CU-BBA-SEM-IV-Commercial And Company Law-Second Draft

2. Explain the provisions relating to Voluntary Winding up 3. Explain the powers of Tribunal as given in Section 273 of the Act 4. Explain the Circumstances in Which Company May be Wound Up by Tribunal 5. Explain Procedure for Winding up by an order of Tribunal B.Multiple choice Questions 1. Companies accepting deposit and having total outstanding deposits of _______ can Wind up without sanction from Tribunal by making an Application to central Government a. 25 lacs b. 30 lacs c. 45 lacs d. 50 lacs 2. The winding up of a company shall, for purposes of section 302, be deemed to be concluded when a. Assets are liquidated and liabilities are settled b. Tribunal passes an order c. order dissolving the company has been reported by the Company Liquidator to the Registrar d. None of these 3. IBC stands for _____________ a. Insolvency and bankruptcy code b. Insolvency bureau committee c. Insolvency and banking committee d. None of these 4. Petition for winding up to Tribunal can be filed by_______ a. The company. b. Any contributory or contributories. c. Central Government d. All of these 5. Which of the following statement is false 251 1. A solvent company can apply for Winding up CU IDOL SELF LEARNING MATERIAL (SLM)

2. Liquidation process can be initiated after sanction by High court or Tribunal a. 1 alone b. 2 alone c. Both 1 and 2 d. Both 1 and 2 are True Answers 1-a, 2-c,3-a,4-d,5-b 11.8 REFERENCES Text Books  A manual of Mercantile Law – M.C. Shukla  The Indian Partnership Act, 1932 – Bare Act  Elements of Mercantile Law – N. D. Kapoor  Law of Partnership – Avtar Singh 252 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 12 ACCOUNTS,AUDIT AND INVESTIGATION STRUCTURE 12.0 Learning Objectives 12.1 Introduction 12.2 Requirement of keeping books of account section 128 12.3 NFRA 12.4 Summary 12.5 Keywords 12.6 Learning Activity 12.7 Unit End Questions 12.8 References 12.0 LEARNING OBJECTIVES After studying this unit, students will be able to  Explain the meaning of the term Books of Accounts as per companies Act 2013  Describe the provisions of section 128 of companies Act 2013  Explain the role and objectives of NFRA  Describe the powers of NFRA and Audit of NFRA 12.1 INTRODUCTION The shareholders provide capital to the company for running the business. They are in a way, the owners of the company. But all of them cannot take part in managing the affairs of the company as their number is usually much more. But they have every right to know as to how their money has been dealt with by the directors in a particular period. This is why perhaps compulsory disclosure through annual information to the shareholders by the directors about the working and financial position of the company enables them to exercise a more intelligent and purposeful control over the affairs of the company. For preparation of annual accounts, the maintenance of proper books of account is a must. Section 128 of the Companies Act, 2013 contains the provisions for books of account etc. to be kept by company. 12.2 REQUIREMENT OF KEEPING BOOKS OF ACCOUNT SECTION 128 Every company shall prepare and keep at its registered office books of account and other relevant books and papers and financial statement for every financial year. Section 128 of the Act, specifies that: – 253 CU IDOL SELF LEARNING MATERIAL (SLM)

i. The company must prepare and keep at its registered office the books of account and other relevant books and papers and financial statement for every financial year. ii. The books of account must give a true and fair view of the state of the affairs of the company or its branches. iii. The books of account must be kept on accrual basis and according to the double entry system of accounting Place of Keeping Books of Account Section 128(1) of the Act requires every company to prepare and keep the books of account and other relevant books and papers and financial statements at its registered office. However, all or any of the books of accounts may be kept at such other place in India as the Board of directors may decide. When the Board so decides, the company is required within seven days of such decision to file with the Registrar of Companies [“RoC”] a notice in writing giving full address of that other place. Such intimation is to be made in e-form AOC 5 to the RoC. Maintenance of Books of account in electronic form (Rule 3 of the Companies (Accounts) Rules, 2014) • The maintenance of books of account or other relevant papers in electronic mode is permitted. Such books of accounts or other relevant books and papers maintained in electronic mode shall remain accessible in India so as to be usable for subsequent use [“the Companies (Accounts) Rules, 2014 hereinafter referred in this Chapter as “Rule”] (Rule 3(1) of the Rules). • The information contained in the records shall be retained completely in the format in which they were originally generated, sent or received, or in a format which shall present accurately the information generated, sent or received and the information contained in the electronic records shall remain complete and unaltered (Rule 3(2) of the Rules). • The information received from branch offices shall not be altered and shall be kept in a manner where it shall depict what was originally received from the branches (Rule 3(3) of the Rules). l The information in the electronic record of the document shall be capable of being displayed in a legible form (Rule 3(4) of the Rules). • There shall be a proper system for storage, retrieval, display or printout of the electronic records as the Audit Committee, if any, or the Board may deem appropriate and such records shall not be disposed of or rendered unusable, unless permitted by law: Provided that the back-up of the books of account and other books and papers of the company maintained in electronic mode, including at a place outside India, if any, shall be kept in servers physically located in India on a periodic basis. (Rule 3(5) of the Rules) The company shall intimate to the Registrar on an annual basis at the time of filing of financial statement – 254 CU IDOL SELF LEARNING MATERIAL (SLM)

(a) the name of the service provider; (b) the internet protocol address of service provider; (c) the location of the service provider (wherever applicable); (d) where the books of account and other books and papers are maintained on cloud, such address as provided by the service provider. (Rule 3(6) of the Rules) Books of Account in Respect of Branch Office The branches of the company, if any, in India or outside India shall also keep the books of account in the same manner as specified in sub- section (1) of Section 128 of the Act, for the transaction effected at the branch office. The books of account and other books and papers maintained by the company within India shall be open for inspection at the registered office of the company or at such other place in India by any director during business hours. The inspection in respect of any subsidiary of the company shall be done only by the person authorised in this behalf by a resolution of the Board of Directors. Further proper summarized return of the books of account of the company kept and maintained outside India shall be sent to the registered office at quarterly intervals, which shall be kept and maintained at the registered office of the company, and which shall be kept open to directors for inspection. [Rule 4(1) of the Rules]. Preservation of books of accounts The books of account of every company relating to a period of not less than eight financial years immediately preceding a financial year, or where the company had been in existence for a period less than eight years, in respect of all the preceding years together with the vouchers relevant to any entry in such books of account shall be kept in good order: Where an investigation has been ordered in respect of the company under Chapter XIV of the Act i.e. Inspection, Inquiry and Investigation, the Central Government may direct that the books of account may be kept for such longer period as it may deem fit. Electronic form of Books of accounts: Second proviso to section 128(1) read with the Companies (Accounts) Rules, 2014 allows a company to keep its books of account or other relevant papers in electronic mode. However, the books of account and other relevant books and papers maintained in electronic mode shall comply with the following conditions: (a) the books of account and other relevant books and papers shall remain accessible in India so as to be usable for subsequent reference. (b) the books of account and other relevant books and papers shall be retained completely in the format in which they were originally generated, sent or received, or in a format which shall present accurately the information generated, sent or received and the information contained in the electronic records shall remain complete and unaltered. (c) the information received from branch offices shall not be altered and shall be kept in a manner where it shall depict what was originally received from the branches. (d) the information in the electronic record of the document shall be capable of being displayed in a legible form. (e) there shall be a proper system for storage, retrieval, display or printout of the electronic records as the audit committee, if any, or the board may deem appropriate and such 255 CU IDOL SELF LEARNING MATERIAL (SLM)

