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m Growth of industry and commerce in Britain led to

formation of organization wherein, individuals pooled


their capital and had liabilities in proportion to their
respective stocks.
m Companies were formed by the Act of Parliament.
First one was the Bank of England (1694)
m Formation of companies was regularized by the Joint
stock Companies Act in1884. It was replaced by
Limited Liabilities Act in 1855.
m In 1862 in Britain, it was amended and renamed as
Companies Act. The concept of private company was
introduced in 1907.
m Introduced by the British in India in 1850 as the Joint
Stock Companies Act (based on the same act of
Britain)
m The first comprehensive Act known as the Indian
Companies Act was passed in 1913.
m After independence, some immediate amendments
were made in 1951. a committee was formed under
the chairmanship of Mr. C.H. Bhabha to make a report
on future company legislation.
m Based on its report, the Companies Act of 1956 was
made effective from 1/4/1956.
m The Companies Act of 1956, consisted of 713 sections
, 12 schedules and innumerable sub-sections.
m 20 amendments have been made so far in the Act.
The amendments of 1960, 1969 and 1974 are the
most significant ones.
m In 1977, Sachar Committee was appointed to to report
on the changes required in the Act.
m In 1988, further amendments were made by the
Government based on its experience of the working of
the Act and the recommendations of the Sachar
Committee.
m The Act extends to the whole of India and applies
to all classes of companies. It also contains
provisions for companies incorporated outside
India but which have an established place of
business in India.
m The exceptions to the Act are related to
a) Nagaland [section 1(3)]
b) Goa, Daman and Diu [section 620- B]
c) Jammu and Kashmir [section 620- C]
m According to the section 3 (1) of the Companies Act
1956, a Company means a Company formed and
registered under this Act or an existing company as
defined in clause (ii).
m Clause (ii) states that an existing Company means a
Company formed and registered under any previous
Companies laws.
m Company may be defined as ³an incorporated
association which is an artificial legal person, having
an independent legal entity, with a perpetual
succession, a common seal, a common capital
comprising transferable shares and carrying limited
liability.´
m þ     
D It means that a Company can
hold property, can sue and can be sued in its name.
the company¶s money and property belong to the
company and not to the shareholders. The importance
of this characteristic was well brought about in the
Salomon vs Salomon case.
m =     
D The company is the owner of its
assets and bound by its liabilities. Members are
neither the owners nor liable for its debts. No member
is bound to contribute anything more than the nominal
value of shares held by him.
m þ   
D A company is a legal person distinct
from its members although its capital and assets are
contributed by share holders they are not the private and
joint owners of its property. The company is a real person
in which all its properties vested and by which it is
controlled, managed and disposed off.
m á    D Company is a creation of law. It is
invisible, intangible, immortal & exists only in the eyes of
law. It can enter into contract, employ people and do
everything just like natural persons except it cannot take
oath, cannot appear on its own person in a court, cannot be
sent to jail, cannot practice a learned profession. But a
company cannot be treated as a fictitious entity because it
really exists.
m   þ    þ D A
company doesnot have an allotted span of life. It can
be said ³members may come and members may go
but the company goes on forever.´ A company¶s life is
determined by the terms of its memorandum of
association.
The common seal is the official signature of a
company. A company should act through its
agents(directors) & all contracts entered into by them
must be under the common seal of the company. Any
document not bearing the common seal will not be
binding on the company.
m (   D Although Company is a legal
person having a nationality, it is not a citizen. It
cannot claim the fundamental rights which are
guaranteed to citizens only. However, it is
sufficiently protected under the constitution for e.g.
it has freedom of trade and commerce and no
unjust discrimination can be shown against it. A
Company can challenge a law if the law happens
to violate fundamental rights of citizens.
m    
þ D According to
Companies Act Section 82, the shares or other
interests of any members in a company shall be
movable property, transferable in the manner
provided by the articles of the company. The
incorporation enables the members to sell their
shares in the open market and get back their
investment without having to withdraw the money
from the company. This right may be restricted by
the articles of a private company.
 There is a veil between the company & its
members & the court do not lift it, to look at the
economic reality.
 The company is the is an association of persons
who are the beneficial owners of all the corporate
property
 But sometimes it may become necessary to break
through the corporate veil
As laid down in SOLOMAN v. SOLOMAN & CO. ±
Courts consider there is a veil between the company &
its members, which even the Court do not lift.
However at times it may become necessary to break
through the corporate veil to look at the beneficial
owners of the company, disregarding the corporate
fiction to pay regard to economic realities.
This is known asD LIFTING or PIERCING THE
CORPORATE VEIL.
m under express statutory provisions

1. no. of members reduced below statutory minimum (Sec


45).
2. relationship of holding & subsidiary companies established
(Sec 212(i)).
3. investigation into related companies under section 239 &
237.
4. for investigation of the ownership of the company (Sec
247).
5. when there is a fraudulent trading [Sec 542(1)].
m under judicial interpretation

1. protection of revenueD Juggilal v. IT Commissioner; Sir Dinshaw


Maneckjee Pelit Re.
2. avoidance of welfare legislationD Workmen of Associated Rubber
Industry v. Association Rubber Industry Ltd
3. prevention of fraud improper conductD Tata Engg & Locomotive
Co Ltd v. State of Bihar
4. company is a µsham¶D Delhi Development Authority v. Skipper
Construction Co(P) Ltd ;Gilford Motor Co Ltd v. Horne
5. company is avoiding legal obligations
6. company acting as agent on trustee of the shareholdersD
Smith Stone & Knight Ltd v. Birmingham Corporation
7. company formed is against public interest or public policyD
Connors Ltd v. Connors
8. determination of character of a company whether it is an
enemyD Daimler Co. Ltd v. Continental Tyre &Rubber Co.
m any company, association or partnership carrying
on banking business with more than 10 members
or carrying on any other business with more than
20 members that has for its object the acquisition
of gain, without being registered under the
Companies Act, shall be considered an Illegal
Association.
m The Stock Exchange
it is not regarded as an illegal association as it is not
formed for the purpose of carrying on any business( V.
V. Ruia v. Dalmia).
m Joint Hindu Family
a hindu family irrespective of the no. of members is not
an illegal association, however when 2 or more families
work together then it comes under section 11( Pannaji v.
Senaji).
m Associations not for profit making
Associations which do not work for the motive of gain &
associations which carry on business by virtue of
pooling agreements to eliminate competition.
m It is not allowed to enter into any contract, nor can it
sue any member or outsider.
m It cannot be sued for any debts.
m It has no existence in the eyes of the law.
m Every member is personally liable for all liabilities
incurred in business.
m Every member is punishable with fine which may
extend to Rs.1000.
m It is not possible to wind it up under the Act.
! á=áá(þD formed in Great
Britain by the royal charter i.e., the special order of the king or
queen for the time being occupying the throne. Such
companies are not formed in India after independence.
A chartered company is governed by its charter which defines
the nature of the company and at the same time incorporates
it.

