CHAPTER I
INCORPORATION,
CONVERSION, AMALGAMATION, TAKE-OVER DISSOLUTION
A. INCORPORATION [Topic 1 to 8]
B. CONVERSION [Topic 9 to 14]
C. AMALGAMATION [Topic 15 to 16]
D. TAKE OVER [Topic 17 to 20]
E. DISSOLUTION [Topic 21 to 25]
(Topic 1 to Topic 8)
Topic 1
1. Select, in
order of preference, a few suitable names, not less than four, each of which
should indicate as far as possible the main object of the proposed company.
2. Out of the
four proposed names as above one name will be main and other three to be
mentioned in order of preference.
3. Avoid names
which resemble too closely or are the same as the names of any other company
already registered. [Section 20], and also avoid names with the words
"Stock Exchange" as part of the name.
4. Names starting
with small alphabets can be used but before using such names it should be
ensured that such names do not have phonetic or visual resemblance to the name
of a company in existence. [Circular No. 6/99, dated 13‑5‑1999].
5. Follow the
guidelines issued by the Central Government for availability or otherwise of
certain names'.
6. See that the
name chosen does not violate the provisions of Emblems and Names (Prevention of
Improper Use) Act, 1950'.
7. Also see that
the name chosen does not contain words like "mutual funds" forming
part of your proposed company unless it is going to be incorporated actually as
a mutual fund company. [PIB Press Release, New Delhi, dated 14‑2-2000].
8. Apply to the
Registrar of Companies of the state in which you proposed to incorporate a
public limited company to ascertain which of the names selected by you is
available.
9. An Application
in Form No. lA is prescribed in this regard by the Companies (Central
Government's) General Rules and Forms, 1956 and a fee of Rs. 500/- is payable
with each application. [Rule 4A].
10. See that one
of the promoters is kept as the subscriber to the memorandum and articles of
association of the proposed company. [Circular No. 1/95 vide File No. 14/6/94
CL‑V, dated 16‑2‑1995].
11. Pay the fee for
the application for availability of name in cash to the Registrar of
Companies.
12. The Registrar
of Companies will ordinarily inform within a period of seven days from the date
of submission of your application whether any of the names applied for is
available or not.
13. Keep in mind
that as per Citizen's Charter issued by the Department of Company Affairs,
Schedule III, Serial No. 1 an application for approval of name of a proposed
company is required to be given within 3 working days. [File No. 5/25/99‑CL‑V;
Press Note No. 9/99 dated 9‑8‑1999].
14. If the name is
not made available, apply again to the Registrar of Companies selecting fresh
names with required application fee where computer facility is available in the
Registrar of Companies office, name availability applications are disposed of
within 3 working days after their receipt. [Circular No. 14/6/94 CL‑V,
dated 16‑2‑1995 read with GSR 283(E), dated 21‑3‑1995].
15. Get the
Memorandum and Articles of Associations suitably drafted. [Sections 13 to 15
and 26 to 30].
(a) The Articles of Association need not necessarily be prepared
and registered in the case of public companies limited by shares as in that
case, Table 'A' of Schedule I shall apply, but in practice, they are invariably
prepared and registered to suit individual requirements;
(b) For references in the Act for matters to be provided in
Articles please refer Appendix 26;
(c) For Matters though not referred to in the Act, but being important,
should be included in the Articles, refer Appendix 27;
(d) For contents and form of Memorandum refer to Sections 13 and
14 and Schedule I Table B of the Act.
(e) While drafting ensure that Memorandum and Articles of
Association are divided into paragraphs numbered consecutively.
16. Ensure that
the authorised share capital of the proposed public company at least is or more
than Rs. 5 lakhs or such higher amount, as may be prescribed to be the minimum
paid up capital for a public company. [Section 3(1)(iv)(b)]
17. If you want to
have the shares of your proposed company to be enlisted with a recognised Stock
Exchange later on when public issue will be made then ensure that the draft of
the proposed Articles of Association includes those specific provisions which
Stock Exchange generally requires to be included in the Articles of public
companies going for enlistment.
18. Before finally
printing the Memorandum and Articles of Association get proper guidance from
the concerned Registrar of Companies, so that at the time of their
registration there are less corrections and alterations.
19. Keep in mind
that computer printed Memorandum and Articles of Association will be accepted
and taken on record by all the Registrar of Companies9 from now on.
20. Get
both the Memorandum and Articles of Association stamped as per the Indian Stamp
Act or the relevant State Act and the notifications thereunder in force in your
State. 11
21. Get both the
Memorandum and Articles of Association after being stamped and duly signed by
at least seven subscribers, each of whom will also write in his own hand, his
father's name, occupation, address and the number of shares subscribed for.
22. There will be
at least one witness to these signatures as mentioned above who will sign and
write in his own hand, his father's name, occupation and address. (Sections 12,
15 and 30).
23. The aforesaid
two documents may be signed on behalf of the subscribers by their agents duly
authorised by power of attorney.
24. In case of an illiterate
subscriber ensure that he gives his thumb impression or mark which is
described as such by the person writing for him.
25. Both these documents will then be dated.
26. See that the
date given on these two documents is any date after the date of stamping of
them and not before that date.
27. Get the following Forms duly filled up and signed:
(i) Consent
of a person to act as a director in Form No. 29. [Section 266];
(ii) Undertaking to take and pay for qualification shares in Form
No. 29.This will be required only where share qualification for directorship is
required and the person named in the Articles of Association as a director has
not subscribed the Memorandum and Articles of Association for shares at least
equal to his qualification shares. [Section 266 (1)(b)(iii)];
(iii) Declaration of Compliance in Form No. 1 by an advocate of the
Supreme Court or of a High Court, an attorney or a pleader entitled to appear
before a High Court or a Secretary or a Chartered Accountant, in whole‑time
practice in India who is engaged in the formation of a company, or by a person
named in the Articles as a director, manager or secretary of the company that
all the requirements of the Companies Act, 1956 and the rules thereunder have
been complied with in respect of registration and matters precedent and
incidental thereto. [Section 33(2)];
(iv) Notice of the situation of the registered office of the
company in Form No. 18. [Section 146];
(v) Particulars of directors, manager or secretary in Form No. 32
in duplicate. [Section 303];
(vi) Declaration in favour of one of the subscribers to the
memorandum of association or any other person authorising him to file the
documents and papers for registration and to make necessary corrections, if
any. This should be executed on non‑judicial stamp paper of the requisite
value.
[Forms stated in sub‑items (iv) and (v),
though required to be filed within thirty days of the incorporation of the
company, are generally filed together with the Memorandum and Articles of Association.]
28. File the
following with the Registrar of Companies within six months from the date of
availability of name with necessary registration and filing fees. Minimum
registration fee is Rs. 4000/‑ and the maximum is Rs. 2 crores [Schedule
X to the Act]:-
(i) The stamped and signed copy of the Memorandum and Articles
of Association. [Section 33];
(ii) The
Forms mentioned in item 27 above;
(iii) Any other agreement, if referred to in the Memorandum and
Articles of Association, as in that case, it will form a part of the
Memorandum, and Articles;
(iv) Any agreement which the company to be incorporated proposes to
enter into with any individual for appointment as its managing or whole‑time
director or manager. [Section 33(1)(c)] ;
(v) Original copy of the Registrar of Companies' letter
intimating about the availability of name.
29. Pay the
registration and filing fee by way of cash or demand draft or treasury challan
for registration of Memorandum of Association and for filing of Articles of
Association and the forms mentioned in items 27 and 28 above depending on the
authorised share capital of the proposed company (Schedule X of the Act). [Rule
22].
30. If paid by way
of demand draft, then draw the demand draft in favour of either the concerned
Registrar of Companies of the State or Union Territory or Pay and Accounts
Officer, Department of Company Affairs, New Delhi or Mumbai or Kolkata or
Chennai [Rule 22].
31. If paid by way
of treasury challan, then obtain three copies of treasury challan from the
specified branches of the Punjab National Bank18 and fill the
details and deposit along with the fee in cash to the said branch of the bank.
32. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21‑6‑1996
(w.e.f. 21‑6‑1996). For account head and code please see Rule 22(1)
in Appendix 1.
33. Two copies of
the challans will be given to the depositor one of which should be sent to the
Registrar of Companies along with the forms and documents mentioned in item 28.
34. The Registrar
of Companies will then scrutinise the documents and papers filed for
registration and, if necessary, on intimation, the authorised person will make
necessary correction in them under his initials.
35. The Registrar
of Companies will then register the company and issue the certificate of
incorporation on which there will be a 21 digit Corporate Identity Number
(CIN). [Circular No. 12/2000, dated 25‑10‑2000] [Sections 33 &
34].
36. The date given
by the Registrar of Companies on the certificate of in( poration will be the
date of incorporation of the company and on that date, company will come into
being as a separate legal entity.
37. On
registration a public company cannot commence business so long it does not
obtain Certificate of Commencement of Business as per Topic 184. [Section
149(2)].
38. Please note
that if you propose to incorporate a private company as a subsidiary of a
public company, it will be treated as a public company. 19 [Sec
3(1)(iv)(c)]
Topic 2
DO YOU WISH TO INCORPORATE A
PRIVATE LIMITED COMPANY?
Introductory
Notes
The procedure of incorporation
of a private limited company is the same as that of a public limited company
(described under Topic 1) with the following exceptions:
(i) There should at least be 2 subscribers in place
of 7. [Section 12];
(ii) The Forms stated in item 23(i) and (ii) of
Topic I will not be required to be prepared and filed in this case;
(iii) Registration of the Articles of Association
with the Registrar of Companies is compulsory. [Section 26].
The provisions of Section
3(1)(iii) of the Companies Act should, however, be carefully noted while
drawing up the Articles of Association of a private limited company including
the new sub‑clause (d) prohibiting any invitation or acceptance of
deposits from persons other than its members, directors or their relatives,
inserted under section 3(1)(iii) after sub‑clause (c) [Section 27(3)].
1. Select, in
order of preference, a few suitable names, not less than four, each of which
should indicate as far as possible the main object of the proposed company.
2. Out
of the four proposed names as above one name will be main and other three to be
mentioned in order of preference.
3. Avoid names
which resemble too closely or are the same as the names of any other company
already registered, [Section 20] and also avoid names with the words
"Stock Exchange" as part of the names.
4. Names starting
with small alphabets can be used but before using such names it should be
ensured that such names do not have phonetic or visual resemblance to the name
of a company in existence. [Circular No. 6199, dated 13‑5‑19991.
5. Follow
the guidelines issued by the Central Government for availability or otherwise
of certain names.
6. See that the
name chosen does not violate the provisions of Emblems and Names (Prevention of
Improper Use) Act, 1950.
7. Also see that
the name chosen does not contain words like "mutual fund" forming
part of your proposed company's name unless it is going to be incorporated
actually as a mutual fund company. [PIB Press Release, New Delhi, dated 14‑2‑2000.]
8. Apply to the
Registrar of Companies of the State in which you propose to incorporate a
private company, to ascertain which of the names selected by you is available.
9. An application
in Form No. 1A is prescribed in this regard by the Companies (Central
Govemment's) General Rules and Forms, 1956, and a fee of Rs.500/- is payable
with each application. [Rule 4A].
10. See that one
of the promoters is kept as the subscriber to the memorandum and articles of
association of the proposed company. [Circular No. 1/95 vide File No. 14/6/94
CL‑V, dated 16‑2‑1995].
11. Pay the fee
for the application for availability of name in cash to the Registrar of
Companies.
12. The Registrar
of Companies will ordinarily inform within a period of seven days from the
submission of your application whether any of the names applied for is
available.
13. Keep in mind
that as per Citizen's Charter issued by the Department of Company Affairs,
Schedule III, Serial No. 1 an application for approval of name of a proposed
company is required to be given within 3 working days. [File No. 5/25/99‑CL‑V;
Press Note No. 9/99 dated 9‑8‑1999].
14. If the name is
not available, you will have to apply again selecting fresh names, with
required application fee where computer facility is available in the
Registrar of Companies office, name availability applications are disposed of
within 3 working days after their receipt. [Circular No. 14/6/94 CL‑V,
dated 16-2‑1995].
15. Get the
Memorandum and Articles of Association drafted suitably for a private limited
company:
(a) For
contents and form of Memorandum, refer to Sections 13 and 14;
(b) Both the Memorandum and Articles be printed and divided into
paragraphs numbered consecutively. [Sections 15 & 30];
(c) There is no form given in the Act for the Memorandum and the
Articles of a private company limited by shares. [Section 29].
(d) While drafting ensure that Memorandum and Articles of
Association are divided into paragraphs numbered consecutively.
16. Ensure that
the authorised share capital of the proposed private company at least is or
more than Rs. 1 lakh or such higher amount as may be prescribed to be the
minimum paid‑up capital for a private company. [Section 3(1)(iii)]
17. Before finally
printing the Memorandum and Articles of Association, get proper guidance from
the concerned Registrar of Companies, so that at the time of their registration
there are less corrections and alterations.
18. Keep in mind that
computer printed Memorandum and Articles of Association will be accepted and
taken on record by all the Registrar of Companies from now on.
19. Get both the
Memorandum and Articles of Association stamped as per the Indian Stamp Act or
the relevant State Act and the notifications thereunder in force in your State.
20. Get both the
Memorandum and Articles of Association signed by at least two subscribers, each
of whom will also write in his own hand, his father's name, occupation, address
and the number of shares subscribed for.
21. There will be
at least one witness to these signatures as mentioned above who will sign and
write in his own hand, his father's name, occupation and address. [Sections 12,
15 and 30].
22. The aforesaid
two documents may be signed on behalf of the subscribers by their agents duly
authorised by power of attorney.
23. In case of an
illiterate subscriber ensure that he gives his thumb impression or mark which
is described as such by the person writing for him.
24. Both the documents will then be dated.
25. See
that the date given on these documents is any date after the date of stamping
of them and not before that date.
26. Get the following forms duly
filled up and signed:-
(i) Declaration of compliance in Form No.1 by an advocate of the
Supreme Court or of a High Court, an attorney or a pleader entitled to appear
before a High Court or a Secretary or a Chartered Accountant, in whole‑time
practice in India who is engaged in the formation of a company, or by a person
named in the Articles as a director, manager or secretary of the company that
all the requirements of the Companies Act, 1956 and the rules thereunder have
been complied with in respect of registration and matters precedent and
incidental thereto. [Section 33(2)];
(ii) Notice of the situation of the registered office of the
company in Form No. 18. [Section 146];
(iii) Particulars of directors, manager or secretary in Form No. 32
in duplicate. [Section 303];
(iv) Declaration in favour of one of the subscribers to the
memorandum of association or any other person authorising him to file the
documents and papers for registration and to make necessary corrections, if
any. This should be executed on non‑judicial stamp paper of the requisite
value.
[Forms stated in sub‑items (ii) and (iii),
though required to be filed within 30 days of the incorporation of the company,
are generally filed together with the Memorandum and Articles of Association.]
27. File the
following with the Registrar of Companies within six months from the date of
availability of name with necessary registration and filing fees. Minimum
registration fee is Rs. 4000/‑ and the maximum is Rs. 2 crores. 14[Schedule
X to the Act]:-
(i) The stamped and signed copy of the Memorandum and Articles
of Association. [Section 33];
(ii) The
forms mentioned in item 26 above;
(iii) Any other agreement, if referred to in the Memorandum and
Articles of Association, as in that case, it will form a part of the Memorandum
and Articles;
(iv) Any agreement which the company to be incorporated proposes to
enter into with any individual for appointment as its managing or whole‑time
director or manager. [Section 33(1)(c) ]
(v) Original copy of the Registrar of Companies' letter
intimating about the availability of name.
28. Pay the
registration and filing fee by way of cash or dernand draft or treasury challan
for registration of Memorandum of Association and for filing of Articles of
Association and the forrns mentioned in item 26 depending on the authorised
share capital of the proposed company [Schedule X of the Act] read with [Rule
22].
29. If paid
by way of demand draft, then draw the demand draft in favour of either the
concerned Registrar of Companies of the State or Union Territory or Pay and
Accounts Officer, Department of Company Affairs, New Delhi, or Mumbai, or
Kolkata or Chennai, as the case may be. [Rule 22].
30. If paid by way
of treasury challan, then obtain three copies of treasury challan from the
specified branches of the Punjab National Bank17 and fill up the
details and deposit along with the fee in cash to the said branch of the bank.
31. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21‑6‑1996
(w.ef 21‑6‑1996). For account head and code please see Rule 22(1)
in Appendix 1.
32. Two copies of
the challans will be given to the depositor one of which should be sent to the
Registrar of Companies along with the forms and documents mentioned in item 26
and item 27.
33. The Registrar
of Companies will then scrutinise the documents and papers filed for
registration and, if necessary, on intimation, the authorised person will make
necessary correction in them under his initials.
34. The Registrar
of Companies will then register the company and issue the certificate of
incorporation on which there will be a 21 digit Corporate Identity Number (CIN).
[Circular No. 12/2000, dated 25‑10‑2000]. [Sections 33 & 34 ].
35. The date given
by the Registrar of Companies on the certificate of incorporation will be the
date of incorporation of the company and on that date, the company will come into
being as a separate legal entity.
36. The private
limited company so registered can commence business and exercise borrowing
powers immediately after obtaining the certificate of incorporation from the
Registrar of Companies. [Section 149(7)(a)].
37. Please note
that if you propose to incorporate a private company which is going to be a
subsidiary of a public company, it will be treated as a public company.
[Section 3(1)(iv)(c)]
Topic 3
DO YOU WISH TO INCORPORATE A PRIVATE
COMPANY WITH PREFERENCE SHARES ONLY?
1. While
incorporating a private limited company with preference shares only and those
preference shares having voting rights, keep in mind the provisions of sub‑section
(1) of section 90, which allow exemption from the provisions of sections 85,
86, 87, 88 and 89.
2. Further
keep in mind that the private company after incorporation does not become a
subsidiary of a public company. [Section 90(2) Explanation].
3. Follow the
same procedure given in Topic 2 for incorporating a private limited company
with preference shares only with voting rights, as only a private limited
company can have such a capital clause.
4. While
drafting the Memorandum of Association see that only preference shares of a
fixed dividend are mentioned in the capital clause.
5. While drafting
the Articles of Association see that not only preference shares with fixed
dividends are mentioned under the heading capital but also the fact that such
preference shares will carry voting rights is mentioned under the heading
"voting rights".
6. Ensure
that the paid‑up capital of such a private company is minimum Rs. 1 lakh
or such higher paid‑up capital as may be prescribed. [Section 3(1)(iii)]
7. Further ensure
that such a private company prohibits any invitation or acceptance of deposits
from persons other than its members, directors or their relatives. [Section
3(1)(iii)(d)]
8. Keep in mind
that a1though a private company with preference shares only can be incorporated
but there also should be some equity shares for the purpose of giving
preference to the preference shareholders so issued over and above the equity
shareholders.
Topic 4
DO YOU WISH TO INCORPORATE A COMPANY
LIMITED BY GUARANTEE?
Introductory
Notes
The procedure of incorporation of a company limited
by guarantee is the same as that of a public company or a private company,
limited by shares, as described under Topics 1 and 2. A company having the
liability of its members limited by the memorandum of association to such
amount as the members may respectively undertake to contribute to the assets of
the company in the event of its being wound up, is termed as a company limited
by guarantee. [Section 12(2)(b)]. In the Memorandum of Association of such a company,
however, a clause stating the amount of guarantee shall have to be added in
addition to the other necessary conditions. Similarly, in the Articles of
Association of such a company, an article stating the number of members with
which the company is proposed to be registered must be included.
A company limited by guarantee may be a company
with a share capital or without a share capital. Such a company may be either a
Private or Public Company. Thus, there can be four types of company limited by
guarantee and they are:-
(i)
It may be without a
share capital and be a private company; or
(ii)
It may be without a
share capital and be a public company; or
(iii)
It may be with a
share capital and be a private company; or
(iv)
It may be with a share
capital and be a public company.
1. Select, in
order of preference, a few suitable names, not less than four, each of which
should indicate as far as possible the main object of the proposed company.
2. Out
of the four proposed names as above one name will be main and other three to be
mentioned in order of preference.
3. Avoid names
which resemble too closely or are the same as the names of any other company
already registered. [Section 20].
4. Names starting
with small alphabets can be used but before using such names it should be
ensured that such names do not have phonetic or visual resemblance to the name
of a company in existence. [Circular No. 6/99, dated 13‑5‑1999].
5. Follow
the guidelines issued by the Central Government for availability or otherwise
of certain names1.
6. See that the
name chosen does not violate the provisions of the Emblems and Names
(Prevention of Improper Use) Act, 19502.
7. Also see that
the name chosen does not contain words like "mutual fund" forming
part of your proposed company's name unless it is going to be incorporated
actually as a mutual fund company. [PIB Press Release, New Delhi, dated 14‑2‑2000.]
8. Apply to the
Registrar of Companies of the State in which you propose to incorporate a company
limited by guarantee, to ascertain which of the names selected by you is
available.
9. An application
in Form No. 1A is prescribed in this regard by the Companies (Central
Government's) General Rules and Forms, 1956, and a fee of Rs. 500/-3
is payable with each application. [Rule 4A].
10. See that one
of the promoters is kept as the subscriber to the memorandum and articles of
association of the proposed company. [Circular No. 1/95 vide File No. 14/6/194
CL‑V, dated 16‑2‑1995].
11. Pay the fee for
the application for availability of name in cash to the Registrar of
Companies.
12. The Registrar
will ordinarily inform within a period of seven days from the submission of
your application whether any of the names applied for is available.
13. Keep in mind
that as per Citizens Charter issued by the Department of Company Affairs,
Schedule III, Serial No. 1 an application for approval of name of a proposed
company is required to be given within 3 working days. [File No. 5/25/99‑CL‑V;
Press Note No. 9/99 dated 9‑8‑1999].
14. If the
name is not made available, you will have to apply again to the Registrar of
Companies selecting fresh names with required application fee.
15. Where computer
facility is available in the Registrar of Companies office name availability
applications are disposed of within 3 working days after their receipt.
[Circular No. 14/6/94 CL‑V, dated 16‑2‑1995 read with GSR
283(E), dated 21‑3‑1995].
16. Get the
Memorandum and Articles of Association suitably drafted. [Sections 13 to 15
and 26 to 30].
17. If the
proposed company limited by guarantee is not having a share capital and is to
be incorporated as a public company, then follow Table C to Schedule I to the
Act for drafting Memorandum and Articles of Association.
