COMPANY ACT 2013 AMENDMENT FOR NOV-2014-CA-IPCC. By CA Amit Popli-Faculty ICAI & ETEN Satellite Classes for IPCC & Final

COMPANY ACT 2013 AMENDMENT FOR NOV-2014-CA-IPCC SECTION TO BE USED IN THIS CHAPTER SECTION As per 1956 Section 4 SECTIONS As per 2013 Section 2(87) & 19 PARA No of Book 22.2 Section 23 New Para NA Section 24 New Para NA Section 30 New Para NA Section 41 Section 2(55) 25.1 No Section 60A Section 31 Section 60B Section 32 27.6 27.7 Section 62 Section 35 27.12 No Section 63 Section 34 27.15 No Section 64 Section 25 27.8 No Section 68 Section 36 Section 69 Section 39 Section 73 Section 40 Section 77B Section 70 27.16 Section 37 New Para NA Section 38 New Para NA 26.4 26.4 30.11 Any new change/modification from Company Act 1956 Yes, use of total share capital rather than Equity share capital Yes, Now such companies as authorized by SEBI can issue such prospectus The new Act, 2013 only says about the filing of red herring prospectus and final prospectus and removes the filing of information memorandum as given under the 1956 Act. The 2013 Act prescribes punishment for falsely inducing another person to enter into an agreement to obtain credit facilities from any bank or financial institution has also been provided. Remaining rules as provided under such para (as per Company Act 1956) are same Remaining rules as provided under such para are same Under the Companies Act, 2013 now the company can buy-back even if it has defaulted in the repayment of deposit or interest thereon, redemption of debentures or preference shares or payment of dividend or repayment of any term loan or interest thereon to any financial institution or bank, provided the default has been remedied and a period of 3 years have elapsed after such default ceased to subsist. Whereas under the 1956 Act, prohibition on buy- back is ceased By CA Amit Popli-Faculty ICAI & ETEN Satellite Classes for IPCC & Final

2 immediately when default ceased to subsist. Section 91 Section 49 29.14 No Section 92 Section 50 29.15 No Section 111 & 111A Section 111 & 111A Section 65 New Para NA Section 58 Section 59 31.3 31.3 The 2013 Act added a default under section 123 related to declaration of dividend in addition to the default related to the filing of the annual return, failure to distribute dividend and Financial statement provided under the Companies Act, 1956 where a company will not be able to directly/indirectly purchase its own shares or other specified securities. The new law under the 2013 Act, Reduces the period within which private company has to intimate refusal to register the transfer from 2 months to 30 days. In case of a public company, the time-limit for registration of transfer has been reduced to 30 days. The power of making the appeal has now been limited for the transferee only. The time period of making an appeal to the tribunal has been reduced from 2 months to 30 days. Where no notice is served there the appeal should be filed within 60 days. In case of a public company the time period of making an appeal to the tribunal has been simplified to 60 days. Where no notice received, the appeal should be filed within 90 days. No Section 86 New Para NA Section 60 New Para NA Section 154 Section 91 25.9 No Section 169 Section 100 28.3 No Section 173 Section 102 28.7 The 2013, Act states that in case of special business to be transacted at the AGM then explanatory statement shall specify the extent of share holding interest of promoters, directors,

managers, and KMP, if their shareholding is 2% or more of the paid up share capital. Whereas extent of such shareholding interest mentioned in the 1956 Act is not less than twenty per cent of the paid-up share capital of that other company. Section 174 Section 103 28.8 Change in Quorum for public limited company Section 175 Section 104 28.9 No Section 181 & 183 Section 106 28.12 No Section 177 Section 107 28.12 No Section 176 Section 105 28.10 No Section 187A Section 112 28.11 No Section 187 Section 113 28.11 No Section 188 Section 111 28.16 Eligibility criteria has changed Section 189 Section 114 28.14 No Sec 408 New Para Constitution of NCLT Sec 410 New Para Constitution of Appellate Tribunal

4 Chapter-1-Basic Concepts 1.1 PRIVATE COMPANIES [Section 2 (68)] Meaning A private company is one which has a minimum paid up capital of rupees one lakh or such higher paid up capital as may be prescribed and which by its Articles of Association, puts the following restrictions Restriction-AOA 1 Restricts the right to transfer its shares, if any. 2 Limits the maximum number of its members to 200 (excluding the present or past employees of the company). 3 Prohibits any invitation to the public to subscribe for any securities PRACTICAL QUESTION Quest Fortune Traders Ltd. Was registered as a private limited company. There are 224 members in the company as noted below: (i) Directors and their relatives 54 (ii) Employees 100 (iii) Ex-employees (shares were allotted when they were employees) 50 (iv) 5 couples holding shares jointly in the names of husband and wife (5 x 2) 10 (v) Others 15 The Board of Directors of the company proposes to convert it into a Public company. Only because of the fact that its member has exceeds minimum prescribed criteria. Advise the Board of directors? 1.2 PUBLIC COMPANIES [Section 2 (71)] Meaning A public company is one Which is not a private company Has a minimum paid up capital of rupees five lakh or such higher paid up capital as may be prescribed Provided that, a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles. PRACTICAL QUESTION Quest A Pvt Ltd is a company subsidiary to XYZ Ltd. Discuss the position in following cases:- 1. How much Paid up capital A Pvt Ltd shall have 2. Whether members of A Pvt Ltd can transfer their shares 3. A Pvt Ltd want to issue prospectus, will it be possible 4. A Pvt Ltd provided a loan of Rs 1.0 :Lacs to Ajay for acquiring its shares