EXAMPLEDEAST INDIA COMPANY FORMED IN 1600 IN


GREAT BRITAIN.
ï þá á(þD These are corporations formed by
specific Acts of Parliament or the state legislative but these are
practically national corporations formed to render specific services
to the nation with more or less monopoly in a particular industry or
commerce. These are public enterprises. Any change in the working
of these companies is regulated by parliament¶s or legislature¶s
amendments only.
These companies are  .
ExampleD the British Broad Casting Corporation formed in 1926.
In IndiaD Reserve Bank of India, State Bank of India, Industrial
Development Bank of India, Life Insurance Corporation etc.
h 
þá(þA registered company is one which is
formed and registered under the Indian Companies Act,1956 or
under any earlier Companies Act in force in India. Companies
registered under the Companies Act are eitherD
 
 ((á(þ
OR
 (áá(þ
!
 ((á(þþ(! 
Any company in which not less than 51% of the paid-up share
capital is held by the Central Government or by any State
Government or Government or partly by the Central Government
and partly by one or more State Government is called a
Government Company. A Company which is subsidiary of a
Government Company is also a Government Company.
 =þá=á =
 ((á(þ
! á  á The auditor of a government company shall be
appointed or re-appointed by the central government on the advice of the
comptroller and Auditor General of India [Section 619(2)].

ï á        á 


 
 The auditor of a Government Company shall submit a copy of his
audit report to the Comptroller and Auditor General of India who shall have
the right to comment upon, or supplement, the audit report [section
619(4)].Any such comments upon, or supplement to, the audit report shall
be placed before the annual general meeting of the company [section
619(5)].
h á        hen the Central Govt. is a
member of the govt. company, it shall cause an annual report on the
working and affairs of the company to be prepared within three months of its
annual general meeting before which the audit report is placed. The report
shall be laid before both houses of parliament together with a copy of the
audit report, and any comments upon, or supplement to, the audit, made by
the comptroller and auditor general of India[section 619-A(1)].
here in addition to the Central Govt., any State Govt. is also a member of
a govt. company, the state govt. shall cause a copy of the above documents
to be laid before the House of the state legislature [Section 619-A(2)].
where the central govt. is not the member of a govt. company, the state govt.
or every state govt. which is a member shall cause the above documents to
be prepared within the specified time and laid before the house or both
houses of the state legislature[section 619-A(3).
˜     !
    According to
Section619-B,the provisions of section 619 shall apply to a company in which at
least 51% of the paid up share capital is held by one or more of the following or
any combination there of, as if it were a government company, namelyD
1. The Central Govt. and one or more govt. companies;
2. Any State Govt. or Governments and one or more government companies;
3. The Central Govt., and one or more corporations owned or controlled by the
Central Government,
4. The Central Govt., one or more State Govts. and one or more corporations
owned or controlled by the central govt.;
5. The central govt. or one or more State Govts. and one or more corporations
owned or controlled by the Central Govt;
6. One or more corporations owned or controlled by the Central Govt. or the State
Govt.; and
7. More than one Govt. Company.
°       
The central
government may, by notification in the official gazette, direct that any of the
provisions of the companies act (other than sections 618,619 and 619-
A),specified in the notification-
(a)Shall not apply to any govt. company; or
(b)Shall apply to any govt. company with such exceptions, modifications, and
adaptations, as may be specified in the notification [Section 620(1)].
This power of the central govt. is subject to the control of parliament
[Section620(2)].
ï (áá(þThese are the companies where the
government does not hold 51%or more of the share capital of such a
company. In this category, the companies may be
(A)Private limited companies,
and
(B)Public limited companies.
(á á=á(þA private limited company means a
company which by its articlesD
a)Restricts the right to transfer the shares, if anyD it means in case of a
private co. having no share capital, there need not contain restrictions
regarding the right of members to transfer shares, while other
restrictions(a)and (b) will apply.
(b)Limits the number of members to 50(min.2)not including-
(i)Persons who are in the employment of the company as well as
shareholders.
(ii)Persons who, having been formerly in the employment of the Company,
were members of the company while in employment and have
continued to be members after the employment ceased and
(c)Prohibits any invitation to the public to subscribe for any shares in or
debentures of the company.2
Private companies can be classified asD
(i)Companies limited by shares;
(ii)Companies limited by guarantee(if they have a
share capital);
(iii)Unlimited companies (if they have a share
capital).
(1)A private co. can be formed with only 2 members[sec12(1)]
(2)A private co. can proceed to allot shares without waiting for
the min. subscription[sec69].the reason is that a private
company is not required to offer shares to the public.
(3)A private company is not required to issue a prospectus.
Therefore, It can allot shares without issuing a Prospectus
or delivering to the Registrar a statement in piece of
prospects [sec70(3)].
(4)A private co. need not offer issue of shares to the existing
shareholders, i.e., a private co. is free to allot new issue to
outsiders [sec81(3)].
(5)A private co. can issue any kind of shares and allow
disproportionate voting rights since sec85 to 89 of the act
are not applicable to it [sec 90(2)].
(6)A private co. can commence business immediately after its
incorporation [sec149(7)].
(7)It need not have an index of members [sec151(1)].
(8)A private co. is not required to hold a statutory meeting or to
file a statutory report with the registrar of companies
[sec165(10)].
(9)Only two members, who are personally present at the
meeting, shall form the quorum unless the articles provide for
a larger number [sec 174(1)].
(10)In case of a private co., poll can be demanded by one
person present in person or by proxy, If not more than seven
persons are present; if the number of persons present is more
than seven, two members present in person or by proxy can
demand a poll[sec179(1)(b)].
(11)A private co. need have a minimum of two directors only[sec
252(2)].
(12)All the directors may be appointed by a single resolution.
(13)The directors of a private co. need not file their written
consent to act as directors or to take up their qualification
shares [sec 264 and 266].
(14)The directors of a private co. need not retire by rotation
[sec255].
(15)Sec 266 dealing with restrictions on appointment or
advertisement of directors is not applicable to private
co.[sec266(5)(b)].
(16)here a new director is to be appointed, a special notice of
14 days is required. This provision is not applicable to a
private co., unless it is a subsidiary of a public co.
[sec 251(2)].
(17)Directors of a private company can vote on a contract in
which they are interested
[sec 300].
(18)A private company is exempted from restrictions regarding
managerial remuneration.
m =    
   

