Category Archives: Companies Act 2013

Post written on the provisions of the (Indian) Companies Act, 2013 and matter incidental thereto

Company Website


A company website is not a simple affair of contents, design, SEO and brand building. It is more about compliance. A company may choose not to have a website. Once, a company decide to have a website; it should comply essential requirement of laws.

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CHANGE OF NAME OF A DIRECTOR


Change of name of a director may happen due to several reasons. A director must register the change in his name under the Companies Act. In this brief post, we will discuss the same.

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EASE AND CHAOS


Ministry of Corporate Affairs has issued many amendment rules and circulars during the month of September 2020 for the ease of doing business. Though one thing always remains – chaos. In this brief post, we will discuss these ease and remaining chaos briefly.  

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FINALLY GENERAL EXTENSION FOR ANNUAL GENERAL MEETING


Just a few days earlier, we made a case here for a general extension for holding Annual General Meeting. The way Government responded through General Circular 28/2020, (presently not accessible) dated 17th August 2020, was not appreciated by Industry and Professional. Now, the Ministry of Corporate Affairs allowed all Registrar of Companies to pass general orders for a general extension for holding Annual General Meeting. Why am I not truly satisfied with these orders?

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Utopia of Investment


During a call with a startup client, we heard the term investor Nth time. “What is a need for investor or investment? It is a self-sufficient business plan.” These days no promoters of startup interested in sales and services but on investment pouring in. They even do not have a plan of servicing of investment which may pour in.
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DENIAL OF GENERAL EXTENSION FOR ANNUAL GENERAL MEETING


We are living in an era of positive presentation. Here is a news headline by a newspaper considered not so sympathetic to the Government: 

Corp affairs ministry allows companies to extend AGMs for up to 3 months

What the Government did? It did not allow any extension as of now. It has not accepted a request to grant a general extension for holding the Annual General Meeting by companies. The Government, in its clarification, mentioned good reason for denial but missed the single and straightforward reason to grant a general extension. We discuss. 

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Share – an abstract God


There is a common property of the God, Rupee and Shares? I replied. The question was how a share look like. Though it may be hard to believe but these three have an ultimate abstract only. You can see an idol of the God or gods, a note of one rupee or more rupees, a certificate of one or more shares, never the God, Rupee and Share (in a normal life). We will discuss a share in following paragraphs.

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WHOLLY OWNED SUBSIDIARIES – SUMMARY OF THE ANTI-THESIS


The Concept of Wholly Owned Subsidiary is an anti-thesis of the concept of the company. At least two persons are required to form a company which is true for wholly-owned subsidiary – but in case of wholly-owned companies one or more registered shareholder declare that one or more beneficial interests in their shares are with a particular company or body corporate.

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NOMINEE OF HOLDING COMPANY!!


Corporate world every holding company having a wholly-owned subsidiary have one or more person as “nominee” shareholders to on record as a registered shareholder holding a nominal number shares in a wholly-owned subsidiary company to satisfy the requirement of the minimum number of members. Treating these registered shareholders as “nominee” is not the perspective of the Company Law but of the Contract Law as applicable to the contract between the company and these shareholders. Let us discuss.

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POWER OF ATTORNEY BY SHAREHOLDERS


I first time wrote on the matter of the power of Attorney in the year 2015 here. Later, I pointed out the option of power of attorney while discussing on draft guidance note on General Meeting on Secretarial Standard on General Meetings (SS-2). I refereed a 92-year-old case law namely Tata Iron & Steel Co. Ltd., In Re., AIR 1928 Bom. 80, which is still considered as a valid reference law for proxies. Nowadays due to Covid-19 related travel restrictions, the requirement of Attorney is being felt in cases where proxies may not be used like in two-person companies. There is a temporary law made through MCA Circulars which allows for a limited period to conduct a general meeting through video conferencing. As the abovementioned post was brief and received many queries.

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Wholly-owned Subsidiary


The concept of the wholly-owned subsidiary is best understood by layman than a young student of law – particularly of corporate law. The concept practically understood by professional dealing with a wholly-owned subsidiary. A student called me to understand this: “how possible?” I replied, “No, It is not possible in true sense.” Unless one understands it clearly that it is not possible in a true legal sense, only then,  you can understand it. Once understood, you will never believe that a wholly-owned subsidiary is not possible in a true legal sense.

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SECURITIES MARKET – WHAT CHANGED IN 1992?


Guest Post Author: TRISHA SHREYASHI

1992 is a germane year in the history of the Indian securities market but why? That’s something we’ll get to know further in this article paper. From the situation before SEBI Act was legislated to the infamous Harshad Mehta case that led to this legislation to the era post that; all of it has been briefly discussed to give the reader an overview of SEBI Act with regard to (hereafter “w.r.t.”) securities market. Before letting the readers into the details, let’s first get an overview of securities market:-

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SECOND THE RESOLUTION


When I was scripting a proceeding to be held in an extraordinary general meeting, I faced a question of whether proposing or seconding a resolution is required. My answer was NO unless an amendment to the motion is moved. Before reading further, my readers may check legal provision for the moving and passing a resolution under the (Indian) Companies Act, 2013.