18. If it is to be
a company limited by guarantee without a share capital and is also to be a
private company, then:
(a) Add the word "Private" in the name clause in
addition to other things stated in Table C to Schedule I to the Act; and
(b) Add the provisions of section 3(l)(iii)(a), (b) and (c) with
a modification to the effect that reference to shares shall be stated as
interest of the members of the company, whatever the form of the interest may
be [Section 42(5)] in the Articles of Association; and
(c) See
that the subscribers to the Memorandum of Association are only two.
19. If the
proposed company limited by guarantee is having a share capital and is to be
incorporated as a public company, then follow Table D to Schedule I to the Act
for drafting Memorandum and Articles of Association.
20. In the
aforesaid case the authorised share capital of the proposed guarantee company
need not be Rs. 5 lakhs or such higher amount as may be prescribed to be the
minimum paid‑up capital for a public company.5 [Section 3(6)]
21. If it is to be
a company limited by guarantee with a share capital and is also to be a private
company, then:
(a) Add
the word "Private" in the name clause; and
(b) Add the provisions of section 3(l)(iii)(a), (b) and (c) in
its Articles of Association; and
(c) See
that the subscribers to the Memorandum of Association are only two.
22. In the
aforesaid case the authorised share capital of the proposed guarantee company
need not be Rs. 1 lakh or such higher amount as may be prescribed to be the minimum
paid‑up capital for a private company. [Section 3(6)]
23. Before finally
printing the Memorandum and Articles of Association, get them vetted by the
concerned Registrar of Companies, so that at the time of their registration there
are less corrections and alterations.
24. Keep in
mind that computer printed Memorandum and Articles of Association will be
accepted and taken on record by all the, Registrar of Companies, from
now on.
25. Get both the
Memorandum and Articles of Association stamped as per the Indian Stamp Act or
the relevant State Act and the notification thereunder in force in your State.
26. Get both the
Memorandum and Articles of Association signed by at least seven subscribers if
it is a public company or two subscribers if it is a private company, each of
whom will also write in his own hand, his father's name, occupation, address
and the number of shares subscribed for.
27. There will be
at least one witness to these signatures, who will sign and write in his own
hand, his father's name, occupation, and address. [Sections 12, 15 and 30].
28. The aforesaid
two documents may be signed on behalf of the subscribers by the agents duly
authorised by power of attorney.10
29. In case of an illiterate
subscriber ensure that he gives his thumb impression or mark which described
as such by the person writing for him.11
30. Both the documents will then be dated.
31. See
that the date given on these documents is any date after the date of stamping
of them and not before that date.
32. Get the
following forms duly filled up and signed, if the company limited by guarantee
is a public company:-
(i) Consent
of a person to act as a director in Form No. 29. [Section 266];
(ii) Undertaking to take and pay for qualification shares in Form
No. 29.This will be required only where share qualification for directorship is
required and the person named in the Articles of Association as a director ha's
not subscribed the Memorandum and Articles of Association for shares at least
equal to his qualification shares. [Section 266(1)(b)(iii)]. Moreover, this
will be required only when the company limited by guarantee is having a share
capital;
(iii) Declaration of Compliance in Form No. 1 by an advocate of the
Supreme Court or of a High Court, an attorney or a pleader entitled to appear
before a High Court or a Secretary or a Chartered Accountant, in whole‑time
practice in India who is engaged in the formation of a company, or by a person
named in the Articles as a director, manager or secretary of the company that
all the requirements of the Companies Act, 1956 and the rules thereunder have
been complied with in respect of registration and matters precedent and
incidental thereto. [Section 33(2)];
(iv) Notice of the situation of the registered office of the
company in Form No. 18.[Section 146];
(v) Particulars of directors, manager or secretary in Form No.
32t in duplicate. [Section 303];
(vi) Declaration in favour of one of the subscribers to the
memorandum of association or any other person authorising him to file the
documents and papers for registration and to make necessary corrections, if
any. This should be executed on non‑judicial stamp paper of the requisite
value.
[Note : Forms stated in sub‑items (iv)
and (v), though required to be filed within thirty days of the incorporation of
the company, are generally filed together with the Memorandum and Articles of
Association.]
33. If the company
limited by guarantee is a private company then get the following forms duly
filled up and signed:-
(i) Declaration
of compliance in Form No. 1. [Section 33(2)].
(ii) Notice of the situation of the registered office of the
company in Form No. 18 [Section 146].
(iii) Particulars of directors, manager or secretary in Form No. 32
in duplicate. [Section 303].
(iv) Declaration in favour of one of the subscribers to the
Memorandum of association or any other person authorising him to file the
documents and papers for registration and to make necessary corrections, if
any. This should be executed on non‑judicial stamp paper of the requisite
value.
34. File the
following with the Registrar of Companies within six months from the date of
availability of name with necessary registration and filing fees.13
Minimum registration fee is Rs. 4000/‑and the maximum is Rs. 2 crores12
, where the proposed guarantee company is also having a share capital:
(i) The stamped and signed copy of the Memorandum and Articles of
Association. [Section 33];
(ii) The Forms mentioned in item 32 above, or the Forms mentioned
in item 33 above if it is a private company;
(iii) Any other agreement, if referred to in the Memorandum and
Articles of Association, as in that case, it will form a part of the Memorandum
and Articles of Association;
(iv) Any agreement which the company to be incorporated proposes to
enter into with any individual for appointment as its managing or whole‑time
director or manager. [Section 33(1)(c)];
(v) Original copy of the Registrar of Companies' letter
intimating about the availability of name.
35. Where the
company is not having a share capital, the registration fee is to be paid
according to the number of members, the minimum of which is Rs. 1000/‑
and the maximum is Rs. 5000/‑.[Schedule X to the Act].
36. Pay the
registration and filing fee by way of cash or demand draft or treasury challan
for registration of Memorandum of Association and for filing of Axticles of
Association and the forms mentioned in item 32 or item 33 as the case may be
and depending on the authorised share capital if there is a share capital.
[Schedule X of the Act] [Rule 22].
37. If paid by way
of demand draft, then draw the demand draft in favour of either the concerned
Registrar of Companies of the State or Union Territory16 or Pay and
Accounts Officer, Department of Company Affairs, New Delhi or Mumbai or Kolkata
or Chennai, as the case may be. [Rule 22].
38. If paid by way
of treasury challan, then obtain three copies of treasury challan from the
specified branches of the Punjab National Bank and fill up the details and
deposit along with the fee to the said branch of the bank.
39. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(1) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21‑6‑1996
(w.ef 21‑6‑1996). For account head and code please see Rule 22(1)
in Appendix 1.
40. Two copies of the
challans will be given to the depositor one of which should be sent to the
Registrar of Companies along with forms and documents mentioned in item 32 or
33.
41. The Registrar
of Companies will then scrutinise the documents and papers filed for registration
and, if necessary, on intimation, the authorised person will make necessary
correction in them under his initials.
42. The Registrar
of Companies will then register the company and issue the certificate of
incorporation on which there will be a 21 digit Corporate Identity Number
(CIN). [Circular No. 12/2000, dated 25‑10‑2000] [Sections 33 &
34].
43. The date given
by the Registrar of Companies on the certificate of incorporation will be the
date of incorporation of the company and on that date, the company will come
into being as a separate legal entity.
44. If the company
limited by guarantee so registered is a private limited company, then it can
commence business and exercise borrowing powers immediately after obtaining the
certificate of incorporation from the Registrar of Companies [Section
149(7)(a)].
45. If the company
limited by guarantee so registered is a public company then it has to obtain
certificate of commencement of business before commencing any business or
exercising any borrowing powers. [Section 149(2)].
Topic 5
[See Section 25(1) and the Companies Regulations,
1956]
1. Select, in
order of preference, a few suitable names, not less than four, each of which
should indicate as far as possible the main object of the proposed company.
2. Out
of the four proposed names as above one name will be main and other three to be
mentioned in order of preference.
3. Avoid names
which resemble too closely or are the same as the names of any other company
already registered. [Section 20].
4. Names starting
with small alphabets can be used but before using such names it should be
ensured that such names do not have phonetic or visual resemblance to the name
of a company in existence. [Circular No. 6/99, dated 13‑5‑1999].
5. Follow the
guidelines issued by the Central Government for availability or otherwise of
certain names2 .
6. See
the name chosen does not violate the provisions of the Emblems and Names
(Prevention of Improper Use) Act, 19503.
7. Also see that
the name chosen does not contain words like "mutual fund" forming
part of your proposed company's name unless it is going to be incorporated
actually as a mutual fund company. [PIB, Press Release New Delhi, dated 14‑2‑2000.]
8. Apply to the
Registrar of Companies of the State in which you propose to incorporate a
company for charitable or other public utility purposes, to ascertain which of
the names selected by you is available.
9. An application
in Form No. 1A is prescribed in this regard by the Companies (Central Government's)
General Rules and Forms, 1956, and a fee of Rs. 500/- is payable with each
application. [Rule 4A].
10. See that one
of the promoters is kept as the subscriber to the memorandum and articles of
association of the proposed company. [Circular No. 1/95 vide File No. 14/6/95,
CL‑ V, dated 16‑2‑1995.]
11. Pay the fee
for application for availability of name in cash to the Registrar of Companies6.
12. The Registrar
will ordinarily inform within a period of seven days from the submission of
your application whether any of the names applied for is available.
13. Keep in mind
that as per Citizens' Charter issued by the Department of Company Affairs,
Schedule III, Serial No. 1, an application for approval of name of a proposed
company is required to be given within 3 working days. [File No. 5/25/99‑CL‑V;
Press Note No. 9/99 dated 9‑8‑1999].
14. If the name is
not made available, you will have to apply again to the Registrar of Companies
selecting fresh names with required application fee.
15. Where computer
facility is available in the Registrar of Companies office, name availability
applications are disposed of within 3 working days after their receipt.
[Circular No. 14/6/94 CL‑V, dated 16‑2‑1995 read with GSR
283(E), dated 21‑3‑1995].
16. Prepare the draft Memorandum and Articles of
Association and get them typed.
17. See that the
Memorandum is in the form specified in Annexure I to the Company Regulations,
1956, or in a form as near thereto as circumstances admit.
18. Keep in mind that
the authorised share capital of the proposed 'Licence' company if it is to be
incorporated as a public company, need not be Rs. 5 lakhs or such higher amount
as may be prescribed to be the minimum paid‑up share capital for a public
company and if it, is to be incorporated as a private company, need not be Rs.
1 lakh or such higher amount as may be prescribed to be the minimum paid‑up
share capital for a private company. [Section 3(6)]
19. It is
advisable to have the draft Memorandum and Articles scrutinised by a solicitor,
a company secretary or a chartered accountant practising in India.
20. Do not get them printed
before being vetted by the Regional Director.
[Regulation 6 of the aforesaid Regulations7].
21. Make an
application to the Regional Director at Mumbai/Kolkata/Kanpur/Chennai in
writing to whom the Central Government has delegated power9,
requesting for issue of a licence under Section 25 for incorporating a company
without the addition to its name of the word 'limited' or the words 'private
limited', as the case may be. [Regulation 310].
22. The application should be accompanied by:
(i) Three printed or type‑written copies of the draft
Memorandum and the Articles of Association of the proposed company. [Regulation
4(i)];
(ii) A declaration on non‑judicial stamp paper of the
required value by an advocate of the Supreme Court or of a High
Court, or an attorney or a pleader entitled to appear before a High Court or a
Chartered Accountant practising in India to the effect that he has scrutinised
the application and the accompanying documents and that he is satisfied that
these have been drawn up in conformity with the Act, and that all the
requirements of the Act and the Rules made thereunder have been duly complied
with in respect of registration or matters incidental or supplementary thereto.
[Regulation 4(ii)];
(iii) Three copies of a list of the names, descriptions, addresses,
and occupations of the promoters (and where a firm is a promoter, of each
partner in the firm), as well as of the members of the proposed Board of
Directors, together with the names of companies, associations and other
institutions, in which such promoters, partners and members of the proposed
Board of Directors are directors, or hold responsible po, sitions, if any, with
descriptions of the positions so held. [Regulation 4(iii)] ;
(iv) A statement showing in detail the assets (with the estimated
value thereof) and the liabilities of the Association, as on the date of the
application, or within seven d4ys of that date. [Regulation 4(v)];
(v) An estimate of the future annual income and expenditure of
the proposed company, specifying the sources of the income and the objects of
the expenditure. [Regulation 4(vi)];
(vi) A statement giving a brief description of the work, if any,
already done by the association and of work proposed to be done by it after
registration in pursuance of Section 25. [Regulation 4(vii)];
(vii) A statement specifying briefly the grounds on which the
application is made. [Regulation 4(viii)]
(viii) A declaration on non‑judicial stamp paper of the required
value12 by each of the persons making the application in the form
set out in Annexure V of the Companies Regulations, 1956 or in a form as near
thereto as circumstances admit. [Regulation 4(ix)];
(ix) A treasury challan or demand draft showing that the necessary
fees have been deposited. The fee for making the application to the Regional
Director is Rs. 500/‑ ; and
(x) A letter of authority given by the person making the
application in favour of any other person to make necessary corrections or
alterations as may be required by the Regional Director, in any documents filed
with him.
23. If paid by way
of demand draft then draw the demand draft favouring "Pay and Accounts
Officer, Department of Company Affairs", Mumbai or Kolkata or Chennai as
the case may be.and payable at Mumbai or Kolkata or Chennai as the case may be.
For payment of application fee by way of demand draft to the Regional Director,
Northern Region Kanpur, draw the demand draft in favour of "Regional
Director, N.R. Department of Company Affairs, Kanpur", and payable at
Kanpur.
24. If paid by way
of treasury challan, then obtain three copies of treasury challan from the
specified branches of the Punjab National Bank15 and fill the
details and deposit along with the fee to the said branch of the bank.
25. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(2) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21‑6‑1996
(w.e.f. 21‑6‑1996). For account head and code please see Rule 22(2)
in Appendix 1.
26. Two copies of
the challans will be given back to the depositor one of which should be sent to
the Regional Director concerned along with the forms and documents mentioned in
item 22.
27. Where the
application is by an association which is already in existence not as a company
but otherwise, three copies of the following documents submitted by the
management thereof to its members for each of the two completed financial years
immediately preceding the date of the application, or where the association has
functioned only for one such financial year, for such year, shall also have to
be enclosed with the application along with all other documents mentioned in
item 22:-
(a) the Accounts;
(b) the Balance Sheets; and
(c) the Reports on the working of the Association.
[Regulation 4(iv)] .
28. If any of the abovementioned
documents is not in English or in Hindi, a translation of that document either
in English or in Hindi, certified to be correct by any promoter or proposed
director or in the case of an association which is already in existence, by any
member of its executive or governing body, shall be furnished to the Regional
Director together with the document. [Regulation 5].
29. Simultaneously
with the application made to the Regional Director, furnish to the Registrar of
Companies, a copy of the application with all its enclosures and accompanying
papers. [Regulation 10].
30. Immediately
on receipt of a copy of the application, the concerned Registrar of Companies
gets the draft Memorandum and Articles of Association and other papers
thoroughly scrutinized in his office to ensure that the various provisions in
these documents conform to the relevant provisions of the Act.
31. The
Registrar of Companies then lists out the modifications considered necessary in
the draft Memorandum and Articles of Association and forwards the same to the
Regional Director within fifteen days of the receipt of the copy of the
application.
32. The Registrar
of Companies also might have some personal knowledge of the promoters and the
proposed members of the Board of Directors and he normally advises the Regional
Director whether or not the proposed company should be granted a licence.
33. The Registrar
of Companies also indicates in his report whether there are other companies in
existence with similar objects in or near the place where the company would be
situated and whether the new proposed company is really necessary.
34. The Registrar
of Companies would, if he thinks that such a consultation is necessary, ask for
the views of the District Magistrate of the State concerned within whose
jurisdiction the registered office of the proposed company is proposed to be
located.
35. In such cases,
the Registrar of Companies would send to the Regional Director a copy of the
District Magistrate's letter in reply to him. Generally, the Registrar gets a
reply direct from the District Magistrate in most of the cases.
36. In
cases, where more important considerations are involved, the Regional Director
makes a reference to the State Government concerned.
37. Such cases as
mentioned above are very few and are largely restricted to companies with the
object of promoting religion of, or rendering social service to, a particular
community, or group. Immediately on receipt of an application, the Regional
Director gets the draft Memorandum and Articles and other papers generally
scrutinized.
38. On receipt of
the report of the Registrar, the applicant may be asked to modify the drafts in
the light of the scrutiny made by the Registrar of Companies and the
Departmental Officers.
39. The Regional
Director will also consult the Ministries concerned ‑of the Central
Government and also determine the objections, if any, received from the public
to a licence being given, where necessary.
40. Having
received the views of the Registrar of Companies, the State Government and the
Ministries of the Central Government, where necessary, and also the objections
from the public, if any, the Regional Director will take a decision whether or
not the licence, applied for, should be granted.
41. Within one week
after the submission of the application to the Regional Director, publish in
the manner specified below, a notice of the application made to the Regional
Director and send a certified copy of that notice to the Regional Director. The
said notice:
(a) shall be in the form set out in Annexure II117 of
the Company Regulations, 1956 or in a form as near thereto as circumstances
admit; [Regulation 11(a)] 17 and
(b) shall be published in principal language of the district in
which the registered office of the company is to be situated and circulating in
that district, and at least once in an English newspaper circulating in that
district. [Regulation 11(b)]. 17
42. Departmental
instructions regarding procedure to be followed in processing application must
be observed.
43. The Regional
Director, being satisfied on all accounts, shall then issue the necessary
licence and may direct the company to insert in its Memorandum or in its
Articles or partly in the one and partly in the other, such conditions of the
licence as may be specified by the Regional Director in this behalf.
44. The licence so
granted shall, however, be revocable by the Regional Director with the
company's right of being heard. [Regulation 14].
45. After
obtaining the licence, get the Memorandum and Articles of Association, as
approved by the Regional Director, printed, and see that such conditions of the
licence as directed by the Regional Director, to be inserted in any one of them
or in both of them are inserted accordingly. [Regulation 14].
46. Prepare and
line up all other Forms and papers which are necessary to be filed with the
Registrar of Companies along with the Memorandum and Articles of Association as
described in Topic 1 item 27, in case of a public company and as referred to in
Topic 2 item 26, in case of a private company without having the Memorandum and
Articles of Association stamped since stamping is exempted under the Indian
Stamps Act, 1899 under Articles 10 and 39 of Schedule I.
47. File the
Memorandum and Articles of Association and all other papers with the Registrar
of Companies with necessary registration and filing fees19 and also
produce the licence granted by the Regional Director.
48. The Registrar
of Companies, on having made the necessary scrutiny and corrections, will issue
the certificate of incorporation and the company will come into being from the
date thereof, without the words "Public Limited" or "Private
Limited" as the case may be.
49. Note
that as per the Citizen's Charter of the Department of Company Affairs,
Schedule II Serial No. 2 Regional Directors are required to grant the licence
within 30 days from the date of filing the application. [File No. 5/25/99‑CL‑V;
Press Note No. 9/99, dated 9‑8‑1999].
I. Departmental Instructions Regarding Procedure to be
followed in Processing Application Processing of Application
1. With a view to
facilitate quicker disposal of applications received from or on behalf of
proposed companies for the grant of licence under Section 25 of the Companies
Act, 1956, it has been decided that the following procedure will hereafter be
followed in processing the aforesaid applications:-
a. The application shall be made to the Central
Government as hitherto;
b. Notice
pursuant to regulation 11 of the Companies Regulations, 1956 shall be published
within one week before or after the admission of the application in one or more
newspapers. The regulation has been amended suitably for this purpose;
c. Applications
will hereafter be accompanied by drafts of the memorandum and articles of
association of the proposed company after scrutiny by an advocate of the
Supreme Court or of a High Court, an attorney or pleader entitled to appear
before a High Court or a Chartered Accountant practising in India, along with a
declaration from such advocate, attorney, pleader or chartered accountant to
the effect that he has scrutinised the application and the accompanying
documents and that he is satisfied that they have been drawn up in conformity
with the Act. Regulations 4 and 8 have been amended accordingly;
d. Immediately
on receipt of a copy of the application under regulation 10, the Registrar
concerned will get the draft memorandum and articles of association and other
papers thoroughly scrutinised in his office with a view to ensure that the
various provisions in these documents conform to the relevant provisions of the
Act. The Registrar will then list out the modifications considered necessary in
the Draft Memorandum and Articles of Association and forward the same to the
Department within fifteen days of the receipt of the copy of the application.
If the Registrar considers the matter to be important enough his comments would
be sent to the Department through the Regional Director who would transmit the
comments of the Registrar within ten days of their receipt by him to this
Department along with his own comments;
e. A
fuller identity of the promoters and the proposed members of the Board of
directors would be available in the applications themselves. Sub‑clause
(ii) of regulations 4 and 8 have been amended accordingly. The Registrar will
then have some personal knowledge of the promotors and the proposed members of
the Board and it should not be difficult for him to advise the Department
whether or not the proposed company should be granted a licence. Only in
doubtful cases he should send his opinion through the Regional Director. The
Registrar shall also indicate in his report whether there are in existence
other companies with similar objects in or near the place where the registered
office is proposed to be situated and whether the new proposed company is
really necessary;
f. The
existing procedure of referring as a matter of routine all applications to the
State Government for their opinion has been discontinued. The Registrar would,
if he thinks such a consultation is necessary, ask for the views of the
District Magistrate concerned within whose jurisdiction the registered office
of the company is proposed to be located. In such cases the Registrar would
send to the Department a copy of the District Magistrate's letter in reply to
him. It is hoped that the Registrar will be able to get a reply direct from the
District Magistrate in most of the cases. In cases, however, where more
important considerations are involved, the Department will make a reference to
the State Government concerned but it is expected that such cases will be few
and will largely be restricted to companies with the object of promoting
religion or social service of a particular community or a group. Immediately on
receipt of an application, the Department will get the draft memorandum and
articles and other papers generally scrutinised. On receipt of the reports of
the Registrar and/or the Regional Director, the applicants will be asked to
modify the drafts in the light of the scrutiny made by the Registrar and the
Departmental Officers. The Department will also consult the Ministries of the
Central Government concerned and also determine the objections, if any,
received from the public to a licence being given to the applicants;
g. Having
received the views of the Registrar, Regional Director, the State Government
and Ministries of the Central Government, where necessary, and also the
objections from the public, if any, the Department will take a decision whether
or not the licence applied for should be granted.
Issue of Licence
2. If the
procedure outlined above is followed diligently, it is hoped that all
formalities would be completed within a period of eight weeks from the receipt
of the application and it should be possible for the Department to issue the
licence applied for within a period of 10 or 12 weeks of receipt of the
application.