1.3 HOLDING AND SUBSIDIARY COMPANIES [Section 2(87)] Meaning of Holding & Subsidiary A holding company is one which has the control over the other company Holding Company which exercise control. Subsidiary Company A company on which said control is exercised. As per the law there exist an holding and subsidiary relations between 2 companies in following circumstances:- As per the law there exist an holding and subsidiary relations between 2 companies in following circumstances:- 1. Control over the composition of board of directors : 2. Holding of majority of shares Where one company controls the composition of the Board of Directors of another company. In such case former becomes the holding and the latter become a subsidiary company When a company shall be considered to have control over the composition of the Board of Directors of another company:- If said company has the powers to appoint or remove all or majority of the directors of the other company. exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies: PRACTICAL QUESTION Quest-1 Quest-2 Quest-3 The paid-up Share Capital of AVS Private Limited is `1 crore, consisting of 8 lacs Equity Shares of `10 each, fully paid-up and 2 lacs Cumulative Preference Shares of `10 each, fully paid-up. XYZ Private Limited and BCL Private Limited are holding 3 lacs Equity Shares and 1,50,000 Equity Shares respectively in AVS Private Limited. XYZ Private Limited and BCL Private Limited are the subsidiaries of TSR Private Limited. With reference to the provisions of the Companies Act, 2013, examines whether AVS Private Limited is a subsidiary of TSR Private Limited? Would your answer be different if TSR Private Limited has 8 out of total 10 directors on the Board of Directors of AVS Private Limited? A Ltd hold shares in B Ltd in fiduciary capacity i.e. as trustees for beneficiary. C Ltd. Discuss the relationship between A Ltd and B Ltd A Ltd and C Ltd Discuss about the position of Holding and Subsidiary in following cases H Ltd S Ltd D1 D2 D3 D4 D5 H Ltd has a right to appoint 3 directors of S Ltd H Ltd H1 H2 H3 H Ltd S Ltd D1 D2 D3 D4 D5 S Ltd Total Paid Up Shares Capital Shares=10,00,000 H Ltd holds Entire Equity H Ltd has a right to appoint 2 Directors of S Ltd, whereas S Lts has a right to appoint 1 director of H Ltd

6 Share Capital of Rs 3,50,000 and rest of capital is held by Z Ltd 1.4 HOLDING AND SUBSIDIARY COMPANIES TRANSACTION [Section 19] Subsidiary company not to hold shares in its holding company- Exceptions According to section 19 of the Companies Act, 2013, no company shall, either by itself or through its nominees- (i) hold any shares in its holding company, and (ii) no holding company shall allot or transfer its shares to any of its subsidiary companies, and any such allotment or transfer of shares of a company made to its subsidiary company shall be void. (a) where the subsidiary company holds such shares as the legal representative of a deceased member of the holding company; or (b) where the subsidiary company holds such shares as a trustee; or Special Note (c) where the subsidiary company is a shareholder even before it became a subsidiary company of the holding company. The subsidiary company referred to in the above exceptions shall have a right to vote at a meeting of the holding company only in respect of the shares held by it as a legal representative or as a trustee, as referred to in clause (a) or clause (b) of the said exceptions. 1.5 NATIONAL COMPANY LAW TRIBUNAL Constitution [Section 408] Power to constitute According to section 408 of the Companies Act, 2013, the Central Government shall, by notification, constitute, a Tribunal to be known as the National Company Law Tribunal Members It shall consist of a President and such number of members, as the Central Government may deem necessary. Qualification of President and Members of Tribunal According to section 409 of the Companies Act, 2013, the President shall be a person who is or has been a Judge of a High Court for five years. A person shall not be qualified for appointment as a Judicial Member unless he is or has been a judge of a High Court; or a District Judge for at least five years; or an advocate of a court for at least ten years. 1.6 APPELLATE TRIBUNAL Constitution [Section 410]

Power to constitute As per section 410 of the Companies Act, 2013, the Central Government shall constitute, an Appellate Tribunal to be known as the National Company Law Appellate Tribunal Members It shall consist of a chairperson and number of Judicial and Technical Members, not exceeding eleven, to be appointed for hearing appeals against the orders of the Tribunal. Qualifications of Chairperson and members of Appellate Tribunal Section 411 of the Companies Act, 2013 says that the chairperson shall be a person who is or has been a Judge of the Supreme Court or the Chief Justice of a High Court. 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. A Technical Member shall be a person having special knowledge and experience, of not less than twenty-five years in various disciplines related to management, conduct of affairs, revival, rehabilitation and winding up of companies. 1.7 PUBLIC OFFER AND PRIVATE PLACEMENT [Section 23] 1. Modes of issue by (a) to public through prospectus, or Public Company (b) through private placement; or 2. Modes of issue by Private Company 1.8 POWERS OF SEBI [Section 24] Power to regulate issue of securities Power of Securities and Exchange Board (c) through a rights issue or a bonus issue, and (d) in case of a listed company or a company which intends to get its securities listed, with the provisions of the Securities and Exchange Board of India Act, 1992 and the rules and regulations made there under. By way of Right issue or Bonus issue Through Private Placement Any issue and transfer of securities etc of the listed companies / companies which intend to get their securities listed, shall be administered by SEBI and the Central Government, as required. Any issue and transfer of securities etc of the listed companies / companies which intend to get their securities listed, shall be administered by SEBI, in other words SEBI may exercise its powers in relation to:- (i) issue and transfer of securities; and Power of CG (ii) non-payment of dividend, by listed companies or those companies which intend to get their securities listed on any recognised stock exchange in India, be administered by the Securities and Exchange Board by making regulations in this behalf In any other case, be administered by the Central Government.

