1.1 Administration of Company[including National Company Law Tribunal (NCLT), National Company Law Appellate Tribunal(NCLAT),Special Courts]

NCLT , NCLAT and Special Courts                                                                            

National Company Law Tribunal (“NCLT”) and National Company Law Appellate Tribunal (“NCLAT”) were established as a part of reforms in India’s Company Law and as a part of reforming Companies Law.  On June 01, 2016, the Ministry of Corporate Affairs (“MCA”) published a notification regarding the constitution of the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) with effect from June 01, 2016. It came as a big-ticket reform as the Companies Act, 1956 was enacted prior to India opening its markets in 1991 and the periodic amendments to the 1956 Act could not satisfy the current needs of Industry, market regulators. NCLT and NCLAT were established as per powers granted to MCA under Section 408 and Section 410 of Companies Act, 2013, respectively. These sections explain the meaning of NCLT and NCLAT in a clear way and we can look at these sections to get an overview of NCLT and NCLAT.

Section 408 of Companies Act, 2013 defines NCLT and it specifies that the Central Government shall constitute a Tribunal to be known as the National Company Law Tribunal composing of President and other Judicial and Technical members, to exercise and discharge powers and functions as prescribed by the Act or any other power delegated to them by way of any other enactment or a Notification by Ministry Of Corporate Affairs.  Similar to NCLT, NCLAT was established as per Section 410 of Companies Act which states that the Central Government, by way of notification shall constitute constitute an Appellate Tribunal to be known as the National Company Law Appellate Tribunal comprising Chairperson and Judicial and Technical members, for hearing appeals against the orders of the Tribunal. Initially NCLT and NCLAT were given Jurisdiction over the Following matters:

Board for Industrial and Financial Reconstruction. (“BIFR”)

The Appellate Authority for Industrial and Financial Reconstruction. (“AAIFR”)

Jurisdiction and powers relating to winding up restructuring and other such provisions, vested in the High Courts.

Company Law Board (“CLB”).

It is important to note that the Company Law Board would cease to exist after the establishment of NCLT and NCLAT as per Section 466 of Companies Act, 2013.

NCLT is established as per Section 408 of Companies Act, 2013. 

NCLAT is established as per Section 410 of Companies Act, 2013.

The provisions related to Special Courts were provided under Chapter XXVIII of the Companies

Act, 2013. Although the provisions related to Special Courts i.e. Section 435 to 438 & 440were

Not notified for being in force till 2016. In the Report of Companies Law Committee chaired by

Sri Tapan  Ray dated February 1, 2016 noted that the establishment/designation of Special Courts under the Act would result in faster prosecution of defaulting companies. The Committee recommended the early establishment/designation of the Special Courts. It was also recommended to be considered that the Special Courts at the subordinate level may also be established in addition to the Sessions Judge or Additional Sessions Judge. The Central Government is  empowered  to establish or designate Special Courts by notification for the

Purpose of providing speedy trial of offences under the  Companies Act, 2013. Consequently,

Ministry of Corporate Affairs notified sections 435 to 438 and section 440 vide notification dated May 18, 2016. The purpose of Special Courts is to provide speedy trial of offences under the Companies Act, 2013. Although, the option of approaching the regular courts for trial of offences under Companies Act was  available to complainants but for the want of expertise and special attention required for these offences, it was necessary to establish the Special Courts. The Special Courts are generally designated from the existing setup of the court system dealing with the criminal offences. The Special Courts were facilitated by Companies (Amendment) Act, 2019 by strengthening  Internal  Adjudication Mechanism, resulting into reduced burden  on Special Courts and allowing them to focus on serious offences under the 2013 Act.

Administration of NCLT and NCLAT

Section 415 to Section 433 (both inclusive) has also came into force. These sections deal with administration of NCLT and NCLAT.

