Corporate Law

Company Law: Recent trends in India and
Abroad
Vinod Kothari
1012 Krishna
224 AJC Bose Road
Calcutta 700 017. India
Phone 91-33-23233863/23233864/22811276/22817715/22813742
Fax: 91-33-23233863
E-mail:vinod@vinodkothari.com; vinodk@vsnl.com
Emerging trends in Company law by Vino 1

d Kothari
Relevance of corporate law on enterprise
Company law is directly related to

enterprise: it can either promote it or
hold it
Most enterprise is corporatised:
corporate regulation has a huge impact
on the economy
Recent Global trends in Company law by Vinod Kothari 2

Sources of modern corporate law
Company law in the commonwealth (UK, Australia, Hong Kong,
Singapore, India, Malaysia) has common sources and influences
Common features also in European Union, US laws
UK Companies Act 1948 is the great mother of most corporate laws
world over: but has undergone several changes over time:
 1947 Cohen Committee report consolidated existing law in 1948 Act
 Jenkins Committee report introduced changes in 1967
 Several changes upto 1985 based on EEC Directives
 New law in 1985 (747 sections and 25 schedules)
 The new law changed substantially by Insolvency Act 1985 (later replaced
by Insolvency Act 1986) (provisions on insolvency separated), Financial
Services Act 1986 (provisions on securities regulation separated) and
Companies Act 1989
New Bill prepared in 2002 much smaller: 225 sections and 4 schedule

UK Companies Act, 1948 Singapore and Hong
Canada: more than
25 years ago, split its
is the great mother of Kong: primarily based
most corporate laws on UK laws; Hong Kong
base from UK laws
reviewed its law in 1999
and is
United States: each state

has its own law; Model Australia: based on UK
Business Corporations law, but major changes
Act 1984 in 1998
South Africa: mixed

influence of UK and Indian subcontinent New Zealand: in 1990
Roman Dutch laws Inspired by UK law started drifting towards
US laws
Corporate law reforms
Commercial law as a whole has been subjected to globalisation:
 Most commercial problems are no more domestic problems
Today’s corporate laws cannot take a domestic approach:
 Global trade has created the multi-jurisdictional enterprise
 Leading to greater international interdependence
Global convergence of corporate laws:
 Securities laws have been more intensively internationalised
 Company law is still largely a domestic issue
UK reforms: The Department of Trade and Industry, UK started a
company law review process in March 1998:
 Scathing criticism by leading commentators as LCB Gower, LS Sealy, Law
Society
EU reforms: High level Group of Company Law Experts set up in Sept
2001 and public comments were received.
 These have now been synthesized and presented in Nov 2003

The outer periphery of company law
A key question before modern company law is what all should
the law deal with?
 Incorporation and regulation of companies
 Issuance of securities by companies: shifted to legislation dealing
with securities regulation:
 Perhaps a legacy of the US, where corporations law are a state subject
and securities law a Federal subject
 Winding up and insolvency of companies: shifted to legislation
dealing with insolvency laws
 Registration and enforcement of security interests on corporate
assets: shifted to laws relating to enforcement of security interests
on personal property
Types of companies to regulate:
 Quoted companies
 Public companies
 Private companies

Major company law reform exercises
UK Companies Act:
 White paper issued in March 2005
 Company Law Reform Bill presented to House of Lords on 1st
November, 2005 [Draft Bill preppared]
 Company Law Reform - Small Business Summary introduced into
parliament on 1st November, 2005 : summary sets out main
elements of Bill affecting small business
 Company Law Reform Bill introduced to House of Commons on 24th
May, 2006
 Company Law Reform Bill : Regulatory Impact Assessment – June,
2006 [An analysis done on cost of compliance v benefits associated
from compliance]
 Company Law Reform Bill – Draft model articles for public
companies – 6th July, 2006
 Notice of Amendments in Bill – 6th July, 2006
EEC has finalised consultation process and may soon issue Directives
US Company law: piecemeal approach, more of a firefighting
Indian company law: which way is the reform heading?

