Prof Farheen Ansari CA IPCC

B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

PAPER 2: CORPORATE & OTHER LAWS

PART I: COMPANY LAW PART II: OTHER LAWS

(60 MARKS) (40 MARKS)

Companies Act, 2013 -The Indian Contract Act, 1872

[Section 1-148] -The Negotiable Instruments Act, 1881
-The General Clause Act, 1897
-Interpretation of Statutes

INDEX OF CHAPTERS
CORPORATE LAW
1 PRELIMINARY
2 INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO
3 PROSPECTUS AND ALLOTMENT OF SECURITIES
4 SHARE CAPITAL AND DEBENTURES
5 ACCEPTANCE OF DEPOSITS BY COMPANIES
6 REGISTRATION OF CHARGES
7 MANAGEMENT & ADMINISTRATION
8 DECLARATION AND PAYMENT OF DIVIDEND
9 ACCOUNTS OF COMPANIES
10 AUDIT AND AUDITORS
OTHER LAWS
1 The Indian Contract Act, 1872
2 The Negotiable Instruments Act, 1881
3 The General Clause Act, 1897
4 Interpretation of Statutes

 Practice Question for Company Law

 Practice Question for Other Laws

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Prof Farheen Ansari CA IPCC
B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

CHAPTER 1: PRELIMINARY
INTRODUCTION:

 Companies Act is an act to consolidate and amend the laws relating to

companies.

Received President Notified in the Official

assent on 29th August gazette on 30th August
2013 2013

Section 1 came into force on

30th August 2013 The act consists of 470 sections, divided
98 sections came into force on into 29 chapters and 7 schedules
12th September 2013
143 sections came into force on
1st April 2014 and so on Applicable all over India to all
companies (including foreign companies)

Case Study:

ABC Ltd. was incorporated on 1.1.1912 under the Indian

Companies Act, 1882. So, the Companies Act, 2013 shall also
be applicable on ABC Ltd.

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B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

APPLICABILITY OF THE ACT:

1. Companies incorporated in India 2. Insurance company (not

(including foreign company) inconsistent with Insurance Act,
1938 or IRDA Act, 1999)

3. Banking company (not inconsistent 4. Companies producing/supplying

with Banking Regulation act, 1949) electricity (not inconsistent with
Electricity Act, 2003)

5. Companies regulated under special 6. Entities notified by Government (Ex.

act (not inconsistent with any Special Food Incorporation of India (FCI),
Act) National Highway Authority of India
(NHAI)

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Prof Farheen Ansari CA IPCC
B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

DEFINITIONS:

Section 2 contains definition under Companies Act:

Abridged prospectus means a memorandum containing such salient features of a

[Section 2(1)] prospectus as may be specified by the SEBI by making
regulations in this behalf;

means the standards of accounting or any addendum thereto

Accounting standards for companies or class of companies referred to in section 133.
[Section 2(2)]
Section 133 of the Act deals with the Central Government to
Prescribe Accounting Standards.

ICAI CG NFRA

Recommends accounting standards Examine, evaluate and

recommend to CG

Alter or Alteration includes the making of additions, omissions and substitutions;

[Section 2(3)]

means-
Articles (AOA) ♦ the articles of association of a company as originally framed,
[Section 2(5)] or
♦ as altered from time to time, or
♦ applied in pursuance of any previous company law, or
♦ applied in pursuance of this Act

Associate company
[Section 2(6)]

“Significant influence”: control of at least 20% of total voting

power, or control of or participation in business decisions under
an agreement;

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B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

Auditing standards means the standards of auditing or any addendum thereto for
[Section 2(7)] companies or class of companies referred to in sub-section (10)
of section 143.

Section 143 of the Companies Act, 2013 deals with the Powers
and Duties of Auditors and Auditing Standards.

