RULES OF LAW

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)...

In civil   appeal no. 2776 OF 2022 in the matter of MAHIMA DATLA VERSUS DR. RENUKA DATLA & ORS. Supreme Court of India held that Duomatic Principle is applicable even in the Indian context. Strict adherence to a statutory requirement may be dispensed with if it is demonstrated any act that the members of a company can do by formal resolution in a general meeting is done with the consent of all the members of the Company. Although this Principle is only applicable in those cases wherein bona fide transactions are involved in case of fraud this principal is a clear exception. The Duomatic Principle can be briefly stated as “anything the members of a company can do by formal resolution in a general meeting, they can also do informally, if all of them assent to it.” This Principle was derived from the decision In Re: Duomatic Ltd., [1969] 2 Ch. 365, wherein Buckley, J. held as under: “where it can be shown that all shareholders who have a right to attend and vote at a general m...

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...

As per Section 137 (1) of the Companies Act, 2013 copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under the Companies Act,2013 duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting in Form AOC-4 and the consolidated financial statements, if any, with form AOC-4 CFS, with the prescribed fee. The following class of companies shall file their financial statements and other documents under section 137 of the Act with the Registrar in e-form AOC-4 XBRL:-   (i) companies listed with stock exchanges in India and their Indian subsidiaries; (ii) companies having paid up capital of five crore rupees or above; (iii) companies having turnover of one hundred crore rupees or above; (iv) all companies which are required to prepare their financial statements i...

The Insolvency and Bankruptcy Code, 2016 is single unified  umbrella of insolvency law which consolidates and amends the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy board of India, and for matters connected therewith or incidental thereto. Before the Insolvency and Bankruptcy Code, 2016 there was no single law in India that dealt with insolvency and bankruptcy. Provisions relating to insolvency and bankruptcy for companies could be found in the in the Sick Industrial Companies (Special Provisions) Act, 1985, the Recovery of Debt Due to Banks and Financial Institutions Act, 1993, the Securitisation and Reconstruct...

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...