Chapter-wise marks distribution
Chapter Chapter Name No. 1 Preliminary 2 Incorporation of company 3 Prospectus and Allotment of Securities 4 Share Capital and debentures 5 Acceptance of Deposits 6 Registration of Charges 7 Management and Administration 8 Declaration and Payment of Dividend 9 Accounts of Companies 10 Audit and Auditors 11 Indian Contract Act, 1872 12 Negotiable Instruments Act, 1881 13 The Genera Clauses Act, 1897 14 Interpretation of Statutes
May 2018
Nov. 2018
6 6
10 10 17
6
6
13 6 6 19
May Nov. Nov. Jan. July Dec. 2019* 2019* 2020* 2021* 2021* 2021* 9 6
4 7 4
13 -
5 10
11 10 3
7
5
8
5
3
2 6 6 14
5 2 2 16
10 6 15 13
3 6 12 13
7 3 12 10
6 6 12 10
6 6 11 10
116
125
92*
87*
90*
10 10
*Descriptive Questions Only (Marks of MCQs not included).
10 10
I-5
4 9
5 6 5 4
7 6
8 6 4 4
8 6
10 7 3 8
2 3 8
3 4 9
7 5 15
6 3 12 10
6 8 12 10
6 9 12 10
92*
92*
92*
7 6
7 6
2
7 6
Syllabus
PAPER - 2 : CORPORATE AND OTHER LAWS (One paper – Three hours – 100 marks) PART I - COMPANY LAW (60 MARKS) Objective: To develop an understanding of the provisions of company law and acquire the ability to address application-oriented issues. Contents:
The Companies Act, 2013 – Sections 1 to 148 1. Preliminary
2. Incorporation of Company and Matters Incidental thereto 3. Prospectus and Allotment of Securities 4. Share Capital and Debentures
5. Acceptance of Deposits by companies 6. Registration of Charges
7. Management and Administration
8. Declaration and payment of Dividend 9. Accounts of Companies
10. Audit and Auditors
Note: The provisions of the Companies Act, 1956 which are still in force would form part of the syllabus till the time their corresponding or new provisions of the Companies Act, 2013 are enforced. PART II - OTHER LAWS (40 MARKS)
Objectives: (a) To develop an understanding of the provisions of select legislations and acquire the ability to address application-oriented issues. (b) To develop an understanding of the rules for interpretation of statutes.
1. The Indian Contract Act, 1872 (Specific contracts covered from section 123 onwards): Contract of Indemnity and Guarantee, Bailment, Pledge, Agency.
2. The Negotiable Instruments Act, 1881*: Meaning of Negotiable Instruments, Characteristics, Classification of Instruments, Different provisions relating to Negotiation, Negotiability, Assignability, Right and Obligation of parties, presentment of Instruments, Rules of Compensation.
I-7
I-8
SYLLABUS
3. The General Clauses Act, 1897: Important Definitions, Extent and Applicability, General Rules of Construction, Powers and Functionaries, Provisions as to Orders, Rules, etc. made under Enactments, Miscellaneous. 4. Interpretation of statutes: Rules of Interpretation of statutes, Aids to interpretation, Rules of Interpretation/construction of Deeds and Documents
* Certain topics have been excluded by way of Study Guidelines.
Note: If new legislations are enacted in place of the existing legislations, the syllabus would include the corresponding provisions of such new legislations with effect from a date notified by the Institute. Similarly, if any existing legislation ceases to have effect, the syllabus will accordingly exclude such legislation with effect from the date to be notified by the Institute.
The specific inclusions/exclusions in the various topics covered in the syllabus will be effected every year by way of Study Guidelines, if required.
