Important Aspects of Insolvency and Bankruptcy Code

The laws relating to insolvency and bankruptcy in the earlier centuries were framed for penalizing the defaulting debtors. Over the Years there has been improvising change in the global regulatory framework towards corporate insolvency. The principal focus of modern insolvency legislation is not liquidation and elimination of insolvent entities but on the renovation of the financial and organizational structure of debtors experiencing financial distress so as to permit the rehabilitation and continuation of their business. If the rehabilitation is not possible it enables effective winding up of companies in time bound manner through single regulator i.e. “National Company Law Tribunal”.

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Dormant Companies Under Companies Act

This is a new initiative of Ministry of Corporate Affairs to introduce the concept of Dormant Companies, as it was not there in Companies Act, 1956 , whereby Companies which are not carrying on any significant accounting transaction for a period of two years can apply to Registrar of Companies for getting declared itself as Dormant Companies. In today’s economic environment, a lot of Companies are formed for the purpose of holding any assets particularly real assets or any IPR or for a future project and such Company just keeps on complying with the laws even if no actual business is being done or transacted.  Another name for this concept can be Asset Shielding Concept Under Companies Act 2013 as a Dormant Company offers excellent advantage to the promoters who want to hold an asset or intellectual property under the corporate shield for its usage at a later stage.

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Law Relating To Section 8 Companies (Non-Profit Organisation)

INTRODUCTION Section 8 of the Companies Act, 2013 provides for a mechanism through which an Association can be registered as a Company, if such association is formed for promoting commerce, art, science, religion or any other useful object and intends to apply its profits/income in promoting its objects. The objective of this provision is to […]

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Law Relating to Appointment, Resignation & Removal of Company Directors

The company must have Board of Directors for the smooth functioning of its affairs. It is the directors under whose supervision, the management team, run the business affairs of the company. A Director may act as Executive or non-executive director of the company.

As per Companies Act, 2013 (Act), a company shall have minimum number of three directors in the case of a public company, two Directors in the case of a private company, and one director in the case of a One Person Company. There shall be a maximum of fifteen directors and that number can be increased beyond fifteen, by passing members special resolution.

Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.

In respect of some specified class of companies independent director and women director are required to be appointed on the board. In case of the appointment of Independent director in General Meeting, an explanatory statement for such appointment should also be annexed with Notice for calling of General Meeting shall include a statement that in the opinion of the board for the fulfillment of the conditions specified in the Act.

Independent director will be appointed for the term for the five years and shall be reappointed after passing the special resolution in General Meeting. The retirement and rotation of the directors does not apply to the Independent Director.

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Related Party Transactions: Legal Provisions & Compliance

The Act puts some restriction on the related party transactions. With the introduction of The Companies Act, 2013, the scope and ambit of related party transactions has significantly enlarged. The Companies Act, 1956 covered only purchase or sale of goods or supply of services and subscription of any shares or debentures of the company under the related party transaction. However, Companies Act, 2013 has brought immovable properties and leasing of property also under the ambit of related party transaction.

The Companies Act, 2013 has removed central government approvals for related party transaction which was mandatory under the Companies Act, 1956 for companies having paid-up share capital of rupees one crore or more.

We will start from the definition of related party, which has been prescribed under the Act.

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