CORPORATE REGULATIONS (B.

COM/ BBA)
Module I (Introduction to companies Act 2013)
Objectives of Indian Companies Act, 2013
 To protect the interest of investors.
 To put strict restriction on insider trading.
 To provide merger, amalgamation and takeover.
 To facilitate ease of doing business.
 To promote CSR activities.
 To improve corporate law.
 To promote standard and transparency of corporate governance.
 To introduce flexibility and simplicity in formation of companies.
 To create National company law tribunal and National Company law
appellate tribunal.
 To introduce one person company, small company and dormant
company.
 To create National financial reporting authority.
Salient features of Companies Act, 2013
 One Person Company
 Corporate social responsibility
 National company law tribunal
 Class action suits
 Cross-border mergers
 Prohibition of insider trading
 Strict rules for auditors
 Financial year
 Composition of board
 Entrenchment provision in articles
 Duties of directors defined
 Maximum number of members is 200 in private companies
 Notice and participation in board meeting
 Company
According to Justice James “a company is an association of a person
united for common object”.
Characteristics of a company
 Voluntary association of a person.
 A company has perpetual succession.
 A company has separate legal entity.
 The liability of a members of a company is limited.
 A company has common seal.
 It is an artificial person created by law.
 It is managed by the board of directors.
 The shares of company are freely transferable.
Types/ Kinds/ Classification of companies
On the basis of On the basis On the basis On the basis of On the basis On the Other types
incorporation of liabilities of number of ownership of control basis of of
members nationality companies
Chartered Companies Private Government Holding National Small
companies limited by Company companies companies companies company
shares
Statutory Companies Public Non- Subsidiary Foreign Defunct
companies limited by company government companies companies company
guarantee companies
Registered Unlimited One person Dormant
companies companies company company
 On the basis of incorporation
1. Chartered companies
Chartered companies is a type of company formed by the crown. It is
regulated by charter incorporating, not by companies act.
2. Statutory company
A company formed by a special statute or act passed by the parliament
is known as statutory company.
3. Registered company
The companies formed and registered under the companies act 2013 is
known as registered company.
 On the basis of liability
1. Companies limited by shares
It means a company having liability of its members limited by the
memorandum to the amount.
2. Companies limited by guarantee
A company having liability of its members limited by the memorandum
to such amount as the members may respectively undertake by
memorandum to contribute the assets of the company in the event of
winding up.
3. Unlimited company
An unlimited company is a type of private company. It has some
features of limited company.
 On the basis of number of members
1. Private Company
A company which is formed with a minimum number of 2 persons is
known as private company.
2. Public company
It is not a private company and has a minimum paid up share capital of
five lakh rupees or such higher paid up capital.
3. One Person Company (OPC)
A company which has only one person as member is called one person
company.
 On the basis of ownership
1. Government companies
A public enterprise incorporated under the Indian Companies Act, 2013
is called Government Company.
2. Non-government companies
The list of non-government companies includes those companies which
are registered under the companies act but not as government
companies.
 On the basis of control
1. Holding company
A company it has control over other that companies known as holding
company.
2. Subsidiary company
A company owned or controlled by another company is known as
subsidiary company.
 On the basis on nationality
1. National company
A company formed under a specific company act of nation is known as
national company.
2. Foreign company
A company incorporated outside India is known as foreign company.
 Other forms of companies
1. Small companies
A small company is a company in which paid up share capital does not
exceed fifty lakhs rupees.
2. Defunct companies
A defunct company is a company which have failed to commence its
business of its incorporation.
3. Dormant company
A company which is not active is known as dormant company.
Listed companies
A company its securities is listed on any recognized stock exchange is
known as listed companies.
Associate company
An associate company means a company which has a significant
influence in another company, but which is not subsidiary company of
that company.
Nidhis
Nidhi means a company which has been incorporated with the object of
cultivating the habit of thrift and savings among its members.
Difference between private company and public company
Private Company Public Company
Minimum number of members is Minimum number of members is
two. seven.
Maximum number of members There is no maximum limit.
is two hundred.
Transferability of shares is Shares are freely transferable
restricted.
Number of directors required is There should be at least three
two. directors.
There is no public invitation. Public invitation is allowed.
Private company is not required Public company issue
to issue prospectus. prospectus.
No restriction on remuneration Legal restriction on
of directors. remuneration directors.
Private company enjoys some There is no such privileges for
special privileges. public company.
Corporate Veil
It is a legal decision to treat the rights and duties of a corporation as a
right or liabilities of its shareholders.
Listing or piercing of corporate veil
It refers to a circumstance in which court set aside limited liability and
hold company’s investors or directors personally liable for the
organisations activities or debts.
