Law Amendment Nov 2016 part 1 By Swapnil Patni Sir

Law Amendment Nov 2016 part 2 By Swapnil Patni Sir

Trick to Remember Sections & Case Laws

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Nature of Company - CS EXECUTIVE & CA IPCC

APPLICABILITY OF COMPANIES ACT 2013

Companies Act, 2013 is an Act of the Parliament of India which regulates incorporation of a company, responsibilities of a company, directors, and dissolution of a company.  The 2013 Act is divided into 29 chapters containing 470 sections as against 658 Sections in the Companies Act, 1956 and has 7 schedules. The Act has replaced The Companies Act, 1956 (in a partial manner) after receiving the assent of the President of India on 29 August 2013. The Act came into force on 12 September 2013 with few changes. 

SECTION (1) Companies Act is Having wide applicability
This Act may be called the Companies Act, 2013. 
It extends to the whole of India including state of Jammu & Kashmir.
This section shall come into force at once and the remaining provisions of this Act shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act ( Applicability in installments that is why still certain sections of this act is yet to be notified)
The provisions of this Act shall apply to -

1. companies incorporated under this Act ( New Companies)  or under any previous company law (existing Companies );
2. insurance companies, except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938 or the Insurance Regulatory and Development Authority Act, 1999;
3. banking companies, except in so far as the said provisions are inconsistent with the provisions of the Banking Regulation Act, 1949;
4. companies engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of the Electricity Act, 2003;
5. any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; and
6. Such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification, specify in this behalf, subject to such exceptions, modifications or adaptation, as may be specified in the notification.

DEFINITION OF A COMPANY  SEC. 2(20)

It means an association of both natural and artificial persons formed and registered under

• this Act (The companies Act ,2013) New Company or
• Any of the previous companies Laws. The Indian companies Act 1866, The Companies Act 1913  or companies Act 1956  Existing Company

Meaning of Company 
It’s a formal organization of conducting business, and can be formed, continues and ends by following the law.

A company is a corporate body and a legal person having status and personality distinct and separate from the members constituting it. It is called a body corporate because the persons composing it are made into one body by incorporating it according to the law and clothing it with legal personality.

‘Corporation’ is a legal person created by a process other than natural birth. It is, for this reason, sometimes called artificial legal person. As a legal person, a corporate is capable of enjoying many of the rights and incurring many of the liabilities of a natural person.

An incorporated company owes its existence either to a special Act of Parliament or to company law. Public corporations like Life Insurance Corporation of India, SBI etc., have been brought into existence through special Acts of Parliament, whereas companies like Tata Steel Ltd., Reliance Industries Limited have been formed under the Company law i.e. Companies Act, 1956 which is being replaced by the Companies Act, 2013.

An association formed not for profit also acquires a corporate character and falls within the meaning of a company by reason of a license issued under Section 8(1) of the Act.

CHARACTERISTICS OR FEATURES OF COMPANY 

Section 9
From the date of incorporation mentioned in the certificate of incorporation, such subscribers to the memorandum and all other persons, as may, from time to time, become members of the company, shall be a body corporate by the name contained in the memorandum, capable of exercising all the functions of an incorporated company under this Act and having perpetual succession with power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and be sued, by the said name.

1. Incorporated association: A company is formed and registered under the companies Act. Registrations of a company are done by complying with the prescribed formalities prescribed under the Act.

2. Artificial person:

• A company is an artificial person. But it is not a fictitious person.
• A company is not a natural person. A company is formed under law. However the law regards company as an artificial person as distinct from members who form the company.

3. Separate legal entity:

• A company is a legal person in the eyes of law distinct from its members
• A company is a separate person having its own rights and obligations.
• Case References – Salomon v Salomon & Co. Ltd., Lee v Lee’s Air Farming Ltd.

4. Perpetual Succession:
Prof. Grower rightly said “members may come & go, but the company can go on forever

• Death, insolvency, insanity etc. of any member does not affect the continuity of the company. Thus, the life of a company does not depend upon the life of its members
• It is generally said that ‘members may come and go, but the company goes on forever’. A company is created under a law and can be wound up only in accordance with the law. In the words of Grower  “ Even a hydrogen bomb cannot destroy
• A company.