Contents PAGE
Chapter-wise marks distribution
I-5
Syllabus
I-7
Chapter 1 u
1.1
Preliminary
Chapter 2 u
Incorporation of Company and Matters Incidental thereto
2.1
Chapter 3 u
3.1
Prospectus and Allotment of Securities
Chapter 4 u
4.1
Share Capital and Debentures
Chapter 5 u
5.1
Acceptance of Deposits by Companies
Chapter 6 u
6.1
Registration of Charges
Chapter 7 u
7.1
Management and Administration
Chapter 8 u
8.1
Declaration and Payment of Dividend
Chapter 9 u
9.1
Accounts of Companies
Chapter 10 u
10.1
Audit and Auditors
Chapter 11 u
11.1
Indian Contract Act, 1872
Chapter 12 u
12.1
The Negotiable Instruments Act, 1881
I-9
I-10
CONTENTS
PAGE
Chapter 13 u
The General Clauses Act, 1897
13.1
Chapter 14 u
Interpretation of Statutes
Past Exam Paper (Dec. 2021 – New Syllabus) Part II – Descriptive Questions – Suggested Answers
14.1 P.1
4
Share Capital and Debentures
4.1 - Sections covered in Chapter IV of Companies Act, 2013 Chapter IV of Companies Act, 2013 titled as “Share Capital and Debentures” covers sections 43 to 72. Sec. 43
Kinds of Share Capital
Sec. 44*
Nature of shares or debentures
Sec. 45*
Numbering of shares
Sec. 46
Certificate of shares
Sec. 47
Voting Rights
Sec. 48
Variation of Shareholder’s Rights
Sec. 49
Calls on Shares of same class to be made on uniform basis
Sec. 50
Company to accept unpaid share capital, although not called up
Sec. 51
Payment of dividend in proportion to amount paid-up
Sec. 52
Application of Premiums received on issue of shares
Sec. 53
Prohibition on issue of shares at discount
Sec. 54
Issue of sweat equity shares
Sec. 55
Issue and redemption of preference shares
Sec. 56
Transfer and Transmission of securities
Sec. 57
Punishment for personation of Shareholders
Sec. 58
Refusal of registration and appeal against refusal
Sec. 59
Rectification of register of Members
Sec. 60*
Publication of authorised, subscribed and paid-up capital
Sec. 61
Power of limited company to alter its share capital
Sec. 62
Further Issue of Share Capital
Sec. 63
Issue of Bonus Shares
Sec. 64
Notice to be given to Registrar for alteration of Share Capital
Sec. 65*
Unlimited company to provide for reserve share capital on conversion into limited company
Sec. 66
Reduction of share capital
Sec. 67
Restrictions on purchase by company or giving of loans by it for purchase of its shares
Sec. 68
Power of Company to purchase its own securities
Sec. 69
Transfer of Certain sums to Capital redemption Reserve Account
Sec. 70
Prohibition for buy back in certain circumstances
Sec. 71
Debentures
Sec. 72*
Power to nominate
*excluded from syllabus vide ICAI announcement dated 24.06.2019.
4.1
Chapter 4
Share Capital and Debentures 4.2 - Concept of capital Meaning Share
of
x
Share means a share in the share capital of a company and includes stock.
x
A share thus represents such proportion of the interest of the shareholders as the amount paid up thereon bears to the total capital payable to the company.
x
A share may be described as an interest measured by a sum of money, in the company’s assets to which a person holding a share is entitled.
– Sec. 2(84)
Authorised Capital
Authorised capital means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company.
– Sec. 2(8) Issued capital
x
– Sec. 2(50)
x
Subscribed Capital
Issued capital means such capital as the company issues from time to time for subscription.
It is that part of authorised capital which is offered by the company for subscription and includes the shares allotted for consideration other than cash. Subscribed capital means such part of the capital which is for the time being subscribed by the members of a company.
– Sec. 2(86) Called-up Capital
Called up capital means such part of the capital, which has been called for payment.
– Sec. 2(15) Paid-up Capital – Sec. 2(64)
Paid-up share capital or share capital paid-up means such aggregate amount of money credited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued and also includes any amount credited as paid-up in respect of shares of the company, but does not include any other amount received in respect of such shares, by whatever name called.
4.3 - Kinds of Share Capital (Sec. 43) Kinds of Share Capital
The share capital of a company limited by shares shall be of two kinds, namely equity share capital and preference share capital.