Sec 43 provides that if a private co. contravenes any of the 3 conditions
included in its articles as per section 3(i)(iii),then it will be treated as if it is a
public company and it will then result in loss of privileges and exemptions to
which it is normally entitled to.
The provison to section 43 states that if the contravention of any of the 3
restrictions contained in the articles was accidental, or if the company law
board is satisfied that it is just and equitable to grant relief, it may relieve the
company from these consequences on the application by the company or
any other interested person.
m á   

  


m   
       

m   

     

m   
 
   
 
 


  
m R   



 



  
m  

  



m  
  

m       

 
 
? A public company means a company which is not
a private company [section3(1)(iii)].
? Any seven or more persons can join hands to form
a public Company. Public limited companies may
be-
(1)Companies limited by shares-where the liability of
the members of a company is limited by the
memorandum to the amount unpaid on the
shares, such a company is known as a company
limited by shares or a limited liability company.
(2)Companies limited by guarantee-is a company having the
liability of its members limited by its memorandum to such
amount as the members may respectively thereby
undertake to contribute to the assets of the company in the
event of its being wound up,the amount guaranteed by
each member cannot be demanded until the company is
wound up. Here, it is the nature of a reserve capital.
(3)Unlimited companies-a co. having no limit on the liability of
its members is an unlimited company ,it means the liability
of members of this type of company is unlimited i.e. it may
extend to the personal property of the members.
   
    

1.Requires minimum two Requires minimum seven


members. members.
2.Maximum limit is of fifty No maximum limit.
members.
3.At least two directors required. At least three directors required.
4.Consent of directors need not
be filed with the registrar. Consent of directors is to be filed
5.Raises capital by private with the registrar.
arrangement, public subscription Raises capital by inviting public
is not allowed. subscription or by private
6.Shares are not transferable arrangement.
except for the provisions in the Shares are freely transferable,
article. may be even quoted on a stock
7.No restriction on managerial exchange.
remuneration. Restriction on total managerial
8.The words µprivate limited¶ are remuneration.
added to the company¶s name. The word µlimited¶ is added to the
company¶s name.
here one co. has control over another it is known as holding co. over which
control is exercised is called the subsidiary co.
Control can be exercised in 3 waysD
a)here one company controls the composition of the board of directors of
another the latter becomes the subsidiary of the former.
b)here one company holds majority of share in another co. the latter becomes
the subsidiary of the former.
c)here one co. is subsidiary of another which is itself a subsidiary of some
another co. the first mentioned co. becomes the subsidiary of the subsidiary of
the mentioned co., the following documents should be attached to the balanced
sheet of the holding company.
Balanced sheet and profit & loss a/c of the subsidiary company.
Copy of report of board of directors & copy of report of its auditors.
Statement of the holding company¶s interest in the subsidiary at the end of the
financial year.
It is one in which almost the whole share capital is held by a single
man who takes a few dummy members simply to meet the statute¶s
requirements regarding the minimum number of members ±may be
by giving only one share to each of the dummy members.
E.g. A private co. is registered with a share capital of rupees 500000
divided into 5000 shares of rupees 100 each, of these shares 4999
are held by A and one share is held by A¶s wife B, this is a one man
company.
The following financial institutions shall be regarded, for the
purposes of the companies act, as public financial institutions,
namely,
ICICI,IDBI,IFCI,LIC,UTI.
Sub section (2) of section 4-A empowers the central govt. to
specify other institutions ,as it may think fit, to be a public
financial institution by issuing a notification in the official
gazette.
However, no institution shall be so specified unless-
It has been established or constituted by or under any central
act
or
Not less than 51% of the paid up share capital of such an
institution is held or controlled by the Central Government.
It means any company incorporated outside India and which after the
commencement of the Indian Companies Act established a place of
business within India, and which before the commencement of the act
had established a place of business within India and continue to have
established place of business within India at the commencement of the
Act.
Requirements regarding Foreign Companies D
  following documents shall be filed within 30 days of formationD
m A certified copy of the charter, statutes, memorandum and articles of the
co. and ,if the instrument is not in English, a certified translation thereof.
m The full address of the registered or principal office of the company.
m A list of the directors and secretary of the company.

m The names and addresses of any person or persons resident in


India, authorized to accept on behalf of the company service of
processes and any notices required to be served on the
company.
m The full address of the principal place of business in India .
á (þ
According to section 594, unless exempted by the central govt., it is required
to file with the registrar every year three copies of the balance sheet and
profit and loss account like a company under the companies act.
The foreign company must also send, along with these documents, three
copies of a list in the prescribed form of all places of business established
in India.
(á
A foreign company shall conspicuously exhibit on the outside of every office
or place where it carries on business in India the name of the company,
together with the name of the country where it is incorporated in English
and in one of the local languages. All bill-heads letter papers, and all other
official publications of the company shall also show the name (section 595).

þá(á

The provisions relating to the registration of charges (sec. 124 to 145), annual
returns(sec. 159), books of account(sec 209 and 209-A), special audit in
certain cases(sec. 233-A), audit of cost accounts(sec 233-B), power of
registrar to call for information(sec. 234 to 246), in so far as they apply to
its Indian business, shall apply to foreign companies also.
?  (þáþþ þþ h
It enumerates the particulars to be stated in the prospectus inviting
subscriptions for shares or debentures by a foreign company. These
are as followsD
a) Name of company in English.
b) Name of country in which it is incorporated.
c) hether the liability of the member is limited.
d) Particular regarding its constitution, date and country of incorporation,
and the law under which it was incorporated abroad.
e) The address of its registered office and the address of its principal
place of business, and
f) Matters required to be included in a prospectus issued by a company
incorporated under the companies act
?  (þ
á(
((
 
here a foreign company, which has been carrying on business in
India, ceases to carry on such business in India, it may be wound up as
an unregistered company under part X (Section 582-590) of the act. A
foreign company¶s business in India can be wound up even in cases
where the company has been dissolved or where it has cease to exist
under the law of the country in which it was incorporated (Section 584).
FORMATION OF
COMPANY

