CORPORATE L LAW -- I COURSE OUTLINE
SEMESTER V B.A.LL.B. (HONS.) SESSION: JULY NOVEMBER 2015 2015 ULY TO N INTRODUCTION Corporate form of ownership is the most important form of ownership of busine business ss in the contem contempor porary ary times. times. Its sig signi nican cance ce is due to many many dis distin tinct ct advantages it has over other forms of ownership of business. In order to regulate various aspects of functioning of companies, the Company Act was enacted in the year 195. It had been the lengthiest piece of legislation ever passed by the Indian !arliament. "ut now we have an entire new piece of legislation in front of us in the form form of Compani Companies es Ac Actt #$ #$1% 1%.. &o ma'e ma'e it more more contem contempor porary ary and relevant to the present corporate regieme, regulators and other sta'eholders in India were trying to ma'e few changes in the 195 Act. As a result of that, the Companies "ill, #$$9 was introduced in the (o' )abha, one of the two *ouses of !arliament of India, on % August #$$9. &his Companies "ill, #$$9 was referred to the !arliamentary )tanding Committee on +inance, which submitted its report on %1 August #$1$ and was withdrawn after the introduction of the Companies "ill, #$11 #$ 11.. &he &he Comp Compani anies es "ill "ill,, #$ #$11 11 was was also also cons consid ider ered ed by the the !arli arliam amen enta tary ry )tanding Committee on +inance which submitted its report on # une #$1#. )ubse-uently, the "ill was considered and approved by the (o' )abha on 1 /ece /ecemb mber er #$ #$1# 1# as the the Comp Compan anie ies s "ill "ill,, #$ #$1# 1# 0the 0the "ill "ill. . &he &he "ill "ill was was then then considered and approved by the 2a3ya )abha too on August #$1%. It received the !resident4s assent on #9 August #$1% and has now become the Companies Act, #$1%. &he changes in the #$1% Act have farreaching implications that are set to signicantly change the manner in which corporates operate in India. &he new Act is more concise, relevant and more responsive to the current scenario. &he emphasis in this course is on the fundamental principles of law relating to
basics of Corporate (aw covering topics right from the preincorporation to the establishment and management of a company.
DETAILS OF THE COURSE OUTLINE MODULE II .. COMPANY A AS A M MEDIUM O OF B BUSINESS Company, as a form of ownership, developed in order to address the re-uirement of business at that time. It is a statutory creation and it has di6erent forms to suit di6erent re-uirements of business and trade. (aw recogni7e veil by dissociating members from company and also the grounds on which corporate veil may be lifted. •
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History of Company Legislation - UK an Inia Corporate personality ! Con"ept Nat#re an Feat#res of a Corporate $oy T%eories of "orporate personality& Lifting of "orporate 'eil Classi("ation of "ompany Company as isting#is%e from ot%er forms of )#siness
MODULE II II .. PRE-INCORPORATION P PHASE "eing statutory creations, companies are created by promoters. !romoters play a very strategic role. It is through their e8pertise and e6orts that a company is born. In cotemporary times, tas' of promotion has professionali7ed. (aw has the tas' of balancing the protection of their interests on the one hand and on the other hand to protect the interest of the company. +urther it maintains sanctity of contracts entered into by promoters.
*romoters+ *romotion of "ompany *romoters+ Legal *osition of a *romoter *romoters+ D#ties an Lia)ilities *ro"e#re for Registration
*re-in"orporation "ontra"ts MODULE III III .. INCORPORATION O OF A C COMPANY A company is incorporated upon its registration. 2egistration confers many advantages on the company. "oth oA 0constitution of the company and AoA 0rules for internal functioning are necessary for getting a company registered. oa contains the fundamental conditions upon which the company is allowed to be incorporated. &he three common law doctrine protects the interest of di6erent sta'eholders involved.
,emoran#m of Asso"iation Do"trine of Ultra ires Arti"les of Asso"iations Do"trine of Inoor ,anagement Do"trine of Constr#"ti'e Noti"e In"orporation an its "onse.#en"es on Corporate Transa"tions o Certi("ate of In"orporation o Certi("ate of Commen"ement
MODULE IV IV .. PROSPECTUS A company is bound to raise nances for its sustenance and growth. &herefore, in nance a prospectus is a disclosure document that describes a nancial security for potential buyers. A prospectus commonly provides investors with material information about di6erent securities, mutual funds, stoc's, bonds and other investments. It also provides with information li'e description of the company:s business, nancial statements, biographies of o;cers and directors, detailed information about their compensation, any litigation that is ta'ing place, a list of material properties and any other material information.
