COMPANY LAW

CORPORATE AND OTHER LAWS: A CAPSULE FOR QUICK RECAP

(THE COMPANIES ACT, 2013)
“At the Intermediate level, for the Company Law portion of the subject “Corporate and Other Laws”
largely involves analysis and application of provisions of the Companies Act, 2013 to solve application-
oriented issues. This subject is very dynamic on account of the large number of amendments/ circulars/
notification as issued by the Ministry of Corporate Affairs.
In this capsule for students, an attempt has been made to capture the significant provisions of
Companies Act, 2013 (Sections 1 to 148). You are advised to read the July, 2017 edition of the Study
Material for a thorough understanding of the relevant provisions of Companies Act, 2013 and solve
the examples and exercise questions given therein to hone your application skills. This capsule (as
applicable for May 2018 examinations) on Intermediate Paper 2: Corporate and Other Laws is intended
to assist you in the process of revision of concepts discussed in the Study Material.”

Title Extent Commencement Applicable On:

Companies Whole of India Section 1 came into ^ Companies
Act, 2013 force at once and the ^ Insurance companies
remaining provisions ^ Banking companies
on different dates ^ Companies producing /supplying electricity
through Notifications. ^ Company regulated by special Act
^ Entities as notified by Central Government

A BRIEF INTRODUCTION ABOUT COMPANY AND ITS TYPES

What is a Company: Company means a company incorporated under this Act or under any previous Company Law
[Section 2(20)].
In other words, a company is an incorporated association, which is an artificial person created by law, having a separate
entity, with a perpetual succession and a common seal.

TYPES OF COMPANIES ^ Such Company cannot be incorporated or converted into

1. On the basis of liability a company under section 8 of the Act. Though it may be
converted to private or public companies in certain cases
Company Limited by shares [Section 2(22)]
^ Such Company cannot carry out NBFC activities including
^ Liability of the members of a company is limited by its
investment in securities of any body corporate
Memorandum of Association (MOA) to the amount (if any)
^ Here, the member can be the sole member and director
unpaid on the shares held by them
Private Company [Section 2(68)]
Company Limited by Guarantee [Section 2(21)]
^ No minimum paid-up capital requirement
^ Liability of its members limited by the memorandum to
^ Minimum number of members – 2 (except if private company
such amount as the members may respectively undertake to
is an OPC, where it will be 1)
contribute to the assets of the company in the event of its
^ Maximum number of members – 200, excluding present
being wound up
employee-cum-members and erstwhile employee-cum-
^ Members cannot be called upon to contribute beyond that
members
stipulated sum
^ Right to transfer shares restricted
Unlimited Company [Section 2(92)] ^ Prohibition on invitation to subscribe to securities of the
^ No limit on the liability of members company
^ The liability ceases when he ceases to be a member ^ Small company is a private company
^ OPC can be formed only as a private company
2. On the basis of members
Public Company [Section 2(71)]
One Person company (OPC) [Section 2(62)]
^ Is not a private company (Articles do not have the restricting
^ Only one person as member. clauses).
^ Minimum paid up capital – no limit prescribed ^ Shares freely transferable
^ The MOA shall indicate the name of the other person, who ^ No minimum paid up capital requirement
shall, in the event of the subscriber’s death or his incapacity to ^ Minimum number of members – 7
contract, become the member of the company ^ Maximum numbers of members – No limit
^ No person shall be eligible to incorporate more than one OPC ^ Subsidiary of a public company is deemed to be a public
^ No minor shall become member of the OPC company

08 February 2018 The Chartered Accountant Student

 COMPANY LAW
3. On the basis of control
Holding and Subsidiary company Foreign company [Section 2(42)]
Holding company [Section 2(46)]: Holding company, in relation Any company or body corporate incorporated outside India
to one or more other companies, means a company of which such which—
companies are subsidiary companies. ^ has a place of business in India whether by itself or through an
Subsidiary company [Section 2(87)]: means a company in which agent, physically or through electronic mode; and
the holding company— ^ conducts any business activity in India in any other manner
^ controls the composition of the Board of Directors; or
^ exercises or controls more than one-half of the total share Formation of companies with charitable objects etc.
capital either at its own or together with one or more of its [Section 8]
subsidiary companies. ^ Formed for the promotion of commerce, art, science, religion,
charity, protection of environment, sports, etc.
Associate Company [Section 2(6)]
^ Uses its profits for the promotion of the objective for which
In relation to another company, means a company in which that
formed
other company has a significant influence, but which is not a
^ Does not declare dividend to members
subsidiary company of the company having such influence and
^ Operates under a special licence from Central Government
includes a joint venture company.
^ Need not use the word Ltd./ Pvt. Ltd. in its name and adopt a
“Significant influence” means control of at least 20% of total
more suitable name such as club, chambers of commerce etc.
share capital, or of business decisions under an agreement.
^ Licence revoked if conditions contravened
The term “Total Share Capital”, means the aggregate of the
^ Can call its general meeting by giving a clear 14 days notice
instead of 21 days
^ Requirement of minimum number of directors, independent
directors etc. does not apply