Causes of lifting the corporate veil
 Under judicial interpretation
 Protection of revenue
 Prevention of fraud
 Determination of enemy character of a company
 Where the company is shame
 Company avoiding legal obligations
 Company acting as an agent or trustee of shareholders
 Avoidance of welfare registration
 Under express statutory provision
 Reduction of number of members below statutory minimum
 Investigation of ownership of companies
 Inspector appointed to investigate the affair of the company

Module II (Promotion)
Promotion
Promotion is the process of organising and planning the finance of a
business under the corporate firm.
Promoter
A promoter is a firm or person who does the preliminary work related
to the formation of a company.
Types of Promoters
 Professional promoters
These promoters take the promotion as their profession. Their interest
is promotion of business, not running of the business.
 Occasional promoters
These promoters takes interest in floating some companies. They are
not engage in promotion work on a regular basis.
 Entrepreneur promoters
They are both promoters and entrepreneurs.
 Financial promoters
A promoter who provides and offer the financial services also is known
as financial promoters.
Function of a promoter
 Discovery of business idea
 Detailed investigation of the project.
 Assembling various factors of production.
 Preparing preliminary documents.
 Entering preliminary documents.
 Naming the companies.
 Appointment of bankers, brokers etc.
Duties of a promoter
 Duty to disclose the secret profit.
 Duty to disclose all the material facts
 Duty to disclose private arrangements
 Duty of promoter against future allotters.
Liabilities of promoter
 Liability to account in profit.
 Liability in the misstatement in the property.
Pre-incorporation contracts
Pre-incorporation contracts are those contracts that are necessary to
run a business or incorporation. Company promotors are makes pre-
incorporation contracts.
Incorporation
Incorporation of a company means a legal procedure that is used to
form a company or legal entity.
Procedure/ process of incorporation
1. Promotion
2. Registration of a company
3. Capital subscription
4. Commencement of business
Documents of companies
1. Memorandum of association
2. Articles of association
3. Prospectus
Memorandum of Association
It is a legal document contains fundamental conditions of a company is
allowed to be incorporated. It contains the relationship between
company and its outsiders.
Contents/ Clauses of memorandum
1. Name clause
2. Situation clause
3. Object clause
4. Liability clause
5. Capital clause
6. Association clause
1. Name clause
The first clause of memorandum state the name of the proposed
company.
2. Situation clause
This clause mention the name of the state in which the registered office
of the company is to be situated.
3. Object clause
This is the most important clause which states the object of the
company.
4. Liability clause
This clause state the nature of liability that the members incurs.
5. Capital clause
This clause states that the capital of the company with which the
company is registered and division of share capital.
6. Association clause
This clause is also known as subscription clause. This clause states that
details of subscribers, shares taken by them etc.
Articles of the Association
Articles of association is a document that defines the purpose of a
company and specifies the regulation for its operations. It is a
document containing rules and regulation framed by the company for
its internal Management.
Contents of articles of association
 The execution of preliminary contracts.
 Share capital and its division.
 Payment of underrating commission.
 Transfer of shares.
 Forfeiture of shares.
 Buyback of shares
 Alteration of capital.
 General meetings
 Capitalization of profits.
 Calls on shares
 Transfer of shares.
 Voting right of shares.
 Adjournment of meetings.
 Seal of the company.
 Books of accounts and audit
 Proxy and their appointment
 Dividend and reserves
 Board of directors
 Proceedings of the board
 Winding up of the company.
Difference between memorandum and articles
Memorandum Articles
It is the main document of the It is the subsidiary document of
company the company.
It is the charter of the company. It is the regulation for internal
management.
It governed by company’s act Articles governed by
only. memorandum and companies
act.
It cannot be altered very easily. It can be altered very easily.
It contains lesser clause. It contain more clause.
It defines object and power of It mention ways and means of
the company. achieving objects in the
memorandum.
It regulates the relationship It regulates the relationship
between company and general between company and
public. members.
Prospectus
Prospectus is a formal document. It is an invitation to offer to subscribe
for shares or debentures in the company.
Types of prospectus
 Red herring Prospectus
It is a prospectus which does not have complete information on the
price and quantum of securities offered.
 Abridged prospectus
It means a memorandum containing salient features of a prospectus as
may be specified by the SEBI by making regulations in this behalf.
Shelf prospectus
It is a type of prospectus which contains all the details regarding
securities being issued such as their prices, maturity date etc.
Deemed prospectus
It is a detailed legal document which contains all information regarding
stocks, shares, securities that a company offers to public.
Statement in lieu of prospectus
It is a document filed with registrar of the companies when the
company has not issued prospectus to the public for inviting them to
subscribe shares.
Mis-statement in prospectus
It means when an untrue or misleading statement included and issued
in the prospectus.
Contents of prospectus
 Name and address of the registered office of the company, company
secretary, chief financial officer, auditors, legal advisors.