records shall not be disposed of or rendered unusable, unless permitted by law. (f) the back- up of the books of account and other books and papers of the company maintained in electronic mode, including at a place outside India, if any, shall be kept in servers physically located in India on a periodic basis. The company is required to intimate to the Registrar on an annual basis at the time of filing of financial statement, the following- (a) The name of the service provider; (b) The internet protocol address of service provider; (c) The location of the service provider (wherever applicable); (d) Where the books of account and other books and papers are maintained on cloud, such address as provided by the service provider [Section 128(5)] Persons responsible to maintain books According to section 128(6) of the Act, the following persons are responsible to take all reasonable steps to secure compliance by the company with the requirement of maintenance of books of accounts etc. i. Managing Director, ii. Whole-Time Director, in charge of finance iii. Chief Financial Officer; or iv. Any other person of a company charged by the Board with duty of complying with provisions of section 128 of the Act. Persons who can inspect books of account & other books and papers: (a) The books of account and other books and papers maintained by the company within India shall be open for inspection at the registered office of the company or at such other place in India by any director during business hour (b) In the case of financial information, if any, maintained outside the country, copies of such financial information shall be maintained and produced for inspection by any director subject to such conditions as prescribed under the Companies (Accounts) Rules, 2014 which provides that- (1) The summarised returns of the books of account of the company kept and maintained outside India shall be sent to the registered office at quarterly intervals, which shall be kept and maintained at the registered office of the company and kept open to directors for inspection. (2) Where any other financial information maintained outside the country is required by a director, the director shall furnish a request to the company setting out the full details of the financial information sought, the period for which such information is sought. (3) The company shall produce such financial information to the director within 15 days of the date of receipt of the written request. (4) The financial information required under sub-rules (2) and (3) above shall be sought for by the director himself and not by or through his power of attorney holder or agent or representative. (c) The inspection in respect of any subsidiary of the company shall be done only by the person authorised in this behalf by a resolution of the Board of Directors. 256 CU IDOL SELF LEARNING MATERIAL (SLM)

(d) The officers and other employees of the company shall give to the person making such inspection all assistance in connection with the inspection which the company may reasonably be expected to give. Penalty In case the aforementioned persons referred to in Section 128(6) of the Act (i.e. MD, WTD, CFO etc.) contravene such provisions, they shall in respect of each offence, be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees or both Financial Statements: As per section 2(40) of the Companies Act, 2013, “Financial Statement” in relation to a company, includes— (a) a balance sheet as at the end of the financial year; (b) a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year; (c) cash flow statement for the financial year; (d) a statement of changes in equity, if applicable; and (e) any explanatory note annexed to, or forming part of, any document referred above. However, the financial statement, with respect to One Person Company, small company and dormant company, may not include the cash flow statement. Section 129 prescribes norms for financial statements which are as under: (i) Form of Financial statements: Sub-section (1) of section 129 provides that the financial statements shall- (a) give a true and fair view of the state of affairs of the company or companies, (b) comply with the accounting standards notified under section 133 and (c) be in the form or forms as may be provided for different class or classes of companies in Schedule III1 (Given as Appendix at the end of this chapter). However, the items contained in such financial statements shall be in accordance with the accounting standards. It may be noted that the above provisions relating to nature and content of financial statement shall not apply to following companies: (a) Insurance Companies (b) Banking companies (c) Company engaged in the generation or supply of electricity (d) Any other class of company for which a form of financial statement has been specified in or under the Act governing such class of company. However, the financial statements shall 257 CU IDOL SELF LEARNING MATERIAL (SLM)

not be treated as not disclosing a true and fair view of the state of affairs of the company, if the following disclosures are not made 12.3 NFRA Through Section 132 of the Companies Act, 2013, the Central Government has introduced a new regulatory authority named as National Authority for Financial Reporting known as National Financial Reporting Authority (NFRA) with wide powers to recommend, enforce and monitor the compliance of accounting and auditing standards. The Companies Act, 1956 empowers the Central Government to form a Committee for recommendations on Accounting Standards which is National Advisory Committee on Accounting Standards (NACAS). This is now being renamed with enhanced independent oversight powers and authority as National Financial Reporting Authority (NFRA).The National Financial Reporting Authority shall perform its functions through such divisions as may be prescribed. NFRA shall be responsible for monitoring and enforcing compliance of auditing and accounting standards and for that purpose, oversee the quality of professions associated with ensuring such compliances. The Authority shall investigate professional and other misconducts which may be committed by Chartered Accountancy members and firms. There is also a provision for appellate authority. The National Financial Reporting Authority shall be a quasi – judicial body to regulate matters related to accounting and auditing. With increasing demand of non – financial reporting, it may be referred to as a National level business Reporting Authority to regulate standards of all kinds of reporting- financial as well as non – financial, by the companies in future. National Financial Reporting Authority shall give its recommendations on accounting standards and auditing standards. It shall only recommend, and it is the Central Government who shall prescribe such standards. Objective The objectives of National Financial Reporting Authority inter alia shall be as follows: (1) Make recommendations on formulation of accounting and auditing policies and standards for adoption by companies, class of companies or their auditors; (2) Monitor and enforce the compliance with accounting standards, monitor and enforce the compliance with auditing standards; (3) Oversee the quality of service of professionals associated with ensuring compliance with such standards and suggest measures required for improvement in quality of service, and (4) Perform such other functions as may be prescribed in relation to aforementioned objectives. Constitution of NFRA The constitution of National Financial Reporting Authority (NFRA), which is supposed to be constituted as an oversight regulatory body to recommend 258 CU IDOL SELF LEARNING MATERIAL (SLM)