Paid-up equity Convertible Dormant company [Section 455]

share capital preference share ^ formed and registered:
√ for a future project or
√ to hold an asset or intellectual property and
^ has no significant accounting transaction,
4. On the basis of access to capital ^ such a company or an inactive company may make an
Listed company [Section 2(52)] application to the Registrar in prescribed manner for
Which has any of its securities listed on any recognised stock obtaining the status of a dormant company.
exchange Nidhi Companies [Section 406]
Unlisted company - company other than listed company ^ Incorporated as a nidhi with the object of
√ cultivating the habit of thrift (cost cutting)
5. Other companies √ savings amongst its members
Government company (GC) [Section 2(45)] √ receiving deposits from and lending to, its members only
At least 51% of the paid up share capital is held by- ^ for their mutual benefit

The Central Any State Partly by CG and

Government Govt./s (SG), partly by one or
(CG), or or more state Govt

Includes a company which is a subsidiary company of such a

Government company.
Small Company [Section 2(85)]
^ A private company
^ Paid up capital – not more than R50 lakhs or such higher
amount as may be prescribed which shall not be more than
five crore rupees; and
Turnover – not more than R2 crores or such higher amount
as may be prescribed which shall not be more than twenty
crore rupees.
^ Should not be – Section 8 company
– Holding or a Subsidiary company
– a company or body corporate governed by
any special Act

The Chartered Accountant Student February 2018 09

COMPANY LAW
INCORPORATION OF COMPANIES
I. MEMORANDUM OF ASSOCIATION
Alteration: Special Resolution (SR) +
NAME Name with which Co. is registered Approval of CG
CLAUSE New certificate of Incorporation will be issued

DOMICILE Specifies the state where Alteration: CG approval necessary when

CLAUSE Registered Office is situated change from one state to another

Contains object for which

Co. is formed

Alteration: SR through postal ballot is to

be passed + Publish in Newspaper+ Give
Enables shareholders, exit opportunity to dissenting shareholders
OBJECT creditors & others dealing (in case of Co. which raised money through
CLAUSE with Co. to know the scope prospectus+ money is un-utilised)
of work Co. can undertake

Any Act beyond specified in

Object Clause is Ultra Vires,
hence Void

MOA Co. limited by Share: Liability

of members is limited up to
unpaid amt of shares

LIABILITY Co. limited by guarantee: Alteration: In case of Co. limited by guarantee

CLAUSE/ Specifies the amt each member and not having share capital, intending to give
CAPITAL undertake to contribute any person a right to participate in divisible
CLAUSE profits otherwise than as member, shall be void

Co. having share capital: Amt

of share capital with which Co.
is to registered

OPC: Name of person who

in the event of death of
subscriber, shall become the
member of the Co.

Sec 7(1)(a) specifies that MOA

SUBSCRIPTION & AOA be duly signed by all
CLAUSE subscribers to the MOA.

II. ARTICLES OF ASSOCIATION (AOA) III. STEPS FOR INCORPORATION OF COMPANY

1 Obtain Digital Signatures
AOA Contain the regulations for the
management of Co. 2 Obtain Director Identification Number [Section 153]

3 Name availability for proposed company

ALTERATION OF AOA 4 Preparation of the MOA and AOA
(i) Alteration is effected by SR Application for incorporation of company
5
(ii) Alteration of AOA may include the Conversion of Pvt Co. to
6 DUTY OF REGISTRAR TO SCRUTINISE THE
Public Co. and Vice versa. However, when Public Co. is converted DOCUMENTS 
into Pvt. Co., approval of Tribunal is necessary. If after filling the Requisite forms for incorporation with the
(iii) Alteration of AOA+ Approval of Tribunal (if any) to be filed Registrar of Companies along with fees, ROC is satisfied
with the contents of the documents filed, ROC will issue the
with ROC within 15 days Certificate of incorporation in Form no.INC 11 as directed
(iv) Alterations once registered will be valid as if it were originally by Rule-18 of Companies (Incorporation) Rules, 2014.
contained in AOA
7 Certificate of Incorporation issued by ROC
Simplified Proforma for Incorporating Company Electronically (SPICe): The MCA has taken various initiatives for ease of business. In
a step towards easy setting up of business, MCA has simplified the process of filing of forms for incorporation of company through SPICe.
10 February 2018 The Chartered Accountant Student
 COMPANY LAW
PROSPECTUS AND ALLOTMENT OF II. POWER OF SEBI TO REGULATE ISSUE AND
TRANSFER OF SECURITIES ETC. [SECTION 24]
SECURITIES
I. ISSUE OF SECURITIES Authorities to exercise Power related to

