsidiary companies.

However, Section IV Part II of Schedule V states that a managerial person shall be eligible for
the following perquisites which shall not be included in the computation of the ceiling on
remuneration specified in Section II and Section III:—

(a) Contribution to provident fund, superannuation fund or annuity fund to the extent these either
singly or put together are not taxable under the Income-tax Act, 1961 (43 of 1961);

(b) Gratuity payable at a rate not exceeding half a month’s salary for each completed year of
service; and

(c) Encashment of leave at the end of the tenure.

Looking at clause (a) above, it is clear that any contribution made to provident fund,
superannuation fund or annuity fund in excess of taxable limits under IT Act, 1961 shall not be
included for the purpose of calculation of managerial remuneration in the event of inadequate
profits or nil profits. The law herein clearly prescribes what value of perquisites shall not be
considered as part of remuneration in cases of inadequate profits. Further, had the intent of law
been to include only taxable amount of perquisites in the definition of ‘remuneration’ under
section 2(78), then this clause would have been rendered meaningless. Thus, one can safely
presume that where the intent was to specifically cover taxable value of perquisites law has been
drafted clearly.

Therefore, to conclude, for the purpose of calculation of remuneration:

i. in the event of adequacy of profits – the entire value of perquisites as per IT Act, 1961 will
have to be considered.

ii. in the event of inadequacy of profits of nil profits – only the taxable amount of perquisites
should be considered. This is relevant only in case of managerial person.

While an expatriate managerial person shall be eligible for the following which shall not be
considered in the definition of remuneration under Schedule V:

a) Children’s education allowance

b) Holiday package studying outside India or family staying outside India

c) Leave travel concession

If any of such directors receive any amount in excess of limits mentioned under the provisions of
the Act, he shall refund such sums to the company and until such sum is refunded, hold it in trust
for the company.

Further, if a Company wants to pay remuneration exceeding Schedule V of the Act then it shall
require a Central Government approval.

Section 197 of the Company Act 2013 also does not bar a managing or whole-time director of a
company to receive compensation from its holding company or subsidiary provided the same
should be disclosed in the director’s report.

Meaning of Effective Capital:

For the purpose of Section 197 of Companies Act’2013, the term “Effective Capital” means:

• The aggregate of paid up share capital (excluding share application money pending
allotment),
• Share premium,
• Reserves and Surplus excluding Revaluation Reserve,
 • Long term loans and deposits repayable after one year, as reduced by –
• The aggregate of investments (except investments made by an investment company
whose principal business is dealing in shares, stocks, debentures or any other securities),
• Accumulated losses, and
• Preliminary expenses not written off

This is also important to know as to when the effective capital should be calculated for the
purpose of payment of managerial remuneration. In this regard, the following should be noted:

1. If the appointment of managerial person is made in the year in which the company is
incorporated, then the effective capital should be calculated on the date of appointment of such
managerial person.

2. In case other than above, the effective capital should be calculated on the last day of the
Financial Year immediately preceding the Financial Year in which the appointment of
managerial person is made.

PROFIT OR INADEQUATE PROFIT IN SPECIAL CIRCUMSTANCES –

In certain special circumstances, a company suffering from no profit or inadequate profit may
pay managerial remuneration in excess of limits specified in Section II above and that too
without the approval of Central Government. Those circumstances are specified below:

1. The company paying managerial remuneration in excess of maximum specified limits is either
a foreign company or a company who has got approval of its shareholders in this regard and
the total managerial remuneration payable by such company is within the permissible limits of
Section 197 of Companies Act’2013.

2. Where the company is:

• A newly incorporated company and is in existence for last seven years from the date of
its incorporation, or
• A sick company in respect of which a scheme for revival and rehabilitation has been
ordered by BIFR or NCLT for a period of five years from the date of sanction of revival
scheme
• It may pay managerial remuneration up to two times of the amount specified in Section
II, given above.

3. Where such excess managerial remuneration is fixed by BIFR or NCLT, subject to fulfilment
of certain additional conditions apart from that given in Section 197 of Companies Act’2013

RESTRICTION ON INDEPENDENT DIRECTOR:

Section 197(5) of the Act 2013 specifically permits different fees to be paid to Independent
Directors, there is no such enabling provision with respect to profit related commission. This
means profit related commission may be paid uniformly to all non-executive directors. A
company may pay such commission within the limit of 1% or 3% of the net profits, as the case
may be. Further, Independent Directors cannot be granted stock options.