New Delhi, the 1st July, 1961
S.O. No. 1578.‑ In exercise of the powers conferred by Sub‑section
(6) of Section 25 of the Companies Act, 1956 (1 of 1956), the Central
Government hereby directs that a body to which a licence is granted under
Section 25 aforesaid shall be exempt from the provisions of the said Act
specified in column (1) of the Table below to the extent specified in
corresponding entries in column (2) of the said Table.
|
Provisions of Act |
Extent of Exemption |
|
(1) |
(2) |
|
Section 147 |
The whole. |
|
Section 160(2)(aa) |
The whole. |
|
Section 166 (2) |
The whole provided that the time, date and place of each annual
general meeting are decided upon beforehand by the Board of Directors, having
regard to the directions, if any, given in this regard by the company in
General Meeting. |
|
Section 171(1) |
A General Meeting may be called by giving a notice in writing of not
less than 14 days. |
|
Section 209(4‑A) |
Books of Accounts relating to a period of not less than four years
immediately preceding the current year shall be preserved. |
|
Section 257 |
Shall not apply to companies whose articles provide for election of
directors by Ballot. |
|
(1) |
(2) |
|
Section 264(1) |
The whole. |
|
Section 280 |
The whole. |
|
Section 282 |
The whole. |
|
Section 285 |
Shall apply only to the extent that the Board of Directors/Executive
Committee/or Governing Committee of such companies shall hold at least one meeting
within every six calendar months. |
|
Section 287 |
Shall apply only to the extent that the quorum for the Board Meeting
shall be either eight members or 1/4th of its total strength whichever is
less provided the quorum shall not be less than two members in any case. |
|
Section 299 |
Shall apply only to cases to which Sub sections (1) and (3) of
Section 297 apply. |
|
Section 301 |
A register shall be maintained only if contracts to which Sub‑sections
(1) and (3) of Section 297 apply. |
|
Section 303 (2) |
The whole. |
S.O. No. 2767.‑ In exercise of the powers conferred by Sub‑section
(6) of Section 25 of the Companies Act, 1956 (1 of 1956) read with Notification
of the Government of India in the Ministry of Finance (Department of Revenue)
No. G.S.R. 178, dated the 1st February, 1964, the Company Law Board
hereby directs that a body to which a licence is granted under Section 25
aforesaid shall be exempt from the provisions of the said Act specified in
column (1) of the Table below to the extent specified in the corresponding
entries in column (2) of the said Table.
|
Provisions of Act |
Extent of Exemption |
|
(1) |
(2) |
|
Section 193 |
Minutes may be recorded within 30 days of the conclusion of every
meeting in case of companies where the Articles of Association provide for
confirmation by circulation. |
|
Section 259 |
The whole. |
|
Section 292 |
Matters referred to in clauses (c), (d) and (e) of Sub‑section
(1) may be decided by the Board by circulation instead of at a meeting. |
Topic 6
[Refer Section 25(3) and the Companies Regulations,
1956]
1. Change
the Memorandum and Articles of Association to bring them in conformity with the
provisions of Section 25(3) read with Section 25(1).
2. If your
company is an existing public limited company then the minimum paid‑up share
capital with share capital of the company 2 need not be increased to Rs. 5
lakhs or such higher amount as may be prescribed. [Section 3(6)].
3. If your
company is an existing private limited company with share capital, then the
minimum paid‑up share capital of the compan need not be increased to Rs.
1 lakh or such higher amount as may be prescribed. [Section 3(6)].
4. Get the
Memorandum and Articles of Association scrutinised by an advocate of the
Supreme Court or High Court, or an ‑ attorney, or pleader entitled to
appear before a High Court or a Chartered Accountant practising in India, or a
Company Secretary in whole‑time practice.
5. Make an
application to the Regional Director at Mumbai/Kolkata/Kanpur/ Chennai, to whom
the Central Government has delegated power3, for issuing a licence
authorising the company to omit the word "limited" or the words
"private limited" from its name as the case may be. [Regulation 7]
6. The application shall be accompanied by:‑
(i) Three printed or type‑written copies of the draft
Memorandum and Articles of the company; [Regulation 8(i)]
(ii) Three copies of a list of the names, addresses, descriptions
and occupations of its directors, manager or secretary, if any, together with
the names of companies, associations and other institutions, in which the
directors of the applicant company are directors or hold responsible positions,
if any, with description of the position so held and with all details of their
identities; [Regulation 8(ii)]
(iii) Three copies of the following documents submitted to the
company in General Meeting for each of the two financial years immediately
preceding the date of the application, or when the company has functioned only
for such financial year, for such year:
(a) the
Profit and Loss Account;
(b) the
Balance Sheet;
(c) the
Annual Report of the Board of Directors, and;
(d) the
Audit Report; [Regulation 8(iii)]
(iv) A statement showing in detail the assets (with the estimated
values thereof) and the liabilities of the company as on the date of the
application or within seven days of that date; [Regulation 8(iv)]
(v) An estimate of the future annual income and expenditure of
the company, specifying the sources of the income and objects of the
expenditure; [Regulation 8(V)]
(vi) A statement giving a brief description of the work, if any,
already done by the company, and of the work proposed to be done by it after
registration in pursuance of Section 25; [Regulation 8(vi)]
(vii) A statement specifying briefly the grounds on which the
application is made; [Regulation 8(vii)]
(viii) A declaration on non‑judicial stamp paper of the required
value by each of the persons being either directors or promoters of the company
making the application in the Form set out in Annexure V of the Companies
Regulations, 1956 or in a form as near thereto as circumstances admit the
effect that they have not been found to be of unsound mind by any court or they
are not undischarged insolvent or they have not applied to be adjudicated as
insolvents or they do not stand disqualified under Section 203 of the Companies
Act, 1956; [Regulation 8(viii) read with Annexure V]
(ix) A treasury challan or demand draft showing that the necessary
fees5 have been deposited. The fee for making the application to the
Regional Director is Rs. 500/‑ only;
(x) A letter of authority given by the persons making the
application in favour of any other person to make necessary corrections or
alterations as may be required by the Regional Director in any of the documents
filed with him.
7. If
paid by way of demand draft then draw the demand draft favouring "Pay and
Accounts Officer, Department of Company Affairs, Mumbai or Kolkatta or Chennai
as the case may be and payable at Mumbai or Kolkata or Chennai, as the case
may be. For payment of application fee by way of demand draft to the Regional
Director, Northern Region, Kanpur, draw the demand draft in favour of
"Regional Director, N.R., Department of Company Affairs, Kanpur", and
payable at Kanpur.
8. If paid by way
of treasury challan then obtain three copies of treasury challan from the
specified branches of the Punjab National Bank6 and fill the details
and deposit along with the fee to the said branch of the bank.
9. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(2) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21‑6‑1996
(w.e.f 21‑6‑1996). For account head and code please see Rule 22(2)
in Appendix 1.
10. Two copies of
the challans will be given back to the depositor one of which should be sent to
the Regional Director concerned along with the forms and documents mentioned in
item 6. [Rule 22].
11. If any
document specified above is not in English or in Hindi, get a translation of
that document either into English or into Hindi, certified to be correct by any
director of the company or by its manager and furnish it to the Regional
Director together with the documents. [Regulation 9].
12. File a copy
of the application with all its enclosures and accompanying papers, with the
concerned Registrar of Companies8 simultaneously. [Regulation 10].
13. The
concerned Registrar of Companies will scrutinise all the documents and papers
so filed and submit his report to the Regional Director.
14. Within
one week after the submission of the application to the Regional Director,
publish in the manner specified below, a notice of the application made to the Regional
Director and send a certified copy of that notice to the Regional Director. The
said notice:
(a) shall be in the form set out in Annexure II of the Companies
Regulations, 1956 or in a form as near thereto as circumstances admit;
[Regulation 11(a)] and
(b) shall be published in principal language of the district in
which the registered office of the company is to be situated and circulating in
that district, and at least once in an English newspaper circulating in that
district. [Regulation 11(b)].
15. Departmental
instructions regarding procedure to be followed in processing application must
be observed.
16. The Regional
Director, being satisfied on all accounts, shall then issue the necessary
licence and may direct the company to insert in its Memorandum or in its
Articles or partly in the one and partly in the other, such conditions of the
licence as may be specified by the Regional Director in this behalf.
17. The licence so
granted shall, however, be revocable by the Regional Director, with the
company's right of being heard. [Regulation 14].
18. On receiving
the licence, produce the same to the concerned Registrar of Companies along
with an application, requesting him to issue a fresh Certificate of
Incorporation in the changed name. [Section 23(1)].
19. On the issue
of such fresh Certificate of Incorporation, the new name without the word
"limited" or the words "private limited" will become
effective and operative.
20. Note that as
per the Citizen's Charter of the Department of Company Affairs, Schedule II,
Serial No. 2, Regional Directors are required to grant the licence within 30
days from the date of filing the application. [File No. 5/25/99-CL‑V;
Press Note No. 9/99, dated 9‑8‑1999].
Topic 7
DO YOU WISH TO FORM A JOINT STOCK COMPANY?
1. See
that the members.of the joint stock company which has, as its objects, the
carrying of any business for gain, are not more than twenty. [Section 11(2)].
2. See that the
joint stock company has permanent paid‑up or nominal share capital of
fixed amount dividend into shares of fixed amount or divided into stock of
fixed amount. [Section 566].
3. See
that the members of the company hold fixed amount of those shares, either as
shares or as stock. [Section 566].
4. Select a suitable name for
the joint stock company.
5. Since a joint
stock company is like a partnership, no application for availability of name in
Form No. 1A as prescribed under Companies (Central Government's) Rules &
Forms, 1956 is required and, therefore, you can select any name.
6. If the idea is
to convert the joint stock company into a company by registering it under Part
IX of the Act, then, select the name keeping in mind the guidelines for
availability of names.
7. In the
aforesaid case also keep in mind to have the minimum paid‑up share
capital of the company Rs. 1 lakh or such higher amount as may be prescribed if
it is a private company or Rs. 5 lakhs or such higher amount as may be
prescribed if it is a public company.1 [Section 3(1)(iii) and
(iv)(b) ]
8. Prepare
the deed of settlement or instrument constituting or regulating the joint stock
company.
9. Get
it stamped as per the Stamp ActŁ prevailing in the State or Union
Territory where the joint stock company is forined,
10. Get it signed by all the
members of the joint stock company.
11. Acquire or take on rent a
place for office of the joint stock company.
12. Print
letter heads in the name of the joint stock company giving the address of the
office just acquired or taken on rent.
13. Open a bank
accoune in the name of the joint stock company and see that any two of these
members could jointly sign on behalf of the joint stock company.
14. Start operating the business
with the capital obtained from its members.
15. If your joint
stock company falls under the Shops and Establishment Act of the State
concerned, then follow the formalities under that Act.
16. Please
remember that a joint stock company does not have a separate legal personality independent
of its constituents and thus is not an artificial juristic person in the eye of
law.
17. Joint Stock
company is defined in Section 566(1) of the Act as a company having a permanent
paid up, or nominal share capital of fixed amount divided into shares, also of
fixed amount, or held and transferable as stock, or divided and held partly in
the one way and partly in the other and formed on the principle of having for
its members the holders of those shares or that stock, and no other persons.
Topic 8
DO YOU WISH TO FORM A JOINT FAMILY
BUSINESS?
1. There
is no maximum limit in the number of members forming a joint family business
for acquisition of gain. [Section 11(3)].
2. All
the members of the joint family except the rniinors will be members of the
joint family business.
3. See
that the minimum number of members of the joint family business is not less
than seven.
4. This
minimum number should be kept in mind for future registration of the company
under the Act, whenever required. [Section 565(1)(a)].
5. Collect
the capital of joint family business from the joint family members by giving
them shares worth of and in proportion to the amount contributed by them.
6. Ensure that
the capital collected is Rs. 1 lakh or such higher sum as may be prescribed1
for a private limited company and Rs. 5 lakhs or such higher amount as may be
prescribed' for a public limited company keeping in mind, the future
registration of the company under Part IX of the Act.
7. If
the members belong to a joint Hindu Family, the deed of settlement should
specifically assign specific share in the corpus, to the co‑parceners.
8. It is also
necessary to clarify in the aforesaid deed, about the future acquisition, the extent
to which such acquisition would or would not belong to the joint Hindu Family
business.
9. Select a suitable name for
the joint family business.
10. Application
for seeking availability of new name under the Companies Act, 1956, is not
needed at this stage but before registering it under Section 565of the Act the
existing or new names should be availed of by making the necessary application
to the Registrar of Companies in Form No. 1A with filing fee of Rs. 500/-2
in cash. [Rule 4A].
11. Prepare
a deed@ of settlement or any other instrument constituting or regulating the
joint family business. [Section 568(b)].
12. Get it
stamped as per the Indian Stamp Act3 prevailing in the State or Union
Territory where the joint family business is formed.
13. Get it
signed by all the existing members of the joint family business or by their
duly authorised agents.
14. Acquire or take on rent a
place for office of the joint family business.
15. Print
letter heads in the name of the joint family business giving the address of
the office just acquired or taken on rent.
16. Open a
bank account in the name of the joint family business and see that any two of
its members could jointly sign on behalf of the joint family business.
17. Start
operating the joint family busines's with the capital obtained from its
members.
18. If the
joint family business falls within the ambit of Shops and Establishment Act,
then follow the formalities required under that Act.
19. Please
remember that a joint family business does not have a separate legal
personality independent of its constituents, and thus is not an artificial
juristic person in the eye of law.
20. Keep in mind
that a joint family business which is not a joint stock company as defined in
Section 566(1) of the Act, cannot later on be registered under Section 565(1)
Proviso (iv) read with Section 568(c) of the Act as a company limited by
shares.
(Topic 9 to Topic 14)
Topic 9
DO YOU WISH TO CONVERT A PUBLIC COMPANY
INTO A PRIVATE ONE?
1. Take the
necessary decision of conversion by convening a Board Meeting as per Topic 131
and fix up the time, place and agenda for convening General Meeting to alter
the Articles of Association subject to the approval of the concerned Registrar
of Companies (delegated by the Central Government) and consequently, the name,
by Special Resolutions. [Section 31(1) Proviso read with Section 21 Proviso].
2. In case your
public company is having a paid‑up share capital of less than Rs. 1 lakh
or such higher sum as may be prescribed, do not forget to increase the said
paid‑up share capital at least to Rs. 1 lakh or such higher sum
prescribed for a private limited company. [Section 3(1)(iii)].
3. Also ensure
while altering the Articles of Association that it contains a clause
prohibiting any invitation or acceptance of deposits from persons other than
its members, directors or their relatives in addition to other three
restrictions mentioned in section 3(1)(iii). [Section 3(1)(iii)(d)]
4. Issue noticest
for the General Meeting by giving not less than twenty‑one days notice in
writing proposing Special Resolutionst with suitable explanatory statements
vide Topics 135, 139, 150, 152. [Sections 166, 169, 171, 172 and 173].
5. See if the
quorum of five members personally present exists in the General Meeting called
and if so, then convene the General Meeting and pass the Special Resolutions by
three fourths majority to the following effect:-
(i) To change the Articles by incorporating in them the
conditions necessary to make the company a private company, vide Section 3 (1)
(iii). Such other Articles which do not apply to a private company may also be
deleted,3all these subject to the approval of the Central
Government;
(ii) Consequent to the above changes, to add the word "private"
in the name of the company before the word "limited". [Section
21 Proviso].
6. The above
changes, except in so far as the same relates to addition of the word
"private" to the name of the company, will be made in the Articles,
subject to the approval of the Central Government, by delegation to the
Registrar of Companies, for the conversion of a public company into a private
company and will only be effective when approved by him; otherwise the old
position will remain. [Section 31, Proviso].
7. The
above position should be mentioned in the body of the resolution it self and
also should be elaborated in the Explanatory Statements.
8. Forward to the
Stock Exchange with which your company is enlisted six copies (one of which
will be certified) of the amendments made in the Articles as soon as they have
been adopted by the company in General Meeting. [Clause 31 (a) of the Standard
Listing Agreement].
9. File the
Special Resolutions passed, with Explanatory Statements with the concerned
Registrar of Companies5 in Form No. 23 within thirty days of their
passing [Section 192(1) & (4)(a)] after paying requisite fee prescribed
under Schedule X to the Act, either by way of cash, demand draft or treasury
challan. [Rule 22].
10. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing, the company and every officer of the company who is in default will be
punishable with fine of Rs. 200/-7 for every day during which the
default continues. [Section 192(5) ]
11. If your
company is having more than 25 shareholders obtain written consent from all
those, shareholders who had not voted for the conversion.8
12. Obtain
consent of every creditor of the company to whom your company owes substantial
amounts.
13. Apply to the
Registrars of Companies for approving the changes mentioned in items 5 and 6
above in Form No. 1B9 enclosing necessary papers as mentioned in the
said Form including the treasury challan or demand draft for the fees within
three months from the passing of the Special Resolution. [Rule 4B, read with
G.S.R. No. 283(E), dated 21‑3‑1995 delegating the power of the
Central Government to the Registrars of Companies].
14. Pay the
requisite filing fee for the application which is minimum Rs. 500/- and maximum
Rs. 2000/‑ depending on the authorised share capital of the company by
way of demand draft or treasury challan.
15. If paid by way
of demand draft, then draw the demand draft in favour of the Pay and Accounts
Officer, Department of Company Affairs, New Delhi, or Calcutta or Mumbai or
Chennai and payable at New Delhi, Calcutta or Mumbai or Chennai depending on
the jurisdiction of the office of the concerned Registrar of Companies where
the said application is filed, as the fee is to be paid to the Central
Government.
16. If paid by way
of treasury challan, then obtain three copies of treasury challan from the
specified branches of the Punjab National Bank and fill up the details and deposit
along with the fees in cash to the said branch of the bank.
17. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(2) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21‑6‑1996
(w.e.f. 21‑6‑1996). For account head and code please see Rule 22(2)
in Appendix 1.
18. Two copies of
the challan will be given back to the depositor one of. which should be sent to
the Registrar of Companies concerned along with the forms and documents
mentioned in item 13.
19. Documents to be attached
with the application are:-
(i) a
certified true copy of the latest Memorandum and Articles of Association;
(ii) a certified true copy of the latest audited Balance‑Sheet
and Profit & Loss Account with Directors' and Auditors' Reports;
(iii) a certified true copy of the special resolution passed for
alteration of articles for conversion;
(iv) a certified true copy. of the minutes of the meeting at which
the decision for converting company was taken;
(v) a certified true copy of the Notice of the general meeting in
which the special resolution was passed along with the relevant explanatory
statement;
(vi) original treasury challan or demand draft evidencing the payment
of the requisite filing fee, as the case may be.
20. The Registrar
of Companies concerned on receipt of an application, may require a suitable
notice to be published in newspapers; and in that case, the same should be
complied with and relevant newspaper clippings should be sent to him, as soon
as the notice is published.
21. Forward
promptly to the Stock Exchange with which your company is enlisted, three
copies of the notices and a copy of the proceedings of the General Meeting.
[Clause 31(c) and (d) of the Standard Listing Agreement].
22. Also forward
to the said Stock Exchange three copies of the notice published in newspaper as
per Registrar of Companies instructions. [Clause 31(e) of the Standard Listing
Agreement].
23. Being
satisfied on all accounts, the Registrar of Companies concerned will approve
the changes and the conversion of the company from public to private, and the
conversion will be effective from that date.
24. Get the
altered articles printed and file a copy thereof along with requisite filing
fee in cash as prescribed under Schedule X of the Act with the concerned
Registrar of Companies within a month from the date of receipt of the approval.
[Section 31 (2A) ].
25. Apply to the
concerned Registrar‑of Companies for issue of a fresh Certificate of
Incorporation in the changed name, viz., the existing name with the word
"private", and on issue of such fresh Certificate, the change of name
of the converted company shall be final and complete. [Section 23].
26. It should thus
be noted that, although the company becomes a private company as soon as the
approval of the Registrar of Companies for the conversion under Section 31 is
received, the change in its name becomes complete and effective only on the
issue of the fresh Certificate of Incorporation by the concerned Registrar of
Companies in the changed name. [Section 23(1)].
27. Necessary
alteration in the Memorandum of Association of the company will also be made by
the concerned Registrar of Companies on its own immediately after issuing of
fresh certificate of incorporation in the changed name effected by the
conversion of the company from public to private. [Section 23(2)].
28. The aforesaid
change of name shall not affect any rights or obligations of the company, or
render defective any legal proceedings by or against it; and any legal
proceedings which might have been continued or commenced by or against the
company by its former name may be continued by or against the company by its
new name. [Section 23(3)].
29. Note that if
your public company is already a subsidiary of another company, by converting
your public company into a private company will not allow your company to enjoy
the benefits of a private company as such a private company being a subsidiary
of a public will be treated as a public company.[Section 3(1)(iv)(c)]
30. Further note
that the Corporate Identity Number (CIN) of your company will also change with
the change in the status of your company. [Circular No. 12/2000, dated 25‑10‑2000].
31. If your company
is a listed company, it must pass the Special Resolution for alteration of
Articles of Association for such conversion through postal ballot.
[Section 192A read with Rule 4(b) of the Companies
(Passing of the Resolution by Postal Ballot) Rules, 2001].
Topic 10
DO YOU WISH TO CONVERT A PRIVATE COMPANY
INTO A PUBLIC ONE?
1. Take the
necessary decision of conversion by convening a Board Meeting by giving not
less than twenty‑one days noticel in writing and fix up the time, place
and agenda for convening a General Meeting to alter the Articles of Association
and consequently, the name, by Special Resolutions. [Section 31, read with
section 21, Proviso].
2. In the
aforesaid Board Meeting also take the decision of increasing the paid‑up
capital to Rs. 5 lakhs or such higher sum as may be prescribed if the existing
paid‑up share capital of your company is less than Rs. 5 lakhs or such
higher sum as may be prescribed.1 [Section 3(1)(iv)(b)]
3. Keep in mind
that if your private company is registered under section 25 even after its
conversion from a private company into a public company the paid up share
capital need not be increased to the minimum amount of Rs. 5 lakhs or such
higher amount as may be prescribed. [Section 3(6)].
4. Issue noticest
for the General Meeting by giving not less than twenty‑one days notice in
writing proposing the Special Resolutions with suitable Explanatory Statements
vide Topics 139, 150 and 152. [Sections 166, 169, 171, 172 and 173].
5. See if the
quorum of two members personally present exists, and if so, then convene the
General Meeting and pass the Special Resolution to the following effect:-
(i) To delete those articles which are required to be included
in the articles of a private company only, vide Section 3(1)(iii). Such other
articles which do not apply to a public company, should be deleted and those
which apply should be inserted.
(ii) Consequent to the above changes, to delete the word
"private" from its name. [Section 21, Proviso].