Prospectus/ Initial Public

Public Offer Offer (IPO)
Issue & transfer Non- payment of In any
Public Co. Further Public
Issue of securities

Private Placement of securities dividend other case

Offer (FPO)
Right Issue
Offer for Sale of
Bonus Issue Securities(OFS) Listed Co. Co. intend to get listed Central
Government
Private Placement

Private Co. Right Issue By SEBI

Bonus Issue
V. LIABILITY IN CASE OF MIS- STATEMENTS IN PROSPECTUS
III. PROSPECTUS [SECTION 2(70)]
Civil ^

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Prospectus means any document described or issued as a prospectus ^

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and includes a red herring prospectus referred to in section 32 or Liability
^

.aBK@B
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QEB
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shelf prospectus referred to in section 31 or any notice, circular,
advertisement or other document inviting offers from the public for
the subscription or purchase of any securities of body corporate. ^

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DRFIQV
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Criminal
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Liability
Information in Prospectus ^

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VI. PRIVATE PLACEMENT

General Financial Statutory Other matters
information information information as CG may list VI (A). Procedure of allotment of securities through Private placement

Issue of private placement letter

PROCESS FOR VARIATION IN TERMS OF CONTRACT OF
PROSPECTUS Payment of money towards subscription
Publish in newspaper Give Exit offer to
SR + (including justification + Dissenting
for such variation) shareholders Allotment of securities within 60 days from receipt of
application money

IV. ALLOTMENT OF SECURITIES Transfer amount in separate bank account

Allotment of securities
Return of allotment filed with registrar with complete list of
Minimum amount application money application money shall security holders
subscribed, and have been paid and not be less than 5% or
received by the such other percentage
company or amount as specified
by SEBI In case of contravention, Company, promoters and directors shall
be liable for penalty

Minimum amount not subscribed and application money

not received VI (B). Procedure in case of failure of allotment of securities through
Within 30 days from date Such other period as Private placement
of issue of prospectus, or specified by SEBI
company
shall be liable
Amount recieved shall be returned within 15 days from the to repay
closure of issue company then application
also fails to money
repay the + Interest
application @12% p.a from
Where company makes an allotment of securities shall repay expiry of 60th
money within
shall file a return of allotment with the registrar application the aforesaid day
money within
Company fails 15 days from period
in allotment the date of
In case of default of securities expiry of 60
within 60 days days
Company shall pay penalty of 1 lac which ever
from receipt
` 1000 for each day during which is less
of application
such default continues, or
money
The Chartered Accountant Student February 2018 11
 COMPANY LAW
SHARE CAPITAL AND DEBENTURES REGISTRATION OF CHARGES
I. TYPES OF SHARE CAPITAL I. DEFINITION OF CHARGE [SECTION 2(16]]
With voting rights
Equity
share Interest or Lien
Kinds capital With differential
of share rights as to dividend,
capital voting or otherwise
As security
and includes Charge Created on
property or
Preference Carries w.r.t.payment of mortgage assets
share preferential dividend and
capital right repayment of
capital at time of
winding up Of a Co. or any of
its undertakings
or both
II. TYPES OF PREFERENCE SHARES
II. NOTICE OF CHARGE
Type of Prefernce
Shares
Date of
Notice of From Registration of
Charge Charge

On the basis of On the basis of On the basis of

Dividend payout convertibility to shares redeeemability III. PROCESS OF REGISTRATION OF CHARGE
Charge Created
Within 30 days
300 days
Convertible Register Charge
Cumulative (mandatorily or Redeemable
optionally; partially or If not registered in 30 days
fully)
Register with Additional fees
[Condonation]
If not registered in 300 days
Non-
cumulative Seek extension from CG
Non- Irredeemable [Rectification in Register of Charges]
convertible

Participatory
Omission to Omission Omission Any other
file with the to register or Mis- grounds
Registrar the Charge Statement / – just &
particulars of within modification equitable
Charge time wrt MOA
Non-
participatory
IV. SATISFACTION OF CHARGE

III. TYPES OF DEBENTURES Company shall give Specified IFSC Public/

intimation to the Private Co. (within 300
Registrar within a days of the payment or
Type of Debentures period of 30 days of the satisfaction)
payment or satisfaction
Satisfaction of Charge

On the basis On the basis of On the basis of Registrar on receipt Exception: No notice,
of security convertibility to redeeemability of intimation, send in case the intimation
shares show cause notice to to the Registrar is in
holder of charge within the specified form and
14 days signed by the holder of
Convertible charge.
Secured Redeemable
(mandatorily
or optionally;
partially or fully)
If any cause is shown, the Registrar
shall record a note in the register of
Non- charges and shall inform the company.
Un-secured Irredeemable
convertible

