PAPER 2 - Institute of Company Secretaries of India

[Pages:777]STUDY MATERIAL EXECUTIVE PROGRAMME

COMPANY LAW

MODULE 1

PAPER 2

ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003 tel 011-4534 1000, 4150 4444 fax +91-11-2462 6727 email info@icsi.edu website icsi.edu

? THE INSTITUTE OF COMPANY SECRETARIES OF INDIA

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EXECUTIVE PROGRAMME COMPANY LAW

In view of increasing emphasis on adherence to norms of good corporate governance, Company Law assumes an added importance in the corporate legislative milieu, as it deals with structure, management, administration and conduct of affairs of Companies. Paper on Company Law is divided into three parts:Part I deals with Company Law, Principles & Concepts, Part II deals with Company Administration and Meetings ? Law and Practices and Part III deals with Company Secretary as a Profession.

Part I emphasises on principles and legal fundamentals with respect to the raising of capital through various sources, allotment of securities, maintaining of records, disclosure and transparency, members and their shareholding, concerns of stakeholders. This also guides on the secretarial and strategic work involved in above stated matters.

Part II relates to the fundamental role that a board of directors play in supporting, guiding the management team in generating long term added value for the shareholders and society at large and to account to the shareholders for companies long term performance. Right decision making is important for company's growth, board meetings leads to greater strategic decision making whereas the shareholder meetings leads to greater transparency and accountability. Company secretary plays a vital role in preparation, convene and conduct of the meetings.

A key expectation of members of self-governing professions is that they accept legal and ethical responsibility for their work and hold the interest of the public and society as paramount. One of the essential traits of a profession is to be subject to strict codes of conduct enshrining rigorous ethical and moral obligations. In a self regulated regime, Company Secretary subjected to a strict code of conduct is looked upon by the regulators, as ethical and trustworthy professional whose professional judgment and competence has made a mark in the corporate sector. It is a moral duty of all of us as Company Secretaries to strictly abide by the Code of Conduct laid down by the Council of the Institute. Part III relates to conduct of company secretaries, discusses brief about Secretarial Standards Board and future of professional practice i.e. mega firms.

This study material is published to aid the students in preparing the paper on Company Law for Executive Programme. It is part of the educational kit and takes the students step by step through each phase of preparation emphasizing key concepts, principles, pointers and procedures. Company Secretaryship being a professional course, the examination standards are set very high, with focus on knowledge of concepts, their application, procedures and case laws, for which sole reliance on the contents of this study material may not be enough. This study material may, therefore, be regarded as the basic material and must be read along with the Bare Acts, Rules, Regulations, Case Law.

The legislative changes made upto May 09, 2018 have been incorporated in the study material. The students to be conversant with the amendments to the laws made upto six months preceding the date of examination. It may happen that some developments might have taken place during the printing of the study material and its supply to the students. The students are therefore advised to refer to the updations at the Regulator's website, Supplement relevant for the subject issued by ICSI and ICSI Journal Chartered Secretary and other publications for updation of study material.

In the event of any doubt, students may write to the Directorate of Professional Development, Perspective Planning & Studies of the Institute for clarification at academics@icsi.edu.

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Although due care has been taken in publishing this study material, the possibility of errors, omissions and/or discrepancies cannot be ruled out. This publication is released with an understanding that the Institute shall not be responsible for any errors, omissions and/or discrepancies or any action taken in that behalf.

Should there be any discrepancy, error or omission noted in the study material, the Institute shall be obliged if the same is brought to its notice for issue of corrigendum in the e-bulletin 'Student Company Secretary'.

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EXECUTIVE PROGRAMME COMPANY LAW

This study material is divided into three parts with following weightage of marks:

Part I - Company Law, Principles & Concepts (50 Marks)

Part II - Company Administration and Meetings ? Law and Practices (40 Marks)

Part III- Company Secretary as a Profession (10 Marks)

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Part I- Company Law, Principles & Concepts

Company Law is the collection of various legal aspects that govern the formation, running and winding up of a Company. The Companies Act 2013 is about improving corporate governance which revolves around the Board of Directors, Senior Management of the Company, their roles, responsibility and accountability, Rights and equitable treatment of stakeholders, prompt disclosures, transparency, the legal and regulatory compliances and appropriate risk management measures to protect and enhance interest of all stakeholders.

This part of the study deals with the evolution of company law whether indian or international, sources of funding the company, shareholders, shareholding, responsibility & accountability of the company with respect to transparency and disclosures, secretarial and strategic work involved.

