(An Imprint of Laxmi Publications Pvt. Ltd.)

CORPORATE LAWS Prof. (Dr.) C.L. Bansal

Corporate Laws

CORPORATE LAWS

By

Prof. C.L. Bansal Professor of Law, Governance and Public Policy Management Development Institute, Gurgaon

LAXMI PUBLICATIONS (P) LTD BENGALURU KOCHI

•

•

(An ISO 9001:2008 Company)

CHENNAI

KOLKATA

•

•

GUWAHATI

LUCKNOW

BOSTON (USA)

•

•

•

HYDERABAD

MUMBAI

•

RANCHI

NAIROBI (KENYA)

• •

JALANDHAR NEW DELHI

CORPORATE LAWS © by Laxmi Publications (P) Ltd. All rights reserved including those of translation into other languages. In accordance with the Copyright (Amendment) Act, 2012, no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise. Any such act or scanning, uploading, and or electronic sharing of any part of this book without the permission of the publisher constitutes unlawful piracy and theft of the copyright holder’s intellectual property. If you would like to use material from the book (other than for review purposes), prior written permission must be obtained from the publishers.

Printed and bound in India Typeset at Goswami Associates, Delhi New Edition ISBN 978-93-5274-091-8 Limits of Liability/Disclaimer of Warranty: The publisher and the author make no representation or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties. The advice, strategies, and activities contained herein may not be suitable for every situation. In performing activities adult supervision must be sought. Likewise, common sense and care are essential to the conduct of any and all activities, whether described in this book or otherwise. Neither the publisher nor the author shall be liable or assumes any responsibility for any injuries or damages arising here from. The fact that an organization or Website if referred to in this work as a citation and/or a potential source of further information does not mean that the author or the publisher endorses the information the organization or Website may provide or recommendations it may make. Further, readers must be aware that the Internet Websites listed in this work may have changed or disappeared between when this work was written and when it is read.

Branches

All trademarks, logos or any other mark such as Vibgyor, USP, Amanda, Golden Bells, Firewall Media, Mercury, Trinity, Laxmi appearing in this work are trademarks and intellectual property owned by or licensed to Laxmi Publications, its subsidiaries or affiliates. Notwithstanding this disclaimer, all other names and marks mentioned in this work are the trade names, trademarks or service marks of their respective owners.

Published in india by

Laxmi Publications (P) Ltd.

(An ISO 9001:2008 Company) 113, GOLDEN HOUSE, DARYAGANJ, NEW DELHI - 110002, INDIA Telephone : 91-11-4353 2500, 4353 2501 Fax : 91-11-2325 2572, 4353 2528 www.laxmipublications.com [email protected]

&

Bengaluru

080-26 75 69 30

&

Chennai

044-24 34 47 26, 24 35 95 07

&

Guwahati

0361-254 36 69,

&

Hyderabad

040-27 55 53 83, 27 55 53 93

&

Jalandhar

0181-222 12 72

&

Kochi

0484-237 70 04,

&

Kolkata

033-22 27 43 84

&

Lucknow

0522-220 99 16

&

Mumbai

022-24 93 12 61

&

Ranchi

0651-220 44 64

251 38 81

405 13 03

content

 1.  CONCEPT AND NATURE OF A COMPANY ......................................................1–18 1.0 Introduction ................................................................................................................................ 1 1.1 Incorporation .............................................................................................................................. 2 1.2 Meaning and Definition of a Company ................................................................................. 4 1.3 Features of a Company ............................................................................................................ 5 1.4 Disadvantages of Incorporation of Joint Stock Companies ................................................. 8 1.5 Body Corporate [Section 2(11)] ................................................................................................ 9 1.6 Corporation............................................................................................................................... 10 1.7 Corporate Personality and Lifting of Corporate Veil ........................................................ 10 1.8 Lifting of Corporate Veil ......................................................................................................... 11 1.9 Illegal Association [Section 464] ............................................................................................ 16 Questions ................................................................................................................................... 17