6. File with the
concerned Registrar of Companies either the Prospectus in the Form as
prescribed under Schedule II or the Statement in lieu of Prospectus in the Form
as prescribed under Schedule IV within thirty days of passing of the above
Special Resolutions. [Section 44(1)(b) and (2)].
7. See that the
said Form is filed along with the requisite filing fee prescribed under
Schedule X of the Act, either by way of cash, demand draft or treasury challan.
8. Filing of Form
No. 29 is not required by a private company converted into a public company.
[Section 266(5)(c)].
9. File
the Special Resolutions passed and the Explanatory Statements with the
concerned Registrar of Companies in Form No. 23 within thirty days of their passing
[Section 192(1) & (4)(a)] after paying requisite fee prescribed under
Schedule X to the Act, either by way of cash, demand draft or treasury challan.
[Rule 22].
10. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing the company and every officer of the company who is in default will be
punishable with fine of Rs. 200/- for every day during which the default
continues. [Section 192(5)]
11. Make an
application@ to the concerned Registrar of Companies2 for the issue
of a fresh Certificate of Incorporation in the changed name, viz., the existing
name with the word "private" deleted. On issue of such fresh
certificate, the change of name of the converted company shall be final and
complete. [Section 23].
12. If the
company has less than three directors, then increase the number of directors to
three as per Topic 70.
13. If the
Company has less than seven members, then increase the number of members to
seven.
14. It should thus
be noted that although the company becomes a public company as soon as the
Special Resolution to change the Articles to make it a public company is
passed, the change in its name becomes complete and effective only on the issue
of the fresh Certificate of Incorporation by the concerned Registrar of
Companies in the changed name. [Section 23(1)].
15. It
should also be noted that when a private company is converted into a public
company, it is not required to obtain a certificate of commencement of
business.
16. Hold a
statutory meeting as per Topic 134 if such conversion is before six months of
the incorporation of the company. [Section 165].
17. Keep in mind
that necessary alteration in the Memorandum of Association of the company will
also be made by the concerned Registrar of Companies on its own immediately
after issuing of fresh certificate of incorporation in thd changed name
effected by the conversion of the company from public to private, [Section
23(2)].
18. Note that The
aforesaid change of name shall not affect any rights or obligations of the
company, or render defective any legal proceedings by or against it; and any
legal proceedings which might have been continued or commenced by or against
the company by its former name may be continued by or against the company by
its new name.
19. Further note
that the Corporate Identity Number (CIN) of your company will also change with
the change of the status of your company. [Circular No. 12/2000, dated 25‑10‑2000].
Topic 11
DO YOU WISH TO CONVERT AN EXISTING BUSINESS
INTO A COMPANY?
1. An existing
business can be converted into a company in any of the following ways:
(i) by
outright sale;
(ii) by making partners of the firm the only shareholders of the
newly incorporated company;
(iii) making a new or existing company become a partner of the firm
which will be dissolved thereafter;
(iv) by
amalgamation under Sections 391 to 394 of the Companies Act, 1956;
(v) by registration of existing joint stock company or existing
joint family business under sections 567 and 568 of the Companies Act, 1956.
2. Where
the existing business is sold outright to a company whether public or private,
keep in mind that a purchase agreement
has to be executed by or on behalf of the company which is buying it and
also by or on behalf of the proprietor or the partners of that existing
business depending on whether the existing business is a proprietorship
business or a partnership business.
3. In case of item 1(ii):
(i) form a new company as per Topic 1 or Topic 2 depending on
whether the company to be formed will be public or private and convert the
existing business into a partnership firm and either make the partners of the
firm the only shareholders of the newly incorporated company or admit the newly
incorporated company as a partner in the firm;
(ii) see that the proprietor of the existing business and any
other one or , more individuals, as the case may be, depending on whether
company to be incorporated is a private or public company, are the subscribers
to that company's Memorandum of Association. [Section 12];
(iii) Admit the other individual or individuals who will be
subscribers to the Memorandum of Association of the newly incorporated company
also as a partner or partners of the firm to be converted thereafter;
(iv) Provide in your partnership deed, the transfer of all assets
and liabilities of the firm to one of the partners who will pay the difference
to other partners.
4. In case of item 1(iii):
(i) where a new company is to be incorporated, form the new
company as per Topic 1 or 2;
(ii) dissolve the partnership with the business as a going concern
going to the company which is the partner of the partnership;
(iii) other partners of the partnership firm as a result of
dissolution get shares issued by the new or existing company.
5. See
that the Memorandum of Association of the newly incorporated company includes
a clause permitting the company to acquire the undertakings of an existing
business in its main objects clause.
6. See that
the Articles of Association of the newly incorporated company gives power to its directors to enter into
agreements facilitating the acquisition of business.
7. Where the
company is already an existing company, see that the Memorandum of Association of
the existing company includes a clause permitting the company to acquire the
undertakings of an existing business in its main objects clause.
8. If
the above mentioned clause is not there then first alter the objects clause of
the Memorandum of Association to contain such an object clause as per Topic 29.
9. Where the
company is already an existing company, see that the Articles of Association of
the company give power to its directors to enter into agreements facilitating
the acquisition of business. If such a provision is not there in the Articles
of Association get the Articles suitably amended as per Topic 26.
10. Enter
into an agreement with the directors of the newly incorporated company for
facilitating the acquisition of the partnership firm.
11. File a copy of
the agreement in Form No. 23 with the concerned Registrar of Companies within
thirty days of entering into the agreement [Section 192], after paying the
requisite fee2 as prescribed under Schedule X to the Companies Act,
1956, by way of cash, demand draft or treasury challan. [Rule 22].
12. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing, the company and every officer of the company who is in default will be
punishable with fine of Rs. 200/‑ for every day during which the default
continues. [Section 192(5)]
13. Hold a Board
Meeting after giving notices to all the directors of the company as per Section
286 and pass a Board Resolution for allotment of shares to the other partners of
the firm as consideration of such acquisition.
14. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1000/-. [Section 286(2) ]
15. If the newly
incorporated company is not a private company, then file a statement in lieu of
prospectus in the Form given in Schedule IV with the concerned Registrar of
Companies at least three days before the allotment of shares, after getting it
signed by all the directors of the new company.
16. File a return
of allotment in Form No. 2 with the concerned Registrar of Companies within
thirty days of making the allotment [Section 75] along with the required filing
fee, as prescribed under Schedule X to the Companies Act, 1956, by way of cash,
demand draft or treasury challan. [Rule 22].
17. Please also
keep in mind that if default is made in complying with the aforesaid
requirement every officer of the company who is in default will be punishable
with fine of Rs. 5000/ for every day during which the default continues.
[Section 75(4)]
18. In case of
item 1(iv), form a new company as per Topic 1 or Topic 2 depending on whether
the company to be formed will be public, private and the newly incorporated
company will take up the existing business under a scheme of amalgamation vide
Topic 15.
19. In case of
item 1(v) if your partnership firm, either being a joint stock company within
the meaning of Section 566(1), or being an existing joint family business wants
to be registered as a company, then deliver to the concerned Registrar of
Companies5 the following documents:
(i) an application in Form No. 37 or in Form No. 38 along with
required fee as prescribed under Schedule X to the Companies Act, 1956, by way
of cash, demand draft or treasury challan. [Rule 22]
(ii) (a) a list in Form No. 39
showing the names, addresses and occupations of all persons who on a day not
more than six clear days before the day of registration were members of the
company and the shares or stock held by each one of them ‑respectively,
distinguishing each share by its number in case the shares are numbered;
[Section 567(a)] or
(b) a list showing in Form No. 42 the names, addresses and occupations
of the directors and the manager, if any. [Section 568(a)].
(iii) a
copy of partnership deed; [Sections 567(b) & 568(b)].
(iv)(a) In case of a joint stock company a
statement in Form No. 40 containing the
following particulars:-
(i) the nominal share capital of the company and the number of
shares into which it is divided or the amount of stock of which it consists;
(ii) the
number of shares taken and the amount paid on each share;
(iii) the name of the company with the addition of the word 'Limited'
or 'Private Limited' as its last words;
(iv) a copy of the resolution declaring the amount of guarantee if
you want to register it as a guarantee company. [Section 567(c)]; or
(b) In case of an existing joint family business a copy of the
resolution declaring the amount of guarantee if such an existing business is
intended to be registered as a company limited by guarantee [Section 568(c)].
20. If the newly
incorporated company is a private company then ensure that its minimum paid‑up
share capital is Rs. 1 lakh or such higher paid‑up capital as may be
prescribed [Section 3(iii)] and if‑the newly incorporated company is a
public company then ensure that its minimum paid‑up share capital is Rs.
5 lakhs or such higher paid‑up capital as may be prescribed [Section
3(iv)(b)]
Topic 12
DO YOU WISH TO MAKE ANOTHER COMPANY A
SUBSIDIARY OF YOUR COMPANY?
You can make a company, say X company, a subsidiary
of your company, say Y company, in any of the following four circumstances:-
1. Let Y company
control the composition of Board of Directors of X company. Such a control
shall be deemed if Y company controls majority of directors of X company and if
without any other help, but solely by its exercisable powers, it:
(a) can appoint all or majority of directors of X company
fulfilling any one of the following conditions:
(i) that the appointment cannot be made without the consent or
concurrence of Y company; or
(ii) that the appointment follows necessarily from his appointment
as director or manager or because the appointee holds any other kind of office
or employment in Y company; or
(iii) that the directorship is held by an individual nominated by Y
company or its subsidiary; or
(b) can remove all or majority of directors of X company. [Section
4(1)(a) read with Section 4(2)],
2. Before
taking the above two steps mentioned in (a) and (b) ensure that the Articles of
Association of X company contains the provision of empowering Y company to
appoint or remove directors of X company.
3. Let
the following three conditions be satisfied with regard to X company which is
to be made into a subsidiary of Y company:-
(a) Y Company holds more than half in nominal value of equity
share capital of X company;
(b) Y company was existing on 1‑4‑1956 and had issued
prior to that date1 preference shares carrying equal voting powers
with the equity shares; and
(c) it exercises or controls more than half of the voting powers
of preference shares carrying voting powers of X company. [Section 4(1)(b)].
4. In the above case:
(a) the
following shall not be counted:
(i)
any shares held in a fiduciary capacity;
(ii) any shares held by virtue of any provisions relating to
debentures of X company or of a trust deed for securing any issue of such
debentures;
(iii) any share held by Y company or by its nominee or its
subsidiary or subsidiary's nominee if the ordinary business of Y company or its
subsidiary, as the case may be, includes the lending of money and the shares
are held as security in the ordinary course of business. [Section 4(3)];
(b) the
following shall, however, be counted:
(i) shares held by Y company's nominee other than in fiduciary
capacity;
(ii) shares held by Y company's subsidiary or its nominee other
than in fiduciary capacity.
5. Let X company
be a subsidiary of any subsidiary of Y company in any of the ways mentioned in
items 1 and 3 above. [Section 4(1)(c)]. Then it automatically becomes a
subsidiary of Y company.
6. If Y
company is a foreign company let X company become a subsidiary of Y company
under that foreign country's law. [Section 4(6)].
Topic 13
NOTE
The Companies (Amendment) Act, 2000 (w.e.f.
13.12.2000) has inserted sub‑section (11) to section 43A making the
provisions of this section inapplicable except sub‑section (2A)1
on and after the commencement of the said Amendment Act. This topic has been
retained for reference though not applicable as the provisions of section 43A
have not yet been deleted from the body of the Companies Act, 1956.
1. A private
company, although incorporated as a private company, will become a public
company in the following circumstances:
(A) If a private
company's paid‑up share capital is held to the extent of twenty‑five
per cent or more by one or more other bodies corporate (public or deemed to be
public by virtue of the provisions of this section), then that private company
automatically becomes a public company. [Section 43A(1) and Explanation
thereto].
In computing the above percentage, the shares held
in that company by a banking company are not taken into account if the
following conditions are fulfilled:-
(a) that
the shares:
(i) form part of the subject‑matter of a trust; (in this
respect, it must be understood that in the absence of a properly executed trust
deed, the banking company should have some basic instrument to show that it
holds the shares in trust);
(ii) have
not been set apart for the benefit of any body corporate;
(iii) are held by the banking company either as trustee of that
trust or in its own name, on behalf of a trustee of that trust; or
(b) that
the shares:
(i) form part of the estate of deceased
person;
(ii) have not been bequeathed by the deceased person by his will
to any body corporate; and
(iii) are held by the banking company either as an executor or the
administrator of the deceased person or in its own name on behalf of an
executor or administrator of the deceased person. [Section 43‑A(l) Second Proviso].
(B) If the
average annual turnover of a private company is rupees twenty‑five2
crores or more during the period of three consecutive financial years, that is
during the relevant period then that private company, irrespective of its paid‑up
share capital becomes a public company on and from the expiry of a period of
three months from the last day of the period during which the said average
annual turnover was exceeded. [Section 43A(1A) read with Rule 4C read with
Explanation (a) of Section 43A(10)].
(C) If a
private company holds not less than twenty‑five per cent of the paid‑up
share capital of a public company, then that private company becomes a public
company. [Section 43A(1B) ].
(D) If a private
company accepts, after an invitation is made by an advertisement or renews
deposits from the public other than its members, directors or their relatives,
then that private company becomes a public company on and from the date on
which such acceptance or renewal is first made. [Section 43A(1C)].
2. Even if a
private company becomes a public company under Section 43A, it has been
provided that such a public company may have articles, (a) prohibiting the
right to transfer its shares, (b) limiting number of members to fifty excluding
past or present employee members, or (c) prohibiting any invitation to the
public to subscribe for any of its shares or debentures.
3. Even if a private
company becomes a public company under Section 43A, its membership may even be
less than seven at any time, and it may have less than three directors.
[Section 43A(1) First Proviso read with Section 252(1) ].
4. Such
a company is not required to file a prospectus or a statement in lieu of
prospectus as is the case with other public companies. [Section 44(1)(b)].
5. Whenever a
private company becomes a public company as aforesaid, see that the company
informs the concerned Registrar of Companies about this within three months
from the date on which it becomes a public company.
6. Also see that
the company submits the original certificate of incorporation to the concerned
Registrar of Companies5 who shall then delete the word
"private" from its name mentioned in that original certificate of
incorporation.
7. If the
aforesaid two steps are not taken then the company and its every defaulting
officer is liable to fine extending upto five hundred rupees per day so long as
the default continues. [Section 43A(2) and Section 43A(5)].
8. Once a private
company has thus become a public company, it cannot again become a private
company unless the Central Government, by delegation to the concerned Registrar
of Companies, approves the same as per Topic 14. [Section 43A(4)].
9. Note that for
determining the date from which a private company shall become a public company
consequent upon increase in the ceiling of average annual turnover from Rs. 10
crores to Rs. 25 crores is 23rd November, 1998, which is three months earlier
to 23rd February 1999, will be the material date and therefore a private
company whose last of three consecutive financial years ended on any date
during the period 23rd November, 1998 to 22nd February, 1999, and its average
annual turnover for three consecutive financial years was Rs. 10 crores or
more, but less than Rs. 25 crores, shall not become a deemed public company by
virtue of sub‑section (1A) of section 43A.6
10. Further note
that till the date of commencement of the Companies (Amendment) Act, 2000,
private companies will continue to become deemed public companies if they fall
under any of the clauses (A), (B), (C) and (D) mentioned under item 1 above and
they will remain as (deemed) public companies till they, are converted into private
companies again with the approval of the Registrar of Companies, under item 6
above.
11. Also keep in
mind that after the commencement of the Companies (Amendment) Act, 2000,
private companies which are subsidiaries of foreign bodies corporate will no
longer be treated as deemed public companies.
Topic 14
DO YOU WISH TO CONVERT A DEEMED PUBLIC
COMPANY (SECTION 43A1) AGAIN INTO A PRIVATE COMPANY?
NOTE
These provisions of section 43A although made inapplicable by the companies (Amendment) Act, 2000 (w.e.f. 13‑12‑2000), except sub‑section (2A) the relevance of this topic still exists as all the deemed public companies once became so under the old provisions have to convert them as private companies and will not become private companies automatically.
1. You have to
infonn the Registrar of Companies2 that it has become a private‑
company by way of an application. [Section 43A(2A3) read with
section 31(1) proviso].
2. Issue notices to
the Directors of the company as per Section 286 for convening a Board Meeting
and then hold a Board Meeting and take the decision of such conversion by
passing a resolution.
3. Make an
applicationŁ to the concerned Registrar of Companies2 on a plain paper
explaining the change in circumstances which no longer prevail to make the
company a deemed public company. [Section 43A(2A) ].
4. The applicatiorif will be
addressed to the concerned Registrar of Comparuies3.
5. Enclose the following documents along with the
application:-
(i) a copy of the balance sheet and profit and loss account of
the company for the last three years;
(ii) a
copy of the Board's resolutiont;
(iii) a treasury challan or demand draft evidencing the payment of
the requisite fee 4 of minimum of Rs. 500/‑ and maximum of Rs. 2000/‑
depending on the authorised share capital of the company as prescribed by the
Companies (Fees on Application) Rules, 1999.
6. If
the fee is paid by way of treasury challan then obtain three copies of treasury
challan from the specified brancheS5 of the Punjab National Bank and fill the
details and deposit along with the fee in cash to the said branch of the bank.
7. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(2) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21‑6‑1996
(w. ef 21‑6‑1996). For account head and code please see Rule 22(2)
in Appendix 1.
8. Two
copies of the challans will be given back to the depositor one of which would
be sent to the concerned Registrar of Companies along with the documents
mentioned in item 5.
9. If the fee is
paid by way of demand draft, draw the demand draft in favour of the Pay and
Accounts Officer, Department of Company Affairs, Calcutta/Mumbai/ Chennai/ New
Delhi, and payable at Kolkata/Mumbai/Chennai/ New Delhi as the case may be,
depending on the region of the location of the Registrar of Companies6
concerned.
10. Keep in mind
that on receipt of the application informing the Registrar that the company has
become private the Registrar will substitute the word "private
company" for the word "public company" in the name of the
company upon the register and will also make the necessary alterations in the
certificate of incorporation issued to your company and its memorandum of
association within four weeks from the date of application made by the company7
[Section 43A(2A)]
11. On receipt of
the approval from the Registrar of Companies if the approval is conditional in
this behalf, call a Board meeting to fix the date, time, place and agenda of
the general meeting to pass a special resolutionj converting the deemed public
company into a private company.
12. The passing of
special resolution as aforesaid is not necessary where the company retained the
provisions of Section 3(1)(iii).8
13. Issue notices
by giving not less than twenty‑one days notice in writing with suitable
explanatory statement and hold the General Meeting, and pass the Special Resolution
by three‑fourths majority.
14. File the
Special Resolution passed and the Explanatory Statement with the concerned
Registrar of Companies in Form No. 23 [Sections 192(1)(4)(a)] after paying the
requisite fee10 prescribed under Schedule X to the Companies Act,
1956, either by way of cash, demand draft or treasury challan. [Rule 22].
15. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing, the company and every officer of the company who is in default will be
punishable with fine of Rs. 200/‑ for everyday during which the default
continues. [Section 75(5)]
16. After the
approval is obtained, intimate the concerned Registrar of Companies for issuing
a fresh certificate of incorporation, and on such issue the deemed public
company again becomes a private company. [Section 23 ].
17. Please keep in
mind ‑that after the commencement of the Companies (Amendment) Act, 2000
making the provisions of section 43A@ except subsection (2A) not applicable any
more, the subsidiaries of deemed public companies will be treated as
subsidiaries of public company so long the said deemed public companies are
converted into privae companies again.
(Topic 15 and Topic 16)
Topic 15
Procedure to be followed by the transferee and the
transferor companies which should be carried out simultaneously by both the
companies.
(A) Procedure to be followed by the Transferee
Company:
1. Check up
whether the Memorandum of Association of the company contains the power to
amalgamate in its Objects Clause. If not, first carry out the proceedings to
alter the same, vide Topic 29.
2. If such power
to amalgamate is already given under the other objects clause of the Memorandum
of Association of the company and not under main objects or objects incidental or
ancillary to the attainment of the main objects of the Memorandum of
Association, then pass a Special Resolutiont only in case the concerned company
is a public company and not a private company as per Topic 153. [Section
149(2A)(b)].
3. Also keep in mind
that if your company is a private company and is a subsidiary of a public
company, it will be treated as a public company. [Section 3(1)(iv)(c) ]
4. Prepare the
draft scheme of amalgamation and consider the same by convening a Board meeting
held after issuing notice to the directors of the company as per Section 286
for this purpose.
5. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1000/‑. [Section 286(2) ]
6. Apply to the
Court for directions to convene the General Meeting by way of Judge's Summons
supported by an affidavit. The summons shall be in Form No. 33 and the
affidavit in Form No. 342 of the Companies (Court) Rules, 1959.
7. See
that a copy of the proposed scheme of amalgamation is attached to the
abovementioned affidavit. [Rule 67 of the Companies (Court) Rules, 1959].
8. The Court having
jurisdiction shall be
(a) the High Court having jurisdiction in relation to the place
at which the registered office of the company concerned is situate, except to
the extent to which jurisdiction has been conferred on any District court or
District courts subordinate to that High Court in pursuance of Subsection (2);
and
(b) where jurisdiction has been so conferred, the District court
in regard to matters falling within the scope of the jurisdiction conferred, in
respect of companies having their registered offices in the district. [Section
10(1) & (b) ].
9. Send
a copy of the application made to the concerned High Court to the Central
Government, by delegation the Regional Director of the region in which the
registered office of the company is situated.
10. Although the
aforesaid notice is supposed to be given by the concerned High Court, usually
it is sent by the company concerned without waiting for the High Court to send
it. [Section 394A ].
11. The summons should be
accompanied by the following documents:-
(i) A certified true copy of the Memorandum and Articles of
Association of each of the two companies;
(ii) A certified true copy of the latest audited Balance‑Sheet
and Profit and Loss Account of your company.
12. Draw
the affidavit in the first person and state the full name, age, occupation and
the place of abode of the deponent.
13. See that the
affidavit is signed by the deponent and sworn to in the manner prescribed by
the Code of Civil Procedure, 1908 or by the rules and practice of the concerned
High Court. [Rule 18 of the Companies (Court) Rules, 1959].
14. The concerned
High Court shall give the directions in respect of matters set out in Rule 69
of the Companies (Court) Rules, 1959 with regard to the meeting including
fixation of time, place and quorum of such meeting, appointment of Chairman
etc.
15. Send notices
for the General Meeting to every member with a statement setting forth the
terms of the compromise or arrangement and explaining its effect; and in.
particular, stating any material interests of the directors, managing director,
or manager of the company, whether in their capacity as such or as members or
creditors of the company or otherwise, and the effect on those interests, of
the amalgamation, if, and in so far as, it is different from the effect on the
like interests of other persons. [Section 393(1)(a)].