– Sec. 43
Equity Share Capital
x Means all share capital which is not preference share capital. x It may be: (a) with voting rights or (b) with differential rights as to dividend, voting or otherwise in accordance with such rules as may be prescribed. Rule 4 of Companies (Share Capital and Debenture) Rules, 2014 Conditions A company limited by shares may issue equity shares with for issue of differential rights as to dividend, voting or otherwise, if it equity shares complies with the following conditions, namely: with (a) AOA of the company authorizes the issue of shares with differential differential rights; voting right (b) Ordinary resolution has been passed at a general meeting of the shareholders. However, if the equity shares are listed on a recognized stock exchange, the issue of such shares shall be approved by the shareholders through postal ballot.
4.2
Chapter 4
Share Capital and Debentures (c)
Voting power in respect of shares with differential rights shall not exceed 74% of the total voting power including voting power in respect of equity shares with differential rights issued at any point of time; (d) Company is having consistent track record of distributable profits for the last three years; (Omitted) (e) Company has not defaulted in filing financial statements and annual returns for 3 financial years immediately preceding the financial year in which it is decided to issue such shares; (f) Company has no subsisting default in the payment of a declared dividend to its shareholders or repayment of its matured deposits or redemption of its preference shares or debentures that have become due for redemption or payment of interest on such deposits or debentures or payment of dividend; (g) Company has not defaulted in payment of the dividend on preference shares or repayment of any term loan from a PFI or State level FI or Scheduled Bank that has become repayable or interest payable thereon or dues with respect to statutory payments relating to its employees to any authority or default in crediting the amount in IEPF to the C.G.: Provided that a company may issue equity shares with differential voting rights upon expiry of 5 years from end of the financial year in which such default was made good. (h) Company has not been penalized by Court or Tribunal during the last 3 years of any offence under the RBI Act, 1934, the SEBI Act, 1992, the SCRA Act, 1956, the FEMA Act, 1999 or any other special Act, under which such companies being regulated by sectoral regulators. Explanatory Statement
The explanatory statement to be annexed to the notice of the general meeting or of a postal ballot shall contain various matters like particulars of issue including its size, details of differential rights, etc.
Restriction on conversion
The company shall not convert its existing equity share capital with voting rights into equity share capital carrying differential voting rights and vice–versa.
Disclosure in Board Report
Board of Directors shall, inter alia, disclose specified particulars in the Board’s Report for the financial year in which the issue of equity shares with differential rights was completed.
Rights of holder of the equity shares with differential rights
The holders of the equity shares with differential rights shall enjoy all other rights such as bonus shares, rights shares etc., which the holders of equity shares are entitled to, subject to the differential rights with which such shares have been issued.
4.3
Chapter 4
Share Capital and Debentures Maintain record Register member Preference Share Capital
in of
Where a company issues equity shares with differential rights, the Register of Members maintained u/s 88 shall contain all the relevant particulars of the shares so issued along with details of the shareholders.
That part of the issued share capital of the company which carries or would carry a preferential right with respect to: (a) payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income-tax; and (b) repayment, in the case of a winding up or repayment of capital, of the amount of the share capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company; Point to Remember Capital shall be deemed to be preference capital, notwithstanding that it is entitled to either or both of the following rights, namely(a)
(b)
that in respect of dividends, in addition to the preferential rights to the amount specified in sub clause (a) of Clause (ii), it has right to participate, whether fully or to a limited extent, with capital not entitled to the preferential right aforesaid. that in respect of capital, in addition to the preferential right to the repayment, on a winding up, of the amounts specified in sub-clause (b) of clause (ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to that preferential right in any surplus which may remain after the entire capital has been repaid.
Important Question Q. No. 1: Can equity share with Differential Voting rights be issued? If yes, state the Conditions under which such shares may be issued? [May 18 (6 Marks)] HINT: Refer sec 43 and Rule 4 of Companies (share capital and Debenture) Rules, 2014.
4.4 – Certificates of Shares (Sec. 46) Meaning Share Certificate Evidential Aspect – Sec. 46(1)
of
x x
A share certificate is a document of title issued by the company declaring that the person named therein is the owner of a specified number of shares in the capital of the company. It is not a negotiable instrument because it is not transferable.
Share Certificate, issued under the common seal if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary, specifying the shares held by any person, shall be prima facie evidence of the title of the person to such shares.
