COMPANY LAW, Lecture notes of Law

Download COMPANY LAW and more Lecture notes Law in PDF only on Docsity! B.COM.(P) Semester-lll COMPANY LAW CORE COURSE -5 UNIT -T SCHOOL OF OPEN LEARNING University of Delhi Department of Commerce Commerce Graduate Course COMPANY LAW CORE COURSE – 5 (UNIT-I) Lesson 1 : INTRODUCTION Lesson 2 : Administration of Company Law:- National Company Law Tribunal (NCLT),National Company Law Appellate Tribunal (NCLAT), Special Courts. Lesson 3 : Types of Companies :- On basis of incorporation and on the basis of members Lesson 4 : Types of Companies:-On the basis of control, Government companies, Foreign companies, Dormant companies, Association Not –For Profit and Illegal Association Lesson 5 : Formation of The Company, Promoters and Online Registration of a Company SCHOOL OF OPEN LEARNING University of Delhi 5, Cavalry Lane, Delhi-110007 3 -Salomon v. Salomon & Co.Ltd.; 1897 A.C.22. Salomon transferred his boot business which initially run as a sole proprietorship, to a newly formed company for 40000 pound. The price for such transfer was paid to Salomon by way of shares and debentures having floating charge(security against debt) on the assets of the company .There are 7 share holder, his (wife, one daughter and 4 sons each have one share of the company ).The company went into liquidation within a year due to trade depression. When the company was wound up, Its asset were found to be worth of 6000 pound and its liabilities are 17000 pounds. 10000 pounds secured Salomon due to debenture preference and 7000 pounds are due to unsecured creditors. The unsecured creditor claimed that Salomon and his company were one and the same person so they demand for priority for the payments of debts. but it was held that the company was, in the eyes of the law , a separate person independent of Salomon and not an agent . Hence the plea of the unsecured creditor for precedence was rejected. There is are so many cases which confirm the concept of separate legal entity. 1.Lee v. Lee’s Air Farming ltd(1961). 2.Re.Kondoli Tea Co.Ltd.(1886) 3.Abdul Haq v.Das Mal(1910). 2.Incorporated Association:- Company is a incorporated associations of person and it formed by registration under various companies act either 2013 or previous companies act. For forming public company atleast 7 persons required and for private company atleast 2 person required . The name of persons subscribed in memorandum of association and they are comply with other legal requirements in respect of registration and incorporation of a company. 3. Artificial legal person:- Company does not exist in physical form- No body, no soul ,no conscience it means ,it doesn’t have attributes like people and we can call it fictitious person. it have existence in the eyes of law. It have own property , liabilities and legal rights can sue and be sued in its own name .It have domicile , nationality and residence but the company cannot enjoy the fundamental rights which is given to natural person mentioned in Constitution of India or citizenship Act. Company cannot be treated as citizen of the country on behalf of its member. Case:-State Trading corporation of India v. C.T.O(Commercial Tax Officer)26th july 1963.In this case State Trading corporation sought relief in the form of appropriate writs or directions against various agencies of State Governments on account of Sales Tax assessed against the Corporation. The petition was filed under Article 32 of the constitution of India, which empowers the Supreme court “to issue directions or orders or writs. Appropriate for the enforcement of the fundamental rights.”The corporation contested the claims saying that it is Government company , hence department of the same. But the appeal dismissed by the court because of the following reason:- 1. Distinction between person and citizens. 2. All citizens are persons but all persons are not citizens. 4 Judgement says :- The corporation has no physical existence, it mere “Abstraction of law” and the functions of state trading being commercial and cannot be regarded as one of the department of the Government of India. 4.Limited liability:- A company’s liability is different from liability of shareholder. Shareholder have limited liability to the unpaid value of shares. once they have paid full amount on the shares held by them and they have no obligation toward company . In the case of losses shareholder are not called to manage the losses of the company. creditor cannot claim personal wealth of shareholder. And in case of guarantee company the members are liable to pay specified amount to the assets of the company in the case of company being wound up. 5.Perpetual succession:- A company has perpetual succession. It never dies nor the life of its depend upon the life of members. It is incorporated by law and end only by process of law. The death of member doesn’t lead to death of company, existence of the company is independent .It is not affected by death , mental disorder , retirement of any of its member. The company aim is to maintain continuity forever until it dissolved, members may come and go company will be there. Case:-Re. Meat supplier Guildford ltd- During the war all the members of a this company , while in general meeting, were killed by a bomb. But the company survived, not even hydrogen bomb destroyed it . A company’s existence is persists irrespective of the change of composition of its members. 6.Common seal:- A company is artificial person and it doesn’t have hand like a human being so it cannot sign any document personally .Every company have its common seal which works as its signature. The document within a company is authorized by the common seal. The company may act through its agents and all such contract entered by its agent must be under the seal of the company . Ex-In India a share certificate is given under the common seal of the company and each usage of common seal is documented in the statutory registry of the company. 7.Transferability of shares:- The company’s capital is divided into small unit called shares, the share of the company is transferable in case of public companies it transfers freely but in case of private companies there are some restriction. Section 44 of the companies act 2013 , it provides that the shares, debentures or other interest of the member of a company are moveable property .Hence , they are transferable in the manner as provided in the company’s articles of association. LIFTING OR PIERCING OF CORPORATE VEIL Meaning of corporate veil:- A company is a separate legal entity and Corporate veil is a curtain between company and its member. 5 Company (differ) Members/Shareholders Property Property Liabilities Liabilities Rights Rights Duties Duties Powers Powers Functions Functions Corporate veil is a legal concept that separates the action of an organisation to the action of the company’s member or shareholders. Some members of the company sometime indulge in fraudulent activities and their ingenuity ,dishonesty let them take benefit of corporate personality or separate legal entity of the company and earn their own profit. In this case , there is ignorance of corporate veil concept and lifting or piercing of corporate veil is done and look at the person behind the company who are the real beneficiaries of the corporate fiction. This doctrine has been established for business efficiency, necessity and convenience . Effect of corporate veil:- Company itself is liable for its acts and its members/directors/employees/ shareholders are not liable for the acts of company. The cases in which the doctrine of the lifting of the veil has been applied can be put under two categories:- Doctrine of the lifting the corporate veil :- 1. Judicial interpretation. (At discretion of Court ) 1. Determination of character or nature of company. 2. Benefits or protection of revenue. 3. Evasion of personal and statutory obligation/ Prevention of fraud. 4. Avoidance of welfare Legislation. 5. Diversion of business opportunity. 6. Determining Expertise of company 7. When company is sham or facade 2. Statutory provision:- According to provision of companies Act. 1. Reduction of minimum number of member. 2.Holding and subsidiary company relationship. 3.Investigation of ownership in company. 8 Case: Re FG Films ltd(1953)- The company, FG Films made a film called “Monsoon”. The company had no premises except its registered office and no employees. Film Group Incorporated ,an American based company who finance and provide all facilities necessary to make the film. FG Films sought to have the film registered as a British Film. This is a sham or facade as the company was not maker of the film .Therefore, the court lifted corporate veil and prohibited film from enjoying the benefit given by British government as that is just sham By FGI. Statutory provision The companies act and other statutes determine the circumstances where corporate veil of the company uplifted or disregarded. Some of those cases are:- 1.Reduction in members of the company:- As per section 3A of Indian companies act 2013 , when the number of members reduce below specified in public- minimum 7 members and in private companies -2 members minimum required and if business carried with members below required for more than 6 month then each existing members of company who are aware of this shall be liable for payment of debts because of reduction in number of members after 6 month from such reduction. 2. Holding and subsidiary company Relationship:- As per section 2(46) of Indian companies act 2013,a “Holding company” is defined as , in relationship to one or more other companies ,a company of which such companies are subsidiary companies. The holding company and its subsidiary company is considered two different company and separate from each other and both have separate corporate veil except to the extent that the statute indicates the nature of holding company and subsidiary company. The lifting of holding and subsidiary companies being separate in two cases:- 1.To present better picture of the group as whole as per section 129(3)- a holding company to attach its copies of balance sheet, Profit and Loss account ,Directors report, Auditors report of each subsidiary companies to make consolidated balance sheet and to determine the financial position of overall companies as group of whole, all stakeholders concern. 2. When the court opines -that the profits of subsidiary company as well as its control is completely with the nominees of the holding company. 3. Investigation of ownership of the company (sec-216). 1.The central government on its own or on orders of the tribunal may appoint one or more inspectors to investigate matters related to the company regarding to membership for purpose of determining the true person:- a. who are or have been financially interested in the success or failure , whether real or apparent of the company or, b. who are or have been able to control or to materially influence the policy of the company or c. who have or had beneficial interest in shares of the company or who are or have been beneficial owners or significant beneficial owners of a company. 2. Without prejudice to its powers sub-section(1), the central government shall appoint one or more inspectors under the sub section , if the tribunal , in the course of any proceeding before it, directs by an order that the affair of the company ought to be 9 investigated as regards the membership of the company and other matters relating to the company ,for the purpose specified sub section (1). 3. while appointing an inspector under sub section (1), the central government may defines the scope of the investigation , whether as respects the matters or the period to which it is to extend or otherwise , and in particular, may limit the investigation to the matters connected with particular shares or debentures. Subject to the terms of appointment of an inspector, his powers shall extend to the investigation of any circumstances suggesting the existence of any arrangement or understanding which,though not legally binding , is or was observed or is likely to be observed in practice and which is relevant for the purpose of his investigation. 