8 1.9 PROSPECTUS [Section 2 (70)] Meaning Means any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate. 1.10 ADVERTISEMENT OF PROSPECTUS [Section 30] Content of Advertisement a. the contents of its memorandum as regards the objects, the liability of members and the amount of share capital of the company, and b. the names of the signatories to the memorandum and the number of shares subscribed for by them, and c. its capital structure. 1.11 ABRIDEGED PROSPECTUS [SECTION 2(1)] 1. Meaning A memorandum containing such salient features of a prospectus as may be specified by the Securities and Exchange Board by making regulations in this behalf. 2. It shall accompany Application Form (Sec 33) No application form for shares in or debentures of a company can be issued unless it is accompanied by an abridged prospectus containing all the prescribed features Exception 1 Where the form of application is issued to person who is bona fide invited to enter into an underwriting agreement. 2 Where form of application is issued in relation to shares or debentures which were not offered to the public. 3 Where the application is issued to existing members or debenture holders of the company whether with or without the right of renunciation. 4 Where the application is issued in relation to shares or debentures which are (i) Uniform in all respects with shares or debentures previously issued, and (ii) Dealt in or quoted at a recognized stock exchange. 1.12 SHELF PROSPECTUS [Section 31] 1. Why Shelf Prospectus 2. Document required along with Shelf Prospectus 3. Meaning of Shelf Prospectus A public company is required to issue a prospectus for raising finance from the public. Every time a fresh issue of securities is made, issuing a fresh prospectus is a costly and time consuming process. In order to minimize such burden, the concept of 'shelf prospectus' is introduced which will be valid for a period of one year. For any subsequent offering within the validity period only an 'information memorandum' for updating the information under the specified heads is required to be filed. Any class or classes of companies as prescribed by the Securities and Exchange Board of India may file a shelf prospectus with the registrar of companies at the

stage of the first offer of securities for a period of one year. 4. Benefit of Filing Shelf Prospectus 5. Information Memorandum shall contain material facts which pertains to A company filing a shelf prospectus with the Registrar shall not be required to issue prospectus afresh at every stage of offer of securities by it within a period of validity of such shelf prospectus. Thus at the time of making any subsequent offer, company shall- File an updated Information memorandum Issue to the public, updated information memorandum along with shelf prospectus Creation of New Charge; and Changes in Financial position of company which has occurred between the first offer of security, previous offer of security and the succeeding offer of security. 1.13 RED HERRING PROSPECTUS [SECTION 32] 1. Meaning of Redherring Prospectus 2. Provisions regarding Red Herring Prospectus 3. When the Final Prospectus shall be filled 4. Final Prospectus shall contain "Red-herring prospectus" means a prospectus which does not have complete particulars on the price of the securities offered and the quantum of securities offered. 1 Any variation between the red-herring Prospectus and prospectus shall be highlighted as variations by the issuing company. 2 The applicant can exercise his right to withdraw from the application on any intimation of variation within seven days from the date of such intimation 3 According to section 32 of the Companies Act, 2013, red herring prospectus may be issued by a company prior to the issue of a prospectus and shall be filed with the registrar at least 3 days prior to the opening of the subscription list and the offer. Upon the closing of the offer of securities, a final prospectus shall be filed In a case of a listed public company with the SEBI and ROC; and In any other case with the ROC only. Upon closing of the offer of securities, the details of information which are not included in the red herring prospectus is to be filed with the registrar and the SEBI. 1.14 DEEMED PROSPECTUS OR PROSPECTUS BY IMPLICATION OR OFFER FOR SALE [SECTION 25] 1. Meaning Where the company allots or agrees to allot any shares or debentures to any issuing house or others With a view that such shares or Debentures would be offered to public for sale Any such document by which this offer for sale to public is made shall be deemed to be a prospectus issued by a company and All provisions applicable to prospectus shall be applicable to it with specified modification. 2. Presumption It will be presumed that an allotment or an agreement to allot shares or debentures