Issue of A duplicate certificate of shares may be issued, if such certificate: Duplicate Share (a) is proved to have been lost or destroyed; or Certificate (b) has been defaced, mutilated or torn and is surrendered to the company. – Sec. 46(2)
4.4
Chapter 4
Share Capital and Debentures
Manner of Issue
The manner of issue of a certificate of shares or the duplicate thereof, the form of such
– Sec. 46(3)
certificate, the particulars to be entered in the register of members and other matters shall be such as may be prescribed. Note: Manner is prescribed under Rule 5, 6 and 7 of Companies (Shares Capital and Debentures) Rules, 2014.
Demat Share
Where a share is held in depository form, the record of the depository is the prima facie
– Sec. 46(4)
evidence of the interest of the beneficial owner.
Penalty
for
If a company with intent to defraud, issues a duplicate certificate of shares,
of
x the company shall be punishable with fine which shall not be less than 5 times the face
duplicate share
value of the shares involved in the issue of the duplicate certificate but which may extend to
issue
certificate with intent to
10 times the face value of such shares or ₹ 10 crores, whichever is higher and x every officer of the company who is in default shall be liable for action u/s 447.
defraud – Sec. 46(5)
4.5 - Voting Rights (Sec. 47) Voting right of Equity
x
have a right to vote on every resolution placed before the company.
Share x
Holder
Every member of a company limited by shares who is holding equity share capital, shall Voting rights of a member on a poll shall be in proportion to his share in the paid-up equity share capital of the company.
- Sec 47(1)
Point to Remember In case of Nidhi, Sec. 47(1) shall apply, subject to the modification that no member shall exercise voting rights on poll in excess of 5% of total voting right of equity shareholders. Voting rights of
Every member of a company limited by shares who is holding any preference share capital
Preference Share Holder
shall, in respect of such capital, have a right to vote only on following resolutions: x
Resolutions which directly affect the rights attached to preference shares and,
- Sec 47(2)
x
Resolution for the winding up of the company or
x
Resolution for the repayment or reduction of its equity or preference share capital.
Note: Voting right of a member on a poll shall be in proportion to his share in the paid-up preference share capital of the company. Note: Where the dividend in respect of a class of preference shares has not been paid for a period of two years or more, there such class of preference shareholders shall have a right to vote on all the resolutions placed before the company. Proportion voting rights
of
The proportion of the voting rights of equity shareholders to the voting rights of the preference shareholders shall be in the same proportion as the paid-up capital in respect of the equity shares bears to the paid-up capital in respect of the preference shares. Point to Remember
Sec. 47 shall not apply to private Company, where memorandum or articles of association of the private company so provides. However, the exemption shall be applicable to private company which has not committed a default in filing its financial statement u/s 137 or annual return u/s 92 with the Registrar.
4.5
Chapter 4
Share Capital and Debentures 4.6 - Variation of Shareholder’s Rights (Sec. 48) Conditions for Variation in Rights
(a) The holders of not less than 3/4th of the issued shares of that class whose rights are to be varied must give consent in writing or a special resolution passed at a separate meeting of the holders of the issued shares of that class. (b) The MOA/AOA of the company must contain a provision with respect of such variation. (c) In the absence of any such provision in the MOA/AOA, such variation must not be prohibited by the terms of issue of the shares of that class. Point to Remember If variation by one class of shareholders affects the rights of any other class of shareholders, the consent of 3/4th of such other class of shareholders shall also be obtained and the provision of this Section shall apply to such variation.
Rights dissentient share
of
(1) The holders of not less than 10% of the issued shares of a class, who did not consent to or vote in favour of the resolution for the variation, may apply to the Tribunal to have the variation cancelled, and where any such application is made, the variation shall not have effect unless & it is confirmed by the Tribunal.
Holders
(2) Application shall be made within 21 days after the date on which the consent was given or the resolution was passed. (3) The decision of NCLT on application shall be binding on the shareholders. (4) The Company shall file copy of NCLT order to ROC within 30 days from date of order of NCLT. Punishment for default
Omitted by Companies (Amendment) Act, 2020
Important Question Q. No. 2: Growmore Ltd.’s share capital is divided into different classes. Now, Growmore Ltd. intends to vary the rights attached to a particular class of shares. Explain the provisions of the Companies Act, 2013 to Growmore Ltd. as to obtaining consent from the shareholders in relation to variation of rights. [RTP-Nov 18] HINT: Refer Sec. 48. 4.7 - Calls on Shares (Secs. 49, 50 and 51) Meaning of a call
A ‘call’ may be defined as a demand made by a company on its shareholders to pay the whole or a part of the balance, remaining unpaid on each share at any time during the continuance of a company.