*rospe"t#s ! ,eaning/ Iss#e an Contents&
Kins of *rospe"t#s ! A)rige *rospe"t#s/ Statement in lie# of *rospe"t#s0 S%elf *rospe"t#s/ Deeme *rospe"t#s& ,is-statements in a *rospe"t#s/ S"ope of Untr#e Statement Lia)ility of ,is-statements in *rospe"t#s
MODULE V V .. R AISING OF C CAPITAL AISING O In order to nance its activities the company needs capital. Capital of a company is of di6erent 'inds. Capital can be raised at the time of formation of the company for starting a business or later on, for e8pansion and diversication. "ut once raised it becomes the permanent liability of the company. And such capital is raised by issuing prospectus in the mar'et which arouses interest of the investors in the company and it induces them to invest in the company. It may be generated through di6erent means from various sources 0e.g. public and private. •
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S%ares 1 S%are Capital – o ,eaning an Nat#re o Kins of S%ares o Iss#e of s%ares ! I*O/ Rig%ts iss#e/ $on#s Iss#e o Allotment/ Transfer/ Forfeit#re/ S#rrener of s%ares o ,em)ers%ip of "ompany+ moes of a".#isition/ eligi)ility0 lia)ility0 Rig%ts0 Cessation of ,em)ers%ip0 o Alteration 2 Re#"tion of s%are "apital& De)ent#re 1 De)t Capital – o Con"ept/ ,eaning 2 C%ara"teristi"s o S%are%oler 'is-3-'is De)ent#re %oler o Kins of De)ent#res o De)ent#re Tr#stees/ De)ent#re Tr#st Dee/ De)ent#re Sto"4 Di'ien ! o ,eaning So#r"es of e"laration o o Interim Di'ien
MODULE VI VI .. CORPORATE M MANAGEMENT (M (MEETINGS)
!rotection of the investors is one of the primary ob3ectives of Corporate (aw.
,eetings - ,eaning an Nee Re.#isites of a ali meeting Kins of ,eeting o 5eneral $oy ,eetings o $oar ,eetings oting
BOOKS T O B E R EFERRED
2amaiyya, =uide to Companies Act, 195 Charlesworth > orse, Company Law =ower > /avies, Principles of Modern Company Law K. Majumdar, Dr. G. K. Kapoor Company Law & Practice, Taxman & ! =osh, Companies ct !"#%, &a8man !ennington, Company Law !almer, Company Law &a8man4s aster =uide to Companies Act #$1% ?icholas "ourne, Principles of Company Law Avtar )ingh, Company Law
S TATUTES & SEBI R EGULATIONS T O B E R EFERRED
Companies Act #$1% Companies Act, 195 )ecurities and @8change "oard of India Act, 199# 0Issue of Capital and /isclosure 2e-uirements 2egulations, #$$9 /epositories Act, 199 )ecurities Contract 2egulation Act, 195
C ASES T O B E R EFERRED
$aloman %. $aloman & Co. Ltd.#'()*((+ll- -ep. Lee %. Lee/s ir 0armin1 Ltd.#(2"+ ll- 3!" D4ulia 5 malner Motor Transport Ltd %. -.-. D4aramsi 6- #()! 7om. 89 Daimler Co. Ltd. %. Continental Tyre & -u::er Co. Ltd. #(#2*#8+ ll- -ep. #(# 7ac4a 0. Gu;adar %. C6T 7om:ay 6- #()) $C 83 Gilford Motor Co. Ltd. %.
man %. ssociates -u::er 6ndustry Ltd. #(')+ 3 $CC ##3 Pratap $in14 %. 7an> of merica #(82+32 Com. Cases )! 7a:ulal C4au>4ani %. Caltex 6ndia+ Ltd. 6- #(28 Cal !") Macaura %. ?ort4ern ssurance Co. Ltd, #(!) C 2#( 0ilm Distri:utors %. -@C 6- #(28 Cal ! 6n re, Mac4inon Mac>ni;e & Co. #(28+ ComLA !"" 7ell %. TurBuand #(3*2"+ ll- -ep.3) 0reeman %. 7uc>4urst Par> Properties #(23+#ll- 2" -e1al
Note9
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T4e students are reBuired to ta>e :ot4 t4e two cts t4e #()2 and t4e !"#+ into consideration at t4e time of preparation. part from t4e cases t4at 4a%e :een mentioned a:o%e, t4e students are also ad%ised to ta>e note of t4e ot4er cases mentioned in t4e :oo>s and discussed in t4e class.