10 with Deemed Prospectus 3. Matters to be Stated in Deemed Prospectus to the issuing houses was made with a view to offer them to public in case:- (a) Shares were offered to the public for sale within 6 months after they were allotted or agreed to be allotted to issuing house, or (b) Whole consideration in respect of shares/debentures had not been received by the company. Contents of prospectus Liability in respect of mis -statements, in and omissions from prospectus, or otherwise relating to prospectus, shall apply with the modifications 1.15 CRIMINAL LIABILITY FOR MIS STATEMENT [Section 34] Liability Defense available According to Sections 34 of the Companies Act, 2013, where any prospectus is issued or circulated or distributed containing any statement which is untrue or misleading in form in which it is included, then every person who authorizes the issue of such prospectus shall be liable for fraud. He can escape his liability under this section if he can prove that:- (a) Statement was immaterial; or (b) He had reasonable ground to believe the statement to be true. 1.16 CIVIL LIABILITY FOR MIS STATEMENT [Section 35] Liability Defense available Where any person subscribes for securities on the basis of misleading statements or inclusion or omission of any matter in the prospectus resulting in any loss or damages, then the company and every person who has authorized the issue of such prospectus or a director, promoter and the other, whosoever is liable- shall have to compensate every person who has sustained such loss or damage. No person shall be liable, if he proves that (a) having consented to become a director of the company, he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent; or b) the prospectus was issued without his knowledge or consent, and that on becoming aware of its issue, he forthwith gave a reasonable public notice that it was issued without his knowledge or consent. 1.17 PENALTY FOR FRAUDULENTLY INDUCING PERSONS TO INVEST MONEY [Section 36] When this Provision shall apply Attempt to induce must be to enters Section is attracted where any person who, induces or attempts to induce another person to enter into, or to offer to enter some agreement by making any false, deceptive or misleading statement, promise or forecast or by any dishonest concealment of material: 1 Any agreement for, the acquisition, disposal, subscribing for, or underwriting Shares or debentures

into any of following agreement 2 Any agreement for the purpose of securing any profit to any of the parties from the yield of shares or debentures, or from fluctuations in the value of shares or debentures 3 Any agreement for obtaining credit facilities from any bank or financial institution. 1.18 ACTIONS BY AFFECTED PERSON [Section 37] When this Provision shall apply The section 37 of the Companies Act, 2013, provides that a suit may be filed or any other action may be taken by any person, group of persons or any association of persons who have been affected by any misleading statement or the inclusion/ omission of any matter in the prospectus. 1.19 PENALTY FOR ACQUISITION OF SECURITIES [Section 38] Punishment for Personation for acquisition, etc., of securities According to this section 38 of the Companies Act, 2013, those persons who apply in a fictitious name or make multiple applications or otherwise induce a company to allot or register any transfer of securities in fictitious name shall be liable for fraud. And the amount so received through disgorgement of gain, seizure and disposal of such securities, shall be credited to the IEPF(Investor Education and Protection Fund). 1.20 LEGAL RULES 1. Minimum subscriptions and application money [Section 39] 2. Consequences in case of failure to received Minimum Subscription 3. Listing of public issue with recognized stock exchange [Section 40] Minimum Subscription Application money No allotment of any securities of a company shall be offered to the public for subscription unless the minimum amount (stated in the prospectus) has been subscribed. It the amount which is payable on each share along with the application for purchase or shares. This amount must not be less than 5% of the nominal value of shares. Within a period of thirty days from the date of issue of the prospectus, or such other period as may be specified by the Securities and Exchange Board, the amount received shall be returned within such time and manner as may be prescribed. Every company making public offer, before making such offer, shall, make an application to one or more recognized stock exchange to obtain permission for the securities to be dealt with. Any allotment made without permission shall be void. All the moneys received on application from public for subscription to the securities shall be kept in a separate bank account. In case of default, the company and every officer who is in default shall be punishable with fine/with imprisonment/both. 1.21 PROHIBITION ON BUY BACK OF SHARES OR OTHER SPECIFIED SECURITIES- Whether directly or Indirectly [Section 70]

12 1. No Buy Back from Subsidiary A company cannot purchase its own shares through any subsidiary company including its own subsidiary company. 2. No buy Back through a Investment company A company cannot purchase its own shares through any investment company. 3. No Default of Repayment of deposit or interest thereon, Redemption of debentures or preference shares or Payment of dividend or Repayment of any term loan or interest thereon to any financial institution or bank. Special Note: - The prohibition is lifted if the default has been remedied and a period of 3 years has elapsed after such default ceased to subsist. 4. No Non- Compliance of filing of Annual Return (section 92), declaration of dividend (section 123) or punishment for failure to distribute dividend (section 127) and Preparation of financial statement (section 129) 1.22 MEANING [Section 2(55)] Meaning Person whose name has been entered in the register of members are called as members of the company. Membership may be taken by: Subscribing in the memorandum of the company or by agreeing in writing to become member of the company or by entering his name in the records of depository as beneficial owner of the shares in a company. Every company has to maintain a register of members containing detailed particulars of each member, to be kept at the registered office of the company or any other place. 1.23 CLOSURE OF REGISTER OF MEMBERS or DEBENTURE HOLDERS or OTHER SECIRITY HOLDERS [Section 91] 1.Applicable 2. Maximum Closure allowed upto 3. Publication of Notice 4. Penalty for noncompliance This section is applicable in case of closure of register of member, register of debenture holders as well as other security holders 1. At one time-30 Days 2. For Entire Year- 45 Days Company shall publish notice intimating such closure atleast 7 days before such closure in a vernacular newspaper If the register of members or of debenture-holders or of other security holders is closed without giving the notice or after giving shorter notice than the company and every officer of the company who is in default shall be liable to a penalty of 5,000/- for every day subject to a maximum of one lakh rupees during which the register is