accounting and auditing standards, shall be governed by sub -section (3) and (4) of section 132 of the Act. Accordingly, (i) It shall consist of a chairperson, who shall be a person of eminence & having expertise in accountancy, auditing, finance, or law, to be nominated by Central Government, and such other prescribed members not exceeding 15 consisting of part-time and full-time members as may be prescribed. (ii) Each division of the National Financial Reporting Authority shall be presided over by the Chairperson, or a full-time Member authorised by the Chairperson. (iii) There shall be an executive body of the National Financial Reporting Authority consisting of the Chairperson and full-time Members of such Authority for efficient discharge of its functions under subsection (2) of Section 132 of the Act [other than clause (a)] and sub- section (4) of Section 132 of the Act. Provided that the terms and conditions and the manner of appointment of the chairperson and members shall be such as may be prescribed. (iv) The chairperson and all members shall make a declaration in prescribed form about no conflict of interest or lack of independence in respect of their appointment. The chairperson and all full – time members shall not be associated with any audit firm or related consultancy firm during course of their appointment and two years after ceasing to hold such appointment. (v) The Central Government may appoint a secretary and such other employees as it may consider necessary for the efficient performance of functions by the National Financial Reporting Authority under the Companies Act, 2013 and the terms and conditions of service of the secretary and employees shall be such as may be prescribed. (vi) The head office of National Financial Reporting Authority shall be at New Delhi, and it may, meet at such other places in India, as it deems fit. (vii) The National Financial Reporting Authority shall meet at such times and places and shall observe such rules of procedure in regard to the transaction of business at its meetings in such manner as may be prescribed. Maintenance of Books and Accounts The National Financial Reporting Authority shall cause to be maintained such books of account and other books in relation to its accounts in such form and in such manner as the Central Government may, in consultation with the Comptroller and Auditor-General of India prescribe. Audit of NFRA The accounts of the National Financial Reporting Authority shall be audited by the Comptroller and Auditor General of India at such intervals as may be specified by him and such accounts as certified by the Comptroller and Auditor-General of India together with the audit report thereon shall be forwarded annually to the Central Government by the National Financial Reporting Authority. The National Financial Reporting Authority shall prepare in such form and at such time for each financial year as may be prescribed its annual report giving a full account of its activities during the financial year and forward a copy thereof to the Central Government and the Central Government shall cause the annual report 259 CU IDOL SELF LEARNING MATERIAL (SLM)

and the audit report given by the Comptroller and Auditor-General of India to be laid before each House of Parliament. Jurisdiction, Powers of and Imposition of Penalties by NFRA The National Financial Reporting Authority have the power to investigate, either suo moto or on a reference made to it by the Central Government, for such class of bodies corporate or persons, in such manner as may be prescribed into the matters of professional or other misconduct committed by any member or firm of chartered accountants, registered under the Chartered Accountants Act, 1949. Provided that no other institute or body shall initiate or continue any proceedings in such matters of misconduct where the National Financial Reporting Authority has initiated an investigation under Section 132 of the Companies Act, 2013. The Authority shall have powers as are vested in a civil court under Code of Civil Procedure, 1908 in respect of following matters: 1. Discovery and production of books of accounts and other documents at such place and at such time as may be specified by the National Financial Reporting Authority 2. Summoning and enforcing the attendance of persons and examining them on oath 3. Inspection of any books, registers and other documents of any person 4. Issuing commission for examination of witness or documents. Where professional or other misconduct is proved, the Authority shall have powers to make an order in relation to: A. Imposing penalty of (i) not less than one lakh rupees which may extend to five times of the fees received in case of individuals and (ii) not less than five lakh rupees which may extend to ten times of the fees received in case of firms B. Debarring member or the firm from- (i) being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate; or (ii) performing any valuation as provided under section 247, for a minimum period of six months or such higher period not exceeding ten years as may be determined by the National Financial Reporting Authority. Appeals and Appellate Authority Any person aggrieved by any order of the National Financial Reporting Authority may prefer appeal before the Appellate Tribunal in such manner and on payment of such fee as may be prescribed. 260 CU IDOL SELF LEARNING MATERIAL (SLM)

12.4 SUMMARY  As per the Act, books of account and other books and papers should be available for inspection by any director on working days during business hours.  The expression ‘annual accounts’ embraces both balance sheet and statement of profit and loss.  The term ‘Balance Sheet’ means a statement prepared from the books of a concern showing the debit and credit balances after the trading and profit and loss accounts have been prepared – a statement drawn up at the end of each trading or financial period, setting forth the various assets, and liabilities of a concern at a particular date.  Profit and loss account is a Statement by which the directors disclose to the shareholders of the company the result of the actual working of the company. It serves to give the shareholders an idea of the earning capacity of the company in relation to its capital and enables them to judge about the administration and management of the affairs of the company.  The National Financial Reporting Authority shall be a quasi – judicial body to regulate matters related to accounting and auditing.  The National Financial Reporting Authority have the power to investigate, either suo moto or on a reference made to it by the Central Government, for such class of bodies corporate or persons, in such manner as may be prescribed into the matters of professional or other misconduct committed by any member or firm of chartered accountants, registered under the Chartered Accountants Act, 1949 12.5 KEYWORDS  Accounts of Companies: As per section 2(12) of the Act, “book and paper” and “book or paper” include books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form  National Financial Reporting Authority (Nfra): Through Section 132 of the Companies Act, 2013, the Central Government has introduced a new regulatory authority named as National Authority for Financial Reporting known as National Financial Reporting Authority (NFRA) with wide powers to recommend, enforce and monitor the compliance of accounting and auditing standards.  NCLT:National company law Tribunal  WTD: Whole time director  CFO: Chief Financial Officer 12.6 LEARNING ACTIVITY 1. Who can be appointed as the Internal Auditor of a company? 261 CU IDOL SELF LEARNING MATERIAL (SLM)

___________________________________________________________________________ __________________________________________________________________________ 2. What is a Quasi-Judicial body? ___________________________________________________________________________ ___________________________________________________________________________ 12.7 UNIT END QUESTIONS A.Descriptive Questions Short Questions 1. Explain the meaning of the term books of Accounts as per companies Act 2013 2. Describe what NFRA is and explain its role 3. Explain about the place Maintenance of books of Accounts as per companies Act 2013 4. Who can inspect books of Accounts as per companies Act 2013? 5. Explain the term financial statements as per companies Act 2013 Long Questions 1. Section 128(1) requires every company to prepare and keep the books of accounts and other relevant books and papers and financial statements at its registered office. State the manner of maintenance of books of accounts in electronic form. 2. Explain about Audit of NFRA. 3. Explain about the role and objectives of NFRA in detail. 4. Explain about the provisions as per companies Act 2013 relating to persons responsible for maintaining books of Accounts and persons who can inspect books of Accounts. 5. Explain about the provisions as per companies Act 2013 relating to Jurisdiction, Powers of and Imposition of Penalties by NFRA B. Multiple choice Questions 1. As per companies Act 2013 books of Accounts must be maintained for a minimum period of ____________ years a. 7 financial years immediately preceding a Financial year b. 8 financial years immediately preceding a Financial year c. Where an investigation has been ordered the Central Government may direct maintenance for a period as it may deem fit. d. Both b and c 262 CU IDOL SELF LEARNING MATERIAL (SLM)