4. Directors with unlimited liability:- Ordinarily, the liability of a director in a limited company is the same as that of the member the of company there is nothing in the act however to prevent their liability being made unlimited by memorandum of the company or if limited by memorandum , being converted into an unlimited liability in pursuance of authority given by the articles . The same principle applies also in the case of manager of a limited company .(Sec 286) 5.Investigation in the affair of a company:- where the central government is of the opinion ,that necessary to investigate into the affairs of a company. A .On the receipt of a report of the registrar or inspector under sec -208. b. on information of a special resolution passed by a company that the affairs of the company ought to be investigated . c. in public interest . it may order its investigation into its affairs of the company. If an inspector is appointed under section 210 or 212 or 213of the companies of the companies act to investigate the affairs of the company he has the power to investigate also the affair of any related company in the same management or group (sec 219). This is in complete disregard to the separate entities of the companies. 6.Fraudulent conduct of business:-(Sec 339) if in the course of winding up of a company , it appears that any business of the company has been carried on in the intention to defraud creditors of the company or any other persons , the tribunal may declare that any persons who were knowingly parties to the carrying on the business in the fraudulent manner, shall be personally responsible without any limitation of liability for all or any of the debts or other liabilities of the company. 7.Failure to return the application money:- sec 39. No allotment of any shares of a company offered to the public for subscription shall be made unless the amount stated in the prospectus as the minimum amount has been subscribed and the sums payable have been paid to and received by the company . If the amount of minimum subscription is not received within 30 days from the date of issue of prospectus or such other period as may be specified by SEBI , the amount shall be returned within such time as may be prescribed .In case of default , the company and its officer who is in default shall be liable to a penalty ,for each default, of Rs 1000 for every day of default or Rs 100000 whichever is less. 8. Misrepresentation in prospectus :- (sec 34, 35) In case there is misstatement in prospectus, every director , promoter , expert and any other person who was involved in 10 the issue of prospectus shall be liable to compensate for loss or damage to every person who subscribed to shares on believing the untrue statement published in the prospectus. 9. Mis-description of name:- The name of the company is very important it shows the identification so every detail regarding to the spelling and pronunciation of the name of company should be paid attention .The company’s name let company enter into contracts and legally bind it. The name require prior approval as under sec 4 and printed under sec 12 of the companies act .Thus if any representative of the company collects bills or sign on the behalf of the company , and enter in incorrect particulars of the company then is personally liable. Case law- Hendon vs. Adelman ,signatory directors were held personally liable for stating company’s name and signed as “L R Agencies Ltd” while the original name was “L&R Agencies Ltd.” 10. Pre – incorporation contract:- Promoters will be personally liable for all those contracts which are made before incorporation of the company and which are not adopted after the incorporation of the company . 11. Ultra vires acts :- Every company is bound to perform in compliances of its memorandum of association , articles of association, and the companies Act, 2013. Any action done outside purview of either is said to be “Ultra vires “or improper or beyond the legitimate scope. Such operations of the company can be subjected to penalty . The doctrine of ultra-vires acts against companies was evolved in the case Ashbury railway carriage and iron company ltd vs. Hector Riche where a company entered into contract for financing construction of railways lines, and this operation was not mentioned in the memorandum. The house of lords held this action as ultra vires and contract , null and void. 12. Liability under other statutes:- There are many other provisions of the company law where directors of a company are personally liable for the default in complying with those provisions . Some of these are non maintenance of proper books of account; default in holding of annual general meetings, default in filing the annual returns ;default in paying dividends after declarations; false declaration of solvency; non cooperation with the company auditors or with the liquidators (in the event of the winding up of the company );non-compliance with the regulation of the Securities and Exchange Board of India (SEBI).Beside these, directors may be held liable under pollution laws, social security laws(Minimum Wages Act ,ESI,EPF, Gratuity ), Competition Act , Foreign Exchange Management Act (FEMA), taxation laws. 13 LESSON-2 ADMINISTRATION OF COMPANY LAW:- National Company Law Tribunal (Nclt),National Company Law Appellate Tribunal (Nclat), Special Courts. Learning objectives 1. Objectives. 2. Introduction. 3. Constitution of NCLT and NCLAT. 4. Members of NCLT and NCLAT. 5. Selection committee of NCLT and NCLAT. 6. Advantages of NCLT and NCLAT. 7. Powers of NCLT And NCLAT. 8. Remedies for Aggrieved persons. 9. Special Courts and Company Law Board(CLB) 10. Summary 11. Self Assessment Questions. Objectives After reading this lesson, you should be able to understand:- a) What is the NCLT , its powers, working scenario and its constitution. b) What is the NCLAT , its powers, working scenario and its constitution. c) What is the special courts and CLB , its powers, working scenario and its constitution. Introduction:- The National Company Law Tribunal (NCLT) and National company law Appellate Tribunal (NCLAT) was established under the companies Act 2013 and was constituted on 1st June 2016. Company (Amendment) Act 2002 was passed to provide for their establishment. It is a quasi-judicial body to regulate and resolve civil corporate dispute. The power to derived from Article 245 of the constitution of India. NCLAT is the higher forum where appeals from NCLT are dealt with. Both Tribunal and Appellate Tribunal follow the Code of Civil Procedure are subject to any rules formed by Central Government. Company law Board (CLB),T he Board for Industrial And Financial Reconstruction(BIFR), The Appellate Authority for Industrial and Financial Reconstruction and company related matters of High court are now governed by NCLT. Any person aggrieved by the order NCLT then appeal any order on question of Law and Fact within 45 days to NCLAT and any person aggrieved by the order NCLAT then appeal order on question of Law within 6o days to Supreme Court. 14 Meaning:-NCLT- The NCLT or Tribunal is a quasi judicial authority created under the Companies Act 2013, to handle corporate civil disputes arising under the act as we know .It is conceptualized by Eradi Committee. The NCLT is obliged to objectively determine facts .decide case in accordance with principles of natural justice and draw conclusions from them in the form of orders .Such orders can be remedy a situation, correct a wrong or impose legal penalties/ costs and may affect the legal rights ,duties or privileges of the specific parties .The Tribunal is not bound by the strict judicial rules of evidence and procedure .It can decide case by the following the principles of natural justice. NCLAT- NCLAT or Appellate Tribunal is an authority provided for dealing with appeals arising out of the decisions of the Tribunal .It is formed for correcting the errors made by the Tribunal. It is an intermediate or mediator appellate forum where the appeals lie after order of the Tribunal. The order can further challenged to Supreme Court .Any aggrieved or dissatisfied party by any order of the Tribunal may be apply to Appellate Tribunal . The Appellate reviews the decision of the tribunal and power to set aside ,modify or confirm it . Difference between the NCLT AND NCLAT:- Basis of NCLT NCLAT 1.Jurisdiction It holds primary jurisdictions on cases of insolvency, bankruptcy and corporate disputes. It holds appellate jurisdictions over the cases judged by NCLT. 2.Evidence It accepts and analyzes the evidences from Creditors /debtors for taking decisions . It accepts and analyzes the decision made by NCLT. 3.Facts It collects all the facts. It analyzes the facts. Constitution of National Company Law Tribunal(NCLT):- Section 408 The central Government shall by Notification, by notification, constitute, with effect from such date as may be specified therein, a tribunal to be known as National Company Law Tribunal consisting of a President and such Judicial and Technical members, as the Central Government may deem necessary , to be appointed by its notification, to exercise and discharge such powers and functions as are , or may be , conferred on it by or under this Act or any other Law for the time being on force. As per section 409 , qualification of President and Members of Tribunal are as under:- 1.The President shall be a person who is or has been a a. Judge of a High Court at least five years 2. Judicial member:- a. Judge of a High Court. 15 b. District Judge for at least five years . c. Has for at least 10 years been an advocate of a court or held a judicial office or as member of a Tribunal . 3.Technical Member:- a. has for at a least fifteen years been a member of the Indian corporate law Service or Indian legal Services out of which at least three years as joint Secretary or above ;or b. is or has been in practice as chartered accountant for at least fifteen years. c. is or has been in practice as a cost accountant for at least fifteen years. d. is or has been in practice as a company secretary for at least fifteen years. e. is a person of proven ability , integrity and standing having special knowledge and experience, of not less than fifteen years ,in law, industrial finance , industrial management or administration ,industrial reconstruction, investment, accountancy , labour matters, or such other disciplines related management, conduct of affairs, revival, rehabilitation and winding up of the companies; or f. is, or has been , for at least five years, a presiding officer of a labour court, Tribunal or National Tribunal Constituted under The Industrial Disputes act ,1947. The National Company Law Tribunal consist of a President and such number of Judicial and Technical Members not exceeding sixty two , as central govt deems fit .The President and every other members of the Tribunal shall hold office for a term of five years from the date on which he enters upon his office but shall be eligible for re- appointment. Constitution of National Company Law Appellate Tribunal (NCLAT):- (section-410). The Central Government shall, by notification , constitute with effect from such date as may be specified therein, an Appellate Tribunal to be known as the national Company Law appellate Tribunal consisting of a chairperson and such number of Judicial and Technical Members, not exceeding eleven , as the Central Government may deem fit , to be appointed by it by notification, for hearing appeals against – a. The orders of the Tribunal or of the National Financial Reporting Authority under this act [Amended by the companies (Amendment Act,2017]. b. Any direction, decision or order referred to in section 53N of the Competition Act 2002 in accordance with the provision of that Act. As per section 411, qualification of President and Members of Appellate Tribunal are as under:- 1. The chairperson shall be who is or has been a judge of the Supreme Court or the Chief Justice of a High Court. 2. A judicial Member shall be a person who is or has been a judge of a High Court or is a Judicial Member of the Tribunal for Five Years. 