PROMOTION REGISTRATION FLOATATION


m Promotion means ³the discovery of business opportunities
and the subsequent organization of funds, property and
managerial ability into a business concern for the purpose
of making profits there from´.
m Palmer defined Promoter as ³a person who originates a
scheme for the formation of the company, has the
Memorandum and Articles prepared, executed and
registered and finds the first directors and settles the terms
of the preliminary contracts and prospectus (if any) and
makes arrangements for advertising and circulating the
prospectus and placing the capital, is a promoter´
A promoter may be an individual,
firm, association of persons or even
a limited company, whether the
person is or not a promoter
depends upon the nature of the role
played by him in the promotion of
business.
m He conceives the idea of the formation of the Company after a
thorough study of the business world that a particular business field
is still unexplored or may be explored further.
m He draws up the scheme and determines the object of a future
company.
m He prepares the memorandum of association, articles of association
and the prospectus. He gets together the able directors to act as
such for the Company.
m He takes the necessary leave of the appropriate government
authorities for that purpose.
m He finds out suitable financiers to back up the company.
m He makes arrangement with vendors, legal advisors and other
persons required for floating a company.
m He takes pain for filing a necessary document with the registrar of
companies for the certificate of incorporation.
m He bears all the preliminary expenses.
As to the exact legal status of the promoter, the
statutory provisions are silent in most part, except for
a couple of Sections in the Specific Relief Act, 1963.
His legal status is incapable of precise statement.
A promoter is neither a trustee nor an agent. Though
a promoter acts on behalf of the Company, he cannot
be called truly an agent or trustee. The reason is that
a person cannot act an as agent or a trustee for a
person who is non-existent and the Company is non-
existent at the time when the promoter acts for it.
? Promoters have following duties with regard to the prospect
(if issued)
a) See that the prospectus contains the necessary particulars.
b) See that the prospectus does not contain any untrue
statement or hide any material fact.
? Liabilities- he incurs following liabilities in case of non
performance of above duties.
a) Civil liability- He makes himself liable to pay any
compensation to any shareholder who buys shares on the
faith of the said prospectus containing untrue statements or
concealing material facts.
a) Criminal liability
I. Promoter is liable to the original allottee of shares for the mis-
statements contained in the prospectus. It is clear that his
liability does not extend to subsequent allottees. He may also
be imprisoned for a term which may extend to 2 years or may
be punished with fine up to rupees 5000 for such untrue
statements in the prospectus [Section 62 & 63]
II. In the course of winding up of the Company, on an application
made by an official liquidator, the court may make a promoter
liable for misfeasance or breach of trust [Section 543]. The
Court may also order for the public examination of the
promoter [ Section 478 & 519]
Note- here there are more than one promoters, they are jointly
and severally liable and if one of them is sued and paid
damages, he is entitled to claim contribution from other or
others.
The death of a promoter does not relieve his estate from
liability arising out of abuse of his fiduciary position.
Three categories of people are involved in the process of formation of a
Company and all of them can be called interested in the formation of
the Company. They areD
 Promoters- They are the first members of the Company and are vitally
interested in the Company. The promoters bring the other two
categories of people to fulfill their plan.
 Experts- Advices of some experts like lawyers, chartered accountants
etc., are commissioned against payment of fees whose expertise is
necessary in preparing documents and fulfilling other legal formalities.
The promoters may even appoint a qualified secretary at this stage on
monthly remuneration and his employment is ratified with retrospective
basis after the Company comes into existence. The expenses already
made by the promoters by themselves are reimbursed in future by the
Company.
 itness- There must be one witness who should testify the signature of
the subscribers to the Memorandum. The witness may be somebody
other than the subscribers [Section15]. The same rule shall apply to the
Articles [Section 30]
1. The certificate of incorporation- An application to be made to the
Registrar of Companies of the State where the proposed Company
is going to be registered, suggesting intended name of the
proposed company and wanting to know whether the suggested
name is available. Generally three names, in order of priority are
suggested. The suggestions shall be made carefully so that the
provisions of Emblems and names (Prevention of Improper use)
Act, 1950 are not violated. The application shall be made in a form
vide Rule 44 of the Companies (Central Government¶s) General
Rules and Forms, supplied by the office of registrar. The
application shall be accompanied with prescribed fee.
? The registrar will send a reply , ordinarily within 14 days, stating
whether the
name is available or not. If not, a fresh application has to be made
with fresh
suggestion.
2. The memorandum of association [Section 13-15] and the articles
3. One copy of the memorandum and one copy of the articles, which
are to be filed with the Registrar, have to be stamped according to
the Indian Stamp Act.
4. The following documents to be filed with the RegistrarD
? One signed and stamped copy of Memorandum.
? One signed and stamped copy of the Articles.
? A declaration of compliance (i.e. all the formalities of the act and the
rules have been complied with) in the prescribed Form no. 1, made
by an advocate, an attorney or pleader entitled to appear before a
High-court, or a C.A. practicing in India, engaged in the formation of
the Company or by a person named in the articles as a director or
manager or secretary of the company [Section 33]
5. The following documents also may be filed-
 Notice of the situation of the registered office of the Company in Form
no. 18 [Section 146]. This can however be filed within 30 days from
the date of incorporation but generally it is filed in advance together
with other documents.
? Particulars of the directors, manager and secretary in Form no. 32
[Section 303]. These particulars are to be filed within 30 days from
appointment, but the appointment may be made from the very
beginning by mentioning in the articles.
6. The following documents also have to be filed-
? The written consent of each person named in the articles as
director to act as director, in Form no. 29 [Section 266(1)(a)].
? A written undertaking by such person to take and pay for
qualification shares, if any, in Form no. 29, unless he has already
taken or paid for the qualification shares or he has subscribed to
the memorandum and articles with the sufficient number of shares
covering the qualification shares[Section 266 (1)(b)].
7. Together with the above documents filing also has to be made of
the following-
? Registrar¶s letter informing availability of the name.
? A letter of authority duly stamped and signed by the subscribers in
favor of one of them or any other person for making necessary
corrections in the documents, on their behalf, if wanted by the
registrar.
8. Filing fees have to be paid at the time of filing each document at
m Memorandum of Association of a Company is the
fundamental document of the Company.
m It contains the ³fundamental conditions upon
which alone the Company is allowed to be
incorporated. It is the charter of the Company and
defines the reason of its existence´.
m It lays down the area of operation of the Company
and regulates its external affairs in relation to the
outsiders.
m It also shows the scope of the Company beyond
which it cannot act.
m It enables the shareholders, creditors and all those
who deal with the Company to know the range of
their powers and activities. The shareholders can
keep a track of the fields and purposes for which
their money is being used by the company and the
risks involved in it.
m It enables the outsiders to know about the objects
of the Company and whether the contractual
relation they are going to enter, is within those
objects.
The Memorandum of the company should beD
 Printed
 Divided into paragraphs numbered conclusively
 Signed by 7 subscribers [ 2 in case of private
company].
 Each subscriber should sign it in the presence of
at least one witness who in turn attests the
