The Companies (Amendment) Act 2015

- ANIMESH KUMAR
Company - Definition

 Section 2(20) of the 2013 Act defines the term “company” to

mean “a company incorporated under the Companies Act 2013
or any previous company law.”
 Accordingly, a company, which is incorporated under the relevant
legislation of a foreign country, will not qualify as a “company”
under the 2013 Act.
 The proviso to section 2(71) states that “a company which is a
subsidiary of a company, not being a private company, shall be
deemed to be public company for the purposes of this Act.”
Companies Amendment Act
(2015)
Removal of minimum paid up share capital:
 Making common seal optional:
 Removal of declaration of commencement of business:
 Punishment for acceptance of deposits introduced:
 Public inspection of certain board resolutions prohibited:
 Losses to be written off before declaration of dividend:
 Regulation of transfers of unclaimed dividend and shares:
Salomon Vs. Salmon Co. Ltd. ,
1896
Salomon v A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22 is a landmark
UK Company Law case. The effect of the House of Lords' unanimous ruling was
to uphold firmly the doctrine of corporate personality, as set out in
the Companies Act 1862, so that creditors of an insolvent company could not
sue the company's shareholders to pay up outstanding debts owed.
Meaning
 Company limited by guarantee means a company having the
liability of its members limited by the memorandum .
 According to Chief Justice Marshall of USA, “A company is a
person, artificial, invisible, intangible, and existing only in the
contemplation of the law.
 Being a mere creature of law, it possesses only those properties
which the character of its creation of its creation confers upon it
either expressly or as incidental to its very existence”
Features and Types
 Incorporation of a Company
 Separate Legal Entity
 Perpetual Existence
 Limited Liability
 Transferability of Shares
 Common Seal
 Management and Ownership
The Most Common Types of
Companies
 Royal Chartered Companies.
 Statutory Companies.
 Registered or Incorporated Companies.
 Companies Limited By Shares.
 Companies Limited By Guarantee.
 Unlimited Companies.
 Public Company (or Public Limited Company)
 Private Company (or Private Limited Company)
One Person Company
 As per section 2 (62) One person Company means a
company which has only one person as a member.

 One Person Company means a company which has

only one member‘. It shall also be important to note that Section
3 classifies OPC as a Private Company for all the legal purposes
with only one member.

 One Person Company is a new type of business entity that allows

a single entrepreneur to operate a corporate entity with limited
liability protection.
Incorporation of a Company

 Steps for the formation of a company

1. One suitable name up to a maximum of six names indicative of the main

objects of the company
2. Ensure that the name doesn’t resemble the name of any other already
registered company and also doesn’t violate the provisions of emblems and
names by availing the services of checking the name availability on the
portal.
3. Apply to the concerned ROC (Registrar of Companies) to ascertain the
availability of the names in the eForm A by logging into the portal. A fee of
Rs. 500 has to be paid alongside and the digital signature of the applicant
proposing the company has to be attached in the form. If the proposed
name is not available the user has to apply for a fresh name on the same
application.
Incorporation of a Company

 4. After the name approval the applicant can apply for the
registration of the new company by filing the regd. Forms within
60 days of the name approval.
 5. Arrange for the drafting of the memorandum and articles of
association by the solicitors, vetting of the same by ROC and
printing of the same.
 6. Arrange for stamping of the memorandum and articles with
the appropriate stamp duty.
 7. Get the memorandum and the articles signed by at least two
subscribers in his or her own hand, his or her father’s name,
occupation, address and the number of shares subscribed for
and witnessed by at least one person.
Incorporation of a Company

 8. Ensure that the memorandum and the articles is dated on a

date after the date of stamping.
 9. Login to the portal and fill the relevant torms and attach the
mandatory documents listed in the eform.
MOA – Memorandum of
Association
 The Memorandum of Association (MOA) is a legal document
prepared in the formation and Registration Process of a Limited
Liability Company to define its relationship with shareholders.
 It states the field in which the company will do the business,
objectives of the company as well as the types of business the
company plans to undertake.
a. Name Clause
b. Regd. Office Clause
c. Objects Clause
d. Liability Clause
e. Capital Clause
AOA- Articles of Association
 As per Section 2(5) of the Companies Act,2013 “articles”
means the articles of association of a company as originally
framed or as altered from time to time or applied in pursuance of
any previous company law or of this Act.
 The articles of a company shall contain the
regulations for management of the company It is basically a
document that states rules which the internal management of
the company will follow.
 The article creates a contract between the company and its
members
 The article mentions the rights, duties and liabilities of the
members.
 It is equally binding on all the members of the company
Society of Motor Manufacturers and Traders Ltd. Vs.
Motor Manufacturers and Traders Mutual Insurance
Co. ltd.

 To be done by the students

Hutton Vs. Scarborough Cliff Hotel Co. (Change
in articles may influence the memorandum

 To be done by the students

Share Capital and Debentures

 Every Company Limited by shares must have a share capital.

Share Capital of a company refers to the amount invested in a
company for it to carry out its operations.
 A share means a share in the share capital of a company and
includes a stock.