 2.  CLASSIFICATION OF COMPANIES ................................................................19–38 2.0 Classification According to the Mode of Incorporation .................................................... 19 2.1 According to Liability of Members ...................................................................................... 20 2.2 According to Number of Members ....................................................................................... 21 2.3 One Person Company (OPC) [Section 2(62)] ....................................................................... 23 2.4 Small Company [Section 2(85)] .............................................................................................. 25 2.5 Dormant Company [Section 455] .......................................................................................... 26 2.6 According to Control .............................................................................................................. 27 2.7 Associate Company [Section 2(6)] ........................................................................................ 29 2.8 According to Ownership ........................................................................................................ 30 2.9 Foreign Company ................................................................................................................... 32

vi

Content 2.10 Companies with Charitable Objects (Associations Not for Profit) [Section 8] ............... 35 2.11 One Man Company ................................................................................................................ 36 2.12 Difference between Public Company and Private Company .......................................... 37 2.13 Special Privileges of a Private Company ............................................................................. 38 Questions ................................................................................................................................... 38

 3.  FORMATION OF COMPANY ............................................................................39–48 3.0 Preliminary ............................................................................................................................... 39 3.1 Promotion ................................................................................................................................. 39 3.2 Promoter’s Remuneration....................................................................................................... 42 3.3 Pre-Incorporation Contracts .................................................................................................. 42 3.4 Ratification of Pre-incorporation Contracts under Specific Relief Act, 1963 .................. 44 3.5 Incorporation or Registration ................................................................................................. 44 3.6 Floatation .................................................................................................................................. 48 Questions ................................................................................................................................... 48

 4.  MEMORANDUM OF ASSOCIATION ................................................................50–62 4.0 Introduction .............................................................................................................................. 50 4.1 Definition of Memorandum ................................................................................................... 50 4.2 Form of Memorandum [Section 4(6)] .................................................................................. 51 4.3 Printing and Signing of Memorandum [Section 15] .......................................................... 51 4.4 Who can be a Subscriber to Memorandum? ........................................................................ 51 4.5 Contents of Memorandum [Section 4] ................................................................................. 52 4.6 Alteration of Memorandum ................................................................................................... 55 4.7 Change of Registered Office .................................................................................................. 56 4.8 Alteration of Objects Clause .................................................................................................. 57 4.9 Alteration of Liability Clause ................................................................................................. 58 4.10 Alteration of Capital Clause (Section 61) ............................................................................. 59 4.11 Doctrine of Ultra Vires ............................................................................................................ 59 4.12 Main Objects Rule of Construction ....................................................................................... 61 Questions ................................................................................................................................... 61

 5.  ARTICLES OF ASSOCIATION .........................................................................63–75 5.0 Meaning and Scope ................................................................................................................ 63 5.1 Contents of Articles of Association [Section 5].................................................................... 64

Content

vii

5.2 Articles to be Mandatory for All Companies....................................................................... 64 5.3 Entrenchment Provision in the Articles [Section 5(3)] ....................................................... 64 5.4 Contents of Articles ................................................................................................................. 65 5.5 Relationship Between Memorandum and Articles............................................................. 66 5.6 Distinction Between Memorandum and Articles ............................................................... 67 5.7 Legal Effect (or Binding Force) of the Memorandum and Articles [Section 10]............. 67 5.8 Alteration of Articles ............................................................................................................... 69 5.9 Limitations on Alteration ....................................................................................................... 70 5.10 Rule of Constructive Notice of Memorandum and Articles [Section 399] ...................... 71 5.11 Doctrine of Indoor Management ........................................................................................... 72 5.12 Exceptions to the Doctrine of Indoor Management ............................................................ 72 Questions ................................................................................................................................... 73

 6.  PROSPECTUS ..................................................................................................76–92 6.0 Introduction .............................................................................................................................. 76 6.1 Meaning and Definition .......................................................................................................... 76 6.2 Definition of Prospectus [Section 2(70)] ............................................................................... 77 6.3 Deemed Prospectus [Section 25(1)] ....................................................................................... 77 6.4 Types of Prospectus ................................................................................................................. 78 6.5 Information Memorandum [Section 31(2)] .......................................................................... 80 6.6 Differences between Shelf-prospectus and Information Memorandum ......................... 80 6.7 Red-herring Prospectus [Section 32] ..................................................................................... 81 6.8 Abridged Prospectus: [Section 33] ........................................................................................ 82 6.9 Contents of a Prospectus [Section 26(1)] .............................................................................. 82 6.10 Statutory Requirements Regarding the Issue of Prospectus ............................................. 84 6.11 Private Placement .................................................................................................................... 85 6.12 Book Building ........................................................................................................................... 87 6.13 Newspaper Advertisement of Prospectus [Section 30] ...................................................... 88 6.14 Mis-statements in the Prospectus and consequences thereof ........................................... 88 Questions ................................................................................................................................... 91