Calls to be made on a uniform basis
Where any calls for further share capital are made on the shares of a class, such calls shall be made on a uniform basis on all shares falling under that class.
– Sec. 49
For this purpose, the shares of the same nominal value on which different amounts have been paid-up shall not be deemed to fall under the same class.
Calls advance – Sec. 50
in
Point to Remember
x
x
A company may, if so, authorized by its articles, accept from any member, the whole or a part of the amount remaining unpaid on any shares held by him, even if no part of that amount has been called up. However, a member of the company limited by shares shall not be entitled to any voting rights in respect of the amount paid by him until that amount has been called up.
4.6
Chapter 4
Share Capital and Debentures
Dividend Paid Capital
on up
Company is permitted to pay dividends in proportion to the amount paid-up on each share, if so authorized by articles.
– Sec. 51
Important Questions Q. No. 3: Moon Star Machineries Limited is authorised by its articles to accept the whole or any part of the amount of remaining unpaid calls from any member even if no part of that amount has been called up by it. Anand, a shareholder, deposits in advance the remaining amount due on his partly paid-up shares without any calls being made by company. Whether Company is permitted to accept the advance amount received on unpaid calls from Anand? HINT: Refer Sec. 50. Company is permitted to accept the advance. Q. No. 4: Coriander Masale Limited has issued 10,00,000 equity shares of ₹ 10 each on which ₹ 6 per share has been called till allotment and the first and final call of ₹ 4 is yet to be made. Reena holds 10,000 shares on which she had paid whole of ₹ 10 per share. In the upcoming extra-ordinary general meeting of the company, she wants to exercise her voting right as owner of fully paid-up shares. Where Company can permit? HINT: Refer Sec 50. Company cannot permit voting right in respect of advance amount.
4.8 - Issue of securities at a Premium (Sec. 52) Credit Securities Premium Account
to
Where a company issue shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received on those shares shall be transferred to a “securities premium account”. The provision of Companies Act, 2013 relating to reduction of capital of company shall, except as provided in this section, apply, as if the securities premium account were the paid-up share capital of the company.
Utilisation of The securities premium account may be applied by the company: Securities (a) towards the issue of unissued shares of the company to the members of the company as fully premium paid bonus shares; account (b) in writing off the preliminary expenses of the company; (c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; (d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company; or (e) for the purchase of its own shares or other securities under section 68.
Important Question Q. No. 5: Walnut Foods Limited has an authorized share capital of 2,00,000 equity shares of ₹ 100 per share and an amount of ₹ 2 crores in its securities Premium account as on 31.03.2021. The Board of Directors seeks your advice about the application of Securities Premium Account for its business purposes. Please give your advice. [RTP-May 19] HINT: Refer Sec 52. Company can utilize the amount of securities premium for the purpose specified u/s 52.
4.7
Chapter 4
Share Capital and Debentures 4.9 - Issue of shares at a Discount (Sec. 53) Prohibition on x issue of shares at a x
A company shall not issue shares at a discount, except in the case of an issue of Sweat equity shares given u/s 54 of the Companies Act, 2013. Any share issued by a company at a discount shall be void.
Point to Remember A company may issue shares at discount to its creditors when its debt is converted into
discount
shares in pursuance of any statutory resolution plan or debt restructuring scheme in accordance with any guidelines or directions or regulations specified by the RBI under the RBI Act, 1934 or Banking (Regulation) Act, 1949. in x of
Penalty case
contravention x
Company and every officer who is in default shall be liable to a penalty which may extend to an amount equal to an amount raised through the issue of shares at a discount or ₹ 5 Lakh, whichever is less; and The Company shall also be liable to refund all monies received with interest at the rate of 12% p.a. from the date of issue of such shares to the persons to whom such shares have been issued.
