Company Law - The Institute of Company Secretaries of India, The

1238 Pages·2012·8.97 MB·English

by  Company Law

EXECUTIVE PROGRAMME
STUDY MATERIAL
COMPANY LAW

MODULE II - PAPER 4

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(iii)
EXECUTIVE PROGRAMME
COMPANY LAW
In view of increasing emphasis on adherence to norms of good
corporate governance, Company Law assumes an added importance in the
corporate legislative milieu, as it deals with structure, management,
administration and conduct of affairs of Companies. A thorough study of
various provisions of the Companies Act is a must for becoming a
competent and efficient Company Secretary. In the light of this, the study
material has been published to impart thorough knowledge to the students
preparing for the Company Law paper of the CS Executive Programme.
The purpose of this study material is to develop an understanding of the
regulation of registered companies and to provide thorough understanding
of the various provisions of the Company Law as well as Schedules and
Rules made thereunder including their interpretation through case laws,
departmental clarifications etc. Additionally this study material also provides
conceptual understanding of the principles of Cooperatives Law.
Company Secretaryship being a professional course, the examination
standards are set very high, with emphasis on knowledge of concepts,
applications, procedures and case laws, for which sole reliance on the
contents of the study material may not be enough. Besides Company
Secretaries Regulations, 1982 requires the students to be conversant with
the amendments to the laws made upto six months preceding the date of
examination. This study material may therefore be regarded as basic
material and must be read along with the Bare Act, Rules, Regulations,
Case Law, as well as suggested readings.
The amendments made upto December, 2011 have been incorporated
in this study material. However, it may happen that some developments
might have taken place during the printing of the study material and its
supply to the students. The students are therefore advised to refer to the
'Student Company Secretary', Chartered Secretary and other publications
for updation of study material. In the event of any doubt, students may
contact the Directorate of Academics and Professional Development in the
Institute for clarification.
Although due care has been taken in publishing this study material yet
the possibility of errors, omissions and/or discrepancies cannot be ruled
out. This publication is released with an understanding that the Institute
shall not be responsible for any errors, omissions and/or discrepancies or
any action taken in that behalf.
Should there be any discrepancy, error or omission noted in the study
material, the Institute shall be obliged if the same are brought to its notice for
issue of corrigendum in the 'Student Company Secretary'.
(iv)
EXECUTIVE PROGRAMME
SYLLABUS
FOR
PAPER 4: COMPANY LAW
Level of knowledge : Expert knowledge.
Objective: To develop an understanding of the regulation of companies and to
provide thorough knowledge of the various provisions of the Company Law in India
as well as Schedules and Rules made thereunder including their interpretation
through case laws, departmental circulars, clarifications, notifications, etc.
Detailed contents :
1. Introduction
Nature and form of business enterprise; types of business enterprises;
company – definition and nature.
Historical development of corporate concepts; emergence of principles of
limited liability and development of Company Law in England and India.
Concept of corporate personality; corporate veil and its lifting.
Working and administration of Company Law.
2. Incorporation and its Consequences
Types of companies and their incorporation; memorandum and articles of
association and their alteration; registered office; publication of name;
commencement of business; contracts; deeds; common seal; effect of
incorporation.
Re-registration and registration of unregistered joint-stock companies.
The doctrine of ultra-vires, constructive notice and indoor management.
Promoters - meaning and importance; position, duties and liabilities.
3. Financial Structure
Concept of capital and financing of companies, sources of capital; classes
and types of shares; equity with differential rights; issue of shares at par,
premium and discount; forfeiture and surrender of shares; bonus issues;
rights issues; issue of sweat equity shares; employees stock option scheme;
private placement.
Alteration of share capital; reduction of capital; buy-back of shares.
Debt capital - debentures, debenture stock, bonds; new developments in
corporate debt financing; debenture trust deed and trustees; conversion of
and redemption of debentures.
Securing of debts – creation, modification and satisfaction of charges.
(v)

