Companies Act, 2013 rules notified

On the 27th of March, 2014, the Ministry of Corporate Affairs notified rules for the implementation of a number of sections in the Companies Act, 2013. Most of the rules are segregated chapter wise:

1. Definitions
2. Incorporation
3. Prospectus and Allotment of Securities
4. Share Capital and Debentures
5. Charges
6. Management
7. Dividend
8. Accounts
9. Directors (Appointment and Qualifications)
10. Board (Meetings and Powers)

This follows the Corporate Social Responsibility Rules that were notified last month. 

The War over GAAR

by Mr. Dev Chaudhary, 5th year, BA LLB (Hons) Jindal Global Law School

Mauritius, an island nation sixteen hundred times smaller than India in size and an economy relatively smaller, single-handedly contributes in excess of forty percent of foreign direct investment in India as reported by the Reserve Bank of India (RBI Annual Report, Published 22nd August, 2013). It may be argued that these startling figures are an outcome of India-Mauritius Double Taxation Avoidance Agreement (the “DTAA”).

Signed in 1982, the DTAA aims at promoting mutual trade and investment while avoiding double taxation on capital gains (Preamble of the DTAA). Accordingly, the DTAA allows residents of Mauritius to avoid tax liability on capital gains incurred in India (Article 13 of DTAA). Although legitimate, DTAA provisions allegedly involve loopholes that have been timely exploited. The DTAA allows for paper companies to route income through tax havens while diverting a considerable amount of revenue away from the Indian Government.

To scrutinize such aggressive tax planning, the Finance Act of 2012 inserted a new chapter- Chapter- X-A, titled as the ‘General Anti Avoidance Rules’ within the Income Tax Act, 1961. This Chapter X-A intends to penalize colorable devices by looking into the substance of the arrangements in question (See. Section 97 of the Finance Act 2012). Perceived to be ambiguous and conferring wide, discretionary powers to Assessing Officer (the “AO”), the rules met with a critical reception by foreign investors. Consequently, the Prime Minister was persuaded to announce a committee, headed by Dr. Parthasarathy Shome, for revisiting GAAR (Income Tax Department Press Release dated 13th July, 2013). While submitting its recommendations, the Panel suggested that in order to restore the confidence of investors, the enforceability of GAAR be deferred (See. Final Report of GAAR in Income Tax Act, 2012). As of now, the GAAR has been deferred vide a Central Board of Direct Taxes (the “CBDT”) through a notification (CBDT notification dated 23rd September, 2013).

A variant of the GAAR, more accommodating to the concerns of investors is to come into effect on 1stApril, 2016. Some issues of contemporary debate include the retrospective operation of the rules and the grandfathering clause that extends protection to transactions entered into before 30th August, 2010. It further provides for a threshold in order to avail of tax benefits. These rules are aimed at allaying the fears of investors while incorporating detailed procedure and thereby limiting the extent of discretion.

The introduction of GAAR has extensively witnessed the tussle between Government interest to disallow harmful tax planning and commercially- motivated interests of investors. Undoubtedly, the consequences upon corporate practice and business planning could be far- reaching if GAAR is enforced. However, countries are evidently keen to enforce GAAR as opposed to Specific Anti-Avoidance Rules (the “SAAR”) due to the fast-changing nature of business and capital transactions. This is due to non-comprehensive nature, and consequently, failure of SAAR to target all arrangements and provide wide powers to AO. The enactment of GAAR could prove to be a major, albeit a tough decision, for Indian Government of its investment-related aspirations. All these changes could prove to be a welcome step for the Indian exchequer if the rules are enacted and implemented as planned, in 2016.

Whistleblowing Provisions in the Corporate Sector

by Mr Suprotik Das, 2nd year, BA LLB (Hons) Jindal Global Law School

Whistle-blowing as the term suggests is a practice by which employees or directors of a company can raise issues pertaining to misconduct, violation of compliance mechanisms and fraud to internal committees in an organisation or to an external body, such as the government or law regulatory bodies.

