THE COMPANIES BILL, 2009

Transcription

1 TO BE INTRODUCED IN LOK SABHA Bill No. 59 of 2009 CLAUSES THE COMPANIES BILL, 2009 ARRANGEMENT OF CLAUSES CHAPTER I PRELIMINARY 1. Short title, extent, commencement and application. 2. Definitions. CHAPTER II INCORPORATION OF COMPANIES 3. Formation of company. 4. Formation of companies with charitable objects, etc. 5. Memorandum. 6. Articles. 7. Incorporation of companies. 8. Effect of registration. 9. Effect of memorandum and articles. 10. Commencement of business, etc. 11. Registered office of company. 12. Alteration of memorandum. 13. Alteration of articles. 14. Alteration of memorandum and articles to be noted in every copy. 15. Rectification of name of company. 16. Copies of memorandum, articles, etc., to be given to members. 17. Re-registration of companies already registered. 18. Subsidiary company not to hold shares in its holding company. 19. Service of documents. 20. Authentication of documents, proceedings and contracts. 21. Execution of bills of exchange, etc. CHAPTER III PROSPECTUS AND ALLOTMENT OF SECURITIES 22. Powers of Securities and Exchange Board to regulate issue and transfer of securities, etc. 23. Matters to be stated in prospectus. 24. Offer or invitation for subscription of securities. 25. Advertisement of prospectus. 26. Shelf prospectus. 27. Red herring prospectus. 28. Issue of application forms for securities. 29. Criminal liability for misstatements in prospectus. 30. Civil liability for misstatements in prospectus. SERVER5\BILL_ 2009/LS/3283LS/3283LS(CONTENT) (i)

2 (ii) CLAUSES 31. Punishment for fraudulently inducing persons to invest money. 32. Action by affected persons. 33. Punishment for personation for acquisition, etc., of securities. 34. Allotment of securities by company. 35. Securities to be dealt with in Stock Exchanges. 36. Global Depository Receipt. CHAPTER IV SHARE CAPITAL AND DEBENTURES 37. Kinds of share capital. 38. Nature of shares or debentures. 39. Numbering of shares. 40. Certificate of shares. 41. Voting rights. 42. Variation of shareholders rights. 43. Calls on shares of same class to be made on uniform basis. 44. Company to accept unpaid share capital, although not called up. 45. Payment of dividend in proportion to amount paid-up. 46. Application of premium received on issue of shares. 47. Prohibition on issue of shares at discount. 48. Issue of sweat equity shares. 49. Issue and redemption of preference share. 50. Transfer and transmission of securities. 51. Punishment for personation of shareholder. 52. Refusal of registration and appeal against refusal. 53. Rectification of register of members. 54. Publication of authorised, subscribed and paid-up capital. 55. Power of limited company to alter its share capital. 56. Further issue of share capital. 57. Notice to be given to Registrar for alteration of share capital. 58. Unlimited company to provide for reserve share capital on re-registration. 59. Reduction of share capital. 60. Restrictions on purchase by company or giving of loans by it for purchase of its shares. 61. Power of company to purchase its own securities. 62. Transfer of certain sums to Capital Redemption Reserve Account. 63. Prohibition for buy-back in certain circumstances. 64. Debentures. 65. Nomination of shares or debentures. CHAPTER V ACCEPTANCE OF DEPOSITS BY COMPANIES 66. Prohibition on acceptance of deposits from public. 67. Repayment of deposits, etc., accepted before commencement of this Act. 68. Damages for fraud. 69. Duty to register charges, etc. 70. Application for registration of charge. 71. Section 69 to apply in certain matters. CHAPTER VI REGISTRATION OF CHARGES