3. A Technical Member shall be a person of proven ability, integrity and standing having special knowledge and experience 18 a. Summoning and enforcing the attendance of any person and examining him on oath ; b. Requiring the discovery and production of documents. c. receiving evidence on affidavits; d. subject to the provisions of the Indian Evidence Act 1872,requisitioning any public record or document or copy of such record or document from any office; e. issuing commissions for the examination of witnesses or documents; f. reviewing its decisions. g. dismissing a representation for default or deciding it ex parte 7. Any order made by the Tribunal or the Appellate Tribunal may be enforced by that tribunal in the same manner as if it were decree made by a court in a suit pending therein. 8. All proceeding before the Tribunal or the Appellate Tribunal shall be deemed to be judicial proceedings within the Indian Penal Code. 9. No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this act and no injunction shall be granted by any court or other authority in respect of any action taken in pursuance of any power conferred by or under this act. 10. Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law arising out of such decision or order. The NCLT has the power under the companies Act to adjudicate proceedings : 1. Initiated before the Company Law Board under the previous act (Companies Act 1956) 2. Pending before the Board for Industrial and Financial Reconstruction (BIFR),including those pending under the Sick Industrial Companies Act (special provision) Act 1985, 3. Pending before the Appellate Authority for Industrial and Financial Reconstruction ; and 4. Pertaining to claims of oppression and mismanagement of a company , winding up of companies and all other powers prescribed under the companies Act . Power Vested in NCLT 1.Class Action : Protection of the interest of various stakeholders , especially non promoter shareholder and depositors , has always been the concern of company law , there were several frauds and improperties that were noticed where the key losers were the shareholders and depositors. The shareholders who invested in listed companies saw their 19 investments and savings drying up when the companies that they invested were cheated the investors. The Companies Act ,2013 has provided a very good combination of remedies where the offender will be punished and the people who are involved (whether it is the company or directors or auditor or experts or consultants) will be liable even for a civil action , wherein they have to compensate the shareholders and depositors for the losses caused to them on account of the fraudulent practices or improperties . A class action is a procedural device that permits one or more plaintiffs to file and prosecute a lawsuit on behalf of a larger group , or class. It is in the nature of a representative suit where the interest of a class is represented by a few of them .A huge number of geographically dispersed shareholders /depositors are affected by the wrongdoings. It is a useful tool where a few may sue for the benefit of the whole or where the parties from a part of voluntary association for public or private purposes, and may be fairly supposed to represent the rights and interest of the whole . Section 245 has been introduced in the new company law to provide relief to the investors against a large set of wrongful action committed by the company management to other consultant and advisors who are associated with the company . Class action can be filed against any type of companies , whether in the public sector or in the private . It can be filled against any company which is incorporated under the Companies 2013, or any previous Companies Act .the Act provides only one exemption; banking companies. 2. Deregistration of Companies: The procedural errors at the time of registration can be now be questioned at any time . The tribunal is empowered to take several steps , including cancellation of registration and dissolving the company . The Tribunal can even declare the liability of members unlimited .Sec7(7) provides this new way for de registration of companies in certain circumstances when there is registration of companies is obtained in an illegal or wrongful manner .Deregistration is remedy that is distinct from the winding up and striking off. 3. Oppression and mismanagement:-The remedy of oppression and mismanagement is retained in 2013 Act. The nature of this remedy has however changed to certain extent and it needs to be seen in light of the change made to the Companies Act 2013. The Act 2013 has reset the bar for oppression to a little lower level has set the bar of mismanagement a little higher by applying the test “winding up on just and equitable grounds” even to mismanagement matters .The Act permits dilution of the eligibility criteria with the permission of Tribunal ,Where a member below the eligibility criteria can apply in deserving cases. 4.Refusal to Transfer shares: The power to hear grievance of refusal of companies to transfer securities and rectification of register members under sec 58 and 59 of the new Act were already notified and were being taken up by CLB. Now, the same are transferred to NCLT. The remedy for refusal to transfer on transmission were restricted only to shares and debentures under 1956 Act .The provisions for refusal to transfer and 20 transmit under Companies Act 2013 Act 2013, Act extends to all securities .These sections gives express recognition to contracts or arrangements for transfer of securities entered into between two or more persons with respect of shares of a public company and thus clears any doubts about the enforceability of these contracts . 5. Deposits : Chapter 5 dealing with deposits was notified in phases in 2014 and powers to deal with the cases under it were assigned in CLB. Now the said powers will be vested in NCLT .The law on deposits is quite distinct under the Companies Act, 2013 as compared to the companies Act 1956. The provision for deposits under 2013 Act were already notified .Aggrieved depositors also have the remedy of class actions for seeking redressal for the acts/omissions of the company which hurt their right as depositors. 6. Reopening of Accounts and revision of financial statement : Several instances of falsification of books of accounts were noticed under the Companies Act, 2013. One such measure is the insertion of section 130 and 131 read with sec 447, 448 in the new Act. Section 130 read with sec 131 are newly inserted provisions that prohibit the company from suo motu opening its accounts or revising its financial statement. This can be done only in the manner provided in the Act .Section 130 read sec 131 provides the instances where financial statements can be revised /reopened .Section 130 is mandatory , where the Tribunal or court may direct the company to reopen its accounts when certain circumstances are shown . Section 131 allows company to revise its financial statement but do not permit reopening of accounts ,The company can itself approach the Tribunal under sec 131, through its director for revision of its financial statement. 7. Tribunal Ordered investigations : chapter XIV provides several powers to the Tribunal in connection with investigation .The most important powers that are conferred to the tribunal are: a. Power to impose restriction on securities:- The restriction earlier could be imposed only on ,shares. Now the Tribunal can impose restrictions on any security of the company . b. Power to investigate into the ownership of the company . c. power to impose restriction on securities: The Restriction earlier could be imposed only on shares. Now, the Tribunal can impose restriction on any security of the company. d. power to investigate into the ownership of the company: The Tribunal is given the power to freeze assets of the company which can not only be used when the company is under investigation , but can also be initiated at. The insistence of a wide variety of persons in certain situations. 8. Conversion of public company into private company : Section 13,14,15 and 18 of the Companies Act ,2013 read with rules regulate the conversion of public limited company into private limited company .It requires approval from NCLT . Approval of the Tribunal is required for such conversion. The Tribunal may at its discretion impose certain conditions subject to which approvals may be granted (sec 459). 23 into play when a person is arrested and detained in custody, and it appears that the investigation cannot be completed within the period of 24 hours as required under the code of Criminal Procedure ,1973 (CrPC) and there are grounds for believing that accusation or information is well –founded, and detention is authorized by Magistrate for a period not exceeding 15 days (if ordered by judicial Magistrate ) or 7 days (if ordered by Executive Magistrate ), as the case may be . In such cases, the special Court has the same power as Magistrate having jurisdiction to try such case; 3. Take cognizance of an offence under the Companies Act ,2013,without the accused being committed to it for trial upon: a. perusal of the police report of the facts constituting such offence b. if a complaint has been filed in that behalf 4. Try at the same trial on offence for which an accused may be charged under CrPC in addition to an offence under the companies Act ,2013. 5. If the Special Court thinks fit ,it may try in a summary way ,any offence under the Companies Act 2013,which is punishable with imprisonment for a term not exceeding 3 years ,provided that in the case of any conviction in such trial , person cannot be sentenced for imprisonment for a term exceeding 1 years. Mediation and Conciliation Panel (Section 442) 1. The central Government shall maintain a panel of experts to be called Mediation and Conciliation Panel Consisting of such number of experts having such qualifications as may be prescribed for mediation between the parties during the pendency of any proceedings before the Central Government or the Tribunal or the Appellate Tribunal under this Act. 2. Any of the parties to the proceedings may, at any time during the proceedings before the central Government or the Tribunal or the Appellate Tribunal, apply to the central Government or the Tribunal or the Appellate Tribunal ,as the case may be, in such form along with such fees as may be prescribed ,for referring the matter pertaining to such proceedings to the mediation Conciliation Panel and the Central Government or Tribunal or the Appellate Tribunal ,as the case may be shall appoint one or more experts from the panel referred to in sub- section(1). 3. The Central Government or the Tribunal or the Appellate Tribunal before which any proceeding is pending may ,suo motu, refer any matter pertaining to such proceeding to such number of experts from the Mediation and Conciliation Panel as The Central Government or the Tribunal or the Appellate Tribunal ,as the case may be ,deems fit. 4. The fee and other terms and conditions of experts of the Mediation and Conciliation panel shall be such as may be prescribed. 5. The Mediation and Conciliation Panel shall follow such procedure as may be prescribed and dispose of the matter referred to it within a period of three months from the date of such reference and forward its recommendations to the 24 central government or the Tribunal or the Appellate Tribunal, as the case may be. 6. Any party aggrieved by the recommendation of the Mediation and Conciliation Panel may file objections to the Central Government or the Tribunal or the Appellate Tribunal ,as the case may . Summary NCLAT was constituted under section 410 of the Companies Act 2013 for hearing appeals against the orders of NCLT with effect from 1st June 2016.NCLT is a quasi – judicial body in India that adjudicates issues relating to Indian Companies .The Central Government has NCLT under section 408 of the Companies Act 2013.The central Government may for the purpose of providing speedy trial of offences punishable under this act with imprisonment of two years or more ,by notification, establish or designate as many Special Courts as may be necessary. The company law Board (CLB) is a quasi –judicial body, exercising equitable jurisdiction, which was earlier being exercised by the High Court or the Central Government. The Board has powers to regulate its own procedures. The Company law board has framed “company Law Board Regulations 1991”prescribing the procedures for filing the application/petition before it. Self Assessment Questions Check yourself:- Q1. Write a short notes NCLT. Q2. Write the difference between CLB and NCLT. Q3. MCQ:- 1 ................... means a member of the Tribunal or the Appellate Tribunal appointed as such and includes the President or the Chairperson , as the case may be:- a. Chairperson b. Judicial Member c. President d. Member. 