Prospectus – definition; abridged prospectus; red-herring prospectus; shelf
prospectus; information memorandum; contents, registration,
misrepresentations and penalties.
Allotment and certificates - contracts to subscribe for shares, debentures and
other securities; calls; share certificates and share warrants.
4. Membership, Depositories and Transfer/Transmission
Membership - modes of acquiring membership; rights and privileges of
members, register of members; dematerialisation and rematerialisation of
securities; transfer and transmission of securities in physical and depository
modes; nomination.
5. Management and Control of Companies
Directors – appointment/re-appointment, qualifications, disqualifications,
remuneration, vacation of office, retirement, resignation and removal; loans
to directors; powers and duties; office or place of profit; role of directors;
contracts in which directors are interested.
Managing and whole-time directors and manager.
Company secretary – appointment, role and responsibilities; company
secretary as a principal officer.
Meetings of directors and committees - frequency, convening, and
proceedings of Board/Committee meetings; tele and video-conferencing of
Board/ Committee(s); resolution by circulation; minutes and evidence.
General meetings - kinds of meetings; law, practice and procedure relating to
convening and proceedings at general and other meetings – notice, quorum,
proxy, voting including voting through electronic means, resolutions,
circulation of members’ resolution, etc.; postal ballot; recording, signing and
inspection of minutes; role of chairman.
Distribution of powers of a company - division of powers between Board and
general meetings; acts by directors in excess of authority; monitoring and
management.
Sole Selling and Buying Agents - Meaning, appointment and reappointment,
removal; powers of Central Government and rules framed for the purpose.
6. Dividend
Profit and ascertainment of divisible profits; declaration and payment of
dividend; treatment of unpaid and unclaimed dividend; transfer of unpaid and
unclaimed dividend to Investor Education and Protection Fund.
7. Investments, Loans and Deposits
Law relating to making investments in and granting loans to other bodies
corporate and giving guarantees and providing security.
Invitation, acceptance, renewal, repayment, default and remedies.
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8. Accounts and Audit
Books of account; financial statements; audit and auditor’s report; powers of
the Central Government to direct special audit; cost audit.
Auditors - appointment, resignation and removal; qualification and
disqualification; rights, duties and liabilities.
9. Board’s Report and Disclosures – preparation; disclosures; directors’
responsibility statement.
Compliance certificate – need and purpose; issue and signing by practising
company secretary; disclosure and filing.
10. Registers and Returns – maintenance, authentication, presentation and
inspection of statutory books/registers prescribed under various provisions of
the company law and filing of various forms/returns to Registrar of
Companies; procedure and penalties for delayed filing, etc.
Annual Return – Nature and significance; contents; filling – preparation and
disclosures; signing, certification and filing; maintenance, place of keeping
and its inspection.
11. Inspection and Investigation
Inspection of documents, books of account, registers etc; powers of the
inspector, seizure of books and documents, inspector’s report; power of the
Registrar of Companies, investigation into affairs of the company.
12. Majority Rule and Minority Rights
Law relating to majority powers and minority rights.
Shareholder remedies - actions by shareholders; statutory remedies;
personal actions; prevention of oppression and mis-management.
13. Compromises and Arrangements – an overview.
14. Societies, Co-operative Societies, Trusts, Producer Companies and
Limited Liability Partnerships
Concept, formation, membership, functioning and dissolution.
15. Application of Company Law to Different Sectors such as Banking,
Insurance, etc.
16. Offences and Penalties – an overview.
17. Striking off Name of Companies.
Concept.
18. Winding up of Companies
Concept and modes.
19. An Introduction to E-governance
20. Secretarial Standards
(vii)