415. Acting President and Chairperson of Tribunal or Appellate Tribunal.

416. Resignation of Members.

417. Removal of Members.

418. Staff of Tribunal and Appellate Tribunal.

419. Benches of Tribunal.

420. Orders of Tribunal.

421. Appeal from Orders of Tribunal.

422. Expeditious disposal by Tribunal and Appellate Tribunal.

423. Appeal to Supreme Court.

424. Procedure before Tribunal and Appellate Tribunal.

425. Power to punish for contempt.

426. Delegation of powers.427. President, Members, officers, etc., to be public servants.

428. Protection of action taken in good faith.

429. Power to seek assistance of Chief Metropolitan Magistrate, etc.

430. Civil court not to have jurisdiction.

431. Vacancy in Tribunal or Appellate Tribunal not to invalidate acts or proceedings.

432. Right to legal representation.

433. Limitation.

However, it provides a Condition that technical members of NCLAT shall not exceed 11 members.

1.2 Characteristics

Characteristics Of Company

Some of the most important characteristics of a company are as follows:

1. Voluntary Association:

A company is a voluntary association of two or more persons. A single person cannot constitute a company. At least two persons must join hands to form a private company. While a minimum of seven persons are required to form a public company. The maximum membership of a private company is restricted to fifty, whereas, no upper limit has been laid down for public companies.

2. Incorporation:

A company comes into existence the day it is incorporated/registered. In other words, a company cannot come into being unless it is incorporated and recognised by law. This feature distinguishes a company from partnership which is also a voluntary association of persons but in whose case registration is optional.

3. Artificial Person:

In the eyes of law there are two types of persons viz:

(a) Natural persons i.e. human beings and

(b) Artificial persons such as companies, firms, institutions etc.

Legally, a company has got a personality of its own. Like human beings it can buy, own or sell its property. It can sue others for the enforcement of its rights and likewise be sued by others.

4. Separate Entity:

The law recognizes the independent status of the company. A company has got an identity of its own which is quite different from its members. This implies that a company cannot be held liable for the actions of its members and vice members and vice versa. The distinct entity of a company from its members was upheld in the famous Salomon Vs. Salomon & Co case.

5. Perpetual Existence:

A company enjoys a continuous existence. Retirement, death, insolvency and insanity of its members do not affect the continuity of the company. The shares of the company may change millions of hands, but the life of the company remains unaffected. In an accident all the members of a company died but the company continued its operations.

6. Common Seal: 

A company being an artificial person cannot sign for itself. A seal with the name of the company embossed on it acts as a substitute for the company’s signatures. The company gives its assent to any contract or document by the common seal. A document which does not bear the common seal of the company is not binding on it.

7. Transferability of Shares:

The capital of the company is contributed by its members. It is divided into shares of predetermined value. The members of a public company are free to transfer their shares to anyone else without any restriction. The private companies, however, do impose some restrictions on the transfer of shares by their members.

8. Limited Liability:

The liability of the members of a company is invariably limited to the extent of the face value of shares held by them. This means that if the assets of a company fall short of its liabilities, the members cannot be asked to contribute anything more than the unpaid amount on the shares held by them. Unlike the partnership firms, the private property of the members cannot be utilized to satisfy the claims of company’s creditors.

9. Diffused Ownership:

The ownership of a company is scattered over a large number of persons. According to the provisions of the Companies Act, a private company can have a maximum of fifty members. While, no upper limit is put on the maximum number of members in public companies.

10. Separation of Ownership from Management:

Though shareholders of a company are its owners, yet every shareholder, unlike a partner, does not have a right to take an active part in the day to day management of the company. A company is managed by the elected representatives of its members. The elected representatives are individually known as directors  and collectively as ‘Board of Directors’.

Key Takeaways: 

1.3 Types of Companies

A. Types of Company on the basis of Incorporation

1. Statutory Companies:

These companies are constituted by a special Act of Parliament or State Legislature. These companies are formed mainly with an intention to provide the public service. Though primarily they are governed under that Special Act, still the CA, 2013 will be applicable to them except where the said provisions are inconsistent with the provisions of the Act creating them (as Special Act prevails over General Act).                                                                                                               

Examples of these types of companies are Reserve Bank of India, Life Insurance Corporation of India, etc.