12 February 2018 The Chartered Accountant Student

 COMPANY LAW
MEETINGS OF THE COMPANY III (B). Signing of annual return
I. GENERAL MEETINGS Signing of Annual Returns

General Meetings

OPC, Small Company,

Pvt. Co. (if such Pvt. Others
Annual General Extra Ordinary General Co.is a Start - up)
Meeting (AGM) Meeting (EGM)

II. TYPES OF REGISTERS Non

If CS If CS Listed Co.
is is not listed Co.
Types of Registers
there there

If CS is not
Register of Register of Register of any there
Members (Both debentures other security By
Equity & Pref.) holders holders By CS Director
of Co.
If CS If CS
is is not
Contains each class of Equity/ there there
Pref. shares held by each member
residing in India or Outside India Certified
by Director By Certified
+ Certified Director by
If articles permit to keep register outside by CS in + CS Director
India: “Foreign Register” may be maintained Practice +
containing the memo & particulars of members, Certified
debenture holders, other security holders or by CS in
beneficial owners residing outside India. Practice

III. ANNUAL RETURN IV. PLACE OF KEEPING OF REGISTERS AND

III (A). Particulars to be Contained in the Annual Return as they
ANNUAL RETURNS
stood on Close of Financial Year
Question Answer
1. Companies’ registered office, principal business activities,
particulars of its holding, subsidiary and associate companies. What is the Place of keeping of Registered Office
Registers and Annual Returns? (RO)
2. Its shares, debentures and other securities and shareholding Can the Registers and Annual Yes
pattern
Returns be kept at any other
place in India?
3. Its indebtedness

4. Its members and debenture-holders along with the changes Registrar

Conditions If more than has been
therein since the close of the PFY (when 1/10th of given
keeping total no. of Prior
a copy
Register & members approval
5. Its promoters, directors, key managerial personnel along with entered of the
AR at any by SR
changes therein since the close of the PFY in register proposed
other place reside there SR in
in India) advance
6. Meetings of members or a class thereof, Board and its various
committees along with attendance details
V. PERSONS WHO CAN INSPECT REGISTER & THEIR
7. Remuneration of directors and key managerial personnel INDICES & ANNUAL RETURN (DURING BUSINESS HOURS)
Persons who can inspect Register & their indices
8. Penalty or punishment imposed on the company, its directors & Annual Return (during business hours)
or officers and details of compounding of offences and appeals
made against such penalty or punishment

Without payment
9. Matters relating to certification of compliances, disclosures of fees With payment of fees

10. Details in respect of shares held by or on behalf of the Foreign

Institutional Investors including their names, addresses,
countries of incorporation, registration and % of shareholding Other
Member Debenture Security Beneficial Any other
held by them. Owner person
holder holder

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COMPANY LAW
V. MEETINGS OF MEMBERS Period of Holding EGM
V(A). AGM
meeting may be
Question Answer If board within Proceed to called & held by
21 days from call EGM on requisitionists
Maximum time duration 15 months + 3 months the date of a day not later themselves
between two AGMs (for special reasons) receipt of than 45 days within 3
Requisition of receipt of months from
Date of AGM Any day except National does not requisition the date of
requisition
Holiday
VI. NOTICE OF MEETING
When is AGM held?

First AGM Members

Subsequent AGM

Within 9 months Within 6 months

from date of from date Legal
closing of 1st of closing of representative
Financial Year Financial Year Every Director of the
Notice should deceased
be served to member
Registrar may, for special reason extend
time by a period not exceeding 3 months

Place of AGM Auditor of the

company Assignee of
insolvent
member
In case of In any Other
Government Company
Company
VII. TYPES OF BUSINESS TRANSACTED IN AGM

Such other place Such other Ordinary Special

RO or within the city, RO or place within Business Business
town or village the city, town
in which RO or village in
of Company is which RO of
situated or such Company is
other place as situated 4 Business At AGM, all other
CG may approve (As given in next businesses except
diagram) ordinary businesses are
special businesses

V(B). EGM
Calling of EGM 1.
Consideration
of financial
statement and
The Board shall call EGM the reports of
on requisition made by the Board of
Directors and
auditors
4.
Appointment 2.
of, and ORDINARY Declaration
fixing of the BUSINESS of any
remuneration dividend
Shareholders holding Such Number of members of the auditors
not less than 1/10th having not less than 1/10th
of paid up capital (in of total voting power of 3.
case of co. having sh. all members (in case of Co. Appointment
cap.) NOT having sh. cap.) of Directors in
place of those
retiring

14 February 2018 The Chartered Accountant Student

 COMPANY LAW
VIII. QUORUM FOR MEETINGS XI. TYPES OF RESOLUTION
Public Company
Resolutions
No. of Members QUORUM

ORDINARY SPECIAL
Number of members 5 members personally present RESOLUTION RESOLUTION
≤ 1000 - passed by simple majority, - passed by three times
i.e. more than 50% majority, i.e. 75%

1000 < Number of 15 members personally present

members ≤ 5000 Characteristics of Special Resolution

Number of members 1. Specified Majority - 75%

30 members personally present
> 5000
2. Resolution shall be set out in the notice
Private Company 3. Notice must state that resolution is to be
passed as a special resolution and omission,
QUORUM 2 members personally present would invalidate the resolution.