5.  Limited Liability

• Liability of members of a company is limited. . The extent of liability depends upon the type of company.
• Nature of company ,
• Company Limited by Shares
• Amount unpaid on the shares held by every member.
• Company limited by Guarantee
• Amount guaranteed by every member.
• Unlimited company
• Every member is liable to contribute to the assets of the company until all the debts of the company are paid in full

6. Transferability of shares

• Shares are movable property (Sec. 44).
• Shares are transferable in the manner provided in articles (Sec. 44).
• Private company the right to transfer the shares is restricted.
• Public company – shares are freely transferable.

7.  Separation of ownership from management

• The members do not participate in day  to day affairs of the company
• The management of the company lies in the hands of elected representatives of members, commonly called as Board of directors or directors or simply the Board.
• The directors are appointed as well as removed by the members. Thus, the Act has ensured the ultimate control of members over the company.

8. Separate property

• A company can own and enjoy property in its own name.
• Members are not owners or co-owners of the company’s property.
• Members have no insurable interest in the property of the company. Example
• M virtually owned all the shares in a company.
• The timber belonging to the company was insured in the name of M.
• The timber was destroyed by fire. M made a claim  against the insurance company for loss of timber,
• The insurance claim was rejected since M had no insurable interest. Timber was property of the company and  not a property of M.

9. Capacity to sue and be sued

• A company can sue others and be sued in its own name.

 PRINCIPLE OF SEPARATE LEGAL ENTITY

Meaning
- A company is a legal entity separate from its members
- It is known by its own name, has rights and liabilities of its own.

Salomon v Salomon & Co. Ltd.
- Transfer of sole proprietorship business to company. Mr. Salomon was carrying on the business of boot manufacturing as a sole proprietor. He incorporated a company named Salomon & Co. Ltd. for the purpose of taking over this business.
- Payment of purchase consideration by the company:

(a) Total consideration                                                          £ 39,000
(b) Cash paid                                                                          £    9,000
(c) Fully paid shares of £ 1 each issued to Salomon         £  20,000
(d) Secured debentures issue to Salomon                         £  10,000

Constitution of Salomon & Co. Ltd. The 6 members of the family of Mr. Salomon were issued one share each. Salomon was the managing director of Salomon & Co. Ltd. Salomon & Co. Ltd. is commonly called as ‘one man company.

- Inability to pay debts by the company in liquidation. In the course of business, the company borrowed from creditors to the extent of £ 7,000. Due to trade depression, the company ran into financial difficulties and eventually went into liquidation. The assets realized only £ 6,000.
Since Salomon was a secured creditor, he made a claim on the amount with the company.

- Contention of unsecured creditors – one man cannot owe money to himself. The unsecured creditors contended that Salomon was carrying on business in the name of Salomon & Co. Ltd. Thus, Salomon and Co. Ltd. was a mere agent for S.

- Decision of the Court. It was held that Salomon & Co. was a real company fulfilling all legal requirements. It had an identity different from its members, and therefore, the secured debentures were to be paid in priority to unsecured creditors.
Implications of the Rule of ‘separate legal entity’

- There can be a transfer of property from a member to the company and vice-versa.
- A person can be a member, director, employee and creditor of the company at the same time.
- A company has the rights and duties of its own.
- A company is not an agent of members or directors.

DOCTRINE OF  LIFTING OF CORPORATE PERSONALITY
(LIFTING OR PIERCING OF CORPORATE VEIL)

The legal personality of a company is distinct and different from its members individually and collectively. Comment and point out the circumstance when the separate personality of a company is disregarded by the courts.

Meaning of corporate veil
A company is a distinct entity.  A company is an Artificial judicial person.  A company cannot function on its own.  A company is managed and controlled by Directors and Members. However a company is considered as distinct entity from its members and directors. Thus there is a veil between the company and its directors.

By fiction of law a company is seen as a distinct entity, yet in reality it is an association of persons who are in fact the beneficial owners of all the corporate property. This fiction is created by a fictional veil, i.e., the corporate veil.

Effect of corporate veil
Only a company is liable for the acts (and defaults) done in the name of the company even though members, directors, or any officer or employee of the company had acted on behalf of the company.
 In the eyes of law, company is seen as a distinct entity.
- Case References – Salomon v Salomon & Co. Ltd., Lee v Lee’s Air Farming Ltd.

