Taxmann's Company Law Ready Reckoner by Taxmann

Contents I-7 Section-wise Index I-25 INTRODUCTION 1 INCORPORATION OF A COMPANY 13 MEMORANDUM OF ASSOCIATION 33 ARTICLES OF ASSOCIATION 48 CAPITAL OF THE COMPANY 56 ISSUE OF SECURITIES 65 FURTHER ISSUE OF SECURITIES 84 REDUCTION OF CAPITAL AND BUY-BACK OF SECURITIES 100 PUBLIC ISSUE OF SECURITIES 113 MEMBERSHIP OF COMPANY 123 TRANSFER OF SECURITIES 155 NOMINATION AND TRANSMISSION OF SHARES 180 DEMOCRACY OF SHAREHOLDERS 194 PROCEDURE OF GENERAL MEETING 215 DIRECTORS OF COMPANY 262 DISQUALIFICATIONS AND REMOVAL OF DIRECTOR 309 RESTRICTIONS ON DIRECTORS IN RELATION TO COMPANY 323 DUTIES, RIGHTS AND LIABILITIES OF A DIRECTOR 340 MEETING OF BOARD OF DIRECTORS 358 REPORT OF BOARD TO MEMBERS 390 CORPORATE GOVERNANCE 402 RESTRICTIONS ON POWERS OF BOARD 435 I-5

Chapter-heads

KEY MANAGERIAL PERSONNEL 451 CHARGE ON ASSETS OF THE COMPANY 483 DEBENTURES 503 PUBLIC DEPOSITS 518 ACCOUNTS OF THE COMPANY 532 DIVIDEND 559 FINANCIAL AUDIT OF ACCOUNTS 581 COST AUDIT AND SECRETARIAL AUDIT 602 PRIVATE COMPANIES 614 HOLDING AND SUBSIDIARY COMPANIES 623 COMPANIES LICENSED UNDER SECTION 8 630 GOVERNMENT COMPANIES 636 FOREIGN COMPANY 645 OTHER TYPES OF COMPANIES 652 MISCELLANEOUS PROVISIONS IN COMPANY LAW 667 OVERVIEW OF NCLT RELATED ISSUES 688 INSPECTION, INVESTIGATION, OFFENCES, PENALTIES 697 ADMINISTRATION OF COMPANY LAW 724 MCA-21 - E-GOVERNANCE 739 PROCEDURAL COMPLIANCES BY A COMPANY 746 SUBJECT INDEX 757 I-6

I-7 Chapter-heads I-5 Section-wise Index I-25 1 INTRODUCTION 1.1 1 1.2 2 1.3 2 1.4 4 1.5 6 1.6 6 1.7 7 1.8 10 1.9 12 2 INCORPORATION OF A COMPANY 2.1 13 2.2 15 2.3 23 2.4 25 2.5 28 2.6 30 Contents

I-8 3 MEMORANDUM OF ASSOCIATION 3.1 33 3.2 34 3.3 36 3.4 36 3.5 37 3.6 37 3.7 37 3.8 38 3.9 38 3.10 40 3.11 44 3.12 44 3.13 46 3.14 ultra vires 47 4 ARTICLES OF ASSOCIATION 4.1 48 4.2 50 4.3 52 4.4 53 4.5 53 4.6 54 4.7 55 5 CAPITAL OF THE COMPANY 5.1 56 5.2 60

6 ISSUE OF SECURITIES 6.1 65 6.2 68 6.3 71 6.4 72 6.5 75 6.6 75 6.7 76 6.8 77 6.9 78 6.10 79 6.11 80 7 FURTHER ISSUE OF SECURITIES 7.1 84 7.2 88 7.3 89 7.4 94 7.5 96 7.6 98 8 REDUCTION OF CAPITAL AND BUY-BACK OF SECURITIES 8.1 100 8.2 102 8.3 104 8.4 104 8.5 105 8.6 106 I-9