4. Proper notice of 21 days is given for holding

the meeting
IX. PROXIES
5. Explanatory Statement should be annexed to
the notice for conducting special business
PROXIES: Any member of a co. entitled to attend and vote at a
meeting of the co. shall be entitled to appoint another person
as a proxy to attend and vote at the meeting on his behalf.

A proxy shall not have the right to speak at such meeting and XII. MINUTES
shall not be entitled to vote except on a poll. Minutes of the proceedings of meeting shall be kept within 30 days
of the conclusion of every such meeting concerned or passing of
A person appointed as proxy shall act on behalf of such resolution by postal ballot in books.
member or number of members not exceeding fifty and
holding in aggregate not more than 10 per cent of the total ^ The minute book shall be consecutively numbered.
share capital of the company carrying voting rights

A proxy received 48 hours before the meeting will be valid ^ The minutes of each meeting shall contain a fair and correct
even if the articles provide for a longer period. summary of the proceedings that took place at the concerned
meeting.

The instrument appointing a proxy shall be in writing.

^ All appointments made at any of the meetings shall be
included in the minutes of the meeting.

X. VOTING ^ In the case of a Board Meeting or a meeting of a committee of

the Board, the minutes shall also contain –
Voting by show of hands
h The names of the directors present at the meeting; and
h In the case of each resolution passed at the meeting, the
names of the directors, if any, dissenting from, or not
concurring with the resolution.

Voting by
electronic means ^ Any of the following matter shall not be included in the
minutes of the meeting, which in the opinion of the Chairman
of the meeting
h Is or could reasonably be regarded as defamatory of any
Voting person; or
h Is irrelevant or immaterial to the proceedings; or
h Is detrimental to the interests of the company
Voting by Poll
^ The matter to be included or excluded in the minutes of the
meetings shall be at the absolute discretion of the Chairman of
the meeting.

^ The minutes kept in accordance with the provisions shall serve

as the evidence of the proceedings therein.
Voting by Postal Ballot

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COMPANY LAW
DIVIDEND III. RULES TO BE FOLLOWED WHILE DECLARING
DIVIDEND OUT OF RESERVES
I. DIVIDEND PAYABLE ON DIFFERENT TYPES OF SHARES
1. Rate of Dividend ≤ (RD1 +RD2 + RD3)/ 3
Shares Where, RD1, RD2, RD3 are rates at which dividend was
declared by it in the 3 years immediately preceding that year.
However, this rule will not apply if a company has not
Equity Shares Preference Shares declared any dividend in each of the 3 preceding financial
years.
2. Total amount that can be ≤ 1/10 of (Paid up share
Dividend dependent Cumulative Non-cumulative drawn from accumulated capital + Free reserves)
on dividend policy Preference Preference profits (as per latest audited
and the availability Shares Shares Financial statement)
of profits after 3. Drawn amount be first utilized to set off losses incurred in
satisfying the No arrears of FY in which dividend is declared
dividend
rights of preference dividend in
accumulates 4. Balance of Reserve ≥ 15% of Paid up capital
shareholders. future
unless it is paid (after drawal of Amt)
in full (as per latest audited
Financial statement)
Section 2(35) of the Companies Act, 2013, states that “dividend” IV. PAYMENT OF DIVIDEND
includes any interim dividend
Payment of dividend
II. DECLARATION OF DIVIDEND
Payable in Payable to Nidhi Co.
Dividend can be
declared out of Cash the registered any dividend
shareholder of payable in cash
may be paid
the share, or by crediting
cheque the same to
Current year Out of the profits of Money provided the account of
profits after the company for any by the Central to his order, or the member,
depreciation previous financial Government warrant if the dividend
year or years arrived or a State is not claimed
within 30 days
at after providing Government to his banker from the date of
for depreciation in for the payment any electronic declaration of
accordance with the of dividend by mode the dividend.
provisions of that sub- the company
section and remaining in pursuance V. UNPAID DIVIDEND ACCOUNT (UPA)
undistributed of a guarantee
given by that Declared Dividend
Government
30 Days
Or Both
Dividend Not Paid/ Claimed
7 Days

Transfer to Reserve Deposit the unpaid/ If not Pay Interest @

Unclaimed dividend amount done 12% p.a. (from
in Bank (Called Unpaid the date of
Dividend Account) default)
Before declaration of dividend, transfer such
% of its profit for that year, as it may consider 90 Days
appropriate (i.e. left at the discretion of the Co.)
Prepare Statement (Name,
Last known address, Unpaid
dividend amount)