signature.
m Section 14 of the Act requires that the memorandum
shall be in one of the forms as in Table B, C, D &E, as
may be applicable in the case of the company.
 Table B for a Company limited by the number of
shares.
 Table C for a Company limited by guarantee and not
having share capital.
 Table D for a Company limited by guarantee and
having share capital.
 Table E for a unlimited Company with share capital.
COMPULSORY CLAUSES
1. The name of the company with ³limited´ and
³private limited´ as the last name for Public and
Private companies respectively.
2. The name of the State in which the registered
office of the company is to be situated.
3. The objects of the company stating separately
the ³Main objects´ and ³other objects´.
4. In the case of the companies [other than trading
corporations] with objects not confined to one
State, the States to the territories of which the
objects extend.
5. In case of the Companies limited by the shares or
the guarantee, it should also state that the
liabilities on its members is limited.
6. The amount of the authorized share capital,
divided into shares of fixed amount.
1. The name of the Company establishes its identity and is
the symbol of its existence.
2. The name of the Company with ³limited´ and ³private
limited´ as the last name for Public and Private companies
respectively.
3. The promoters are free to choose any name subject to
some rules. A name is undesirable ifD
 It is identical with or too nearly resembles the name of an
already existing company. In case this happens, the first
company can apply to the court.
 It is identical with or too nearly resembles the name of a
company in liquidation.
 The provisions of the Emblems and Names Act 1950 shall
not be violated.
4. The company must have a certain amount of authorized capital if it uses any
of the key words like Corporation, International, Continental, Hindustan,
India, Industries, Enterprise etc, in its name.
5.Every Company shallD
 Paint or affix its name & address and keep the same, on the outside of the
office or place of business, in letters easily legible and in language used in
the locality.
 Have its name mentioned on all the business letters, bill heads, negotiable
instruments and receipts etc. It should also be engraved on its Seal.
PENALTY
In case a Company does not follow the Name Clause, the Company and every
officer who is in default shall be punishable with fine. It¶s the duty of the
Registrar to take the necessary action if the provisions of the Section 147
are violated.
m It states that every Company shall have a
registered office from the day it starts its
operations or from the 30th day after the date of its
corporation.
m In case of a default, the Company and its every
officer who is in default, is punishable with a fine.
m It defines the sphere of activities of the Company, beyond
which it cannot operate.
m It should containD
 Main objects of the Company
 Objects incidental or ancillary to the attainment of main
objects.
 Other objects not included in the above two categories.
m The objects should not be illegal, immoral or opposed to
the public policy.
m The narrower the objects are expressed, the less is the
subscribers¶ risk; but the wider the objects, greater is the
security of those who transact with the Company.
m It states the nature of liability of the members(whether
it is by shares or by guarantee).
m In case of a Company limited by shares, a member
can be called upon to pay to the Company the amount
unpaid on the shares held by him.
m In case of a Company limited by guarantee, the clause
should state the amount which every member
undertakes to contribute to the assets of the Company
in the event of its winding up.
m This clause is absent form the Memorandum if the
Company is Unlimited which implies that the liability of
its members is unlimited.
m This clause states the amount of share capital with
which the Company is to be registered and the
division into shares of fixed amount.
m The Company cannot issue more shares than
authorized for the time being by the Memorandum.
m The shares issued by a Company can be equity or
preference shares but they cannot have
disproportionate rights.
m A Private Company which is not a subsidiary of a
Public company may continue to issue shares of any
kind and with disproportionate rights.
m At the end of the Memorandum, there should be
the Association clause which is to be signed by at
least 7 subscribers in case of a Public company
and by at least 2 subscribers in case of a Private
company.
m Each subscriber has to take at least one share.
Their number of shares is to be mentioned in in
the document.
m The signature of each subscriber is to be attested
by at least one witness who cannot be another
subscriber.
CHANGE OF NAME
m Section 21 provides that the name of a Company can be
changed at any time by passing a special
resolution(passed by ¾ majority) at its general meeting
and with the written approval of the central government.
This approval is not required if a Public company is being
converted into a Private company or vice- versa.
m Fresh certificate of incorporationD The change of name
must be communicated to the Registrar of companies
within 30 days who will then issue a fresh certificate of
incorporation with necessary alterations [Section 23(1)] .
Change of name shall not affect any rights or obligations of
Company or render defective any legal proceedings by or
against it [Section 23(2)]
A. In same city, town or villageD it involves passing of the boards
resolution to that effect and inform the Registrar within 30 days.
B. From one State to anotherD it involves alteration of Memorandum and
the change is allowed if it enables the Company to meet any of the
purposes listed in the Section 17(1)-
m To enable the company to carry out its business more economically.
m To attain its main purpose by improved means.
m To enlarge or change the area of Companies operation
m To restrict or abandon any of the objects specified in the Memorandum.
m To sell or dispose whole or part of to the undertaking of the Company.
m To amalgamate with any other Company or body of persons.
The shift of the registered office in this case can be done
by special resolution confirmed by Company law board. A
copy of the special resolution under Section 146 & 17
should be sent to registrar of companies within 30 days.
Certified copies of CLBs orders should be filed within 3
months with the registrar of companies of the old and new
state, otherwise the change becomes void and inoperative.
A notice of the new location must be given to the registrar
of the new state within 30 days.
C. One town to another in the same stateD this requires
passing of special resolution in the general meeting and
communicating the change to the registrar within 30 days.
m It is allowed if the Company wants to meet out the purposes enumerated in
Section 17(1).
m The procedure involves following stepsD
1. Passing a special resolution & filing it with the Registrar within 30 days.
2. Getting confirmation of the Company law board which has to satisfy itself
that D
â Sufficient notice has been given to every debenture holder, creditor and
other parties whose interest may be affected by the alteration.
â Every objecting creditor has been paid in full or his consent has been
obtained.
â Notice has been given to the registrar about intended change.
â The alteration is fair and equitable considering the interest of members
and creditors of the Company.
m Section 38 states that a Company cannot impose any
additional liability on the members or compel them to
buy additional shares unless all of them agree in
writing to such change.
m The change becomes effective from the day of
passing the resolution.
m The Registrar should be informed about the change
along with the necessary documents within 30 days.
m Shareholders of an unlimited company can limit their
liability by passing a special resolution and obtaining
court¶s order. A copy of the special resolution is to be
filed within 30 days and of the court¶s order in 3
months, with the Registrar.
m Section 94 provides that a Company limited by
share capital may by an ordinary resolution,
passed in its general meeting, alter the capital
clause so as toD
1. Increase its authorized share capital by issuing
fresh shares.
2. Consolidate and divide all or any of its share
capital into shares of larger amount than its
existing shares.
3. To convert all or any of its fully paid-up shares into
stock and reconvert the stock into fully paid-up
shares of any denomination.
4. To sub-divide its shares into shares of smaller
amount than fixed by the Memorandum, but the
proportion paid and unpaid on each share should
remain the same.
5. To cancel shares which at the date of passing the
resolution in that behalf, have not been taken or
agreed to be taken by any person.
m     
   