Special needs of small companies
Current foundations of company law are inclined towards larger companies
Today’s reality: lots of small businesses which are individual enterprises are
corporatised:
 The starting point of company law reform should be small companies
Public versus private companies:
 Original UK legislation treated public companies as the residual form, and private
companies only if they satisfied certain criteria
 In 1980, this structure was changed – private company now became the residual form
 Under the amended law, in either case, it is by mere declaration
Single member corporations are already permitted by UK law:
 The concept was borrowed from US laws
 New amendments permit even public companies to be formed by single person
Formation of companies:
 There will be no charter: companies to be formed based on a simple signed declaration at
the time of formation:
 Constitutional documents required only if the company opts the same; different from model
constitution appended to the law

Objects clause and ultra vires dumped
UK govt has accepted the suggestion to dump objects
clause:
 Where required, objects clause may be there, but it will only have
an internal effect
 Doctrine of indoor management also dropped:
 Provision inserted in law to say that the Board has full authority for all
the powers of the company
 Has full authority to delegate
 This applies inspite of restrictions in the constitution
Ultra vires doctine had been dropped long time ago under
the European Communities Act 1972
Memorandum and articles to be merged into one
 Alteration of the constitution permitted with special resolution
 Companies may insert “entrenching provision” making alteration
more difficult

Capital maintenance
Traditional foundations of law treat capital as the basis for limited liability:
 The Fourth EEC Directive required UK law to dump that concept and introduced
concept of redeemable equity shares/ shares buyback (1981 amendment)
The concept of authorised capital to be done away with
The amendment continues with par value concept
 Also bars issuance of shares at a discount; capital payment for subscribing to
shares:
 Such payment can be made out of distributable profits
Public companies required to obtain a trading certificate:
 Trading certificate to be given if the intended initial capital obtained
Reduction of capital permitted with mere solvency statement, and not court
approval:
 No restrictions on private companies
 Public companies – public notification required; creditors have a right to move to
Court
Funding by private companies for their own shares to be permitted

Decision-making by shareholders
UK Companies Act in 1989 allowed private companies opt out of
annual general meetings
Also allowed companies to ascertain the sense of the members without
a meeting:
 Common law rule of unanimous consent has always existed
Amendment Bill proposes to dispense with annual general meetings
altogether for private companies:
 Approval of accounts, appointment of auditors/directors dispensed with
In case of public companies too, with unanimous consent, the company
may opt out of AGMs
Two sets of provisions:
 For private companies, the “mandatory requirements” (holding AGM and
laying accounts) applicable only if opted in
 For public companies, mandatory requirements not applicable if opted out;
 Unanimous consent of all members at a meeting required
 Current draft law allows any member or auditor to requisition the meeting

More reforms on meetings
Written resolutions:
 Special set of provisions for ordinary and special resolutions
in writing:
 75% of the total voting strength or more than 50% of total voting
strength
 Requires “formal agreement” – not voting is not treated as
consent
Proxies may be deposited in advance
Demand for poll may be made before the meeting
Proxies may speak at the meeting, and vote on a
show of hands:
 Proxy has all the powers of the member in person
 Also has the power to demand a poll

Rights of beneficial shareholders
Companies would be permitted to

recognise rights of beneficial interest
holders

Duties of directors
Instead of relying on complex and
inaccessible caselaw, the law will lay down
significant duties of directors
 Schedule 2 lays down the general duties of
directors:
 Broad principles of trust law and significant case law
developed over time incorporated
Directors duties to creditors:
 Duty to make contribution in certain cases
Codification of civil remedies against directors

Corporate directors
Most of states in the US permit individual
directors
UK Companies Act permits corporate
directors
Australia, New Zealand, Singapore and
Canada recently prohibited corporate
directors
France permits
 Company law reform in UK seeks to prohibit
corporate directors

Distribution of annual reports
Law seeks to avoid sending of annual reports
to debentureholders:
 This may be required under the terms of the
debentures
A new form of sending statements: website
publication
 Law avoids sending of statements, if shareholders
given web access:
 The option is to be exercised by the shareholder
 The shareholder is to be notified of the statement having
been put on website