 Dates of opening and closing of the issue, and declaration about the
issue of allotment letters.
 A statement of board of directors about the separate bank account.
 Details about underwriting about the issue.
 Consent of the directors, auditors, banks to the issue.
 Authority for the issue and details of the resolution passed.
 Procedure for allotment and issue of securities.
 Time schedule for allotment and issue of securities.
 Capital structure of the company.
 Main objects of the public offer, terms of the present issue.
 Details of directors including their appointment and remuneration.
 Minimum subscription, amount payable by way of premium.
Doctrine of indoor management
It states that the company affairs should be conducted in a manner that
is fair and justice to all the shareholders.
Exceptions of doctrine of indoor management
1. Knowledge of irregularity
2. Negligence on the part of the outsider
3. Forgery
4. No knowledge of articles
5. Acts outside apparent authority
Doctrine of constructive notice
Every person who deals with the company is deemed to know the
contents of memorandum and articles. This is known as doctrine of
constructive notice.
Doctrine of ultravires
Any activity done contrary to or in excess of the article or
memorandum is termed as doctrine of ultravires.
Effects of ultravires
1. Injunction
2. Personal liability of directors
3. Ultravires contracts
4. Property acquired ultravires
5. Ultravires torts
Table A
Table A refers to the model set of 99 articles given in Schedule 1 of the
companies Act.
 Module II (Shares and Share capital)
Share
The capital of a company is divided into small units. Those units are
called share.
Stock
A set of shares put together in a bundle is called stock.
Difference between shares and stock
Shares Stock
It has nominal value It has no nominal value
It has distinctive numbers It has no such number
It is partly or fully paid up It is always fully paid up
It can be issued directly It cannot be issued directly
It transferred in multiple of one It transferred in fractions
Share capital
Share capital refers to funds raised by a company to issue shares to the
general public.
Types/ Classes of share capital
 Registered Capital
The capital with which a company is registered is called registered
capital. It is also known as nominal or authorised capital.
 Issued Capital
It is a part of authorised capital which is issued to the public for
subscription.
 Subscribed Capital
It is a part of issued capital which is subscribed by the public.
 Called up Capital
It is a part of subscribed capital which the directors have called from
the shareholders.
 Paid up capital
It is a part of called up capital which is actually paid up by the
shareholders.
 Reserve capital
It is the amount of the capital which is not called by the company
except in the event of winding up.
Kinds of share capital
1. Equity Share capital
2. Preference Share capital
Equity Share Capital
Shares which are not preference shares are called equity shares. These
are ordinary shares.
Merits of equity shares
 It is a permanent capital. There is no liability for payments.
 It improve creditworthiness of the company.
 There is no capital obligation for payment of dividend.
 Company can strengthen financial base by issuing equity shares.
 Equity shareholders enjoy ownership.
 Reward from equity shares is high.
Preference shares
Preference shares are those shares which carries preferential right with
respect to payment of dividend and repayment of capital.
Merits of preference shares
 It ensure creditworthiness of the company.
 Shareholders earn a stable dividend rate.
 No voting right. So existing shareholders will not loss controlling
power of the company.
 Preference dividend is a fixed obligation.
 Issue of preference shares enjoy financial flexibility.
 No legal obligation for dividend payment.
 Improved borrowing capacity.
Demerits of preference shares
 Preference dividend should be paid in arrears. It will affect the
financial flexibility of the company.
 Preference shares lack of liquidity in market.
 The rate of dividend to equity shares is more than preference.
 Skipping dividend disregard market image.
 Costly source of finance.
Types of preference share capital
1. Cumulative preference share.
2. Non-cumulative preference shares.
3. Participating preference shares.
4. Non-participating preference shares.
5. Convertible preference shares.
6. Non-convertible preference shares.
7. Redeemable preference shares.
8. Irredeemable preference shares.
Difference between equity shares and preference shares
Equity Shares Preference Shares
It is an ownership security. It is a hybrid security.
Dividend rate is not fixed. Dividend rate is fixed.
Nominal value is lower. Nominal value is higher.
Expenses on issue are lower. Expenses on issue are higher.
It can be buyback. It cannot be buyback.
Dividend is paid last. Dividend is before paying equity
dividend.
It has voting right in all It has voting rights in some
circumstances. special circumstances.
Raising of capital/ Issue of shares
1. Private placement
2. Right issue
3. Public offer
Private placement
Private placement is the issue of securities of a company direct to one
investor or small group of investors.
Right issue
It is an issue of shares to the existing shareholders in proportion to their
existing shareholding.
Public issue
Public issue means selling of shares or securities to public by issue of
prospectus.
Types of public issue
a) Initial public offer (IPO)
This is a method of raising securities in which a company sells shares or
stocks to general public for first time.
b) Offer for sales
In this method shares are offered to public through the intermediaries.