Around the world, mainly in the United States and in the United Kingdom, whistleblowing provisions are mandatorily followed by the private sector and whistleblowers are protected. The US has the Sarbanes-Oxley Act of 2002 and the recent Dodd-Frank Act. Some of the features of the Dodd-Frank Act are –

• Financial rewards to the whistleblower;
• Strong confidentiality provisions for whistleblowers;
• Whistleblowers are allowed to report fraud anonymously; and
• By law, employers are not allowed to terminate, demote, threaten or coerce a whistleblower.

Further, the Securities and Exchange Commission Office of the Whistleblower was established under this Act to help, guide and handle complaints. Unlike the UK, India does not have a law to protect whistleblowers and most people who expose alleged fraud within companies are often victimised, threatened, terminated or even murdered.

The 2013 Act has expanded its safety net to whistleblowers by including a number of provisions.

Firstly, companies must have a strong vigil mechanism with specific policies against victimisation of people using that mechanism as described under Sections 177(9) and 177(10) of the Act.

Secondly, the vigil mechanism should operate through the internal audit committee comprising of its Board of Directors, and a minimum of three directors with independent directors forming a majority as per Sections 177(1) and 177(2) of the 2013 Act.

Thirdly, in exceptional situations, other than the requirement of displaying the mechanism on the website and including it within the board report, direct access to the chairperson of the audit committee must be granted.

However, it is crucial to observe that the 2013 Act does not define the term ‘genuine concern’ and neither delves into the procedure to be followed in ensuring this mechanism under Section 177(9). Standard practice by companies usually involves having a hotline number to report grievances or reporting grievances through email or websites.

A strict adherence to vigil guidelines have led to a greater reduction in fraud as per the KPMG India Fraud Survey, 2012. Incentivising whistleblowers for exposing potential hazards can be another mechanism by which whisteblower policies can be taken a step further.

As a conclusion, I leave the reader with some questions-

• Will a whistle-blowing protection law like the Dodd-Frank Act in the United States have an effective implementation in India?
• Would it be advantageous or detrimental to merely ‘import’ laws from the United States?
• Is it pragmatic to induce a law of a developed nation into a developing nation, wherein corruption is so rampant?

Piercing the Corporate Veil in arrest of sister ships: A Paradigm Shift

by Ms Naghm Ghei, 4th year, BA LLB (Hons) Jindal Global Law School and Mr Ishaan Saha, 5th year, BA LLB (Hons) Jindal Global Law School

Owing to the transient nature of ships which are always in a state of motion, thus creating the likelihood of an errant vessel not being available for arrest, Article 3 of the 1952 Arrest Convention provides that a claimant may arrest not only the particular ship in respect of which a maritime claim arose but also “...any other ship which is owned by the person who was, at the time when the maritime claim arose, the owner of the particular ship...” India was brought under the ambit of this convention by virtue of the M.V. Elisabeth & Ors v Harwan Investment and Trading decision.

In practice, this power to vindicate a maritime claim through arrest of a sister ship is often rendered nugatory by the convoluted corporate structuring of entities by companies, into single ship enterprises, whose assets comprise of no more than the single ship plying on a voyage, in order to insulate themselves from liability to claimants. Owing to this peculiar commercial exigency in the business of shipping, in order to preserve the bite of the remedy of sister ship arrests, it becomes imperative that corporate laws on limited liability are interpreted in a manner cohesive to the objectives of admiralty law.

The courts have sometimes resorted to piercing the veil so that a common parent of a common parent of different registered owners of both guilty and sister ships is treated as liable for a claim against the ship to be arrested.

However the English courts have been reticent to lift the corporate veil for identifying sister ships unless separate companies have been created by a ship-owner to perpetrate a fraud, or where the corporate form is a mere sham or façade to conceal ‘true facts’.

While India has traditionally shown deference to the English criterions for disregarding corporate existence, in a deviation from the strict English norm of deeming corporate existence as sacrosanct, the case of Great Pacific Navigation (Holdings) Corporation Ltd. vs. M.V. Tongli Yantai in the Bombay High Court seems to evince a change in the trajectory of interpretations of ownership in piercing the corporate veil, where fraud is no longer an indispensable prerequisite. It concluded that the test is whether the entities in question exist as autonomous units or as organs of each other. The court looked beyond the registered ownership of the vessel, to determine the beneficial ownership. Though it was pointed out to the court that the veil could only be lifted when fraud was pleaded, the court observed that the principle behind the doctrine was a dynamic concept, and expanded its horizons.