Operating and financial review
A new reporting requirement for “operating
and financial review” to be applicable:
 “major company” based on certain financial
parameters: turnover, balance sheet total and
employees
 OFR is mandatory for all public companies
 OFR also required for private companies if the
same are major companies:
 The monetary parameters are 10 times in case of private
companies
Apart from historical information, this also
includes projections
Corporate governance: the role of the independent
director
Derek Higgs committee recommendations in

Jan 2003: role of non-executive directors
 No of board meetings and the attendance of
individual directors should be reported in annual
report
 Chairman and chief executive should not be the
same person
 Non-executive directors must meet separately at
least once in a year
 Non-executive directors should serve 2 3-year
terms

Company secretaries
Realising that companies secretaries

are not essential to corporate
governance, the Bill allows private
companies to opt out of keeping them.

Offences
Offences classified in 6 types:
 Type A: summary conviction, fine upto level 3 on standard scale
 Type B: summary conviction; fine upto level 5
 Type C: on either indictment or summary conviction, fine upto
statutory maximum
 Type D:
 Indictment: imprisonment upto 2 years or fine or both
 Summary conviction: imprisonment upto 6 months or fine or both
 Type E:
 Summary conviction: imprisonment upto 6 months or both
 Type F:
 Summary conviction: imprisonment upto 6 months or fine or both

US corporations law : a different breed
altogether
The corporation in the US is much different
from the “joint stock company”:
 The latter was a business association clothing
itself with a corporate character
US corporations emanated from chartered
corporations, allowing people to form
corporations under a general corporation law:
 Single member corporations are common
 No need for a “contract” among members
 Object of association, or Ultra vires have been
been there

The German model
Germany has separate regulatory structure for public and private
companies:
 AG is a German public company
 Minimum capital of 100000 DM
 GmbH is a German private company
 Single shareholder is possible
 Minimum capital of 50000 DMs
 Share certificates not required
Incorporation of GmbH is very simple – single constitutional
document
Ultra vires rule is not applicable
AG has two tier board structure: supervisory board and managerial
board:
 The former is supposed to take care of shareholder and employee
interests
 For AG’s with more than 2000 employees, there will be equal
participation

The French model
Two types of companies:
 Public companies Societe Anonyme (SA):
 Minimum 7 members; capital of 250000 FFs
 Public companies are required for investment and real estate businesses
 Private companies: separate law exists; called Societe a Responsabilite
Limitee, or abbreviated as SARL:
 Maximum membership of 50 and minimum capital 50000 FFs
 Share certificates are not required: participation or book entry ownership is
possible
 Single member companies, called EURL (Enterprise Unipersonnelle a
Responsabilite Limite)
Public companies are very common: approx 200000 SA’s exist
Board structures are mostly unitary with minimum 3 and maximum
12 directors

Recommendations of the EU Group of
Experts
Types of companies: public and private company distinction is not
relevant. Three main types exist today:
 Listed companies
 Open companies: whose shares can be traded
 Closed companies
Corporate governance:
 Pre-meeting materials (notices, etc) to be put on companies’ websites
 Electronic voting or voting in absentia
 Obligation on the part of institutional shareholders to disclose their
beneficial shareholdings and voting directions
 Rights of minority shareholders to apply for investigation
 Nomination, remuneration and audit committees
 Remuneration to be disclosed; shares and

EU group recommendations: legal capital
The relevance of legal capital as a protection
to creditors and lenders put to question
Shares without par values:
 Shares expressed as fractions of total capital
Capital reduction: instead of all capital
reductions to require protection, shareholders
to be given right to apply for protection
Buyback of shares by companies upto a
distributable profits to be allowed:
 Financial assistance for purchase of self-shares
should also be allowed upto distributable profits

EU recommendations: Creditors’
protection
Before distribution of dividends,
directors should make a solvency
statement:
 Balance sheet solvency
 Liquidity solvency
Alternative regime of subordination of

insiders’ claim has been recommended

EU recommendations: restructuring and
mobility
Members to be given right to approach
Court to seek protection in case of
restructuring

Company law reform in India: Naresh Chandra
recommendations
Private companies should have minimal
regulations
Sees a new class of companies called “small
private companies” to which added exemptions
to be allowed from the Act including a
simplified exit scheme
 Either
 Paid up capital and free reserves upto Rs 50 lacs (this
covers 93% of private companies) AND
 Turnover or other receipts upto Rs 5 crores OR
 SSI
SPCs must have a single main object
JJ Irani Committee recommendations
Recent Global trends in Company law by 29