3 (iii) CLAUSES 72. Date of notice of charge. 73. Register of charges to be kept by Registrar. 74. Company to report satisfaction of charge. 75. Intimation of appointment of receiver or manager. 76. Company s register of charges. 77. Punishment for contravention. CHAPTER VII MANAGEMENT AND ADMINISTRATION 78. Register of members, etc. 79. Declaration in respect of beneficial interest in any share. 80. Investigation of beneficial ownership of shares in certain cases. 81. Power to close register of members or debenture holders or other security holders. 82. Annual return. 83. Place of keeping and inspection of registers, returns, etc. 84. Registers, etc., to be evidence. 85. Annual general meeting. 86. Power of Tribunal to call annual general meeting. 87. Power of Tribunal to call meetings of members, etc. 88. Punishment for default in complying with provisions of sections 85 to Calling of extraordinary general meeting. 90. Notice of meeting. 91. Explanatory statement to be annexed with notice. 92. Quorum for meetings. 93. Chairman of meetings. 94. Proxies. 95. Restriction on voting rights. 96. Voting by show of hands. 97. Voting through electronic means. 98. Demand for poll. 99. Postal ballot Circulation of members resolution Representation of the President and Governors in meetings Representation of corporations at meeting of companies and of creditors Ordinary and special resolutions Resolutions requiring special notice Resolutions passed at adjourned meeting Resolutions and agreements to be filed Minutes of proceedings of general meeting, meeting of Board of Directors and other meeting and resolutions passed by postal ballot Inspection of minute books of general meeting Report on general meeting. CHAPTER VIII DECLARATION AND PAYMENT OF DIVIDEND 110. Declaration of dividend Unpaid Dividend Account Investor Education and Protection Fund Amount lying in previous Fund to become part of Fund under this Act Right to dividend, rights shares and bonus shares to be held in abeyance pending registration of transfer of shares Punishment for failure to distribute dividends within thirty days. CHAPTER IX ACCOUNTS OF COMPANIES 116. Books of account, etc., to be kept by company Financial statements.

4 (iv) CLAUSES 118. Constitution of National Advisory Committee on Accounting and Auditing Standards Central Government to notify accounting standards Financial Statement, Board s report, etc Right of member to copies of audited balance sheet Copy of financial statement to be filed with Registrar. CHAPTER X AUDIT AND AUDITORS 123. Appointment of auditors Eligibility, qualifications and disqualifications of auditors Remuneration of auditors Powers and duties of auditors and auditing standards Auditor not to render certain services Auditor to sign audit reports, etc Auditors to attend general meeting Punishment for contravention Central Government to specify audit of items of cost in respect of certain companies. CHAPTER XI APPOINTMENT AND QUALIFICATIONS OF DIRECTORS 132. Company to have Board of Directors Appointment of directors Application for allotment of Director Identification Number Allotment of Director Identification Number Prohibition to obtain more than one Director Identification Number Director to intimate Director Identification Number Company to inform Director Identification Number to Registrar Obligation to indicate Director Identification Number Punishment for contravention Right of persons other than retiring directors to stand for directorship Appointment of additional director, alternate director and nominee director Appointment of directors to be voted individually Option to adopt principle of proportional representation for appointment of directors Disqualifications for appointment of director Number of directorships Duties of directors Vacation of office of director Resignation of director Removal of directors Register of directors and key managerial personnel and their shareholding Members right to inspect Punishment. CHAPTER XII MEETINGS OF BOARD AND ITS POWERS 154. Meetings of Board Quorum for meetings of Board Passing of resolution by circulation Defects in appointment of directors not to invalidate actions taken Committees of Board Powers of Board.

5 (v) CLAUSES 160. Restrictions on powers of Board Prohibitions and restrictions regarding political contributions Disclosure of interest by director Loan to directors, etc Loan and investment by company Investments of company to be held in its own name Related party transactions Register of contracts or arrangements in which directors are interested Contract of employment with managing or whole-time directors Payment to director for loss of office, etc., in connection with transfer of undertaking, property or shares Restriction on non-cash transactions involving directors Contract by One Person Company Prohibition on forward dealings in securities of company by a key managerial personnel Prohibition on insider trading of securities. CHAPTER XIII APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL 174. Appointment of managing director, whole-time director or manager Remuneration of managerial personnel Remuneration payable to directors Compensation for loss of office of managing or whole-time director or manager Appointment of key managerial personnel. CHAPTER XIV INSPECTION, INQUIRY AND INVESTIGATION 179. Power to call for information, inspect books and conduct inquiries Conduct of inspection and inquiry Report on inspection made Search and seizure Investigation into affairs of company Investigation into company s affairs in other cases Security for payment of costs and expenses of investigation Firm, body corporate or association not to be appointed as inspector Investigation of ownership of company Procedure, powers, etc., of inspectors Power of inspectors to conduct investigation into affairs of related companies, etc Seizure of documents by inspector Freezing of assets on an inquiry and investigation of a company Imposition of restrictions upon securities Inspector s report No suit or proceeding till submission of final report Actions to be taken in pursuance of inspector s report Expenses of investigation Voluntary winding up of company, etc., not to stop investigation proceedings Legal advisers and bankers not to disclose Investigation, etc., of foreign companies Penalty for furnishing false statement, mutilation, destruction of documents.