2. Registered Companies: Companies registered under the CA, 2013 or under any previous Company Law are called registered companies.

Such companies comes into existence when they are registered under the Companies Act and a certificate of incorporation is granted to it by the Registrar

B. Types of Company on the basis of Liability

1. Companies limited by shares:

A company that has the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them is termed as a company limited by shares.

The liability can be enforced during existence of the company as well as during the winding up. Where the shares are fully paid up, no further liability rests on them.

For example, a shareholder who has paid 75 on a share of face value 100 can be called upon to pay the balance of 25 only. Companies limited by shares are by far the most common and may be either public or private.

2. Companies limited by guarantee:

Company limited by guarantee is a company that has the liability of its members limited to such amount as the members may respectively undertake, by the memorandum, to contribute to the assets of the company in the event of its being wound-up. In case of such companies the liability of its members is limited to the amount of guarantee undertaken by them.

The members of such company are placed in the position of guarantors of the company’s debts up to the agreed amount.

Clubs, trade associations, research associations and societies for promoting various objects are various examples of guarantee companies.

3. Unlimited Liability Companies

A company not having a limit on the liability of its members is termed as unlimited company. Here the members are liable for the company’s debts in proportion to their respective interests in the company and their liability is unlimited.

Such companies may or may not have share capital. They may be either a public company or a private company.

C. Types of Company on the basis of number of members

1. Public Company:                                                                                                                                            

Defined u/s 2(71) of the CA, 2013 – A public company means a company which is not a private company.

Section 3(1) of the CA, 2013– Public company may be formed for any lawful purpose by 7 or more persons.

Section 149(1) of the CA, 2013 – Every public company shall have minimum 3 director in its Board.

Section 4(1)(a) of the CA, 2013 – A public company is required to add the words “Limited” at the end of its name.

It is the essence of a public company that its shares and debentures can be transferable freely to the public unlike private company. Only the shares of a public company are capable of being dealt in on a stock exchange.

A private company that is a subsidiary of a public company, will be considered a public company.

2. Private company:

Defined u/s 2(68) of the CA, 2013 –

A private company means a company which by its articles—

a. Restricts the right to transfer its shares;

b. Limits the number of its members to 200 hundred (except in case of OPC)

Note:

Persons who are in the employment of the company; and persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall be excluded.

Where 2 or more persons hold 1 or more shares in a company jointly they shall be treated as a single member.

Prohibits any invitation to the public to subscribe for any securities of the company;

Section 3(1) of the CA, 2013 – Private Company may be formed for any lawful purpose by 2 or more persons.

Section 149(1) of the CA, 2013 – Every Private company shall have minimum 2 director in its Board.

Section 4(1)(a) of the CA, 2013 – A private company is required to add the words “Private Ltd” at the end of its name.

Special privileges – Private Companies enjoys several privileges and exemptions under the Companies Act.

3. One Person Company (OPC):

With the enactment of the Companies Act, 2013 several new concepts was introduced that was not in existence in Companies Act, 1956 which completely revolutionized corporate laws in India. One of such was the introduction of OPC concept.

This led to the avenue for starting businesses giving flexibility which a company form of entity can offer, while also offering limited liability that sole proprietorship or partnerships does not offers.

Defined u/s 2(62) of the CA, 2013 – One Person Company means a company which has only one person as a member.

Section 3(1) of the CA, 2013 – OPC (as private company) may be formed for any lawful purpose by 1 persons.

Section 149(1) of the CA, 2013 – OPC shall have minimum 1 director in its Board, its sole member can also be director of such OPC.

Some Feature explained

Single-member: OPCs can have only 1 member or shareholder, unlike other private companies.

Nominee: A unique feature of OPCs that separates it from other kinds of companies is that the sole member of the company has to mention nominee while registering the company Since there is only one member in an OPC, his death will result in the nominee choosing or rejecting to become its sole member. This does not happen in other companies as they follow the concept of perpetual succession.