Vinod Kothari
Access to Capital

Vinod Kothari
Broad assessment
Some bold thinking, international awareness, in tune with global efforts
at company law rewriting
However:
 Full of glib talk and statements of pious intentions:
 Examples:
 “raising money fraudulently should be subject to strict penalty regime”
 “Companies should be allowed to raise capital so long as they provide true and correct
information to investors and regulators”
 “The legal process associated with prosecution should be revisited so as to make such
process more effective”
 Baby may be thrown with bathwater
 Makes several recommendations which are already a part of the law:
 Disclosure requirements for deposits by advertisement:
 All that has been recommended already exists
 Provision similar to sec. 68 for fraudulent inducement to invest should be
inserted for deposits:
 Actually, the definition of “prospectus” includes the invitation to deposits; hence, those
provisions apply already
 Makes several recommendations which have been made over years, with
no headway at all:
 Insurance of depositors:
 Has been made over years since Sachar Committee

Streamlining Capital Issues Regulation
Need for separate Financial Services regulation ruled:

 By itself, this is a very large, macro issue
 In UK, integration of financial sector supervision into the FSA
is a model
 India still goes by separation of regulatory regime:
 These authorities have proliferated over time
Harmonisation of activities of regulators:
 Core provisions on maintenance and management of capital,
rights flowing from various types of capital may be left to the
Companies Act:
 Details may be left for the securities regulator
 Avoid intrusive regulation so as not to revert to the Capital
Issues Control regime
 More coordination between SEBI and the Department

A complex web of regulation over financial services sector
Financial
sector
Banking &
Capital
Insurance non-banking Pensions Housing
Market
services financial and OASIS finance
Services
services
IRDA RBI SEBI PFRDA? NHB

Making capital issues faster, simpler
Capital issues approval may be made faster with concept of “deemed approval”:
 Also in case of filing and registration of docs with the Registrar
Dissemination of information: electronic media should be recognised
Shelf prospectus:
 Currently has limited applicability:
 Only specified financial institutions (sec. 60A) can use it
 May be extended to other classes of companies
Well-known Seasoned Issuers concept may be evolved:
 These companies file only a main document once a year, and then only make
incremental changes
 US SEC practice recognises concept of WKSIs:
 Current in its filings and
 $ 700 mn of common equity or $1 bn of debt over last 3 years
 Several facilities were granted in 2005 reforms
 Except in case of debt issues (which are mostly unlisted), there is not much
relevance of this concept in India; however, forward-looking
Time taken in rights issues to be reduced
Deemed public offers: recommends exemption to:
 Exemption to rights offers by unlisted companies:
 Concept of sec. 67 has been misinterpreted
 Issues of shares to employees by private companies:
 Private company meaning sec 3 (1) (iii) companies – question of more than 50 does not
arise
 Issuance of shares to QIBs
New forms of securities
Tracking stocks:
 Stocks that derive dividends only from profits of a particular division:
 If this concept is to work, it can only work under the frame of “Cellular
Companies” or “protected cell companies”
 Permitted in several countries : USA, Japan, Germany
 However, note:
 No tracking stocks issued since 2002; between 1984 to 2001, 38 issues came of
which only 5 are trading now
Treasury stocks:
 Companies buy back their shares but hold them as a part of their treasury
 Committee realises lots of preparatory steps are required to bring these
changes into effect
 Many countries permit them: USA, Japan, Hong Kong, most EU countries,
proposed in UK also
 Companies allowed to buyback shares:
 No dividends
 No voting rights
 Shares may be cancelled or reissued
Target shares buyback:
 Buyback of shares on a preferential basis from a shareholder block:
 Negatively recommended by the Committee
 Permitted in many countries

Preference shares
Perpetual preference shares:
 Recommended
 Floating rate preference with a benchmark rate
 Call and put provisions may provide optionality to
issuer/shareholder
Arrears of Dividends on preference shares:
 Committee recommends, may be capitalised even if the
company did not make profits:
 Erroneous concept, as dividends on preference shares are
never guaranteed; the only concept of dividend is distribution of
profit
 Ambiguity on arrears of preference shares
 Some rulings have held that preference dividend can be
converted into equity on redemption:
 Mr A R Ramnathan’s rulings in Caledonian Jute, British India
Corporation, etc

Capital reduction
May be made easier by transfer of

powers to NCLT:
 Already enacted.