9 PUBLIC ISSUE OF SECURITIES 9.1 113 9.2 114 9.3 115 9.4 115 9.5 116 9.6 116 9.7 119 9.8 120 9.9 121 9.10 121 10 MEMBERSHIP OF COMPANY 10.1 123 10.2 132 10.3 133 10.4 134 10.5 136 10.6 139 10.7 141 10.8 142 10.9 145 10.10 150 11 TRANSFER OF SECURITIES 11.1 155 11.2 160 11.3 162 11.4 164 11.5 165 I-10

11.6 165 11.7 165 11.8 166 11.9 167 11.10 169 11.11 170 11.12 171 11.13 172 11.14 173 11.15 174 11.16 175 11.17 179 12 NOMINATION AND TRANSMISSION OF SHARES 12.1 180 12.2 184 12.3 189 12.4 191 12.5 192 12.6 193 12.7 193 12.8 193 12.9 193 13 DEMOCRACY OF SHAREHOLDERS 13.1 194 13.2 195 13.3 200 13.4 207 13.5 210 13.6 214 I-11

PROCEDURE OF GENERAL MEETING

14.1 215 14.2 221 14.3 223 14.4 229 14.5 233 14.6 237 14.7 237 14.8 237 14.9 240 14.10 241 14.11 241 14.12 245 14.13 249 14.14 252 14.15 254 14.16 258 14.17 259 14.18 259 15 DIRECTORS OF COMPANY 15.1 262 15.2 264 15.3 264 15.4 273 15.5 274 15.6 274 15.7 275 15.8 279 15.9 280 I-12

15.10 281 15.11 285 15.12 286 15.13 289 15.14 289 15.15 De facto 290 15.16 291 15.17 291 15.18 292 15.19 292 15.20 297 15.21 298 15.22 300 15.23 301 15.24 304 15.25 306 15.26 307 15.27 307 16 DISQUALIFICATIONS AND REMOVAL OF DIRECTOR 16.1 309 16.2 313 16.3 314 16.4 317 16.5 319 16.6 321 16.7 321 16.8 321 16.9 322 16.10 322 16.11 322 I-13

17 RESTRICTIONS ON DIRECTORS IN RELATION TO COMPANY 17.1 323 17.2 325 17.3 327 17.4 335 17.5 337 17.6 337 17.7 339 17.8 339 18 DUTIES, RIGHTS AND LIABILITIES OF A DIRECTOR 18.1 340 18.2 341 18.3 341 18.4 341 18.5 342 18.6 342 18.7 343 18.8 343 18.9 344 18.10 346 18.11 346 18.12 348 18.13 350 18.14 351 18.15 351 18.16 351 18.17 353 18.18 355 18.19 357 I-14

19.1 358 19.2 359 19.3 360 19.4 362 19.5 i.e. 363 19.6 370 19.7 370 19.8 372 19.9 373 19.10 375 19.11 377 19.12 378 19.13 381 19.14 381 19.15 382 19.16 383 19.17 385 20 REPORT OF BOARD TO MEMBERS 20.1 390 20.2 392 20.3 400 20.4 401 20.5 401 21 CORPORATE GOVERNANCE 21.1 402 I-15

MEETING OF BOARD OF DIRECTORS

21.2 403 21.3 403 21.4 403 21.5 404 21.6 405 21.7 410 21.8 412 21.9 412 21.10 416 21.11 419 21.12 422 21.13 422 22 RESTRICTIONS ON POWERS OF BOARD 22.1 435 22.2 435 22.3 437 22.4 438 22.5 439 22.6 bona ﬁde 439 22.7 440 22.8 440 22.9 442 22.10 442 22.11 442 22.12 444 22.13 444 22.14 445 22.15 447 22.16 450 I-16

23.1 451 23.2 458 23.3 460 23.4 461 23.5 462 23.6 463 23.7 465 23.8 466 23.9 467 23.10 471 23.11 474 23.12 475 23.13 476 23.14 478 24 CHARGE ON ASSETS OF THE COMPANY 24.1 483 24.2 485 24.3 489 24.4 494 24.5 495 24.6 497 24.7 498 24.8 499 24.9 500 24.10 500 I-17