Special privileges: OPCs enjoys several privileges exemptions under the Companies Act.

D. Types of Company on the basis of Domicile

1. Foreign company:

Defined u/s 2(42) of the CA, 2013 – “foreign company” means any company or body corporate incorporated outside India which,—

Section 379 to Section 393 of the CA, 2013 prescribes the provisions which are applicable on such companies.

2. Indian Company:

A company formed and registered in India is known as an Indian Company.

E. Other Types of Company:

1. Government Company:

Defined u/s 2(45) of the CA, 2013 – “Government company” means any company in which not less than 51 % of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company. Explanation – “paid-up share capital” shall be construed as “total voting power”, where shares with differential voting rights have been issued.

Special privileges: Government Company enjoys several privileges and exemptions under the Companies Act.

2. Subsidiary Company:

Defined u/s 2(87) of the CA, 2013 –  “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company—

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.

Explanation: For the purposes of this clause-

3. Holding Company:

Defined u/s 2(46) of the CA, 2013 –“holding company”, in relation to one or more other companies, means a company of which such companies are subsidiary companies;

Explanation: For the purposes of this clause, the expression “company” includes any body corporate.

Key Takeaways:

1.4 Association not for profit

Association not for profit

There are three ways of registering a Non-Profit Organizations or Non-Governmental Organizations- Society, Trust and Section 8 Company. Trusts and Societies do not have central laws as its laws are restricted within that state only where it is established.

Section 8 Company (earlier known as Section 25 Company) is a legal form of Non Profit Organizations or Non Governmental Organizations registered under Section 8 of the Companies Act, 2013 and has its objective of promotion of arts, science, commerce, education, sports, research, religion, social welfare, charity or any other similar object.

Income earned by the Company is applied only for promoting the objects of the Company and it cannot be distributed to promoters. It shall enjoy all the privileges of limited Company subject to the obligations.

Main requirements and privileges for incorporating a section 8 company are as follows:

• There should be minimum two Shareholders;

• There should be minimum two Directors;

• At least one of the Director should be resident in India;

• No requirement of Minimum capital is there, it can be formed with or without share capital;

• It shall obtain a license from Central Government for registration of persons as a Limited Company. Further, the power of Central Government is delegated to the Registrar of Companies having jurisdiction over the place where the registered office of the Company is proposed to be situated.

• These Companies are not required to add Limited or Private Limited as the case may be at the end of their names. Instead, it shall use the words Foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust etc.

• It takes 30-40 days to incorporate a Section 8 Company. The time can be reduced if a license is issued and other forms are approved earlier by respected Registrar of Companies..

Section 8 Company is identical to trust or society but it has certain advantages over trust or society like legal recognition, better standing, and higher credibility. Other advantages of Section 8 Company are as follows:

• Limited Liability

• Separate legal entity

• Perpetual Succession

• Lesser Compliances as compared to other entities

• Easy to transfer shares

• Various tax benefits

PROCEDURE FOR INCORPORATING SECTION 8 COMPANY IS AS FOLLOWS:

• Obtain the below-mentioned documents and information:

a. Name of the Proposed Company along with its business activity in brief.

b. PAN, Identity Proof and Address Proof of all the Directors and Shareholder of the proposed Company

(Note: Voter ID/Aadhaar Card/Passport/Driving Licence can be considered as Identity Proof and Latest Bank Statement/Electricity bill/Mobile Bill/Telephone Bill can be considered as Address Proof)

c. Photo, Email Id and Mobile Number of all the Directors of the proposed Company.

d. Complete address of Registered Office including Latest Electricity Bill for the same and rent agreement if premises are rented.