6 (vi) CLAUSES CHAPTER XV COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS 201. Power to compromise or make arrangements with creditors and members Power of Tribunal to enforce compromise or arrangement Merger and amalgamation of companies Merger or amalgamation of certain companies Amalgamation by mutual agreement Power to acquire shares of shareholders dissenting from scheme or contract approved by majority Purchase of minority shareholding Power of Central Government to provide for amalgamation of companies in public interest Registration of offer of Schemes involving transfer of shares Preservation of books and papers of amalgamated company Liability of officers in respect of offences committed prior to merger, amalgamation, etc. CHAPTER XVI PREVENTION OF OPPRESSION AND MISMANAGEMENT 212. Application to Tribunal for relief in cases of oppression, etc Powers of Tribunal Consequence of termination or modifications of certain agreements Right to apply under section Class action Application of certain provisions to proceedings under sections 212 and 216. CHAPTER XVII REGISTERED VALUERS 218. Valuation by registered valuers Registration of valuers Appointment of committee of experts Practice as registered valuers Furnishing of particulars in certain cases Removal and restoration of names of valuers from register. CHAPTER XVIII REMOVAL OF NAMES OF COMPANIES FROM THE REGISTER 224. Power of Registrar to remove name of a company from register No application under section 224 in certain situations Effect of a company notified as dissolved Fraudulent application for removal of name Appeal to Tribunal. CHAPTER XIX REVIVAL AND REHABILITATION OF SICK COMPANIES 229. Determination of sickness Application for revival and rehabilitation Appointment of interim administrator.

7 (vii) CLAUSES 232. Committee of creditors Order of Tribunal Appointment of administrator Powers and duties of company administrator Scheme of revival and rehabilitation Sanction of scheme Scheme to be binding Implementation of the scheme Winding up of company on report of company administrator Power of Tribunal to assess damages against delinquent directors, etc Punishment for certain offences Bar of jurisdiction Rehabilitation and Insolvency Fund. CHAPTER XX WINDING UP 245. Modes of winding up. Part I Winding up by the Tribunal 246. Circumstances in which a company may be wound up by Tribunal Petition for winding up Powers of Tribunal Directions for filing statement of affairs Company Liquidators and their appointments Removal and replacement of liquidator Winding up order to be communicated to the Registrar Effect of winding up order Stay of suits, etc., on winding up order Jurisdiction of Tribunal Submission of report by Company Liquidator Directions of Tribunal on report of Company Liquidator Custody of company s properties Directors, officers and employees to co-operate with Company Liquidator Settlement of list of contributories and application of assets Obligations of directors and managers Committee of inspection Submission of periodical reports to the Tribunal Power of Tribunal on application for stay of winding up Powers and duties of Company Liquidator Provision for professional assistance to Company Liquidator Exercise and control of Company Liquidator s powers Books to be kept by Company Liquidator Audit of Company Liquidator s accounts Payment of debts by contributory and extent of set-off Power of Tribunal to make calls Adjustment of rights of contributories Power to order costs Power to summon persons suspected of having property of company, etc Power to order examination of promoters, directors, etc Arrest of person trying to quit India or abscond Dissolution of company by Tribunal Appeals from orders made before commencement of Act. Part II Voluntary Winding up 279. Circumstances in which company may be wound up voluntarily Declaration of solvency in case of proposal to wind up voluntarily.