   

  


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m Share capital ,rights of shareholders variation of these
rights payment of underwriting commission
m Lien on shares ,calls on shares ,transfer of shares,
transmission of shares, forfeiture of shares conversion of
shares in stock ,share warrants
m Alteration of capital ,general meetings and proceedings
thereat ,voting rights of members directors ,there
appointment ,qualification, remuneration
m Manager ,secretary ,dividends and reserves ,accounts
,audits and borrowing powers
m Capitalization of profits and winding up
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m This is a limitation to the doctrine of constructive
notice ,namely that so far as the internal
proceedings of the company are concerned, the
stranger dealing with the company is entitled to
assume that the provisions of the articles have
been observed by the officers of the company.
An outsider is not expected to see that how the
company carries out its internal regulations
m contd«
m à 
 



 

  

 

 
 
 
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³Any document described or issued as a prospectus
& includes any notice, circular, advertisement or
other document inviting deposits from the public for
the subscription or purchase of any shares in, or
debentures of, a body Corporate.´
m ³any section of the public whether elected as
member or debenture holders, or as clients of the
person issuing the Prospectus or in any other
manner´
m it does not include a small & closely restricted
group of investors which have been described by
the Act as ³being domestic concern of the persons
making & receiving the offer or invitation´.
Schedule II of the Act provides a model which has
to be strictly followed to prepare a Prospectus.
 Part I D state the matters specified in Part I of
Schedule II
 Part II D set out the reports specified in Part II of
Schedule II
 Part III D the provisions as stated, have effect
subject to the provisions contained in Part III of
Schedule II.
m    of the company & details of the signatories.
m      & about redemption in case of redeemable
preference shares.
m   -details of them, qualification shares, remuneration, etc.
m       to be raised to meet preliminary expenses.
m    the subscription list.
m á 
  on application & allotment.
m particulars of 
   .
m particulars of     issued.
m á 
     on each share issued.
m      
acquired or to be acquired.
m á        within 2 preceding yrs.
m  with managing director manager.
m     of every promoter or director in the promotion or
property of the company acquired within preceding2yrs to be acquired.
m reasonable    where copies of balance sheets & profits & loss
accounts    
m  
  of the company w. r. t. profits &
losses of last 5 yrs, assets & liabilities.

m proceeds of the issue of shares or debentures to be used


to purchase a business.

m proceeds to be applied directly or indirectly to acquire


shares in other body corporate at last date.
m the persons to be considered as vendors to the
company.

m a vendor includes lessor.

m where the 5 financial yrs cover a period of loss than 5yrs


then 5yrs shall mean 5 financial yrs.

m any reports acquired in Part II shall be


!  
 an officer or servant or a partner or
in employment of a company or its holding or subsidiary
company or a subsidiary of company¶s holding company.
m Registration must be made      
     

m the Prospectus     


 
     to the Registrar for registration.

m Prospectus must be issued w   


of the date on
which a copy thereof is delivered for registration.

m      are to keep an authenticated record of


the terms & conditions of issue of shares or debentures;& to
pinpoint the responsibility of the persons issuing the
prospectus.
if any person violates the requirements of section 56
i.e., of making the prospectus in conformity with
the Schedule II,    w   w 

 °
µMinimum Subscription¶ is the amount stated in a prospectus as the
minimum amount which, in the opinion of the Board of Directors,
shall be raised by the issue of share capital in order to provide
forD

m the purchase price of any property purchased or to be purchased


which is to be defrayed in whole or in part out of the proceeds of
the issue,

m any preliminary expenses payable by the company, &


commission so payable to any person in consideration of his
agreeing to subscribe for or of his procuring or agreeing to
procure subscriptions for any shares in the company,

m the repayment of any moneys borrowed by the company.


? It is a process.
? Under the process, the life of the company is ended and its
property is administered for the benefits of its members and
creditors.
? A liquidator is appointed to realize the assets and properties of
the company.
? After payments of debts, if any surplus of assets is left out, they
will be distributed among the members according to their rights.
? inding up does not necessarily means that the Company is
insolvent. A perfectly solvent company may be wound up by the
approval of members in a general meeting.
? There are differences between winding up & dissolution.
inding up

Compulsory winding Voluntary winding up


up through an order of Voluntary winding up under the supervision
court of the court