Meaning of lifting or Piercing the corporate veil
The separate personality of a company is a statutory privilege and it must be used for legitimate business purposes only.

As separate personally of the company is a statutory privilege. It must be used for legitimate business purpose only. Where a fraudulent and dishonest use is made of the legal entity, the individuals concerned will not be allowed to take shelter behind the corporate personality. The court will break through the corporate shell and applies the principle of what is known as “lifting of or piercing through the corporate veil”.

• Lifting of corporate veil means ignoring the separate identity of a company.
• Lifting of corporate veil means disregarding the corporate personality and looking behind the real persons who are in the control of the company

Lifting is permissible only in exceptional cases

Lifting of corporate veil is permissible only if-

• it is permitted by the Statute; or
• There is a clear evidence of abuse of the device of incorporation.

The Court has the discretion whether or not to lift the corporate veil may be lifted.

(A) Lifting of corporate veil under statutory provisions.
Fraudulent trading (Sec.339)

• if in a winding up
• it appears to the tribunal
• that the business of the company has been carried on with intent of defraud its creditors or any other person,
• the court may declare
• that any of the directors or officers who are parties to the fraud
• Shall be personally liable.

Various other section of companies Act 2013
Apart from section 339 there are various other sections under which  directors and promoters are personally liable for the offences committed by the company.

Arrears of tax (Sec. 179 of the Income Tax Act, 1961)

-    In case a private company
-    Is being wound up, but
-    any tax payable by the company cannot be recovered.
-    Then, every person who was a director at any time during the relevant previous year
-    shall be jointly and severally liable for the payment of tax.

Ultra Virus Acts
The directors of a company shall be personally liable for all the ultra vires acts done by them on behalf of the company Ultra virus Acts means those acts of the company which are beyond  the  powers of the company as stated in the memorandum of Association of the company.

(B) Lifting of corporate veil under judicial decisions
Protection of revenue

Re, sir Dinshaw Maneckjee Pettit

An assessee was receiving huge dividend and interest income on certain investments.

• He formed four private companies. The whole of the investments were transferred to these private companies
• The interest and dividend received by these companies were within the exempted limits under the Income Tax Act of that time.
• These companies did not have any business or asset except these investments.
• The income received on investments by these companies was diverted to the assessee in the form of pretended loans, which were never paid back by him.
• The Court held that the only purpose of incorporating these private companies was to evade taxes. Each of these companies was a sham. Therefore, income earned by all these private companies was treated as the income of the assessee.

Prevention of fraud or improper conduct

Gilford Motor Co. Ltd. v Horne

• An employee entered into a contract with his employer that he will not solicit the customers of the employer after leaving the employment.
• After leaving the employment, the employee incorporated a company. He, his wife and one other person were the only members of this company.
• The company started soliciting the customers of the employer.
• The Court held that the purpose of formation of the company was to avoid a legal obligation arising from a contract, which was not permissible. It was held that the company and the controlling persons were same.
• Therefore the company was restrained from soliciting the customers of the employer.

Determining the character of the company – whether an enemy company
A company can be regarded as having enemy character under certain circumstances.

Daimler Co. Ltd. v Continental Tyre & Rubber Co. Ltd.

• A company was formed in England for the purpose of selling tyres made by a German company. The German company virtually held the entire share capital of the English company. All the directors were German residents.
• During the First World War, the English company commenced an action to recover a trade debt from another English company
• It was held that the corporate personality of the company be ignored and the persons in the ultimate control of the company shall be considered. Since the persons controlling the company were enemies, the suit was not maintainable.  The company recovering the debt was  considered as german company though it was formed in England.

Check avoidance of welfare legislation

• Workmen employed in Associated Rubber Industries Ltd. v Associated Rubber industries Ltd.
• As per Bonus Act, 1965, the basis of payment of bonus is the profits earned.
• A company was earning huge profits. The company incorporated a subsidiary company and transferred some valuable investments to it.
• The subsidiary company did no business, and had no assets except the investments transferred to it.
• Looking at the purpose of formation of the subsidiary, the court lifted the corporate veil. It was held that the subsidiary was formed merely for the purpose of reducing the liability of bonus payable under the Bonus Act. Therefore the profits earned by the subsidiary company were held to be the profits of the holding company.