8 (viii) CLAUSES 281. Meeting of creditors Publication of resolution to wind up voluntarily Commencement of voluntary windingup Effect of voluntary winding up Appointment of Company Liquidator Power to remove and fill vacancy of Company Liquidator Notice of appointment of Company Liquidator to be given to Registrar Cesser of Board s powers on appointment of Company Liquidator Powers and duties of Company Liquidator in voluntary winding up Appointment of committees Company Liquidator to submit report on progress of winding up Report of Company Liquidator to Tribunal for examination of persons Final meeting of dissolution of company Power of Company Liquidator to accept shares, etc., as consideration for sale of property of company Distribution of property of company Arrangement when binding on company and creditors Power to apply to Tribunal to have questions determined, etc Costs of voluntary winding up. Part III Provisions applicable to every mode of winding up 299. Debts of all descriptions to be admitted to proof Application of insolvency rules in winding up of insolvent companies Overriding preferential payments Preferential payments Fraudulent preference Transfers not in good faith to be void Certain transfers to be void Liabilities and rights of certain persons fraudulently preferred Effect of floating charge Disclaimer of onerous property Transfers, etc., after commencement of winding up to be void Certain attachments, executions, etc., in winding up by Tribunal to be void Offences by officers of companies in liquidation Penalty for frauds by officers Liability where proper accounts not kept Liability for fraudulent conduct of business Power of Tribunal to assess damages against delinquent directors, etc Liability under sections 314 and 315 to extend to partners or directors in firms or companies Prosecution of delinquent officers and members of company Company Liquidator to exercise certain powers subject to sanction Statement that a company is in liquidation Books and papers of company to be evidence Inspection of books and papers by creditors and contributories Disposal of books and papers of company Information as to pending liquidations Official Liquidator to make payments into public account of India Company Liquidator to deposit into scheduled bank Liquidator not to deposit monies into private banking account Company Liquidation Dividend and Undistributed Assets Account Liquidator to make returns, etc Meetings to ascertain wishes of creditors or contributories.

9 (ix) CLAUSES 330. Court, tribunal or person, etc., before whom affidavit may be sworn Powers of Tribunal to declare dissolution of company void Commencement of winding up by Tribunal Exclusion of certain time in computing period of limitation. Part IV Official Liquidators 334. Appointment of Official Liquidator Powers and functions of Official Liquidator Summary procedure for liquidation Sale of assets and recovery of debts due to company Settlement of claims of creditors by Official Liquidator Appeal by creditor Order of dissolution of company. CHAPTER XXI COMPANIES INCORPORATED OUTSIDE INDIA 341. Application of Act to foreign companies Documents, etc., to be delivered to Registrar by foreign companies Accounts of foreign company Display of name, etc., of foreign company Service on foreign company Debentures, annual return, registration of charges, books of account and their inspection Fee for registration of documents Interpretation Dating of prospectus and particulars to be contained therein Provisions as to expert s consent and allotment Registration of prospectus Offer of Indian Depository Receipts Application of sections 29 to 31 and Chapter XX Punishment for contravention Company s failure to comply with provisions of this Chapter not to affect validity of contracts, etc. CHAPTER XXII GOVERNMENT COMPANIES 356. Annual reports on Government companies Power to modify Act in its application to Government companies. CHAPTER XXIII REGISTRATION OFFICES AND FEES 358. Registration offices Admissibility of certain documents as evidence Provisions relating to filing of applications, documents, inspection, etc., in electronic form Electronic form to be exclusive, alternative or in addition Provision of value added services through electronic form Application of provisions of Information Technology Act, Fee for filing, etc Fees, etc., to be credited into public account. CHAPTER XXIV COMPANIES TO FURNISH INFORMATION OR STATISTICS 366. Power of Central Government to direct companies to furnish information or statistics.

10 (x) CHAPTER XXV NIDHIS CLAUSES 367. Power to modify Act in its application to Nidhis. CHAPTER XXVI NATIONAL COMPANY LAW TRIBUNAL AND APPELLATE TRIBUNAL 368. Definitions Constitution of National Company Law Tribunal Qualifications of President and Members of Tribunal Constitution of Appellate Tribunal Qualifications of Chairperson and Members of Appellate Tribunal Selection of Members of Tribunal and Appellate Tribunal Term of office of President, Chairperson and other Members Salary, allowances and other terms and conditions of service of Members Acting President and Chairman of Tribunal and Appellate Tribunal Resignation of Members Removal of Members Staff of Tribunal and Appellate Tribunal Benches of Tribunal Orders of Tribunal Appeal from orders of Tribunal Expeditious disposal by Tribunal and Appellate Tribunal Appeal to Supreme Court Procedure before Tribunal and Appellate Tribunal Power to punish for contempt Delegation of powers Members, officers, etc., to be public servants Protection of action taken in good faith Power to seek assistance of Chief Metropolitan Magistrate, etc Civil court not to have jurisdiction Vacancy in Tribunal or Appellate Tribunal not to invalidate acts or proceedings Right to legal representation Limitation Transfer of certain pending proceedings. CHAPTER XXVII SPECIAL COURTS 396. Establishment of special courts Offences triable by special courts Appeal and revision Application of Code to proceedings before a special court Offences to be non-cognizable Transitional provisions Composition of certain offences Power of Central Government to appoint company prosecutors Appeal against acquittal Compensation for accusation without reasonable cause Application of fines.