Members voluntary Creditors voluntary


winding up winding up
? Special resolution of the company[ Section 433(a)]
? Default in holding statutory meeting or in delivering statutory
report to the registrar [Section 433(b)]
? Failure to commence business within a year of incorporation[
Section 433( c )]
? Reduction in membership [Section 433(d)]
Court may order for the winding up of company if it is not able to
pay its debts. The basis of an order for winding up under this
clause is that the company is unable to meets its current
demands , although the assets when realized may exceed its
liabilities. According to Section 434 of the act Company shall be
deemed to be unable to pay its debt in following casesD
 hen a statutory notice was served
 Decreed debt
 In case of commercial insolvency Cont.
? Just and equitable reasons [ Section 433 (1)]
This clause give gives the court a very wide power to order
winding up wherever the court considers it just and equitable to
do so. But the court may give due weightage to the interest of the
company and its stake ± holders.
 Deadlock management- hen it is not possible for the Company
to carry out its objects for which it was formed. CaseD Yenidjije
tobacco Co. Ltd.
 Loss of substratum- hen the main objects of the company have
failed to materialize or the Company has lost its substratum , it is
just and equitable to wind up the Company. CaseD German Date
Coffee Co.
 Oppression of minority- hen majority of the shareholders are
using their powers unfairly or have adopted, an oppressive policy
towards the minority or the management.
 Illegal or fraudulent purposes- hen the company has ceased to
carry on its authorized business.
? here the members of the Company have lost their confidence
with the Company.
? hen the Company does not carry on any business or does not
have any property.
m By the company itself [Section 439 (1) (a)]
m By the creditors [ Section 439 (1) (b)]
m By any contributory [ Section 439(a) (c )]
m By registrar of companies [Section 439 (1)(e)]
m By the central government or any person
authorized by it
[ Section 439 (1)(f)]
m By the liquidator
The winding up is deemed to commence from the date of
the resolution which is passed by the company for
³voluntary winding up´ & this resolution is passed before the
presentation of the petition for the winding up of the
company by the court.
In all other cases (i.e. where the company has not passed
the petition for voluntary winding up), the winding up of the
company by the court is deemed to commence from the
time of the presentation of the petition for the winding up.
Advertisement of petition-
Every petition shall be advertised 14 days before the
hearing; stating the date on which the petition was
presented & the names and addresses of petitioners.
? Powers to stay winding up order- On receipt of an application
either from the liquidator or from any creditor or contributory, the
Court may stay the proceedings altogether or for a limited time
[Section 466]
? To settle the list of contributories- In order to discharge the
liabilities of the company the Court can get the assets of the
Company & has the power to prepare a list of such shareholders
as are liable to contribute to the assets of the company [Section
467]
? To order for delivery of property to liquidator
? Right to call from a contributory to clear dues
? To make calls- the Court may ask the contributories to pay the
uncalled money on shares when it finds that assets are
inadequate to meet the liabilities and the expenses of winding up
[Section 470] Cont.
m To call for money from debtors [Section 471]
m Power to exclude creditors- those creditors who have
failed to prove their claims within stipulated period
may be excluded by the Court from the list of creditors
[Section 474]
m To summon any person known or suspected to have in
possession of Company¶s property [Section 477(2)]
m To order for the public examination of promoters,
directors etc [Section 478]
m To order for the arrest of absconding share-holder, if
any [Section 479]
m To order for dissolution of the company [Section 481]
A liquidator is a person who is appointed by the court
to conduct the proceeding in winding up the Company
and perform such duties in reference thereto as the
Court may impose. For the purpose of winding up,
there shall be attached to each High Court an official
liquidator appointed by Central government who may
be either a whole time or part time officer. A body
corporate cannot be appointed a liquidator in any form
of winding up. here the official liquidator becomes or
acts as liquidator, he shall be paid by the Central
Government out of the assets of the Company such
fees as may be prescribed.
? He must conduct equitably & impartially all proceedings in
the winding up, according to provision of the law.
? He must submit a preliminary report to the Court. The report
shall contain-
1. As to the amount of capital issued , subscribed & paid up
& the estimated amount of assets and liabilities.
2. If the company has failed, the cause of the failure, &
3. hether in his opinion, further inquiry is desirable as to
any matter related to promotion, formation or failure of the
Company, or the conduct of the business thereof [Section
455(1)]
? Additional reports
A liquidator has two types of powers under the ActD
1. Powers to be exercised with the sanction of the court.
2. Powers to be exercised without the sanction of the
court.
NoteD All these powers are exercised by the liquidator
within the control of the court [Section 457]