IS COMPANY A CITIZEN?: Citizenship under the Citizenship Act is available only to an individual. Therefore, no company can be a citizen of India.

No rights of citizens: The Constitution of India grants certain fundamental rights. Some fundamental rights are  given to citizens only  and some fundamental rights are availabl;e to all persons , citizens as well as non citizens.. Since a company is not a citizen, the fundamental rights which are available only to a citizen, are not available to a company.

A company has other fundamental rights: The Constitution of India grants certain fundamental rights to every person, whether a citizen or not. Thus, a company registered in India can enjoy all the fundamental rights which are available to all persons.

DIFFERENCE BETWEEN A COMPANY AND  A FORM

COMPANY

Mode of creation: A company comes into existence only when it is incorporated under the Companies Act, 1956. A partnership  is formed on the basis of an agreement.  A partnership may or may not be registered under the Indian Partnership Act ,1932.

Separate legal entity: A company has an identify of its own. Law does not consider partnership as a separate legal entitiy.

Perpetual succession: A company enjoys the benefit of perpetual succession. Death or insolvency of shareholder(s) does not affect the continuity of the company. A partnership  comes to an end on the death,  or insolvency of a partner.

Transfer of shares: A member of the company can transfer his shares. On such transfer, the transferee becomes a member of the company.

Management: A company is managed by the directors.

Mutual agency : There is no mutual agency between the members of a company. Thus, no member of the company is bound by the acts of any other member. Similarly, the company is not bound by the acts of a member.  Acts of the partner bind other partners.

Separate property: A company has separate property

Capacity to sue and to sued : A company can sue and be sued in its own name.  Law regards partner and   firm as one.

Liability : The liability of the members is generally limited. Liabilty of partners is unlimited except where a firm has been constituted under Limited liability partnership Act.

Minimum number of  persons: There must be at least 2 members in case of a private company, and 7 members in case of a public company. Minimum two partners are required to form a partnership firm.

Maximum number of persons: The maximum number of members in case of a private company is 50. There is no maximum limit in case of a public company. Maximum number of partners is 10 in case of banking business and 20 in case of any other business.

Audit :The audit of accounts is mandatory in case of all companies

Minimum :Every private must have a minimum paid up capital of Rs. 1 lakh. Every public must have a minimum paid up capital of Rs. 5 lakhs.

Non-profit activities : A company may be formed for carrying on a non-profit activity.

Limitation of action: No creditor of the company has a right to proceed against any member for recovery of any amount payable by the company. This will be so, even if a member holds partly paid shares.  A credit can proceed against the partner if the firm is unable to pay its debt.

Contracts with members : Since a company has a separate identity apart from its members, it can enter into a contract with any member.

Division of profits :The distribution of profits is optional since a company may or may not declare dividends even if it has earned huge profits. Thus, no member is entitled to a fixed share of profits earned every year.

  

ILLEGAL ASSOCIATION 

Section 11 is replaced by section 464
Under section 464 of the companies Act, an association or partnership which has been formed for the purpose of carrying on any business that has for its object acquisition of gain should have more than 50 members. If the number of members exceed fifty it should be  registered under the companies act or should be formed under any other law for the time  being in force.

In order to prevent the mischief arising from large trading undertakings being carried on by large fluctuating bodies so that persons dealing with them did not know with whom they were contracting, the law has put a ceiling on the number of persons constituting an association or partnership. An unincorporated company, association or partnership consisting of large number of persons has been declared illegal. Rule 10 of Companies (Miscellaneous) Rules, 2014 prescribes 50 persons in this regard.

By virtue of section 464 of the Companies Act, 2013, no association or partnership consisting of more than such number of persons as may be prescribed shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association or partnership or by the individual members thereof, unless it is registered as a company under this Act or is formed under any other law for the time being in force. The number of persons which may be prescribed under this section shall not exceed 100. Section 464 of the Act does not apply to the case of a Hindu undivided family carrying on any business whatever may be the number of its members. 

However, this section is also not applicable to an association or partnership, if it is formed by professionals who are governed by special Acts. Since, the law does not recognize it, an illegal association:

1. cannot enter into any contract;
2. cannot sue any member, or outsider, not even if the company is subsequently registered;
3. cannot be sued by a member, or an outsider for recovery of any debts;
4. cannot be wound up by an order of the Court.

