Tag Archives: Ministry of corporate affairs

MAJOR CAUTIONS UNDER PUBLIC OFFER (COMPANIES ACT, 2013)


In recent posts, we discussed provisions of Chapter III of the Companies Act, 2013. This is time to discuss major penal provisions in this chapter.

CRIMINAL LIABILITY FOR MIS-STATEMENT IN PROSPECTUS (SECTION 34):

Where a prospectus, issued, circulated or distributed:

a)    includes any statement which is untrue or misleading in form or context in which it is included; or

b)   where any inclusion or omission of any matter is likely to mislead;

Every person who authorises the issue of such prospectus shall be liable under section 447 i.e. fraud.

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Effective Provisions of Companies Act, 2013 as on 12th September 2013


On 30th August 2013 (Bhadrapada 8, 1935 Saka), Ministry of Law and Justice issued a notification regarding the Companies Act, 2013 immediately after it received assent of President of India. Only section 1 of the Act of 2013 came into effect from that day. Section 1 as usual deals with short title, Extent, commencement and application.

Earlier Act of 1956 was applicable to whole of India with some modification related to Indian State of Nagaland, but not applicable Indian state of Sikkim. Act of 2013 is applicable to whole of India including Sikkim and without any exception to any state. Sub – section 4 of Section 1 of Act of 2013 lists out some exception regarding particular classes of companies. However, Act of 2013 is not made effective to Sikkim as on 12th September 2013.

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VARIANTS OF PROSPECTUS (Companies Act, 2013)


In our last blog post Prospectus (Companies Act 2013) , we discussed provisions related to prospectus. We will continue our study in this post.

ADVERTISEMENT OF PROSPECTUS (SECTION 30):

When a company issue an advertisement of prospectus, the advertisement shall specify contents of its memorandum; the objects, the liability of members, amount of share capital, name of signatories, and number of shares subscribed for by these signatories and its capital structure.

SHELF PROSPECTUS (SECTION 31):

Any class of company may file a shelf prospectus with the Registrar of Companies at the stage of first offer of securities.

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PUBLIC OFFER AND PRIVATE PLACEMENT


Any business cannot run without funds. In case of an incorporated company, initial capital always come from subscribers to the memorandum. As we have discussed in earlier post Commencement of Business, company should commence its business within 180 days by filing some documents with Registrar of Companies. This is legal requirement of Section 11, all subscribers should paid the value of shares agreed to be taken by him and company should receive that money before filing document for filing for commencement of business. But this initial capital may not be sufficient for running a business. [UPDATE: This  portion stand deleted due to the Companies (Amendment) Act, 2015.] Public funding is a fundamental proposition for legal structure called company.

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MINOR PROVISIONS IN CHAPTER II (COMPANIES ACT 2013)


There are some provisions other than what I have already discussed in my recent posts. I will discuss these provisions here.

COPIES OF DOCUMENTS TO MEMBERS (SECTION 17):

Whenever a member ask, company shall send him within seven days of this request a copy of each following documents:

  1. The Memorandum,
  2. The Articles, and
  3. Every Agreement and Every Resolution under Section 117.

There a provision for a payment of prescribed fee. Section 117 deals with agreements and resolutions which are required to be filed by the company with Registrar. We will discuss it in a future post.

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NAME AND CLASS OF THE COMPANY


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

After reading my posts on Formation of a Company and Alteration of Memorandum and Articles, few readers suggested that I should cover provisions related to names in one place. I will discuss these provisions here along with provisions related to conversion of company from one class to another.

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Quotes from Companies Bill debate in Rajya Sabha


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

For every new law, legislative intent, which show it in debates taken place in Parliament, become important. These debates offer a guide while drafting subordinate legislation. There are many questions about future rules and regulations. I, here, compiled some important quotes from this debates from Rajya Sabha.[i][ii][iii]

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The Company under the Companies Act 2013


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

This is my first post after passing of the Companies Bill, 2012 by Rajya Sabha on 8th August 2013. Lok Sabha have already passed this Bill, earlier on 18th December 2012. The Bill is just one signature away from being an Act or two-three step away from come to be in forced by Notification.

Here, I try to study briefly some definitions related to companies under present Bill [Now the Companies Act, 2013]. Readers may please add their inputs in comment section of this post.

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CLASS ACTION IN COMPANIES ACT, 2013


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

In continuation with my last blog post on Oppression and Mismanagement; I am reading Class Action under Clause 245 of the Bill. Provisions relating to Class Action are under Chapter XVI of the Companies Bill, 2012 and basically target to achieve investor protection in a limited manner and on an experimental basis.

[Law discussed in this post was valid till 8 May 2019 and have academic and Historic value.]

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OPPRESSION & MISMANAGEMENT UNDER COMPANIES ACT 2013


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

Class Action is one of the youngest additions to Indian jurisprudence particularly, in Indian Corporate Jurisprudence. Class Action aims to prevent Oppression and Mismanagement in Companies. The Provisions relating to Oppression and Mismanagement are in Chapter XVI of the Companies Bill, 2012.

In this post, I will cover Section 241 – 244 which deals with normal provisions.

In next post, I will discuss Section 245 dealing with Class Action and after that Section 246 read with Section 373 to 341.