Thus, this judgment is a landmark as it undermines the prerequisite of fraud for invoking the doctrine of lifting the veil, and recognizes the exigencies created by corporate structures prevailing in the shipping business, urging the courts to do complete justice upon equitable considerations. This judgment empowers the court to disentangle the corporate maze enabling the determination of the beneficial ownership of sister ships lying with the same entity, thus removing the impediments erstwhile plaguing the exercise of the power to arrest sister ships.

Corporate Governance and The Companies Act, 2013

The last speaker of the seminar, Professor Arjya B. Majumdar, Jindal Global Law School addressed various aspects of Corporate Governance and its implications under The Companies Act, 2013.

The need for Corporate Governance was seen in year 2000-2001 due to the infamous accounting frauds involving Enron and WorldCom. Subsequently, the Sarbanes-Oxley Act, 2002 was enacted in the US. This Act specifically provided for disclosure controls, conduct of audits and auditor independence, corporate responsibility, conflicts of interest for securities analysts and accountability for corporate fraud and recognized the need for Corporate Governance.

The speaker then discussed the Corporate Governance framework in India prior to 2013. The old Act did not address the need for Corporate Governance in India. The Naresh Chandra Report on Corporate Audit and Governance and the Narayan Murthy Committee on Corporate Governance addressed the need for Corporate Governance in India. The Committee’s recommendations were implemented through an amendment of Clause 49 of the Listing Agreement to include Independent Directors, annual and quarterly disclosures, Committees of the Board of Directors on audit, remuneration and shareholders grievances.

This led to the discussion on Corporate Governance under the 2013 Act. The key points discussed by the speaker include the following:

• Directors: The Board of Directors must include at least one director who is a resident of India, one woman director for a prescribed class of companies and certain public companies are required to have one director elected by small shareholders. The fiduciary capacity of the directors require that they act in accordance with the Articles, act in good faith, promote the objects of the company, exercise due and reasonable care, skill and diligence, not get involved in situations of conflict of interest and not to achieve any undue gain or influence. 
• Independent Directors (ID): One-third of the Board should comprise of ID if the Chairman is a non-executive director or half of the board should comprise of ID if the Chairman is an executive director. The ID should be a person of integrity and should possess relevant skill and experience. Further the ID should have no material pecuniary relationship or transactions with the company or related parties. Schedule IV of The Companies Act 2013 provides for a code for independent directors which may have drawbacks.
• Board Committees:
• Audit: The Audit Committee is to comprise of at least three directors of whom only one-third should be managing or whole time directors. Further a majority of the members should be financially literate.
• Nomination and Remuneration: The Committee is to comprise of three or more non-executive directors, of which at least half must be ID.
• Stakeholders Relationships: A company having more than 1000 shareholders, debenture holders, deposit holders and other security holders must constitute a Stakeholders Relationships Committee. The Chairman of the Committee must be a non-executive director.
• Internal Audit: Certain companies (as may be prescribed) must appoint an internal auditor to evaluate the functions and activities of the company. This auditor is separate from the statutory auditors.

Note: This post is part of the report on a conference titled 'Reflections on The Companies Act, 2013' organised by the Michigan-Jindal Centre for Global Corporate and Financial Law and Policy on the 24th of October, 2013

Enhanced Disclosure and Accountability under The Companies Act, 2013

In his address to the students, Mr Ketan Mukhija, Managing Associate, Luthra & Luthra, discussed the topic of increased disclosures under the 2013 Act.

He elaborated on the age-old problem of ensuring compliance with rules and laws put in place by the legislature, highlighting that there were around 420 rules put in place by the Central Government by way of delegated legislation regarding The Companies Act. 1956 that were facing a severe implementation deficit by virtue of being blatantly ignored or subverted by companies

Mr. Mukhija opined that while the 2013 Act attempts to improve compliance, it may not have done enough. Mr. Mukhija proceeded to explain how the provision stipulates a mandatory expenditure of 2% of a company’s profits of the past 3 financial years towards CSR activities and how easily these provisions can be misused by companies. For example, a company may manipulate its accounts in such a way such that it shows no profits, thereby easily avoiding expenditure on CSR. Even if the company does possess profits but still does not undertake the required expenditure, the penalty imposed is negligible thereby making no monetary difference to large companies with larger turnovers. Further, there remains a question of whether a company would be liable to pay towards CSR in cases where a company has been in existence for less than 3 financial years.