Depositing amount of Dividend Put on

Website of Website approved by

Co. Govt. for this purpose
Amount of dividend including interim dividend
shall be deposited in a scheduled bank in a
separate bank account within 5 days from the Transfer to IEPF (Unpaid/Unclaimed dividend +
date of declaration of such dividend interest)

Any person claiming for the amount transferred in UPA may apply
to Co. for the payment of money claimed

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 COMPANY LAW
VI. PUNISHMENT FOR FAILURE TO DISTRIBUTE EXCEPTIONS UNDER WHICH NO OFFENCE SHALL BE
DIVIDENDS DEEMED TO HAVE BEEN COMMITTED
Declared Dividend
Dividend could not be paid
by reason of operation of
any law; those directions
Dividend not paid/Warrant not Posted
cannot be
(within 30 days from the date of
complied
declaration) Shareholder gave with and the
Exception directions regarding same has been
under 127 payment of dividend, AND communicated
Consequences to him;
Dispute regarding right to
receive dividend;

Every Director
(If knowingly a party to Company Dividend has been lawfully
default) adjusted against any sum
due from shareholder to
Co.; or

Imprisonment Fine ` 1,000 per Simple Interest for any other reason, the failure to pay/ post
≤ 2 years day (during which @18% per annum dividend/ warrant within prescribed time,
default continues) was not due to any default on the part of the
company.

ACCOUNTS OF COMPANIES
I. FINANCIAL STATEMENT (FS) Company shall
Prepare
Financial Statement is defined under Section 2 (40), to include –

Cash flow
Books of Books and Financial
Statement
accounts papers statement
Profit and Loss Statement
account or Income of change
and Expenditure in equity, if
account applicable
Keep at its registered
any explanatory office/any other place in
notes annexed India as BOD may decide
Balance Sheet Financial
Statement to or forming
part of financial
statements
Open for inspection
by directors
Financial statement shall:

Give True & Fair view of state of affairs of the Co.

Preserved for 8 years
Comply with AS

Be in form as provided for different classes of Co.s in Schedule III

Failure in compliance
At each AGM, the Board of Directors (BOD) shall lay the FS for
the FY

If the Co. has subsidiary or associate or Joint Venture, Imprisonment Fine (R50,000-
Consolidated Financial Statement (CFS) is also to be laid before (upto 1 yr) 5 lacs)
AGM

If FS Do not comply with AS, reasons for such deviation along

with financial effects need to be disclosed in FS.
Both

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COMPANY LAW
II. RE-OPENING OF ACCOUNTS ON COURT’S OR V. CONTENTS OF BOARD REPORT
TRIBUNAL ORDERS
Application to be made by: Board of Director’s Report:

Following informations
Central IT SEBI Statutory Any other
Govt. authorities regulatory person Extract of Annual return No. of meetings of Board
body

Directors’ responsibility Report Details of fraud reported by

Application made to Court/ auditors
Tribunal
Declaration by ID’s Companies policy on directors
appointment and remuneration
Court/tribunal passes an
Comments by board on remarks Particulars of loans, guarantees
order to the effect that made by auditor and CS or investments

Particulars of contracts or State of Company affairs

Affairs of company were arrangements
Earlier accounts prepared mis-managed related to
in fraudulent manner Amounts carrying reserves or Material change affecting on
accounts paid by way of dividend financial position

Conservation of energy, Development and

technology absorption, foreign implementation of Risk
exchange management
Notice to be served to applicants
CSR policy and initiatives Other matters as prescribed

Take Representation into consideration, if any

Listed /other public companies (paid up share
capital of 25 cr or more) shall contain statement
of annual evaluation of performances of Board,
Pass order to revise/ recast the accounts committees and individual directors.

Such revised or re-casted accounts shall be final VI. ENTITLEMENT TO RECEIVE FINANCIAL STATEMENT

III. VOLUNTARY REVISION OF FINANCIAL Copies of audited FS +CFS+ Audit Report+ other document
STATEMENTS OR BOARD’S REPORT

If it appears to the Directors of the Co. Sent to

FS and Board report

not in complaince Any member Trustee for debenture Other persons
Prepare holder
with section 129
&134 revised
FS Copy of order
of revised FS At least 21 days
& Report to before GM
Revise be filed with
On approval and report (any
order of tribunal Registrar
3 P.F.Y)
In case of Listed companies:
The above steps shall have deemed to be complied, if the copies of documents
IV. AUTHENTICATION OF FINANCIAL STATEMENTS are made available for inspection at RO during Working Hours for a period
of 21 days before the meeting