In fact, the Court cannot entertain a petition for its winding up as an unregistered company, for if it did, it would be indirectly according recognition to the illegal association However, an illegal association is liable to be taxed The members of an illegal association are individually liable in respect of all acts or contracts made on behalf of the association; they cannot either individually or collectively, bring an action to enforce any contract so made, or to recover any debt due to the association

Under sub-section (3) of section 464, every member of an illegal association shall be punishable with fine which may extend to one lakh rupees and shall also be personally liable for all liabilities incurred in such business.

Applicability of Section 464 to LLPs This section will not be applicable to LLPs as they are incorporated as bodies corporate under LLP Act.

  

COMPANIES BILL, 2012

  

The Government considered the recommendations of Irani Committee and also had detailed discussions and liberations with various stakeholders viz Industry Chambers, Professional Institutes, Government Departments, Legal Experts and Professionals etc. Thereafter, the Companies Bill, 2009 was introduced in the Lok Sabha on 3rd August, 2009, The Bill laid greater emphasis on self regulation and minimization of regulatory approvals in managing the affairs of the company. The Bill promised greater shareholder democracy, vesting the shareholders with greater powers, containing stricter corporate governance norms and requiring greater disclosures.

The objectives of the Bill were: 

1. Revising and modifying the Act in consonance with the changes in the National and International economy,
2. Bringing about compactness of company law by deleting the provisions that had become redundant and by re-grouping the scattered provisions,
3. Re-writing of various provisions of the Act to facilitate easy interpretation,
4. De linking the procedural aspects from the substantive law and provide greater flexibility in rule making to enable adoption to the changing economic and technical environment.
5. Enabling the corporate sector to operate in a regulatory environment of best international practices that fosters entrepreneurship, investment and growth. 

Checklist for Incorporation of Company

Step-1

1.Obtaining Directors Identification Number (DIN) 

Checklist for Obtaining DIN (If Applicant does not have the DIN)

1. Signed copy of PAN 
2. Signed copy of Address Proof 
3. Color Photograph 
4. Area of Occupation (Self employed, Professional, home maker, Student, Serviceman) 
5. Educational Qualification Certificate 
6. Email address 
7. Mobile number 
8. Place of birth 

Note: - For Obtaining DIN applicant must have the Digital Signature.

For obtaining Digital Signature following documents are required:-

1. Signed original application 
2. One color photograph of the applicant 
3. Photograph should be crossed signed on the application 
4. Signed copy of PAN 
5. Signed copy of Address proof 
6. Email 
7. Mobile number 

Step-2

(Selecting a name)

1. The promoter under a proposed name shall make an application for Reservation of name in Form INC-1 to Registrar of Companies of the state in which registered office of company is proposed to be situated. 
2. Applicant is required to give 6 alternative names to the registrar. 
3. The proposed name shall not be Identical/ similar to the name of a Company already exist. 
4. The proposed name shall not be registered in the Trade marks 
5. If the proposed name contains name of any other person than promoters or their close blood relatives then NO Objection Certificate from that other person would be required. 
6. If the proposed name includes name of the relatives then proof of relation would be required. 
7. Minimum 2 Directors in case of a private company and 3 in case of a Public Limited company. 

Registrar after examining all the documents may reserve the name of the Proposed Company which will be valid for 60 days from the date of application.

Step-3 

(Filing of various Documents after getting the Name Approval)

An Application shall be filed, with the Registrar within whose jurisdiction the registered office of the company is proposed to be situated, in Form INC-7 for Incorporation of Company

Form INC-7 is required to be filed for Incorporation of the Company

Section 7 (1):

Following documents and information to be filed with the Registrar within whose jurisdiction the registered office of a company is proposed to be situated, namely:

• The MOA & AOA duly signed by all the subscribers to the memorandum. 
• A declaration in form INC-8 to be filed by an advocate, a chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of the company on Rs. 10 stamp paper duly notarized. 
• An affidavit in  form INC-9 from each of the subscribers to the memorandum and from persons named as the first directors on Rs. 10 stamp paper duly notarized. 
• Verification of Signature of Subscribers in  Form INC-10. 
• The address for correspondence till its registered office is established. 
• The particulars of name, including surname or family name, residential address, nationality and such other particulars of every subscriber to the memorandum along with proof of identity, as may be prescribed. 
• Number of shares Subscribed by each Subscriber. 
• The particulars of the persons mentioned in the articles as the first directors of the company, their names, including surnames or family names, the Director Identification Number, residential address, nationality and such other particulars including proof of identity as may be prescribed. 
• The particulars of the interests of the first directors of the company in, other firms or bodies corporate along with their Consent to act as a Director of the company in  Form DIR-2. 