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RTI Reply on Working of MCA21 Portal in 2012 – 13


I filed an application for Information of period from 1st April 2012 to 31st March 2013 about working of MCA21 portal. My question was:

Description of the information required:

1. Current User Capacity of MCA21 Portal,

2. Number of Month – wise Log – in on MCA21 portal from 1st April 2012 to 31st March    2013

3. Total Month – wise time – period, during 1st April 2012 to 31st March 2013, when MCA21 Portal was not working due to Maintenance, Updating, Production release, upgrades, switchovers, switchback drills or other official Reasons; and details thereof,

4. Total month – wise time period, during 1st April 2012 to 31st March 2013, when MCA21 Portal put notice like “Large numbers of users are logged in MCA21 portal. Kindly try after some time.”

 

I received this reply from Ministry of Corporate Affairs, which is also embedded here. Please read and share your views on comment section of this blog post.

BOARD COMMITTEES IN COMPANIES ACT 2013


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

Delegation of Power is buzz word in this Companies Bill 2012. This delegation is not only from legislature to Executive but also from Board of Directors to its committees. Committees are not new to Indian Corporate Jurisprudence. Audit Committee was introduced in the present Companies Act, 1956 twelve years ago in year 2000. Schedule XII also has Remuneration committee.

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APPOINTMENT OF MANAGING DIRECTOR AND MANAGER


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

[NOTE: The law stated in this post is effective from 1st April 2014 till 11th September 2018. For the law applicable from 12th September 2018, please visit here]

Managing Director is Key Managerial Personnel of utmost importance. He is the face of a company and its decision-making mechanism. A person gains significant advantages as Managing Director which may not be there, in case of his appointment as Manager or Chief Executive Officer. While Chief Executive Officer has no special advantage except his clubbing as Key Managerial Personnel with Manager and Managing Director, Manager has some. Their definitions speak themselves. Appointment of Managing Director, Whole – Time Director and Manager is governed by the provision of Section 196 of the Bill. They all are a different class of Key Managerial Personnel and has the specific provision of appointment in addition to Section 203, discussed in an earlier post.

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INDEPENDENT DIRECTORS IN COMPANIES ACT 2013


 (UPDATE: on 30th August 2013: Companies Bill became the Companies Act, 2013 (Act 18 of 2013).

When I was reading Section 149 of the Companies Bill, 2012 for an earlier post “Appointment and Qualification of Director”, I have not discussed provisions related to independent director. As mentioned in that post every listed company shall have at least one-third of total number of directors as Independent directors. The central government may prescribe minimum number of independent directors in other class or classes of public companies. Independent director is a genre of directors and all law related to duties, vacation, resignation, removal will also be applicable to them also. do not forget; they are not key managerial personnel or officer in default.

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DIRECTOR: DUTIES, VACATION, RESIGNATION, REMOVAL


UPDATE: on 30th August 2013: Companies Bill became the Companies Act, 2013 (Act 18 of 2013)

In my last post, I stopped myself from further reading midway due to length of the post “Appointment and Qualification of Director”. Now, this is time to resume reading.  Let us start with Additional Director, Alternate Director and Nominee Directors.

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APPOINTMENT AND QUALIFICATION OF DIRECTOR


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

I discussed in my last post that it is first time that concept of “Key Managerial Personnel” has been introduced in India. Hopefully, present Companies Bill will change status of Corporate Governance in India. The qualified Directors and transparency in appointment of directors is single most important key for success of public corporate and corporate governance. As I discussed, appointment of “Key Managerial Personnel” is discussed in Section 203 but specific provisions of Chapter XI should be taken care of in case of appointment of Directors as they are specific provisions for them. Chapter XI consists of 23 Section from Section 149 to Section 172.

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KEY MANAGERIAL PERSONNEL


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

In any jurisdiction, Quality of Corporate Governance and compliance of ethics depends upon quality of people taking charge of the affairs. The companies Bill 2012 have some inbuilt elements of corporate governance in it. First time Concept of Key Managerial Personnel is being introduced in India. Which seems different with “officer who is in default” as that concept is still in this Bill.

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EMPLOYEES WELFARE IN PROFESSIONAL BODIES


Employee’s welfare is also a matter corporate social responsibility for all body corporate. During debate on corporate social responsibilities we heard a lot from all quarters.

Principle 3 of National Voluntary Guideline on Social, Environment, & Economic Responsibilities of Business issued by Ministry of Corporate Affairs say, ”Businesses should promote the well being of all Employees.” On page 17 of this guideline, it is mentioned that “…strongly believe that addressing health issues significantly contributes to the sustainability of their business operations and especially the health and welfare of their employees.” There is separate guideline issued by Government for Central Public sector Enterprises.

As a stakeholder, we have interest in measures taken by professional bodies under Ministry of Corporate Affairs. It is noteworthy to note, these professional bodies are very instrumental to spread awareness about corporate social responsibilities on behalf of government. I filed applications under three professional bodies and asked same questions:

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INTERNAL AUDIT AND COST AUDIT


(UPDATE: on 30th August 2013: Companies Bill became the Companies Act, 2013 (Act 18 of 2013).

In this series of my blog post related to Companies Bill, 2012; I am writing this post about provision relating to internal and cost audits. The manner of appointment of auditors may affect independence of cost audit and good corporate governance. The bill addresses this issue very well.

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