Cont.
1) To institute or defend any suit, prosecution or other legal proceedings (civil
or criminal) in the name of the Company or on the behalf of the Company.
2) To carry on business so far it may be necessary for the beneficial winding of
the Company.
3) To sell the immovable and movable property of the Company by the public
auction.
4) To raise on the security of the assets of the Company.
5) To sell the movable or immovable property of the Company under the
private contract of sale.
6) To secure loan by mortgaging the property of the Company.
7) To enter into necessary compromise or arrangement with regard to payment
to creditors.
8) To enter into any compromise or accept suitable security in connection with
payment to debtors and calls outstanding on shareholders.
9) To appoint any advocate or legal advisor to assist him in connection with
the discharge of his duties.
10) To do all such things as may be necessary for winding up the affairs of a
Company and distribution of its assets.
1) To execute all deeds and other documents in the name and on the behalf of
the company and to use the Company¶s common seal,
2) To prove and claim from an insolvent contributory for any balance against his
estate.
3) To draw, accept and endorse any negotiable instrument of behalf of the
Company.
4) To obtain letters of administration to any deceased contributory and take
necessary steps for obtaining payment of any money due from the
contributory of his estate.
5) To appoint an agent to do any business which the liquidator is unable to do
himself.
6) To check the records and returns of the Company.
7) To extend the date of final payments by the buyers in an auction sale of
Company¶s property.
8) To call the meetings of the creditors and contributories to discuss the matters
related to winding up process.
In this form of winding up , the Company and its creditors
are left to settle their affairs by themselves, without going to
the Court , but the parties can request the Court for general
direction or orders, wherever necessary. It is the most easy,
common popular form of winding up.
Circumstances for Voluntary inding Up-
a) The article fixed for tenure of the Company has expired or
an event upon which the Company has to be wound up
has happened and the Company in general meeting has
passed a special resolution.
b) The Company has for any cause whatever passed a
special resolution to wind up voluntarily [ Section 484].
The Company may be wound up by a special resolution
even if it is prosperous.
1. Members voluntary winding up,
&
2. Creditors voluntary winding up.
1) Appointment of liquidator [Section 490]- The Company in general meeting or
shall appoint one or more liquidators for winding up the affairs of the Company
and for distributing the assets. The Company shall also fix his remuneration and
unless his remuneration is not fixed, he will not take charge of his office.
2) Boards power to cease [Section 491]- On appointment of liquidator , all powers
of Board of Directors, Managing director(s) and manager, shall cease to exist
except when the Company or liquidator may sanction their continuance.
3) Power to fill the vacancy of liquidator [Section 492]- If any vacancy occurs in the
office of liquidator, the Company may in general meetings fill the vacancy subject
to any arrangement with its creditors. The vacancy may arise due to death,
resignation or otherwise.
4) Notice of appointment of liquidator to Registrar [Section 493]- ith in 10 days of
the date of appointment of liquidator, a notice of information may be given to
registrar of the event. PENALTY- In case of default the Company and every
officer of the Company who is in default shall be punishable with a fine,
extending Rs.100/- for every day of default.
5) Disposal of property [Section 494]- The liquidator may, with the sanction of a
special resolution of the Company , sell all or part of the Company¶s business or
property or shares or like interest in another Company to be distributed among
the members.
6) Meeting of the Creditors [Section 495]- If, at any time, the liquidator is of the
opinion that the Company will not be able to pay its debts in full within the
period mentioned in the declaration of solvency, he must call a meeting of the
creditors and lay down before them a statement of the assets & liabilities.
PENALTY- On default the penalty is a fine which may extend to Rs.500/-
where a liquidator has called a creditors meeting under Section 495, the
winding up, then, would proceed as if it was creditors voluntary winding up
[Section 498].
7) Annual general meeting at the end of first year and subsequent years[
Section 496]- If the winding up continues for more than one year, the
liquidator must call a general meeting of the Company and a meeting of the
creditors at the end of first year of the commencement of winding up and at
the end of each of the subsequent years and may lay before them an account
of the acts or the dealings.
8) Final meeting and dissolution [Section 497]- The liquidator shall perform the
following ,as soon as the affairs of the Company are fully wound up-
? He shall make up the account of the winding up, showing how the same has
been conducted and how the property has been disposed of.
? He shall call a general meeting of the Company for laying before it the said
accounts. The meeting shall be called by advertisement specifying the time,
place and object thereof.
? ithin one week after the meeting, the liquidator shall send a copy of the
account to the registrar and the official liquidator and also a return of the
1) Meeting of creditors [Section 500]- If a voluntary winding up is proposed and no
declaration of solvency has been made, then the Board must call a meeting of
the creditors either on the same day or the next day of the general meeting in
which the resolution is passed. Notice of the meeting should be advertised in
the official gazette as well as in 2 newspapers.
2) Notice to registrar [Section 501]- Notice of any resolution passed at a creditors
meeting shall be given by the Company to the registrar within 10 days of the
passing thereof.
3) Appointment of liquidator [Section 502]- The creditors and the members may
nominate a liquidator for the purpose of winding up the affairs and distributing
the assets of the Company. If the creditors & the members nominate different
persons, the creditors nominee is the liquidator.
4) Appointment of committee of inspection [Section 503]- Creditors may appoint a
committee of inspection of not more than 5 members. Company may also
appoint members of this committee. In case of dispute matter will be referred to
the court.
5) Fixing of Liquidator¶s remuneration [Section 504]- The committee of inspection,
or where there is no such committee the creditors shall fix the remuneration of
the liquidator, where the remuneration is not fixed, it shall be determined by the
court. the remuneration once fixed cannot be increased in any case.
6) Board¶s powers to cease [Section 505]- on the appointment of
liquidator , all the powers of the Board of directors shall cease,
except in so far as the committee of inspection, or if there is no
such committee, the creditors in a general meeting, may
sanction.
7) Vacancy in office of liquidator [Section 506]- If any vacancy
occurs by death, resignation or otherwise in the office of the
liquidator ( other than a liquidator appointed by or by the
direction of the court), the creditors in a general meeting may fill
he vacancy.
8) Meeting at the end of each year [Section 508]- If the winding up
continues for more than one year, the liquidator must call a
general meeting of the Company and a meeting of the creditors
at the end of first year of the commencement of winding up and
at the end of each of the subsequent years and may lay before
them an account of the acts or the dealings.
9) Final meeting & dissolution [Section 509]
At any time after a Company has passed a resolution for voluntary winding up,
the court may make an order that the voluntary winding up shall continue, but
subject to such liberty, contributories or others to apply to the Court & generally
on such terms and conditions as the court thinks just [Section 522]
A petition for the continuance of a voluntary winding up subject to the supervision
of the court shall be deemed to be a petition for winding-up by the Court [Section
523]
The Court will not in general make a supervision order on the petition of a
contributory, unless it is satisfied that the resolution for winding up voluntarily was
so obtained that the minority of members were overborne by fraud or improper or
corrupt influence
here a Company is being wound up voluntarily or subject to the supervision of
the Court may be presented by-
? Any person authorized to do so under Section 4399(which deals with provisions
as to application for winding up), or
? The official liquidator [ Section 440(1)]
NoteD The Court shall not make a winding up order on the petition presented to it
unless it is satisfied that the voluntary winding up or winding up subject to
supervision of court cannot be continued with due regard to the interest of
creditors or contributors or both [Section 440(2)]
m hen the rules relating to the winding up are not
being strictly adhered to, or
m hen the majority is playing a fraud on minority
m hen the resolution for voluntary winding up was
obtained by fraud,
m hen the liquidator is negligent in collecting the
assets of a Company, or
m hen the liquidator is prejudiced or partial, etc.
However, the court had wide discretion in the matter of
either to grant or refuse the supervision order.
Any officer of Company, whether past or present, in the winding up of
Company is punishable with fine and imprisonment in connection with
certain offences. He is punishable for-
1. If he does not, to the best of his knowledge and belief, fully and truly
disclose to the liquidator all the property of the Company.
2. If he does not deliver up to the liquidator, or as he directs , all such part
of the Company as is in his custody or under his control and which he is
required by law to deliver up on;
3. If he does not deliver up to the liquidator, or as he directs , all such
books and papers of the Company as are in his custody or under his
control and which he is required by law to delivering up;
4. If he conceals any part of the property of the Company to the value of
Rs.100 or more, or conceals any debt due to or from the Company;
5. If he fraudulently removes any part of the property to the value of
Rs.100 or more within 12 months next before the commencement of the
winding up or at any time thereafter;
6. If he makes any material omission in any statement relating to the affairs
of the Company;
7. If he knowingly or believing that a false debt has been proved, by any
person under the winding up, fails for a period of one month to inform the
liquidator thereof;
8. If he, after the commencement of winding up, prevents the proportion of any
book or paper affecting or relating to the property or affairs of the Company
9. If he makes, or privy to the making of any false entry in any book or paper
affecting or relating to the property or affairs of the Company;
10. If he, by false representation or other fraud, obtains on credit for or on behalf
of the Company and property which the company does not subsequently pay
for;
11. If he attempts to account for any part of the Company by fictitious losses or
expenses;
12. If he pledges or disposes off any property of the Company which has been
obtained on credit and has not been paid for, unless such pledge or disposal is
in the ordinary course of business of the Company;
In the case of any offences mentioned in 10 and 12 the defaulting officer shall
be punishable with imprisonment for a term which may extend up to 5 years ,
or with fine, or with both and in case of any other offence with imprisonment
for a term which may extend to 2 years or with fine or with both.
THANK
YOU!!