Preference Shares :- Are the shares that don’t carry voting rights
in the company as well as the amount of dividend is also fixed.
Equity Shares: Are the shares that carry voting rights and the rate
of dividend also fluctuate every year as it depends on the amount of
profit available to the company.
Debentures

 A Debenture is an instrument of debt executed by the company

acknowledging its obligations to repay the sum at a specified rate
and also carry an interest.
 It is one of the methods of raising the loan capital by the
company.
 A debenture is thus like a certificate of loan or a loan bond
evidencing the fact that the company is liable to pay a specified
amount with interest and although the money raised by
debentures becomes a part of the company’s capital structure it
doesn’t become share capital.
Debentures

 It is defined under the companies act, 2013 (2013 Act) include

debentures stock, Bonds or any other instruments of a company
evidencing a debt whether constituting a charge on the assets of
the company or not.

 The power to issue debentures can be exercised on behalf of the

company at a meeting the of the board of Directors under the
provisions of the provisions of sections 179(3) of 2013 Act.
Types of Debentures

 Convertible Debentures can be converted to the equity shares of

a company after a specified term.
 Earns regular income in form of interest up to the period they are
converted to the equity shares of the company.
 Non-convertible debentures (NCD) are the ones which are backed
up by some assets which can be liquidated for paying off the
debentures holders in case the company issuing the same is not
able to redeem them.
Acceptance of Deposits
 Section 2 (31) of the Companies Act herein after called the act
defines deposit as under.
 ‘Deposit’ includes any receipt of money by way of deposit or loan or
in any other form by a company but doesn’t include such categories
of amount as way be prescribed in consultation with the Reserve
Bank of India.
 As per the CA 2013 – it has introduced the stringent provisions in
relation to acceptance /renewal/repayment of deposits. However, no
specific penalty was prescribed for non-compliance with the relevant
provisions i.e. section 73 and section 76. This lacuna has been filed
up by the CA Amendment Act 2015.
 As per section 76 A :- The defaulting company will be liable for fine of
a minimum amount of INR 10,000,000 and max. of INR 100,000,000
in addition to the amount of deposits or part thereof along with the
interest.
Acceptance of Deposits

 Further every officer of the company in default is punishable with

imprisonment which may extend up to 7 years or with a fine
amounting to a minimum of INR 2500000 and maximum of INR
20,000,000 or both.
 Such Officer may attract additional penalty for fraud under the CA
2013 – if the Non –Compliance was done knowingly or with the
intention to deceive the company, shareholders, depositors,
creditors or tax authorities.
 It prohibits acceptance of Deposits except from the members
through ordinary resolution or acceptance deposits by ‘eligible
company’ being a public company, subject to the conditions
specified in the rules (Eligible Company is defined under the rules
based on the net worth and turnover).
Eligible Companies for
acceptance of Deposits
 Public Companies whose net worth is more than or equal to Rs.
100 crore
OR
 Public Companies whose turnover is more than equal to Rs. 500
Crore.
Union of India vs. Allied
International Products Ltd.
 To be Done By the students
Appointment of Directors

 Only individual can be appointed as a member of the board of

directors
 Usually, the appointment of Directors is done by shareholders
 A company, association, a legal firm with an artificial legal
personality can't be appointed as Director. It has to be a real
person.
Public / Private Company

 A 2/3rd of Directors are appointed by the shareholders

 The rest of the (1/3)rd remaining members are appointed with regard to
the guidelines prescribed by the Articles of Association.
 Private company – their articles of association can prescribe the
method to appoint any and all directors.
 In case the articles are silent the directors must be appointed by the
shareholders.
 2/3rd of the company directors to be appointed according to the
principle of proportional representation.
 Nominee Directors will be appointed by the third party authorities or
the govt. to tackle mismanagement and misconduct
Public/Private Company

 The duties of the Director are to act honestly, exercise reasonable care
and skill while performing their duties on behalf of the organization.
 For appointment of a Managing Director
1. Shouldn’t be sentenced to imprisonment
2. Shouldn’t have been detained or convicted for any period under the
conservation of Foreign Exchange and Prevention of Smuggling
Activities Act 1974
3. Should have completed twenty five years of age but be less than the
age but be less than the age of seventy years
4. Managerial person in one or more companies and draws remuneration
from one or more companies subject to the ceiling specified.
5. He or she should be a resident of India
Removal of Directors

 Removal of a company in the General Meetings

 Removal by the govt. central govt. chooses to use the power on
the recommendation of the company Law Board / National
Company Law Tribunal
 Removal by Company Law Tribunal / National Company Law
Tribunal
 May remove a Director from the Board if found guilty any
inappropriate conduct like fraud, harassment, oppression or any
other justifiable cause he will be removed.
Appointment of Director
including a Woman Director
 Every other public company having paid up share capital of Rs.
100 crores or more or turnover of Rs. 300 crore or more as on the
last date of latest audited financial statements, shall also appoint
at least one woman director within 1 years from the
commencement of second proviso to Section 149(1) of the Act.

 As per the Companies Act, 2013, it is mandatory to appoint at

least one woman director as a board member in certain types of
companies.  The penalty for non-compliance of provision extends
to a fine of Rs.10,000 with a further fine of Rs.1000 per day if the
contravention continues.
Sh. Rakesh Gupta vs Registrar
Of Companies on 26 October,
2018
 To be done by the students