Authorized capital or means such capital as is authorized by the memorandum of a

Nominal capital company to be the maximum amount of share capital of the
[Section 2(8)] company;

Board of Directors or means the collective body of the directors of the company;
Board
[Section 2(10)]

Body corporate or includes a company incorporated outside India, but does not
Corporation include—
[Section 2(11)]
(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,
specify in this behalf;

include books of account, deeds, vouchers, writings,

Book and Paper documents, minutes and registers maintained on paper or in
[Section 2(12)] electronic form;

Branch office means any establishment described as such by the company;

[Section 2(14)]

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B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

includes records maintained in respect of—

Books of account
[Section 2(13)] (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
(iv) the items of cost as may be prescribed under section 148 in
the case of a company which belongs to any class of
companies specified under that section;

Called-up capital means such part of the capital, which has been called for
[Section 2(15)] payment;

Chief Executive means an officer of a company, who has been designated as

Officer (CEO) such by it;
[Section 2(18)]
He is the KMP of the company as defined u/s 2(51)

Chief Financial means a person appointed as the Chief Financial Officer of a

Officer(CFO) company
[Section 2(19)]
He is the KMP of the company as defined u/s 2(51)

Company means a company incorporated under this Act OR under any

[Section 2(20)] previous company law;

means a company having the liability of its members limited by

Company limited by the memorandum to such amount as the members may
guarantee respectively undertake to contribute to the assets of the
[Section 2(21)] company in the event of its being wound up;

Company limited by means a company having the liability of its members limited by
shares the memorandum to the amount, if any, unpaid on the shares
[Section 2(22)] respectively held by them;

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Prof Farheen Ansari CA IPCC
B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

shall include:
Control i) the right to appoint majority of the directors or
[Section 2(27)] ii)to control the management or policy decisions
exercisable by a person or persons acting individually or in
concert, directly or indirectly, including by virtue of their
shareholding or management rights or shareholders agreements
or voting agreements or in any other manner;

Debenture includes debenture stock, bonds or any other

[Section 2(30)] instrument of a company evidencing a debt,
whether constituting a charge on the assets of the
company or not;

Director means a director appointed to the Board of a company

[Section 2(34)]

Document includes summons, notice, requisition, order, declaration, form

[Section 2(36)] 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;

means the option given to the directors, officers

Employees’ stock or employees of a company or of its holding
option company or subsidiary company or
[Section 2(37)] companies, if any, which gives such directors,
officers or employees, the benefit or right to
purchase, or to subscribe for, the shares of the
company at a future date at a pre-determined
price;

Expert includes an engineer, a valuer, a Chartered Accountant, a

[Section 2(38)] Company Secretary, a Cost 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

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B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

Financial statement (FS) includes—

[Section 2(40)] (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;
(iii) cash flow statement for the financial year;
(iv) a statement of changes in equity, if applicable; and
(v) any explanatory note annexed to, or forming part of,
any document referred to in sub-clause (i) to sub-clause
(iv):

Provided: The FS, of One Person Company, small

company and dormant company and Private company,
may not include the cash flow statement;

Note: The term “start-up” or “start-up company” means

private company incorporated under the Act.

Financial year means the period ending on the 31st day of March every
[Section 2(41)] year

Provided: where a company or body corporate, which is

a holding company or a subsidiary or associate company
of a company incorporated outside India and is required
to follow a different financial year for consolidation of its
accounts outside India, the Central Government may, on
an application made by that company or body corporate
in such form and manner as may be prescribed, allow any
period as its financial year, whether or not that period is a
year

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Prof Farheen Ansari CA IPCC
B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

Free reserves means such reserves which, as per the latest audited
[Section 2(43)] balance sheet of a company, are available for
distribution as dividend
Provided:
(i) any amount representing unrealized gains, notional
gains or revaluation of assets, whether shown as a reserve
or otherwise, or
(ii) any change in carrying amount of an asset or of a
liability recognized in equity, including surplus in profit and
loss account on measurement of the asset or the liability
at fair value,
SHALL NOT BE TREATED AS FREE RESERVES;

Government company means any company in which not less than 51% of the
[Section 2(45)] 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;

Holding company means a company of which such companies are

[Section 2(46)] subsidiary companies

Issued capital means such capital as the company issues from time to
[Section 2(50)] time for subscription;