16. The aforesaid
notice shall be in Form No. 363 of the Companies (Court) Rules,
1959, and it shall be sent not less than twenty‑one clear days before the
date fixed for the meeting. [Rule 73 of the Companies (Court) Rules, 1959].
17. Where a notice
is given by advertisement, see that a statement as aforesaid is included or a
notification of the place at which and the manner in which members who are
entitled to attend the meeting may obtain copies of such a statement as
aforesaid. [Section 393(1)(b)].
18. The aforesaid
advertisement must be in Form No. 383 of the Companies (Court)
Rules, 1959, and it must be given not less than twenty‑one clear days
before the date fixed for the meeting. [Rule 74 of the Companies (Court) Rules,
1959].
19. Where the
amalgamation affects the rights of debentureholders of the company, the said
statement shall give the like information and explanation as respects the
trustees of any deed for securing the issue of the debentures as it is required
to give as respects the company's directors. [Section 393(2)].
20. Where a notice
given by advertisement includes a notification that copies of a statement
setting forth the terms of compromise or arrangement proposed and explaining
its effect can be obtained by creditors or members entitled to attend the
meeting, every creditor or member so entitled, shall, on making an application
in the manner indicated by the notice, be furnished by the company, free of
charge, with a copy of the statement. [Section 393(3)].
21. Such
copies must be furnished within 24 hours of the requisition being made. [Rule
75 of Companies (Court) Rules, 1959].
22. See that the
Chairman appointed for the meeting or the company or other person directed to
issue the advertisement and the notices of the meeting file an affidavit not
less than seven days before the date of the meeting.
23. The aforesaid
affidavit will show that the directions regarding the issue of notices and the
advertisement have been duly complied with. [Rule 75 and Rule 76 of the
Companies (Court) Rules, 1959].
24. Hold the General Meeting and pass the Resolutionst
as follows:-
(i) A resolution approving the draft scheme of amalgamation
subject to the confirmation of the High Court to be passed by a majority in
number representing three‑fourths in value of members as required under
Section 391(2) and authorising the directors to implement the scheme;
(ii) A Special Resolution or an ordinary resolution followed by Central
Government approval under Section 81 authorising directors to allot further
shares without offering them first to the company's existing equity
shareholders and also authorising the directors to dispose of at their
discretion those shares which may not be taken up by the dissenting
shareholders of the transferor company;
(iii) Where the unissued share capital is not sufficient, an
Ordinary or Special Resolution if required by the Articles of Association of
the company to increase authorised share capital of the company in accordance
with the provisions of the Articles of Association in this regard.
25. If your
company is a listed company it must pass the resolution mentioned under 24(i)
above only through postal ballot. [Section 391(2) read with Rule 4(i) of the
Companies (Passing of the Resolution by Postal Ballot) Rules, 2001.]5
26. All the
decisions of the meeting shall be ascertained only by taking a poll. [Rule 77
of the Companies (Court) Rules, 1959].
27. Forward
promptly to the Stock Exchange with which your company is enlisted three copies
of the notice and a copy of the proceedings of the General Meeting. [Clause
31(c) and (d) of the Standard Listing Agreement6].
28. File the resolutions
mentioned in item 24(i) and (ii) above, and if the resolution mentioied in item
24(iii) is a Special Resolution then, that also along with Explanatory
Statement with the concerned Registrar of CompanieS7 within thirty days of
their passing in Form No. 23[Section 192] after paying requisite fee prescribed
under Schedule X to the Companies Act, 1956, either by way of cash, postal
order, demand draft or treasury challan. [Rule 22].
29. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing the company and every officer of the company who is in default will be
punishable with fine of Rs. 200/‑8 for every day during which
the default continues. [Section 192(5)]
30. See that the
Chairman of the meeting reports the result of the meeting to the Court in Form
No. 399 within the time fixed by the judge or within seven days
after the conclusion of the meeting. [Rule 78 of the Companies (Court) Rules,
1959].
31. Move the
concerned High Court for approval by presenting a petition in Form No. 40
within seven days of the filing of the report by the Chairman. The provisions
of sections 391 to 395 should be noted in this connection. Rules 79 to 87 of
the Companies (Court) Rules, 1959, should also be noted.
32. The aforesaid
petition should be accompanied by an affidavit in Form No. 3 verifying
the said petition and such affidavit should be drawn in the way mentioned in
item 6. [Rule 21 read with Rule 18 of the Company (Court) Rules, 1959].
33. Advertise the
notice of hearing of the petition, once the concerned High Court fixes the
hearing of the petition, not less than ten days before the date fixed for the
hearing. [Rule 80 of the Companies (Court) Rules, 1959].
34. On receipt of
the concerned High Court's Order, file the certified true copy thereof with the
concerned Registrar of Companies within thirty days of obtaining the copy of
the order in Form No. 21 [Section 394(3)] after paying requisite fee prescribed
under Schedule X to the Companies Act, 1956, either by way of cash, demand
draft or treasury challan. [Rule 22]
35. Please also
keep in mind that if default is made in complying with the aforesaid
requirement of filing, the company and every officer of the company who is in
default will be punishable with fine of Rs. 500/- [Section 394(3)]
36. A copy of
every such order shall be annexed to every copy of the Memorandum of
Association of the company issued after the certified copy of the order has been
filed as aforesaid, or in the case of a company not having a Memorandum of
Association, to every copy so issued of the instrument constituting or defining
the constitution of the company. [Section 391(4)].
37. Proceed on
effecting the scheme of amalgamation as per the scheme approved and directions
given by the concerned High Court by issuing suitable notices to the
shareholders and persons concerned and allotting shares and taking over the
business as per the scheme.
(B) Procedure to be followed by the Transferor
Company:
1. Check
up whether the Memorandum of Association of the company contains the power to
amalgamate in its objects clause.
2. If such power
is not given there then first carry out the proceedings to alter the same vide
Topic 29.
3. If such power
to amalgamate is already given under the other objects clause of the Memorandum
of Association of the company and not under main objects or objects incidental
or ancillary to the attainment of the main objects, of the Memorandum of
Association then pass a special resolution as per Topic 150. [Section
149(2A)(b) ]
4. Also keep in
mind that if your company is a private company and is also a subsidiary of a
public company, it will be treated as a public company. [Section 3(1)(iv)(c)].
5. Further keep
in mind that the Special Resolution for change of objects clause should be
passed only through postal ballot if your company is a listed company. [Section
192A read with Rule 4(a) of the
Companies (Passing of the Resolution by Postal Ballot) Rules, 2001].
6. Prepare the
draft scheme of amalgamation and approve it by convening a Board meeting held
after issuing noticet to the directors of the company as per Section 286 for
this purpose.
7. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of upto Rs. 1000/‑. [Section 286(2)]
8. Apply to the
High Court for directions to convene the General Meeting by way of Judge's
summons supported by an affidavit.
9. The
aforesaid summons shall be in Form No. 33 and the affidavit in Form No. 34 of the Companies (Court)
Rules, 1959.
10. See
that a copy of the proposed scheme of amalgamation is attached to the said
affidavit. [Rule 67 of the Companies (Court) Rules, 1959].
11. The Court having
jurisdiction shall be
(a) the High Court having jurisdiction in relation to the place
at which the registered office of the company concerned is situate, except to the
extent to which jurisdiction has been conferred on any District court or
District courts subordinate to that High Court in pursuance of Sub-section (2);
and
(b) where jurisdiction has been so conferred, the District court
in regard to matters falling within the scope of the jurisdiction conferred, in
respect of companies having their registered offices in the district. [Section
10(1) & (b)].
12. Send a copy of
the application made to the concerned High Court to the Central Government, by
delegation the Regional Director of the region in which the registered office
of the company is situated.
13. Although the
aforesaid notice is supposed to be given by the concerned High Court, usually
it is sent by the company concerned without waiting for the High Court to send
it. [Section 394A ].
14. Send notices
for the General Meeting to every member with a statement setting forth the
terms of the compromise or arrangement and explaining its effect; and in
particular, stating any material interests of the directors, managing director,
or manager of the company, whether in their capacity as such or as members or
creditors of the company or otherwise, and the effect on those interests, of
the amalgamation, if, and in so far as, it is different from the effect on the
like interests of other persons. [Section 393(1)(a)].
15. The aforesaid
notice shall be in Form No. 3617 of the Companies (Court) Rules,
1959, and it shall be sent not less than twenty‑one clear days before the
date fixed for the meeting [Rule 74 of the Companies (Court) Rules, 1959].
16. Where a notice
is given by advertisement, there shall be included either such a statement as
aforesaid or a notification of the place at which and the manner in which
members who are entitled to attend the meeting may obtain copies of such a
statement as aforesaid. [Section 393(1)(b)].
17. The aforesaid
advertisement must be in Form No. 38 of the Companies (Court) Rules, 1959, and
it must be given not less than twenty‑one clear days before the date
fixed for the meeting. [Rule 74 of the Companies (Court) Rules, 1959].
18. Where the
amalgamation affects the rights of debentureholders of the company, the said
statement shall give the like information and explanation as respects the
trustees of any deed for securing the issue of the debentures as it is required
to give as respects the company's directors. [Section 393(2)].
19. Where a notice
given by advertisement includes a notification that copies of a statement
setting forth the terms of compromise or arrangement proposed and explaining
its effect can be obtained by creditors or members entitled to attend the
meeting, every creditor or member so entitled, shall, on making an application
in the manner indicated by the notice, be furnished by the company, free of
charge, with a copy of the statement. [Section 393(3)].
20. A copy
of the statement must be furnished within 24 hours of the requisition being
made.
21. See that the
Chairman appointed for the meeting or the company or other person directed to
issue the advertisement and the notices of the meeting files an affidavit not
less than seven days before the date of the meeting.
22. The aforesaid
affidavit will show that the directions regarding the issue of notices and the advertisement
have been duly complied with. [Rules 75 and 76 of the Companies (Court) Rules,
1959].
23. Hold the
General Meeting and pass the resolution approving the draft scheme of
amalgamation subject to the confirmation of the High Court to be passed by a
majority in number representing three‑fourths in value of members as
required under section 391 and authorising the directors to implement the
scheme.
24. If your
company is a listed company then it must pass the aforesaid resolution only
through postal ballot.[Section 192A read with Rule 4(i) of the Companies
(Passing of the Resolution by Postal Ballot) Rules, 2001.]
25. Forward
promptly to the Stock Exchange with which your company is enlisted three copies
of the notice and a copy of the proceedings of the General Meeting.
26. File the
Resolution along with the Explanatory Statement mentioned in item 23 above in
Form No. 23@ with the concerned Registrar of Cornpanies within thirty days of
its passing [Section 192] after paying the requisite fee prescribed under
Schedule X to the Companies Act, 1956, either by way of cash, demand draft or
treasury challan. [Rule 22].
27. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing, the company and every officer of the company will be punishable with
fine of upto Rs. 200/-21 for every day during while the default
continues. [Section 192(5)]
28. The concerned
High Court will be moved jointly with the transferee company if the registered
offices of the two companies are in the same State.
29. If the two
companies involved in the scheme of amalgamation are incorporated in two dif ferent states then see that each company moves
the respective High Court for direction in the manner laid down under Rules 82,
83 and 84 of the Companies (Court) Rules, 1959.
30. If both
the companies are situated in the same state then only one company can move
the court provided the other company is made a party to the petition, because
in a scheme of amalgamation there is an identity of interests between the
transferor and transferee companies.
31. The provisions
of Sections 391 to 395 should be noted in this connection. Rules 79 to 87 of
the Companies (Court) Rules, 1959, should also be noted.
32. Provide the
concerned High Court with all the material facts regarding the scheme. [Proviso
to Section 391(2) ].
33. See that the
Regional Director gives satisfactory report to the concerned High Court.
34. This is
because the said High Court will not sanction the scheme unless it has received
satisfactory report from the Regional Director or the Registrar of Companies
stating that the affairs of the company have not been conducted in a manner
prejudicial to the interests of its members or to public interest. [Proviso to
Section 394(1)].
35. The Regional
Director or the Registrar of Companies will not normally have objection, as
regards "exchange ratio" if all the members of each of the companies
content to the "exchange ratio".
36. On receipt of the
concerned High Court order, file the certified copy thereof in Form No. 21 with
the concerned Registrar of Cornpanies within thirty days after obtaining a copy
of the order [Section 394(3)], after paying the requisite fee prescribed under
Schedule X to the Companies Act, 1956, either by way of cash, demand draft or
treasury challan. [Rule 22]
37. Please also
keep in mind that, if default is made in complying with the aforesaid
requirement of filing the company and every officer of the company who is in
default will be punishable with fine of upto Rs. 5001‑.25
[Section 394(3)]
38. A copy of
every such order shall be annexed to every copy of the Memorandum of
Association of the company issued after the certified copy of the order has
been filed as aforesaid, or in the case of a company not having a Memorandum of
Association, to every copy so issued of the instrument constituting or defining
the constitution of the company. [Section 391(4)].
39. Proceed on
effecting the scheme of amalgamation as per the scheme approved and directions
given by the concerned High Court by issuing suitable notices to the
shareholders and persons concerned.
Topic 16
1. Prepare the
detailed scheme of amalgamation of the two or more companies in public
interest, each of which companies should be a Government company within the
meaning of section 617.
2. Ensure
that the aforesaid scheme of amalgamation is prepared by both the two or more
companies which are being amalgamated as per the said scheme.
3. Convene a
Board Meeting of each of the two or more Government companies which are being
amalgamated in public interest, by giving notice to all the directors of the
respective companies as per section 286.
4. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1000/‑. [Section 286(2)]
5. In the
aforesaid Board Meeting have the draft scheme of amalgamation approved and also
have one of the directors authorised to make the application to the Central
Government under section 396.
6. Obtain no
objection letter, from the concerned State Government to which the companies
belong to, for having the amalgamation of those companies effected in public
interest.
7. Convene a
General Meeting of each of the companies which are being amalgamated by giving
at least twenty‑one days notice with relevant explanatory statement
before the date of such meeting. [Section 171(1) read with Section 173(2)].
8. In the
aforesaid General Meeting have the scheme of amalgamation as approved by the
Board of Directors, approved by the members.
9. Have an application
made by each one of the two or more amalgamating Government companies in their
respective letter heads, as there is not prescribed form, to the Central
Government under section 396 and address each of the applications to the
Secretary, Department of Company Affairs, Shastri Bhavan, 5th Floor, 'A' Wing,
Dr. Rajendra Prasad Road, New Delhi‑ 110001 and attach the following
documents:-
(1) Certified
true copy of the scheme of amalgamation;
(2) Certified true copy of the Board Resolution approving the
scheme of amalgamation;
(3) Certified true copy of the Board resolution giving authority
to one of the directors, to file the application;
(4) Certified true copy of the Memorandum and Articles of
Association of the company;
(5) Certified true copies of the latest audited balance sheet and
profit and loss account with Directors' and Auditors' Report for the last three
financial years;
(6) Certified true copy of the No Objection Letter from the
concerned State Government;
(7) Demand draft favouring "Pay and Accounts Officer,
Department of Company Affairs, New Delhi", and payable at New Delhi
evidencing payment of the requisite application fee2 prescribed
under the Companies (Fees on Applications) Rules, 1999, on the basis of
authorised share capital of the company.
10. After
considering the applications from two or more amalgamating Government
companies, the Central Government will send the draft of the order of
amalgamation to the concerned companies.
11. After waiting
for two months from the date of receipt of the draft order of amalgamation by
the concerned companies, if there is no objection from any one of the them
within that time, the Central Government will notify the order of amalgamation
in the Official Gazette, in public interest.
12. The aforesaid
order will provide for the amalgamation of those companies into a single
company with such constitution, with property, powers, rights, interests,
authorities and privileges and with such liabilities, duties and obligations as
may be specified in the order.
13. Please note
that application for amalgamation of companies in national interest under
section 396 will be disposed of within 60 days. [Citizen's Charter for the
Department of Company Affairs Schedule 1 item No. 14 vide No. 5/25/99-CLV; Press
Note No. 9/99, dated 9‑8‑1999].
(Topic 17 to Topic 20)
Topic 17
DO YOU WISH TO TAKE OVER ANOTHER
COMPANY?
Notes
Effect of
Companies (Amendment) Act, 1999
Existing topics dealing with the subject matter as well
as certain action points contained in different topics relating to inter‑corporate
investments/loans have been retained in the book as the effect of the newly
inserted provisions in the Companies Act, 1956, by a new section 372A, has
taken retrospective effect on and from 31st October, 1998 and before this date
all the provisions contained under section 370 and 372 of the Act had remained
in force till that date and therefore henceforth all the new provisions under
section 372A as given in detail under Topic 262 are to be followed.
1. Please note
that take over is a term of commercial parlance and covers purchase or
acquisition of undertakings, acquisition of shares of the company proposed to
be taken over, as also any arrangement whereby the control over the affairs one
company passes to another company.
2. If you wish to
take over another company by acquisition of its shares, decide upon the
percentage of such acquisition in the paid‑up equity and preference share
capital or subscribed equity share capital of the other company.
3. In case your
own acquisition is limited to 60% of your paid‑up share capital and free
reserves or less than 100% of your company's free reserves, the Board of
Directors can do so by passing a resolution in its meeting with the consent of
all the directors present at the meeting. [Sections 372A1 (1)&(2)
and for procedure to be followed see Topic 262]
4. Even where the
acquisition exceeds 60% of your company's paid‑up share capital and free
reserves or 100% of your company's free reserves, passing of a special
resolution is not required in case you are a private limited company, not being
a subsidiary of public limited company. [Section 372A2 (8)(iii)]
5. In case the acquisition
of shares is distributed between your company and a few other subsidiaries of
your company, acquisition can be so distributed that passing of a special
resolution under section 372A(1)2 1st proviso of the
Companies Act, 1956 is dispensed with, each subsidiary acquiring less than the
prescribed percentage of the subscribed capital of the other company at
different points of time. Ensure that, in such a case, not a rupee of
investment is made by the holding company.
6. In case the
company proposed to be taken over is first made a voting power controlled
wholly owned subsidiary [Section 4(1)(b)(i)], subsequent acquisition of shares
in that company which is more than 60% of the paid‑up share capital and
free reserves or 100% of free reserves which ever is more would not attract the
provisions of section 372A2.
7. In case you
want to purchase or take over on lease the whole or substantially the whole of
the undertaking of the company proposed to be taken over, the latter company
should pass an ordinary Resolution@ in a general meeting under section
293(12)(a) of the Companies Act, 1956. [For this, follow the procedure in Topic
No. 247].
8. The latter
company as aforesaid if is a listed company then it must pass the said
resolution only through postal ballot.3 [Section 192A read with Rule
4(f) of the Companies (Passing of the Reolution by Postal Ballot) Rules, 2001.]
9. You can also,
if you so wish, propose a merger for amalgamation of the other company with
your company.
10. For above
purpose follow the procedure for amalgamation by making application before the
concerned High Court, under sections 391‑394 of the Companies Act, 1956.
[Vide Topic No. 15].
11. The company
intending to take over another company should ensure that the total acquisition
in all other bodies corporate is equal to or less than 60% of the paid‑up
share capital and free reserves or less than 100% of free reserves of the
investing company. [Section 372A2]
12. Please
note that acquisition of shares in other bodies corporate whether they are
within the same group or not does not make any difference.
Topic 18
DO YOU WISH TO TAKEOVER A LISTED
COMPANY?
(In addition to the formalities to be complied with
as stated in Topic 17, the following additional formalities have to be complied
with if the intention is to takeover a listed company.)
1. If you are a
listed company and the person taking over the company is already holding
fifteen per cent or more of the voting rights in respect of shares to be
acquired, then, the acquirer can seek an order of exemption from the provisions
of Chapter III of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 19971.
2. Takeover
Regulations of SEBI will not apply if allotment of shares is made pursuant, to
a public issue or rights issue or preferential allotment pursuant to a
resolution passed under section 81(A) or pursuant to any underwriting agreement
to the underwriters in a public issue.
3. Takeover
Regulations of SEBI will not apply to acquisition of shares in the ordinary
course of business, by:
(i) a
registered stock broker of stock exchange on behalf of clients;
(ii) a registered market.of stock exchange in respect of shares
for which he is the market maker, during the course of market making;
(iii) public
financial institutions on their own account;
(iv) banks
and public financial institutions as pledges.
4. Takeover
Regulations of SEBI will also not apply to acquisition of shares of an unlisted
company or acquisition pursuant to a scheme of amalgamation sanctioned by the
High Court or amalgamation under the Sick Industrial Companies (Special
Provisions) Act, 1985.
5. Takeover
Regulations of SEBI will also not apply to acquisition of shares by government
companies and statutory corporations provided that this exemption will not be
applicable if a government company acquires shares or voting rights or control
of a listed public sector undertaking through the competitive bidding process
of the Central Government for the purpose of disinvestment. [Regulation 3(1)(h)
proviso2]
6. Takeover
Regulations of SEBI will apply if by virtue of acquisition or change of control
of any unlisted company, whether in India or abroad, the acquirer acquires
shares or voting right or control over a listed company.
7. Takeover Regulations of
SEBI will also not apply to the following
(i) inter‑se
transfer of shares amongst group companies, relatives, promoters;
(ii) acquisition of shares by way of transmission
on succession or inheritance;
(iii) acquisition
of shares by government companies;
(iv) transfer of shares from state level financial institutions
including their subsidiaries, to co‑promoters of the company pursuant to
an agreement between such financial institution and such co‑promoters.
8. Takeover
Regulations of SEBI will also not apply to the Acquisition of Global Depository
Receipts or American Depository Receipts so long as they are not converted into
shares carrying voting rights.
9. Please note if
there is any,acquirer acquiring shares or voting rights, which taken together
with shares or voting rights if any held by the acquirer or by persons acting
in concert with the acquirer, which would carry fifteen per cent or more of the
voting rights of your company and if so, check if the acquirer has made a
public announcement to acquire shares at a minimum offer price from the other
shareholders of the company.
10. Please check
if the acquirer has appointed a merchant banker holding a certificate of
registration, who is not an associate of or group of the acquirer or the target
company before public announcement of offer is made.
11. Please check
if the public announcement has been made in all editions of one national
English daily with wide circulation, one Hindi national daily with wide
circulation and a regional language with wide circulation at the place where
the registered office of the target company is situated and at the place where
the shares of the company are listed and more frequently traded.
12. Please note
that public announcement must be made not later than four working days of
entering into an agreement to acquire shares, or voting rights or deciding to
acquire shares or voting rights whichever is earlier.