kept closed. 1.24 PUBLICATION OF AUTHORISED, SUBSCRIBED AND PAID UP SHARE CAPITAL [Section 60] Provision According to the section 60 of the Companies Act, 2013, where any notice, advertisement or other official publication, or any business letter, etc. of a company contains a statement of the amount of the authorized capital of the company, there such mentioned documents shall also contain the amount of the capital which has been subscribed and the amount paid-up. Penalty for noncompliance If any default is made, there the company shall be liable to pay a penalty of ten thousand rupees and every officer of the company who is in default shall be liable to pay a penalty of five thousand rupees, for each default. 1.25 CALLS ON SHARES 1. Meaning A call may be defined as a demand made by a company on its shareholders to pay the whole or a part of the balance, remaining unpaid on each share at any time during the continuance of a company 2. Resolution of the Board 3. Uniform basis [Section 49] The call must be made by a resolution Passed of board of directors. The resolution must specify the amount of the call, and the time and place of payment of calls. Section 49 of the Companies Act, 2013 provides that where any calls for further share capital are made on the shares of a class, such calls shall be made on a uniform basis on all shares falling under that class. The shares of the same nominal value on which different amounts have been paidup, shall not be deemed to fall under the same class. 4. Bona fide The call must be made bona fide in the best interest of the company. Power to call should not misused by directors to make calls for their personal benefits 5. Compliance of AOA 6. Notice to be Served Properly The call must be made strictly in accordance with the provisions of the articles of the company Proper notice shall be served on members stating the date, time and last date for payment of call. Any irregularity in issuance of notice will invalidate the notice, in spite of the fact that such irregularity was not material. 1.26 PAYMENT OF CALLS IN ADVANCE [Section 50] 1. Provision As per section 50 of the Companies Act, 2013 a company may accept from any member the whole or a part of the amount remaining unpaid on any shares, even if no part of that amount has been called up. 2. Voting Power A member of the company limited by shares shall not be entitled to any voting rights in respect of the amount paid by him until that amount has been called up. 1.27 PAYMENT OF PROPORTIONATE DIVIDEND [Section 51] Provision As per section 51 of the Companies Act, 2013, a company may, if so authorised by

14 its articles, pay dividends in proportion to the amount paid-up on each share. 1.28 CONVERSION OF UNLIMITED COMPANY INTO LIMITED COMPANY [Section 65] 1. Procedure for conversion 2. Steps for Conversion 3. Default in Compliance Section 65 of the Companies Act 2013, lays down the procedure for the conversion of the unlimited company into a limited company by increasing the nominal amount of each share or/ and by providing that the company cannot call unpaid portion of share capital except in the event of winding up. (a) increase the nominal amount of its share capital by increasing the nominal amount of each of its shares, but that no part of the increased capital shall be capable of being called up except in the event and for the purposes of the company being wound up; (b) by providing that a specified portion of its uncalled share capital shall not be capable of being called up except in the event and for the company being wound up. If any default is made in complying with the order of the Tribunal under this section, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and Every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees, or with both. 1.29 REFUSAL TO REGISTER THE TRANSFER OF SHARES [Sec 58] IN CASE OF PRIVATE COMPANIES Right of Appeal to transferee Meaning of Prescribe Time IN CASE OF PUBLIC COMPANIES If a private company limited by shares refuses, to register the transfer of, or the transmission of the right to any securities or interest of a member in the company, the company shall send notice of the refusal to the transferor and the transferee or to the person giving intimation of such transmission, within a period of thirty days from the date on which the instrument of transfer, or the intimation of such transmission, was delivered to the company. Transferee may prefer an appeal to Tribunal. The appeal should be in writing and should be filed within the prescribed time. Where the company gives a notice of refusal Where the company does not give any notice of refusal Appeal should be filed within 30 days of the receipt of such notice, and Appeal should be filed within 60 days from the date on which the instrument of transfer was delivered to the com If a public company without sufficient cause refuses to register the transfer of securities within a period of thirty days from the date on which the instrument of transfer or the intimation of transmission, is delivered to the company, the transferee may submit an appeal to tribunal, within a period of

sixty days of such refusal or where no intimation has been received from the company, within ninety days of the delivery of the instrument of transfer or intimation of transmission Power of Tribunal The Tribunal, while dealing with an appeal may, after hearing the parties, either dismiss the appeal, or by order o direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within a period of ten days of the receipt of the order; or o direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved. Incase of Contravention If a person contravenes the order of the Tribunal he shall be punishable with imprisonment for a term not less than one year but may extend to three years and with fine not be less than one lakh rupees but may extend to five lakh rupees. 1.30 RECTIFICATION OF REGISTER OF MEMBERS [Sec 59] Remedy to the aggrieved for not carrying the changes in the register of members: Appeal to Tribunal may be submitted by aggrieved party if the name of any person is, without sufficient cause, entered in the register of members of a company, or after having been entered in the register, is, omitted there from, or if a default is made, or unnecessary delay takes place in entering in the register Order of the Tribunal The Tribunal may, after hearing the parties to the appeal by order, either dismiss the appeal or direct that the transfer or transmission shall be registered by the company within a period of ten days of the receipt of the order, or direct rectification of the records of the depository or the register and direct the company to pay damages, if any, sustained by the party aggrieved.