 7.  SHARES AND SHARE CAPITAL ................................................................... 93–115 7.0 Concept of ‘Share’ ................................................................................................................... 93 7.1 Nature of ‘Share’ ..................................................................................................................... 93 7.2 Share Certificate ...................................................................................................................... 94

viii

Content 7.3 Stock ........................................................................................................................................... 96 7.4 Kinds of Share Capital ............................................................................................................ 97 7.5 Employees Stock Option ....................................................................................................... 100 7.6 Sweat Equity Shares [Section 54] ......................................................................................... 100 7.7 Issue of Bonus Shares [Section 63]....................................................................................... 102 7.8 Restriction on Purchase or Giving of Loan by a Company for Purchase of its Own Shares [Section 67] ....................................................................................................... 103 7.9 Purchase by a Company of its Own Securities [Section 68] ............................................ 104 7.10 Prohibition on Buy Back in Certain Circumstances [Section 70] ................................... 107 7.11 Underwriting ......................................................................................................................... 108 7.12 Brokerage ................................................................................................................................ 109 7.13 Issue of Securities at a Premium [Section 52] .................................................................... 109 7.14 Prohibition on Issue of Shares at a Discount [Section 53] ................................................ 110 7.15 Forfeiture of shares ................................................................................................................ 110 7.16 Surrender of Shares ............................................................................................................... 112 7.17 Calls on Shares ....................................................................................................................... 113 Questions ................................................................................................................................. 114

 8.  ALLOTMENT OF SHARES .......................................................................... 116–127 8.0 Meaning of ‘Allotment’ ......................................................................................................... 116 8.1 Statutory Provisions as to Allotment .................................................................................. 116 8.2 Alteration of Share Capital [Section 61].............................................................................. 119 8.3 Increase in Authorised Share Capital ................................................................................. 119 8.4 Conversion of Debentures Loans into Shares [Section 62] ............................................. 121 8.5 SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009 for Rights Issue by Listed Companies (Amended August 25, 2014) .................................... 122 8.6 Reduction of Share Capital [Sections 66] ............................................................................ 122 8.7 Voting Rights (Section 47) ................................................................................................... 124 8.8 Variation of shareholders’ rights [Section 48].................................................................... 125 Questions ................................................................................................................................. 127

 9.  TRANSFER AND TRANSMISSION OF SHARES ........................................128–135 9.0 Introduction ............................................................................................................................ 128 9.1 Transfer of Shares ................................................................................................................. 128 9.2 Who can Transfer? ................................................................................................................ 129

Content

ix

9.3 Procedure of Transfer [Section 56] ...................................................................................... 129 9.4 Transfer of Shares Under Depository System ................................................................... 131 9.5 Forged Transfer ...................................................................................................................... 131 9.6 Blank Transfer ........................................................................................................................ 132 9.7 Transmission of Shares (Articles 23-27 of Table F) ........................................................... 132 9.8 Rectification of Register of Members (Section 59) ............................................................. 133 9.9 Distinction Between Transfer & Transmission .................................................................. 134 9.10 Power to Make Nomination for Shares (Section 72) ......................................................... 134 Questions ................................................................................................................................. 135

 10.  MEMBERSHIP IN A COMPANY ...................................................................136–146 10.0 Introduction ............................................................................................................................ 136 10.1 Difference between a ‘Member’ and a ‘Shareholder’ ...................................................... 136 10.2 Methods of Acquiring Membership ................................................................................... 137 10.3 Who Can Become Member of a Company? ...................................................................... 139 10.4 Termination of Membership ................................................................................................ 141 10.5 Rights and Liabilities of Members ...................................................................................... 142 10.6 Liabilities of Members .......................................................................................................... 143 10.7 Register of Members .............................................................................................................. 144 Questions ................................................................................................................................. 146

 11.  COMPANY MEETINGS .................................................................................147–166 11.0 Meaning of Meeting .............................................................................................................. 147 11.1 Types of Meetings .................................................................................................................. 147 11.2 Meetings of Shareholders ..................................................................................................... 148 11.3 Annual General Meeting (AGM) [Section 96] ................................................................... 148 11.4 Extraordinary General Meeting (EGM) [Section 100] ...................................................... 151 11.5 Holding of EGM by the Requisitionists Themselves [Section 100(4)]............................ 152 11.8 Resolutions.............................................................................................................................. 160