(2) The Registrar on the basis of documents and information filed under sub-section (1) shall register all the documents and information referred to in that subsection in the register and issues a certificate of incorporation in the prescribed form to the effect that the proposed company is incorporated under this Act. 

(3) On and from the date mentioned in the certificate of incorporation issued under subsection(2), the Registrar shall allot to the company a corporate identity number, which shall be a distinct identity for the company and which shall also be included in the certificate. 

(4)Form INC-7 to be filed within sixty days from the date of application of reservation of name in Form INC-1 

Step-4

(Filing of Form INC -22)

1) Verification of Registered office to be filed in Form INC-22 with Registrar within 30 days from the date of incorporation.

Any of the following documents shall be attached along with the form, namely -

• The registered document of the title of the premises of the registered office in the name of The Company. 
• the notarized copy of lease / rent agreement in the name of the company along with a copy of rent paid receipt not older than one month, if any. 
• The authorization from the owner or authorized occupant of the premises along with proof of ownership or occupancy authorization, to use the premises by the company as its registered office, if any. 
• The proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner or document, as the case may be, which is not older than two months.

Exemptions to Government Companies U/s. 462 of CA 2013

G.S.R. __(E). – In exercise of the powers conferred by clauses (a) and (h) of sub-section (1) of section 462 and in pursuance of sub-section (2) of said section of the Companies Act, 2013 (18 of 2013) and in supersession of notifications issued under section 620 of the Companies Act, 1956 (1 of 1956), except as respects things done or omitted to he done before such supersession, the Central Government, in the interest of public, hereby directs that certain provisions of the Companies Act, 2013, as specified in column (2) of the Table, shall not apply or shall apply with such exceptions, modifications and adaptations, as specified in column (3) of the said Table, to a Government company, namely:-