Procedure for issuing new shares
 Approval and filing of prospectus.
 Issue of prospectus.
 Receiving of application.
 Scrutiny of application.
 Sorting of application.
 Closure of application list.
 Record of application.
Irregular allotment
If allotment of shares is made against the provision of the Act, then the
allotment is termed as irregular.
Employees’ Stock Option Plan (ESOP)
It is a scheme under which the company gives option to the whole time
directors, officers or employees to purchase or subscribe equity shares
at a future data at a predetermined price.
Different types of ESOPs
1. Employees Stock Option Scheme (ESOS)
Under this scheme, the company grand an option to the employees to
acquire shares at a future date with predetermined price.
2. Employees Stock Purchase Plan (ESPP)
Employees are given the right to acquire shares of the company
immediately, not a future date.
Book Building
It is an international practice which refers to collecting orders from
investment bankers as large investors based on an inductive price
range.
Issue price of shares
1. Issue of shares at par
When shares are issued equal to their face value is called issue of
shares at par.
2. Issue of shares at premium
When shares are issued at a price higher than face value is called issue
of shares at premium.
3. Issue of shares at discount
When shares are issued at a price lower than face value is called issue
of shares at discount.
Underwriting
Underwriting is an act of guarantee by an organisation for the sale of
certain minimum amount of shares and debentures issued by a public
limited company.
Underwriting commission
It is a compensation that an underwriter receives for placing a new
issue with investors.
Listing of Securities
It means enrolment of name of the company in the official list
maintained in the stock exchange.
Objectives of Listing
 To ensure supervision and control of trading.
 To mobilise savings for economic development.
 To protect interest of investors.
 To create ready marketability and liquidity.
Advantages of listing
 High liquidity
 Facilitate buying and selling
 Tax advantages
 Fair price
 Helps to raise finance
 Protects investors
 Good collateral securities
 Get regular information
Limitations of listing
 Speculation
 No regular price quoting
 Large amount of listing fees
 Information to competitors
Sweat equity shares
Sweat equity shares are those shares issued by the company to its
directors and employees at a discount or for consideration other than
cash for providing know how or making available rights in the nature of
intellectual property rights or value additions.
Conditions for issue of sweat equity shares
 It should be authorized by special resolution.
 Resolution specifies the number of shares, current market price,
monetary consideration etc.
 The sweat equity shares of a company whose equity shares are listed
on a recognized stock exchange.
Forfeiture of shares
It means cancellation of shares due to non-payment of allotment
money within a specified period.
Share Certificate
It is a document issued by the company evidencing that a person
named in such certificate is the owner of the shares of the company.
Contents of a share certificate
 Name and address of registered office.
 Serial number of share certificate
 Date of issue of share certificate.
 Name and address of holder.
 Number and class of shares.
 Signature.
Share warrant
It is a document issued under the common seal of the company stating
that the bearer is entitled to the specified number of shares.
Transmission of shares
It is the passing of title or property in shares from one person to
another by the operations of law such as death, insolvency etc…
Difference between Transfer and Transmission of shares
Transfer of shares Transmission of shares
It is voluntary. It is involuntary.
Transfer of shares take place at It is take only at the time of
any time. death, insolvency, insanity.
Valid consideration exist. There is no consideration.
Bonus shares
Bonus shares are those shares which are issued by a company free of
cost to the existing shareholders of a company.
Conditions for issue of bonus shares
1. It should be authorized by articles.
2. Approval of Board of directors.
3. Company should have sufficient profit and reserves.
4. It must follow SEBI guidelines.
Advantages of Bonus shares
A) To the shareholders
 Shareholders get additional shares for free
 Not required to pay income tax on bonus shares
 Shareholders will get increased dividend in future
 When market price of shares increases shareholders can earn more
profit.
B) To the company
 It does not affect working capital of the company.
 The cost of issue of bonus shares are less.
 It increases goodwill of the company.
 No tax payment related to bonus shares.
Disadvantages of Bonus shares
A) To the share holders
 It encourages speculation.
 Market value of shares sometimes fall
 Sometimes dividend per shares reduced.
 EPS will fall.
B) To the company
 It encourages undesirable speculation.
 It reduces accumulated profits earned in past years.
 Company's reputation may suffer.
 Some expenses like stamp duty, printing etc. will incurred.
Sources of bonus shares
Revenue reserve/Profit Capital Reserve/profit
Credit balance in P&L A/c. Profit on sale of fixed asset.
General Reserve. Profit prior to incorporation.
Dividend equalisation reserve. Security premium reserve.
Capital redemption reserve.
Dematerialisation
It is a process of converting physical shares into digital or electronic
form.
Remeterialization
It is the process by which a client can get his electronic holdings
converted into physical certificates.
Advantages of Demat system
 Immediate transfer of shares.