2. What is the maximum number of judicial and Technical members in NCLAT? a.3 b.11 c.6 d.10 3. The president of NCLT shall be a person who is or has been judge of high Court ................. years. a. 5 years b.2 years c.7 years d. 1 years. 4. The President of the Tribunal shall be appointed after consultation with the ............... . 25 a. President of India b. Prime Minister of India c. Home minister of India d. Chief Justice of India. 5. Mr. Dev wants to be a member of Tribunal in the year 2020.His age is 49 years in 2020 .would he is eligible for appointment as member of the Tribunal ? a. Yes b. no. c. Not applicable Q4. Fill in the blanks:- a. NCLT shall consist of a............... b. Selection committee of NCLT recommends the appointment of............ of Tribunal. c. The President/Chairperson and Members of Tribunal /Appellate Tribunal shall hold office for a term of .............years from the date on which he enters upon his office . d. The principal Bench of the Tribunal shall be at............... e. What is the time limit from the date of receipt of the order to file Appeal to the Supreme Court.........................? ANSWERS Q3. 1. b 2.b 3.a 4.d 5. B Q4. 1. President, Technical members, Judicial Members 2.Members 3. 5years+5 years 4.New Delhi 5. 60 days. 28 order of the court .Death of members does not dissolve the company of partner dissolves the partnership. 1.According to the modes of incorporation, companies may be classified into three categories :- a. Registered Companies. b. Statutory Companies. c. Chartered Companies. Registerd companies Company registered under the Indian companies act is known as Registered companies .It is officially set up and registered with Registrar of Companies and get Certificate of incorporation issued by Roc. EX- Google India private ltd. Registered Companies further divided into 3 parts :- a. Companies limited by shares. b. Companies limited by guarantee. c. Unlimited Companies. a. Companies limited by shares:- Section 2(22) of Indian Companies Act 2013 defines” Company limited by shares” as a company having the liability of its members limited by the Memorandum of Association to the amount (if any )unpaid on the shares held by them ,such a company is known as a company limited by shares. The liability can be enforced during the existence of the Company as also during the winding up of the company .If the shares are fully paid , the liability of the members holding such shares are nil. For example: If a XY. Ltd. has a share capital of 20,000 shares of Rs.20 each , and A has purchased 200 shares on which he has paid so far Rs. 12 share, the maximum liability of A is only Rs.8 per share (the unpaid amount). Companies limited by shares are the most common and also known as “Limited Liability Company”. A company Limited by shares may be a public company or private company. b. Companies limited by guarantee:- According to Section 2(21) of the Companies Act 2013,where the liability of the members of a company is limited by its Memorandum of Association to such amount as the members may respectively undertake to contribute to the assets of the company in the event of it being wound up .Company limited by guarantee also called Guarantee company .The amount guaranteed by each member in the nature of a reserve capital .It cannot be called up except in case of winding up of the affairs of the Company .The articles of association of such a company shall state the number of members with which 29 the company is to be registered .These companies may or may not have share capital .If it has a share capital ,liability of members shall be two fold ,firstly liable to pay the amount which remains unpaid on their shares plus the amount payable under the guarantee. The objective of these companies ,not to earn profit these are non trading companies. These companies are usually formed for the promotion of educational or scientific research ,science , religion, social or charitable purpose. Ex- sports club ,trade association NGOs are usually registered as guarantee companies. c. Companies with unlimited Liability:- According to section 2(92) of the Indian Companies Act 2013 defines that unlimited company as a company not having any limit on the liability of its members .In case of an unlimited company ,every member is liable for the debts of the company to an unlimited extent. An unlimited company may or may not have share capital. In case it has any share capital ,it can increase or reduce its share capital without any restriction If it has a share capital ,it may be a public company or a private company. It must have its own Article of Association. Statutory Companies There are the Companies which are created by a special Act of the central and state legislature is called Statutory Company .Statutory companies governed by the provisions of their special Acts .some examples of these type of companies are- the Reserve Bank of India , the State Bank of India , the Life Insurance Corporation ,etc. These are mostly concerned with public utilities and objective is not to earn profit but to serve people .e.g., railways, tramways , gas and electricity companies and enterprise of national importance .The provision of the Companies Act ,2013 apply to them ,if they are not inconsistent with the provisions of the Special Acts under which they formed. The liability of the members of such companies is limited .But in the most of the cases, they may not be required to use the word ”Limited” as part of their names. Annual Report on the working of each such company is required to be placed on the table of the Legislature (Parliament or State Legislative Assembly as the case may be).The audit of such Companies is conducted under the supervision, control and guidance of the Comptroller and Auditor General of India. Chartered Companies A Company which is formed by the grant of the Charter by the crown and which is regulated by that charter is called as chartered company. These are the companies which are created under a special charter issued by the king or queen of country of Monarchy. Example – East India of India, Bank of England. 30 Difference between Unlimited company and Partnership Firm:- Although the members of unlimited companies are fully liable for all the debt incurred by the Company like partners of a partnership firm, unlimited company is different from partnership firms: 1) The creditors of unlimited companies cannot sue the members directly on account of separate legal personality of the company. In case of company fails to pay ,the creditors will have to resort to the winding up of the company. The liquidators will call upon the members to contribute towards the assets of the company so as to enable him to meet the debts and the costs of winding up of the company. 2) An unlimited company is registered under the Companies Act and is legal person with perpetual succession and common seal. A partnership firm on the other hand has no existence as a legal entity. 2. According to basis of the number of member ,Companies may be classified into Four categories:- a. Public Company. b. Private Company. c. Small Company. d. One –person Company. Public Company According to Section 2(71) of the Companies Act ,2013, public company is a company which- A) is not a private company. B) has minimum paid- up share capital Rs 5,00,000 or such higher paid-up capital as may prescribed, C) has seven or more members. The Company can invite public for Subscription of shares and debentures .The term public limited is added to its name at the time of incorporation. There is no restriction on the maximum number of members. As per the provision of Companies Act,2013 ,a company which is a subsidiary of a company (not being a private company ) shall be deemed to be a public company even where such subsidiary company continues to be a private company in Article of Association(AOA). 33 case of Members exceed 5000. 12.Internal Audit. 138 Applicable in case of:- 1.Turnover >=Rs.200 crore in preceding financial year or 2.Loans from bank or NBFCs>= Rs. 100 Crore in preceding Financial year. Applicable in case of:- 1.Paid up capital >=Rs.50 Crore in the preceding financial year ,Or 2.Turnover >=Rs 200 Crore in preceding financial year,Or 3.Loans from Bank or NBFCs >=Rs. 100 crore in preceding Financial or 4.Public Deposit>=Rs.25 Crore in preceding financial year . 13.Annual Evaluation in the Board’s Report . 134(3)(p) Not applicable If Paid up share capital is Rs .25 crore or more, the details of annual evaluation in the Boards Report. 14.Rotation of Auditor . 139(2) Applicable in case of Paid up capital is Rs. 20 Crore or more. Applicable in case of paid up Capital is Rs .10 Crore. 15.No.Directors and independent Directors. 149 2(Two); Not required to appoint independent director . 3(three);and in case of listed Companies; at least One-third as independent directors. 16.Retirement by rotation – appointment of Directors. 152 Not applicable At least two-third of total number of directors be liable to retire by rotation and eligible of being re- appointed in AGM. 17.Contract of Employment with Managing Director /Whole Time Director. 190 Not required (optional ) Compulsory Required. 34 18.Restriction on Managerial Remuneration . 197 No restriction on amount of managerial remuneration. Managerial Remuneration is:- Restricted to 11% of Net profit (subject to condition ); or at least Rs 30 lakh per annum depending upon paid up capital . Exemption enjoyed by a Private Company in India:- 1. Members:- A private company can formed with only two people.(Sec 3) 2. Prospectus:- A private company don’t need to issue prospectus . So , private company exempted from complying with the provisions of the Act regarding the issue of the prospectus .(sec 23(1)). 3. Exemption regarding share capital:- A Private can give financial assistance for the purchase of subscription of its own shares or its holding company.(Sec 67(2)) .Restriction applicable to public companies regarding kinds of share capital ,voting rights, issue of shares with disproportionate voting right and termination of disproportionate excessive rights do not apply to private companies. 4. Exemptions regarding to directors:- A private company have enjoys following exemptions regarding directors – a. A private company may have two directors. b. A private company is not required to appoint independent . c. Directors of private company need not retire by rotation. d. Persons holding an office of profit can be appointed as directors of a company without passing a special resolution.(Sec .149(e)(i)). e. The provision excluding an interested director from participating in voting at boards proceedings does not apply to a private company. 5. Exemption regarding number of director:- The restrictions as to maximum number of companies of which a person may be appointed as director is 20 in case of private company and 10 in a public company (Sec 165(1)). 6. Exemption regarding managerial remuneration . The provision of the Act regarding fixing or increasing the remuneration of managerial personnel of a company are not applicable to private companies. (Sec 197). 7. Audit committee:- A private company is not required to constitute an audit committee of the Board.(Sec 177). 