Based on a request made by various stakeholders, the Ministry of Corporate Affairs (MCA) has issued a clarification explaining some of the provisions of the Companies Act, 2013 relating to independent directors. Some of the aspects clarified include the following: – For the purposes of the definition of an independent director, the concept of “pecuniary relationship” will not include...
Guest Post: Deposits – Issues Under the Companies Act, 2013 – Part 2
[The following post is contributed by Madhusudan Bose, who is a lawyer and company secretary by profession, at PRA Law Offices, New Delhi This is the continuation of the previous post on the topic] 3. Amounts Received by a Company from Another Company Excluded from Scope of “Deposits” 3.1 Like in the Old Rules...
Guest Post: Deposits – Issues Under the Companies Act, 2013 – Part 1
[The following post is contributed by Madhusudan Bose, who is a lawyer and company secretary by profession, at PRA Law Offices, New Delhi] 1. Introduction 1.1 The company law in India prescribes stringent conditions for acceptance of deposits by any company. In the interests of the ordinary depositor, “deposits”...
Directors’ Actions: For Whose Benefit?
It is clear that directors ought to act in good faith for the benefit of the company. Since the company is a separate legal personality, there is often the question as to who represents the interests of the company. Generally, the interests of the company are said to equate with the interests of the shareholders, while in the case of an insolvent company (or one that is in the zone of insolvency)...
Financing Domestic M&A
A Times of India report indicates that the Finance Ministry is considering a proposal to allow banks to finance domestic M&A, i.e. acquisitions of local targets by local acquirers. If this proposal goes through (although significant doubts have been raised regarding that), it will mark a sea-change in the funding of domestic M&A that is currently deprived of bank funding. At present...
Codification of Directors’ Duties: Is Common Law Excluded?
Background Hitherto, directors had negligible guidance under company law as regards their duties and liabilities. The preexisting Companies Act, 1956 (the 1956 Act) did not explicitly stipulate directors’ duties, which made it necessary to fall back on common law principles (to be articulated by courts while delivering specific decisions). The statutory uncertainty was compounded by the absence...
Guest Post: The Changing Definition of Debentures
[The following post is contributed by Nidhi Bothra of Vinod Kothari & Co. She can be contacted at [email protected]] The new Companies Act, 2013 has changed the regulatory face of the corporate India; “raising the bar on Corporate Governance.” The new regulatory changes including need for CSR activities, increased investor protection, greater transparency in business and have been the...
Court-Convened Meetings and Postal Ballot
Background In one of the first few cases interpreting the provisions of the Companies Act, 2013 (the 2013 Act), the Bombay High Court last week issued its judgment on the use of postal ballot facility at a court-convened meeting to consider a scheme of arrangement. In re Godrej Industries Limited, the court was concerned with a scheme of amalgamation of Wadala Commodities Limited into Godrej...
The Meaning of ‘Inability to Pay Debts’ for the Purpose of Winding-up
The test for statutory winding-up in Indian company law has a long history. Section 434(1)(a) and 434(1)(c) of the Companies Act, 1956 was based on section 223 of the English Companies Act, 1948, and the new Companies Act, 2013, retains this language (see section 271), although the language has been slightly modified in later British legislation (sections 89 and 123 of the Insolvency Act, 1986)...
Companies Act, 2013: Directors’ Duties and Liabilities
The NSE Centre for Excellence in Corporate Governance (CECG) has issued its most recent quarterly briefing titled “Directors’ Duties and Liabilities in the New Era”. The executive summary is as follows: – Since directors and the board play a pivotal role in corporate governance, the law foists duties and liabilities on them; – The Companies Act, 2013 has brought about a paradigm shift...
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