13. Further note
that the above public announcement must be made not later than 4 working days
of the acquirer executing the shares purchase agreement or shareholders
agreement with the Central Government in the case of disinvestment of a public
sector undertaking. [Regulation 14(1) Proviso3]
14. In case the
acquisition is of securities including Global Depositories Receipts (GDRs) or
American Depository Receipts (ADRs) then make the public announcement not later
than four working days before the acquirer acquires voting rights on such GDRs
or ADRs upon conversion or exercise of option as the case may be.
15. Public announcement must contain the following
features:
(i) the paid‑up share capital of the target company, the
number of fully paid‑up and partly paid‑up shares;
(ii) the total number and percentage of shares proposed to be
acquired from the public, subject to a minimum as specified in sub‑regulation
(1) of regulation 21;
(iii) the minimum offer price for each fully
paid‑up or partly paid‑up shares;
(iv) mode
of payment of consideration;
(v) the identity of the acquiree(s) and in case the acquirer is a
company or companies, the identity of the promoters and/or the persons having
control over such company(ies) and the group, if any, to which the company(ies)
belong;
(vi) the existing holding, if any, of the acquirer in the shares of
the target company, including holdings of persons acting in concert with him;
(vii) salient features of the agreement, if any, such as the date,
the name of the seller, the consideration and the number and percen tage of
shares in respect of which the acquirer has entered into the agreement to
acquire the shares or the consideration, monetary or otherwise, for the
acquisition of control over the target company, as the case may be;
(viii) the highest and the average price paid by the acquirer or
persons acting in concert with him for acquisition, if any, of shares of the
target company made by him during the twelve month period prior to the date of
public announcement;
(ix) object and purpose of the acquisition of the shares and future
plans, if any, of the acquirer for the target company, including disclosures
whether the acquirer proposes to dispose of or otherwise encumber any assets of
the target company in the succeeding two years, except in the ordinary course
of business of the target company:
Provided that where the future plans are set out,
the public announcement shall also set out how the acquirers propose to
implement such future plans;
(x) the
'specified date' as mentioned in regulation 19;
(xi) the date by which individual letters of offer would be posted
to each of the shareholders;
(xii) the date of opening and closure of the offer and the manner in
which and the date by which the acceptance or rejection of the offer would be
communicated to the shareholders;
(xiii) the date by which the payment of consideration would be made
for the shares in respect of which the offer has been accepted;
(xiv) disclosure to the effect that firm arrangement for financial
resources required to implement the offer is already in place, including
details regarding the sources of the funds whether domestic i.e. from banks,
financial institutions or otherwise or foreign i.e. from non‑resident
Indians or otherwise;
(xv) provision for acceptance of the offer by person(s) who won the
shares but are not the registered holders of such shares;
(xvi) statutory approvals, if any, required to be obtained for the
purpose of acquiring the shares under the Companies Act, 1956 (1 of 1956), the
Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969), the Foreign
Exchange Regulation Act, 1973 (46 of 1973) and/or any other applicable laws;
(xvii) approvals
of banks or financial institutions acquired;
(xviii) whether the offer is subject to a minimum level of acceptance
from the shareholders; and
(xix) such other information as is essential for the shareholders to
make an informed decision in regard to the offer.
16. Please
remember that copies of advertisement, circular, brochure, public material or
letter of offer issued in relation to the acquisition issued for public
announcement should not contain any misleading information.
17. Please note
that the acquirer through the merchant banker has to file a draft of the letter
of offer to the SEBI within fourteen days of public announcement containing
disclosure as specified by the SEBI Board.
18. Ensure that
the letter of offer contains justification on the basis on which the price bas
been determined.
19. Please note
that along with aforesaid letter of offer, a sum of Rs. 50,000/- has to be paid
by way of a fee to the SEBI either by way of a banker's cheque of demand draft,
payable at Mumbai.
20. Please also
note if within 21 days from the date of submission of the letter of offer to
the SEBI, it specifies any changes in that letter of offer, the merchant banker
and the acquirer should carry out such changes before the letter of offer is
despatched to the shareholders.
21. Please also note
that the letter of offer will have to be sent to all the shareholders of the
company not earlier than 21 days from the date of filing it with the SEBI as on
the specified date which shall not be more than thirtieth day from the date of
the public announcement.
22. Please also
note that there has to be a minimum offer price which shall be payable either
in cash or by exchange or transfer of shares or by exchange or transfer of
secured instruments with a minimum of 'A' grade rating from a credit rating agency
or combination of them.
23. Please also
note that the minimum offer price shall be either the negotiated price or the
highest price paid by the acquirers or persons acting in concert with him
during the 26 week period prior to the date of public announcement, or the
price paid by the acquirer under a preferential allotment at any time during
the 12 months period upto the date of closure of the offer or, average of the
weekly high' and low of the closing price of the shares during the 26 weeks
preceeding the date of public announcement.
24. Further note
that the minimum offer price of shares of the target company which are not
frequently traded should be determined by the issuer and the merchant banker
taking into account the following factors:
(i) the
negotiated price;
(ii) highest price paid by the acquirer or persons in concert with
him for acquisition including by way of allotment in a public or rights issue,
if any during the 26 week period prior to the date of public announcement;
(iii) the price paid by the acquirer under a preferential allotment
at any time during the 12 months period upto the date of closure of the offer;
and
(iv) other parameters such as return on networth, book value of the
shares of the target company, earning per share, price earning multiple vis‑avis
the industry average.
25. In case of
disinvestment of a Public Sector Undertaking whose shares are infrequently
traded, the minimum offer price shall be the price paid by the successful
bidder to the Central Government, arrived at after the process of competitive
bidding of the Central Government for the purpose of disinvestment. [Regulation
20(3A)4].
26. Further note
that where the acquirer has acquired shares in the open market or through negotiation
or otherwise after the date of public announcement at a price higher than the
minimum offer price stated in the letter of offer than the highest price paid
for such acquisition should be payable for all acceptances received under the
offer, provided that no such acquisition should be made by the acquirer during
the last 7 working days prior to the closure of the offer.
27. Further
note that where offer is made in lieu of cash payment, the value should be
determined in the same manner as mentioned in items 23, 24 and 25.
28. Within 45 days
of the public announcement of offer, the shareholder of the target company are
supposed to receive a letter of offer for the acquisition of shares wherein the
acquirer should indicate the date of opening of the offer which should not be
later than the 60th days from the date of public announcement and the period of
keeping the offer open which should not be less than 30 days and it would
contain that date for the purpose of determining the names of the shareholders
to whom such draft is to be sent.
29. Also send a
draft letter of offer to the target company within 14 days of the public
announcement at its registered office address so that it may be placed before
the Board of Directors of the target company.
30. Also send a
copy of the draft letter of offer to all the stock exchanges where the shares
of the target company are listed within 14 days of the public announcement.
31. Further send a
said copy of the custodians of GDRs or ADRs to enable them to participate in
the open offer if they are entitled to do so.
32. Further
send a said copy to all the warrant holders or convertible debenture holders
where the period of exercise of option or conversion falls within the
33. Please also
note that public offer must be extended to all the remaining shareholders of
the company to acquire an aggregate minimum of twenty per cent of the voting
capital of the company, provided that where the public offer is made in
pursuance of making the acquirer to exercise more than 75 per cent of the
voting rights of the company public offer may be then for such percentage of
the voting capital for the company as may be decided by the acquirer.
34. Please
also note that the offer shall not be such as to reduce public share holding
to less than ten per cent of the voting capital of the company.
35. If it is so
reduced make an offer to buy out the outstanding shares remaining with the
shareholders at the same offer price within a period of 3 months from the date
of closure of the public offer or undertake to disinvest through an offer for
sale or by fresh issue of capital to the public so as to satisfy the listing
requirements.
36. Ensure that
the offer for sale or the fresh issue of capital is opened within a period of 6
months from the date of closure of the public offer.
37. Please note
that any person other than the acquirer may make a public announcement making a
competitive bid for acquisition within 21 days of the public announcement made
by the acquirer.
38. The person making
competitive bid will have to comply with the instructions given in the SEBI
Takeover Regulations mentioned in item 9 about public announcement and other
related matters.
39. Please note that
being an acquirer, you can always make upward revisions in your offer in
respect of both price and number of shares at any time upto 7 working days
prior to the date of closure of the offer, whether or not there is a
competitive bid.
40. In case your
company is a financially weak company but not a sick company that is, it has at
the end of the previous financial year accumulated losses which have resulted
in erosion of more than fifty per cent but less than hundred per cent of net
worth, the public financial institution or scheduled bank can approve a scheme
of rehabilitation for takeover of your company.
41. The aforesaid
takeover is known as bailout takeover and in such case the promoters of the
company will not be allowed to keep any shares with them if the scheme of
bailout takeover is to be implemented.
42. At least three parties will
be invited to give offers.
43. The lead
institution will accept one of the offers and the financial institution will be
eligible to unload its own shareholding in favour of the person taking over the
company.
44. Please note
that the persons taking over the company may be asked to make a public
announcement, if the circumstances so warrant.
Topic 19
DO YOU WISH TO TAKE OVER A COMPANY
WITHOUT GOING TO THE COURT? (SECTION 395)
Procedure to be followed by the transferee and the
transferor company which should be carried out simultaneously by both the
companies.
(A) Procedure to be followed by the Transferee
Company
1. Check up
whether the Memorandum of Association of the company contains power to acquire
shares or any class of shares of another company under any scheme or contract,
involving transfer of shares. If not, first carry out the proceedings to alter
the same, vide Topic 29.
2. If such power
to acquire shares under any scheme or contract is already given under the other
objects clause of the Memorandum of Association of the company and not under
main objects or objects incidental or ancillary to the attainment of the main
objects of the Memorandum of Association then pass a Special Resolution as per
Topic 150. [Section 149(2A)(b)] if your company is not a private company
[Section 149(7)(a)].
3. Please keep in
mind that if your company commences any such bussiness in contravention of the
aforesaid requirement every person, who is responsible for the contravention,
will, without prejudice to any other liability be punishable with fine of Rs.
5000/‑1 for every day during which the default continues.
[Section 149(2A) ]
4. Prepare the
draft scheme or contract involving acquisition of all the shares or of all the
shares of any class of another company.
5. Consider the
aforesaid draft scheme or contract by convening a Board Meeting held after issuing
notice to all the directors of your company as per Section 286 for this
purpose.
6. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1000/-. [Section 286(2)]
7. Also get
approved in the aforesaid Board Meeting the mode of acquiring the shares,
whether the shares will be acquired in cash or otherwise than in cash.
8. If cash is
proposed to be paid for the acquisition of shares pursuant to the scheme or
contract then also get approved in the same Board Meeting a draft statement
disclosing the steps which your company will take to ensure that necessary cash
will be available at the time of implementation of the scheme or contract.
9. Keep in mind
that if the other company is a listed company you have to follow the
regulations of Securities and Exchange Board of India (Substantial Acquisition
of Shares and Takeovers) Regulations, 1997, before acquiring the shares vide
Topic 18.
10. Also keep in
mind the provisions of section 372A of the Act, which require consent of
shareholders of your company by passing a Special Resolution prior to the
acquisition of shares if such acquisition is more than 60% of the paid up share
capital and free reserves of your own company or 100% of your company's free
reserves whichever is more [Section 372A(1)]4. Note that with
retrospective effect from 31st October, 1998 the Companies (Amendment) Act,
1999 has inserted a new section 372A by which investment of the aforesaid
limits are clubbed together with a company giving loan, providing guarantee and
security in connection with such loan.
11. Further keep
in mind the provisions of Section 108A(1) if your company is the owner in
relation to a dominant undertaking and such acquisition of shares would result
in the increase of production, supply, distribution or control of any goods
that are produced, supplied, distributed or controlled in India or any
substantial part thereof by your company or if such acquisition of shares would
result in making your company, the owner of a dominant undertaking. [Section
108G].
12. Forward the
scheme or contract involving acquisition of shares to the other company, along
with the statement showing steps to be taken by your company to make necessary
cash available if the consideration is to be paid in cash, as approved by the
Board Meeting of your company.
13. Within two
months after the expiry of four months from the date of making the offer to the
other company for acquisition of shares and approval of such offer by the
holders of not less than nine‑tenths in value of shares of the other
company, your company should give notice in Form No. 35 to any dissenting
shareholder of the other company stating therein that it desires to acquire his
shares.
14. Keep in mind
that in counting the aforesaid nine‑tenths of value of shares of the
other company, shares already held by your company in the other company either
through a nominee of your company or through any subsidiary of your company
would not be taken into account.
15. Wait for one
month from the date of giving the notice and if within that time no application
is made to the concerned High Court by the dissenting shareholder, acquire those
shares of the dissenting shareholder on the terms on which, under the scheme or
contract of the offer, the shares of the approving shareholders of the other
company are to be transferred to your company.
16. If your
company is already holding more than one‑tenth of the aggregate of the
value of all the shares in the other company then ensure that:
(a) your company offers the same terms to all the holders of the
shares of the other company whose transfer is involved except to your own
holding; [Section 1395(1), Proviso (a)]; and
(b) the holders of shares of the other company who approve the
scheme or contract besides holding not less than nine‑tenths in value of
the shares whose transfer is involved excluding your own company's holding, are
not less than three fourths in member of the holders of those shares. [Section
395(1), Proviso (b)].
17. If your
company is already holding some shares in the other company either through a
nominee or through any of your company's subsidiary and as a result of the
scheme or contract involving transfer of shares of the other company to your
company, your company comes to hold in total nine‑tenths in value of the
shares of the other company then ensure that:
(i) your company gives notice in Form No. 35 to the holders of
the remaining shares who have not assented to the scheme or contract involving
transfer of shares within one month from the date of the transfer about the
fact that your company has acquired nine‑tenths of the shares of the
other company and desires to acquire shares held by them; [Section 395(2)(a)]
and
(ii) dissenting shareholders give notice to your company within
three months from the receipt of the aforesaid notice given by your company to
them requiring your company to acquire the shares in question. [Section
395(2)(b)].
18. On receipt of
the aforesaid notice from the dissenting shareholders requiring their shares to
be acquired, your company is entitled and bound to acquire those shares on the
terms on which, under the scheme or contract, the shares of the approving
shareholders were transferred to your company, or on such terms as may be
agreed upon by your company and the dissenting shareholders.
19. If an
application is made to the concerned High Court by your company after the expiry
of three months where your company does not receive any noticefrom the
dissenting shareholders requiring their shares to be acquired, acquire the
shares of the dissenting shareholders on such terms as the said High Court
thinks fit to order.
20. If an application
is made to the concerned High Court by the dissenting shareholders, acquire the
shares of the d issenting shareholders
on such terms as the said High Court thinks fit to order.
21. Where your
company has given a notice to the dissenting shareholder within two months
mentioned in item 13 and if on an application made to the concerned High Court
by the dissenting shareholders, the said High Court does not make an order to
the contrary, then within one month from the date on which the aforesaid notice
was given by your company to the dissenting shareholder or if the application
to the said High Court is still pending then after that application has been
disposed of by the said High Court then take the following steps:
(i) transmit a copy of the notice sent to the dissenting
shareholder in Form No. 35 to the other company whose shares are being acquired
together with the instrument of transfer in Form No. 7B executed on behalf of
the dissenting shareholder by any person appointed by your company and also on
your own company's behalf;
(ii) pay or transfer, to the other company whose shares are being
acquired, the amount or other consideration representing the price payable by
your company to the said other company.
22. If your
company is a listed company then also follow the conditions of clause 40A and
40B of the Listing Agreement5.
(B) Procedure
to be followed by the Transferor company
1. Check up
whether the Memorandum of Association of your company contains power to
transfer shares or any class of shares of your company to another company
under any offer of a scheme or contract involving such transfer of shares. If
not then, first carry out the proceedings to alter the same, vide Topic 29.
2. If such power to
transfer shares under any offer of a scheme or contract is already given under
the other objects clause of the Memorandum of Association of your company and
not under ' main objects or objects incidental or ancillary to the attainment
of the main objects of the Memorandum of Association then pass a Special
Resolution as per Topic 150. [Section 149(2A)(b)] if your company is not a
private company. [Section 149(7)(a) ].
3. Please keep in
mind that if your company commences any such business in contravention of the
aforesaid requirement, every person who is responsible for the contravention
will be punishable without prejudice to any other liability, with fine of Rs.
5000/‑6 for every day during which the contravention
continues. [Section 149(2A)]
4. On receipt
of the offer of the scheme or contract'involving the transfer of shares of your
company from the other company do the following:
(a) Convene a Board Meeting after issuing notice to all the
directors of your company as per section 286 approve the following:
(i) draft of the circular containing the offer or the
recommendation to be made to the members of your company to accept the offer of
the scheme or contract involving transfer of shares;
(ii) draft of the information to be given to the members in Form
No. 35A which should be attached to the aforesaid circular;
(iii) draft of the Notice of the General Meeting fixing thereby the
date, time, place and agenda for calling the said meeting to pass a Special
Resolution, and its Explanatory Statement.
(b) Please keep in mind that every officer of the compdny whose
duty is to give notice of the Board Meeting as aforesaid and who fails to do so
will be punishable with fine of Rs. 1000/- [Section 286(2)]
(c) Ensure that the General Meeting is fixed on a date not later
than four months from the date of making of the offer of the scheme or contract
involving transfer of shares by the other company to your company. [Section
395(]
(d) Obtain Auditor's Certificate from your company's auditors or
other auditor stating therein that the information contained in the offer or
recommendation is correct.
(e) File the circular containing or recommending acceptance of su
ch offer by the directors of your company with the concerned Registrar of
Companies7 before issuing that circular or recommendation to the
members of your company, after paying the requisite fee' as prescribed under
Schedule X to the Act, either in cash, demand draft or treasury challan. [Rule
22].
(f) Ensure that the circular or recommendation so filed with the
concerned Registrar of Companies7 is accompanied by the prescribed
information in Form No. 35A.
(g) Issue notices in writing at least twenty one days before the
date of the General Meeting proposing the Special Resolution to be passed with
special majority.
(h) Enclose to the abovementioned notice a copy of the circular
or recommendation of the offer of the scheme or contract involving transfer of
shares along with the information in Form No. 35A.
(i) Hold the General Meeting and pass the Special Resolution by
the holders of not less than nine‑tenths in value of the shares whose
transfer is involved other than those shares already held in your company by
the other company either on its own or through a nominee or through its
subsidiary company.
(j) Immediately inform the other company that the scheme or
contract involving transfer of shares has been approved by the holders of not
less than nine‑tenths in value of the shares whose transfer is involved.
5. Keep
in mind that if you issue the circular referred to in item 4(f) without
registering it with the Registrar of Companies, you will be punishable with
fine of Rs. 5000/‑.9
6. Where your
company is in receipt of the instrument of transfer executed by the other
company on its own behalf as well as by any person appointed by the other
company on behalf of the dissenting shareholder under Section 395(3) and your
company is also in receipt of the amount or other consideration representing
the price payable by the other company for the shares entitled to be acquired
by them along with the instrument of transfer then do the following:
(a) Immediately register in the Register of Members of your
company the name of the other company as the holder of those shares acquired by
them pursuant to the scheme or contract;
(b) Inform the dissenting shareholders within one month of the
date of registration of name of the other company in the Register of Members,
about such registration and also about receipt of the amount or other
consideration representing the price of the shares transferred to the other
company.
7. Open a bank
account and keep the amount received from the other company as price of the
shares acquired under the scheme of contract in that separate bank account.
8. Hold the
aforesaid amount in trust for the several persons entitled to the shares in
respect of which the said amount was received by your company from the other
company.
Topic 20
DO YOU WISH TO PREVENT TAKE OVER OF YOUR
COMPANY?
1. If you are a
director or manager of the company and you apprehend that, as a result of a
change which has taken place or is likely to take place in the ownership of any
shares held in the company, the change in the Board of Directors is to take
place, you may make a complaint to the Company Law Board under Section 409 of
the Companies Act, 1956 to prevent such change.
2. Before making
the complaint, please satisfy yourself that you have reasonable ground to
believe that there has been or is likely to be some cornering of shares of your
company which is likely to pass on the control of the company to some other
person.
3. Please
also ensure that you have reasonable ground to believe that if the control
passes hands, it will affect the affairs of the company prejudicially.
4. Make your
complaint to the Company Law Board Principal Bench, New Delhi or to the
Additional Principal Bench Chennai1 as the case may be by way of a
petition to be prepared in Form No. 1 in Annexure II to the Company Law Board
Regulations, 1991 and annex thereto the following:-
(i) Documentary and/or other evidence in support of the
statements made in the petition as are reasonably open to the petitioner;
(ii) Documentary evidence in proof of the eligibility and status
of the petitioner with the voting power held by the petitioner;
(iii) Affidavit verifying the aforesaid petition, which should be
prepared on a non‑judicial stamp paper of the requisite value2
prevalent in the State and hould be either notarised by the Notary Public or shown
before the Oath Commissioner.
(iv) Demand
draft evidencing payment of the fee of Rs. 2,500/‑.3
(v) Certified true copy of the Memorandum and Articles of
Association of the company.
(vi) Certified true copy of the latest audited balance‑sheet
and profit and loss account with the Directors' and Auditors' Reports.
(vii) Memorandum of Appearance in Form No. 5 of the Company Law Board
Regulations with a certified true copy of the board resolution or the executed
Vakalatnama, as the case may be.
(viii) Original
acknowledgement of the concerned Registrar of Companies.
(ix) Original
acknowledgement of the Central Government.
5. The affidavit
verifying the petition should be drawn up in first person and shall state the
full name, age, occupation and complete residential address of the deponent and
shall be signed by the deponent. [Regulation 14(5) of the Company Law Board
Regulations, 1991].
6. If the
deponent is not personally known to the person before whom the affidavit is
sworn, he shall be identified by a person who is known to the person before
whom the affidavit is sworn. [Regulation 14(6) of the Company Law Board
Regulations, 1991].
7. The said
affidavit should clearly and separately indicate the statements which are true to
the knowledge of the deponent, information received by the deponent, belief of
the deponent and information based on legal advice. [Regulation 14(7) of the
Company Law Board Regulations, 1991].
8. Where any statement
is stated to be true to the information received by the deponent, the affidavit
shall also include the name and complete residential address of the person from
whom the information has been received by the deponent and whether the deponent
believes that information to be true. [Regulation 14(8) of the Company Law
Board Regulations, 1991].
9. Please ensure
that the aforesaid petition is written, typewritten, cyclostyled or printed,
neatly and legibly on one side of the substantial paper of foolscap size in
double space and separate sheets shall be stiched together and every page
consecutively numbered. [Regulation 11(1) of the Company Law Board Regulations,
1991].
10. Please also
ensure that numbers and dates specified therein should be expressed in figures
as well as in words. [Regulation 11(2) of the Company Law Board Regulations,
1991].