 No stamp duty on transfer of securities.
 Elimination of bad deliveries.
 Elimination of loss or theft of shares.
 It enable share transfer without involve much paperwork.
 Faster and smoother settlement.
Disadvantages of Demat system
 Dishonest stockbrokers.
 Trading in stock maybe uncontrollable in case of dematerialisation.
Depository Participant (DP)
It is described as an agent or the registered stock broker of a
depository.
Buy back of shares
Buy back simply means buying of own shares. It is a process of capital
restructuring.
Objectives/ Advantages of buy back
 To improve returns on capital.
 To increase the EPS.
 To increase the market price of the shares.
 To prevent hostile takeover bids.
 To achieve optimum capital structure.
 To improve the financial health of the company.
 To change capital structure.
 It will improve the company's image.
 It is a reward for investors.
 It helps to utilize liquid assets.
Dangers of buy back
 It is tool for insider trading.
 It is used for manipulation of share prices.
 It weakens the position of minority shareholders.
Conditions / Manners of buy back
 It should be authorized by article
 A company should pass a special resolution in general meeting
authorizing the buy back.
 The debt equity ratio is not more than 2:1
 It must be completed within 12 months.
 The securities buy back should be physically destroyed within 7 days.
 Money borrowed cannot be utilized for buy back.
Sources of buy back shares
 Free reserve
 Surplus
 General reserve
 Dividend equalization reserve
 Security premium reserve A/c

Module IV (Management of companies)

Director
A director means a director appointed to the board of a company. It
means the person who appointed for the management of the company.
Qualification of director
In Companies act, 2013 does not laid down any particular qualification
for a director, not even qualification of shares. Directors must held
qualification shares. Nominal value of qualification shares of a director
is fixed by the articles of the company.
Disqualification of Directors
 If he is unsound mind.
 If he is undischarged insolvent.
 He has been convicted by a court of any offence.
 If he has not paid any call in respect of shares of the company.
 If he has not allotted the direct identification number.
 If he has not filled the annual accounts for continuous three financial
year.
 If he has not filed annual returns for continuous three financial year.
Role of directors
1. Directors as agents
A director is an agent of the company for the conduct of the business of
the company. Directors of a company have fiduciary relationship with
the company as well as shareholders when act as an agent.
2. Directors as trustees
Directors as trustee of the company's money and properties. They
safeguard them for and on behalf of the company.
3. Directors as employees
Where any director, besides being a director is also in the service or
employment of the company such as secretary, managing or otherwise
he will be treated as an employee.
4. Directors as managing partners
Directors are elected representatives of the shareholders and they are
in a position as managing directors.
Powers of directors
 To call on shareholders in respect of money unpaid on shares.
 To authorize buy back of shares.
 To borrow monies.
 To grant loans.
 To issue securities.
 To diversify the business of the company.
 To approve amalgamation and merger.
 To invest fund of the company.
Duties and Responsibilities of directors
 Statutory duties
 To verify truthiness of prospectus.
 To determine amount of minimum subscription.
 To keep register of members.
 To convene annual general meeting.
 To convene extra ordinary general meeting.
 To send to the registrar the copies of resolution.
 To keep register of mortgages and charges.
 To submit statement of affairs at the time of winding up.
 General duties
 To exercise independent judgment.
 To exercise reasonable care, skill and diligence.
 To avoid conflicts of interest.
 Not to accept benefits from third party.
 To promote the success of the company for the benefits of its
members as a whole.
Rights of directors
 Right to access company’s document and financial records.
 Right to get remuneration.
 Right to delegate duties.
 Right to receive notice of board meeting.
 Right to participate in board meeting.
 Right to vote at board meeting.
 Right to hold any number of directorships.
 Right to claim reimbursement of business expenses.
Liabilities of directors
Liabilities of the directors can be classified into three types:
1. Liability to outsiders.
2. Liability to company
3. Criminal liability.
Appointment of directors
1. Appointment of first directors
 By articles of the articles of the company.
 By the subscribers to the memorandum of association.
2. Appointment of subsequent directors
 By the company in general meeting.
 By the board of directors.
 By third party.
 By tribunal.
 By the principle of proportional representation.
Removal of directors
1. Removal by the share.
2. Removal by the tribunal.
3. Removal by central government.
Board of directors
The person who are in charge of the management of the affairs of a
company are termed as directors. They are collectively known as board
of directors.
Whole time Director
He is a director in the whole time employment of the company.
Managing Director
He is the key managerial personnel of the company. He is the head of
the company and decision making.
Resident director
A person who has stayed in India for a total period of not less than 182
days in the previous calendar year.
Nominee director
A nominee director is a person who is appointed to a board of directors
by another person or entity to act on their behalf.
Independent director
An independent director is a member of the board of directors who
does not have a material relationship with the company, is not a part of
the companies executive team and not involved with the day to day
operations of the company.