35 Conversion of Companies already registered (Section -18) According to Indian Companies Act 2013 (sec-18) allows an existing company existing Company of other class by altering its memorandum of association in the manner prescribed in chapter II of the Companies Act 2013. Section 13- provides alteration of Memorandum of Association and Section -14 provides for Alteration of Articles of Association. Conversion of a Private Limited Comapny into Public Company:- Section 14 of Companies Act, 2013 plays an important role during conversion of a Private Company into Public Company .Conversion of a private Company into a Public Company involves alteration of articles of association of Private company under section 14 which cannot completed without passing special resolution of Shareholders in the General meeting. Three mode:- 1.Conversion by Default :- Where a private company makes default in complying essential statutory requirement on the companies act 2013 then company ceases to enjoy the privileges and exemptions conferred on a private company. 2.Conversion by Operation of Law or Private Company to be deemed Public Company. 3.Conversion by choice:- Alteration of article of association require and special resolution of members passed at a general meeting. Procedures are:- 1. Calling of Board meeting :- notice shall be issued with provision of section 173(3) of the Companies Act 2013. Agenda of this board meeting are:- A. Pass a board resolution to get approval of Directors for conversion of a Private Company into Public company by altering AOA. B. To get Approval of share holders , time ,date and place should be fixed to holding Extra –ordinary General Meeting (EGM) , by way of Special resolution. C. According to section 102(1) of Companies Act 2013- to approve notice of EGM along with Agenda and Explanatory statement to be annexed to the notice of General meeting. 2. Issue of EGM Notice:- Notice issued of the Extra –ordinary General meeting (EGM) to all members- Directors, and Auditors of the company in accordance with the provisions of Section 101 of the Companies Act 2013. 38 Number of Members Falling below Requirement :- Section 3-A has been included by the Companies (Amendment) Act ,2017, regarding liability of members in case when number reduced from statutory minimum. In both case – public company below seven , private company below 2. And the company carries business for more than 6 month ,while the number of member is so reduced , every person who is a member of the company during the time that it so carries on business after those six month and is aware of the fact that they carrying business with less than 7 or 2 members , as the case may be ,shall be severally liable for the payment of the whole debts of the company contracted during that time , and may be severally sued therefore. Small company Definition:- Section 2(85) of the Companies Act 2013 defines a small company as- “Small Company” means a company , other than a public Company,- 1. Paid –up share capital of which does not exceed fifty lakh rupee or such higher amount may be prescribed which shall not be more than Rs. Ten crore. 2. Turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees. Provided that nothing in this section shall be apply to :- 1. Public Company. 2. A holding company or a subsidiary company; 3. A company registered under section 8 ; or 4. A company or body corporate governed by any special act . “Turnover “ here means the aggregate value of the realisation of amount from the sale, supply and distribution of goods or an account of services rendered , or both , by the company during a financial year.[section 2(91)]. Salient features of the small company:- 1.Private company:- only a private company can be classified as a small company. 39 2. Types of the Companies –Holding company or a subsidiary company ,charitable company and company governed by any Special Act cannot be classified or mentioned as small company. 3. Status of the company:- The status of a company may change from one year to another year . Thus , the benefits which are available during a particular year may stand withdrawn for next year and become available again in subsequent year . 4. In case of Gradual growth of business:- when there is gradual growth in business , if company cross any of the thresholds provided , either paid up Capital or turnover , then the company have to give its status of small company and all the benefit granted for such companies. 5. Criteria for qualifying as a small company:- previously ,for qualifying as a small company , its enough to fulfil one criteria which is mentioned in Definition in sec 2(85). Later the word “or “in the sub-clause (i) of section 2(85) was substituted by word “and” by Companies (Removal of difficulties) ordered dated 13.02.15 . Special Provision and exemption for small company:- 1. Signing of annual return:- Company Secretary can be sign the annual return of a small company alone, but in case there is no company secretary then signed by single director of the company. 2. Board meeting:- Small company may hold only two meetings .one Meeting may be hold in first 6 month of calendar year and next in another 6 month ,minimum gap between two meetings are 90 days. 3. Financial statement:- Section2(40) of the companies Act 2013, says Financial statement includes cash flow statement for the Financial year .However this section specifically excludes requirement of cash flow statement for small companies, one person company and dormant company .small company need not include Cash flow statement as a part of its financial statement. 4. Rotation of Auditor:- Provisions regarding to mandatory rotation of auditor /maximum term of auditor being 5 years in case of an individual and 10 years in case of firm of auditors is not applicable to a small company as per section 139(2) of the Companies Act,2013. 5. Matters to be included in Board’s Report :- Small companies are exempted from the matters to be included in the Board’s report as per Rule 8 of Companies (Accounts )rule,2014 . But in case One person company (OPC) shall include the matter stated in Rule 8A of companies (Accounts )rule 2014. 40 6. Internal Financial Controls:- A small company is not required to report on the adequacy of the internal financial controls and its operating effectiveness in the auditor’s report. 7. Lesser penalties for small Companies under Section 446B of the Companies Act, 2013:- If a small company fails to comply with the provisions of Section 92(5), section 117(2), or section 137(3),such company and officer in default of such company shall be liable to a penalty which shall not be more than one half of the penalty specified in such sections . 8. Fast Track Merger of Small Companies :- On fast track basis , merger process between two or more small companies to be approved .Such merger need to get approval from ROC ,official liquidator , members holding at least 90% of total number of shares and majority of creditors representing 9/10th in value the creditors or class of creditors of respective companies indicated in a meeting convened by the company by giving a notice of twenty –one days along with the scheme to its creditors for the purpose ,or otherwise approved in writing. 9. Professional Certification for e –forms to be filled with MCA:- As per Rule 8(12) of Companies (The registration offices and fees)Rules,2014 the e-forms filed by small companies are not required to be pre-certified by Chartered Accountant or the Company Secretary or as the case may be the Cost Accountant , the whole time practice. To promote small company all stringent provision of Companies Act , 2013 which are impractical and suitable for administration and management of large organisation are exempted. One person company Definition:- Section 2(62) of the Companies Act, 2013 defines One-person company as a company which has only one person as a member. Members of a company are subscribers to its memorandum of association , or its shareholders, so an OPC is effectively a company that has only one shareholder as its member. In OPC legal and financial Liability is limited to the company only not to that person.(Liability is limited). These Companies are generally created when there is only one founder or promoter for business .Entrepreneurs whose business lie in early stage prefer to create OPCs instead of sole proprietorship business because so many advantages OPCs offers. The basic difference between OPCs and Sole Proprietorships:- 43 Summary Companies can be classified into 5 categories – on the basis of formation, on the basis of members, basis of control, basis of nationality. Private companies are those companies whose articles restrict transferability of shares and prevent public at large from subscribing them .Public company is a company that has limited liability and may offer shares to the general public by Initial Public Offer (IPO).Where the company is listed and any individual can purchase or acquire the shares of such company via stock market. Small companies are basically the small start-ups with limited amount of capital or investment by the promoter .OPC as a company which has only one person as a member. There are different companies with different advantages, members, directors, paid up capital and all the companies have to follow the compliances and provisions mentioned in the Indian Companies act 2013. Self Assessment Questions Check yourself:- Q1. Write the difference between Private company and public company. Q2. Write the difference between OPC and small company. Q3 .MCQ:- a. Minimum number of directors in public company as per Indian Companies ,Act 2013 are:- 1. 5 2. 6 3. 7 4. 3 b. Minimum paid up capital in private company as per Indian companies ,Act 2013 is :- 1. 2 lakh 2. 5 lakh 3. 1 lakh 4. 7 lakh. c. OPC is defined under which section of Indian Companies Act ,2013:- 1. 2 (62) 2. 2 (85) 3. 2 (95) 4.2 (74) d. According to Indian Companies act 2013, Small company turnover not exceed from 1. 5 crores. 2. 6 crores. 3. 1 crores. 4. 2 crores. e. RBI is which type of Company:- 1. Registered company 2. Private company 3. OPC 4.Statutory Company. Q4. Fill in the blanks :- 1. Minimum paid up share capital of Public company is ---------------. 2. OPC was first recommended by the ------------. 3. Private company is defined in section--------------- of Companies Act, 2013. 4. Registered Companies which are formed and registered under the ---------------. 5. A holding company /subsidiary company is not ------------------ company. 44 Q5. True or false:- 1. The words “One-Person Company” must be mentioned (in brackets) below the name of the company. 2. Companies with limited by liability mention in section 5. 3. Public company have to limit its member to 300.’ 4. A company or body corporate governed by any Special act is not a Small company. 5. The Requirement of Rs 100000 or more as minimum paid up share capital for private companies has been omitted by the Companies (Amendment ) Act , 2015. Answers:- Q3. a. 4 b. 3. c. 1 d. 4. e. 4. Q4. 1. five lakh 2.Jamshed J. Irani Expert Committee. 3. 2(68) 4. Indian companies act 2013. 5. Small Q5. 1.true 2. false 3.false 4. true 5.true. 45 LESSON-4 TYPES OF COMPANIES:- On the basis of control, Government companies ,Foreign companies, Dormant companies, Association Not –For Profit and Illegal Association. Learning Objectives 1. Objectives. 2. Introduction. 3. Classification of company on the basis of control- holding companies, Subsidiary Companies and Associate Company. 4. Foreign companies . 5. Dormant companies. 6. Association Not –for Profit. 7. Illegal Association. 8. Summary. 9. Self Assessment Question Objectives After reading this lesson, you should be able to understand:- a) What is the types of companies on the basis of control ,difference between companies and its function b) Advantages and disadvantages , types of Companies. c) What is Government company, Foreign company and Dormant Company? Introduction:- A company is a legal entity formed by a group of individuals to engage in and operate a business- commercial or industrial. A company may be structured in various ways for tax and financial liability purposes depend upon the corporate law and its jurisdiction .There are different types of companies like, Government companies, dormant companies , NPO etc. With different ownership structure, regulation and financial reporting requirement. A company has many legal requirements and rights as a person as a person, like the ability, to enter into contracts, the right to sue (or to be sued), borrow money, pay taxes, own assets and hire employees. 