11. The petition
should be divided into separate paragraphs which should be numbered serially
and shall state thereon the matter and the name of the company to which it
relates. [Regulation 12 of the Company Law Board Regulations, 1991].
12. Please also
ensure that the aforesaid petition is presented by the petitioner in original
and four extra copies thereof in person or through authorised representative to
the office of the Bench or be sent by registered post with acknowledgement due
addressed to the Secretary or Bench Officer of the Bench concerned, as the case
may be. [Regulation 14(1) of the Company Law Board Regulations, 1991].
13. Affix
Court fee stamp of the requisite value4 on the original petition
before submission.
14. Please furnish
a copy of this petition to the concerned Registrar of Companies5
before filing it with the Company Law Board. [Regulation 14(3) of the Company
Law Board Regulations, 1991].
15. Please also
furnish a copy of this petition to the Regional Director of the region in which
the registered office of your company6 before filing it with the
Company Law Board. [Regulation 14(3), Second Proviso of the Company Law Board
Regulations, 1991].
16. Pay the filing
fee of Rs. 2,500/-7 as per Rule 3 read with Rules 4 and 5 of Company
Law Board (Fees on Applications & Petitions) Rules, 1991, by way of demand
draft.
17. Draw
the demand draft in favour of "Pay and Accounts officer, Department of
Company Affairs, New Delhi", and payable at New Delhi.
18. You can also
make a complaint to the Company Law Board under Section 250 of the Companies
Act, 1956 to enable the Company Law Board to take appropriate action including
action to prevent the transfer of shares, exercise of voting right and change
of management.
19. If you are
making a complaint to the Company Law Board under Section 250, see that you
hold not less than one‑tenth of the total voting power of the company
[Section 235(2)(b)] or make sure that the complaint is made by not less than
two hundred members of the company. [Section 235(2)(a)].
20. Make the
complaint under section 250 of the Companies Act, 1956 to the Company Law
Board, Principal Bench in the same manner as a complaint made aforesaid under
section 409 of the Act.
21. The filing
fee, enclosures and the manner of presenting the aforesaid petition is same as
that of a complaint made under section 409 of the Act.
22. Keep in mind that
penalty by way of fine under section 250(9) and (10) has been increased from
Rs. 5000/‑ to Rs. 50,000/‑ by the Companies (Amendment) Act, 2000.
(Topic 21 to Topic 25)
Topic 21
DO YOU WISH TO PUT YOUR COMPANY INTO
MEMBERS' VOLUNTARY WINDING UP?
1. Convene a
Board Meeting by issuing noticest to the directors of the company as per
section 286 within five weeks immediately preceding the date of resolution for
winding up and make sure that the company can pay its debts in full within a period
of three years if put into liquidation and make a declaration therein to this
effect in Form No. 149 prescribed under Rule 313 of the Companies (Court)
Rules, 1959, and verified by an affidavit.
2. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1000/-2 [Section 286(2) ]
3. Ensure that the aforesaid
Declaration is accompanied by:-
(i) the audited balance‑sheet and the profit & loss
account commencing from the date of the last audited balance‑sheet and
the profit & loss account ending with the latest practicable date before
the date of declaration;
(ii) a
statement of the company's assets and liabilities as at that date; and
(iii) a copy of the report of the auditors of the company on the
above two documents. [Section 488(2) ].
4. Approve
in the said meeting the draft of the resolution for putting the company into members'
voluntary winding up and appointing liquidator(s) and fixing his/their
remuneration and also fix the date, time, place and agenda of the general
meeting. [Sections 484 and 490].
5. Please keep in
mind that any director making a declaration without having reasonable grounds
for the opinion that the company will be able to pay its debts in full within
the period specified in the declaration will be punishable with imprisonment
for a term extending to 6 months or with fine of Rs. 50,000/‑,3
or with both. [Section 488(3)]
6. If the winding
up takes place as per the period or event prescribed in the Articles of
Association, then the resolution will be an ordinary resolution, otherwise a
special resolution. [Section 484(1)].
7. See that a body corporate
is not appointed as a liquidator. [Section 513].
8. Get the
declaration mentioned in item 3 above duly verified by an affidavit before a
Judicial Magistrate and deliver the same with the concerned Registrar of
Companies4 before the general meeting is held for passing the
resolution for winding up. [Section 488(2)(a)].
9. Issue noticesl
for the general meeting by giving not less than twenty‑one days notice in
writing proposing the Ordinary or Special Resolution, as the case may be, with
suitable Explanatory Statement. [Section 484(1)(a) and (b) ].
10. Hold
the General Meeting and pass the Ordinary Resolution by ordinary majority or
Special Resolution for winding‑up.
11. Keep in
mind that the winding up commences from the time of passing the resolution by
three‑fourths majority. [Section 486].
12. Forward
promptly to the Stock Exchange with which your company is enlisted three copies
of the notice and a copy of the proceedings of the general meeting. [Clause
31(c) & (d) of the Standard Listing Agreement5 ].
13. Within ten
days of the passing of the resolution, file notice with the concemed Registrar
of Companies4 for the appointment of the liquidator [Section 493(2)]
after paying the requisite fee6 prescribed under Schedule X to the
Companies Act, 1956, either by way of cash, postal order, demand draft or
treasury challan. [Rule 22]. Postal order is accepted upto Rs. 50/‑.
[Rule 22(3)].
14. Please
keep in mind that any default made in filing the aforesaid notice with the
Registrar of Companies4 Will make the company including every liquiator
or continuing liquidator who is in default punishable with fine of upto Rs.
1,000/-7 for every day during which the default continues. [Section
493(3)]
15. Submit to the
liquidator a statement on the company's affairs in Form No. 578 in
duplicate, duly verified by affidavit in Form No. 588 within twenty‑one
days of the commencement of winding‑up. [Section 454 read with Section
511A and Rule 127 of the Companies (Court) Rules, 1959].
16. File the
Ordinary or Special Resolution passed for winding up with Explanatory Statement
with the concerned Registrar of Companies within thirty days of its passing in
Form No. 23 [Section 192(4)(f)] after paying requisite feelo prescribed under
Schedule X to the Companies Act, 1956, either by way of cash, postal order,
demand draft or treasury challan. [Rule 22]. Postal order is accepted upto Rs.
50/‑. [Rule 22(3), Proviso].
17. Within
fourteen days of passing of the resolution for voluntary winding up, give
notice of the resolution by advertisement in the Official Gazette and also in
some newspaper circulating in the district where the registered office of the
company is situated. [Section 485(1) ].
18. Please keep in
mind that if any default is made in complying with the aforesaid requirement
will make the company and every officer of the company who is default
punishable with fine upto Rs. 500/- for every day during which the default
continues. [Section 485(2)]
19. Forward
promptly to the Stock Exchange with which your company is enlisted three copies
of the notice of the resolution advertised as above. [Clause 31 (c) of the
Standard Listing Agreement ].
20. See that the
liquidator files the notice of his appointment with the concerned or Registrar
of Companies9 in Form No. 1528 of the Companies Court)
Rules, 1959, and publish the same in the Official Gazette in Form No. 151of the
said Rules within thirty days of his appointment. [Section 516 and Rule 315 of
the Companies (Court) Rules, 1959].
21. Also see that
the liquidator gives notice of his appointment to the Income Tax Officer of the
company within thirty days of his appointment. [Section 178 of the Income Tax
Act, 1961].
22. If a
vacancy occurs by death, resignation or otherwise in the office of the
liquidator, call a General Meeting to fill up the vacancy. [Section 492].
Inform the concerned Registrar of Companies12 of the vacancy and
repeat the formalities as stated in items 13, 20 and 21 hereof
23. If, in the
case of a winding up which has commenced after the 1st April, 1956,
the liquidator is at any time of the opinion that the company will not be able
to pay its debts in full within the period stated in the declaration of
solvency, or that period has expired without the debts having been paid in
full, he has to summon forthwith a meeting of the creditors, and has to lay
before the meeting a statement of the assets and liabilities of the company in
Form No. 150of the Companies (Court) Rules, 1959 and if he does not do it he
will be punishable with fine of Rs. 5,000/‑. [Section 495 and Rule 314 of
the Companies (Court) Rules, 1959].
24. If the process
of winding‑up continues for more than a year, call a general meeting
within three months from the end of every year from the date of commencement of
winding‑up, or within such longer period as the Central Government may
allow, and lay before the meeting the liquidator's account of his acts and
dealings together with the statement in Form No. 153 of the Companies (Court)
Rules, 1959, duly verified in Form No. 154 of the said Rules. [Section 496].
25. Please
keep in mind that the liquidator will be punishable with fine of Rs. 1,000/‑
for not calling the general meeting as aforesaid. [Section 496(2) ]
26. Where the case
falls under item 22 hereof, then the meeting of creditors will also be likewise
called except in case of the meeting at the end of the first year where the
same shall not be required to be called unless the meeting held under item 24
hereof has been held more than three months before the end of the year.
[Section 498 and rule 328 of the Companies (Court) Rules, 1959] .
27. If winding up
is not concluded within a year after its commencement then the liquidator shall
file statements with the concerned Registrar of Companies12 twice in
every year. [Rule 327 of the Companies (Court) Rules, 1959].
28. Get the first
year's statement audited for the full year, that is the period commencing from
the date of appointment of the liquidator to the end of twelve months, from the
commencement of the winding‑up, and thereafter subsequent statements
every six months (as at present prescribed), in Form No. 15313 of
the Companies (Court) Rules, 1959.
29. Get the
aforesaid two statements verified in Form No. 154 of the said Rules and file
the same with the Registrar in duplicate within two months from the year end.
[Section 551 and Rule 327 of the
Companies (Court) Rules].
30. Keep in mind
that the auditors' report will be in the form as agreed to between the Government
and the Institute of Chartered Accountants of India, a copy of which may be had
from the office of the concerned Registrar of Companies.
31. Further
keep in mind that even where there is no receipt and payment the aforesaid statement
shall be filed stating this fact accordingly.
32. Complete
the winding‑up by realising all assets and paying off all liabilities
and returning share capital and surplus, if any.
33. The provisions
of Sections 426 to 432, 452, 487, 491, 494, 511, 511A, 512, 514, 515, 517 to
520, 528 to 549 and 553 to 556 and those of Rules from Nos. 124 to 134 and Nos.
312 to 361 of the Companies (Court) Rules, 1959, should also be noted in this
respect.
34. As soon
as the affairs of the company are fully wound up, prepare the liquidator's
account of the winding up in Form No. 15617 of the Companies (Court)
Rules, 1959, and get the same audited as stated in item 28 above. [Section
497].
35. Call the final
General Meeting by giving notice in Form No. 15517 of the Companies
(Court) Rules, 1959, by advertisement to be given not less than one month
before the meeting in the Official Gazette and also in some newspaper
circulating in the district where the registered office of the company is
situate; place the above account in the same and give an explanation thereof.
[Section 497].
36. Please keep in
mind that for not calling the final General Meeting as aforesaid, the
liquidator will be punishable with fine upto Rs. 5,000/‑. [Section 497(7) ]
37. If the
case falls within item 22 hereof, then call the creditors' meeting also
likewise. [Section 498].
38. Pass also the
Special Resolution for disposal of the books and papers of the company when the
affairs of the company are completely wound‑up and it is about to be dissolved.
[Section 550].
39. Within a week
of the final meeting (and where the case falls within item 15 hereof then
within a week of the members' meeting or the creditors' meeting whichever is
held later), file the copy of the above account with the concerned Registrar of
Companies as well as with the Official Liquidator and file a return to each of
them in Form No. 15717 of the Companies (Court) Rules, 1959.
40. Please keep in
mind that if a copy as aforesaid is not sent or the return as aforesaid is not
made within a week of the final meeting, the liquidator will be punishable with
fine upto Rs. 500/‑19 for every day during which the default
continues. [Section 497(3)]
41. If a quorum is
not present, in the aforesaid meeting file the return in Form No. 158 of the
Companies (Court) Rules, 1959. [Sections 497 and 498 and Rule 331 of the
Companies (Court) Rules].
42. The Registrar
of Companies, on receiving the account and either the return mentioned in Sub‑section
(3) of Section 497, or the return mentioned in Subsection (4) of Section 497,
shall forthwith register them. [Section 497(5)].
43. The Official
Liquidator, on receiving the account and either the return mentioned in Sub‑section
(3) of Section 497, or the return mentioned in Sub section (4) of Section 497,
shall, as soon as may be, make, and the liquidator and all officers, past or
present, of the company shall give the Official Liquidator all reasonable
facilities to do so, a scrutiny of books and papers of the company.
44. If on such
scrutiny the Official Liquidator makes a report to the concerned High Court,
that the affairs of the company have not been conducted in a manner prejudicial
to the interest of its members or to the public interest, then, from the date
of the submission of the report to the concerned High Court the Company shall
be deemed to be dissolved. [Section 497(6)].
45. If on such
scrutiny the Official Liquidator makes a report to the Court that the affairs of
the company have been conducted in a manner prejudicial, as aforesaid, the
concerned High Court shall by order direct the Official Liquidator to make
further investigation of the affairs of the company and for the purpose shall
invest him with all such powers as the concerned High Court may deem fit.
[Section 497(6A) ].
46. On receipt of
the report of the Official Liquidator on such further investigation, the
concerned High Court may either make an order that the company shall stand
dissolved with effect from the date to be specified by the concerned High Court
therein or make such other order as the circumstances of the case brought out
in the report permit. [Section 497(6B) ].
47. File the
Special Resolution mentioned in item 38 hereof with the concerned Registrar of
Companies within thirty days of passing in Form No. 23 after paying the
requisite fee21 [Section 192] prescribed under Schedule X to the
Companies Act, 1956, either by way of cash, demand draft or treasury challan.
[Rule 22].
48. The concerned
High Court may in a fit case declare the dissolution void within two years of
the date of the dissolution on application by the liquidator of the Company or
by any other person who appears to the Court to be interested.
49. A person who
obtains the said order of the concerned High Court shall file the certified
copy of the said Court's order with the concerned Registrar of Companies in
Form No. 21 within thirty days or such further time as may be allowed by the
Court. [Section 55] after paying the requisite fee prescribed under Schedule X
to the Companies Act, 1956 either by cash, postal order, demand draft or
treasury challan. [Rule 22].
Topic 22
DO YOU WISH TO PUT YOUR COMPANY INTO
CREDITORS VOLUNTARY WINDING UP?
1. Convene
a Board Meeting by issuing notices to the directors of the company as per
Section 286 for the following purpose:
(a) for fixing up the day, time, place and agenda for a General
Meeting to pass resolutions (i) for a creditors' winding up of the company,
[Section 484 ]; and (ii) for appointing a liquidator. [Section 502 ];
(b) for fixing up day, time, place and agenda for creditors'
meeting, (i) to lay before it a full statement of the company's affairs
together with the creditors' list and their claims. [Section 500(3)(a)]; and
(ii) to appoint a liquidator [Section 502] and to fix his remuneration.
[Section 504(i) ];
(c) for nominating one of the directors to preside at the
creditors' meeting. [Section 500(3)(b)].
2. Please
keep in mind that every officer of the company whose duty is to give notice of
the Board Meeting as aforesaid and who fails to do so will be punishable with
fine of Rs. 1000/‑.1[Section 286(2) ]
3. See
that day of the creditors' meeting is fixed on a day or a day next following the
day of the General Meeting at which the resolution for voluntary winding up is
to be proposed. [Section 500(1) ].
4. If the winding
up is due to the expiry of a time period or on the happening of an event
prescribed in the Articles of Association, the resolution will be an Ordinary
Resolution; otherwise it would be Special Resolution. [Section 484].
5. See that a
body corporate is not appointed as a liquidator. [Section 513]. Liquidator's
remuneration can also be fixed by the Committee of Inspection or the Court in
the circumstances mentioned in Section 504.
6. Winding
up shall be deemed to commence at the time when the resolution for winding up
is passed. [Section 486].
7. Send
notices not less than twenty‑one days in advance for the General Meeting
and simultaneously send the notice of the creditors' meeting.
8. Advertise the
notice for the creditors' meeting once at least in the Official Gazette and
once at least in two newspapers circulating in the district where the company's
registered office or principal place of business is situate. [Section
500(2)].
9. Forward
promptly to the Stock Exchange with which your company is enlisted three copies
of the notice so advertised. [Clause 31(c) of the Standard Listing Agreement2].
10. Hold both the
meetings. In the members' General Meeting, get the resolutions as stated in item
1(a) above passed. In the creditors' meeting transact the business as
stated in items 1(b) and (c) above.
11. Please keep in
mind that if default is made by the company in calling a creditors' meeting or
in advertising the notice for the creditors' meeting or if default is made by
the Board of Directors in complying with the requirements of item l(b) &
(c), then the company and each of the directors and every officer of the
company who is in default will be punishable with fine upto Rs. 10,000/-
[Section 500(6)]
12. Give notice of
any resolution passed at the creditors' meeting to the concerned Registrar of
Companies within ten days of passing thereof in Form No. 36A after paying the
requisite fee5 prescribed under Schedule X to the Companies Act,
1956. [Section 501(1)], either by way of cash, postal order, demand draft or
treasury challan. [Rule 22]. Postal order is accepted upto Rs. 50/‑.
[Rule 22(3), Proviso].
13. Please keep in
mind that if default is made in complying with the aforesaid requirement, the
company and every officer of the company will be punishable with fine of Rs.
500/‑ for every day during which the default continues. [Section 501(2)]
14. Submit to the liquidator
a statement on the company's affairs in Form No. 57 of the Companies (Court)
Rules, 1959, one copy of which will be duly verified by an affidavit in Form
No. 58. of the said Rules within twenty‑one days of the commencement of
winding‑up. [Sections 454 & 511A]
15. File the
resolution for winding up with the Registrar of Companies in Form No. 23 within
thirty days of its passing after paying the requisite fee9
prescribed under Schedule X to the Companies Act, 1956. [Section 192], either
by way of cash, or demand draft or treasury challan [Rule 22].
16. Give notice of
the resolution by advertisement in the Official Gazette and also in some
newspaper circulating in the district where the registered office of the company
is situated within fourteen days of the passing of the resolution. [Section
485].
17. Forward
promptly to the Stock Exchange with which your company is enlisted three copies
of the notice of resolution advertised as above. [Standard Listing Agreement10].
18. If the
liquidators appointed by the members and creditors are different persons, the
person appointed at the creditors' meeting will be the liquidator.
19. Any member or
creditor may, however, appeal to the concerned High Court against such appointment
of the liquidator. If no liquidator is appointed by one of the meetings, the
person appointed in the other will be the liquidator.
20. Any vacancy in
the liquidator's office will be filled up in the creditors' meeting and for the
appointment of the new liquidator repeat the formalities as mentioned
hereinabove. [Sections 502 & 506].
21. A Committee of
Inspection may also be appointed by a meeting of the creditors consisting of
five members who will then fix the remuneration of the liquidator. [Section
503].
22. Where the
winding up continues for more than a year, then at the end of every year from
the date of commencement of winding‑up, call the members' as well as the
creditors' meetings within a period of three months from the end of the year or
such longer period as the Central Government may allow.
23. In the
aforesaid meeting lay before the meeting liquidator's account of his acts and
dealings together with the statement in Form No. 153 of the Companies (Court)
Rules, 1959, and verified in Form No. 154 of the said Rules. [Section 508].
24. Please keep in
mind that if the liquidator fails to call the meeting as mentioned in item 23
above or lay before the said meeting the aforesaid account, he will be
punishable in respect of each failure with fine upto Rs. 1,000/‑."
[Section 508(2)]
25. Get the first
year's statement audited for the full year, that is the period commencing from
the date of appointment of the liquidator to the end of twelve months from the
commencement of the winding up, and thereafter subsequent statements every six
months (as at present prescribed) in Form No. 15312 of the Companies
(Court) Rules, 1959.
26. Get the
aforesaid statements verified in Form No. 15412 of the said rules
and file the same with the Registrar in duplicate within two months. [Section
551 and Rule 327 of the Companies (Court) Rules, 1959].
27. The auditor's
report will be in the form as agreed to between the Government and the
Institute of Chartered Accountants of India, a copy of which may be had from
the Registrar's office.
28. Even
where there is no receipt and payment the aforesaid statement shall be filed
stating this fact accordingly.
29. Complete the
winding‑up by realising all assets and paying off all liabilities and returning
share capital.
30. The provisions
of Sections 426 to 432, 454, 487, 505, 507, 511, 511A, 512, 514, 515, 517 to
520, 528 to 549 and 553 to 556 of the Act and those of Rules from Nos. 124 to
134 and 197, 199, 202, 203, 218, 220 to 231 and 312 to 361 of the Companies
(Court) Rules, 1959, should also be noted in this respect.
31. As soon as the
affairs of the company are fully wound up, make the liquidator's account of the
winding up in Form No. 156 of the Companies (Court) Rules, 1959, and get the same
audited as stated in item 25 above. [Section 509].
32. Call the final
general meeting of the members as well as of creditors by giving notice
in Form No. 15512 of the Companies (Court) Rules, 1959, by
advertisement which has to be given not less than one month before the meetings
in the Official Gazette and also in some newspaper circulating in the district
where the registered office of the company is situate.
33. Please
keep in mind that if you fail to call the aforesaid meetings then you will be punishable
for each failure, with fine of Rs. 5000/‑. [Section 509(7)]
34. Place
the liquidator's account in the aforesaid final general meeting and give any
explanation thereof. [Section 509].
35. Also pass the
special resolution in the members' meeting for disposal of the books and papers
of the company when the affairs of the company are completely wound up and it
is about to be dissolved. [Section 550].
36. Within a week
of the final meeting of members or creditors, whichever is held later, file the
copy of the above account mentioned in item 31 above with the Registrar as well
as with the Official Liquidator and make a return to each of them in Form No.
157 of the Companies (Court) Rules, 1959.
37. Please keep in
mind that if you fail to comply with aforesaid requirements, you will be
punishable with fine of Rs. 500/-15 for every day during which the
default continues. [Section 509(3) ]
38. If
quorum is not present, file the return in Form No. 158 of the said Rules, 1959.
[Section 509].
39. The Registrar,
on receiving the liquidator's account and either the return mentioned in Sub‑section
(3) of Section 497 or the return mentioned in subsection (4) of Section 497,
shall forthwith register them. [Section 509(5) ].
40. The Official
Liquidator, on receiving the account and either the return mentioned in Sub‑section
(3) of Section 497 or the return mentioned in Sub‑section (4) of Section
497 of the Act, shall, as soon as may be, make, and the liquidator and all
officers, past or present of the company, shall give the Official Liquidator
all reasonable facilities to do so, a scrutiny of books and papers of the
company.