16 Other Points 1. The provisions of this section shall not restrict the right of a holder of securities, to transfer such securities and any person acquiring such securities shall be entitled to voting rights unless the voting rights have been suspended by an order of the Tribunal. 2. Where the transfer of securities is in contravention of any of the provisions of the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992 or this Act or any other law for the time being in force, there the Tribunal may, on an application made direct any company or a depository to set right the contravention and rectify its register or records concerned. 1.31 REGISTRATION OF CHARGE [Section 65] 1. Meaning Every company is under an obligation to keep at its registered office a register of charges and enter therein all charges specifically affecting property of the company and all floating charges on the undertaking or any property of the company. 2. Punishment for contravention As per section 86 of the Companies Act, 2013, if a company makes any default with respect to the registration of charges covered under Chapter VI, there penalty shall be levied, ranging from 1 lakh to 10 lakhs. Every defaulting officer is punishable with imprisonment for a term not exceeding 6 months or fine which shall not be less than 25,000 rupees, but not exceeding 1 lakh rupees or both.

Chapter-2-General Meeting 2.1 EXTRA ORDINARY GENERAL MEETING [Section 100] 1. Who can call? Extraordinary General Meeting may be called by Board, Requisitionists or CLB. 2. EGM by Board of Directors 3. Meaning of Required Numbers 4. Requirement as to Requisition 1. Suo motu i.e. on their own 2. On Requisition of the Members Case A For company having share capital Case B For company having no share capital The Board may, whenever it thinks fit, call an extraordinary general meeting. Board on the requisition of the required number of the members can call an extraordinary general meeting. Required number of members will be as follows: Members holding at least 10% of the paid up share capital of the company, Members having at least 1/10 of the total voting power 1 The requisition must contain all the matters for consideration of which the meeting is to be called. 5. Action to be taken by Board upon receipt of Requisition 6. EGM by Requisitionists themselves 7. Time limit for holding EGM as per 8. Consequences of Absence Quorum 9. Right of Requisitionists 2 If any special resolution is intended to be passed at the requisitioned meeting, the Board shall be deemed not to have duly convened the meeting if they do not give such notice thereof as is required. 4 Requisition must be signed by all the Requisitionists. In case of joint shareholders, a requisition signed one or some of them for the purpose of this section is also sufficient. 5 The requisition must be deposited at the registered office of the company. The Board of Directors must proceed within 21 days of the deposit of the requisition to convene a meeting which must be held within 45 days of such deposit of the requisition with the company. If the board fails to call an EGM, than such a meeting shall be called by the Requisitionists themselves. Every effort should be made in conducting the meeting in similar manner as it is called by BOD Where the meeting is called by the Requisitionists, such meeting must be held before the expiry of 3 months from the date of deposit of requisition. If the Quorum is not present within half an hour from the time appointed for holding of the meeting the meeting, shall stand dissolved if it is called on the requisition of the members. But if the articles provide otherwise then articles will apply. If default is made in calling the meeting by the board and Requisitionists themselves proceed to call an EGM. They shall be entitled to claim all reasonable expenses

18 10. Consequences for Director who are at default incurred by them for convening a meeting from the company. Any such expenses shall be bear out of remuneration of directors who are at fault. PRACTICAL QUESTION May-06 Hint To remove the Managing Director, 40% members of Global Ltd. Submitted requisition for holding extra-ordinary general meeting. The company failed to call the said meeting and hence the requisitionists held the meeting. Since the Managing Director did not allow the holding of meeting at the registered office of the Company, the said meeting was held at some other place and a resolution for removal of the Managing Director was passed. Examine the validity of the said meeting and resolution passed therein in the light of the companies Act, 2013. It was held by the SC in case of LIC v Escorts that, Every shareholder of a company has a right to requisition for an extraordinary general meeting. He is not bound to disclose the reasons for the resolution to be proposed at the meeting. Section 100 of the companies Act contains provisions regarding holding of extraordinary general meetings. It provides that if directors fail to call a properly requisitioned meeting, the requisitionists or such of the requisitionists as represent not less than 1/10th of the total voting rights may call a meeting to be held on a date fixed within 3 months of the date of the requisition. Where a meeting is called by the requisitionists and the registered office is not made available to them, still meeting will remain a valid meeting and Further, resolutions properly passed at such a meeting, are binding on the company. Thus, in the given case, since all the above mentioned provisions are duly complied with. Hence the meeting with the resolution removing the managing director shall be valid. 2.2 STATEMENT TO BE ANNEXED TO THE NOTICE [Section 102] When According to section 102 of the Companies Act, 2013, a statement setting out all the material facts concerning each item of special business to be transacted at a general meeting, shall be annexed to the notice calling such meeting. It includes 1. All material facts concerning each item of business. 2. The nature of interest of every director and the manager, if any; every other key managerial personnel; and relatives of the persons mentioned in point (i) and (ii). 3. where any item of special business to be transacted at a meeting of the company, relates to or affects any other company, the extent of shareholding interest in that other company of every promoter, director, manager, if any, and of every other key managerial personnel of the first mentioned company shall, if the extent of such shareholding is not less than two per cent of the paid-up share capital of that company, also be set out in the statement.