2.NFRA is an/a ______- a. Quasi-judicial body b. Court c. Dispute resolution council d. None of these 3. Who amongst the following conducts Audit of NFRA? a. Central government b. State Government c. ICAI d. C & AG 4. Financial statement as per sec 2(40) of companies Act 2013 in case of OPC or small and dormant company shall not include a. Manufacturing Account b. Trading and P & L c. Cash flow statement d. Fund flow statement 5. Financial statements shall be as per companies Act 2013 Schedule iii except in case of ___________ a. One person company b. Private company c. Aircraft company d. Insurance company Answers 1-b 2-a 3-d 4-c 5-d 12.8 REFERENCES Reference books  1.Dr. Avtar Singh : Company Law; Eastern Book Company, 34, Lalbagh, Lucknow – 226 001 2. C.R.  Datta : Datta on the Company Law; Lexis Nexis, Butterworths Wadhwa, Nagpur 263 CU IDOL SELF LEARNING MATERIAL (SLM)

 Ramaiya : Guide to the Companies Act; Lexis Nexis, Butterworths Wadhwa, Nagpur 264 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 13 LATESTPROVISIONOFCOMPANYLAW STRUCTURE 13.0 Learning Objectives 13.1 Features of New Company’s Act 2013 13.2 Highlights 13.3 Summary 13.4 Keywords 13.5 Learning Activity 13.6 Unit End Questions 13.7 References 13.0 LEARNING OBJECTIVES After studying this unit, students should be able to • Explain the reason for Introduction of New companies Act 2013 • Highlight Salient features of New companies Act 2013 • Discuss in brief the Amendments and changes introduced in New companies Act 2013 13.1 FEATURES OF NEW COMPANY’S ACT 2013 The Companies Act 2013 passed by the Parliament received the assent of the President of India on 29th August 2013. The Act consolidates and amends the law relating to companies. The Companies Act 2013 was notified in the Official Gazette on 30th August 2013. Download the complete Act: Companies Act 2013. Some of the provisions of the Act have been implemented by a notification published on 12th September 2013. The provisions of Companies Act 1956 are still in force. Parliament approved the long-awaited overhaul of legislation governing Indian companies on 9 August 2013. The new law is aimed at easing the process of doing business in India and improving corporate governance by making companies more accountable. The 2013 Act also introduces new concepts such as one – Person Company, small company, dormant company and corporate social responsibility (CSR) etc. The Act introduces significant changes in the provisions related to governance, e-management, compliance and enforcement, disclosure norms, auditors, mergers and acquisitions, class action suits and registered valuers. The act is now in force w.e.f. 1st April 2014. 265 CU IDOL SELF LEARNING MATERIAL (SLM)

The Companies Act 2013 was introduced to ease the process of doing business in India and improving corporate governance. Another factor behind the introduction of Companies Act 2013 was to make companies more accountable. The Indian Companies Act 2013 replaced the Indian Companies Act, 1956. The Companies Act 2013 makes comprehensive provisions to govern all listed and unlisted companies in the country. The Companies Act 2013 implemented many new sections and repealed the relevant corresponding sections of the Companies Act 1956. This is a landmark legislation with far- reaching consequences on all companies incorporated in India. Comparison of Companies Act 1956 and Companies Act 2013 Indian Companies Act 2013 has fewer sections (470) than Companies Act 1956 (658). The new act empowers shareholders and gives high value for Corporate Governance. Details 1956 Act 2013 Act Parts 13 NA Chapters 26 29 Sections 658 470 Schedules 15 7 13.2 HIGHLIGHTS Key Highlights of Indian Companies Act 2013 • The maximum number of members (shareholders) permitted for a Private Limited Company is increased to 200 from 50. • One-Person company. • Section 135 of the Act which deals with Corporate Social Responsibility. • Company Law Tribunal and Company Law Appellate Tribunal. Salient features of the Companies Act 2013 Introduction of One Person Company (OPC) - It's a Private Company having only one Member and at least One Director. This concept is already prevalent in the Europe, USA, China, and Singapore and in several countries in the 266 CU IDOL SELF LEARNING MATERIAL (SLM)

Gulf region. It was first recommended in India by an expert committee (headed by Dr. J.J. Irani) in 2005. The one basic pre-requisite to incorporate an OPC is that the only natural-born citizens of India, including small businessmen, entrepreneurs, artisans, weavers or traders among others can take advantage of the ‘One Person Company’ (OPC) concept outlined in the new Companies Act. The OPC shall have minimum paid up capital of INR 1 Lac and shall have no compulsion to hold AGM (Annual General meeting). What is a small Company -? It means a company, other than a public company, paid-up share capital of which does not exceed fifty lakh rupees, or such higher amount as may be prescribed which shall not be more than five crore rupees; or turnover of which as per its last profit and loss account does not exceed two Crore rupees or such higher amount as may be prescribed which shall not be more than twenty Crore rupees. The 2013 Act provides exemptions to Small Companies primarily from certain requirements relating to board meeting, presentation of cash flow statement and certain merger process Minimum members for private company – The new act has increased the limit of the number of members from 50 to 200. Immediate changes in stationery – The letterhead, bills or invoices, quotations, emails, publications & notifications, letters or other official communications, should bear the full name of contact person, address of company’s registered office, Corporate Identity Number ( CIN No. which is a 21-digit number allotted by Government), Telephone number, fax number, Email id, contact website (if any). Articles of Association- In the next General Meeting, it is desirable to adopt Table F as standard set of Articles of Association of the Company with relevant changes to suite the requirements of the company. Further, every copy of Memorandum and Articles (MOA) issued to members should contain a copy of all resolutions / agreements that are required to be filed with the Registrar of companies (ROC). Commencement of business – For all the companies (public/private Company) registered under Companies Act 2013 needs to file the following with the Registrar of Companies (ROC) in order to commence their business – A declaration by the director in prescribed form stating that the subscribers/ promoters to the memorandum have paid the value of shares agreed to be taken by them A confirmation that the company has filed a verification of its registered office with the Registrar of companies (ROC) 267 CU IDOL SELF LEARNING MATERIAL (SLM)