Manager of a company
A manager is an individual who subject to the superintendence, control
and director of the board of directors, has management of the whole of
the affairs of the company.
Director Identification Number (DIN)
It is an eight-digit unique identification number that has lifetime
validity. Through DIN details of directors are maintained in a database.
Chief Executive Officer
An officer of a company who has been designed as such by it.
Chief Financial Officer
According to Section 219, a person appointed as chief financial offer of
a company.
Key managerial personnel
 Chief executive officer
 Whole time directors
 Chief financial officer
 Company secretary
Statutory books kept by companies
 The register of members.
 Register of debenture holders.
 Record of private placement.
 Register of directors and key managerial personnel.
 Register of charges
 Register of sweat shares.
 Register of loans
 Minutes of meeting
Corporate Governance
Corporate governance refers to the set of systems, principles and
processes by which a company is governed.
Need and Importance of corporate governance
 Change in ownership structure.
 Growing number of scams.
 Separation of ownership from management.
 Social responsibility.
 Globalisation.
 SEBI rules made corporate governance compulsory.
 Take over and mergers.
Principles of corporate governance
 Fairness
 Responsibility.
 Transparency.
 Accountability.
Corporate Social responsibility (CSR)
CSR is the contribution of a company to the community’s development
by the implementation of social and environmental projects and the
developmental programs of a country.
Importance of CSR
 Increased employment loyalty and retention.
 Gaining legitimacy and access to markets.
 Less litigation.
 Increased quality of products and services.
 Less violate stock value.
 Avoiding state regulation.
 Increased customer loyalty.
Benefits of corporate social responsibility (CSR)
 Benefit to the society
 Improved quality of life.
 Balanced echo system.
 Waste management.
 Clean and green environment.
 Capacity building create wealth and employment.
 Benefit to the corporations
 Goodwill and community acceptance.
 Profit, growth, competitive edge and image.
 Genuine dialogue with shareholders.
 Spiritual and pride values to their families and employees.
Audit Committee
An audit committee is a committee of a company's board of directors
that is responsible for overseeing the financial reporting and audit
processes of the company.
SEBI
SEBI stands for the Securities and Exchange Board of India. It is the
regulatory authority for the securities market in India. SEBI was
established in 1988 as an independent statutory body to protect the
interests of investors and promote the development and regulation of
the securities market in India.
Basic objectives of SEBI
 To protect the interest of investors.
 To prevention of malpractices.
 To promote fair and proper functioning.
 To regulate the security markets.
 To promote the development of security market.
 To facilitate redressal of investor grievances.
Functions of SEBI
 To protect the interest of investors.
 To regulating the business of stock exchanges.
 Promoting and regulating self-regulatory organizations.
 Prohibiting unfair trade practices in stock markets.
 Promoting investors education and training.
 Prohibiting insider trading.
 Levying fees and other charges.
 Registering and regulating working of stock brokers, sub brokers,
Marchant bankers etc.
 Registering and Regulating working of depositories, participants etc.
 Registering and regulating the working of venture capital fund,
mutual funds etc.
Powers of SEBI
 Call for periodical returns from stock exchanges.
 To compel listing of shares to public companies.
 To grant recognition to stock exchanges.
 To grant registration to intermediaries.
 Withdrawal of recognition of stock exchanges.
 Prohibit contract in certain cases.
 To give direction to stock exchanges.
 To suspend business of recognized stock exchanges.
 Securities Appellate Tribunal (SAT)
It is a statutory board established under the provisions of Section 15K
of the SEBI Act, 1992 to hear and dispose of appeals against orders
passed by the SEBI.
Powers of SAT
 Enforce and summons attendance of any person.
 Require the discovery and production of documents.
 Receive evidence on affidavits.
 Issue commissions for the examination of the documents or
witnesses.
 Dismiss an application for default or deciding it ex-parte.
Composition of SAT
 Presiding Officer: Appointed by the central government in
consultation with Chief justice of India or nominee.
 The two members shall be appointed by central government.
Module V (Company meetings and winding up)
Company meetings
Company meeting means coming together of at least a quorum of
members in order to transact either ordinary or special business of the
company.
Characteristics of company meeting
 Two or more persons must present.
 Notice is essential.
 Held at a particular place, date and time.
 Must be held as per companies Act
Kinds of company meetings
 Meeting of directors
 Meeting of shareholders
 Meeting of creditors
 Meeting of debenture holders.
1. Meeting of directors
The directors must hold their meetings as frequently as possible. This
meetings of the directors are known as board meetings.
Important matters relating to directors meeting
1. Frequency of board meeting
First meeting should be held within thirty days from the date of
incorporation. Minimum four meeting of BOD should be held every
year. One person company, small and dormant company at least one
meeting of the BOD has been half of the calendar year.