48 b. The expression “joint venture “ means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement . Thus, a company will be treated or taken as associate company and not a subsidiary company if it holds 20% or more but less than 50%of the share capital of another company . Example:- If Company A holds 23% of shares of Company B then Company B is associate company of company A not a subsidiary company. Government companies:- Section 2(45) According to Section 2(45) of Indian Companies Act 2013 “Any company in which not less than 51% of the paid-up share capital is held by the Central Government , or by any state Government or Governments , or partly by the Central Government and partly by one or more state Governments, and includes a company which is a subsidiary company of such a Government company.” Some points:- 1. Public sector undertakings /enterprises in India are also included in this definition. 2. A “subsidiary company “ or “subsidiary “ of a Government company would also be categorised as a Government Company provided the Government Company :- a. Controls the composition of the Board of Directors ;or b. Exercises or controls more than one-half of the total voting rights [till January 2018 the word share capital was used instead of voting rights ] either at its own or together with one or more of its other subsidiary companies. 3. Municipal and other local authorities or statutory corporations (which are the government bodies) holding the shares are not to be taken into consideration for this purpose. Example of Government company:-Steel authority of India , Hindustan steel limited. Annual Reports of Government companies [Sec.394)/(sec 395)]. 1. Annual reports to be placed before Parliament :-Where the Central Government is a member of a Government company , the Central Government shall cause an annual report on the working and affairs of that company to be :- 49 a. prepared within three months of its annual general meeting before which the comments given by the Comptroller and Auditor- General of India and the audit report is placed under provision to section143(6). b. After preparation, report laid before both houses of Parliament together with a copy of the audit report and comments upon on or supplement to the audit report, made by the Comptroller and Auditor –General of India. Where in addition to the Central Government, any state Government is also a member of a Government company , the state Government shall submit a copy of the annual report prepared and laid before the House or both Houses of the State legislature together with a copy of the audit report and comments upon or supplement to the audit report. In case where only state government or every state Government which is a member , shall cause the above documents to be prepared within the specified time and laid before the House or both Houses of the State Legislature. The provision of both Section 394 and 395 shall, so far as may be , apply to a Government company in liquidation as they apply to any other company. 2. Appointment of auditor and audit reports:- (Sec-139) Within a period 180 days from the commencement of the financial year, The auditor of a Government company shall, in respect of a financial year, be appointed or reappointed by the Comptroller and Auditor- General of India .Such auditor shall hold office till the conclusion of the next annual general meeting. Once Government company is registered then within 60 days the first auditor of a government company shall be appointed by Comptroller and Auditor –General of India. Within said period if Comptroller and Auditor –General of India does not appoint such auditor then within the next 30 days the Board of Directors of the company shall appoint such auditor. And in case if Board of Director of the company fails to appoint the auditor within the 30 days then this information shall given to members of the company who shall appoint such auditor within 60 days at an extraordinary general meeting . The comptroller and Auditor –general shall have the power to instruct the way the company’s accounts shall be audited by the auditor .He shall also have power to conduct a supplementary or test audit of the company’s accounts by such person or persons as he may authorise in this behalf. The provisions of section 143(5)(6)(7) of the Indian companies Act ,2013 which deal with audit shall apply. 50 3. Audit reports to be submitted Comptroller and Auditor –General of India. The auditor of a Government company shall submit a audit report copy to the Comptroller and Auditor-General of India ,who shall have right to comment upon ,or supplement , the audit report shall be shown before the annual general meeting of the company. 4. Certain provision of the companies act not to apply :- The Central Government may, by notification in the official Gazette ,direct that any of the provision of the Companies Act ,specified in the notification – a. Shall not apply to any Government company ;or b. Shall apply to any Government company; with such expectations, modifications, and adaptations ,as may be specified in the notification. Every notification copy proposed to be issued shall be mentioned in draft before each house of Parliament while it is in the session of 30 days which may be comprised in one or two more successive sessions. If the both houses (Rajya Sabha and Lok Sabha ) agree in disapproving the issue of the notification ,the notification shall not be issued . If they agree in making any kind of modification in the notification, the notification shall be issued in the modified form. There is exemption notification dated 5th June 2015 accordingly has exempted government companies from some provisions of the Companies Act. Foreign Companies:- Section 2(42) According to Section 2(42) of Indian companies Act 2013, foreign company means any company or body corporate incorporated outside India which has a place of business in India whether by itself or through an agent , physically or through electronic media ; and, conducts any business activity in India in any such manner .The expression “electronic media “ means that cover all those companies which are operating online on a virtual platform such as Amazon , flipkart. Application of the Act to Foreign Companies :- 1. Section 380 to 386 and sections 392 and 393 shall apply to all foreign companies : said that the Central government may, by order published in the official Gazette , exempt any class of Foreign Companies ,specified in the order , from any of the provisions of Section 380 to 386 and Sections 392 and 393 and a copy of every such Order shall, as soon as may after it is made , be laid before both Houses of parliament [Sub –section(1) and provision inserted by the Companies (Amendment )Act,2017]. 2. Where not less than 50%, of the paid –up share capital ,whether equity or preference partly equity and partly preference , of a foreign company is held by one or 53 characters of the language or one of the languages in general use in the locality in which the office or place is situated. Service of notice on Foreign Company (Sec. 383) Any process, notice, or other document required to be served on a foreign company shall be deemed to be sufficiently served if addressed to any person whose name and address have been delivered to the Registrar under section 380 and left at, or sent by post to, the address which has been so delivered to the Registrar or by electronic mode. Debentures , Annual Return , Registration of Charges , Books of Account and their Inspection(Sec. 384) 1. The provisions of section 71 shall apply mutatis mutandis to foreign company. 2. The provisions of section 92 shall, subject to such exceptions ,modification adaptations as may be made therein by rules made under this Act , apply to a foreign company as they apply to a company incorporated in India . 3. The provisions of section 128 shall apply to a foreign company to the extent of requiring it to keep at its principal place of business in India, the book account referred to in that section, with respect to monies received and spent, sales and purchases made , and asset and liabilities, in the course of or in relation to its business in India. 4. The provisions of Chapter VI shall apply mutatis mutandis to charges on properties which are created or acquired by any foreign company. 5. The provision of chapter XIV shall apply mutatis mutandis to the Indian business of a foreign company as they apply to a company incorporated in India . Fee for Registration of Documents (Section 385) There shall be paid to the Registrar for registering any document required by the provisions of this chapter to be registered by him , such fee ,as may be prescribed. Interpretation (Section 386) For the purpose of the foregoing provisions of this chapter,- a. The expression “certified” means certified in the prescribed manner to be true copy or a correct translation. b. The expression “director “, in relation to a foreign company , includes any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act; and 54 c. The expression “place of business” includes a share transfer or registration office. Punishment for contravention (section 392) If a foreign company contravenes the provisions of this chapter , the foreign company shall be punishable with fine which shall not be less than one lakh rupees (Rs. 100000) but which may extend to three lakh rupees and in the case of a continuing offence , with an additional fine which may extend to fifty thousand rupees (Rs. 50000) for every day after the first during which the contraventions continues and every officer of the foreign company who is in default shall be punishable with imprisonment for a term which may extend to five lakh rupees(Rs500000) , or with both. Example of Foreign Companies in India are:- Gillette (India ) Ltd, Nestle India Ltd. Dormant companies (Section 455) Dormant means “inactive or inoperative”, its good to start a company for future perspective ,holding project and hold an asset /intellectual property without significant accounting transaction . It is new initiative taken by Ministry of Corporate Affairs to introduce Dormant company 1. Where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company . Explanation- For the purpose of this section ,- A. “inactive company” means a company which has not been carrying on any business or operation , or has not made any significant accounting transaction during last two financial years ; B. “significant accounting transaction” means any transaction other than – a. Payment of fees by a company to the Registrar ; b. Payments made by it to fulfil the requirements of this acts or any other law; c. Allotment of shares to fulfil the requirements of this act; and d. Payments for maintenance of its office and records. 2. The Registrar on consideration of the application shall allow the status of a dormant company to the applicant and issue a certificate in such form as may be prescribed to that effect. 55 3. The Registrar shall maintain a register of dormant companies in such form as may be prescribed. 4. In case of a company which has not filed financial statements or annual returns for two financial years consecutively, the Registrar shall issue a notice to that company and enter the name of such company in the register maintained for dormant companies. 5. A dormant shall have such minimum number of directors, file such documents and pay such annual fee as may be prescribed to the Register to retain its dormant status in the register and may become an active company on an application made in this behalf accompanied by such documents and fee as may be prescribed. 6. The registrar shall strike off the name of a dormant company from the register of dormant companies, which has failed to comply with the requirements of this section. Procedural formalities to get the status of a Dormant company:- File form MSC -1 +fees + consent of 3/4th of the shareholders (in value )either by special resolution in the meeting or issuing notice to the shareholder. Registrar to issue certificate in Form MSC-2. The Registrar shall maintain the register of dormant companies. The same is maintained on WWW.MCA .GOV.IN or any other specified website. Example of Dormant company:- NCORE Technology Pvt. Ltd. ,Good Leaf Traders Pvt. Ltd. 58 9. A company registered under this section shall amalgamate only with another company registered under this section and having similar objects. 