In the case of a company requiring registration from any sectoral regulators such as RBI, SEBI etc., approval from such regulator shall be required prior to starting the business. Financial Year - The Companies Act 1956 Act provided companies to elect financial year. The Companies Act 2013 Act eliminates the existing flexibility in having a financial year different than 31 March. The 2013 Act provides that the financial year for all companies should end on 31 March, with certain exceptions approved by the National Company Law Tribunal. Companies should align the financial year to 31 March within two years from 01 April 2014. Eligibility age to become Managing Director or whole time Director - The eligibility criteria for the age limit has been revised to 21 years as against the existing requirement of 25 years. Number of directorships held by an individual - Section 165 provides that a person cannot have directorships (including alternate directorships) in more than 20 (twenty) companies, including ten (ten) public companies. It provides a transition period of one year from 1 April 2014 to comply with this requirement Board of Directors and Disqualifications for appointment of director - The 2013 Act requires that the company shall have a maximum of 15 (fifteen) directors (earlier it was 12) and appointing more than 15 (fifteen) directors will require special resolution by shareholders. Further, it requires appointment of at least one-woman director on the board for prescribed class of companies. It also requires that company should have at least 1 (one) resident director i.e., who has stayed in India for a total period of not less than 182 (hundred and eighty-two days) in the previous calendar year. All existing directors must have Directors Identification Number (DIN) allotted by central government. Directors who already have DIN need not take any action. However, Directors not having DIN should initiate the process of getting DIN allotted to him and inform the respective companies on which he is a director. The Company, in turn, has to inform the registrar of companies (ROC). Independent Directors - The 2013 Act defines the term \"Independent Director”. In case of listed companies, one third of the board of directors should be independent directors. There is a transition period of 1 (one) year form 01 April 2014 to comply with this requirement. The 2013 Act also provides additional qualifications/ restrictions for independent directors as compared to the 1956 Act. Section 150 enables manner of selection of independent directors and maintenance of databank of independent directors and enables their selection out of data bank maintained by a prescribed body 268 CU IDOL SELF LEARNING MATERIAL (SLM)

Resident Director: Every Company must have at least one director who has stayed in India for a total period of 182 days or more in previous calendar year. For existing companies, the compliance needs to be made before 31st March 2015. Loans to director – The Company cannot advance any kind of loan / guarantee / security to any director, Director of holding company, his / her partner/s, his/ her relative/s, Firm in which he or his relative is partner, private limited in which he is director or member or any bodies corporate whose 25% or more of total voting power or Board of Directors is controlled by him. Appointment of managing director, whole time director or manager [section 196 of 2013 Act] The re-appointment of a managerial person cannot be made earlier than one year before the expiry of the term instead of two years as per the existing provision of section 317 of the 1956 Act. However, the term for which managerial personnel can be appointed remains as five years. Further, the 2013 Act lifts the upper bar for age limit and thus an individual above the age of 70 years can be appointed as key managerial personnel by passing a special resolution. Key Managerial Personnel (KMP) - The Provisions relating to appointment of KMP includes (i) the Chief Executive Officer (CEO) or the managing director (MD) or the manager (ii) the company secretary (iii) the whole-time director; (iv) the Chief Financial Officer (CFO); and (v) such other officer as may be prescribed is applicable only for Public Limited Companies having paid up capital more than 10 crores and Private Limited Companies are exempted from appointment of KMPs. Attending Board Meetings - As per section 167 of the Act, a Director shall vacate his/her office if he/she absents himself from all the meetings of the Board of Directors held during a period of 12 (twelve months) with or without seeking leave of absence of the Board. Simply speaking, attending at least one Board Meeting by a director in a year is a must else he has to vacate his/her office. Board meetings - At least 7 days’ notice to be given for Board Meeting. The Board need to meet atleast 4 times within a year. There should not be a gap of more than 120 days between two consecutive meetings. Appointment of Statutory Auditors- Every Listed company can appoint an individual auditor for 5 years and a firm of auditors for 10 years. This period of 5 / 10 years commences from the date of their appointment. Therefore, those companies who have reappointed their statutory auditors for more than 5 / 10 years, have to appoint another auditor in their Annual General Meeting for year 2014. 269 CU IDOL SELF LEARNING MATERIAL (SLM)

Other specialized services which cannot be provided by Statutory Auditors - The Statutory Auditor of the Company cannot give following specialized services directly or indirectly to the company – • Accounting and book keeping services • Internal audit • Design and implementation of any financial information system • Actuarial services • Investment advisory services • Investment banking services • Rendering of outsourced financial services • Actuarial services • Management and/or any other services as may be prescribed Corporate Social Responsibility (CSR) – The company has to constitute a CSR committee of the Board and 2% of the average net profits of the last three financial years are to be mandatorily spent on CSR activities by an Indian company if any of the following criteria is met: Net worth of Rs.500 crores or Turnover of Rs. 1000 crores or more or Net profit of Rs. 5 crores or more Contributing to Incubators, which has been notified by the Government of India, is eligible for spending under CSR. This is a prosperous time for incubators and entrepreneurs and can really change the entrepreneurial eco system in India. Financial statements - Financial Statements are now defined under the Act as comprising of the following. All companies (except one person Company, small company and dormant company)are now mandatorily required to maintain the following, which may not include the cash flow statement) – A balance sheet as at the end of the financial year A profit and loss account / an income and expenditure account for the financial year, as the case may be Cash flow statement for the financial year A statement of changes in equity (if applicable) 270 CU IDOL SELF LEARNING MATERIAL (SLM)

Any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) to sub-clause (iv) 13.3 SUMMARY • Class action suits for Shareholders: The Companies Act 2013 has introduced new concept of class action suits with a view of making shareholders and other stakeholders, more informed and knowledgeable about their rights. • More power for Shareholders: The Companies Act 2013 provides for approvals from shareholders on various significant transactions. • Women empowerment in the corporate sector: The Companies Act 2013 stipulates appointment of at least one-woman Director on the Board (for certain class of companies). • Corporate Social Responsibility (CSR): The Companies Act 2013 stipulates certain class of Companies to spend a certain amount of money every year on activities/initiatives reflecting Corporate Social Responsibility. • National Company Law Tribunal (NCLT): The Companies Act 2013 introduced National Company Law Tribunal and the National Company Law Appellate Tribunal to replace the Company Law Board and Board for Industrial and Financial Reconstruction. They would relieve the Courts of their burden while simultaneously providing specialized justice. • Fast Track Mergers: The Companies Act 2013 proposes a fast track and simplified procedure for mergers and amalgamations of certain class of companies such as holding and subsidiary, and small companies after obtaining approval of the Indian government. • Cross Border Mergers: The Companies Act 2013 permits cross border mergers, both ways; a foreign company merging with an India Company and vice versa but with prior permission of RBI. • Prohibition on forward dealings and insider trading: The Companies Act 2013 prohibits directors and key managerial personnel from purchasing call and put options of shares of the company, if such person is reasonably expected to have access to price-sensitive information. • Increase in number of Shareholders: The Companies Act 2013 increased the number of maximum shareholders in a private company from 50 to 200. • Limit on Maximum Partners: The maximum number of persons/partners in any association/partnership may be upto such number as may be prescribed but not exceeding one hundred. This restriction will not apply to an association or partnership, constituted by professionals like lawyer, chartered accountants, company 271 CU IDOL SELF LEARNING MATERIAL (SLM)