LIST OF RECOMMENDED BOOKS
COMPANY LAW
Readings:
1. Dr. Avtar Singh : Company Law; Eastern Book Company,
34, Lalbagh, Lucknow – 226 001
2. A. Ramaiya : Guide to Companies Act; Wadhwa & Company
Nagpur.
3. B.K. Sen Gupta : Company Law; Eastern Law House,
54, Ganesh Chunder Avenue,
Kolkata (Calcutta) 700013.
4. ICSI Publication : Manual on Capital Issues
(in the Light of SEBI Guidelines)
5. Dr. Avadesh Ojha, : Company & Security Laws Practice
CS. Amit Baxi Compendium, The Tax Publishers
”Kedarnath”, 7, Avadh Vihar,
Chopasani Road, Jodhpur-342 009.
6. A.K. Majumdar, : Company Law and Practice; Taxmann,
Dr. G.K. Kapoor 59/32, New Rohtak Road,
New Delhi-110 005.
7. P.K. Ghosh & : Company Law and Practice; Sultan Chand &
V. Balachandran Sons, 23, Daryaganj, New Delhi-110 002.
8. M.C. Kuchhal : Modern Indian Company Law; Shri Mahavir
Book Depot, 2603, Nai Sarak, Delhi-110 033.
9. Ashok K. Bagnal : Company Law, Vikas Publishing House Pvt.
Ltd., A-122, Sector 4, Noida.
References:
1. Taxmann : Company Law Ready Reckoner;
Taxmann Publication (P) Ltd.,
59/32, New Rohtak Road,
New Delhi-110 005.
2. Palmer : Company Law (Vol. 1); Stevens & Sons Ltd.,
London.
3. L.C.B. Gower : Principles of Modern Company Law; Stevens &
Sons Ltd., London.
5. Bare Act : Corporate Laws; Taxmann,
59/32, New Rohtak Road,
New Delhi-110 005.
(viii)
Journals:
1. Chartered Secretary : ICSI, New Delhi
2. Student Company : ICSI, New Delhi
Secretary
3. Corporate Law Adviser : Corporate Law Advisers, Post Bag No. 3,
Vasant Vihar, New Delhi.
4. Company Law Journal : L.M. Sharma, Post Box No. 2693,
New Delhi – 110 005
Note: The latest edition of all the books referred to above should be read.
(ix)

C O N T E N T S

Study Topic

1. Introduction
2. Incorporation and Its Consequences - I
3. Incorporation and Its Consequences - II
4. Incorporation and Its Consequences - III
5. Incorporation and Its Consequences - IV
6. Financial Structure and Membership - I
7. Financial Structure and Membership - II
8. Financial Structure and Membership - III
9. Financial Structure and Membership - IV
10. Financial Structure and Membership - V
11. Financial Structure and Membership - VI
12. Financial Structure and Membership - VII
13. Financial Structure and Membership - VIII
14. Management and Control of Companies - I
15. Management and Control of Companies - II
16. Management and Control of Companies - III
17. Management and Control of Companies - IV
18. Management and Control of Companies - V
19. Investments and Loans
20. Deposits
21. Corporate Accountability – I
22. Corporate Accountability – II
23. Sole Selling and Sole Buying Agents
24. Board’s Report and Disclosures
25. Registers and Returns
26. Inspection and Investigation
27. Shareholders’ Democracy; Majority Powers and Minority
Rights; and Prevention of Oppression and Mismanagement
28. Compromises and Arrangements
29. Law relating to Co-operatives, Societies and Trusts
30. Producer Companies
31. Limited Liability Partnerships
32. Application of Company Law to different sectors such as
Banking, Insurance etc.
33. Offences and Penalties
34. Striking off Name of Companies
35. Winding Up of Companies
36. An Introduction to E-Governance
37. Secretarial Standards
TEST PAPERS
Question Papers of two previous sessions.
(xi)
EXECUTIVE PROGRAMME
COMPANY LAW
C O N T E N T S
STUDY I
INTRODUCTION
Page
Learning Objectives … 1
Meaning of a Company ... 1
Company—Its Nature and Characteristics ... 2
Brief History of Company Law in India and England … 10
Background of English Company Law ... 10
Development of Indian Company Law ... 12
Amendments made to the Companies Act by the
Depositories Act, 1996 ... 15
The Companies (Amendment) Act, 1999—Salient Features ... 15
The Companies (Amendment) Act, 2000—Salient Features ... 16
The Companies (Amendment) Act, 2002 and Companies (Second
Amendment) Act, 2002—Salient Features ... 17
The Companies (Amendment) Act, 2006 … 18
Highlights of Companies Bill, 2011 … 20
Distinction between Company and Partnership ... 20
Distinction between Company and Hindu Joint Family Business ... 21
Distinction between Company and Corporation ... 21
Distinction between Company and Limited Liability Partnership … 23
Advantages of Corporate Form of Enterprise ... 23
Disadvantages of Corporate Form of Enterprise ... 23
Concept of Corporate Personality … 24
Lifting or Piercing the Corporate Veil ... 25
Lifting of Corporate Veil under Judicial Interpretation ... 25
Use of Corporate Veil for Hiding Criminal Activities ... 28
Personal Liability of Directors or Members ... 29
Illegal Association ... 31
Company as Person ... 32
Nationality and Residence of a Company ... 33
Company as a Citizen ... 33
Lesson Round-Up … 34
SELF-TEST QUESTIONS ... 35

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