Disclosure norms for capital issues
Glib talk - there is a need for proper disclosure

at every stage
 No detailing as to what is currently not disclosed that
requires to be disclosed
Shareholders should be informed about all
material facts:
 Such as?
Disclosure about shareholding controls, direct or
indirect:
 If “indirect” is discrete, it can never be disclosed.
 If not discrete, it is hardly ‘indirect”
 Clause 49 requires control disclosures already

Deposit taking
Non-banking non-financial companies should be banned from accepting public deposits:
 This suggestion was considered and rejected by the Committee
 The committee, instead, recommends stricter norms for public deposits
Facts:
 Public deposits by NBNCs is a rare practice: India is possibly the only example
 It was allowed as an adhoc measure way back in 1960s
 Public deposits are very costly - financial viability of a company may be severely affected by
public deposits
 Public does not need it – savings are getting increasingly institutionalised.
 Public deposit has been grossly abused instrument over time – people have miserably lost money
 There is greater case than ever before in the past to ban public deposits completely
Stricter norms recommended:
 Disclosure requirements: already there
 Credit rating – if a company has a good rating, there is no reason for it to access public deposit
 Cash Reserve requirements out of profits – liquidity requirement already there; cash reserve
further increases the cost of public deposits
 Dispute resolution mechanism – the problem with public deposits is not dispute; it is default
 Need for bolstering confidence – it is not confidence but greed that drives people to put in money
in deposits
 Provisions similar to sec 68 for fraudulently accepting public deposits – in fact, prosecution
provisions for public deposits are much stricter than those for any other form of capital
 Suspension of further deposit taking in case of default – already exists
 Insurance of depositors – the matter has been discussed ever since 1975 with no resolution

Registration of charges
Makes only a tinkering suggestion:
 Documents requiring signature of both the lender and
the borrower create difficulties
In fact, more fundamental thinking is required
here:
 Globally, there is a move for a completely independent
system of registration of security interests:
 UK Law Commission has also recommended the same
 There is no reason why charges should be registered
only in case of companies:
 Increasing use of non-corporate or JV form of businesses
 Registration of charges should be done by the lender,
in the lender’s own interest

Issue of shares other than for cash
Valuation of consideration by independent valuer:
 Difficult to understand the intent of this thought
 X Ltd buys property from Y, and issues shares
 This is issue of shares for non-cash consideration
 The committee is worried about this
 X Ltd buys property from Y, pays for the same in cash. Y subscribes
to shares of X Ltd., pays for in cash
 This is NOT an issue of shares for non-cash consideration
 The Committee has no worries here – why?
 The fear on which this recommendation is founded is only
results out of conflict of interest in related party transactions
 No reason to single out issue of shares for non-cash consideration
Similar recommendation in case of transfer of assets by
the company and receipt of consideration other than in
cash

Restrictions on inter-corporate loans and
advances
Observations relating to stock market scam –

corporate funds diverted for price rigging
Suggests prohibition on companies lending to stock
brokers:
 Provides for special resolution for allowing to do so
“Detailed” disclosure by a lending company on end-
use of funds by the borrowing company
Disclosures to be made in explanatory statement for
seeking approval also to be laid down

Preferential allotments
SEBI-type regulations on preferential allotments in
case of unlisted companies also recommended:
 Recommends valuation of shares
Difficult to understand the genesis of this proposal:
 Preferential allotment by any public company requires
special resolution
 If a special majority of shareholders approves of the action
of the company, whose protection are we seeking?
 Valuation of shares of an unlisted company is itself most
inefficient:
 Market value provides a transparent method of fair valuation
 There is no consistent or reliable method of valuation in case of
unquoted shares

Minimum subscription
The law should permit retention of actual subscription even if
minimum subscription not reached:
 Difficult to understand the suggestion;
 Minimum subscription is the minimal amount needed to accomplish
the purpose for which the issue was made
 If the minimum subscription is not reached, where will be the issue
funds be invested?
 The concept of minimum subscription has not been properly
appreciated
Partly to blame is mistaken understanding over time to equate
the issue amount and the minimum subscription
 Sec 69 of the Companies Act expects the prospectus to mention
the minimum subscription:
 Item 5 of Part I of Schedule 2 specifically lists out
 Since CCI regime, 90% of the issued amount has been taken as
minimum subscription:
 The practice has no basis.