41. If on such
scrutiny the Official Liquidator makes a report to the concerned High Court,
that the affairs of the company have not been conducted in a manner prejudicial
to the interests of its members or to the public interest, then, from the date
of the submission of the report to the concerned High Court the company shall
be deemed to be dissolved. [Section 509(6)].
42. If on such scrutiny
the Official Liquidator makes a report to the concerned High Court that the
affairs of the company have been conducted in a manner prejudicial, as
aforesaid, the concerned High Court shall by order direct the Official
Liquidator to make further investigation of the affairs of the company and for
the purpose shall invest him with all such powers as the concerned High Court
may deem fit. [Section 509(6A) ]
43. On receipt of
the report of the Official Liquidator on such further investigation, the concerned
High Court may either make an order that the company shall stand dissolved with
effect from the date to be specified by the concerned High Court therein or
make such other order as the circumstances of the case brought out in the
report penrnit. [Section 509(6B)].
44. File
the special resolution mentioned in item 35 above with the concerned Registrar
of Companies within thirty days in Form No. 23 after paying the requisite fee17
prescribed under Schedule X to the Companies Act, 1956 [Section 192], either by
way of cash, demand draft or treasury challan. [Rule 22].
45. Please keep in
mind that if default is made in complying with the aforesaid requirement of
filing, the company and every officer of the company who is in default will be
punishable with fine of Rs. 200/‑18 for every day during which
the default continues. [Section 192(5)]
46. The concerned
High Court may in a fit case declare the dissolution void within two years of the
date of the dissolution on application by the liquidator of the company or by
any other person who appears to the concerned High Court to be interested.
47. A person who
obtains the said order of the concerned High Court shall file the certified
copy of the Court order with the concerned Registrar of Companieswithin thirty
days or further time as may be allowed by the concerned High Court. [Section
559].
48. Forward
promptly to the Stock Exchange with which your company is enlisted three copies
of any notice given to shareholders or debenture holders and a copy of
proceedings of each general meeting held by the company. [Clause 31(c) &
(d) of the Standard Listing Agreement].
Topic 23
DO YOU WISH TO HAVE YOUR COMPANY WOUND
UP UNDER THE COURT'S SUPERVISION?
A. Members' Voluntary Winding up
1. Convene a
Board Meeting by issuing notices to the directors of the company as per section
286 within five weeks immediately preceding the date of resolution for winding‑up
and make sure that the company can pay its debts in full within a period of
three years if put into liquidation.
2. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1000/‑. [Section 286(2)]
3. Make
a declaration therein to this effect in Form No. 149 prescribed under Rule 313
of the Companies (Court) Rules, 1959 and verified by an affidavit.
4. Ensure that the aforesaid
declaration is accompanied by:
(i) the audited balance‑sheet and the profit & loss
account commencing from the date of the last audited balance‑sheet and
the profit & loss account ending with the latest practicable date before
the date of declaration;
(ii) a
statement of the company's assets and liabilities as at that date; and
(iii) a copy of the report of the auditors of the company on the
above two documents. [Section 488(2)].
5. Approve
in the said meeting the draft of the resolution for putting the company into
members' voluntary winding up and appointing liquidator(s) and fixing his/their
remuneration and also fix the date, time, place and agenda of the General
Meeting. [Sections 484 and 490].
6. Please
keep in mind that any director making a declaration without having reasonable
grounds for the opinion that the company will be able to pay its debts in full
within the period specified in the declaration will be punishable with
imprisonment for a term extending to 6 months or with fine of Rs. 50,000/‑,or
with both. [Section 488(3)]
7. If the winding
up takes place as per the period or event prescribed in the Articles of
Association, then the resolution will be an ordinary resolution, otherwise a
special resolution. [Section 484(1)].
8. See that a body corporate
is not appointed as a liquidator. [Section 513].
9. Please keep in
mind that any appointment of a body corporate as a liquidator will be void
[Section 513(2)] and any body corporate acting as such will be punishable with
fine up to Rs. 10,000/‑. [Section 513(3)]
10. Get the declaration
mentioned in item 2 of this topic duly verified by an affidavit before a
Judicial Magistrate and deliver the same with the concerned Registrar of
Companies before the general meeting is held for passing the resolution for
winding up. [Section 488(2)(a)].
11. Issue notices
for the General Meeting by giving not less than twenty‑one days notice in
writing proposing the Ordinary or Special Resolution, as the case may be, with
suitable Explanatory Statement. [Section 484(1)(a) and (b)].
12. Hold the General
Meeting and pass the Ordinary Resolution by ordinary majority or Special
Resolution for winding up. The winding up commences from the time of passing
the resolution by three fourths majority. [Section 486].
13. Forward
promptly to the Stock Exchange with which your company is enlisted three copies
of the notice and a copy of the proceedings of the general meeting. [Standard
Listing Agreement] .
14. File the
Ordinary or Special Resolution passed for windinf up with Explanatory Statement
with the concerned Registrar of Companies within thirty days of its passing in
Form No. 23@ [Section 192(4)(f)] after paying requisite fee6
prescribed under Schedule X to the Companies Act, 1956, either by way of cash,
demand draft or treasury challan. [Rule 22].
15. Also keep in
mind that if default is made in complying with the aforesaid requirement of
filing, the company and every officer of the company who is in default will be
punishable with fine of Rs. 200/‑ for every day during which the default
continues. [Section 192(5) ]
16. Within
fourteen days of passing of the resolution give notice of the resolution by
advertisement in the Official Gazette and also in some newspaper circulating in
the district where the registered office of the company is situated. [Section
485].
17. Please keep in
mind that any default made in complying with aforesaid requirements will make
the company and every officer of the company who is in default punishable with
fine upto Rs. 500/‑ for every day during which the default continues.
[Section 485(2)]
18. Forward
promptly to the Stock Exchange with which your company is enlisted three copies
of the notice of the resolution advertised as above. [Standard Listing
Agreement8].
19. If the process
of winding up continues for more than a year, call a general meeting within
three months from the end of every year from the date of commencement of
winding up, or within such longer period as the Central Government may allow.
20. Lay before the
aforesaid meeting the liquidator's account of his acts and dealings together
with the statement in Form No. 1539 of the Companies (Court) Rules,
1959, duly verified in Form No. 154 of the said Rules. [Section 496].
21. Where the case
falls under item 19 hereof, then the meeting of creditors will also be likewise
called except in case of the meeting at the end of the first year where the
same shall not be required to be called unless the meeting held under item 22
of Topic 22 has been held more than three months before the end of the year.
[Section 498 and Rule 328 of the Companies (Court) Rules, 1959].
22. If winding up
is not concluded within a year after its commencement then the liquidator shall
file statements with the Registrar of Companies twice in every year. [Rule 327
of the Companies (Court) Rules, 1959).
23. Get the first year's statement audited for the full year, that is the period commencing from the date of appointment of the liquidator to the end of twelve months, from the commencement of the winding up, and thereafter subsequent statements every six months (as at present prescribed), in Form No. 153 of the Companies (Court) Rules, 1959, and get them verified in Form No. 154 of the said Rules and file the same with the Registrar of Companies in duplicate within two months from the year end. [Section 551 and Rule 327 of the Companies (Court) Rules].
24. The
auditors' report will be in the form as agreed to between the Government and
the Institute of Chartered Accountants of India, a copy of which may be had
from the office of the Registrar of Companies. Even where there is no receipt
and payment the said statement shall be filed stating this fact accordingly.
25. The concerned
High Court will then supervise the winding up proceedings which will be carried
out in accordance with the provisions of Sections 426 to 432 and 522 to 556 and
as per the relevant Rules of the Companies (Court) Rules, 1959.
B. Creditors' Voluntary Winding up
1. Convene a
Board Meeting by issuing noticesl to the directors of the company as per
Section 286 for the following purpose :-
(a) for fixing up the day, time, place and agenda for a General
Meeting to pass resolutions (i) for a creditors' winding‑up of the
company. [Section 484]; and (ii) for appointing a liquidator. [Section 502 ];
(b) for fixing up day, time, place and agenda for a creditors'
meeting, (i) to lay before it a full statement of the company's affairs
together with the creditors' list and their claims. [Section 500(3)(a)]; and
(ii) to appoint a liquidator [Section 502] and to fix his remuneration. [Section
504(i)];
(c) for nominating one of the directors to preside at the
creditors' meeting. [Section 500(3)(b)].
2. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1000/‑. [Section 286(2)]
3. See that the
creditors' meeting is fixed on the day or the day next following the day of the
General Meeting at which the resolution for voluntary winding up subject to the
supervision of the concerned High Court is to be proposed. [Section 500(1)].
4. If the winding
up is due to the expiry of a time period or on the happening of an event
prescribed in the Articles of Association, the resolution will be an ordinary
resolution; otherwise it would be special resolution. [Section 484].
5. See that a body corporate
is not appointed as a liquidator. [Section 513].
6. Liquidator's
remuneration can also be fixed by the Committee of Inspection or the Court in
the circumstances mentioned in section 504.
7. Keep
in mind that winding up shall be deemed to commence at the the time when the
resolution for winding‑up is passed. [Section 486].
8. Send
notices not less than twenty‑one days in advance for the General Meeting
and simultaneously send the notice to the creditors by post for creditors'
meeting.
9. Advertise the
notice for the creditors' meeting once at least in the Official Gazette and
once at least in two newspapers circulating in the district where company's registered
office or principal place of business is situate. [Sect 500(2)].
10. Forward
promptly to the Stock Exchange with which your company is enlisted three copies
of the notice so advertised. [Standard Listing Agreement].
11. Hold both the
meetings. In the General Meeting, get the resolutions stated in item 1(a)
above, passed. In the creditors' meeting, transact the busin as stated in items
1(b) and (c) above.
12. Please keep in
mind that if default is made by the company in callin creditors' meeting or in
advertising the notice for the creditors' meeting or if fault is made by the
Board of Directors in complying with the requirements item 1(b) and (c), then
the company and each of the directors and every office the company who is in
default will be punishable with fine upto Rs. 10,000/-.[Section 500(6) ]
13. Give notice of
any resolution passed at the creditors' meeting to the concerned Registrar
Companies within ten days of passing thereof after paying requisite fee prescribed
under Schedule X to the Companies Act, 1956 [Sect 501(1)], either by cash,
demand draft or treasury challan. [Rule 22].
14. Please further
keep in mind that if default is made in complying with aforesaid requirement,
the company and every officer of the company, will punishable with fine of Rs.
5000/‑12 for every day during which the default continues.
[Section 501(2)]
15. Submit
to the liquidator a statement on the company's affairs in Form No. 57 of the Companies (Court) Rules, 1959, one copy
of which will be duly verified by an affidavit in Form No. 58 of the said Rules
within twenty‑one days of the commencement of the winding up. [Sections
454 & 511A].
16. Obtain an
order of the concerned High Court, after the company has passed a resolution
for creditors voluntary winding up as stated above, for continuation of the
winding up under the supervision of the concerned High Court. [Section 522]
17. After the
order is made by the concerned High Court, see that the liquidator advertises
the order within twenty‑one days from the date of the order in one issue
of the Official Gazette of the State or Union Territory concerned and in one
issue of each of a newspaper in the English language and in the regional language
circulating in the State or Union territory concerned, as the concerned High
Court may direct.
18. Also see that
within the said period of twenty one days a certified copy of the order is
filed with the concerned Registrar of Companies in Form No. 21, after paying
requisite fee prescribed under Schedule X to the Companies Act, 1956, either by
way of cash, demand draft or treasury challan. [Rule 22 read with Rule 316 of
the Companies (Court) Rules, 1959].
19. The
time taken in obtaining the copy of the concerned High Court's order shall be
excluded in counting the aforesaid twenty one days. [Section 640A].
20. Forward promptly to the Stock Exchange with which
your company is enlisted three copies of the Courts' Order advertised as above.
[Standard Listing Agreement].
21. If the winding up of the company is not concluded
within a year after its commencement, see that statements required to be filed
under section 551 is filed with the concerned Registrar of Companies twice in
every year. Such a statement shall also be filed in the concerned High Court,
simultaneously.
22. Please keep in mind that if the aforesaid
statements are not filed, the liquidator will be punishable with fine upto Rs.
5000/-20 for everyday during which the failure continues. [Section
551(5)]
23. The first statement shall be filed in Form No. 153
of the Companies (Court) Rules, 1959, in duplicate and a copy of it shall
be verified by an affidavit in Form No. 154 of the said Rules within one month
from the expiration of twelve months from the commencement of the winding up
and subsequent statements shall be filed at intervals of half a year. [Rule
327 of the Companies (Court) Rules, 1959].
24. File the resolution for winding up with Explanatory
Statement with the Registrar of Companies within thirty days of the passing
thereof in Form No. 23 after paying the requisite fee prescribed
under Schedule X to the Companies Act, 1956 [Section 192 ], either by
cash, demand draft or treasury challan. [Rule 22].
25. Please keep in mind that if default is made in
complying with the aforesaid requirement of filing, the company and every
officer of the company who is in default will be punishable with fine of Rs. 200/-
for every day during which the default continues. [Section 192(5)]
26. Usually the liquidator appointed in the voluntary
winding up is allowed to continue but the concerned High Court has the power to
appoint additional liquidators or remove any liquidator. [Section 524].
27. The concerned High Court will then supervise the
winding up proceedings which will be carried out in accordance with the
provisions of Sections 426 to 432 and 522 to 556 of
the Act and as per the relevant Rules of the Companies (Court) Rules, 1959.
Topic 24
DO
YOU WISH TO HAVE YOUR COMPANY WOUND UP BY ORDER OF THE COURT?
1. A
compa ny may be wound up by the Court:
(a) If the Company has, by special resolutiont, resolved that the
company be wound up by the Court;
(b) If it defaults in delivering the statutory report to the
Registrar of Companies or in holding the statutory meeting;
(c) If it does not commence its business within a year from its
incorporation, or suspends its business for a whole year;
(d) If the number of members is reduced, in the case of a public
company, below seven, and in the case of a private company, below two;
(e) If
it is unable to pay its debts;
(f) If the Court is of opinion that it is just and equitable that
the company should be wound‑up. [Section 433].
2. A company is deemed to be unable to pay
its debts in the circumstances as mentioned in Section 434.
3. A petition for winding up can be made
by any of the persons and in the manner as mentioned in Section 439.
4. The said petition shall be in Form No. 45,
46 or 47 prescribed under Rule 95 of the Companies (Court) Rules, 1959.
5. If the petition is presented by the company, see that every contributory or creditor of the company is furnished with a copy of the petition within 24 hours of his requiring the same on payment of the prescribed charges. [Rule 98 of the Companies (Court) Rules, 1959].
6. Prescribed charges as mentioned above mean charges
prescribed by the rules of the concerned High Court in respect of analogous
matters in its other proceedings. [Rule 2(10) of the Companies (Court) Rules,
1959].
7. See that the petition is advertised in Form No. 48
of the Companies (Court) Rules, 1959, subject to any directions of the Court
not less that fourteen days before the date fixed for hearing in one issue of
Official Gazette of the State or the Union Territory concerned and in one issue
each of a daily newspaper in the English language and in the regional language
circulating in the State or the Union Territory concerned. [Rule 99 of the
Companies (Court) Rules, 1959].
8. Forward promptly to the Stock Exchange with which
your company is enlisted three copies of the petition advertised as above. [Clause
31(e) of the Standard Listing Agreement3].
9. Apply to the concerned High Court with an affidavit
showing sufficient grounds for the appointment of the provisional liquidator
and after getting the affidavit either notarised by the Notary Public or sworn
before the Oath Commissioner and obtain the order of the concerned High Court
appointing the Official Liquidator as the provisional liquidator. [Rule 106
of the Companies (Court) Rules, 1959].
10. On receipt of the winding up order from the
concerned High Court, it should be advertised in Form No. 53 of the Companies
(Court) Rules, 1959, within fourteen days of the date of making the order in
one issue each of a newspaper in the English language and in the regional
language circulating in the State or the Union Territory concerned.
11. A copy of the order must also be served upon such
person, if any, and in such manner as the Judge may direct. [Rule 113 of the
Companies (Court) Rules, 1959].
12. File with the concerned Registrar of Companies a
certified copy of the order in Form No. 21 within thirty days from the date of
making the order after paying the requisite fee prescribed under Schedule X to
the Companies Act, 1956. [Section 445], either in cash, demand draft or
treasury challan. [Rule 22].
13. Please keep in mind that if default is made in
complying with the aforesaid requirement, you will be punishable with fine upto
Rs. 1000/‑6 for each day during which the default continues. [Section
445(1) ]
14. A statement of the affairs of the company in Form
No. 577 of the Companies (Court) Rules, 1959, must be submitted
to the Official Liquidator within twenty‑one days from the date of
appointment of the Official Liquidator or from the date of the winding up order
or within such extended time not exceeding three months.
15. The aforesaid statement must be submitted in
duplicate, one copy of which shall be verified by an affidavit in Form No. 587
of the Companies (Court) Rules, 1959. [Section 454 of the Act and Rule 127 of the
Companies (Court) Rules, 1959].
16. Please keep in mind that if you i make any default
in complying with the requirements of item Nos. 14 & 15 without reasonable
excuse you shall be punishable with imprisonment for a term which may extend
to 2 years or with fine upto Rs. 1000/‑ for every day during which the
default continues or with both. [Section 454(5)]
17. The winding up proceedings will be carried out in
accordance with the provisions of Sections 426 to 483 and 528 to 559 and as per the
relevant Rules of the Companies (Court) Rules, 1959.
18. The winding up of a company by order of the
concerned High Court shall be deemed to be concluded at the date on which the
order dissolving the company has been reported by the liquidator to the
concerned Registrar of Companies. [Rule 284(a) of the Companies (Court) Rules,
1959].
Topic 25
DO
YOU WISH TO WIND UP AN UNREGISTERED COMPANY? (SECTIONS 582,583,585 TO 590)
1. Before winding up an unregistered company under the
Companies Act, 1956, the following things must be kept in mind:-
(a) The unregistered company proposed to be wound up must have
more than seven members at the time of presenting the winding up petition to
the concerned High Court. [Section 582(b) ].
(b) The unregistered company can only be wound up by the concemed
High Court and neither voluntarily nor subject to the supervision of the
concerned High Court. [Section 583(3) ].
(c) The
unregistered company can be wound up under the following circumstances:
(i) if the company is dissolved, or has ceased to carry on
business, or is carrying on business only for the purpose of winding up its
affairs;
(ii) if
the company is unable to pay its debts;
(iii) if the concerned High Court is of opinion that it is just and
equitable that the company should be wound up. [Section 583(4)].
(d) Suit or other proceedings against the members of the
unregistered company can also be stayed by the concerned High Court. [Sections
580 and 586].
(e) A foreign company within the meaning of Section 591 of the
Act is an "unregistered company".
2. An unregistered company would be deemed
to be unable to pay its debts in the following circumstances:
(a) Where a creditor who is indebted in a sum exceeding Rs. 500/‑
has served a demand on the unregistered company under his handwriting requiring
it to pay the said sum and it neglected to pay the said sum for three weeks
after the service of the demand.
(b) If any suit or other legal proceeding has been instituted
against any member for any debt or demand due, or claimed to be due, from the
company, or from him in his character of member, and notice in writing of the
institution of the suit or other legal proceeding having been served on the
company by leaving the same at its principal place of business or by delivering
it to the secretary, or some director, manager or principal officer of the
company or by otherwise serving the same in such manner as the Court may
approve or direct, the company has not, within ten days after the service of
the notice,
(i) paid,
secured or compounded for the debit or demand, or
(ii) procured
the suit or other legal proceeding to be stayed, or
(iii) indemnified the defendant to his satisfaction against the suit
or other legal proceeding" and against all costs, damages and expenses to
be incurred by him by reason to the same.
(c) If execution or other process issued on a decree or order of
any Court in favour of a creditor against the company, or order of any Court in
favour of a creditor against the company, or any member thereof as such, or any
person authorised to be used as nominal defendant on behalf of the company, is
returned unsatisfied in whole or in part.
(d) If it is otherwise proved to the satisfaction of the Court
that the company is unable to pay its debts.
3. Present the winding up petition, in duplicate,
in Forms Nos. 45 or 46 and 47 of the Companies (Court) Rules, 1959, before the
High Court of the State in which the principal place of business of the
unregistered company is situate.
[Rule 95 of the
Companies (Court) Rules, 1959 and Section 583(2) read with Section 10].
4. The High Court of the State alone has the
jurisdiction to try winding up petition of an unregistered company. [Section
10(2)(b) read with Section 583(1)].
5. The petition may be presented either by any
contributory/contributories or creditor/creditors or all or any of them
separately or together. [Section 439(1)(d) read with Section 583 (1)]
6. If the petition is presented by any contributory or contributories, then the form to be used is Form No. 45 and if it is by any creditor or creditors, then, in Form No. 461 and if the petition is presented by the company itself, then in Form No. 471 as prescribed under Rule 95 of the Companies (Court) Rules, 1959.
7. Present the winding up petition along with an
affidavit in Form No. 3 as prescribed under Rule 21 of the Companies (Court)
Rules, 1959, verifying the petition, after having it either notarised by the
Notary Public or sworn before the Oath Commissioner.
8. Advertise
the winding‑up petition not less than fourteen days before the date fixed
for hearing in:
(i) one
issue of the Official Gazette of the State or Union Territory concerned;
(ii) one issue of a daily newspaper in English language
circulating in the State or Union Territory concerned;
(iii) one issue of a daily newspaper in the regional language
circulating in the State or the Union Territory concerned. [Rule 24 of the
Companies (Court) Rules, 1959].
9. See that the above advertisement is in Form
No. 48 as prescribed under Rule 99 of the Companies (Court) Rules, 1959.
10. After obtaining the winding up order of the
concerned high Court, advertise the order within fourteen days of the date of
making the order in Form No. 53 of the Companies (Court) Rules, 1959, in the
following newspapers circulating in the State or Union Territory concerned:
(i) one
issue of the newspaper in English language;
(ii) one issue of a newspaper in the regional language [Rule 113 of
the Companies (Court) Rules, 1959].
11. Serve the winding up‑order upon such persons and in such manner as
the Judge directs.
12. File a certified copy of the winding up order with
the concerned Registrar of Companies in Form No. 21 within thirty days from the
date of the making of the order [Section 445(1) read with Section 589(1)], after
paying the requisite fee prescribed under Schedule X to the Companies Act, 1956
either in cash, demand draft or treasury challan. [Rule 22].
13. Please keep in mind that if default is made in
complyini with the aforesaid requirement, you will be punishable with fine upto
Rs. 1000/‑ for each day during which the default continues. [Section
445(1)]