10. If a company makes any default in complying with any of the requirements laid down in this section , the company shall , without prejudice to any other action under the provisions of this section , be punishable with fine which shall not be less than ten lakh(Rs 1000000) rupees but which may be extend to one crore rupees (Rs 10000000) and the directors and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than twenty five thousand rupees (Rs 25000) but which may be extend to twenty-five lakh rupees, or with both. Provided that when it is proved that the affairs of the company were conducted fraudulently, every officer in default shall be liable for action of Section 447. Example of NPO are:- Siksha (NGO), Federation of Indian Chambers of commerce and industry (FICCI). Nidhi company (Section 406). “Nidhi” means a company which has been incorporated as a Nidhi with the object of:- a. Cultivating the habit of thrift and savings amongst its members b. Receiving deposits from , and lending to , its members only , for their mutual benefit c. And which complies with such rules as are prescribed by the central Government for regulation of such class of companies. Nidhi company have different names- Permanent Fund, Benefit Fund , mutual Benefit funds and mutual Benefit company. Nidhi’s are most popular in South India and localized single office institutions. Nidhi’s are not much when compared to organised banking sector. Its come under NBFCs . RBI is empowered to issue directions to them in matters relating to deposit acceptance activities. Whereas RBI exempted the notified Nidhi’s from the core provisions of the RBI act and other direction applicable to NBFCs. Illegal Association (Section 464) [Prohibition of association of partnership of persons exceeding certain number. No association or partnership consisting of more than such number of persons as may be prescribed shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association or partnership or by the individual 59 member thereof , unless it is registered as a company under this Act or is formed under any other law for the time being force : Provided that the number of persons which may be prescribed under this sub- section shall not exceed one hundred ( 100). 2. Nothing in sub- section (1) shall apply to – a. A Hindu undivided family carrying on any business ; or b. An association or partnership , if it formed by professionals who are governed by special Acts. 3. Every member of an association or partnership carrying on business in contravention of sub –section( 1) shall be punishable with fine which may extend to one lakh rupees(Rs. 100000) and shall also be personally liable for all liabilities incurred in such business. 4. No legal existence :-An illegal association cannot :- 1. Enter into binding contracts . 2. Cannot file case or sue any member or an outsider . Summary Government company is a company or an organisation with at least 51% of paid up share capital with Central government and state government or both and defined in section 2(45) of Indian companies Act 2013.A foreign company is a company who main branch or head office is outside India but has place of business in India either in physical form or an electronic mode (section 2(42).Dormant company is a company which is for future project perspective without any significant accounting transaction for more than two years(section 455). There are producer ,nidhi company and Association not for profit with different companies provision as well as illegal association in case of number exceeds in partnership. Self assessment question :- Check yourself:- Q1. What is the Difference between Government company and Foreign Company? Q2. Dormant Company is a inactive company. Explain how? Q3. Write short notes on a. Illegal Association b. Nidhi company c. Producer company. 60 Q4. MCQ:- 1. A Government company means any company in which not less than how much paid up share capital:- a. 25% b. 35% c. 51% d. 60%. 2. In which of the following conditions, a company will be reckoned a foreign company? a. If the company is established outside India and has a place of business in India. b. A company incorporated outside India having shareholders who are all Indian citizens and having its business outside India . c. A company is incorporated in India but having all foreign shareholders. d. Both (a) and (b). 3. The company nationality is decided by its:- a. Shareholders b. Registered office. c. Place at books of accounts are kept. d. None of the above. 4. Association not for profit defined in section of Indian Companies Act 2013:- a. Section 2(74) b. Section 2(54) c. Section 2(36) d. Section 8. 5. According to section 455 of Indian companies act which company defined:- a. Illegal association b. Dormant company c. Producer company d. Nidhi company. Answers. Q3. 1. c 2.a 3.b 4.d 5.b. 63 d. the address for correspondence till its registered office is established; e. the particulars of name, including surname or family name , residential address, nationality and such other particulars of every subscriber to the memorandum along with proof of identity, as may be prescribed, and in the case of a subscriber being a body corporate, such particulars as may be prescribed. f. the particulars of the persons mentioned in the articles as the first directors the company , their names , including surnames or family names , the Director Identification Number, residential address, nationality and such other particulars including proof of identify as may be prescribed; and g. the particulars of the interests of the persons mentioned in the articles as the first directors of the company in other firms or bodies corporate along with their consent to act as directors of the company in such form and manner as may be prescribed . 2. The Registrar on the basis of documents and information filed under sub- section(1) shall registrar all the documents and information referred to in that subsection in the register and issue a certificate of incorporation in the prescribed form to the effect that proposal company is incorporated under this Act. 3. On and from the date mentioned in the certificate of incorporation is issued under sub-section (2), the Registrar shall allot to the company a corporate identity number, which shall be , distinct identity for the company and which shall also be included in the certificate . 4. The company shall maintain and preserve at its registered office copies of all documents and information as originally filed under-section (1) till its dissolution under this Act. 5. If any persons furnishes any false or incorrect particulars of any information suppresses any material information, of which he is aware in any of the documents filed with the Registrar in relation to the registration of a company, he shall be liable for action under Sec 447. 6. Without prejudice to the provisions of sub section (5) where, at any time after the incorporation of a company , it is proved that the company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporation such company, or by any fraudulent action, the promoters, the persons named as the first directors of the company and the persons making declaration under clause (b) of sub-section(1) shall each be liable for action under section 447. 64 Certificate of incorporation :- Section 7(2) When the all important or requisite documents are filed with the registrar, the Registrar shall satisfy himself that all the statutory requirements regarding to the registration have been duly compiled with. If the Registrar is satisfied with compliance to the statutory requirements, then he registers the MOA and AOA and all other important documents filed with him and issues a “certificate of incorporation”. A Certificate of incorporation is a legal document/ license relating to the formation of a company or corporation. It is a kind of license to form a corporation and it is issued by Registrar of company in accordance of state government. Conclusiveness of Certificate of Incorporation :- A certificate of incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the requirements of this Act have been compiled with in respect of registration and matters precedent and incidental thereto, and that the association is a company authorised to be registered and duly registered under this Act. Three cases :- 1. Barned’s Banking Co.; Re Peel’s Case,(1867) known as Peel’s case. 2. Jubilee Cotton Mills ltd. v Lewis(1924). 3. T.V. Krishna v. Andhra Prabha Pvt ltd (1960). The certificate of incorporation has been held to be conclusive on the following points:- 1. That requirements of the Act in respect of registration of matters precedent and incidental thereto have been compiled with. 2. That the association is a company authorised to be registered under the Act and has been duly registered. 3. That the date borne by the certificate of incorporation is the date of birth of the company, the date on which the company comes into existence. If a company got incorporated with by furnishing any false and incorrect information or representation by suppressing any material fact or information in any of the documents and declarations filed or made for incorporating such company or by any fraudulent action , the Tribunal may, on an application made to it, on being satisfied that the situation so warrants- a. Pass such orders, as it may think fit, for regulation of the management of the company including changes, if any , in its MOA and AOA , in the public interest or in the interest of the company and its member and creditors; or b. Direct that liability of the members shall be unlimited ; or 65 c. Direct removal of the name of the company from the register of companies ; or d. Pass an order for the winding up of the company; or e. Pass such other orders as it may deem fit: Provided that before making any order under this sub-section – 1. The company shall be given a reasonable opportunity of being heard in the matter; and 2. The Tribunal shall take into consideration the transactions entered into by the company, including the obligation, if any, contracted or payment of any liability. Thus, in view of the above Section and deletion of Sections 34 and 35 of the companies Act, 1956 the certificate of Incorporation is not conclusive any more. Effects of Registration (section 9). From the date of incorporation mentioned in the certificate of incorporation, such subscribers to the memorandum and all other persons, as may, from time to time, become members of the company, shall be a body corporate by the name contained in the memorandum, capable of exercising all the functions of an incorporated company under this Act and having perpetual succession and a common seal with power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and to be sued, by the said name. When a company is registered and a certificate of incorporation is issued by the Registrar, three important consequences follow:- 1. The company becomes a distinct legal entity:- Its life commences from the date mentioned in the certificate of incorporation . 2. The company acquires a perpetual succession:- The members may come and go, but its goes on forever, unless it is wound up. 3. The company’s property is not the property of the shareholders:- The shareholders have a right to share in the profits of the company when realised and divided . Likewise, any liability of the company is not the liability of the individual shareholders. A private limited company can commence business immediately after its incorporation. A public company has to obtain to certificate to commence business first. Promoter 2(69) 68 in existence. Hence he occupies the peculiar position of a quasi –trustee (Vali P. Rao v. Sri Ramanuja Ginning and Rice Factory (Pvt.) Ltd, (1986). 