 12.  DIRECTORS OF A COMPANY .....................................................................167–216 12.0 Concept of ‘Director’ [Section 2(34)] ................................................................................... 167 12.1 Mandatory Constitution of Board of Directors [Section 149] .......................................... 167 12.2 Who can be appointed a ‘Director’? [Section 149(1)] ........................................................ 168 12.3 Number of Directors [Section 149(1) (a) (b)] ...................................................................... 168

x

Content 12.4 Mandatory Appointment of Woman Director .................................................................. 168 12.5 Resident Director [Section 149(3)] ....................................................................................... 168 12.6 Restriction on Number of Directorships [Section 165] ..................................................... 168 12.7 Ceiling on Directorships in Listed Companies.................................................................. 169 12.8 Independent Director [Sections 149 (4) and (6)] ................................................................ 169 12.9 Legal Position of Directors ................................................................................................... 171 12.10 Disqualifications of Directors [Section 164] ....................................................................... 174 12.11 Vacation of Office [Section 167] ........................................................................................... 174 12.12 Resignation by a Director [Section 168] .............................................................................. 175 12.13 Appointment of Directors..................................................................................................... 175 12.14 Appointment of Directors by Proportional Representation (Section 163) .................... 179 12.15 Appointment of Director by Small Shareholders [Section 151] ...................................... 180 12.16 Board Committees ................................................................................................................. 181 12.17 Removal of Directors ............................................................................................................. 184 12.18 Powers of Board of Directors ............................................................................................... 185 12.19 Various Prohibitions Applicable to Directors.................................................................... 187 12.20 Other Restrictions on the Powers of the Board ................................................................ 188 12.21 Related Party Transactions [Section 188] ........................................................................... 189 12.22 Restriction on loans to directors [Section 185] ................................................................... 191 12.23 Intervention by shareholders in the powers of the board ............................................... 192 12.24 Meetings of the board [Section 173] .................................................................................... 193 12.25 Contracts in which Directors are Interested ...................................................................... 195 12.26 Authentication of Financial Statements and Board’s Report [Section 134] ................... 197 12.27 Directors’ Responsibility Statement [Section 134(5)] ........................................................ 198 12.28 Corporate Social Responsibility [Section 135] ................................................................... 199 12.29 Duties of Directors ................................................................................................................. 201 12.30 Liabilities of Directors .......................................................................................................... 202 12.31 Statutory Registers Relating to Directors ........................................................................... 204 12.32 Managerial Remuneration .................................................................................................... 204 12.33 Managing Director ................................................................................................................. 210 12.34 Whole-Time Director ............................................................................................................. 213 12.35 Company secretary ................................................................................................................ 213 12.36 Mandatory appointment of Company Secretary .............................................................. 214

Content

xi

12.37 Duties of Company Secretary [Rule 10 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014] ...................................................... 214 Questions ................................................................................................................................. 216

 13.  DECLARATION AND PAYMENT OF DIVIDEND ..........................................217–225 13.0 Meaning of dividend ............................................................................................................. 217 13.1 Right To Distribute Dividend .............................................................................................. 218 13.2 Profits Versus Divisible Profits ........................................................................................... 218 13.3 Rules Regarding Declaration of Dividend [Section 123].................................................. 218 13.4 Right to Dividend, Right Shares and Bonus Shares to be Held in Abeyance Pending Registration of Transfer of Shares [Section 126] ................................................................ 223 13.5 Punishment for failure to pay dividend [Section 127]...................................................... 224 13.6 Payment of Dividend Out of Capital Profits ..................................................................... 224 Questions ................................................................................................................................. 224