secretaries, etc. who are governed by their special laws. Under the Companies Act 1956, there was a limit of maximum 20 persons/partners and there was no exemption granted to the professionals. • One Person Company (OPC): The Companies Act 2013 provides new form of private company, i.e., one Person Company. It may have only one director and one shareholder. The Companies Act 1956 requires minimum two shareholders and two directors in case of a private company. • Entrenchment in Articles of Association: The Companies Act 2013 provides for entrenchment (apply extra legal safeguards) of articles of association have been introduced. • Electronic Mode: The Companies Act 2013 proposed E-Governance for various company processes like maintenance and inspection of documents in electronic form, option of keeping of books of accounts in electronic form, financial statements to be placed on company’s website, etc. • Indian Resident as Director: Every company shall have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year. • Independent Directors: The Companies Act 2013 provides that all listed companies should have at least one-third of the Board as independent directors. Such other class or classes of public companies as may be prescribed by the Central Government shall also be required to appoint independent directors. No independent director shall hold office for more than two consecutive terms of five years. • Serving Notice of Board Meeting: The Companies Act 2013 requires at least seven days’ notice to call a board meeting. The notice may be sent by electronic means to every director at his address registered with the company. • Duties of Director defined: Under the Companies Act 1956, a director had fiduciary (legal or ethical relationship of trust) duties towards a company. However, the Companies Act 2013 has defined the duties of a director. • Liability on Directors and Officers: The Companies Act 2013 does not restrict an Indian company from indemnifying (compensate for harm or loss) its directors and officers like the Companies Act 1956. • Rotation of Auditors: The Companies Act 2013 provides for rotation of auditors and audit firms in case of publicly traded companies. • Prohibits Auditors from performing Non-Audit Services: The Companies Act 2013 prohibits Auditors from performing non-audit services to the company where they are auditor to ensure independence and accountability of auditor. 272 CU IDOL SELF LEARNING MATERIAL (SLM)

• Rehabilitation and Liquidation Process: The entire rehabilitation and liquidation process of the companies in financial crisis has been made time bound under Companies Act 2013. 13.4 KEYWORDS • OPC: One person company • Actuary: An actuary is a business professional who analyzes the financial consequences of risk • Audit: Independent Examination of books of Accounts • CSR: Corporate Social Responsibility • NCLAT: National company law Appellate Tribunal 13.5 LEARNING ACTIVITY 1. Know about Satyam Scandal and its impact on Company’s Act 2013 ___________________________________________________________________________ ___________________________________________________________________________ 2. Learn the reason behind introduction of OPC in New Company’s Act 2013 ___________________________________________________________________________ ___________________________________________________________________________ 13.6 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Explain the term OPC as defined by Companies Act 2013 2. Describe the term KMP as defined by Companies Act 2013 3. List a few Services which is prohibited for a statutory Auditor under New Companies Act 2013 4. What is the maximum number of persons with which partnership can be formed as per New Companies Act 2013? 5. Explain briefly about rotation of Auditors Long Questions 1. Explain the provisions relating to Auditors that have undergone Amendment as per New companies Act 2013 2. Discuss about provisions relating to Introduction of Woman directors as per New companies Act 2013 273 CU IDOL SELF LEARNING MATERIAL (SLM)

3. Explain the provisions relating to directors that have undergone Amendment as per New companies Act 2013 4. Discuss in detail highlighting any 5 Salient Features of New companies Act 2013 5. Discuss about the Features of New companies Act 2013 B. Multiple choice Questions 1. Maximum shareholders in a private company as per New companies Act 2013 a. 100 b. 200 c. 50 d. 500 2. As per New companies Act 2013 Every Listed company can appoint an individual auditor for a period not exceeding____ years a. 10 b. 20 c. 5 d. None of these 3. As per New companies Act 2013 Every Listed company can appoint an Audit Firm for a period not exceeding____ years a. 10 b. 20 c. 5 d. None of these 4. Small company, other than a public company, paid-up share capital of which does not exceed___ lakhs a. 50 b. 100 c. 200 d. 75 5. Every company shall have at least one director who has stayed in India for a total period of not less than______ a. 90 days b. 6 months c. 186 days d. 182 days 274 CU IDOL SELF LEARNING MATERIAL (SLM)

Answers 1-b, 2- c, 3- a, 4- a, 5- d 13.7 REFERENCES Reference books • Dr. Avtar Singh : Company Law; Eastern Book Company, 34, Lalbagh, Lucknow – 226 001 2. C.R. • Datta : Datta on the Company Law; Lexis Nexis, Butterworths Wadhwa, Nagpur • A. Ramaiya : Guide to the Companies Act; Lexis Nexis, Butterworths Wadhwa, Nagpur Website • www.mca.org 275 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 14 AMALGAMATION STRUCTURE 14.0 Learning Objectives 14.1 Introduction 14.2 Amalgamation 14.3 Amalgamation in Public interest – implication of Section 237 of the Companies Act, 2013 14.4 Summary 14.5 Keywords 14.6 Learning Activity 14.7 Unit End Questions 14.8 References 14.0 LEARNING OBJECTIVES After studying this unit, students will be able to  Explain the meaning of the term Amalgamation and its types  Describe the advantages and disadvantages of Amalgamation  Explain Amalgamation in Public interest  Discuss Case laws relating to Amalgamation in Public interest 14.1 INTRODUCTION Amalgamation is a combination of two or more entities forming into a new entity. It is, however, different from merger as neither of the entities involved survives as a legal entity but there is formation of an entirely new entity. Assets and liabilities of both the entities are combined into this one entity. The term amalgamation is not been defined under the Companies Act 2013, however as per Section 2(1B) of the Income Tax Act 1961, amalgamation, in context to companies, indicates the merger of one or more companies with other company or the merger of two or more companies to form one company in a way that (i) all property of amalgamated company becomes property of the amalgamated company; (ii) all liabilities of the amalgamated company becomes the liabilities of the amalgamated company; and (iii) shareholders holding not less than 3/4th shares in the amalgamating companies become shareholders in the amalgamated company. 276 CU IDOL SELF LEARNING MATERIAL (SLM)

