Lecture on Companies Act 2013 and Other Related Topics

Session Overview

• Main Topic: Companies Act 2013
• Revision Series: Special 26 5.0
• Session Timing: 3:45 PM daily
• Preparation Guidance: Read from ICAI's module or your current notes/books
• Focus: Completing Companies Act, 2013

Companies Act 2013

General Information

• Total Sections: 470
• Total Schedules: 7
• Total Chapters: 29
• CA Intermediate: 11 chapters cover approximately 40% of Companies Act
• Aim: Improve corporate governance, simplify regulations, attract foreign companies, protect minority interests, support whistle-blowers, and enable class action suits

Applicability

• Companies incorporated under this Act or any previous company law
• Insurance companies (e.g., LIC)
• Banking companies (e.g., SBI)
• Electricity companies (e.g., MSCEB)
• Special Act companies and other companies notified by Central Government

Definition of a Company

• Incorporated under this Act or any previous company law
• Legal definitions and examples

Key Features

• Separate Legal Entity: Company and members are distinct entities
  • Case Law: Macaura vs Northern Assurance Company Limited
• Perpetual Succession: Members may come and go, but the company continues
• Limited Liability: Members' liabilities are limited to unpaid amounts on shares
• Artificial Legal Person: Created by law, can own property, sue, and be sued
• Common Seal: Optional, official signature of the company

Lifting of Corporate Veil (Lifting up of Corporate Veil)

• Purpose: Disregarding corporate entity for tax protection, legal obligations, fraud, and more
• Key Cases:
  • Dinhshaw Maneckji Petit: Tax evasion by creating multiple companies
  • Workmen Employed in Associated Rubber Industries: Avoiding bonus payments by transferring assets
  • Continental Tyre and Rubber Company: Trading with an enemy
  • British Transport Commission: Formation of subsidiary as agent
  • Gilford Motor vs Horne: Company formed for fraudulent purposes

Classes of Companies

Based on Liability

• Limited by Shares: Members liable up to unpaid share value
• Limited by Guarantee: Members promise a certain amount at winding up
• Unlimited Company: No limit on members' liability

Based on Members

• One Person Company (OPC): Single member, nominee's name in MOA
• Private Company: 2 to 200 members, restrictions on share transfers
• Smalls Company: Private company with paid-up share capital ≤ ₹4 crore and turnover ≤ ₹40 crore
• Public Company: Not a private company, no member limit
• Deemed Public Company: Subsidiary of public company considered public

Based on Control

• Holding and Subsidiary Companies
  • Conditions: Control over board of directors or holding majority voting power
  • Associate Company: Significant influence but not a subsidiary (20%-50% voting power)

Based on Capital

• Listed Company: Securities listed or in process
• Unlisted Company: Securities not listed

Other Companies

Government Company

• Definition: ≥51% paid-up share capital held by government(s)
• Subsidy Inclusion: Includes subsidiaries of government companies

Foreign Company

• Definition: Incorporated outside India, conducting business in India

Section 8 Company

• Purpose: Charitable objects
• Features: No dividend distribution, funds used for promoted objectives

Dormant Company

• Purpose: Future projects, holding assets/intellectual property
• Criteria: No significant accounting transactions

Nidhi Company

• Purpose: Cultivate thrift and savings, mutual benefit

Public Financial Institution (PFI)

• Conditions: Established under an Act of Parliament, ≥51% government stake
• Examples: LIC, IDFC

Final Notes

• Focus on effective preparation, maintain consistency, and aim for conceptual clarity