Key managerial personnel means—

[Section 2(51)] (i) the Chief Executive Officer or the managing director or
the manager;
(ii) the company secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer;
(v) such other officer, not more than one level below the
directors who is in whole-time employment, designated
as key managerial personnel by the Board; and
(vi) such other officer as may be prescribed

Listed company means a company which has any of its securities listed
[Section 2(52)] on any recognized stock exchange;

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of these notes should be reproduced, distributed or communicated to any third party. Further the Author herein does not
accept any liability, intended or unintended in respect of this report.
Prof Farheen Ansari CA IPCC
B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

Member means—
[Section 2(55)] (i) the subscriber to the memorandum of the company
who shall be deemed to have agreed to become
member of the company, and on its registration, shall be
entered as member in its register of members even if the
subscription money has not been paid to the company;
(ii) every other person who agrees in writing to become a
member of the company and whose name is entered in
the register of members of the company;
(iii)every person holding shares of the company and
whose name is entered as a beneficial owner in the
records of a depository;

Memorandum means the memorandum of association of a company as

[Section 2(56)] originally framed or as altered from time to time in
pursuance of any previous company law or of this Act

Net worth means the aggregate value of the paid-up share capital
[Section 2(57)] and all reserves created out of the profits, securities
premium account and debit or credit balance of profit
and loss 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

Officer includes any director, manager or key managerial

[Section 2(59)] personnel or any person in accordance with whose
directions or instructions the Board of Directors or any one
or more of the directors is or are accustomed to act

Officer who is in default for the purpose of any provision in this Act which enacts
[Section 2(60)] 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 any of the
following officers of a company, namely:—
(i) whole-time director (WTD);
(ii) key managerial personnel (KMP);

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Prof Farheen Ansari CA IPCC
B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

(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;
(vii) in respect of the issue or transfer of any shares of a
company, the share transfer agents, registrars and
merchant bankers to the issue or transfer

One Person Company means a company which has only one

[Section 2(62)] person as a member;

Ordinary or Special means an ordinary resolution, or as the case may be,

resolution special resolution referred to in section 114 (Ordinary and
[Section 2(63)] Special Resolution);

means such aggregate amount of money credited as

Paid-up share capital or paid-up as is equivalent to the amount received as paid-
share capital paid-up up in respect of shares issued and also includes any
[Section 2(64)] amount credited as paid-up in respect of shares of the
company, but does not include any other amount
received in respect of such shares, by whatever name
called.

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of these notes should be reproduced, distributed or communicated to any third party. Further the Author herein does not
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Prof Farheen Ansari CA IPCC
B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

Postal ballot means voting by post or through any electronic mode

[Section 2(65)]
Section 110 of the Act provides list of items of business
which should be transacted only by means of voting
trough a postal ballot.

Private company means a company having a minimum paid-up share

[Section 2(68)] capital as may be prescribed, and which by its articles,—
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the
number of its members to two hundred:
(iii) prohibits any invitation to the public to subscribe for
any securities of the company;

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
(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;

Promoter means a person—

[Section 2(69)] (a) who has been named as such in a prospectus or is
identified by the company in the annual return, OR
(b) who has control over the affairs of the company,
directly or indirectly whether as a shareholder, director or
otherwise; OR
(c) in accordance with whose advice, directions or
instructions the Board of Directors of the company is
accustomed to act:

Note: A person acting in professional capacity shall not

be treated or included in promoter

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of these notes should be reproduced, distributed or communicated to any third party. Further the Author herein does not
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Prof Farheen Ansari CA IPCC
B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

Prospectus means any document described or issued as a

[Section 2(70)] prospectus and includes a red herring prospectus or shelf
prospectus 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

Public company means a company which—

[Section 2(71)] (a) is not a private company; and
(b) has a minimum paid-up share 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

Register of companies means the register of companies maintained by the

[Section 2(74)] Registrar on paper or in any electronic mode under this
Act

Registrar means a Registrar, an Additional Registrar, a Joint

[Section 2(75)] Registrar, a Deputy Registrar or an Assistant Registrar,
having the duty of registering companies and
discharging various functions under this Act