Important Questions Q. No. 6: ABC Limited is a public company incorporated in New Delhi. The Board of Directors of the company wants to bring a public issue of 1,00,000 equity shares of ₹ 10 each. The BOD has appointed an underwriter for this issue for ensuring the minimum subscription of the issue. The underwriter advised the BOD that due to current economic situation of the country it would be better if the company offers these shares at a discount of ₹ 1 per share to ensure full subscription of this public issue. The Board of directors agreed to the suggestion of underwriter and offered the shares at a discount of ₹ 1 per share. The issue was fully subscribed and the shares were allotted to the applicants in due course. Decide whether the issue of shares as mentioned above is valid or not as per Sec. 53 of Companies Act, 2013. What would be your answer in the above case if the shares are issued to employees as sweat equity shares?
[Nov. 20 (3 Marks)]
HINT: Refer Sec. 53. Issue of shares at discount is not valid. In case the shares have been issued to employees as Sweat equity shares, then the issue of shares at discount is valid. Q. No. 7: State the reasons for issue of shares at premium or discount. Also write in brief the purposes for which the securities premium account can be utilized?
[Jan. 21 (5 Marks)]
HINT: Refer Sec. 52 and 53.
4.10 - Issue of Sweat Equity Shares (Sec. 54) Meaning of Sweat Equity Shares – Sec. 2(88) Conditions
Sweat equity shares” means such equity shares as are issued by a company to its directors or employees at a discount or for consideration, other than cash, for providing their know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called. A company may issue Sweat equity shares of a class of shares already issued, if the following conditions are fulfilled, namely: (a) the issue is authorised by a special resolution passed by the company;
4.8
Chapter 4
Share Capital and Debentures (b) the resolution specifies the number of shares, the current market price, consideration, if any, and the class or classes of directors or employees to whom such equity shares are to be issued; (c) not less than one year has, at the date of such issue, elapsed since the date on which the company had commenced business (Omitted); and (d) where the equity shares of the company are listed on a recognised stock exchange, the Sweat equity shares are issued in accordance with the regulations made by the SEBI in this behalf and if they are not so listed, the sweat equity shares are issued in accordance with such rules as may be prescribed. Rule 8 of Companies (Share and Debentures) Rules, 2014 Requirement of SR
A company other than a listed company, which is not required to comply with the Securities and Exchange Board of India Regulations on Sweat equity, shall not issue Sweat equity shares to its directors or employees unless the issue is authorised by a special resolution passed by the company in general meeting. Point to Remember Employee means : (a) a permanent employee of the company who has been working in India or outside India; or (b) a director of the company, whether a whole – time director or not; or (c) an employee or a director as defined in sub clauses (a) or (b) above of a subsidiary, in India or outside India, of a holding company of the company.
Validity of SR
The special resolution authorising the issue of Sweat equity shares shall be valid for making the allotment within a period of not more than 12 months from the date of passing of the special resolution.
Limit on issue The company shall not issue Sweat equity shares for more than 15% of the Sweat existing paid-up equity share capital in a year or shares of the issue value of of rupees five crores, whichever is higher: equity shares Provided that the issuance of Sweat equity shares in the Company shall not exceed 25% of the paid up equity capital of the Company at any time. Point to Remember A Start up Company may issue Sweat equity shares not exceeding 50% of its paid-up capital upto 10 years from the date of its incorporation or registration. Lock in period
The Sweat equity shares issued to directors or employees shall be locked in/non-transferable for a period of 3 years from the date of allotment.
Valuation of Sweat Equity Shares
The Sweat equity shares to be issued shall be valued at a price determined by a registered valuer as the fair price giving justification for such valuation.
Valuation of IPR/Know how/Value addition
The valuation of intellectual property rights or of know how or value additions for which Sweat equity shares are to be issued, shall be carried out by a registered valuer, who shall provide a proper report addressed to the Board of directors with justification for such valuation.
4.9
Chapter 4
Share Capital and Debentures Treatment of non-cash consideration
Where Sweat equity shares are issued for a non-cash consideration on the basis of a valuation report in respect thereof obtained from the registered valuer, such non-cash consideration shall be treated in the following manner in the books of account of the company(a) where the non-cash consideration takes the form of a depreciable or amortizable asset, it shall be carried to the balance sheet of the company in accordance with the accounting standards; or (b) where clause (a) is not applicable, it shall be expensed as provided in the accounting standards.