11 (xi) CHAPTER XXVIII MISCELLANEOUS CLAUSES 407. Punishment for false statements Punishment for false evidence Punishment where no specific penalty or punishment is provided Punishment in case of repeated default Punishment for wrongful withholding of property Punishment for improper use of Limited, Private Limited or OPC Limited Adjudication of penalties Dormant company Protection of action taken in good faith Non-disclosure of information in certain cases Delegation by Central Government of its powers and functions Powers of Central Government or Tribunal to accord approval, etc., subject to conditions and to prescribe fees on applications Condonation of delay in certain cases Annual report by Central Government Power to modify certain provisions of Act in their application to private company, One Person Company and small company Prohibition of association or partnership of persons exceeding certain number Repeal of certain enactments and savings Dissolution of Company Law Board and consequential provisions Power to remove difficulties Power of Central Government to make rules.

12 TO BE INTRODUCED IN LOK SABHA THE COMPANIES BILL, 2009 A BILL to consolidate and amend the law relating to companies. BE it enacted by Parliament in the Sixtieth Year of the Republic of India as follows: CHAPTER I PRELIMINARY Bill No. 59 of (1) This Act may be called the Companies Act, (2) It extends to the whole of India. (3) This section shall come into force at once and the remaining provisions of this Act shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions and any reference in any provision of this Act to the commencement of this Act shall be construed as a reference to the commencement of that provision. (4) The provisions of this Act shall apply to (a) companies incorporated under this Act or under any previous company law; and (b) any company or body corporate governed by any special Act, in the absence of any corresponding provisions therein. Short title, extent, commencement and application.

13 2 Definitions. 2. (1) In this Act, unless the context otherwise requires, (a) abridged prospectus means a memorandum containing such salient features of a prospectus as may be prescribed; (b) accounting standards means such accounting standards as the Central Government may notify under section 119, in consultation with the National Advisory Committee on Accounting and Auditing Standards constituted under section 118; (c) alter or alteration includes the making of additions, omissions and substitutions; (d) Appellate Tribunal means the National Company Law Appellate Tribunal constituted under section 371; (e) articles means the articles of association of a company as originally framed or as altered from time to time or applied in pursuance of any previous company law or of this Act; (f) associate company, in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence or of any other company. Explanation. For the purposes of this clause, significant influence means control of at the least twenty-six per cent. of total voting power, or of business decisions under an agreement; (g) auditing standards means such auditing standards as the Central Government may notify under sub-section (10) of section 126, in consultation with the National Advisory Committee on Accounting and Auditing Standards constituted under section 118; (h) authorised capital or nominal capital means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company; (i) banking company means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949; (j) Board of Directors or Board, in relation to a company, means the collective body of the directors of the company; (k) body corporate or corporation includes a company incorporated outside India, but does not include (i) a co-operative society registered under any law relating to co-operative societies; and (ii) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification published in the Official Gazette, specify in this behalf; (l) book and paper and book or paper include books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form; (m) books of account includes records maintained in respect of (i) all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place; (ii) all sales and purchases of goods and services by the company; (iii) the assets and liabilities of the company; and 10 of 1949.