2.3 PROPER CHAIRMANSHIP [Section 104] 1. Appointment of Chairman 2. Voting Rights of a Chairman Option-1 Unless the article of a company provides otherwise, the members personally present at the meeting shall elect one of them to be the chairman thereof on a show of hands. Option-2 If a poll is demanded on the election of the chairman (whether before/after the election of chairman on a show of hand) then it shall be taken forthwith and the person elected as chairman on show of hands shall exercise all the powers of chairman. If some other person is elected chairman as a result of poll he shall be the chairman for the rest of the meeting. Chairman is entitled to exercise one vote as a member of a company and second/casting vote as a Chairman in case of equality of votes (if articles provides) on a show of hands or a poll. As he is not a member Chairman is entitled to exercise only second/casting vote as a chairman in case of equality of votes on a show of a hand or a poll. 2.4 QUORUM for GM (Section 103) 1. Meaning of Quorum 2. Quorum Required for General Meeting It means minimum number of members that must be present in order to constitute a valid meeting. (a) in case of a public company, Quorum for the meeting 5 members personally present 15 members personally present 30 members personally present Number of members as on date of a meeting not more than one thousand more than one thousand but up to five thousand exceeds five thousand 3. Who will be considered as Member Personally Present (b) in the case of a private company, two members personally present, shall be the quorum for a meeting of the company (i) A member of the company (ii) Authorized representative of a body corporate. (iii) Representative of President/Governor of the state.

20 4. Who will not be considered as Member Personally Present 5. When Quorum Required? 7. Effect of Absence of Quorum Note Notice of an adjourned meeting (i) Proxy appointed by the member. (ii) Proxy appointed by authorized representative of a body corporate/ Representative of President/Governor. Quorum must be present at the time of commencement of GM. If the Quorum is not present within half an hour from the time appointed for holding of the meeting, following shall be applied: Priority Step need to be taken 1 Provision contained under AOA shall apply 2 Meeting shall be adjourned at a place and time as board may determine. 3 Meeting shall be Adjourned to the same day in the next week at the same time and same place If at adjourned meeting quorum is not present within half an hour, members present shall form quorum. A single member shall not constitute quorum at an adjourned meeting. Where the meeting stands adjourned to the same day in the next week at the same time and place, or to such other date and such other time and place as the Board may determine, there the company shall give at least 3 days notice to the members either individually or by publishing an advertisement in the newspapers. 2.5 VOTING [Sec 106] 1- Restriction on voting rights 2.Right to use the Voting Right Differently 3. Voting by a show of hands 1 In case of non payment of Calls due on shares 2 In case of non payment of other dues against the members 3 Where right of lien is exercised by the company in respect of shares On a poll taken at a meeting of a company, a member entitled to more than one vote, or his proxy, where allowed, or other person entitled to vote for him, as the case may be, need not, if he votes, use all his votes or cast in the same way all the votes he uses. Section 107 of the Companies Act, 2013 provides that at general meeting a resolution put to the vote of the meeting shall, unless a poll is demanded or the voting is carried out electronically, be decided on a show of hands. PRACTICAL QUESTIONS May-09- Modified The articles of ABC Limited provided that only those shareholders would be entitled to vote whose names have been there on the Register of Members for two months before the date of the meeting. X' a member, of the ABC Limited was holding 200 equity shares of the company. X transferred his shares to Y before one month form the date on which the meeting was due. The name of Y could not be entered in the Register of Members as the application of transfer of shares was pending. Y attended the meeting but he was prohibited by the company from exercising his voting right on the ground that he has not hold his shares for specified period as

Hint Nov-05 Hint May-10 Hint provided in the articles before the date of the meeting. State whether Y can exercise his voting right in the meeting? State also the grounds upon which Y may be excluded from exercising his voting rights in the meeting of the shareholders. A public limited company can not impose any restriction on voting right of its members on any ground other than those specified under section 106. Since above ground of restriction is not covered under section 106, thus restriction so imposed shall be invalid C, a member of LS & Co. Ltd., holding some shares in his own name on which Final call money has not been paid, is denied by the company voting right at a general meeting on the ground that the articles of association do not permit a member to vote if he has not paid the calls on the shares held by him. With reference to the provisions of the Companies Act, 2013, examine the validity of company's denial to C of his voting right. Since restriction is imposed as per the ground as specified u/s 106, thus company is justified J held 100 partly paid up shares of LKM Limited. The company asked him to pay the final call money on the shares. Due to some unavoidable circumstances he was unable to pay the amount of call money to the company. At a general meeting of the shareholders, the chairman disallowed him to caste his vote on the ground that the articles do not permit a shareholder to vote if he has not paid the calls on the shares held by him. J contested the decision of the Chairman. Referring to the provisions of the Companies Act, 2013 decide whether the contention of J is valid Since restriction is imposed as per the ground as specified u/s 106, thus company is justified 2.6 PROXIES [Section 105] 1. Who Appoint a Proxy Every member who is entitled to attend and vote at a meeting of the company shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of himself. 2. Duties of Proxy Proxy is Bound to Vote According to the Directions of the Member Appointing Him since relationship between a member and his proxy is that of principal and agent. 3. Limitations of a Proxy 4. Who can be appointed as a Proxy 5. Statement authorizing appointment of Proxy in Notice 6. Deposit of Proxy Form A proxy (if not member) shall not be entitled to speak at the meeting. A proxy is not counted for the purpose of quorum shall not be entitled to vote except on a poll. Any Person (whether member or not) Notice calling a meeting shall contain a statement that member can appoint proxy and proxy need not necessarily be a member of a company. It should be submitted to the company 48 hours before the meeting In case Article provides any further shorter period than it should be complied with 7. Appointment of Should be as per the AOA