Ranking of Sweat Equity Shares
Disclose in Board Report
The Board of Directors shall, inter-alia, disclose in the Director’s report for the year in which such shares are issued, the specified details of issue of sweat equity shares.
Maintenance of Register
x
The company shall maintain a Register of Sweat Equity Shares in Form No. SH-3 and shall forthwith enter therein the particulars of Sweat Equity Shares issued u/s 54.
x
The Register of Sweat Equity Shares shall be maintained at the registered office of the company or such other place as the Board may decide.
The rights, limitations, restrictions and provisions as are for the time being applicable to equity shares shall be applicable to the Sweat equity shares issued under this section and the holders of such shares shall rank pari passu with other equity shareholders.
IMPORTANT QUESTIONS Q. No. 8: Trisha Data Security Limited was incorporated on 1st August, 2021 with a paid-up share capital of ₹ 200 crores. Within a small period of about 4 months in operation, it has earned sizeable profits and has topped the charts for its high employee – friendly environment. The company wants to issue sweat equity to its employees. A close friend of the CEO of the Company has told him that the Company cannot issue sweat equity shares as minimum 2 years have not elapsed since the time company commended its business. The CEO of the company has approached you to advice about the essential conditions to be fulfilled before the issue of sweat equity shares especially since their company is just a few months old. [RTP-May 19, MTP-March 19, May 20] HINT: Refer Sec 54. Company can issue Sweat equity shares by following the conditions as mentioned in Sec. 54. It does not make a difference that the company is just a few months old. Q. No. 9: Yellow Pvt Ltd. is an unlisted company incorporated in the year 2012. The company have share capital of ₹ 50 crores. The company has decided to issue Sweat equity shares to its directors and employees. The company decided to issue 10% Sweat equity shares (which in total will add up to 30% of its paid-up equity shares), with a locking period of 5 years, as it is a start-up company. How would you justify these facts in relation to the provision for issue of Sweat equity shares by a start-up company, with reference to the provision of the Company Act, 2013. Explain? [RTP-Nov. 21, MTP-Nov. 21] HINT: Refer Sec. 54 read with Rule 8. Company can issue Sweat equity shares by passing special resolution at its general meeting. The company as a startup company is right in issue of 10% Sweat equity share as it is overall within the limit of 50% of its paid-up share capital. But the lock in period of the shares is limited to maximum three years period from the date of allotment.
4.10
Corporate & Other Laws AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE
: : : : : : :
PANKA J GARG TAXMANN FEBRUARY 2022 2022 9789393656551 384 PAPERBACK
Rs. : 750 | USD : 43
Description This book is prepared exclusively for the Intermediate Level of Chartered Accountancy Examination requirement. It covers the entire revised syllabus as per ICAI. The Present Publication is the Latest 2022 Edition & Updated till 31 st October 2021 for CA-Inter | New Syllabus | May/Nov. 2022 exams, authored by Pankaj Garg, with the following noteworthy features: u
[Tabular Presentation] of the subject matter
u
[Simple & Concise Language] for easy understanding
u
[450+ Question & Case Studies] along with Hints for Self-practice
u
n
Detailed answers provided in the 2022 Edition of Taxmann’s CRACKER cum Exam Guide for Corporate & Other Laws for CA-Intermediate | New Syllabus
n
Questions are covered for each topic for better understanding
Coverage of this book includes: n
All Past Exam Question till the December 2021 CA-Inter Exam with suggested answers for Part II (Descriptive Questions)
n
All Questions from RTPs and MTPs of ICAI
u
[Points-wise Answers] for easy learning
u
[Topic-wise & Chapter-wise Marks Distribution] for past exams from May 2018, at the beginning of each chapter
u
[Student-Oriented Book] The authors have developed this book, keeping in mind the following factors: n
Interaction of the authors with their students, with specific emphasis on difficulties faced by students in the examinations
n
Shaped by the authors’ experience of teaching the subject matter at different levels
n
Reaction and responses of students have also been incorporated at different places in the book
ORDER NOW