Related party means—

[Section 2(76)] (i) a director or his relative;
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is a
partner;
(iv) a private company in which a director or manager or
his relative is a member or director;
(v) a public company in which a director and manager
is a director and holds along with his relatives, more than
two per cent of its paid-up share capital;
(vi) any body corporate whose Board of Directors,
managing director or manager is accustomed to act in

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Prof Farheen Ansari CA IPCC
B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

accordance with the advice, directions or instructions of

a director or manager;
(vii) any person on whose advice, directions or
instructions a director or manager is accustomed to act:
Provided that nothing in sub-clauses (vi) and (vii) shall
apply to the advice, directions or instructions given in a
professional capacity;
(viii) any body corporate which is-
(A) a holding, subsidiary or an associate company of
such
company;
(B) a subsidiary of a holding company to which it is also
a subsidiary; or
(C) an investing company or the venture of the
company;
(ix) such other person as may be prescribed;

Relative with reference to any person, means anyone who is

[Section 2(77)] related to another, if—
(i) they are members of a Hindu Undivided Family;
(ii) they are husband and wife; or
(iii) one person is related to the other in such manner as
may be prescribed;

Note:
(1) Father: Provided that the term “Father” includes step-
father
(2) Mother: Provided that the term “Mother” includes the
step-mother.
(3) Son: Provided that the term “Son” includes the step-
son.
(4) Son’s wife.
(5) Daughter.
(6) Daughter’s husband.
(7) Brother: Provided that the term “Brother” includes the
step-brother;
(8) Sister: Provided that the term “Sister” includes the step-
sister.

Share means a share in the share capital of a company and

[Section 2(84)] includes stock;

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of these notes should be reproduced, distributed or communicated to any third party. Further the Author herein does not
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Prof Farheen Ansari CA IPCC
B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

Small company means a company, other than a public company,—

[Section 2(85)]
(i) paid-up share capital of which does not exceed fifty
lakh rupees or such higher amount as may be prescribed
which shall not be more than ten crore rupees; AND
(ii) turnover of which as per profit and loss account for the
immediately preceding financial year does not exceed
two crore rupees or such higher amount as may be
prescribed which shall not be more than one hundred
crore rupees:

Subscribed capital means such part of the capital which is for the time being
[Section 2(86)] subscribed by the members of a company;

Subsidiary company or in relation to any other company (that is to say the

Subsidiary, holding company), means a company in which the
[Section 2(87)] 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 either at its own or together with one or
more of its subsidiary companies:

Provided that such class or classes of holding companies

as may be prescribed shall not have layers of subsidiaries
beyond such numbers as may be prescribed

Sweat equity shares means such equity shares as are issued by a company to
[Section 2(88)] its directors or employees at a discount or for
consideration, other than cash, for providing their know-
how or making available rights in the nature of intellectual
property rights or value additions, by whatever name
called

Total voting power in relation to any matter, means the total number of votes
[Section 2(89)] which may be cast in regard to that matter on a poll at a
meeting of a company if all the members thereof or their
proxies having a right to vote on that matter are present
at the meeting and cast their votes.

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of these notes should be reproduced, distributed or communicated to any third party. Further the Author herein does not
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Prof Farheen Ansari CA IPCC
B.com, CS, LLB, PGDIPR Paper 2: Corporate and Other Laws

Turnover means the gross amount of revenue recognized in the

[Section 2(91)] profit and loss account from the sale, supply, or
distribution of goods or on account of services rendered,
or both, by a company during a financial year

Unlimited company means a company not having any limit on the liability of
[Section 2(92)] its members;

Voting right means the right of a member of a

[Section 2(93)] company to vote in any meeting of
the company or by means of postal
ballot;

Disclaimer: That the Author is the holder of Copyrights of this given notes. Unless expressly provided in writing, no part
of these notes should be reproduced, distributed or communicated to any third party. Further the Author herein does not
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