 14.  ACCOUNTS AND AUDIT ..............................................................................226–243 14.0 Books of Accounts to be Kept by a Company [Section 128] ............................................ 226 14.1 Legal Provisions about Books of Accounts ........................................................................ 227 14.2 Financial Statements (Section 129) ...................................................................................... 228 14.3 Statutory Books ...................................................................................................................... 231 14.4 Annual Return [Section 92] .................................................................................................. 231 14.5 Audit of Company Accounts ............................................................................................... 233 14.6 Appointment of Auditors [Section 139].............................................................................. 233 14.7 Qualifications and Disqualifications of Auditors [Section 141] ...................................... 236 14.8 Remuneration of Auditors [Section 142] ............................................................................ 237 14.9 Removal of Auditors [Section 140] ...................................................................................... 237 14.10 Powers of Auditors [Section 143] ........................................................................................ 239 14.11 Duties of an Auditor .............................................................................................................. 240 14.12 Liabilities of Auditors............................................................................................................ 241 14.13 Qualifications in Auditor’s Report [Section 143]............................................................... 242 14.14 Cost Audit (Section 148) ....................................................................................................... 242 Questions ................................................................................................................................. 243

xii

Content

  5.  BORROWING POWERS, CHARGES, DEBENTURES AND  1     ACCEPTANCE OF DEPOSITS .....................................................................244–260 15.0 Introduction : Borrowings .................................................................................................... 244 15.1 Ultra Vires Borrowing and Its Effect ................................................................................... 245 15.2 Charges and their Registration ............................................................................................ 246 15.3 Registration of Charges (Section 77) ................................................................................... 249 15.4 Debentures .............................................................................................................................. 252 15.5 Issue of Convertible Debentures [Section 71] .................................................................... 254 15.6 Debenture Trustee ................................................................................................................ 255 15.7 Rights of Debenture Holders ............................................................................................... 256 15.8 Acceptance of Public Deposits (Section 73) ....................................................................... 257 Questions ................................................................................................................................. 259

 16.  MAJORITY POWERS AND MINORITY RIGHTS .........................................261–265 16.0 Majority Rule .......................................................................................................................... 261 16.1 Implications of the Majority Rule ........................................................................................ 262 16.2 Advantages of Majority Rule ............................................................................................... 262 16.3 Protection of Minority ........................................................................................................... 263 Questions ................................................................................................................................. 264

 17.  PREVENTION OF OPPRESSION AND MISMANAGEMENT ......................266–277 17.0 Meaning of Oppression......................................................................................................... 266 17.1 Ingredients of ‘Oppression’ .................................................................................................. 266

 18.  COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS .................277–289 18.0 Introduction ........................................................................................................................... 277 18.1 Power to Compromise or make Arrangement with Creditors or Members [Section 230] ......................................................................................................... 277 18.2 Meaning of ‘Compromise’ ................................................................................................... 277 18.3 Meaning of ‘Arrangement’ .................................................................................................. 278 18.4 Procedure for Compromises and Arrangement [Section 230] ........................................ 278 18.5 Tribunal’s Power to Supervise the Enforcement of Compromise or Arrangement [Section 231] ................................................................................................... 280 18.6 Merger and Amalgamation of Companies [Sections 232-235] ........................................ 281 18.7 Procedure for Merger and Amalgamation ......................................................................... 282 18.8 Fast Track Merger and Amalgamation of Small Companies [Section 233] .................. 285

Content 18.9

xiii

Merger/Amalgamation of a Company with a Foreign Company [Section 234].......... 286

18.10 Purchase of Minority Shareholding [Section 236] ............................................................. 286 18.11 Amalgamation in Public Interest [Section 237] ................................................................ 287 18.12 Mandatory Registration of Offer of Schemes of Transfer of Shares in the Transferor Company to Transferee Company [Section 238] .................................... 288 Questions ................................................................................................................................. 289

 19.  INVESTIGATIONS.........................................................................................290–300 19.0 Introduction ........................................................................................................................... 290 19.1 Meaning of Investigation ...................................................................................................... 290 19.2 Legal Provisions Relating to Investigations ....................................................................... 291 19.3 Investigation by the Serious Fraud Investigation Office (SFIO) [Sections 211, 212] ... 291 19.4 Investigation by the Into the Affairs of a Company in Other Cases (Section 213) ....... 294 19.5 Appointment and Powers of Inspectors ............................................................................. 295 19.6 Investigation of Ownership of Company [Sections 216].................................................. 299 19.7 Imposition of Restrictions on Securities [Section 222] ...................................................... 299 Questions ................................................................................................................................. 300