Financial Statement

Statement containing salient features of documents is sent to:

signed by

Trustee for
Member debenture
chairperson holders
(authorised by Chief Chief Company
the Board)/ Executive Financial secretary
two directors Officer Officer (if (if
(1 shall be (if he is appointed) appointed) At Least 21 days
MD,if any) director) before GM

18 February 2018 The Chartered Accountant Student

 COMPANY LAW
VII. MANNER OF CIRCULATION OF FINANCIAL IX. INTERNAL AUDIT
STATEMENTS Companies required to conduct internal audit

Circulation of Financial statement Listed co. Paid up share capital (50 cr or more

Companies eligible for internal audit

during P.F.Y)

Turn over 200 cr or more during P.F.Y

Listed companies Public co. (Net worth > 1 crore Unlisted
and Turn Over > 10 crores) Out standing loan/borrowing from
public co. banks or PFI 100 cr or more during P.F.Y

Out standing deposits 25 cr or more

By Dispatch of physical copies as during P.F.Y
By Electronic mode
specified in Sec 20
Turnover (200 Cr or more)
Private Co.
Outstanding loans/ borrowings from banks
When To Other All Other or PFI exceeding 100 crores during P.F.Y
Shareholding in shareholders Cases
dematerialized who do not have Who Can Be an Internal Auditor
form & dematerialized shares
Email ID is but have consented in
registered with writing for receiving
Depository by electronic mode Other
professional Chartered
as decided by Accountants
Board

VIII. FINANCIAL STATEMENT TO BE FILED WITH

REGISTRAR
Cost accountants

AGM

AUDIT AND AUDITORS

Held Not held
[137(1)] [137(2)] I. APPOINTMENT OF FIRST AUDITOR
First Auditor

[Copy of FS + CFS Prescribed In case of Government Co.* In any Other Co.

+ other documents documents +
to be presented]: Statement of Facts
Prescribed & Reasons for not C & AG shall appoint auditor BOD shall appoint auditor
documents holding AGM
Within 30 days of
Within 60 days from date of
Registration of Co.
Registration of Co.
File with ROC
Un- adopted If BOD does not
in AGM/ If C & AG does not appoint appoint auditor
Adopted 1st Auditor in said 60 days
Adjourned
AGM Within 30 days BOD shall inform members
of the Last date BOD shall appoint auditor regarding such failure
before which the
Filed within 30 AGM should have Within next 30 days Member shall appoint auditor
days of AGM. Filed with been held
Registrar registrar Within 90 days at AGM
take them as Within 30 If BOD does not appoint
Provisional in days of the auditor in these 30 days
their records date of AGM Tenure - Till the conclusion of
1st AGM.
BOD shall inform the Co.

Now, Co. shall appoint 1st auditor

Further,
Adopted in
adjourned Within 60 days at EGM
AGM filed with
Registrar within Tenure- Till the conclusion of 1st AGM.
30 days of the
* Government company or any other company owned or controlled, directly
said meeting or indirectly, by the Central Government, or by any State Government, or
Governments, or partly by the Central Government and partly by one or
more State Governments.
The Chartered Accountant Student February 2018 19
COMPANY LAW
II. APPOINTMENT OF SUBSEQUENT AUDITOR III. ROTATION OF AUDITORS
Subsequent Auditor Rotation of Auditors (in listed companies or specified
class of companies)

In case of Government Co.* In Other Companies

Individual as Auditor Audit firm as auditor

Appointed by C & AG Appointed by Co. in AGM

Maximum time: Maximum time:

One term of 5 Two terms of 5
For a Financial Year Tenure:- Auditor shall hold Consecutive years Consecutive years
office from the conclusion
of that meeting till the
Within 180 days from conclusion of its 6th AGM.
Commencement of Cooling period :-
Financial Year 5 years
Member shall certify such
appointment in every AGM.
Tenure:- Till the conclusion Further, as on the date of appointment no audit firm which
of AGM. has common partner/s to the other audit firms whose tenure
has expired in a company immediately preceding the Financial
Year, shall be appointed as auditor of the same Co. for a period
* Government company or any other company owned or controlled, directly of 5 years.
or indirectly, by the Central Government, or by any State Government, or
Governments, or partly by the Central Government and partly by one or more
State Governments.