• Initiate the process of obtaining Digital Signature Certificate of proposed Directors;

• An application has to be filed to respected ROC under RUN for name approval;

• Reserved name shall be valid for 20 days. After obtaining name approval, an application in E-Form INC-12 has to be filed to respected ROC for license approval of Section 8 Company i.e. to run a charitable organization;

• After obtaining a license, an application has to be filed in Spice forms (INC-32, INC-33 and INC-34) for final approval of ROC for incorporating the Company stating the Details of Directors, Shareholding Pattern, Objects of the Company along with necessary attachments including PAN, ID and Address Proof of all the Directors and shareholders.

• Once the ROC gets satisfied with all the above formalities, a Certificate of Incorporation will be issued to the Company.

Hence, from the above, it is concluded that Section 8 Company is the most reliable source of establishing a Non-Profit Organization because of Central recognition and better laws as mentioned.

1.5           Formation of Company

Formation Of Company

The procedure or formation of a company may be divided into four stages:

1. Promotion

2. Incorporation

3. Raising of capital

4. Commencement of business

1. Promotion:

It is the first stage in the formation of a company. In this stage the idea of carrying on a business is conceived by a person or a group of persons called promoters. They make detailed investigation about the workability of the idea, amt of capital required, operating expense etc

Before a company  can be formed, there must be some persons who have an intention to form a company and who take the necessary steps to carry that intention into operation. Such persons are called promoters.

The promoter is the person who brings a company into existence.

2. Incorporation:

The promoter is the person who brings a company into existence of incorporation is the birth certificate of the company. A company comes into existence from the date mentioned mentioned in the certificate.

Procedure for Registration

The promoter has to first decide the proposed form of company as whether it is to be a public company or a private company. They may form the company with limited liability , unlimited liability  or limited by guarantee.

They have to decide the name of the company agreeable and desirable to all. For eg if the name proposed is identical with or closely resembles the name of an existing company , it is undesirable.

For getting registration an application has to be made to the registrar.

The application shall be accompanied by the following documents:

1. Memorandum of association,

2. Articles of association,

3. A statement of nominal capital,

4. A notice of address of the registered office of the company.

5. A list of directors and their consent to an act signed by them

6. A declaration that all the requirements of the act have been complied with. Such declaration shall be signed by an advocate of high court or supreme court or a chartered accountant who is engaged in the formation of company

Certificate of Incorporation:

If the registrar is satisfied that all the requirements of the act have been complied with he shall register the company and issue a certificate of incorporation.

Conclusive Proof

Once a company is registered incorporation cannot be challenged subsequently. The certificate of incorporation is a conclusive evidence of the fact that:

1. All the requirements of the act have been complied with.

2. Company is duly registered.

3. Company came into existence on the date of certificate.

Advantages of Incorporation:

1. Transferability of shares

2. Separate legal entity

3. Perpetual succession

4. Common seal

5. Separate property

6. Capacity to sue

3. Raising of Capital:

After incorporation a company can raise capital by issuing shares. A private company cannot issue shares to public.

In case of public company a copy of prospectus is filed with the registrar and it will be issued to the public. Those who are intended in purchasing share are required to send their application money to company's banker.

On the last date fixed for the receipt of application if the company has received application equal to minimum subscription the directors will start with allotment of shares.

4. Commencement of Business:

A private company may commence its business immediately after incorporation.

But a public company cannot commence business immediately after incorporation but it has to obtain a certificate of commencement from the registrar.

Key Takeaways:

1.6 Filing Of Documents

Filing Of Document

MCA PORTAL

The Ministry is primarily concerned with administration of the Companies Act 2013, the Companies Act 1956, the Limited Liability Partnership Act, 2008 & other allied Acts and rules & regulations framed there-under mainly for regulating the functioning of the corporate sector in accordance with law.

The Ministry is also responsible for administering the Competition Act, 2002 to prevent practices having adverse effect on competition, , to promote and sustain competition in markets, to protect the interests of consumers through the commission set up under the Act.

Besides, it exercises supervision over the three professional bodies, namely, Institute of Chartered Accountants of India(ICAI), Institute of Company Secretaries of India(ICSI) and the Institute of Cost Accountants of India (ICAI) which are constituted under three separate Acts of the Parliament for proper and orderly growth of the professions concerned.