KEY MANAGERIAL PERSONNEL

PUBLIC DEPOSITS

25 DEBENTURES 25.1 503 25.2 505 25.3 508 25.4 510 25.5 514 25.6 517 26

26.1 518 26.2 520 26.3 521 26.4 526 26.5 529 27 ACCOUNTS OF THE COMPANY 27.1 532 27.2 535 27.3 539 27.4 543 27.5 546 27.6 549 27.7 550 27.8 550 27.9 551 27.10 556 27.11 557 27.12 558 I-18

28 DIVIDEND 28.1 559 28.2 561 28.3 563 28.4 564 28.5 565 28.6 567 28.7 568 28.8 569 28.9 571 28.10 572 28.11 573 28.12 574 28.13 575 28.14 577 29 FINANCIAL AUDIT OF ACCOUNTS 29.1 581 29.2 582 29.3 584 29.4 587 29.5 588 29.6 589 29.7 590 29.8 593 29.9 593 29.10 594 29.11 596 29.12 597 I-19

29.13 599 29.14 600 30 COST AUDIT AND SECRETARIAL AUDIT 30.1 602 30.2 605 30.3 605 30.4 606 30.5 608 30.6 611 30.7 612 30.8 612 31 PRIVATE COMPANIES 31.1 614 31.2 619 31.3 vice versa 620 31.4 622 32 HOLDING AND SUBSIDIARY COMPANIES 32.1 623 32.2 625 32.3 627 32.4 628 32.5 629 I-20

33 COMPANIES LICENSED UNDER SECTION 8 33.1 630 33.2 634 34 GOVERNMENT COMPANIES 34.1 636 34.2 639 34.3 641 34.4 641 34.5 641 35 FOREIGN COMPANY 35.1 645 35.2 649 35.3 650 35.4 650 35.5 650 36 OTHER TYPES OF COMPANIES 36.1 652 36.2 653 36.3 659 36.4 660 36.5 661 36.6 662 36.7 662 36.8 662 I-21

36.9 662 36.10 663 36.11 664 36.12 664 36.13 666 37 MISCELLANEOUS PROVISIONS IN COMPANY LAW 37.1 667 37.2 668 37.3 675 37.4 678 37.5 678 37.6 680 37.7 685 38 OVERVIEW OF NCLT RELATED ISSUES 38.1 688 38.2 688 38.3 689 38.4 691 38.5 692 38.6 693 38.7 693 38.8 693 39 INSPECTION, INVESTIGATION, OFFENCES, PENALTIES 39.1 697 39.2 699 I-22

39.3 699 39.4 702 39.5 703 39.6 703 39.7 705 39.8 709 39.9 711 39.10 712 39.11 712 39.12 715 39.13 717 39.14 717 39.15 718 39.16 718 39.17 719 40 ADMINISTRATION OF COMPANY LAW 40.1 724 40.2 727 40.3 729 40.4 731 40.5 737 40.6 737 40.7 737 40.8 738 41 MCA-21 - E-GOVERNANCE 41.1 739 I-23

42 PROCEDURAL

42.1 746 42.2 746 42.3 749 42.4 750 SUBJECT INDEX 757 I-24

COMPLIANCES BY A COMPANY

1 9.6-4 2 27.10 3 3.7, 4.6 5 4.1 6 17.3-2 7 29.1-1 8 5.1-4 10 19.2 11 1.3-1 12 27.1-1 13 27.1-1 14 27.1-5, 29.9 15 5.1-5 16 24.2 17 29.2-2 18 23.1 19 23.1-1 20 1-3-2 22 1.6, 1.7-1 24 23.12 27 32.1 28 30.1-3 29 40.7 30 25.1 31 26.1-1 32 10.1-1 33 5.1-2 34 15.1-1 35 28.1 36 27.1-1 38 9.7-1 40 27.2 41 27.2-4 42 35.1 43 22.14-2, 28.2-4 44 35.5-1 45 34.1 46 32.1 47 15.3 50 5.1-5 51 23.1 52 1.7-3 53 23.1 54 23.1 55 3.5, 10.1-1, 10.4 56 3.1, 4.2 57 22.14-2 59 39.8 I-25 Section-wise Index

