Companies Act, 2013 
         
        COMPANIES ACT 2013 
         UNIT 1: PRELIMINARY ..................................................................................................................................... 1 
         UNIT 2: PROSPECTUS AND ALLOTMENT OF SECURITIES ............................................................................ 19 
        ACCEPTANCE OF DEPOSITS ............................................................................................................................... 27 
        MEMBERSHIP ..................................................................................................................................................... 31 
         UNIT 3: SHARE AND SHARE CAPITAL ............................................................................................................ 35 
         UNIT 4: MEETINGS ......................................................................................................................................... 45 
        Unit 5: Payment of Dividend.............................................................................. Error! Bookmark not defined. 
        Unit 6: BOOKS OF ACCOUNT AND FINANCIAL STATEMENTS .......................... Error! Bookmark not defined. 
        Unit 7: AUDIT AND AUDITORS ........................................................................... Error! Bookmark not defined. 
        COMPANY AMENDMENT ACT 2017 ..................................................................................................... 57 
         
                                  
                          COMPANIES ACT 2013 
                           UNIT 1: PRELIMINARY 
         
        Some general Knowledge on Companies Act 2013 
         
        Total no of chapters: 29 
        No. of sections 470 
        No. of schedules 7 
         
        The act applies to whole of India.  
        Applies to  
              (a)  Companies incorporated under company law  
              (b) Insurance - Banking – Electricity – Except there is in consistency.  
               
        What is a company?  
        Means a company incorporated under this Act / previous law.  
         
        Features of the Company.  
        Perpetual succession: Death of members will not stop the company. Mem may come and go, 
        company go on for ever. 
        Separate legal entity: Company and its members are different. Can own its property in its own 
        name. Members cannot claim the ownership in the property of the company. 
        Limited liability: Liability is limited to the extent of shares unpaid in case of company limited by 
        shares. 
        Common seal (optional): A seal which is affixed in important document issued by the company 
        Artificial person: Company is a legal person and not a natural person. 
        Transferability of shares: Shares can be transferred from one person to another. 
        Capacity to sue and be sued: Company can sue other in the name of the company and be sued 
        in its own name.  
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                                               Companies Act, 2013 
         
         
        Difference between company and Body corporate: 
        2 (20) “company” means a company incorporated under this Act or under any previous company 
        law 
         
        2 (11) body corporate” or “corporation” includes a company incorporated outside India, but does 
        not include— 
        (i) a co-operative society registered under any law relating to co-operative societies; and 
        (ii) any other body corporate (not being a company as defined in this Act), which the Central 
        Government may, by notification, specify in this behalf 
         
        What is separate legal entity?  
         
        The company is different person altogether from the subscribers. Members can enter into contract 
        with company. Case Law: Salomon (vs.) Salomon. 
        Salomon with his wife and children started a company. Due to financial difficulties faced by the 
        company, salomon also financed the company by way of debt too which is secured. Company 
        also purchased from various people in credit (Un secured). One day the company went into 
        liquidation. Creditors claimed that they should be paid first. But Solomon as a secured creditor 
        claimed that he shall be paid first to the extent of debt secured. Creditor complained that saloman 
        is a share holder. Court held that though salomon is a shareholder, he is different person all to 
        gether when he financed company as secured creditor. So he shall be paid first as secured creditor 
        to that extant. 
         
        LIFTING OF CORPORATE VEIL 
         
        The following case disregards separate legal entity. 
        Where the legal entity of a corporate body is mis used for fraudulent and dishonest purposed – 
        the individuals concerned will not be allowed to take shelter behind corporate entity of the 
        company. 
         
        Daimler Ltd (vs.) Continental tyre & rubber Co. – Trading with enemy country.  
        In this case, one company of Germany doing business in Britain by incorporating a company 
        there, on war even though the company incorporated in Britain, they will lift the corporate viel 
        sand see who are the sahreholders who controls the company. 
         
        Dinshah Manackjee Petit - Protection of revenue 
        A person held soo much of investments and getting huge income from that. As he is getting much 
        tax liabilities, he formed many companies and transferred his investments like shares, debentures 
        to those companies. Those time even companies have basic exemption limit. He transferred 
        investment in shuch a way no company will get more incomemorethan basic exemption limit. 
        Once the company receives dividend, interest from the company in which he invested, this person 
        taken loans from his company and he will never repay. By this way, he also will not pay tax, his 
        company will not pay tax. 
         
