Thursday, 11 June 2015

Winding up a company

It is quite possible that a foreign company can be wound up as an unregistered company. This happens if the company does not carry on business in India any more or also in cases where the corporate body for the same tends to get dissolved or if the same stops altogether in existence in accordance with the law under which it had been initially incorporated. The Act states the detailed provisions with respect to the winding up of a company and also prescribes the winding up modes. The said modes can be either by the court or under its supervision. In addition to that, there is also a provision of voluntary winding up.

There can be several reasons based on which the Tribunal may take the decision of ordering for the wind up of any company. Some of these issues can include situations when the company is found to be acting against the sovereignty and integrity of the country, its security or international relations. In another condition, if the company is found guilty of fraudulent practices or has been reported by the ROC for being indulged in any other sort of unacceptable activities. The Act does not distinguish between the winding-up by members or creditors.

Monday, 8 June 2015

Understanding the class action lawsuit as per the Indian Companies Act

The Class Action lawsuit is a new concept that has been introduced by the Indian Companies Act 2013. The lawsuit can be initiated against a certain company and its auditors by its shareholders for any fraud or practices that are unlawful. The Class Action Suit is a procedural instrument for a group with common interest or grievances to approach the National Company Law Tribunal to sue the accused party. This instrument allows the prosecution of litigation in a smoother way.

The suit can be filed against auditors for misleading particulars, against experts or advisers for incorrect statements etc. The suit can also be filed for claiming several relief. Some examples include restraining the company from acting against their memorandum of association or breaching any articles as such. In addition to that, the Directors and other members of the company can also be restrained from going against any of the company policies, resolutions or agreements that might violate the best interest of the shareholders or partners. The CA2013 also allows for the provision of using the class action lawsuit for claiming of damages and also for compensation regarding relevant issues from the Directorial board, audit firm or the company as a whole.

Wednesday, 3 June 2015

Transferring shares under the companies act 2013

The transfer of shares under the CA2013 requires the companies to issue the relevant certificates for the same within a specified time limit. This time limit is basically a period of one month from the date when the instrument of transfer is first received by the company. It is understandable that the shares of a company are a movable asset and that is what makes them freely transferable too. In case a certain company plans on making such a transfer, they will have to fill up the related form recommended by the Companies Act 2013.

The share transfer form has to be duly stamped and dated. It also has to bear the names of the  transferor and the transferee. Partly paid shares cannot be transferred without a thorough analysis and special permit from the Board. The adequate value of the document along with the relevant dates needs to be mentioned on the form. The buyer also will have to be notified about any pending payments and a certificate for no objection in case he or she is willing to allow the transfer of partly paid shares. It is also important to be aware about the applicable stamp duty on share transfer as well as other details.

Sunday, 31 May 2015

The powers of the board of Directors

The Companies Act 2013 confers a company’s' directorial board with several powers. The Board is entitled for exercising all those powers and also to indulge in acts that the company is authorised for as a whole. There also are a few restrictions imposed either under the Act or in the respective Memorandum or articles of the company and the Board is liable to abide by those under all circumstances.

The main highlights of the powers of the Board of Directors have been stated below.
  •  The power to authorise any required buy backs of securities
  •  To initiate or assist with the diversification of business
  •  Borrowing monies
  •  Making investments using the funds of the company for the best interest of the company
  •  The power to grant financial loans or to provide security or guarantee regarding the loans
  •  The power for approving reports
  •  Issuing securities as well as debentures within India as well as abroad
  •  The power for sending approvals related to mergers, reconstruction and amalgamation
  •  Acquiring a company or a substantial stake in another company

Apart from the above mentioned powers, the Board can also take crucial decisions for the company

as and when required.

Wednesday, 27 May 2015

The duties of the directors

The Indian Companies Act of 2013 classifies the duties of the directors into a fiduciary category and  interest investment category. The first classification is all about ensuring that the directors of the companies maintain ethical practices and work towards the best interest of all their stakeholders. The second classification on the other hand, is to encourage the investment efforts that are made by the directors at several levels for providing elegant and swift resolutions as well as for making wise decisions to protect the company of unnecessary risks.
The specific duties that have been assigned for the directors include exercising of the responsibilities with utmost care and diligence. Also, the directors are not supposed to involve in a situation that may hamper the best interests of the company directly or indirectly. The duties of the directors also require them to:

  •  Act in accordance with the company's AOA
  •  Avoid any attempts to derive undue advantage from the company's profits
  •  Not assign his or her office to anyone else
  •  Abide by all the company policies and pre decided codes of conduct

A failure in the up keeping of the duties by a director can draw penalty charges up to five lakh
rupees and even more serious legal consequences depending on the gravity of the situation.

Sunday, 24 May 2015

The compulsion of having women directors on board

Companies in India that are governed by the Companies Act 2013 are expected to follow the guidelines that have been set forth regarding the board of Directors and other aspects. Certain clauses of the Act have been especially designed for strengthening the contributions by women in the board room. The companies need to comply with the particular requirement that is stated by the Companies Act wherein it is compulsory to have at least one woman Director on the Board. The prescribed class of companies have been directed by the CA2013 to stipulate the appointment of women Directors as a compulsion so as to allow the corporates in reaping the benefits of people coming from diversified backgrounds and those carrying different viewpoints.Companies that need to comply with the above mentioned requirement of women Directors on board, can be described in the following ways. Public companies who possess at least one hundred crore rupees paid–up share capital or a minimum turnover of three hundred crore rupees. All the listed companies functioning within the first year from the commencement of second provision as stated elaborately in the Act. These new compulsions can prove to be a great way of encouraging gender diversity at the corporate level.

Wednesday, 20 May 2015

Striking off a company

Once a company has been incorporated as per the Indian Companies Act 2013, it also gets a certificate issued by the government of India that states all the details like the dates and other important points. Once a company has been registered, its name cannot be removed unless there is an instance where it gets dissolved by law. However, this has another condition according to which it is compulsory for that particular company to start business within a span of one year. A failure to do so can lead to the company being considered as defunct. Once that happens, its name can be automatically struck out from the Register of Companies. Another situation that can lead to the striking out of a company arises when a registered company fails to fill its balance sheet for many years. The power of the ROC to strike off a company's name includes the scenarios where the company is either wound up or no liquidator is working in it or if any pending returns are not being submitted. However, the striking off of a company does not have a drastic effect on the creditors because they
have the ability to claim for any dues.