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IMPORTANCE OF SUBSCRIBERS TO MEMORANDUM AND ARTICLES OF ASSOCIATION OF COMPANY


Subscribers of a company, particularly of a startup are ignorant tribe as far as company law is concerned. They need proper handholding. A subscriber to the memorandum of association and articles of association of a company is a neglected person though otherwise celebrated as member shareholder of a company.

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DIGITAL SIGNATURE


Digital Signature nowadays a most important but highly unprotected personal property of an individual just next to his figure prints and unprotected payment instruments – UPIs, credit or debit cards or cheque books. If no fraud has been committed misusing a Digital Signature in last 10 days it is because no fraudster know the true power of a Digital Signature or you have placed your digital signature certificate in a hand of a person of integrity.

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MICRO, SMALL AND MEDIUM ENTERPRISES


Since long, we all are waiting for this change. Very few things accelerated due to the present crisis of COVID-19. A long-forgotten debate lost somewhere in history with Notification S.O. 1702(E) dated 1st June 2020 amending definition of Micro, Small and Medium Enterprises. This is not a change in the Act but a notification to give the effect a related provision. Let us discuss.

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RETROSPECTIVE CSR


Indian laws are interesting phenomena incrementally so in recent years. It is like the king’s wishes. If king pronounces a desire it will be treated as law and will of God. Procedure to convert that desire formally to the law may be complied with in a due course. Any donation made by a company till 26th May 2020 was not legally a CSR contribution except under ages-old pre-democracy principle of king’s wishes. Now, due course of law-making granted king’s wishes its due legal status retrospectively.

Schedule VII of the Companies Act, 2013 which list out items which might be considered as CSR may be amended without parliamentary node by way of Notification issued by concerned Joint Sectary of the Ministry of Corporate Affairs. Practically it requires official approval from concern Minister. Mere wishes of the Minister or even of the whole cabinet are not enough to change a legal position.

In the present case, Prime Minister announced a new but controversial fund almost parallel to existing and well settled “Prime Minister’s National Relief Fund”. New fund is named as the “Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund)”.

The major difference in both PM funds is the audit – previous one is to be audited by a constitutional authority – Comptroller and Auditor General of Indian (CAG) which place its audit report to Public through the Parliament of India – called as the temple of Indian Democracy by the present prime minister. On the other hand, newer one is to be audited by a Chartered Accountant firm of choice of the fund and the audit report shall largely be a private affair of the fund. Hopefully, the second one shall be made public under federal transparency law called the Right of Information Act, 2005. However, nothing is clear as of now.

As soon as Prime Minister of India announced this Fund and requested contribution to this fund as part of Corporate Social Responsibility, money starts pouring into this fund. But where was the law? No due diligence was made either by the Government at the time of acceptance of the Fund as CSR nor by contributors. India particularly Corporate India has a long history of pleasing the ruling king then the compliance of the law. This was one fit case.

Soon, auditors of the contributing companies start raising queries. A national but silent whistle was blowing which was a wakeup call for the Government.

Now the notification read as under:

  1. (the number is actually missing, a familiar typo) In Schedule VII, item (viii), after the words “Prime Minister’s National Relief Fund”, the words “or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund)” shall be inserted.

  2. This notification shall be deemed to have come into force on 28th March 2020.

What it actually convey? No company contributing to the fund since 28th March 2020 till 26th May 2020 is good in legal interpretation. These companies receive no proper legal advice despite hiring big law firms. They actually do not care about the written law as they understand and believe the king’s wishes are law after all.

No, I have no issue with the king’s wishes as long as it gives a positive result to the society and the Nation. Read paragraphs hereinabove in a lighter tone and just for legal understanding only. We all know this was actually a hard time for Ministers and Secretaries working on various relief packages. It was appreciable work when a good number of government officers was working from home.

Take inspiration and stay at home as far as possible. Work from Home is a buzz word.

Aishwarya Mohan Gahrana

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A VALUERS’S SIDE OF DRAFT VALUATION BILL


Ministry of Corporate Affairs has placed on its website a Report of the Committee of Experts which examined the Need for an Institutional Framework for Regulation and Development of Valuation Professionals. Stakeholders may send their comments till 14th May 2020. Usually, Indian stakeholders took no interest in such draft as the law-making process is considered slow. However, stakeholders are equally responsible for plight create by half-hearted laws be it the Companies Act, 2013 or the Insolvency and Bankruptcy Code, 2016.

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GOOD OPPORTUNITY TO ATTEND AN AGM


Corona is good for corporate governance. The government, without any known intention to do so, adopted an inclusive approach for the benefit of members and shareholder of companies in India. If you are a shareholder in any company in India, this is the best time for you to attend a General Meeting of your company. Of course, you will be part of their decision-making process in all practical manner. Read More to avail best out of this opportunity and share a lot for benefit of lakhs of individual investors and improvement of corporate Governance.

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ANNUAL GENERAL MEETING IN YEAR 2020


Annual General Meeting during the year 2020 is not an ordinary affair. This is now recognized by the Ministry of Corporate Affairs. Now, bigger companies are required to facilitate members to present in their Annual General Meeting through Video Conference or other audiovisual means even when holding AGM physically, others have the facility to use hold AGM through VA and OAVM. Circular 20/2020 dated 5th May 2020 extends facility provided by Circulars 14/2020 and 17/2020to hold General Meetings through VA and OAVM to Annual General Meetings.

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