A curated selection of the Companies Act's most-referenced provisions — incorporation, the board of directors, accounts and audit, oppression and mismanagement, and winding up. Not the complete text; verify against India Code before citing.
Provided for study purposes. Cross-check against the official source (India Code / the relevant government gazette) before citing or relying on this text — amendments and corrections may not be reflected here.
"Company" means a company incorporated under this Act or under any previous company law.
A private company is a company which, by its articles, restricts the right to transfer its shares, limits the number of its members to two hundred (excluding present and former employees who are members), and prohibits any invitation to the public to subscribe for any securities of the company. Persons who hold shares jointly are treated as a single member.
A public company is a company which is not a private company and has a minimum paid-up share capital as may be prescribed. A company which is a subsidiary of a company that is not a private company is deemed to be a public company even where it continues to be a private company in its articles.
A company may be formed for any lawful purpose by seven or more persons, where the company to be formed is a public company; by two or more persons, where the company to be formed is a private company; or by one person, where the company to be formed is a One Person Company, by subscribing their names to a memorandum and complying with the requirements of this Act.
The memorandum of a company shall state the name of the company with the last word "Limited" for a public limited company or "Private Limited" for a private limited company, the State in which the registered office is to be situated, the objects for which the company is proposed to be incorporated, the liability of the members, and the amount of authorised share capital with the division into shares of a fixed amount.
The articles of a company shall contain the regulations for the management of the company and such matters as may be prescribed. A company may adopt all or any of the regulations contained in the model articles applicable to it, and may contain provisions for entrenchment requiring a more restrictive procedure than a special resolution for the alteration of specified provisions.
Incorporation requires filing with the Registrar the memorandum and articles of the company, duly signed by the subscribers, along with a declaration of compliance, particulars of directors, and the registered office address. On registration, the Registrar shall issue a certificate of incorporation, and the company becomes a body corporate capable of exercising all the functions of an incorporated company from the date of incorporation.
From the date of incorporation mentioned in the certificate of incorporation, the subscribers to the memorandum and all other persons who may from time to time become members of the company shall constitute a body corporate, capable of exercising all the functions of an incorporated company, having perpetual succession, with power to acquire, hold and dispose of property, and to contract and sue and be sued in its own name.
A company shall, within thirty days of its incorporation and at all times thereafter, have a registered office capable of receiving and acknowledging all communications and notices. Every company shall paint or affix its name and the address of its registered office outside every office or place of business, and get its name, address, Corporate Identity Number, telephone number and, where applicable, email and website addresses printed on its business letters, billheads and official publications.
Every prospectus issued by or on behalf of a public company must be dated and signed, and must state such information and set out such reports on financial information as may be specified, including particulars of the company's capital structure, objects, management, and the terms of the present issue.
Where a company proposes to increase its subscribed capital by the issue of further shares, those shares shall be offered to existing equity shareholders in proportion to their paid-up share capital by a notice specifying the number of shares offered and a period of not less than fifteen days and not exceeding thirty days within which the offer must be accepted. Shares may also be offered to employees under a scheme of employees' stock option approved by a special resolution, or to any persons on a preferential basis if authorised by a special resolution and priced by a registered valuer's report.
Every company shall prepare an annual return in the prescribed form containing the particulars as they stood at the close of the financial year, including its registered office, principal business activities, particulars of holding, subsidiary and associate companies, shares, debentures and other securities, members and debenture-holders, promoters, directors and key managerial personnel, meetings, and remuneration of directors and key managerial personnel.
Every company other than a One Person Company shall, in each year, hold an annual general meeting, in addition to any other meetings, and shall specify the meeting as such in the notice calling it. Not more than fifteen months shall elapse between the date of one annual general meeting and that of the next.
The financial statements of a company shall give a true and fair view of the state of affairs, comply with the accounting standards notified under this Act, and shall be in the form or forms as may be provided for different classes of companies. The Board of Directors shall lay the financial statements before the company at every annual general meeting.
The financial statement, including the consolidated financial statement, shall be approved by the Board of Directors before being signed and submitted to the auditor for their report. The Board's report attached to the statements shall include the extract of the annual return, the number of Board meetings, the Directors' Responsibility Statement, particulars of loans, guarantees and investments, particulars of related party contracts, and a statement on the development and implementation of a risk management policy.
Every company having a net worth, turnover or net profit above the thresholds prescribed in this section shall constitute a Corporate Social Responsibility Committee of the Board and shall ensure that it spends, in every financial year, at least two per cent of the average net profits made during the three immediately preceding financial years in pursuance of its Corporate Social Responsibility Policy. Where the company fails to spend the amount, the Board shall specify the reasons in its report and, except in the case of an ongoing project, transfer the unspent amount to a Fund specified in Schedule VII.
Every company shall, at its first annual general meeting, appoint an individual or a firm as an auditor, who shall hold office from the conclusion of that meeting until the conclusion of its sixth annual general meeting, subject to ratification requirements and rotation rules prescribed for certain classes of companies.
Every company shall have a Board of Directors consisting of individuals as directors, with a minimum of three directors for a public company, two for a private company, and one for a One Person Company, and a maximum of fifteen directors, which may be increased beyond fifteen by passing a special resolution. Certain classes of companies are required to have at least one woman director and independent directors as prescribed.
Every company shall hold the first meeting of its Board of Directors within thirty days of the date of incorporation, and thereafter hold a minimum of four meetings every year, with not more than one hundred and twenty days intervening between two consecutive meetings. Participation of directors may be in person or through video conferencing or other audio visual means capable of recording and recognising the participation.
The Board of Directors of a company is entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do. Certain powers, including the power to make calls, to authorise buy-back, to issue securities, to borrow monies, to invest the funds of the company, to grant loans or give guarantees, to approve financial statements and the Board's report, and to diversify the business of the company, may be exercised only by means of resolutions passed at meetings of the Board.
No company shall, directly or indirectly, advance any loan, including a loan represented by a book debt, to any of its directors or to any other person in whom the director is interested, or give any guarantee or provide any security in connection with such a loan. The section provides exceptions, including loans to a managing or whole-time director as part of the conditions of service extended to all employees or pursuant to a scheme approved by a special resolution.
Except with the consent of the Board given by a resolution at a meeting, no company shall enter into a contract or arrangement with a related party with respect to the sale, purchase or supply of any goods or materials, selling or otherwise disposing of or buying property, leasing of property, availing or rendering of services, appointment of an agent, appointment to any office or place of profit, or underwriting the subscription of any securities. Transactions exceeding prescribed thresholds require prior approval by a resolution of the company, and no member who is a related party shall vote on such a resolution.
Any member of a company who complains that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members, or that a material change has taken place in the management or control of the company likely to be prejudicial to the interests of the company, may apply to the Tribunal for an order under this Chapter.
Where a company has failed to commence its business within one year of incorporation, or is not carrying on any business or operation for a period of two immediately preceding financial years and has not applied for dormant status, the Registrar may, after sending notice and considering representations, remove the name of the company from the register of companies. A company may also, after extinguishing all its liabilities, apply by special resolution for the removal of its name.