The Ministry also has the responsibility of carrying out the functions of the Central Government relating to administration of Partnership Act, 1932, the Companies (Donations to National Funds) Act, 1951 and Societies Registration Act, 1980.

MCA SERVICES 

1. Obtain Digital Signature Certificate

About Digital Signature Certificate (DSC)

The Information Technology Act, 2000 has provisions for use of Digital Signatures Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. This is secure and authentic way to submit a document electronically. As such, all filings done by the companies/LLPs under MCA21 e-Governance programme are required to be filed using Digital Signatures by the person authorised to sign the documents.

Related Links and Artefacts

1. Legal Warning:

You can use only the valid Digital Signatures issued to you. It is illegal to use Digital Signatures of anybody other than the one to whom it is issued.

2. Certification Agencies:

Certification Agencies are appointed by the office of the Controller of Certification Agencies(CCA) under the provisions of IT Act, 2000. There are a total of eight Certification Agencies authorized by the CCA to issue Digital Signature Certificates (DSCs). The details of these Certification Agencies are available on the portal of the Ministry Certifying Authorities External link image

3. Class of DSCs:

The Ministry of Corporate Affairs has stipulated a Class-II or above category signing certificate for e-Filings under MCA21. A person who already has the specified DSC for any other application can use the same for filings under MCA21 and is not required to obtain a fresh DSC.

4. Validity of Digital Signatures:

The DSCs are typically issued with one year validity and two year validity. These are renewable on expiry of the period of initial issue.

5. Costing/ Pricing of Digital Signatures:

It includes the cost of medium (a UBS token which is a one time cost), the cost of issuance of DSC and the renewal cost after the period of validity. The company representatives and professionals required to obtain DSCs are free to procure procure the same from any one of the approved Certification Agencies as per the MCA portal. The issuance costs in respect of each Agency vary and are market driven.

However, for the guidance of stakeholders, the Ministry has obtained the costs of issuance of DSCs at the consumer end from the Certification Agencies. The costs as intimated by them are as under:

6. Obtain Digital Signature Certificate

• Digital Signature Certificate (DSC) Applicants can directly approach Certifying Authorities (CAs) with original supporting documents, and self-attested copies will be sufficient in this case

• DSCs can also be obtained, wherever offered by CA, using AadhareKYC based authentication, and supporting documents are not required in this case

• A letter/certificate issued by a Bank containing the DSC applicant’s information as retained in the Bank database can be accepted. Such letter/certificate should be certified by the Bank Manager

E- FILING (SECTION 397 TO 402)

As a part of Annual e-Filing, Companies incorporated under the businesses Act, 1956 are required to e-file the following documents with the Registrar of Companies (RoC)

Balance-Sheet: Form 23AC to to be filed by all Companies

Profit & Loss Account: Form 23ACA to be filed by all Companies

Annual Return:Form 20B to be filed by Companies having share capital

Annual Return: Form 21A to be filed by companies without share capital

Compliance Certificate:Form 66 to be filed by Companies havingpaid up capital of Rs.10 lakh to Rs. 5 crore

Step by Step Process for additional Attachments to form 23AC :

1 If the dimensions of Form 23AC exceed 2.5 MB, remove some attachments or split and attach only a small a part of the attachment to limit the shape size to 2.5 MB. You'll upload the remaining/ other parts of attachments separately using ‘Additional Attachment Sheet’ as below.

2 Download the ‘Additional Attachment Sheet’ from ‘Annual Filing Corner’ link on the homepage of MCA portal.

3 Enter the CIN and click on ‘Pre-fill’ button to automatically fill the name and address of the company within the e-Form.

4 Fill the date of relevant balance sheet.

5 Select the type of document from the dropdown list and click ‘Attach’ button to ‘browse and select’ the file to be attached. You have the option to connect maximum 5 documents.