namely :-

S. No.	Chapter                Number/ Section number/ Sub-section(s) in the Companies Act, 2013	Exceptions, Modifications and Adaptations.
(1)	(2)	(3)
1.	Chapter II, section 4.	In section 4, in sub-section (1). in clause (a), the words ‘in the case of a public limited company, or the last words “Private Limited” in the case of a private limited company’ shall he omitted.
2.	Chapter  IV,  section 56	In sub-section  (1), after the proviso, the following provisos shall he inserted, namely:- Provided further that the provisions of this sub-section, in so far as it requires a proper instrument of transfer, to be duly  stamped and executed by or on behalf of the transfer  and  by or on behalf of the transferee, shall not apply with respect  to bonds issued by a Government company, provided that an  intimation by the transferee specifying his name, address and  occupation, if any, has been delivered to the company along with the certificate relating to the bond; and if no such certificate is in existence, along with the letter of allotment of  the bond: Provided also that the provisions of this sub-section shall not apply to a Government Company in respect of securities held by nominees of the Government.
3.	Chapter VII.  section 89.	Shall not apply.
4.	Chapter VII.  section 90.	Shall not apply
5.	Chapter   VII.   sub- section  (2) of section 96	In sub-section (2). for the words “some other place within the city, town or village in which the registered office of the company is situate”, the words “such other place as the Central Government may approve in this behalf ” shall be  substituted.
6.	Chapter VIII, second proviso to sub-section (1 ) of section 123.	Shall not apply to a Government Company in which the entire  paid  up  share  capital  is  held  by  the  Central Government, or by any State Government or Governments or  by  the  Central  Government  and  one  or  more  State Governments.
7.	Chapter   VIII.   sub- section  (4) of section 123.	Shall not apply to a Government Company in which the entire  paid  up  share  capital  is  held  by  the  Central Government. or by any State Government or Governments or by  the  Central  Government  and  one  or  more  State Governments or by one or more Government Company.
8.	Chapter  IX.  section 129.	Shall not apply to the extent of application of Accounting Standard  17 (Segment Reporting) to the companies engaged in defence production.
9.	Chapter IX, clause (e) of sub-section  (3) of section 134	Shall not apply
10	Chapter IX, clause (p) of sub-section  (3) of section 134.	Shall not apply in case the directors are evaluated by the Ministry or Department of the Central Government which is  administratively in charge of the company, or, as the case  may be. the State Government, as per its own evaluation  methodology.
11	Chapter  Xl  section 149 (1) (b)    and   first proviso to sub-section (1) of section  149.	Shall not apply
12.	Chapter XI, clause (a) of sub-section  (6) of section 149.	In section  149. in sub-section (6), in clause (a), for the word “Board”, the words “Ministry or Department of’ the Central Government which is administratively in charge of the company, or, as the case may he, the State Government” shall be substituted
13	Chapter XI, clause (c) of sub-section  (6) of section 149.	Shall not apply.
14.	Chapter   XI   sub-section  (5) of section 152	Shall not apply where appointment of such director is done by the Central Government or State Government, as the case may be
15.	Chapter   XI   sub sections (6) and (7) of section 152	Shall not apply to – (a) a Government Company in which the entire paid up share capital is held by the Central Government, or by any State Government or Governments or by the Central Government and one or more State Governments; (b) a subsidiary of a Government company, referred to in (a) above, in which the entire paid up share capital is held by that Government company.
16	Chapter  XI,  section 160.	Shall not apply to – (a) a Government Company in which the entire paid up share capital is held by the Central Government, or by any State Government or Governments or by the Central Government and one or more State Governments; (b) a subsidiary of a Government company. referred to in (a) above, in which the entire paid up share capital is held by that Government company.
17	Chapter  XI,  section 162.	Shall not apply to – (a) a Government Company in which the entire paid up share capital is held by the Central Government, or by any State Government or Governments or by the Central Government and one or more State Governments; (b) a subsidiary of a Government company, referred to in (a) above, in which the entire paid up share capital is held by that Government company.
18	Chapter  X1,  section  163.	Shall not apply to – (a) a Government Company in which the entire paid up share capital is held by the Central Government, or by any State Government or Governments or by the Central Government and one or more State Governments; (b) it subsidiary of a Government company, referred to in (a) above, in which the entire paid up share capital is held by that Government company.
19	Chapter   XI,    sub- section(2) of section 164	Shall not apply.
20	Chapter  XI,  section 170	Shall not apply to a Government Company in which the.entire share capital is held by the Central Government, or by any State Government or Governments or by the Central Government or by one or more State Governments
21	Chapter  XI,  section 171	Shall not apply to a Government Company in which the entire share capital is held by the Central Government, or by any State Government or Governments or by the Central Government or by one or more State Governments.
22	Chapter  XII,  clause (1) of sub-section      (4) of section 177.	ln clause (i) of sub-section (4) of the section 177, for the words “recommendation for appointment, remuneration and terms of appointment” the words “recommendation for remuneration” shall be substituted.
23	Chapter XII, sub-sections (2), (3) and (4) of section 178.	Shall not apply to Government company except with regard to appointment of ‘senior management’ and other employees.
24	Chapter XII, section 185.	Shall  not apply to Government company in case such .company obtains approval of the Ministry or Department of the Central Government which is administratively in charge of the  company,  or,  as  the  case  may  be,  the  State Government before making any loan or giving any guarantee or providing any security under the section
25	Chapter XII, section 186	Shall not apply to        – (a) a   Government   company   engaged   in   defence production; (b) a Government company, other than a listed company. in  case  such  company  obtains  approval  of the Ministry or Department of the Central Government which is administratively in charge of the company, or. as the case may be, the State Government before making any loan or giving any guarantee or providing any security or making any investment under the section.
26	Chapter XII, first and second proviso to sub-section (1) of section 188.	Shall not apply to – (a)  a  Government company in respect of contracts or arrangements entered into by it with any other Government Company (b) a Government company, other than a listed company, in respect of contracts or arrangements other than those referred to in clause (a), in case such company obtains approval of the Ministry or Department of the Central Government which is administratively in charge of the company, or, as the case may be, the State Government before entering into such contract or arrangement.-
27	Chapter   XIII,   sub sections (2),   (4) and (5) of section 196	Shall not apply.
28	Chapter XIII, section 197	Shall not apply.
29	Chapter XIII, sub-sections (l), (2), (3) and (4) of section 203.	After sub-section (4), the following sub-section shall be inserted, namely:- “(4A) The provisions of sub-sections (1). (2). (3) and (4) of this section shall not apply to a managing director or Chief Executive Officer or manager and in their absence, a whole-time director of the Government Company.”
30	Chapter XXIX.  sub-section  (2) of section 439	In sub-section (2), the words the Registrar, a shareholder of the company, or of shall be omitted.