Shares with differential voting rights
Provisions were inserted but not effective

Provisions should be retained – anomalies to be
removed:
 Essentially, Companies Act envisaged years ago
preference shares as non-voting shares
 Artificial restriction brought in Indian law to say –
shares to be of only two classes
 This restriction may be done away with
 Instead, provision may be inserted to prevent
management perpetuating control by issuing
“management shares”
 In other words, curb shares with higher voting rights, than
shares with lower or no voting rights

Other provisions
DRR
 to regulate creation of DRR by non-banking
finance companies
 For other companies, flexibility to be ruled by
the Central Government
Deletion of sec. 208:
 No companies in the present times are using
sec 208 at all
 But that is not the only provision in Companies
Act which is deadwood
Minority rights

Vinod Kothari
Minority rights
Elaborate paras in Chapter VI dealing with minority interests:
 Para 1 to 2.4 in essence seem to say nothing
 They only describe the existing provisions
 And say, new Act should bring in a “reasonable framework” for
minority interest by bringing “specific provisions”
 Neither is there any suggestion that the exiting framework is not
reasonable, or not specific
Should minority directors/ directors by proportional representation
be made mandatory:
 Committee favoured existing optionality
Stringent disclosures for Companies accessing funds through
public offers:
 Glib talk, as no discussion on what disclosures other than those
required at present
Board and management to be protected from undue/unjustified
interference by minority:
 Again, no details
Extensive use of postal voting and voting by electronic media

Oppression and mismanagement, takeovers
No recommendations at all
Objections to a scheme of takeover, a limit to be
prescribed for minimum shareholding:
 Courts preside over these matters; discretion of court should be
reserved
In case of takeover of 90% voting control, there must be
an option to the 10% holder to sell their shares
Fair valuation of shares of minority:
 By a valuer to be appointed by Tribunal
A company that has delisted its shares should give a
buyback offer with 3 years of delisting:
 Superfluous, as delisting procedures currently provide buyback
offer before delisting

Class action/ derivative law suits
Suits by a shareholder on behalf of a

company to be allowed
Class action/ derivative suits are legally
allowed in many countries:
 USA, Korea

MCA 21

Vinod Kothari
MCA 21
WHAT IS MCA-21?
MCA-21 is an e-governance initiative that builds on the
Government vision to introduce a service oriented approach in
the design and delivery of Government services.
OBJECTIVE OF MCA-21
 To meet the expectation arising from globalisation
 Easy and secure access to MCA services
 To move from the traditional paper based operation to a
near paperless environment
 Enable convenience for statutory compliance in a
manner that best suits the stakeholders

MCA 21
SCOPE
 Covers only the offices of ROCs, RDs and the HQs at New
Delhi
 Does not include other offices of MCA like Official
Liquidators, CLB/Tribunal and Court
SERVICES AVAILABLE ON MCA 21

 Registration and incorporation of new companies
 Filing of forms for change of names/address/ Directors
details
 Registration and verification of charges
 Inspection of documents
 Application for various statutory services from MCA
 Investor grievance redressal

MCA 21 – KEY BENEFITS
On-line incorporation of companies
Simplified and easy mode of filing of forms/returns
Registration as well as verification of charges anytime
and from anywhere
Inspection of public documents anytime and from
anywhere
Total transparency through e-governance
Building up a centralized database repository of
corporate operations in India
Timely redressal of investor grievance
Availability of more time for MCA employees for
qualitative analysis of corporate information

