RULES OF LAW

  Diversity is a key factor that is receiving increasing attention from regulators, investors, and other stakeholders. Regulation 17 (1) of the Securities and Exchange Board of India (SEBI) Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, which mandates the composition of the board of directors of a listed entity. The regulation specifies that the board of directors must have an optimal combination of executive and non-executive directors, with at least one woman director. Additionally, not less than 50% of the board of directors must comprise of non-executive directors. The regulation further states that the top 1000 listed entities must have at least one independent woman director. This requirement is in addition to having an optimal combination of executive and non-executive directors. The top 1000 entities are determined based on their market capitalization as at the end of the immediate previous financial year. Furthermore, if the chairperson of th...

The Company’s Memorandum of association represents its charter as it defines the objects for which it has been setup. In Cotman Vs. Brougham (1918)AC 514, it was observed that “the purpose of memorandum is to enable the shareholders, creditors and those dealing with the company to know what is its permitted range of enterprise”. The Memorandum of association sets out the boundaries beyond which the company cannot traverse. Any action of a company which is beyond the memorandum is ultra virus and void and incapable of being ratified. Where there is no connection or nexus between the power exercised and the attainment of an object, the exercise of such power shall be deemed to be ultra virus. Section 4(1) of the Companies Act 2013   provides the relevant information that a Memorandum of association shall provide, which includes, in sub-clause (a) the name of the company; in sub-clause (b) the State in which the registered office of the company is to be situated; in sub-Clause (c)...

  Court while hearing objections under the scope of section 34 of the arbitration act cannot interfere unless the findings and conclusions of the arbitrator are totally perverse and illegal. Perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury principle of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a court of law often in writ jurisdiction of the superior courts but no less in statutory processes wherever the same are available. Intervention of the courts is envisaged in few circumstances only like in case of fraud or bias by the arbitrators; violation of principal of natural justice etc. courts can correct the error of arbitrator. An award contrary to substantive provisions of law or the provisions of Arbitration and conciliation Act, ...

A Company in law is equal to a natural person and has a separate legal entity of its own. The entity of a Company in entirely separate from that of its shareholders; it bears its own name, its assets are separate and distinct from those of its members; it can sue and be sued exclusively for its own purpose; its creditors cannot obtain satisfaction from the assets of its members; the liability of the members or shareholders is limited to the capital invested by them; similarly, the creditors of the members have no right to the assets of the corporation. This position has been well-established in the case of Salomon v. Salomon & Co. (1897) A.C. 22, H.L. which was pronounced in 1897 by the House of Lords. But the  concept of Corporate Veil was established to encourage and promote trade and commerce, not to defraud people, evade obligations of law or to commit illegalities which are otherwise not permissible in law. Therefore, where a Company is established with the purpose of de...

The first and most elementary rule of construction is that the words of a statue must prima facie be given their ordinary meaning. Ordinary words must be given their ordinary meanings and technical meanings, unless absurdity would result. This is called the golden rule of interpretation. This rule is also called “literal rule of Construction”. The intention of the Legislature is primarily to be gathered from the language used in the statute, thus paying attention to what has been said as also to what has not been said. When the words used are not ambiguous, literal meaning has to be applied. Effect should be given to the plain words, not because there is any charm or magic in the plainness of such words but because plain words may be expected to convey plainly the intention of the Legislature. Intention of the legislature and not the words is paramount. Even where the words of statutes appear to be prima facie clear and unambiguous it may sometimes be possible that the pl...

Government of India took a step ahead in the aim of Ease of doing business in India as MCA has amended Companies (Incorporation) Rules, 2014 and inserted the provisions for Simplified Proforma For Incorporating Companies Electronically (SPICe) by adding Rule 38 to Companies (Incorporation) Rules, 2014 with effect from 2 nd October 2016.  Newly added Rule 38 to Companies (Incorporation) Rules, 2014 provides as follow: “38. Simplified Proforma for Incorporating Company Electronically (SPICe) 1) The simplified integrated process for incorporation of a company in Form No. INC-32 alongwith e-Memorandum of Association in Form No. INC-33 and e-Articles of Association in Form No. INC-34. 2) The provisions of sub-rule (2) to sub-rule (13) of rule 36 shall apply mutatis mutandis for incorporation under this rule. Provided that for the purposes of references to form numbers INC-29, INC-30 and INC-31 in rule 36 with Form No. INC-32, Form no. INC-33 and Form No. INC-...