14 3 38 of of of of (iv) in the case of a company which belongs to any class of companies specified under section 131, such items of cost as may be prescribed under that section; (n) branch office, in relation to a company, means any establishment described as such by the company; (o) called-up capital means such part of the subscribed capital, which has been called for payment; (p) charge means an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage; (q) chartered accountant means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act; (r) Chief Executive Officer means an officer of a company, who has been designated as such by it; (s) Chief Financial Officer means a person appointed as the Chief Financial Officer of a company; (t) company means a company incorporated under this Act or under any previous company law; (u) company limited by guarantee means a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up; (v) company limited by shares means a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them; (w) Company Liquidator, in so far as it relates to the winding up of a company, means a person appointed by the Tribunal, company or creditors, as the case may be, as a Company Liquidator from a panel of professionals maintained by the Central Government under sub-section (2) of section 250; (x) Company Secretary or Secretary means a Company Secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 and who is appointed by a company to perform the functions of a Company Secretary under this Act; (y) Company Secretary in practice means a Company Secretary who is deemed to be in practice under sub-section (2) of section 2 of the Company Secretaries Act, 1980; (z) contributory means a person liable to contribute towards the payment of a company s debts in the event of its being wound up; (za) controlling interest means the largest voting power a member may exercise in a general meeting of a company, whether directly or indirectly, and either alone or in association with his relatives, bodies corporate or firms controlled by such person or his relatives; (zb) cost accountant means a cost accountant as defined in clause (b) of subsection (1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act; (zc) Court means (i) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to

15 4 which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court under sub-clause (ii); (ii) the District Court, in cases where the Central Government has, by notification, empowered any District Court to exercise all or any of the jurisdictions conferred upon the High Court, within the scope of its jurisdiction in respect of a company whose registered office is situate in the district; (iii) the Court of Session having jurisdiction to try any offence under this Act or under any previous company law; (iv) the special court established under section 396; (v) any Metropolitan Magistrate or a Judicial Magistrate of the First Class having jurisdiction to try any offence under this Act or under any previous company law; (zd) debenture includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not; (ze) deemed director means a person under whose advice, instructions or directions, the Board of Directors is accustomed to act, but does not include a person who has been engaged by the company to advise it in a professional capacity; (zf) deposit means a deposit accepted by a company under section 66 and includes a deposit existing on the commencement of this Act; (zg) depository means a depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996; (zh) derivative means the derivative as defined in clause (aa) of section 2 of the Securities Contracts (Regulation) Act, 1956; (zi) director means a director appointed to the Board of a company, and includes a deemed director; (zj) Director-General means the Director-General of Registration appointed under sub-section (2) of section 358; (zk) dividend includes any interim dividend; (zl) document includes summons, notice, requisition, order, declaration, form and register, whether issued, sent or kept in pursuance of this Act or under any other law for the time being in force or otherwise, maintained on paper or in electronic form; (zm) employees stock option means the option given to the directors, officers or employees of a company or of its holding company or subsidiary company or companies, if any, which gives such directors, officers or employees, the benefit or right to purchase, or subscribe for, the shares of the company at a future date at a predetermined price; (zn) expert includes an engineer, a valuer, a Chartered Accountant, a Company Secretary, a Cost and Works Accountant and any other person who has the power or authority to issue a certificate in pursuance of any law for the time being in force; (zo) financial institution includes a scheduled bank; (zp) financial statement in relation to a company, includes (i) a balance sheet as at the end of the financial year; (ii) a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year; 22 of of 1956.

16 5 (iii) cash flow statement for the financial year; and (iv) any explanatory note attached to, or forming part of, any document referred to in sub-clause (i) or sub-clause (ii); (zq) financial year, in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate laid before it in its annual general meeting is made up: Provided that on an application made by a company or body corporate, the Tribunal may, if it is satisfied that the circumstances so warrant, allow any period as its financial year, whether that period is a year or not; (zr) foreign company means any company or body corporate incorporated outside India which has a place of business in India whether established before or after the commencement of this Act; (zs) free reserves means such reserves which, as per the latest audited balance sheet of a company, are available for distribution as dividend; (zt) Global Depository Receipt (GDR) means any instrument in the form of a depository receipt, by whatever name called, created by a foreign depository outside India and authorised by a company making an issue of such depository receipts; (zu) Government company means any company in which not less than fiftyone per cent. 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; (zv) holding company, in relation to one or more other companies, means a company of which such companies are subsidiary companies; (zw) independent director means an independent director as defined under sub-section (5) of section 132; (zx) Indian Depository Receipt (IDR) means any instrument in the form of a depository receipt created by a domestic depository in India and authorised by a company incorporated outside India making an issue of such depository receipts; (zy) interested director means a director who is in any way, whether by himself or through any of his relatives or firm, body corporate or other association of individuals in which he or any of his relatives is a partner, director or a member, interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into by or on behalf of a company; (zz) issued capital means such capital as the company issues from time to time for subscription by the public; (zza) key managerial personnel, in relation to a company, means (i) the Managing Director, the Chief Executive Officer or the Manager and where there is no Managing Director or Manager, a whole-time director or directors; (ii) the Company Secretary; and (iii) the Chief Financial Officer; (zzb) listed company means a company which has any of its securities listed on any recognised stock exchange;