Company Secretaries, over a period of time, have developed themselves as professionals having core competence in compliances and corporate governance, moving from their traditional role of Company Secretary of the Company. Company law is the core area of practice for the company secretary professionals whether in practice or employment. This part imparts expert knowledge of the various provisions of the Companies Act, its schedules, rules, notifications, circulars including secretarial practice & case laws. ______________________________________________________________________________

Part II - Company Administration and Meetings ? Law and Practices

Company directors are responsible for the management of their companies. They must act in a way most likely to promote the success of the business and benefit its shareholders. The board of directors has an essential role in company governance and setting the strategic direction of the business. The right board of directors brings your company specialist knowledge and expertise in key business areas, such as management, finance or technology.They also have responsibilities to the company's employees, its trading partners, and the state. Companies use board meetings to create and improve key business strategies. Hence from company secretary point of view meeting preparation is vital: from setting up right papers, circulating meeting papers in advance to providing all kinds of supplementary support to the meeting. A collection of resources on company administration including company filing, company records, company meetings and the responsebilities of company secretaries.

? The company secretary acts as the chief governance officer of the company, and shares various responsibilities with the directors under the Companies Act.

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? According to Section 205 of the Companies Act, 2013 the Company Secretary shall discharge following functions and duties, this is the first time that the duties of the company secretary have been specified in the company law:

o To report to the Board about the compliance with the provisions of this Act.

o To ensure that the company complies with the applicable secretarial standards.

o To provide to the directors of the company the guidance they require in discharging their duties, responsibilities and powers.

o To facilitate the convening of meetings and attend Board, committee and general meetings and maintain the minutes of these meetings.

o To obtain approvals from the Board, general meeting, the government and such other authorities as required under the provisions of the Act.

o To assist the Board in the conduct of the affairs of the company.

o To assist and advise the Board in ensuring good corporate governance and in complying with the corporate governance requirements and best practices.

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Part III- Company Secretary as a Profession

A Professional is a person who has completed formal education and training in a profession. A Professional is subject to strict codes of conduct enshrining rigorous ethical and moral obligations. A Professional is an interface between business and society. Professionals are expected to conduct themselves in such a manner so as to uphold the grace, dignity and professional standing of their respective institutes. Any commitment to complete a particular assignment as agreed by the person himself should be completed in a professional manner. This section gives an overview of the code of conduct that applies on the professional conduct of company secretaries, discusses brief about Secretarial Standards Board and future of professional practice i.e. mega firms.

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LEGAL FRAMEWORK OF COMPANY LAW

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EXECUTIVE PROGRAMME Module 1 Paper 2

Company Law (Max Marks 100)

SYLLABUS

Objectives

To impart expert knowledge of the various provisions of the Companies Act, its schedules, rules, notifications, circulars including secretarial practice, case laws and Secretarial Standards.

Detailed Contents Part I : Company Law, Principles & Concepts (50 Marks)

1. Introduction to Company Law: Jurisprudence of Company Law; Meaning, Nature, Features of a company; Judicial acceptance of the company as a separate legal entity; Concept of Corporate Veil, Applicability of Companies Act; Definitions and Key Concepts.

2. Shares and Share Capital: Meaning and types of Capital; Concept of issue and allotment; Issue of Share certificates; Further Issue of Share Capital; Issue of shares on Private and Preferential basis; Rights issue and Bonus Shares; Sweat Equity Shares and ESOPs; Issue and Redemption of preference shares; Transfer and Transmission of securities; Buyback of securities; dematerialization and rematerialization of shares; Reduction of Share Capital.

3. Members and Shareholders: How to become a member; Register of Members; Declaration of Beneficial Interest; Rectification of Register of Members; Rights of Members; Variation of Shareholders' rights; Shareholders Democracy; Shareholder agreement, Subscription Agreements, Veto powers.

4. Debt Instruments: Issue and redemption of Debentures and Bonds; creation of security; Debenture redemption reserve; debenture trust deed; conversion of debentures into shares; Overview of Company Deposits.

5. Charges: Creation of Charges; Registration, Modification and Satisfaction of Charges; Register of Charges; Inspection of charges; Punishment for contravention; Rectification by Central Government in Register of charges.

6. Distribution of Profits: Profit and Ascertainment of Divisible Profits; Declaration and Payment of Dividend; Unpaid Dividend Account; Investor Education and Protection Fund; Right to dividend; rights shares and bonus shares to be held in abeyance.

7. Corporate Social Responsibility: Applicability of CSR; Types of CSR Activities; CSR Committee and Expenditure; Net Profit for CSR; Reporting requirements.

8. Accounts, Audit and Auditors: Books of Accounts; Financial Statements; National Financial Reporting Authority; Auditors-Appointment, Resignation and Procedure relating to Removal,

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