IV. STEPS FOR REMOVAL OF AUDITOR VI. PUNISHMENT UNDER SECTION 147

A Special Notice is received for Removal of auditor IN CASE OF COMPANY AND OFFICER OF COMPANY

A board meeting will be held In case ` 25,000 to R5 Lac

of Co.
(To decide of above and then authorising the filing of application
to CG) Contravention Fine: ` 10,000 to R1 Lac
of sec 139 to
146
In case Imprisonment: May
Application to CG (to be made in ADT - 2), within 30 days of Board of Every extend to 1 year
Meeting Other
Officer Or Both
Approval of CG received

After approval from CG, Special Notice to be sent for AGM IN CASE OF AUDITOR

Auditor shall be given a reasonable opportunity of being heard Contravention by Auditor of sec 139, 143 to 145

Removal of auditor can be done only through Special Resolution

If default is Not Wilful If default is Wilful
Auditor will be removed

V. RESIGNATION BY AUDITOR Fine: ` 25,000 Fine: ` 1 Imprisonment: Auditor

Lac to `25 May extend to shall also
to R5 Lac
Resignation Lac 1 Year be liable
by auditor of to:
Government within 30 with
Form Company,
company or days of
ADT-3 Registrar
company resignation
controlled by CG & CAG
or SG
Refund the Pay for the damages to the Co.,
remuneration statutory bodies, authorities
Resignation by within 30 with for loss arising out of incorrect
Form
auditor of Other days of Company & statements in Audit Report
ADT-3
Co. resignation Registrar

20 February 2018 The Chartered Accountant Student

 INCOME TAX LAW
Income-tax Law: A Capsule for Quick Recap
[Continued from January, 2018 issue]

In the January, 2018 issue, the Capsule for quick recap of IIPCC/Intermediate Paper 4A: Income-tax Law
highlighted the significant provisions of income-tax law which impacted the computation of total income and tax
liability of an individual, discussed in detail in Chapters 1 to 8 of the Study Material. In continuation, the capsule on
this subject published in this issue highlights the compliance procedures relating to tax deduction at source (TDS)
and advance tax as well as the provisions for filing return of income, discussed in detail in Chapters 9 and 10 of the
Study Material. Kindly note that this capsule would be relevant both for Intermediate Paper 4A: Income-tax law
and IIPCC Paper 4A: Income-tax. The two additional topics which are relevant only for Intermediate Paper 4A,
namely, Introduction to TCS and self-assessment are not covered in this capsule.
This capsule is intended to assist you in the process of revision of concepts discussed in the Study Material.
You are advised to read the July 2017 edition of the Study Material for understanding the various concepts and
provisions of income-tax law and work out the questions given therein to hone your problem solving skills.

CHAPTER 9: ADVANCE TAX AND TAX DEDUCTION AT SOURCE

I TDS Provisions : At a Glance
Section Nature of Threshold limit for Payer Payee Rate of TDS Time of
payment deduction of tax at source deduction
192 Salary > Basic exemption limit Any person responsible for Individual Average rate At the time of
(` 2,50,000/ ` 3,00,000, as the paying any income chargeable (Employee) of income-tax payment
case may be). This is taken care under the head “Salaries” computed on
of in computation of the average the basis of the
rate of income-tax. rates in force
192A Premature Payment or aggregate payment Trustees of the EPF Scheme or Individual 10% [In case At the time of
withdrawal from ≥ ` 50,000 any authorised person under the (Employee) of failure payment
Employees’ Scheme to furnish
Provident Fund PAN, TDS@
Maximum
Marginal
Rate]
193 Interest on > ` 10,000 in a F.Y., in case of Any person responsible for Any resident 10% At the time of
Securities interest on 8% Savings (Taxable) paying any income by way of credit of such
Bonds, 2003 interest on securities income to the
> ` 5,000 in a F.Y., in case of account of the
interest on debentures issued payee or at the
by a Co. in which the public time of payment,
are substantially interested, whichever is
paid or credited to a resident earlier.
individual or HUF by an A/c
payee cheque.
No threshold specified in any
other case.
194 Dividends > ` 2,500 in a F.Y., in case of The Principal Officer of an Resident 10% At the time of
payment to a shareholder, being Indian company or a company shareholder payment
an individual, by an A/c payee which has made prescribed
cheque. arrangements for the declaration
No threshold specified in any and payment of dividends in
other case. India
No deduction is required in
respect of dividends subject to
DDT u/s 115-O.
194A Interest other > ` 10,000 in a F.Y., in case of Any person (other than an Any 10% At the time of
than interest on interest credited or paid by – individual or HUF whose total Resident credit of such
securities (i) a banking company; sales, gross receipts or turnover income to the
(ii) a co-operative society from business or profession do account of the
engaged in banking not exceed the limits specified payee or at the
business; and u/s 44AB in the immediately time of payment,
(iii) a post office on any deposit preceding F.Y.) responsible whichever is
under a notified Scheme. for paying interest other than earlier.
> ` 5,000 in a F.Y., in other cases. interest on securities.
194B Winnings from > ` 10,000 The person responsible for Any Person 30% At the time of
any lottery, paying income by way of such payment
crossword puzzle winnings
or card game or
other game of any
sort
194BB Winnings from > ` 10,000 Book Maker or a person holding Any Person 30% At the time of
horse race licence for horse racing, or for payment
arranging for wagering or betting
in any race course.

The Chartered Accountant Student February 2018 21