6 Fill the signatory details i.e. Designation and DIN/ Membership No.

7 Affix the Digital Signature Certificate of the signatory

8 Click ‘Verify’ button. Just in case of any error, rectify the same and repeat this step.

9 Close the form and save it again on prompting by the system. Please ensure that size of ‘Additional Attachment Sheet’ doesn't exceed 2.5 MB.

10 If you wish to attach more attachments, please download a fresh Form and repeat the above steps. You have the option to upload maximum two ‘Additional Attachment Sheet’ against one Form 23AC.

11 After uploading of Form 23AC on MCA portal, system will prompt for following options:

• File Form 23ACA

• File additional attachments to form 23AC12

12 Select the second option and upload saved ‘Additional Attachment Sheet’.

13 After uploading of 1 ‘Additional Attachment Sheet’, system will again prompt for making a selection. If you have the second ‘Additional Attachment Sheet’ for uploading, select the second option again and upload an equivalent . Otherwise select the first option and upload Form 23ACA to finish the filing and proceed to ‘payment option’ screen.

14 If you have uploaded two ‘Additional Attachment Sheets’ system will prompt you to file Form 23ACA to complete the filing and proceed to ‘payment option’ screen.

How to do the Filing Companies can do e-Filing in three different ways:

1)The company representative can upload the e-Forms on the MCA portal through the ‘Annual Filing Corner’ link (after registering oneself as a user of the portal) at his convenience from his office/ home. This is often the most convenient way of e-Filing.

2)The company representative can prepare the e-Forms as per guidelines, get them digitally signed by the authorized signatory, copy them during a CD or a pen drive and visit the closest “Registrar’s Front Office” (RFO). RFO staff will assist in uploading of e-Forms on MCA portal. For addresses/ phone numbers of RFOs, please ask the “Facilitation Centre” link on the homepage of MCA portal.

3)The company representative also can contact any of the Certified Filing Centers (CFCs) for the Annual Filing of e-Forms by paying the service charges to the CFCs. The details about the CFCs are available under the ‘Certified Filing Centre’ tab on the homepage of MCA Portal.

DIN- DIRECTIONS IDENTIDICATION NUMBER

Director identification number is a prerequisite for appointment as director during a company in India. Same time Register of Directors and Key Managerial personnel serve the aim of Record of interests of those persons in company and otherwise.

Directors’ IdentificationNumber (SECTIONS 153 – 159)

(Section 153)

Every individual intending to be appointed as director of a company shall make an application for allotment for Director Identification number (DIN) to the Central government.

(Section 154)

The Central government shall within one month from the  receipt of the appliance allot a Director number to the applicant.

(Section 155)

No person who already has a Director Identification number shall apply for another Director Identification number.

(Section 156)  

Every existing director, within one month of the receipt of Director Number from Central Government, shall intimate the number to all or any the companies where he/she may be a director.

(Section 157)

Every company, within fifteen days of the receipt of intimation from the director, shall furnish the Director Identification number to the registrar. If a company fail to furnish Director identification within a period specified under Section 403, the company shall be punishable with fine which shall not be but twenty-five thousand rupees but which can reach one lakh rupees and each officer of the company who is in default shall be punishable with fine which shall not be but twenty-five thousand rupees but which can reach one lakh rupees.

(Section 158)

Every person or company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall mention the Director identification number in such return, information or particulars just in case such return, information or particulars relate to the director or contain any reference of any director. Where a replica of such resolution is to be furnished somewhere, DIN should be mentioned. Simply, this is often prudent to say DIN in all resolutions.

(Section 159)

If any individual or director of a company, contravenes any of the provisions of section 152, section 155 and section 156, such individual or director of the company shall be punishable with imprisonment for a term which can reach six months or with fine which may extend to fifty thousand rupees and where the contravention may be a continuing one, with an extra fine which may reach five hundred rupees for each day after the first during which the contravention continues.

1.7 Promoters-Their Legal position

Section 2(69) of Companies Act 2013, deals with the term Promoter:

1. A person who has been named as such in a prospectus or is identified by the company in the annual return in section 92; or

2. A person who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or

3. A person who is in agreement with whose advice, directions or instructions the Board of Directors of the company is accustomed to act.