MCA 21 – PRESS NOTES/CIRCULARS
Press Note dated 17-2-2006
MCA 21 Handbook
MCA 21 Initiation Guide
DIN Process Document
Frequently Asked Questions
FAQs on DIN
Proposed E-forms
Instruction Kit
Details of New forms and fees
General Instruction kit for form filing in physical mode
Guidelines to be followed during E-filing
Scheme for Certified Filing Centres
Bulletin form Banks/FIs for Operation under MCA 21

MCA 21 – LEGISLATIVE CHANGES
Companies (Central Government’s) General Rules and Forms
(Amendment) Rules, 2006 [Notification No. 56(E) dated 10-02-2006
Application of Section 159 to Foreign Companies (Amendment) Rules,
2006 [ Notification No. 132 (E), dated 03-03-2006]
Companies (Disqualification of Directors under Section 274(1)(g) of the
Companies Act, 1956) Amendment Rules, 2006 [ Notification No. 133(E),
dated 03-03-2006]
Companies (Declaration of Dividend Out of Reserves) Amendment Rules,
2006 [ Notification No. 134(E), dated 03-03-2006]
Investor Education and Protection Fund (Awareness and Protection of
Investors) Amendment Rules, 2006 [Notification No. 135(E), dated 03-03-
2006]
Companies (Amendment) Regulations, 2006 [ Notification No. 157(E),
dated 16-03-2006]
Companies (Appointment of Sole Agents) Amendment Rules, 2006
[ Notification No.147 (E), dated 08-03-2006]
Cost Audit Report (Amendment) Rules, 2006 [ Notification No. 148 (E),
dated 08-03-2006]
The Companies (Amendment) Act, 2006 [ Notification No.

COMPANIES (AMENDMENT) ACT, 2006
Act to come into force on the notified date –
1st June 2006 as the effective date
Section 253-A new proviso inserted making
DIN Compulsory for directors
DIN – New Section 266A to 266G inserted
E-Filing – Section 610B and 610C inserted
CG to provide Value Added Services – 610D
IT Act applicable – 610E

E-FILING
MCA 21 project facilitates e-filing of forms and applications under the
Companies Act, 1956.
E-filing initiative started from Companies Amendment Act, 1960 by inserting
Section 610A
Also, Recommendation of J.J. Irani Committee for e-filing of documents adopted
E-filing would include incorporation of new companies, filing annual and other
statutory returns, registration and verification of charges and applying for various
approvals/clearances
Directors Identification Number (DIN) and Digital Signature Certificate (DSC) are
pre-requisite under e-filing regime
Companies Amendment Act, 2006 on E-filing:
 CG to make Rules for –
 Filing of applications, BS, Prospectus, Return, declaration, M&AOA,
charges, etc in
E-form
 Service or delivery of document, notice, communication or intimation in E-
form
 Maintenance of Applications, BS, etc by Registrar in E Form

E-FILING
 Inspection of documents through E Form
 Payments of Fees, Charges or other sums through E Form
 Registration of Documents/incorporation certificates,
record/receive notice in E Form [Section 610B]
 CG may frame a scheme to facilitate the above [Section
610B]
 CG to notify that any provisions of Companies Act, 1956 be
made inapplicable or made applicable in modified form to
suit e-filing [Section 610C]
 Information Technology Act, 2000 to be made applicable in
relation to electronic records [Section 610E]
Companies (Central Government) General Rules and Forms,
Companies (Declaration of Dividend out of Reserves) Rules etc.
modified to make them compatible with e-filing

DIRECTORS IDENTIFICATION NUMBER (DIN)
DIN is a pre-requisite for e-filing of certain company related documents
Applicable to existing as well as new directors except directors of
foreign companies having branch offices in India
Form, manner and fees to be prescribed by Central Government – At
present no fees is required to get DIN
CG to allot DIN within one month from the receipt of the application
Only 1 DIN permitted
DIN not an alternative to PAN
Existing Director to intimate his DIN within one month to all the
companies wherein he is a director
Companies to intimate DIN to Registrar within one week
DIN to be quoted in all returns/information/particulars in case they
relate to directors
Penal Provision – Rs.5000/- and in case of continuing default Rs500/-
per day

DIN – SOME ISSUES
What happens to existing DINs taken

before the commencement of
Companies Amendment Act, 2006?
[Second Proviso to Section 266A –
weird drafting]
What if the existing director is out of

station or incapacitated for 60 days?