2. The Government companies, while complying with such exceptions, modifications and adaptations, as specified in column (3) of the aforesaid Table, shall ensure that the interests of’ their shareholders are protected.

3.  A copy of this notification has been laid in draft before both Houses of Parliament as required by sub-section (2) of section 462 of the Companies Act. 2013.

Exemption from Provisions related to Loan to directors of Private Companies

MCA vide notification dated 05/06/2015 titled Exemptions to Private Companies U/s. 462 of CA 2013 has provided that  Restriction on loan to directors provided under section 185 of Companies Act, 2013 shall not apply to following private companies: 

(a) in whose share capital no other body corporate has invested any money; 

(b) if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and 

(c) such a company has no default in repayment of such borrowings subsisting at the time of making transactions under this section. 

So now Private Companies other than the subsidiary of a public company complying with above requirements can Give loans/ guarantee/security to Group Companies. 

Dividends – All you want to know about

Dividend – Meaning :

The term dividend is used to indicate that a part of the profits of a company, which is to be distributed amongst its shareholders. It may, therefore, be defined as the return that shareholders will get from the company, out of its profits, on his shareholdings.

According to the Institute of Chartered Accountants of India, dividend is, a distribution to shareholders out of profits or reserves available for this purpose. A company should not declare divided unless there are :

1.Sufficient profits

2. Board of Directors recommendation

3. An acceptance of the shareholders in the annual general meeting.

Different types of Dividend :

there are several types of dividends, some of which do not involve the payment of cash to shareholders.

1.Final Dividend :

It is the amount of dividend paid annually, proposed by the board of directors and approved by the shareholders in general meeting. It is known as final dividend because it is usually paid subsequent to the finalization of accounts of the company.

No dividend is paid on calls in advance. And it’s the decision of company whether to pay dividend to those shares having calls in arrears by providing for the same in articles of association.

2.Interim Dividend :

It is the amount of dividend payable between the two Annual General Meeting before finalizing the accounts. Articles of association should permit the company to pay interim dividend.If Articles so permit, the directors may decide to pay dividend at any time between the two Annual General Meeting. No Interim Dividend can be declared without providing for depreciation for the whole financial year.

3.Cash dividend :

The cash dividend is the most common of the dividend types used. On the date of declaration of dividend, the board of directors resolves to pay a certain dividend amount in cash to those investors holding the company’s stock on a specific date. Usually companies having huge liquid cash pay dividend in the form of cash.

4.Stock dividend :

Payment stock dividend is popularly known as issue of bonus shares in India. Issue of bonus shares results in conversion of company’s profit into share capital. Companies, not having liquid cash position, generally pay dividend in the form of shares by capitalizing the profits and reserves.

5.Scrip dividend :

It is the dividend given in the form of promissory notes to pay the amount at a specific future date. The promissory note is known as scrips.When a company is a regular dividend paying company but temporarily its cash position is affected due to locking up of funds, which is likely to be released shortly, this opinion is preferred. Scrip may or may not be interest bearing.Such dividend was allowed before passing of the Companies Act 1960, but thereafter this unhealthy practice was stopped.

6.Bond Dividend :

In case the company does not have sufficient funds to pay dividend in cash it may issue bonds for the amount due to the shareholders by way of dividends. It has longer maturity date than Scrip dividend. It always carries interest. Thus, bondholders get regular interest on their bonds besides payment of bond money on the due date. But this practice is not allowed in India.

7.Property Dividend :

A company may issue a non-monetary dividend to investors, rather than making a cash or stock payment.The distribution of dividend is made whenever the asset is no longer required in the business such as investment or stock of finished goods.

Note :

In India distribution of dividend is permissible in the form of cash or bonus shares only. Distribution of dividend in any other form is not allowed.