        Workman employed in Associated Rubber Industries.  Avoidance of welfare legislation. 
        A company had many employees, so they have to pay bonus, Providend fund etc., But this 
        company demerged to many company so that none of the company will have more than 20 
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                                               Companies Act, 2013 
         
        employees. But all the company had same members. This has done to circumvent welfare 
        legislation.  
         
        Gilford Motor Co. v. Horne: Prevention of fraud or improper conduct - company is a sham – 
        breach of trust. 
        A employee resigned his job. The employer ask him to sign non compete agreement and gave 
        him lumpsum. But the employee started a new company and stated doing business in the 
        company name. When enquired by his previous employer, the employee says -  I am  not 
        competing, I am just a shareholder in this company. 
         
        Gallaghar vs. Germania brewing company. If company is just an extention of AOP and trying 
        to involve in fraud through taking shelter under corporate veil 
         
        Company acting as agent or trustee of the shareholders: F.G. Films Ltd.,  
        During Britain rule in India, only britishers can do film production , shooting in India. Americans 
        started a company in Britain and done the same. They lifted corporate veil. 
         
        Smith, stone and knight Ltd., (Vs.) Lord Mayor of Birmingham - forming subsidiary company 
        to act as agent. 
        SSK holds a land, gave it on lease to its subsidiary, and it is not using it, mayor done compulsory 
        acquisition, and told this had is not used by SSK, but its subsidiary, and subsidiary is not owner, 
        so, no compensation. But it is decided subsidiary is agent of parent.  
         
        If the number of members reduced less than statutory minimum – corporate veil will be lifted. 
         
         
        Classes of Company  
         
        Depending upon No. of Member : One Person Company, Private, Public  
        Depending upon Liability: Limited, unlimited  
        Limited company can be further classified into: Limited by shares, guarantee  
        On basis of control – Holding, subsidiary,  
        Others: Foreign, government, small, dormant, Nidhi, charitable.  
         
        Company Limited by Shares: 2(22)  
        In Memorandum of Association – (MOA) the liability is limited up to unpaid by them.  
        But any time during the life or at the time of winding up, they may be called. 
         
        The Owner of share is not owner of the assets of the company.  
         
        Company Limited by Guarantee: 2 (21)  
        Liability is limited to amount of guarantee cannot be called beyond the stipulated sum  
         
        Similarity between company limited by shares and guarantee: 
        Legal entity, limited liability 
         
        Dis similarity:  
        Guarantee amount will be called only at the time of winding up.  
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                                               Companies Act, 2013 
         
        Guarantee Co. will not raise any amount to start the company.  
         
        Narendra Kumar Agarwal vs. Saraj Maloo  
        Guarantee Company can refuse transfer of rights in a Company.  
         
        Unlimited Co: 2 (92)  
        In case Company has shares, the amount should be defined in Memorandum Of Association.  
        Even though the company allot shares, the shareholders has unlimited liability. In future the 
        company cannot able to meet its liabilities, members have to contribute. 
        Members are liable only to that amount to the company till the company gets wound up.  
         
        In case on winding up – if the Liability cannot the Settled, then creditor can claim from any one 
        member. He in turn can ask from others.  
         
        One person company 2(62)  
        Only one member 
        Separate legal entity.  
        Even OPC’s members has right to transfer the share.  
         
        Private Company 2 (68)  
        Minimum paid up capital: Now not required. 
        Restrict Transfer of shares  
        Minimum 2 members.  
        Max. No. Of Members - 200  
        Joint Holder will be counted as 1  
        Exclude - Employee shareholder - past employee share holder  
        Public cannot be invited for subscription.  
        Previlege:  Minimum 2  directors.,  No  Independent  Director,  exempt  from  audit committee, 
        nomination committee, stakeholders committee. 
         
        Small Company: 2 (85)  
        Paid up capital does not exceed 50 L (In future CG may extend this up to- Rs. 5 Cr.) 
        T.O. does not exceed Rs. 2 crores (In future CG may extend this up to Rs. 25 Cr ) 
         
        2 (91) “turnover” means the aggregate value of the realisation of amount made from the sale, 
        supply or distribution of goods or on account of services rendered, or both, by the company 
        during a financial year 
         
        The following companies are not Small Company 
        Holding / subsidiary Co,  
        Section 8 co  
        Special act Co.  
         
        Public Company: 2 (71) 
            Not private Company 
            If a private company is held by public company – it will be termed as deemed public 
            company. 
            Minimum 7 Members.  
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