3. Fiduciary position of a promoter :- A promoter stands in a fiduciary relation(relation requiring confidence or trust) to the company which he promotes . In Erlanger v. New sombrero phosphate Co. (1878) .Lord Cairns :- “In equity the promoters of a company stand in a Fiduciary relation to it and those persons who they induce to become shareholders in it, and cannot in equity bind the company by any contract with themselves as promoters without fully disclosing to the company all material facts which the company ought to know.” The fiduciary position of a promoter may be summed up as follows: A. Not to make any profit at the expense of the company :- The promoter must not make, either directly or indirectly, any profit at the expense of the company which is being promoted . If any secret profit is made in violation of this rule, the company may, on discovering it, compel him to account for and surrender such profit [Cape Breton Co. Re, (1885)]. B. To give benefit of negotiation to the company :- The promoter must, when once he has begun to act in promotion of a company , give to the company the benefit of any negotiations or contracts into which he enters in respect of the company . Thus, where he purchases some property for the company, he cannot rightfully sell that property to the company at a price higher than he gave for it. If he does so, the company may, on discovering it, rescind the contract and recover the purchase money. Erlanger v. New Sombrero Phosphate Co. (1878). A syndicate, of which E was the head, purchased an island said to contain valuable minerals. E, as promoter, sold the island to a company newly formed for the purpose of buying it. A contract was entered into between X, a nominee of the syndicate, and the company for purchase at double the price actually paid by E. Held, as there had been no disclosure by the promoters of the profit they were making, the company was entitled to rescind the contract and to recover the purchase money from E and the other members of the syndicate. C. To make a full disclosure of interest or profit :- The company may sue in case if promoter fails to make a full disclosure of all the relevant facts, including any profit and his personal interest in transaction with the company , damages for breach of his fiduciary duty and recovery of any secret profit made even though rescission is not asked for or is impossible. In case of full of full disclosure of profit then that is permissible .The disclosure must be made to an independent Boards of Directors. Where in case there is no independent board, disclosure must be made to the intended shareholders as a whole. 69 D. Not to make unfair use of position:- The promoter must not make an unfair or irrelevant use his position and must take care to avoid anything which has the appearance of undue influence or fraud. Further, a promoter cannot relieve himself from the liability of by making provisions to that effect in The Articles of the company [Omnium Electric Palaces Ltd. v. Baines , (1914)]. Remuneration of a promoter:- A promoter has no right to get compensation from the company for his services in promoting the company unless there is a contract regarding to remuneration. If there is no contract, he is not entitled to get any compensation in respect of any payment made by him in connection with the formation of the company. Promoters takes remuneration for his services in one of the following ways :- 1. He may sell his own property to the company after making full disclosure about profit to the boards of directors or to intended shareholders. 2. He may have an option to purchase or buy a certain number of shares in the company at par. 3. He may take commission on shares sold. 4. He may be paid with lump sum amount by the company according to contract made. Liabilities of Promoter :- 1.Non-disclosure of Secret Profit. 2. Non-adoption of Preliminary Contract . 3. Fraud in the promotion of the company.(section -447, 282, 452) 4. Omission in the Prospectus .(Section 26) 5. Misrepresentation in the prospectus .(Section 34, 35) Preliminary or pre incorporation contract :- Meaning:- Pre-incorporation contract are those contracts which are made before the company is incorporated . Promoters entered into preliminary contract on the behalf of the company as a agent. The legal position is that “in case when two consenting parties are necessary to a contract whereas the company ,before incorporation , is a non-entity.”[Kelner v. Baxter,(1866)]. Adoption of preliminary contract:- A company may adopt preliminary contracts by either of the two ways :- 70 1. The company may adopt these contracts by entering into new contracts with the third parties on the same terms as were embodied in the original contract. Such a new agreement of adoption may not be expressly made but may be implied by the acts of the company . 2. The company may adopt these contracts under the Specific Relief Act 1963.Section 15(h) and 19(e ) of the Act provide that a contract entered into by the promoters on behalf of the company before its incorporation can be enforced by or against the company, if the following two conditions are satisfied: A. The contract is entered into, for the purposes of the company and such contract is warranted by the terms of incorporation .The term “for the purposes of the company” implies that the contract should be for the working purpose of the company . B. The company accepts the contract after its incorporation and communication such acceptance to the other party to the contract . Case :- Imperial Ice mfg Co. v. Manchershaw . Position of Promoters as Regards Pre- Incorporation Contracts :- 1. Company is not bounded by the pre-incorporation contract :- A company does not have legal existence before incorporation and so it cannot enter into any contracts before incorporation .However, so many financial commitments are made and tasks executed to bring a company into existence .Promoters entered into such contracts but with understanding that the liability will be incurred by the company when it comes into existence. These contracts are the arrangements with legal and financial consultants for the formation of the company. In such cases, the important question arises- what is the liability of the company in respect to these contracts .A company, when it comes into existence. is not bound by a pre-incorporation contract even where it takes the benefit of the contract entered into on its behalf. Case- English and Colonial Produce Co. Ltd , Re(1906). 2. Company cannot enforce pre-incorporation contract :- A company cannot , after incorporation , enforce a contract made before its incorporation . Its all upto the company that those pre contracts will accepted by the company or not. Case:- Natal land and Colonisation Co. ltd v. Pauline colliery and Development Syndicate ltd.(1904). 3. Promoters personally liable :- The promoters remain personally liable for the pre-incorporation contract which is made on behalf of acomaony which have not 73 ON-Line Incorporation of company :-Non –integrated process. 1. Digital Signature Certificate(DSC):- obtain the DSC for all proposed Directors because MCA 21 , E governance requires the use of digital signatures by all the those persons who are authorised to sign the Documents . A licensed Certifying Authority (CA) issues the digital signature . 2. Directors identification number (DIN ):- Apply for DIN in proper format to be digitally signed by CA/CS/Cost Accountant etc, and uploaded by MCA portal after payment of fees electronically . Upload, successful, payment, then Provisional DIN is generated. 3. Validate the signature:- Implement a role check in the MCA application to validate the signature Director as well as that of a professional .who certified the documents . Only after that the e form will be uploaded in the portal. 4. Names (prevention of Improper Use )1950, :- to select , in order of preference, at least one name and maximum of six names, consistent with the main objects of the company . Also ensure that the name does not resemble the name of any already – registered company and that it does not violate the provisions of Emblems and Names (Prevention of Improper) Act, 1950. If the proposed name is not available, then in that case fresh name on the same application. 5. Name approved: after the name approval, the applicant can apply for registration of new company by filing all the required documents for incorporating of a company other than OPC within 60 days of the name approved. The application for incorporation of a company shall be attached with following documents :- a. MOA is signed by the subscribers and witnessed. Therefore , name of the subscribers, Father’s name, address, occupation and the number of shares taken must be given along with similar details of the witness. b. AOA also need to be signed by the subscribers to the moa and witnessed. c. Declaration:- A declaration by professional (practising CA, CS, ICWA) and director, manager or company secretary that all requirements related to incorporation have been compiled with. d. Affidavit:- An affidavit from each subscriber and first director stating that in the past five years, he has not been convicted of an offence in connection with promotion, formation or management of a company , nor found guilty of fraud /misfeasance /breach of duty , and all document contain true and complete information to the best of his knowledge . 6. Section 12:- A company furnish to the register, verification of its registered office, within 30 days of it incorporation, in such may be prescribed, 74 accompanied by any prescribed document. A title registered documents in the name of company, b. Notarised copy of lease/ rent agreement with name of company with copy of rent paid. 7. Appointment of directors:- file particulars of appointment of directors and key managerial personnel with the Registrar within 30 days from the date of appointment of every directors and key personnel. 8. E- payment:- make payment, MCA -21 portal provide facility of e payment of requisite filing and registration fee. 9. Receiving E-mail:- Receiving email on approval of application, then Registrar generated incorporation certificate which consist Corporate Identity Number(CIN) in INC. 11 within a few days . Consist PAN(Permanent account number ) of the company . consist TAN(Tax deduction account ) . NO hard copy of certificate issued,only digital certificate issued. Summary The incorporation of a company is a legal process which is used to form a legal entity. It is long process earlier but now the initiative taken by MCA of online registration called SPICE. ROC play important role in whole registration process it define all documents and steps required in incorporation of the company. After all verification by the ROC, company is registered and ready to do business. Promoter play vital and important role to make it possible and convenient to get company registered .He do all preliminary work, incur preliminary expenses as well entered in pre-incorporation contract and provisional contract . Self Assessment Questions Check yourself:- Q1. What is the process of incorporation of the company according to Indian companies Act 2013? Q2. Who is Promoter and what is the meaning of fiduciary position regarding to promoter? Q3. How company get registered online? Q4. MCQ:- a. When a public company said to be registered :- 1. When it files the memorandum of association with the registrar of companies. 2. When it get the certificate of incorporation. 75 3. When it actually starts its business. 4. None of the above. b. Contracts which are entered into by agents or trustee on behalf of a prospective company before it has come into existence are called:- 1. Provisional contracts 2. Pre-incorporation contracts 3. Both provisional and pre-incorporation contract . 4. None of the above . c. Every company shall have its registered office within _______ of its incorporation . 1. 15 days 2. 30 days 3. 45 days 4. 60 days. d. A change in the name of a company requires:- 1. An ordinary resolution and approval of the Central government. 2. A special resolution and approval of the Central government . 3. A special resolution and approval of the tribunal . 4. An ordinary resolution and approval of the tribunal . e. INC -33 is filed for :- 1. MOA 2. AOA 3. Prospectus 4. None of the above. Answers:- Q4. A. 2 b.2 c.2. d. 2 e. 1.