60 39.8-1 62 36.2 63 14.8 64 5.1-7 65 14.13 68 4.4, 10.8, 31.1-1 69 2.1-1 70 9.6-1 71 1.7-2, 31.1-1 72 22.15-5 75 40.3, 2.5 76 17.3-2, 17.3-3 77 17.3-2 78 15.21-1 80 22.15-5 81 1.7-3, 5.1-2 84 10.1 85 36.1 86 5.1-5 87 32.1 88 7.4 89 14.8 91 36.1 92 1.7-5 93 14.8 94 23.1 94A 38.8-1 1.7 1.3-2, 2.1, 36.2 36.4 2.2-1 3.1-1 d 1.7-1 e 6.8-2 2.2-12 3.1-2 4.1 4.3-1 3.1, 4.3 2.4 4.1-1 b 23.14-2 2.4 2.5-2 33.1 1.3-3, 2.5-1 3.1, 4.2 2.6 3.10, 3.2 2.6 2.2-13, 3.9-1, 36.2-3 b 1.4 3.10-3 3.9 3.10-5 4.6, 31.3-1 4.2 3.7 3.9-5 1 3.6 2.5-5, 31.3, 36.2-3 32.2-3 1.8-3, 37.1 3.2-1 1.4-1, 23.14-2 1.4-1 1.8-2 6.1 9.1 28.1, 6.1 9.6-5 9.6-2, 9.7-1, 9.9 I-26

9.6-3, 7.1-3 9.10, 9.9 9.1-1 10.1-1 9.1-2 9.6-6 9.6-7 9.10, 9.10-5 6.9-2, 9.10, 9.10-1, 18.11-1 9.10-2 9.10-2 9.5 6.9-4, 6.10-1, 9.1-3 6.8-1 6.10-3, 9.2-1, 9.2-2 9.3 9.4 6.1 6.4 5.1-1, 5.2 10.1, 25.1 10.1-1 10.1-1 1.4-1, 10.1-1 5.2-1 10.1-1 14.11 5.2-1 10.3 6.4 5.1-1 6.11-1 5.1-7, 14.11-1 28.6-1 6.2-1 c 6.1 d 2.1-5 2.1-5 6.2-2, 7.4 7.4, 6.1 5.2-3 5.2, 5.2-2 7.3 25.4-4 11.1-2, 11.1-3 12.2 11.1-1 10.1-1, 11.3-3, 25.4-1 11.3-3 10.4-3 11.1-1 7.1-8, 7.3-11, 28.11 11.8 11.3-3 11.15-3 11.16 7.1-8, 7.3-11, 28.11 3.4-1 5.1-5, 8.4 3.12, 5.1-6 6.1, 6.2-3, 6.6, 22.14-3 7.1, 7.2 7.1-3 6.1 6.2-1, 7.3, 7.3-8 7.3-1 3.12-1 6.6 5.2-3 1.7-5, 5.1-8 8.1 8.6 I-27

6.1-2 31.1-3, 32.2 5.2-2 8.6-1 8.6-2 8.6-10 7.3 8.6-8 32.2 25.1, 25.2 6.1, 6.4-3 25.5-1 25.3 25.5-6 25.3-2 12.1 10.8-2 26.2 26.4 26.4-1 26.2-1 24.3-2 24.7 24.3-3 24.3-4 b 24.5-2 24.6-2 24.9 24.5-3 24.5-3 24.3-5 24.3-3, 24.8 24.3-2, 24.10 10.1-2, 10.10, 25.4-3 10.9-1 10.9-1 10.10-3 23.14-2, 36.2-2, 42.4-1 42.4-2 10.10, 10.10-2 10.1-1, 10.10-1 13.5-3 3.2-1, 13.3-2 13.5-3, 13.5-9 13.2-10 13.5-6 13.2-2, 14.9 13.2-3 13.2-7 13.3-4, 13.3-5 13.3-9 13.3-8 13.5-1 b 13.2-2 13.4-2 14.1-2 10.8 b 13.2-4 14.1 14.3 14.3-6 14.4-1 14.11-1 14.11 14.15-2 14.12-4 14.12 14.13 14.9 14.8 14.8-1 13.2-9, 14.8-2 I-28