17 6 (zzc) manager means an individual who, subject to the superintendence, control and direction of the Board of Directors, has the management of the whole, or substantially the whole, of the affairs of a company, and includes a director or any other person occupying the position of a manager, by whatever name called, whether under a contract of service or not; (zzd) managing director means a director who, by virtue of the articles of a company or an agreement with the company or a resolution passed in its general meeting, or by its Board of Directors, is entrusted with the management of the whole, or substantially the whole, of the affairs of the company; (zze) member, in relation to a company, means (i) any subscriber to the memorandum of the company and whose name is entered in the register of members of the company; (ii) every other person who agrees in writing to become a member of the company by virtue of his holding equity or preference shares in the company and whose name is entered in the register of members of the company; (iii) every person holding equity or preference shares of the company and whose name is entered as a beneficial owner in the records of a depository; (zzf) memorandum means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of this Act; (zzg) net worth means the aggregate value of the paid-up share capital and all reserves created out of the profits and share premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation; (zzh) notification means a notification published in the Official Gazette and the expression notify shall be construed accordingly; (zzi) officer who is in default, for the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means all or any of the following officers of a company, namely : (i) whole-time director or directors; (ii) other key managerial personnel; (iii) where there is no key managerial personnel such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified; (iv) any person who, under the immediate authority of the Board or any key managerial personnel, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default; (v) any person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act other than a person who gives advice to the Board in a professional capacity; (vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance;

18 7 10 of of of of of of of of of ; (vii) in respect of the issue or transfer of any shares of a company, the share transfer agents, bankers, registrars and merchant bankers to the issue or transfer; (zzj) Official Liquidator means an Official Liquidator appointed under section (zzk) One Person Company means a company which has only one person as a member; (zzl) paid-up share capital or share capital paid-up means such aggregate amount of money credited as paid-up as is equivalent to the amount received as paidup in respect of shares issued, but does not include any other amount received in respect of such shares, by whatever name called; (zzm) postal ballot means voting by post or through any electronic communication; (zzn) prescribed means prescribed by rules made under this Act; (zzo) previous company law means any of the laws specified below: (i) any Act or Acts relating to companies in force before the Indian Companies Act, 1866; (ii) the Indian Companies Act, 1866; (iii) the Indian Companies Act, 1882; (iv) the Indian Companies Act, 1913; (v) the Registration of Transferred Companies Ordinance, 1942; (vi) the Companies Act, 1956; and (vii) any law corresponding to any of the Acts or the Ordinance aforesaid and in force (A) in the merged territories or in a Part B State (other than the State of Jammu and Kashmir), or any part thereof, before the extension thereto of the Indian Companies Act, 1913; or (B) in the State of Jammu and Kashmir, or any part thereof, before the commencement of the Jammu and Kashmir (Extension of Laws) Act, 1956, in so far as banking, insurance and financial corporations are concerned, and before the commencement of the Central Laws (Extension to Jammu and Kashmir) Act, 1968, in so far as other corporations are concerned; (viii) the Portuguese Commercial Code, in so far as it relates to sociedades anonimas ; and (ix) the Registration of Companies Act (Sikkim) 1961; (zzp) private company means a company which, by its articles, (i) restricts the right to transfer its shares; (ii) limits the number of its members to fifty : Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member: Provided further that (A) persons who are in the employment of the company; and