14.2 AMALGAMATION Types of Amalgamation Amalgamation in nature of merger In it is in this category of amalgamation, not only assets and liabilities are transferred from the amalgamating company to the amalgamated company but also, there is transfer of shareholders’ interest and businesses of both the companies. The business of this amalgamated company commences after the amalgamation is concluded, with no adjustments that are to be made in the book value. Shareholders that hold a not less than 90% of the face value of equity shares of the amalgamating company, become equity shareholders in the amalgamated company. Amalgamation in nature of purchase By this mode of amalgamation, one company is acquired by the acquiring company. The shareholders, holding shares in the Target Company (or acquired company) do not continue to have proportionate share in the equity of combined company or business. Advantages of amalgamation Leads to reduction in competition in the market. Increases the research and development facilities. Reduces the operating costs. Disadvantages of amalgamation May lead to the elimination of a healthy competition from the market, if monopoly is established. A larger firm might experience diseconomies of scale. There can be less choice available in the market for consumers. 14.3 AMALGAMATION IN PUBLIC INTEREST – IMPLICATION OF SECTION 237 OF THE COMPANIES ACT, 2013 For amalgamation, a company can subject itself from refraining to amalgamate with other company; however, this must be conducted in a manner which is not prejudicial to the interest of its member or to the public interest. Essentially, a scheme of amalgamation is beneficial to every shareholders and creditors of the company and also the welfare and interest of public is taken into utmost consideration before entering into any such scheme. Public interest, as per Black’s Law Dictionary, is defined as something wherein the public and community have pecuniary or any interest by which the legal rights and liabilities of communities are affected. The definition provides for a broader aspect in the meaning of 277 CU IDOL SELF LEARNING MATERIAL (SLM)

public interest. As per Companies Act 2013, the term public interest has been recognised in provisions 62(4), 129, 210, 221, 233(5) and 237 in the Act. Under company law, public interest shall be given precedence even though the approval of the management and stakeholders are provided for the scheme of amalgamation. Section 237 of the Companies Act 2013 (Section 396 of Companies Act 1956) provides the Central Government power to provide for amalgamation of companies in the interest of public. It is through this provision, that the Central Government has power to order for a forced amalgamation of two or more companies if it is satisfied that such amalgamation is essential for the interest of public. If the Central Government is satisfied that it is in the interest of public, where two or more companies shall amalgamate into a single company with such constitution, property, rights, powers, interests, privileges, liabilities and obligations as specified in the order by the government, then such amalgamation is considered to be valid and in the interest of public. Every member of the amalgamating company must be given equal, or near to equal, interest and rights in the amalgamated company as he/she originally held in the amalgamating company. In case any of such condition is not complied by the amalgamated company, the member can claim compensation from the amalgamated company. To enforce the order of amalgamation by Central Government, a copy of order must be provided to the companies concerned; and modifications suggested or objected to by the concerned companies are considered by the government in the draft order. In order to exercise power provided to the government under Section 237 of Companies Act 2013, the government should be satisfied that two or more companies needs to be merged for interest of the public or in case it becomes an essential requirement. The government cannot force a healthy company to merge with an unhealthy company just to benefit the latter. This does not amount to public interest but a forced merger. Procedure for Amalgamation Following are the steps to be followed by the companies for amalgamation under section 237 of the Companies Act 2013- Board Meeting– initial step is that the company must convene a board meeting where it resolves to amalgamate with the other company. Application is to be filed in the stock exchanges via electronic mode for approval. The company shall obtain approval letter from the stock exchanges. Application to the tribunal– the company shall make an application to the tribunal, which is the National Company Law Tribunal (“NCLT”) of the relevant jurisdiction under Form-1. Such application is to be accompanied with- Form No. NCLT-2 (notice of admission), affidavit in Form no. NCLT-6, a copy of scheme of amalgamation, Fees prescribed in the Schedule of Fees and the companies shall disclose to NCLT the basis on which each class of 278 CU IDOL SELF LEARNING MATERIAL (SLM)

creditor or member is identified for the approval of scheme. It should be noted that, it is upon the concerned companies’ discretion if they want to make a joint application. Notice of meeting– a notice shall be sent to all the members or class of members and creditors or class of creditors and debenture holders of the company in prescribed Form no. CAA 2, by the chairperson appointed for the meeting. The notice shall be accompanied by a copy of scheme of amalgamation and a statement disclosing the details of order of NCLT; details the company; date of board meeting; disclosure of effect of amalgamation upon the directors, key managerial personnel and debenture trustee; investigation of proceedings; details of prescribed documents of and for inspection by members and creditors; details of sanctions, approvals and NOCs from regulatory or other authorities required for the scheme of amalgamation; and a statement to the effect about the persons voting or in the meeting either in person or proxy. Advertisement for notice of meeting as per Form No. CAA 2 in one English newspaper and one vernacular newspaper. A copy of notice shall also be provided on the website of the company. Also, it is upon the discretion of the companies to give a joint advertisement of notice. Notice to statutory authority– notice along with copy of the scheme shall be sent to the Central Government, IT authorities, RBI, Registrar of Companies (Form GNL- 1), Official Liquidator, Competition Commission of India and other relevant authorities. This notice is sent under Form No. CAA 3. Affidavit of service– an affidavit shall be filed before NLCT in not less than seven days before the date fixed for the meeting o date of first meeting, stating that the directions with respect to the issue of notice and advertisement shall be complied to. A meeting of members and creditors shall be convened to accord the sanction of the scheme. The scheme shall be approved if three-fourths of the persons, comprising of creditors or class of creditors and member or class of members agree to it. The chairperson must file the Report in Form No. CAA 4 with NCLT within 3 days from the conclusion of the meeting. Order on petition– upon the agreement over the scheme by the members and creditors, company shall file Form No. CAA 5 before NCLT within 7 days from the Chairperson’s report. NCLT shall fix the final date of hearing. The advertisement should be made in the same newspaper as notice in Form No. CAA 2. Approval from RBI and other authorities shall be obtained. The NCLT will pass a final order in Form no. CAA 7. Post-Final order compliances– stamp duty as affirmed in the State Stamps Duty Acts shall be complied with. On receiving of final order’s certified copies, the company shall file such certified copies before ROC within 30 days from its receipt in Form INC-28 along with acknowledgement of Fees payment to Official Liquidator and Regional Director. Shareholders shall be allotted shares as per the scheme; application must be made to stock 279 CU IDOL SELF LEARNING MATERIAL (SLM)