14.18 14.18-1 14.15, 14.15-2 19.17 19.17-5 14.4-4, 14.16-1 14.17, 19.1 19.17 14.16 14.18, 42.4-4 36.2-2 28.1-1 28.3, 28.5 7.3-10, 28.6 28.8-1 28.13-1 28.13-4 11.10-2 b 7.1-8 28.9 27.1-1 27.7, 32.2 27.1-3 27.2, 27.10 32.2-1 27.5 27.5-2 27.9 27.10 20.1, 27.3, 36.2-2 23.14-2, 27.2-5 20.5 20.2-1 21.13 27.3-1, 32.2-2 13.6, 27.4 32.2-2, 36.2-2, 42.4-1 27.4-2 27.6 14.8-2 29.2-1 19.4-3, 29.2-4 29.3 29.4 29.7-1 14.8-2, 29.7 29.7-2 29.2-1, 29.2-3 29.2-1 32.4 29.6 19.17-6 27.7, 29.6, 29.8 29.5-1 29.9 29.1-1 29.10 29.13 13.3-9, 14.4-1, 29.12-1 13.3-9, 14.4, 29.12-2 29.14, 30.1-6 30.1-1 15.1, 15.3 15.6, 15.6-1, 36.2-2 15.10 15.3, 15.5 15.3 15.4 15.1, 15.7-3, 15.12-2, 36.2-2 15.1-2, 15.3 15.19-1 15.7-6 I-29

15.7-4, 31.1-3 15.7-6 15.19-1 15.19-1 15.19-1 15.19-1 15.19-1 15.19-1 15.19-1 15.8 15.11-3 15.9, 15.12 15.10 15.14 15.7-2 16.1, 31.1-3 15.10-5, 42.4-1 b 25.5-7 16.1-2 15.17 18.1-1 15.6 16.1-2, 16.3-1, 31.1-3 e 17.1-4 16.3-4 16.1-2 16.3-4, 16.4 16.4-2 16.3-4 14.8-2, 15.9, 16.5 a 16.5-2 b 16.5 15.20 15.19-4 15.20-1 b 14.4-1 15.1, 15.3, 15.6-1 19.3-1 19.3-1, 19.4-3 19.16 19.9-1 36.1 14.1-3, 14.2 19.12, 19.16 19.12-4 17.3-11, 19.12-2 19.3-1, 19.12-1 19.5 15.15, 16.3-3, 19.2-4 21.9, 21.10 17.4-7 20.2-7 21.9-3, 20.2-8 20.2-1, 21.11 21.12 19.3-1 19.2 14.18, 19.5-1, 20.1, 22.4, 22.15 19.5-1 a 6.11 e 22.15 f 22.15 22.1, 22.4 14.18 22.6 22.8 22.7 17.3-8, 18.7 15.19-6, 15.19-7, 17.1-2, 17.1-3 17.1-1 17.1-4 I-30

17.2 32.4 17.2, 18.11-1 20.2-1, 22.1, 22.12 19.5-1, 19.6, 22.15 22.15-6 22.15-7 22.14-3 22.16 10.9-1, 22.11-1 32.5 17.3-5, 17.3-12 20.2-10 17.3-10 17.4-1 14.4-1 17.3-8 23.1-4 17.6 32.4 17.7 17.8, 36.2-2 23.1-4 19.14, 23.1-4, 23.6 23.1-4, 23.8, 31.1-3 15.23 15.22 15.21-1, 15.23-1 15.27 15.27, 20.2-6

18.16-3

23.10-1 15.27, 32.4 15.23, 15.24 27.5-1 23.1-4 23.6-1 23.11 19.6, 19.10, 23.1-4, 23.13 14.1 19.5-1, 19.6 20.2-12 23.14 27.7, 39.1 39.1-2, 39.1-3 16.1, 16.3 39.1-4 39.2 39.3 39.6 39.6 39.3 39.3-2 27.7, 39.4 39.3-5 39.5 39.3-4 a 32.4 11.8-4 39.3-7 39.3-8 39.3-3, 39.4 39.5-1 39.1, 39.4 3.12-2 38.5 38.5-2 38.6 38.7 38.3-4 4.6-1, 4.7 h 16.5 I-31

