Category Archives: Chapter I – CA2013

PRELIMINARY (and Date of Enforcement, Amendment, Repealing also as section 1 is here.)

Election of Directors – Companies limited by Guarantee without Share Capital


I received this interesting question on Quora and replied here. Other replies to the answer prompt me to post a short write up here on my blog. It seems it is a quite confusing and lesser explored area of most of us. We all students of corporate law at least once wonder about it and sometimes continue to do so.

The base question is – “How to decide voting rights of members in a guarantee company not having share capital?”

Here, before coming to the main question, it is prudent to discuss briefly the concept of the member under the Companies Act, 2013. Most of us use the terms members and shareholders as interchangeable. It is not so. All shareholders are generally members, but all members are not shareholders. When we say so, we usually think about shareholders pending registration of transfer or transmission. We miss 50% of the theoretical portion of the subject – Company limited by guarantee.

According to clause (55) of Section 2 the “member”, in relation to a company, means—

(i) the subscriber to the memorandum of the company who shall be deemed to have agreed to become a member of the company, and on its registration, shall be entered as a member in its register of members;

(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; and

(iii) every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository.

Membership of a company may or may not be in the form of shareholding. Membership is transferable. In the case of a company limited by shares, a member may transfer his membership by transfer of share. In the case of a company limited by guarantee, a member may transfer his membership by just transferring membership. If a reader is confused about such transfer of share, he may just discuss himself about a transfer of shares not fully paid.

As I mentioned some of my earlier answers on the Quora and on my blog, a company limited by shares and a company limited by guarantee have no practical difference except one. A reader may look into the definition given here as the footnote[1].

May you for a moment consider a company having a share capital with all members decided to pay only at the time of liquidation or winding up. It is akin to a guarantee company. A company with uncalled unpaid shares has no practical difference with a guarantee company. ( see footnote [2])

The voting rights in a guarantee company may be decided on the basis of the ratio of guarantee or say the amount of percentage of guarantee given by a member against total guarantee given to the company by all member combine.

A, B, C and D may form a guarantee company by a promising guarantee of Re.5,000/, Rs. 15,000/-, Rs. 12,000 and Rs 8,000/-respectively. They may have respectively 5, 15, 12 and 8 votes in the General Meeting of the company.

Now, you may understand how to elect directors in general meeting other than first directors.

All practical provisions related to appointment of directors and passing any resolution shall remain the same.

Note -To my understanding, there will not be any differential voting rights in the guarantee company. Readers may also discuss the same.

[1] Two other important definitions in this regards are as under

(21) “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.

(22) “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.

[2] It is a secondary thing that present law requires receiving of money shares subscribed in the memorandum of association by the promoters.

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The Companies Amendment Ordinance 2019


The Government of India Promulgated the Companies (Amendment) Ordinance, 2019 on 12th January 2019 to give continuing effect to the Companies(Amendment ) Ordinance, 2018 and to amend the Companies Act, 2013. This is notable that the companies (Amendment) Ordinance, 2019 has a significant difference its precursor.

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Financial Year for a company


Law stated in this post is as on 20th December 2018.

Financial Year reflects the reporting period for the purpose of financial and non-financial reporting by a company to its stakeholders including government authorities. Since the financial year of the Government of India is 1st April to 31st March as per the British system. The Companies Act, 2013 aligned financial year for companies registered in India to that of the government. There are certain exemptions to have a different period for the financial year. In this post we will discuss the financial year in light of the companies (Amendment) Ordinance, 2018 read with the companies (Incorporation) Fourth Amendment Rules, 2018 and Notification S.O. 6225 (E) dated 18th December 2018.

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Effective Provisions of the Companies Amendment Act 2017 w.e.f. 13 June 2018


With Four Notifications; S.O. 351(E) dated 23rd January 2018, S.O. 630(E) dated 9th February 2018, S.O. 1833(E) dated 7th May 2018 and S.O. 2422(E) dated 13th June 2018 most provisions of the Companies (Amendment) Act, 2017 (1 of 2018) come into force. Here is a bird’s eye view.

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Half of the Companies Amendment Act, 2017 effective


Vide Notification S.O. 351(E) dated 23rd January 2018 Section 1 and 4 of the Companies (Amendment) Act, 2017 came into force on 26th January 2018. According to a draft notification placed on the website of Ministry of Corporate Affairs[i], Central Government appoints 9th February 2018 as the date on which 42 other sections and a major part of section 2 of the Companies (Amendment) Act, 2017 came into force.

UPDATE: The Notification S. O. 630(E) dated 9th February 2018 published in the Gazette of India on 12th February 2018 uploaded with the digital signature of publisher dated 16th February 2018.

Here is a bird’s eye view.

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AishMGhrana – Law Governance Responsibility 2017


The blog “AishMGhrana – Law Governance Responsibility” regularly put here its annual reports for public information. Our readers are our assets. We are thankful to every reader for the long association since March 2011.

Our readers can enhance their knowledge anywhere anytime on mobiles, tablets, laptops and desktops. We assure our readers that this blog has secured https protocol and completely mobile friendly. The blog is a participant of Accelerated mobile Pages (AMP) program of Google to ensure less mobile data consumption while loading.

The blog was adjudged as one of the best blogs in India by Indianbloggers.org in category “law” in 2013 and continue hold this position. Indian Blog critics IndianTopBlogs.com listed this blog among best blogs on Corporate Affairs for years 2013 – 14, 2014 – 15, 2016 and 2017. The Feedspot lists this blog among “Top 100 Legal Blogs worldwide Every Lawyer and Law Student Must Follow”. This blog is among top 50 blogs on this list of the Feedspot.

The blog got about 5.02 lakh page views by 3.32 lakhs unique visitors this year against 3.6 lakh page views by 2.4 lakhs unique visitors last year. This year we achieved magic figure of 50,000 views a month twice. During the year, the blog posted 58 posts. The blog now hosts total 628 blog posts and completed 17 lakh page-views and 10.9 lakh visitors.

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On-demand, Index of Companies Law Posts as updated on 31st December 2017 is uploaded here: Index of Company Law Posts 2017

Subsidiaries Layers limited


The Patron Government of ease of doing business was earlier considered not favourable for corporate governance. After “successful” demonetization, government looking for all possible measure it seems necessary even though earlier not much liked by it. The enforcement of the provision of limiting layers of subsidiaries is one such law. Ministry of Corporate Affairs on 20th September 2017 notified Proviso to clause (87) of section 2 and –.

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