 20.  WINDING UP .................................................................................................301–325 20.0 Introduction ............................................................................................................................ 301 20.1 Methods of Dissolution of a company ................................................................................ 301 20.2 Dissolution by Removal of Name [Section 248] ................................................................ 302 20.3 Winding Up ............................................................................................................................ 302 20.4 Modes of Winding Up [Section 270] .................................................................................. 303 20.5 Winding Up by the Tribunal ................................................................................................ 303 20.6 Who May File Winding up Petition before the Tribunal? ............................................... 306 20.7 Power of Tribunal [Section 273]........................................................................................... 307 20.8 Company Liquidator (Section 275) ..................................................................................... 309 20.9 Winding up Committee [Section 277(4) to (7)] ................................................................. 310 20.10 Official Liquidator [Section 359] .......................................................................................... 311 20.11 Consequences of Winding of Order by the Tribunal ....................................................... 312 20.12 Powers and Duties of Company Liquidator ..................................................................... 313 20.13 Directions by Tribunal for Filing Statement of Affairs (Section 274) ............................ 314 20.14 Voluntary Winding Up ......................................................................................................... 315

xiv

Content 20.15 Meeting of Creditors [Section 306] ..................................................................................... 316 20.16 Powers and Duties of Company Liquidator in Voluntary Winding up [Section 314] 318 20.17 Contributory ........................................................................................................................... 319 20.18 Winding Up of Unregistered Companies .......................................................................... 320 20.19 Preferential Payments (Section 327) .................................................................................... 322 20.20 Effect of Winding up on Antecedent And Other Transactions ....................................... 322 20.21 Dissolution of Company ....................................................................................................... 324 Questions ................................................................................................................................ 325

 21.  REVIVAL AND REHABILITATION OF SICK COMPANIES ..........................326–334 21.0 Introduction ............................................................................................................................ 326 21.1 Application for Revival and Rehabilitation [Section 254] ................................................ 327 21.2 Limitations on the Right to Apply to the Tribunal [Provisos to Section 254(1)] .......... 328 21.3 Determination of Sickness Shall be by Reference to Failure to Pay Debts .................... 328 21.4 Determination of Measures for Revival and Rehabilitation ............................................ 328 21.5 Appointment of Interim Administrator [Section 256] ...................................................... 329 21.6 Committee of Creditors [Section 257] ................................................................................. 329 21.7 Orders of the Tribunal [Section 258] ................................................................................... 329 21.8 Company Administrator ...................................................................................................... 330 21.9 Scheme of Revival and Rehabilitation [Section 261] ......................................................... 330 21.10 Mandatory Winding up of company on Company Administrator’s Report [Section 265] ............................................................................................................................ 332 21.11 Power of Tribunal to assess damages against delinquent directors [Section 266] ....... 333 21.12 Penalties [Section 267] ........................................................................................................... 333 21.13 Rehabilitation and Insolvency Fund [Section 269]............................................................ 333 Questions ................................................................................................................................ 334

22.  AUTHORITIES UNDER THE ACT ................................................................335–343 22.0 Introduction ........................................................................................................................... 335 22.1 National Company Law Tribunal (NCLT) [Section 408] ................................................ 335 22.2 National Company Law Appellate Tribunal [Section 410] ............................................. 336 22.3 Special Courts ......................................................................................................................... 340

 23.  PRODUCER COMPANIES............................................................................344–358 23.0 Introduction ............................................................................................................................ 344 23.1 Meaning................................................................................................................................... 345

Content

xv

23.2 Objectives of a Producer Company [Section 581-B] ......................................................... 345 23.3 Who are eligible to form a ‘Producer Company’ .............................................................. 345 23.4 Formation And Registration Of Producer Company ....................................................... 346 23.5 Voting Rights of Members of Producer Companies [Section 581-D] ............................. 346 23.6 Benefits to Members [Section 581-E] ................................................................................... 347 23.7 Registration of Memorandum and Articles of Association [Section 581-E] ................. 347 23.8 Contents of Memorandum of Association [Section 581-F] .............................................. 347 23.9 Articles of Association [Section 581-G] ............................................................................... 348 23.10 Inter-State Co-operative Societies........................................................................................ 350 23.11 Management of a Producer Company ................................................................................ 350 23.12 Powers and Function of Board (Sections 581-R and 581-S) ............................................. 352 23.13 Liability of directors (Section 581-T) ................................................................................... 353 23.14 Committees of Directors (section 581-U) ............................................................................ 353 23.15 Meetings of Board and Quorum (section 581-V)............................................................... 353 23.16 Chief Executive and his Functions (Section 581-W) ......................................................... 354 23.17 Secretary of Producer Company (Section 581-X) .............................................................. 354 23.18 General Meetings (Section 581-ZA)..................................................................................... 355 23.19 Finance, Accounts and Audit ............................................................................................... 356 23.20 Rights of Members ................................................................................................................. 358 Questions .................................................................................................................................. 358