A company in or resident in India, to make payment in rupees to its non WTD who is resident
outside India and is on visit to India for the company’s work and is entitled to payment of sitting
fees or commission or remuneration, and travel expenses to and from and within India, in
accordance with the provisions contained in the company’s MOA & AOA or in agreement
entered into by it or in any resolution passed by the company in general meeting or by Board,
provided the requirements of any law, rules, regulations, directions applicable for making such
payments are duly complied with.

MINIMUM REMUNERATION IN CASE OF LOSSES DURING THE TENURE OF

MANAGERIAL PERSONNEL:

According to Departmental Clarification regarding amendments made by the Companies

(Amendment) Act, 1988 as revised w.e.f. 1993, the Approval of Central Government shall not be
required in case of loss or inadequacy of profit during the tenure of Managerial Person were the
appointment was made and minimum remuneration paid was strictly in accordance with
Schedule XIII of the 1956 Act.

DEVALUATION AND MANAGERIAL REMUNERATION:

A non-resident Indian may occupy the position of managerial person in certain companies, it has
been examined by foreign exchange, taxation, Company Law and other aspects and was
accordingly decided as a matter of policy that, in case of devaluation of currency there was a
need to compensate such non-resident managerial persons to maintain these remittances at the
pre-devaluation level and such increase in remuneration is allowed even if the resultant increased
remuneration exceeds the statutory limits imposed by the Companies Act.

REMUNERATION PAYABLE TO A MANAGERIAL PERSON IN TWO COMPANIES:

Subject to the provisions of sections I to IV, a managerial person shall draw remuneration from
one or both companies, provided that the total remuneration drawn from the companies does not
exceed the higher maximum limit admissible from any one of the companies of which he is a
managerial person.

PENALTY CLAUSES:

If any person contravenes the provisions of the section 197, he shall be punishable with fine
which shall not be less than one lakh rupees and may extend to five lakhs rupees If a company or
any officer of a company or any other person contravenes any of the provisions of this Act or the
rules made there under, the company and every officer of the company who is in default or such
other person shall be punishable with fine which may extend to ten thousand rupees, and where
the contravention is continuing one, with a further fine which may extend to one thousand rupees
for every day after the first during which the contravention continues.
Companies Act 2013

One Person Company

The Companies Act, 2013 completely revolutionized corporate laws in India by introducing
several new concepts that did not exist previously. On such game-changer was the introduction
of One Person Company concept. This led to the recognition of a completely new way of starting
businesses that accorded flexibility which a company form of entity can offer, while also
providing the protection of limited liability that sole proprietorship or partnerships lacked.

Several other countries had already recognized the ability of individuals forming a company
before the enactment of the new Companies Act in 2013. These included the likes of China,
Singapore, UK, Australia, and the USA.

Definition of One Person Company

Section 2(62) of Companies Act defines a one-person company as a company that has only one
person as to its member. Furthermore, members of a company are nothing but subscribers to its
memorandum of association, or its shareholders. So, an OPC is effectively a company that has
only one shareholder as its member.

Such companies are generally created when there is only one founder/promoter for the business.
Entrepreneurs whose businesses lie in early stages prefer to create OPCs instead of sole
proprietorship business because of the several advantages that OPCs offer.

Difference between OPCs and Sole Proprietorships

A sole proprietorship form of business might seem very similar to one-person companies
because they both involve a single person owning the business, but they’re actually exist some
differences between them.

The main difference between the two is the nature of the liabilities they carry. Since an OPC is a
separate legal entity distinguished from its promoter, it has its own assets and liabilities. The
promoter is not personally liable to repay the debts of the company.

On the other hand, sole proprietorships and their proprietors are the same persons. So, the law
allows attachment and sale of promoter’s own assets in case of non-fulfilment of the business’
liabilities.