Some significant recent rulings
SC ruling in the Gaekwad family case – the only relevant
restriction on allotment is the provisions of
articles/memorandum
 Directors are not trustees for individual shareholders; they are
only for the company
In a significant ruling dealing with mergers, Rajasthan high
court dispensed holding of meetings of shareholders and
creditors based on sanction of concerned parties: [Rajasthan
Telecom Company Ltd., In Re (Raj) [2006] 69 SCL 71]
Revaluation reserves can be used for issuing bonus shares –
SC ruling in Bhagwati Developers v. Peerless Finance
House of Lords – charges of future assets are floating
charges: National Bank of Westminster
Auditors report relating to sec. 274 (1) (g) is to be based on
verification of facts and not just statement made by the
company – Calcutta High Court in Hindustan Club

Corporate Law

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Corporate Law

Загружено:

Авторское право:

Доступные форматы

Company Law: Recent trends in India and

Emerging trends in Company law by Vino 1

Company law is directly related to

Recent Global trends in Company law by Vinod Kothari 2

Recent Global trends in Company law by Vinod Kothari 3

United States: each state

South Africa: mixed

Recent Global trends in Company law by Vinod Kothari 5

Recent Global trends in Company law by Vinod Kothari 6

Recent Global trends in Company law by Vinod Kothari 7

Recent Global trends in Company law by Vinod Kothari 8

Recent Global trends in Company law by Vinod Kothari 9

Recent Global trends in Company law by Vinod Kothari 10

Recent Global trends in Company law by Vinod Kothari 11

Recent Global trends in Company law by Vinod Kothari 12

Companies would be permitted to

Recent Global trends in Company law by Vinod Kothari 13

Recent Global trends in Company law by Vinod Kothari 14

Recent Global trends in Company law by Vinod Kothari 15

Recent Global trends in Company law by Vinod Kothari 16

Derek Higgs committee recommendations in

Recent Global trends in Company law by Vinod Kothari 18

Realising that companies secretaries

Recent Global trends in Company law by Vinod Kothari 19

Recent Global trends in Company law by Vinod Kothari 20

Recent Global trends in Company law by Vinod Kothari 21

Recent Global trends in Company law by Vinod Kothari 22

Recent Global trends in Company law by Vinod Kothari 23

Recent Global trends in Company law by Vinod Kothari 24

Recent Global trends in Company law by Vinod Kothari 25

Alternative regime of subordination of

Recent Global trends in Company law by Vinod Kothari 26

Recent Global trends in Company law by Vinod Kothari 27

Recent Global trends in Company law by 29

Recent Global trends in Company law by 30

Recent Global trends in Company law by Vinod Kothari 31

Need for separate Financial Services regulation ruled:

Recent Global trends in Company law by Vinod Kothari 32

IRDA RBI SEBI PFRDA? NHB

Recent Global trends in Company law by Vinod Kothari 33

Recent Global trends in Company law by Vinod Kothari 35

Recent Global trends in Company law by Vinod Kothari 36

May be made easier by transfer of

Recent Global trends in Company law by Vinod Kothari 37

Glib talk - there is a need for proper disclosure

Recent Global trends in Company law by Vinod Kothari 38

Recent Global trends in Company law by Vinod Kothari 39

Recent Global trends in Company law by Vinod Kothari 40

Recent Global trends in Company law by Vinod Kothari 41

Observations relating to stock market scam –

Recent Global trends in Company law by Vinod Kothari 42

Recent Global trends in Company law by Vinod Kothari 43

Recent Global trends in Company law by Vinod Kothari 44

Provisions were inserted but not effective

Recent Global trends in Company law by Vinod Kothari 45

Recent Global trends in Company law by 47

Recent Global trends in Company law by Vinod Kothari 48

Recent Global trends in Company law by Vinod Kothari 49

Suits by a shareholder on behalf of a

Recent Global trends in Company law by Vinod Kothari 50

Recent Global trends in Company law by 51

Recent Global trends in Company law by Vinod Kothari 52

SERVICES AVAILABLE ON MCA 21