Owing to the impossibility in laying down rules for every conceivable situation that may arise under a provision, Mr Mukhija proceeded towards explaining the Legislature’s realization of self-regulation through an enhanced compliance and disclosure mechanism. An enhanced disclosure mechanism essentially attempts to give the possible shareholders a bird eye view into the company’s functioning.

For instance, as per the 2013 Act, listed companies in capital markets are required to disclose all additional liabilities, high risk factors, exact amount of promoter contributions, rules not complied with, names of all important office bearers, etc. in their prospectuses, thereby increasing disclosure of information. Another mechanism by which shareholders can be given maximum information are through the three instruments of disclosure which are: annual returns, the board report and explanatory statement.

The 2013 Act also introduces various compounding mechanisms where defaulting companies can approach the Registrar of Companies regarding their non-compliance and voluntarily pay a penalty for the same and also defines certain new terms which were earlier left ambiguous such as ‘associated company’, to prevent attempts by companies to subvert legal provisions by using their subsidiaries, chit funds, etc. as pawns to do so.

Therefore, according to Mr. Mukhija, although it is too early to say for sure how efficient these provisions would be in ensuring compliance, the inclusion of enhanced disclosure mechanisms in the 2013 Act is certainly a step in the right direction and helps fill the lacunae that existed under the old Act.

Note: This post is part of the report on a conference titled 'Reflections on The Companies Act, 2013' organised by the Michigan-Jindal Centre for Global Corporate and Financial Law and Policy on the 24th of October, 2013

Class Actions under The Companies Act, 2013

The concept of class action suit under Section 245 of the 2013 Act has been introduced in the aftermath of the Satyam corporate scandal. Mr. Amit Mishra, Head of Dispute Resolution Practice Pathak & Associates, highlighted the fact that in India, numerous small investors of the Satyam group were unable to seek effective relief against the management as opposed to their counterparts in the US who brought class actions suits under Rule 23 of the US Federal Rules of Civil Procedure and got recompensed immediately.

However, Mr. Mishra highlighted that merely providing the right to bring a class action suit is not enough. There are several US practices we must critically evaluate and consider borrowing in order to make our class action mechanism efficient and effective. They include the following:

• Lead Plaintiff: In a class action lawsuit, a lead plaintiff is the named party who files the case and represents the group. It is usually upon the lead plaintiff to determine the settlement. This saves the trouble and cost of mobilizing large number of people.
• Opting-Out: In the US, you can opt out of a class action suit and individually sue if you are not satisfied with the settlement decided by your lead plaintiff. In India, however, there is no option to opt out.
• Members: In the US, even a consumer can initiate a class action suit. However, in India this right is only restricted to shareholders and depositors.
• Tax: In the US, damages recovered by the plaintiffs in a class action suit are tax free. However in India, 30% tax would apply nonetheless, which may act as a deterrent for people wanting to file a class action suit.
• Court fees: In the US, there are specialized law firms engaged in the work of class action suits, that work on a contingency fee basis, which lessens the burdens on court fees on members of a class. In India, contingency fee is not allowed.
• Miscellaneous: When compared to US laws, other concerns such as the appropriate forum for filing class action suits, and the period within which they can be filed are not addressed by the 2013 Act.

Mr. Mishra concluded by saying that we still have to put in a lot of thought into our class action regime for it to be as efficient as the US mechanism. However, the recognition of Class Actions under the 2013 Act is a crucial first step towards achieving the goal of an efficient system.

Note: This post is part of the report on a conference titled 'Reflections on The Companies Act, 2013' organised by the Michigan-Jindal Centre for Global Corporate and Financial Law and Policy on the 24th of October, 2013

Serious Fraud Investigations and The Companies Act, 2013

Mr. Avinash Sharma, Solo Practitioner and Panel Counsel to Competition Commission of India, spoke to the students about the Serious Fraud Investigation Office (SFIO) under the 2013 Act. The aim of this talk was to throw some light on the purpose of establishing the SFIO and whether the objectives of establishing the organization have been achieved.