19 8 (B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and (iii) prohibits any invitation to the public to subscribe for any securities of the company; (zzq) promoter means a person who has (a) been named as such in a prospectus; or (b) control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise: Provided that nothing in sub-clause (b) shall apply to a person who is acting in a professional capacity; (zzr) prospectus means any document described or issued as a prospectus and includes a red herring or shelf prospectus or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities, but does not include any memorandum or other document containing information about the prospectus or the matters included therein issued prior to the issue of the prospectus and any document which shows on the face of it that it is not a prospectus; (zzs) public company means a company which is not a private company or such private company which is a subsidiary of a company which is not a private company; (zzt) public financial institution means any financial institution (i) which is established or constituted by or under any Central or State Act; or (ii) in which not less than fifty-one per cent. of the paid-up share capital is held or controlled by the Central Government or any State Government or both by the Central Government and any State Government or Governments or by the State Governments, and which is notified by the Central Government as such under this Act; (zzu) recognised stock exchange means a recognised stock exchange as defined in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956; (zzv) red herring prospectus means a prospectus which does not include complete particulars of the quantum or price of the securities or class of securities included therein; (zzw) register of companies means the register of companies maintained by the Registrar on paper or in any electronic mode under this Act; (zzx) Registrar means any officer having the duty of registering companies under this Act; (zzy) related party with reference to a company means (i) a relative of a director or key managerial personnel; (ii) a firm, in which a director, manager or his relative is a partner; (iii) a private company in which a director or manager is a member or director; 42 of 1956.

20 9 43 of of of of (iv) a public company in which a director or manager is a director or holds along with his relatives, more than two per cent. of its paid-up share capital; (v) any body corporate whose Board of Directors, managing director, or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager; (vi) any person under whose advice, directions or instructions a director or manager is accustomed to act; (vii) any company which is (A) a holding, subsidiary or an associate company of such company; or (B) a subsidiary of a holding company to which it is also a subsidiary: Provided that nothing in sub-clauses (v) and (vi) shall apply to the advice, directions or instructions given in a professional capacity; (zzz) relative, with reference to any individual, means the spouse, brother, sister and all lineal ascendants and descendants of such individual related to him either by marriage or adoption; (zzza) remuneration means any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under the Income-tax Act, 1961; (zzzb) scheduled bank means the scheduled bank as defined in clause (e) of section 2 of the Reserve Bank of India Act, 1934; (zzzc) securities means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956; (zzzd) Securities and Exchange Board means the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992; (zzze) share means a share in the share capital of a company and includes stock; (zzzf) shelf prospectus means a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus; (zzzg) small company means a company, other than a public company, (i) whose paid-up share capital does not exceed such amount as may be prescribed and the prescribed amount shall not be more than five crore rupees; or (ii) whose turnover as per its last profit and loss account does not exceed such amount as may be prescribed and the prescribed amount shall not be more than twenty crore rupees: Provided that nothing in this clause shall apply to (A) a holding company or a subsidiary company; (B) a company registered under section 4; or (C) a company or body corporate governed by any special Act; (zzzh) subscribed capital means such part of the capital which is for the time being subscribed by the members of a company;

21 10 (zzzi) subsidiary company or subsidiary, in relation to any other company (hereinafter referred to as the holding company), means a company in which the holding company (i) controls the composition of the Board of Directors; or (ii) exercises or controls more than one-half of the total voting power. Explanation. For the purposes of this clause, a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company; (zzzj) sweat equity shares means such equity shares as are issued by a company to its directors or employees at a discount or for consideration, other than cash, for their providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called; (zzzk) total voting power means the total number of votes that may be cast at a meeting of the company if all the members thereof cast their votes either personally or by means of postal ballot; (zzzl) Tribunal means the National Company Law Tribunal constituted under section 369; (zzzm) unlimited company means a company not having any limit on the liability of its members; (zzzn) voting right means the right of a member of a company to vote in any meeting of the company; (zzzo) whole-time director includes a director in the whole-time employment of the company. (2) Words and expressions used and not defined in this Act but defined in the Securities Contracts (Regulation) Act, 1956 or the Securities and Exchange Board of India Act, 1992 or the Depositories Act, 1996 shall have the meanings respectively assigned to them in that Act. CHAPTER II 42 of of of INCORPORATION OF COMPANIES Formation of company. 3. (1) A company may be formed for any lawful purpose by any (a) seven or more persons, where the company to be formed is to be a public company, or (b) two or more persons, where the company to be formed is to be a private company, or (c) one person, where the company to be formed is to be a One Person Company, by subscribing their names or his name to a memorandum in the manner prescribed and complying with the requirements of this Act in respect of registration: Provided that the memorandum of a One Person Company shall indicate the name of the person who shall, in the event of the subscriber s death, disability or otherwise, become the member of the company: Provided further that it shall be the duty of the member of a One Person Company to intimate the Registrar the change, if any, in the name of the person referred to in the preceding proviso and indicated in the memorandum within such time and in such form as may be prescribed, and any such change shall not be deemed to be an alteration of the memorandum.