2. Notice of the meeting
A minimum seven days’ notice should be send to every directors at his
address by post or mail.
3. Agenda
The term agenda means things to be done. It is a statement of the
business to be transacted at a meeting.
4. Quorum
The quorum for a meeting of BODs of a company shall be 1/3 rd of its
total strength or two directors whichever is higher.
5. Chairperson
Every meeting of the board must have chairperson to preside over it.
6. Resolution
Decisions are taken by directors by passing resolutions.
7. Voting
Each director has one board for each resolution put to vote at the
meeting. In case of an equality of votes, the chairperson shall have a
second or casting vote.
2. Meeting of shareholders
Shareholders meeting can be any of the following:
1. Annual general meeting
2. Extra ordinary meeting
3. Class meeting
1. Annual general meeting
Annual general meeting is regarded as the most important of all
company meetings. The purpose of the meeting is to give full
information to members of the progress by the company during the
year.
Secretary’s duties in connection with annual general meeting
 Before the meeting
 Ensure the final accounts are ready.
 Final accounts will be submitted to the board meeting for approval.
 Secretary must issue notice to the shareholders, directors, auditors
and stock exchange at least twenty one days before the date of the
meeting.
 Make necessary arrangement for poll, preparation of voting papers
etc.
 At the meeting
 To get the attendance register signed by the shareholders.
 To help the chairman in ascertaining the quorum.
 To read the auditor’s report.
 To help the chairman in the conduct of meeting.
 To take notes for preparing meeting.
 After the meeting
 To prepare minutes.
 To get minutes of meeting approved by the chairman.
 To send intimation of the appointment to the directors and auditors.
2. Extra ordinary meeting
All general meetings of a company other than annual general meeting
are called extra ordinary general meeting which is held between two
annual general meetings.
3. Class meeting
Meeting of different classes of shareholders is known as class meeting.
3. Meeting of Creditors
A company call the meeting of creditors, when the company proposes
to make a scheme for arrangement with its creditors.
4. Meeting of debenture holders
The company may call the meeting of its debenture holders to get their
approval for making any change in their terms and conditions.
Essentials of a valid meeting (Requisites)
1. Proper authority to convene the meeting.
The proper authority to convene a general meeting to the company is
the board of directors. If the directors fail to call the meeting, the
tribunal is the proper authority.
2. Notice of meeting
The second requirement of a valid meeting is that a proper notice of
meeting should be given to the members. In addition to the members,
notice should be given to auditors, directors etc.
3. Quorum
Quorum means minimum number of members who must be present in
the meeting for validity of the meeting.
4. Chairman of the meeting
The chairman is a person who presides the meeting. A chairman is
necessary to conduct a meeting.
Duties of Chairman
 To set the agenda.
 To lead the meeting.
 To maintain order at the meeting.
 To ensure the conventions of the meeting are been followed.
 To ensure members present at meeting.
 To exercise his casting votes for interest of the company.
5. Minutes of meeting
Minutes is a clear and accurate record of the proceedings and the
decisions at a meeting.
Objectives of use of minutes
 It provide a clear and accurate record of business transactions at a
meeting.
 It is a permanent record of the meeting.
 It accepted in a court of law for evidence.
 To provide a link between one meeting and previous meeting.
6. Voting
Each director has one vote for each resolution put to vote at the
meeting. Voting may be of show of hands or voting by poll.
7. Proxy
A proxy is an authorised agent of member for the purpose of voting.
8. Resolution
A resolution represents the collective decision of the meeting.
Types of resolution
a. Ordinary resolution
It is one which require a single majority that is the votes in favour
should exceed the votes against the resolution.
b. Special resolution
It is a resolution which is passed by at least three fourth majority of
votes of members on show of hands or electronically.
Difference between ordinary resolution and special resolution
Ordinary Resolution Special Resolution
It is required for ordinary It is required for special matters.
matters.
It is passed by simple majority of It is passed by at least 3/4th
votes. majority of members.
It is not required to mention in It is required to mention in the
the notice of the meeting. notice of the meeting.
Copy of ordinary resolution need Copy of special resolution must
not be filled with registrar. be filled with registrar.
Chairman can use his casting Chairman cannot do so.
vote.
Statutory meeting
Every public company within a period not less than one month and not
more than three months after the date of commencement of business
hold a general meeting of members. It is called statutory meeting.
Motion
A motion is a proposal that is put before a meeting for discussion and a
decision.
Company secretary
Company secretary is a principal officer responsible for the secretarial
and management of the company as per companies Act.
Duties of company secretary
1. Promotion, formation and incorporation of companies.
2. Arranging board meeting.
3. Arranging general meeting.
4. Preparation of minutes.
5. Maintaining the statutory register.
6. Keeping safe custody of company seal.
7. Communicating with the company shareholders.
8. Ensuring good corporate governance.
Rights of company secretary
1. He has the right to supervise, direct and control all the office
activities of the subordinate office.