As per the provisions of the 1956 Act, the SFIO functioned under the Ministry of Corporate Affairs. It was set up in 2003 to undertake investigations of corporate frauds. Under Sections 235 and 237 of the 1956 Act, the Central Government was empowered to appoint an inspector to investigate the affairs of a company and thereafter report to the Government. In 2010, the Ministry of Corporate Affairs passed a notification delegating its powers under Section 240 of the 1956 Act to the Director of the SFIO whereby the Director of SFIO could ask any person or corporate to produce documents, appear before him/her and punish for non-cooperation with fine and/or imprisonment.

As opposed to the 1956 Act, the SFIO under the 2013 Act is a statutory body and not a body created by an executive order. But the SFIO is empowered to carry out an investigation only on the directions from the Central Government pursuant to either a report of the Registrar of Companies, or a special resolution passed by the Company in a matter of public interest or on account of a request from any department of the Central/State Government.

Under the 2013 Act, the SFIO is the exclusive investigative agency to take up matters of corporate concern. The SFIO has the same powers as those vested in a civil court; namely discovery and production of documents, summoning witnesses, call for information (including relevant papers and records), and examination on oath. The SFIO has been empowered to liaison with courts or authorities outside India in the course of an investigation and has the power to arrest if it has reason to believe that a person is guilty of having committed certain offences mentioned in the 2013 Act (including making untrue or misleading statements in a prospectus, fictitious application for subscription of shares, etc.). Another important feature is that the term ‘fraud’ has been defined under the 2013 Act.

Mr. Sharma concluded his presentation by highlighting two crucial deficiencies of the SFIO under the 2013 Act. Firstly, the SFIO is not an independent investigative agency. Secondly, the SFIO cannot suo moto conduct investigations and cannot prosecute matters unless the Central Government issues directions for the same.

Note: This post is part of the report on a conference titled 'Reflections on The Companies Act, 2013' organised by the Michigan-Jindal Centre for Global Corporate and Financial Law and Policy on the 24th of October, 2013

Revisiting Corporate Social Responsibility from the Philosophical Perspective

Corporate Social Responsibility (“CSR”) is a constantly evolving phenomenon in our society. It is a self-regulating mechanism whereby businesses monitor and ensure compliance with the spirit of law, ethical standards, and international norms.

Mr. Ashok Kapur, Joint Managing Director, Institute of Directors and one of the eminent speakers for second panel of the seminar, stated that by incorporating corporate citizenship with the mandate of company law, India has become a part of the global fraternity. Accordingly, corporates are identified to have the responsibility, as any citizen, to integrate social, environmental and economic concerns within their institutional framework. It was argued that CSR is not law. Rather, it is a concept that influences the culture and values of corporations and that the need for CSR primarily arises because corporations on the whole are not looked upon as factoring in social and environmental considerations in their business models.

Section 135 of the 2013 Act prescribes mandatory CSR spending of 2% of profit before tax for companies with net worth of Rs. 500 Cr. or a turnover of Rs. 1000 Cr. or net profit of Rs. 5 Cr. CSR provisions under the 2013 Act are fairly comprehensive in terms of where the funds could be deployed. Companies have the liberty to choose action areas which are most strategic and beneficial for them, as per their CSR policy. For guidance purposes, as much as nine activity areas encompassing all social development activities like education, healthcare, environmental sustainability, gender equality, employability etc. are provided in the 2013 Act. Companies can choose to set up trusts, societies, companies recognized under Section 8 or fund such existing firms operating in India to implement the activities outlined in its CSR strategy. Companies recognized under Section 8 of 2013 Act are those that are directed towards promotion of commerce, art, science or any such object and are allowed to be registered as limited companies, subject to grant of license from the Government.