Features of a One Person Company

Here are some general features of a one-person company:

 a. Private company: Section 3(1)(c) of the Companies Act says that a single person can
form a company for any lawful purpose. It further describes OPCs as private companies.

b. Single member: OPCs can have only one member or shareholder, unlike other private
companies.

c. Nominee: A unique feature of OPCs that separates it from other kinds of companies is
that the sole member of the company has to mention a nominee while registering the
company.

d. No perpetual succession: Since there is only one member in an OPC, his death will
result in the nominee choosing or rejecting to become its sole member. This does not
happen in other companies as they follow the concept of perpetual succession.

e. Minimum one director: OPCs need to have minimum one person (the member) as
director. They can have a maximum of 15 directors.

f. No minimum paid-up share capital: Companies Act, 2013 has not prescribed any
amount as minimum paid-up capital for OPCs.

g. Special privileges: OPCs enjoy several privileges and exemptions under the Companies
Act those other kinds of companies do not possess.

Formation of One Person Companies

A single person can form an OPC by subscribing his name to the memorandum of association
and fulfilling other requirements prescribed by the Companies Act, 2013. Such memorandum
must state details of a nominee who shall become the company’s sole member in case the
original member dies or becomes incapable of entering into contractual relations.

This memorandum and the nominee’s consent to his nomination should be filed to the Registrar
of Companies along with an application of registration. Such nominee can withdraw his name at
any point in time by submission of requisite applications to the Registrar. His nomination can
also later be canceled by the member.

Membership in One Person Companies

Only natural persons who are Indian citizens and residents are eligible to form a one-person
company in India. The same condition applies to nominees of OPCs. Further, such a natural
person cannot be a member or nominee of more than one OPC at any point in time.

It is important to note that only natural persons can become members of OPCs. This does not
happen in the case of companies wherein companies themselves can own shares and be
members. Further, the law prohibits minors from being members or nominees of OPCs.
Conversion of OPCs into other Companies

Rules regulating the formation of one-person companies expressly restrict the conversion of
OPCs into Section 8 companies, i.e. companies that have charitable objectives. OPCs also cannot
voluntarily convert into other kinds of companies until the expiry of two years from the date of
their incorporation.

Privileges of One Person Companies

OPC enjoy the following privileges and exemptions under the Companies Act:

• They do not have to hold annual general meetings.

• Their financial statements need not include cash flow statements.

• A company secretary is not required to sign annual returns; directors can also do so.

• Provisions relating to independent directors do not apply to them.

• Their articles can provide for additional grounds for vacation of a director’s office.

• Several provisions relating to meetings and quorum do not apply to them.

• They can pay more remuneration to directors than compared to other companies.

Difference between Companies Act 2013 vs Companies Act 1956

Sl Point Companies Act 2013 Companies Act 1956

No
1 Financial Year Companies must have their financial Companies were permitted to
year ending on 31 Mar every year have financial year ending on a
date decide by Company
2 Formats of Schedule III Schedule VI
Financial
Statement
3 Maximum No of As per rules, subject to Max 10 in banking business and 20
Partners 100.currently is 50 . in any other business.
4 Max 200 excluding past and present 50 excluding past and present
Shareholders in employees employees
Pvt Ltd
Company
5 One Person Company which has only one person Did not exist
Company (OPC) (natural person) as its member
6 Issue of Share at Section 53 prohibits issue of shares at a Section 79 permitted issue of
discount discount However, Section 54 permits shares at a discount.
issue of ESOPs to its employees at a
discount.
8 Security Utilisation of Securities Premium Utilisation of Securities Premium
Premium Reserve is provided in Section 52(2) Reserve was provided in Sec 77A
Reserve and 78
9 Article of Table F applies where Companies Table A applied where
Association Limited by shares does not adopt their Companies did not adopt their
own Articles of Association. own Articles of Association.
10 Interest in Calls In the absence of a clause in the In the absence of a clause in the
in Arrears Articles of Association, the maximum Articles of Association,
interest chargeable on Calls-in-arrears maximum interest chargeable
is 10% p.a. on Calls-in-arrears was 5% p.a.
11 Interest in Calls In the absence of a clause in the In the absence of a clause in the
in Advance Articles of Association, the maximum Articles of Association, the
interest payable on Calls-in-advance is maximum interest payable on
12% p.a. Calls-in-advance was 6% p.a.
12 Minimum Sec39 a company shall not allot Sec 69 the requirement of
Subscription Securities unless the amount stated in minimum subscription was with
the prospectus as minimum respect to Shares only
subscription has been subscribed & the
sum paid