2. He has the right to attend board meeting.
3. He has the right to claim his salary and other allowances.
4. He has the right to issue proper guidelines to concerned officers.
5. During winding up he can claim his legal dues.
Winding Up
It is a process of realisation of assets, payment of liabilities and
distribution of surplus among the members of the company. It is also
known as liquidation of company.
Modes of winding up
a. Winding up by tribunal
b. Voluntary winding up
a. Winding up by tribunal
The company may require to wound up by the tribunal under the
following situations:
 In the case of company does not pay debts amounts exceeding one
lakh rupees.
 In the case of fails to submit annual returns and financial statements
of the last five financial years.
 The formation of company is for any unlawful purpose.
 In case of company is formed in a fraudulent manner.
 In case of sick companies, if no revival and rehabilitation is done.
b. Voluntary winding up
It means winding up of the company by the members without
interference by the tribunal.
Conditions for voluntary winding up
1. Declaration of solvency
A voluntary winding up takes place only when the company is solvent.
Declaration must be made by the directors of the board.
2. Shareholder’s resolution
Shareholders must meet and pass ordinary resolution or a special
resolution for the winding up of the company.
3. Meeting of creditors
The company should call a meeting of creditors and the majority should
agrees for winding up.
Provisions applicable to voluntary winding up
 Commencement of voluntary winding up
 Stopping the business.
 Appointment of company liquidator.
 Powers to remove and fill vacancy of company liquidator.
 Notice of appointment of liquidator.
 Cessor of board’s power.
 Powers and duties of company’s liquidator in voluntary winding up.
 Appointment of companies.
 Liquidator to submit report on progress of winding up.
 Report of liquidator to tribunal for examination of persons.
 Final meeting and dissolution of company.
Consequences of winding up
1. Consequences as to shareholders
The shareholders are liable to pay the face value of shares. A member
of a company is liable to pay full amount of shares held by him.
2. Consequences as to creditors
It is the duty of the liquidator to pay off all liabilities of the company.
3. Consequences as to servants and officers
A winding up order by a court operates as a notice of discharge to the
employees and officers of the company except when the business of
the company is continued.
4. Consequences as to cost
Assets of the company are insufficient to satisfy the liabilities, the court
may make an order for payment of cost of assets.
5. Consequences as to documents
Any document in the name of the company must contain a statement
that the company is wound up.
Liquidator
A liquidator is an officer who is specially appointed to wind up the
affairs of a company.
Powers and duties of company liquidator
 To verify the claims of all the creditors and consolidate them.
 To take into his custody all the assets, properties etc.
 To evaluate the assets and properties of the corporate debtor.
 To invite and settle claim of creditors, employees or any other
claimant.
 To sell the whole of the undertaking of the company as a going
concern.
 To raise any money required for the security of the asset of the
company.
Dissolution of a company
Dissolution of a company means existence of a company comes to an
end.
Difference between winding up and dissolution
Winding up Dissolution
Order of tribunal is not essential. Order of tribunal is essential.
The legal entity of the company The legal entity status comes to
continues. end.
Liquidators carry out the process NCLT passes the order of
of winding up. dissolution.
Winding up is one of the Dissolution is the end process.
methods of dissolution of a
company.
Method of dissolution of a company
 Dissolution by the order of tribunal.
 Dissolution by liquidation.
 If the name of the company is removed from the register of
companies.
National Company Law Tribunal (NCLT)
The central government has to establish a tribunal to be known as
National Company Law Tribunal. It consists of president and such
number of judicial and technical members as may be deemed
necessary.
National Company Law Appellate Tribunal (NCLAT)
The central government has to establish an appellate tribunal known as
National Company law Appellate Tribunal. It has to consist of a
chairman, judicial and technical members not exceeding eleven. It has
to hear appeals against the orders of the tribunal.
Contributory
It refers to a person are liable to contribute to the assets of the
company in the event of winding up.
Fraudulent preference
Fraudulent preference refers to a situation where a debtor transfers
assets or makes payments to a preferred creditor with the intent to
defraud other creditors.
Liquidation Dividend
A liquidation dividend refers to the distribution of funds or assets to
creditors and shareholders during the winding up or liquidation process
of a company, after all liabilities and expenses have been settled.
Committee of inspection
It is a group of people who represent the interest of creditors of a
company that can no longer pay its debts and is being wound up by
liquidation.

(This is the short note of the subject CORPORATE REGULATIONS. This can be used for both
2019, 2020 AND 2021 admissions. For detailed study you may refer all the available materials
based on your syllabus.)

JUBAIR MAJEED
RAHUL MURALI

8089778065 WhatsApp only)