The concept of CSR that is now being implemented under the 2013 Act is not a new thought. The spirit of the modern CSR is already exists in Indian philosophical thought. For instance, in Gandhi’s view, revenue is derived from the society itself; this obliges the entities to give something in return. In his words, ‘wealth is meant for use by self and the public’. Mr. Kapur, therefore, argued that the concept of CSR in the 2013 Act is a mere embodiment of the Gandhian philosophy. While highlighting the importance of the role of corporates in the society, he emphasized that the Gandhian definition of ‘business’ primarily calls for less of commercialization and expansion on part of corporations. Accordingly, corporates are conceived to be trustees of public funds. As generally observed, corporations predominantly consider profit-making as their fundamental duty. This Gandhian vision calls for corporations to go beyond this duty. This vision, at present, has been substantially converted into something which is much more concrete by integrating CSR in the 2013 Act.

Note: This post is part of the report on a conference titled 'Reflections on The Companies Act, 2013' organised by the Michigan-Jindal Centre for Global Corporate and Financial Law and Policy on the 24th of October, 2013

Role and Responsibilities of Auditors appointed under The Companies Act, 2013

Mr. Naveen Kumar Gupta, C.A., Senior Manager, S. Ramanand Aiyar & Co., in his address to the students, focused on Chapter X of the 2013 Act, that specifically deals with the roles, responsibilities and liabilities of auditors.

Section 144 of the 2013 Act specifies the services that an auditor must not render, such as accounts and book keeping, internal audit, investment banking, design and implementation of any financial system etc. This is considered a welcome move as the restrictions imposed would ensure the auditor’s independence and would improve the credibility of audit results. The scope and powers of the National Financial Reporting Authority (NFRA), constituted under Section 132 of the 2013 Act promotes adherence to professional conduct. Mr. Gupta also discussed the powers of the National Company Law Tribunal under Section 447 of the 2013 Act, such as the power to investigate fraud and order the change of auditors. The 2013 Act includes various penalty provisions (including imprisonment and fines) for wilful or other contravention with the 2013 Act by auditors (including contraventions such as misleading statements in the auditor’s report). The 2013 Act also imposes criminal liability on auditors in cases where a prospectus is found to be issued fraudulently. Additionally, Section 143 of the 2013 Act casts certain other responsibilities on auditor, such as, duty to report any fraud to the Central Government, responsibility to make observations and comments on the financial transactions or matters that have an adverse effect on the functioning of a company, responsibility to state any qualifications, reservations or adverse remarks relating to the maintenance of accounts and responsibility to note whether the company has adequate internal financial controls in place.

The new provisions have broadened the scope of audit with the reporting responsibility on the existence of fraud. However, according to Mr. Gupta, fraud detections are the ambit of investigators and require an approach that is inherently different from the approach required for audits. The 2013 Act does not state any materiality limits for fraud reporting. Further, the requirement of reporting on “financial transactions or matters” needs to be clearer, i.e. whether the 2013 Act requires the auditor to report on the propriety of business and management decisions or not.

The problem of multiple regulators created through the 2013 Act is of some interest as well. Currently auditors are subject to peer review by the Institute of Chartered Accountants of India (ICAI), the Financial Reporting Review Board (established by the ICAI) and the Quality Review Board (established under The Chartered Accountants Act, 1949). The constitution of the NFRA will result in additional review burdens and may deter firms from taking up auditing activities. Finally, the different and rather severe penalty provisions in the 2013 Act might also demotivate firms from taking up additional auditing assignments.

Note: This post is part of the report on a conference titled 'Reflections on The Companies Act, 2013' organised by the Michigan-Jindal Centre for Global Corporate and Financial Law and Policy on the 24th of October, 2013

Mergers & Acquisitions under The Companies Act, 2013

Mr. Satwinder Singh, Partner, Vaish Associates Advocates, addressed the students on the key changes brought in the 2013 Act with regard to mergers and acquisitions.

The 1956 Act defines arrangement under Section 390(b) as including a reorganization of the share capital of the company by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both those methods. Under the 2013 Act this definition of the term ‘arrangement’ has been added as an explanation to Section 230. The 2013 Act also expressly provides for two additional forms of amalgamation, namely: by (i) absorption, and (ii) formation of a new company.

Section 233 of the 2013 Act allows for the possibility of initiating a fast-track merger. Accordingly, the 2013 Act provides for a scheme of merger or amalgamation between two or more small companies or between a holding company and its wholly-owned subsidiary or such other class or classes of companies, as may be prescribed.