15.27,

3.12-2 38.3-4 40.4-1 38.8-1 38.8-3 38.8-2 11.1-6 11.1-6 11.6 27.1-3 38.8-3 35.4 35.1-2 35.1-3 35.1-6 35.1-7 35.2 c 35.1 35.5 35.5 35.5-1 35.1-9 34.3 34.3 40.3 39.11-4, 40.3 27.4-1 40.4-1 40.1 23.14-2 c 38.8 39.11-1 39.11-2 39.11-1 39.17 39.11-3 39.11-5 20.5-1, 39.9 20.5-1, 39.9 39.16 2.2 39.7-1 36.3 40.1 39.5-3 40.1 40.1 40.1 40.1 40.1 36.1, 36.2-2 39.15 1.3 40.1 40.1 40.1 3.1-2, 4.1 28.3-1 27.2, 27.11-2, 32.2-1 15.3, 17.4-5 15.22, 23.4, 23.9 22.14-3 21.13 I-32

RESTRICTIONS ON DIRECTORS IN RELATION TO COMPANY

If director becomes interested at a later stage

17.1 CONTRACTS IN WHICH DIRECTORS ARE INTERESTED

Interested director

a or b

17.1-1 Disclosure of interest in contract or arrangement

or 323 17

Contract voidable at option of assessee if interest not disclosed or director participated in the Board meetingor ab initio

No prohibition on entering into contract with company, unless prohibited under other law -

Contract or arrangement between two companies or body corporates where director holds 2% or more paid up capital

b between one or more companies and one or more bodies corporate or the body corporate

Needle Industries (India) Ltd. Needle Industries Newey 17.1-2 Disclosure to be made in meeting of Board of Directors

Para 17.1 324

17.1-3 General notice to Board

Notices must be kept at registered ofﬁce and in proper custody

Speciﬁc disclosure when contract comes for discussion even if general disclosure made and non-participation in meeting

17.1-4 Effect of non-disclosure of interest

17.2 RESTRICTIONS ON LOANS TO DIRECTORS

borrowing company for its principal business

activities

Explanatory statement to proposed special resolution

325 Para 17.2

Loan can be only to another company or body corporate company or body corporate

Meaning of “to any other person in whom director is interested”

a b c

Non-applicability of the restriction

b c

Explanation

for its principal business activities,

for its principal business activities

Restriction not applicable to speciﬁed private companies

Restriction not applicable to Government company if loan or security approved by Government -

Penalty for contravention

` ` Para 17.2 326

17.3 RELATED PARTY TRANSACTIONS

` `

vis-à-visi ii iii iv v and vide 327 Para 17.3

viii any body corporate which is—(A a holding, subsidiary or an associate company of such company (B a subsidiary of a holding company to which it is also a subsidiary; or (C an investing company or the venturer of the company.

Explanation.—For the purpose of this clause, “the investing company or the venturer of a company” means a body corporate whose investment in the company would result in the company becoming an associate company of the body corporate.

(vi such other ofﬁcer, not more than one level below the directors, who is in whole-time employment, designated as Key Managerial Person by the Board and (vii such other ofﬁcer as may be prescribed

vi vii Provided vi vii

ix ixviiiviii Key Managerial Personnel (KMP) i ii iii iv v

51 -

director“ ” ‘ ’ RelativePara 17.3 328

Interested

Associate Company

Explanation

total voting power

Earlier Explanation as existing upto 7-5-2018

Control

Meaning of ‘accustomed to act’ - Shadow director and dummy director

andvide329 Para 17.3

Meaning of ‘ofﬁce or place of proﬁt’

U C Raman P.T.A. Rahim

Jaya Bachchan UOI

Disclosure in agenda of the Board meeting

Interested director not to be present

a b c d e f g

i ii

Para 17.3 330

COMPANY LAW Ready Reckoner

AUTHOR : TAXMANN’S EDITORIAL BOARD

PUBLISHER : TAXMANN

DATE OF PUBLICATION : JULY 2023

EDITION : 13TH EDITION

ISBN NO : 9789357782142

NO. OF PAGES : 808

BINDING TYPE : PAPERBACK

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