In a simple word, the promoter may be an individual, a firm or a company that does all the necessary preliminary duties to bring a company into existence. The promoter’s work is to formulate new ideas and to develop it and also persuade others to join the company.

According to L.J. Brown. “The term promoter is a term not of law but of business, usefully summing up in a single word a number of business operations familiar to the commercial world by which a company is generally brought into existence.”

According to Justice C. Cockburn. “Promoter is one who undertakes to form a company with reference to a given object and to set it going, and who takes the necessary steps to accomplish that purpose.”

Legal Position of a Promoter is that he is not an agent or trustee of the company. Promoter has a fiduciary relationship with the company which is based on trust and confidence. Therefore, a promoter is obliged to disclose all the relevant facts and any secret profit which is made by him in relation to the formation of the Company.

In Erlanger v. New Sombrero Phosphate Co., Lord Carins stated, The promoter of the company has a fiduciary position. They can create and mold the company as well. The promoter has full authority to define how and when and in what shape and under what supervision, it will start into existence and begin to act as a trading corporation.

Legal status/position of a promoter:  

The statutory provisions are silent regarding the legal status of a promoter.

A promoter cannot be an agent or trustee for the proposed company (or) company under incorporation.

However, the law imposes certain duties, functions, responsibilities and liabilities on a promoter which are “like that of an agent or trustee” of a proposed/under incorporation company.

This position of the promoter “like that of an agent or trustee” is called the “fiduciary duties or fiduciary role or fiduciary position” of a promoter.

Fiduciary position of the promoter: The promoter stands in a fiduciary relation to the company which he promotes. They are follows:-  

(1)Not to make any profit at the expense of the company: The promoter cannot make any profit of the company he promotes either directly (or) indirectly without knowledge and the consent of the company. Similarly he is not allowed to drive any profit from the sale of his own property to the company unless all material facts are disclosed. If any such secrete profits is violated to this rule, the company may compel him to account for and surrender for such profits.

(2) To give benefit of negotiations to the company: The promoter must give benefit to the company of any contracts (or) negotiations enter into by him in respect of the company. Thus where he purchases some property for the company and he cannot rightfully sell that property to the company, he may sell at a higher price than he gave for it. If he does do, the company may on discovering the fact, the company may have the following remedies against such promoter:

a) Rescind the contract and recover the money if any already paid on the transaction (or)

b) Retain the property, pay the promoter only the cost value and deprive him the profit,(or)

c) Where the above remedies are inappropriate, the company may sue for misfeasance (i.e.., breach of duty to disclose)

Example: Erlanger (vs) New Sombrero Phosphates Co., (1878):

Facts: A Syndicate, of which ‘E’ was the head, purchased an island with valuable minerals. ‘E’, as promoter, sold the island to a newly formed company for the purpose of buying it. A contact was entered into between ‘X’, a nominee of the Syndicate, and the company for purchase at double the price actually paid by ‘E’.

Judgment: It was held by the court that as there had been no disclosure by the promoters of the profit that were making, the company was entitled to rescind the contract and to recover the purchase money from ‘E’ and the other members of the syndicate.

(3) To make full disclosure of interest and profits: if the promoter fails to disclose the relevant facts, the company may sue him for damages for breach of his fiduciary duty and recover them from him any secrete profit. It is important to note that profit is permissible, if full disclosure of the facts is given to the independent Board of director (or) shareholders.

(4) Not to make unfair use of the position: The promoter must not make an unfair (or) reasonable use of his position and must take care to avoid anything which has the appearance of undue influence (or) fraud.

Key Takeaways:

1. Promoter is one who undertakes to form a company with reference to a given object and to set it going, and who takes the necessary steps to accomplish that purpose.

2. Promoter has a fiduciary relationship with the company which is based on trust and confidence.

References:

• ‘Company Law’ by Brenda Hannigan
• ‘Elements of Company’ Law by N. D. Kapoor