 24.  THE DEPOSITORIES ACT 1996 ..................................................................359–376 24.0 Introduction ............................................................................................................................ 359 24.1 Meaning of Depository ......................................................................................................... 359 24.2 Objectives of the Depositories Act, 1996 ............................................................................ 360 24.3 Constituents of Depository System ..................................................................................... 361 24.4 Features of Depositories System .......................................................................................... 362 24.5 Benefits of Depository System ............................................................................................. 363 24.6 Process of Availing Services of a Depository .................................................................... 364 24.7 Registration of a Depository................................................................................................. 366 24.8 Rights of Depository .............................................................................................................. 368 24.9 Duties of Depository ............................................................................................................. 368 24.10 Duties of Depository Participant (DP) ................................................................................ 369 24.11 Beneficial Owner .................................................................................................................... 369

C O R P O R AT E L AW S

Prof. (Dr.) C.L. Bansal

ABOUT THE BOOK After 1991, corporate sector of India has been on the upswing. It has augmented the need to revamp the law relating to companies to make it pragmatic and aligned with contemporary realities. It is in this context that the current text has been written. The basic aim is to explain the various provisions of company law in a simple manner for easy understanding of students. An attempt has been made to highlight the application part of this law. In view of the reduction in total number of substantive provisions in the current company legislation, reference to relevant rules has been made wherever considered necessary. Keeping this fact in mind, the book has described various concepts of this subject in a comprehensive manner. The book inter alia deals with various topics, including the classification of companies and their formation; statutory documents and doctrines connected therewith; promoters and their role in the promotion and incorporation of a company; holding of general meetings; institution of directors with special focus on independent directors; corporate governance; raising of securities through prospectus; accounts and audit; oppression and mismanagement; majority rule and minority rights; enforcement authorities; class action suits; corporate social responsibility; and winding up. The book also discusses how the new law is different from its predecessor. It is hoped that the book will provide a ready reference for students both at the undergraduate and post-graduate levels as well as those pursuing professional courses. ABOUT THE AUTHOR Prof. (Dr.) C. L. Bansal is a former Senior Professor of Law, Governance, and Public Policy at the Management Development Institute (MDI), Gurugaon. Currently, associated with the Indian Institutes of Management at Ranchi, Kashipur (Dehradun Campus); Rohtak; and Sirmaur, he holds a Ph.D in Corporate Governance from the Delhi School of Economics, from where he had also graduated in Law (LLB). He is a Fellow (FCS) of the Institute of Company Secretaries of India. He obtained a specialized Post Graduate Diploma in Administrative Law from the Indian Law Institute, New Delhi. A merit-holder in M.Com from the University Business School, Panjab University, Chandigarh, he had worked as a Customs Officer on the basis of his selection in the Central Services in 1975. Prior to joining MDI, Gurgaon, Dr. Bansal had been with the College of Vocational Studies (University of Delhi) as an Associate Professor. He has also worked in some MNCs as a Head Legal and Company Secretary besides being a legal consultant. He has written extensively and has published over 10 books in different areas of Law, Corporate Governance, Startups & Entrepreneurship and public policy besides publications in peer reviewed journals. He has contributed case studies, chapters in edited books and presented papers at various national and international conferences and written book reviews. He is a trained trainer in Corporate Governance from International Finance Corporation, Washington. He is actively engaged in providing consultancy and training to senior executives of various corporations such as NTPC, OIC, ONGC, etc. He has been an expert faculty for training officers of various wings of Indian Armed Forces. He has also been associated with the Insolvency and Bankruptcy Board of India as an expert. As coordinator of Advanced Management Programme at MDI, he has taken senior executives of various PSUs for training to ESCP, Paris; Frankfurt School of Finance; University of Turin (Italy); University of Liepzig (Germany) and European Union Office at Brussels.

ISBN 978-93-5274-091-8

(An Imprint of Laxmi Publications Pvt. Ltd.) An ISO 9001:2015 Company

9 789352 740918

97893527409180450 9788152740918- 0450

M.R.P. ` 450.00 RLC-3718-450-CORPORATE LAWS-BAN