Cross-border mergers have been introduced under Section 234 of the 2013 Act. As per the provision, a company registered under the 2013 Act may merge into a foreign company in notified jurisdictions, subject to Reserve Bank of India’s approval.

Mr. Singh also talked about the following key changes, as introduced in the 2013 Act:

The following definitions have been introduced:

• “One Person Company” means a company which has only one person as a member [Section 2(62)]
• “Associate Company” in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company having such influence and includes a joint venture company [Section 2(6)]
• “Foreign Company” means any company or body corporate incorporated outside India which – (a) has a place of business in India whether by itself or through an agent, physically or through electronic mode and (b) conducts any business activity in India in any other manner [Section 2(42)]
• “Government Company” means any company in which not less than fifty-one per cent 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 Government, and includes a company which is a subsidiary company of such a Government Company [Section 2(45)]
• “Listed Company” means a company which has any of its securities listed on any recognized stock exchange
• Definition of the term ‘Control’ under Section 2(27): “Control” shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

It has been stated under Section 58(2) that arrangements in respect of transfer of securities (even in case of public companies) shall be enforceable as a contract.

In reference to the definition of Associate Company, the definition of ‘significant influence’ has been added as an explanation. “Significant Influence” means control of at least twenty percent of total share capital, or of business decisions under an agreement.

Under Section 2(41) “Financial Year” has been defined as the period ending on the 31st day of March every year. In case a company has been incorporated on or after 1st day of January of a year, then the period ending on the 31st day of March of the following year shall be considered for preparing the financial statements.

Note: This post is part of the report on a conference titled 'Reflections on The Companies Act, 2013' organised by the Michigan-Jindal Centre for Global Corporate and Financial Law and Policy on the 24th of October, 2013

Reflections on The Companies Act, 2013

Given that The Companies Act, 1956 (the “1956 Act”) has been replaced by The Companies Act, 2013 (the “2013 Act”), the Michigan-Jindal Centre on Global Corporate and Financial Law and Policy (the “Centre”) saw it fit to host a conference on the 24th of October, 2013 at the O.P. Jindal Global University campus. The conference attracted some of the best-known names in Indian corporate law - practitioners, policy makers and academicians.

The programme included the following speakers and topics:

• MR. SATWINDER SINGH - Partner, Vaish Associates Advocates “Mergers & Acquisitions under The Companies Act, 2013”

• MR. AVINASH SHARMA - Solo Practitioner and Panel Counsel to Competition Commission of India - “Serious Fraud Investigations and The Companies Act, 2013”

• MR. NAVEEN KUMAR GUPTA - Senior Manager, M/s S.Ramanand Aiyar & Co. - “Role and Responsibilities of Auditors appointed under The Companies Act, 2013”

• MR. ASHOK KAPUR, IAS (retd.) - Joint Managing Director, Institute of Directors - “Revisiting Corporate Social Responsibility from the Philosophical Perspective”

• MR. AMIT KUMAR MISHRA - Head of Dispute Resolution Practice Pathak & Associates - ‘‘Class Actions under The Companies Act, 2013”

• MR. KETAN MUKHIJA - Managing Associate, Luthra & Luthra - ‘‘Enhanced Disclosure and Accountability under The Companies Act, 2013’’

• MR. ARJYA B. MAJUMDAR - Assistant Professor, Jindal Global Law School - ‘‘Corporate Governance and The Companies Act, 2013’’

This seminar provided the students a much needed and timely understanding of the new concepts emerging under the 2013 Act. The next seven posts constitute a brief summary of the topics that the speakers addressed and the issues they raised.

Hello World!

At the Michigan-Jindal Centre for Global Corporate and Financial Law, we were concerned about the growing gap between academia and industry. The risks of academia slipping into irrelevancy are often all too  real. (See Nicholas Kristof's hard-hitting article on the irrelevancy of academia here) So, instead of cloistering ourselves as medieval monks, we decided on something else. We needed to sustain a medium that would satisfy our endless desires to study, analyse and write. We needed to do it well. We needed to ensure that you, dear reader, would find it accessible, interesting and useful.

Thus, the idea of a blawg focused on corporate and financial law was formed. Thank you for joining us on this journey. We hope it'll be just as enjoyable for you as it will be for us.