exchanges about the listing of new shares issued as consideration; and intimation should be made to stakeholders regarding the effectiveness of Scheme of amalgamation. Case Laws 63 Moons Technologies Ltd. v. UOI & Ors. The National Spot Exchange Limited (“hereinafter referred to as “NSEL”), which was 99.99% subsidiary of 63 Moons Technologies Limited (then Financial Technologies India Limited) (hereinafter referred to as “FTIL”) shut down its operations on grounds of payment default and was ordered that it cannot enter into any new contracts by SEBI. After the crisis, Ministry of Corporate Affairs directed NSEL and 63 Moons for merger under Section 396 of Companies Act 1956. The company challenged the order which was dismissed by Bombay HC. The dismissal order by Bombay HC was challenged by the company in Supreme Court. The Supreme Court set aside the order of the Government order of merger and stated that the merger did not satisfy the “public interest” criteria and therefore there should be no compulsory amalgamation. The term public interest was defined by the court as the greatest interest of the public and at large when compared with individual or private group of individuals. It was further held by the court, that an amalgamation will be considered in the interest of public if it shows a positive impact over the community in terms of employment, production and consumption of goods and services. On the other, if any amalgamation between companies leads to the obstruction of promotion and growth of the communities, then such amalgamations are not considered in the interest of public. The court held that the merger would not provide any compensation to the debtors and shareholders of FTIL, and further held that there was complete non- application of mind by the authority that was assessing compensation to the interests of the creditors and shareholders. The government contended that- (i) the amalgamation will restore faith of public in the contract; (ii) business realities will be effective on combination of NSEL and FTIL assets; and (iii) NSEL will be facilitated to recover its dues from its defaulters. For contentions (i) and (ii) made by the government, the court held that these contentions were not mentioned in the draft amalgamation order and the only intention of the amalgamation of the company was to clear the dues of NSEL, thereby reviving the exchange commodities of NSEL. Court stated that there was neither public interest involved nor did the amalgamation order satisfy the essentiality test. The court stated that the amalgamation order was violative of Section 396 of the Companies Act 1956 and Article 14 of the Constitution of India. Wiki Kids Ltd. and Avantel Ltd. v. Regional Director, South East Region and Others In this case, Transferor and Transferee Company proposed a scheme of amalgamation which was rejected by the tribunal on the grounds that there will be undue advantage to the common promoters of both the companies as per the valuation report. Both the companies filed appeal 280 CU IDOL SELF LEARNING MATERIAL (SLM)

as they had complied with all requirements and there were no objections from any authorities or general public at large. The court held that although there were no objections and all the compliances were met, however, as per the valuation report there was undue advantage to the common promoters. Further assets were created in the book by the Transferor Company but had neither generated any revenue nor were a single product sold from the very inception. The financial benefit was to be made by few promoters. The objective of the scheme is that interests of all the shareholders are met and not a particular group take any undue advantage, which was clearly not the case here. The court held that the entire scheme was created to provide benefit to the promoters and benefits to other shareholders are subject to contingency upon realisation of revenue in future. Appeal was thus rejected, and decision of tribunal was upheld for rejection of the scheme. 14.4 SUMMARY  Amalgamation is a combination of two or more entities forming into a new entity. It is, however, different from merger as neither of the entities involved survives as a legal entity but there is formation of an entirely new entity  In Amalgamation in nature of purchase one company is acquired by the acquiring company  Amalgamation in nature of merger category of amalgamation, not only assets and liabilities are transferred from the amalgamating company to the amalgamated company but also, there is transfer of shareholders’ interest and businesses of both the companies.  Public interest is given a very wide understanding under the company law and comprehends that there should be welfare for all the members of the company and the public.  The tribunal and courts in India have proven that just because the scheme of amalgamation is beneficial for or in the interest of a particular group of members, it does not mean there is public interest involved in such scheme.  There is a difference between exercising powers provided under Section 237 of the Companies Act 2013 for forced merger and for merger in public interest; such difference needs to be the primary focus for the government for exercising its power under the aforementioned provision. 14.5 KEYWORDS  Amalgamation: Amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 2013 or any other statute which may be applicable to companies and includes ‘merger’. 281 CU IDOL SELF LEARNING MATERIAL (SLM)

 Merger: Amalgamation in nature of merger category of amalgamation, not only assets and liabilities are transferred from the amalgamating company to the amalgamated company but also, there is transfer of shareholders’ interest and businesses of both the companies.  NCLT: National company law tribunal 14.6 LEARNING ACTIVITY 1. Comment what is the difference between a normal Amalgamation and Amalgamation under Sec 237 of companies Act 2013 ___________________________________________________________________________ ___________________________________________________________________________ 2. Learn the difference between Amalgamation in the nature of purchase and merger as per AS 14 ___________________________________________________________________________ ___________________________________________________________________________ 14.7 UNIT END QUESTIONS A.Descriptive Questions Short Questions 1. Explain the meaning of the term Amalgamation 2. What is Amalgamation in the nature of purchase? 3. Explain the meaning of “Public Interest” as decided by the courts for Amalgamations in public interest 4. List the advantages of Amalgamation 5. What are the disadvantages of Amalgamation? Long Questions 1. Explain what Amalgamation is, its types and advantages and disadvantages 2. Explainin detail about Amalgamation in Public Interest. 3. Explain procedure for Amalgamation carried as per Section 237 of Companies Act 2013 4. Discuss any well-known case law for Amalgamation in Public interest. 5. Explain the provisions of Section 237 of the Companies Act 2013. B.Multiple choice Questions 282 CU IDOL SELF LEARNING MATERIAL (SLM)

1. In case of _______ the Majority shareholders of Acquired Company becomes members of acquiring company a. Merger b. Purchase c. Take over d. None of these 2. In case of Amalgamations done under Sec 237 of the Companies Act 2013 Interest of ______ is/are taken into consideration a. Public b. Shareholders c. Creditors d. All of these 3. As per companies Act 2013, Sanction of any scheme of Amalgamation is done by ________ a. High court b. Supreme court c. NCLT d. CLB 4. To accord a sanction of the scheme of Amalgamation the meeting comprising shareholders and creditors for the scheme to be approved it must be voted by ____ % of the persons present a. 25 b. 51 c. 75 d. 90 5. In ________ one company is just acquired by the acquiring company a. Merger b. Purchase c. Demerger d. None of these Answers 283 CU IDOL SELF LEARNING MATERIAL (SLM)

1-a, 2-d, 3-c, 4-c, 5-b 14.8 REFERENCES Reference books  1.Dr. Avtar Singh : Company Law; Eastern Book Company, 34, Lalbagh, Lucknow – 226 001 2. C.R.  Datta : Datta on the Company Law; Lexis Nexis, Butterworths Wadhwa, Nagpur  A. Ramaiya : Guide to the Companies Act; Lexis Nexis, Butterworths Wadhwa, Nagpur Website  https://blog.ipleaders.in/amalgamation-scheme-companies-public- interest/#:~:text=Amalgamation%20is%20a%20combination%20of,combined%20int o%20this%20one%20entity. 284 CU IDOL SELF LEARNING MATERIAL (SLM)