Central Government has amended the Companies (Share Capital and Debentures) Rules, 2014 to carry out the necessary changes in regard to Issuance of bonds to overseas investors by Indian Companies via Notification dated 12 th August, 2016. In the rule 18 of Companies (Share Capital and Debentures) Rules, 2014 sub-rule 11 has been added stating: “(11) Nothing contained in this rule shall apply to rupee denominated bonds issued exclusively to overseas investors in terms of A.P. (DIR Series) Circular No. 17 dated September 29, 2015 of the Reserve Bank of India.” MINISTRY OF CORPORATE AFFAIRS NOTIFICATION New Delhi, 12th August, 2016 G.S.R. 791(E).— In exercise of the powers conferred by sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Share Capital and Debentures) Rules, 2014, namely:— 1.         ...

Ministry of Corporate affairs has issued circular No. 09/2016 dated 03.08.2016 to provide Clarification in regard to applicability of provisions of Chapter III of the Companies Act, 2013 to Issuance of bonds to overseas investors by Indian Companies and clarified that matter relating to issue of rupee denominated bonds to overseas investors is being regulated by RBI as part of ECB Policy framework and stated unless otherwise provided in the circular/ directions/ regulations issued by Reserve Bank of India, provisions of Chapter III of the Act and rule 18 of Companies (Share Capital and Debenture) Rules, 2014 would not apply to issue of rupee denominated bonds made exclusively to persons resident outside India in accordance with applicable sectoral regulatory provisions and in this regard necessary changes are being made by the Ministry in Companies (Share Capital and Debenture) Rules, 2014. Following is the Circular issued by the Ministry of Corporate Affairs: General Circula...

As per Section 179(3) of the Companies Act, 2013 read with rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014 read with Companies (Meetings of Board and its Powers) Amendment Rules, 2015 following are the powers which shall be exercised by the Board of Directors on the behalf of the Company by means of resolutions passed at meetings of the Board: to make calls on shareholders in respect of money unpaid on their shares; to authorise buy-back of securities under section 68; to issue securities, including debentures, whether in or outside India; to borrow monies; to invest the funds of the company; to grant loans or give guarantee or provide security in respect of loans; to approve financial statement and the Board’s report; to diversify the business of the company; to approve amalgamation, merger or reconstruction; to take over a company or acquire a controlling or substantial stake in another company; to make political contributions; to appoint or remo...

In continuation of MCA General Circular 1 of 2016 dated 12.01.2016, MCA has issued General Circular No. 05/2016 and clarified that Companies while undertaking Corporate Social responsibility activities under the provisions of the Companies Act, 2013, shall not contravene any other prevailing laws of land including Cigarettes and Other Tobacco Products Act (COTPA), 2003.   http://www.mca.gov.in/Ministry/pdf/General_circular05_16052016.pdf

In exercise of the powers conferred by section 399 read with subsections (1) and (2) of section 469 of the Companies Act, 2013 , the Central Government has made amendment to Companies (Registration Offices and Fees) Ru1es, 2014 and notified new Form No.- GNL-1 & Form No. GNL-4, the copy of new forms are given in the attached notification dated 06.05.2016. http://www.mca.gov.in/Ministry/pdf/Rules_09052016.pdf

In exercise of the powers conferred by sub-section (1) of section 458 of the Companies Act, 2013 Central Government has delegated the power to appoint inspectors for inspection of books and papers of a Company under Section (5) of Section 206 to the regional directors. http://www.mca.gov.in/Ministry/pdf/General_notification_04052016.pdf  

Central Government has notified the following amendments to the Schedule III of Companies act, 2013 via notification dated 06/04/2016: 1) In the Companies Act, 2013 (hereinafter referred to as the principal Act) in Schedule III, Central government has inserted the following for the heading "General instructions for preparation of Balance Sheet and Statements of Profit and Loss of a Company": “Division I Financial Statements for a company whose Financial Statements are required to comply with the Companies (Accounting Standards) Rules, 2006. GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET AND STATEMENT OF PROFIT AND LOSS OF A COMPANY” 2) And In the principal Act, in Schedule III , at the end, the following has been inserted: “Division II Financial Statements for a company whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015. GENERAL INSTRUCTIONS FOR PREPARATION OF FINANCIAL STATEMENTS...