22 Proxy in Case of Joint Holdings? 8. Relationship Between Member and Proxy 9. Inspection of Proxy 10. Situation where an invitation are issued at company s expenses 11. Revocation of Proxy 12. Rights of a Proxy In absence thereof, first named joint holder should sign the proxy. The relationship between a member and his proxy is that of a principal and agent. The proxy is bound to vote according to the directions of the member appointing him. Every member entitled to vote at a meeting of the company, or on any resolution to be moved thereat, shall be entitled during the period beginning twenty-four hours before the time fixed for the commencement of the meeting and ending with the conclusion of the meeting, to inspect the proxies lodged, at any time during the business hours of the company, provided not less than three days notice in writing of the intention so to inspect is given to the company. Every officer of the company who knowingly issues the invitations as aforesaid or wilfully authorises or permits their issue shall be punishable with fine which may extend to one lakh rupees. However, an officer shall not be punishable whereby reason only of the issue to a member at his request in writing of a form of appointment naming the proxy, or of a list of persons willing to act as proxies, if the form or list is available on request in writing to every member entitled to vote at the meeting by proxy. 1 When a member appointing a proxy, personally attend the meeting. 2 When a member appointing a proxy, appoint another proxy at a later date, in such a case person appointed proxy subsequently shall be treated as proxy 3 Where intimation of death or insanity is received prior to commencement of meeting (whether original or adjourned) 4 Where intimation of transfer of shares is received by company prior to commencement of meeting (whether original or adjourned) 1 A proxy shall be entitled to vote in case of voting by poll even if an article does not provide so 2 Proxy can vote on show of hand only of such power is expressly provided by Article. 3 A proxy may demand for poll PRACTICAL QUESTION Nov-04 Annual General Meeting of a Public Company was scheduled to be held on 15.12.2003. Mr. A, a shareholder, issued two Proxies in respect of the shares held by him in favour of Mr. 'X' and Mr. 'Y'. The proxy in favour of 'Y' was lodged on 12.12.2003 and the one in favour of Mr. X was lodged on 15.12.2003. The company rejected the proxy in favour of Mr. Y as the proxy in favour of Mr. Y was of dated 12.12.2003 and thus in favour of Mr. X was of dated 15.12.2003. Is the rejection by the company in order? Hint As per Section 105 of the Companies Act, 2013 a proxy should be deposited 48 hours before the time of the meeting. In the given case, the proxies should have, therefore, been deposited on or before 13.12.2003 (the date of the meeting being 15.12.2003). X deposited the proxy on 15.12.2003.

Therefore, proxy in favour of Mr. X has become invalid. Thus, rejecting the proxy in favour of Mr. Y is unsustainable. Proxy in favour of Y is valid since it is deposited in time. May-08 The Chairman of the meeting of a company received a Proxy 54 hours before the time fixed for the start of the meeting. He refused to accept the Proxy on the ground that the Articles of the company provided that a Proxy must be filed 60 hours before the start of the meeting. Decide, under the provisions of the Companies Act, 2013 whether the Proxy holder can compel the Chairman to admit the Proxy? Hint As per Section 105 of the Companies Act, 2013 proxy shall be deposited with the company within 48 hours before the meeting. Any provisions contained in the Articles of a company that requires a longer period than 48 hours before a meeting of the company for depositing a proxy shall be void. Thus contention of Mr X is valid May-10 K, a member of MNO Limited, appoints L as his proxy to attend the general meeting of the company. Later he (K) also attends the meeting. Both K (the member) and L (the proxy) voted on a particular resolution in the meeting. K's vote was declared invalid by the chairman stating that since he has appointed the proxy and L's vote has been considered as valid. K objects to the decision of the Chairman. Decide, under the provisions of the Companies Act, 2013 whether K's objection shall be taxable. Hint Decision by Chairman is invalid. Since K i.e. a member himself attended a meeting and voted on resolution, it will amount to revocation of proxy. Thus any vote put by L i.e. proxy shall be invalid 2.7 APPOINTMENT OF REPRESENTATIVE 1. Representation of Company [Section 113] 2. Representation of the President and Governors [Section 112] Where a company is a member of another company, it may attend the meeting of any other company through a representative. The representative must be appointed by a resolution of the board of directors. The person so appointed is entitled to exercise the same rights and powers (including the right to vote by proxy) on behalf of the company as the member personally present may exercise. Where a president or Governor is a member of any company, they may appoint a person to attend meeting in their place as their Representative. Said Representative shall be treated as a member personally present thus he avails all power thereof. 2.8 RESOLUTION [ Sec 114] Ordinary Resolution Meaning of Special Resolution A resolution shall be an ordinary resolution when The notice of general meeting required under the Act has been duly given, The votes cast including the casting vote if any of the chairmen (whether on show of hand or on a poll as the case may be) exceed the votes if any cast against the resolution. A resolution shall be an ordinary resolution when The notice of general meeting required under the Act has been duly given, The votes cast including the casting vote if any of the chairmen (whether on show of hand or on a poll as the case may be) are at least 3 times the number of votes if any cast against the resolution). The intention to propose the resolution as a special resolution has been duly