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Introduction If Company is showing false profits, prepares false financial reports to show that they are financially sound who is the looser ? Investors. Lenders(Banks).You and Me. There have been many auditing scandals. Wherein companies loots money from investors and banks by preparing false reports. (Notably Enron, Lehman Brothers, and Satyam). Auditors plays a crucial rule in avoiding this. He is the person who can bring truth and fairness in reports,books and accounts prepared by Company. Companies Act 2013 provides provisions related to Auditors from Section 139 to 148. It discusses qualification, appointment, power duties and liabilities of auditors. After reading this post, you have an fair idea about Qualification of Auditors. Appointment of Auditors Removal of Auditors Power and Duties of Auditors Liabilities of Auditors  Qualification/Disqualification of Auditors Section 141 of the Companies Act provides the eligibility, qualification and disqualification of Auditors. Wh...

 Introduction  Promoters are knows as entrepreneur. They promote a business for maximization of profits. Here is one famous promoter of Kingfisher Airlines. In this part we will cover below things. Promoters and Promotions Activities of Promoter Position of Promoter Duties of Promoter Liabilities of Promoter Promoters and Promotions Who is promoter ? Vijay Mallya was promoter of Kinfisher Airlines (Which is bankrupt). A corporate promoter is a firm or person who does the preliminary work incidental to the formation of a company, including its promotion, incorporation, and flotation, and solicits people to invest money in the company, usually when it is being formed. House of Lords gave definition of promoter and promotions in judgement Whaley Bridge Co Vs Green 1897 QBD 111, where justice Bowell LJ held that Promotion is not a term of law, but of a business operations familiar to the commercial world, by which company is generally brought in to existence. Promotion include wid...

Introduction Great directors make great movies. For example one of the finest crime movie Gangs of Wasseypur was directed by Anurag Kashyap.       On the similar lines directors in Board of Directors play a role in Company. They can take companies to greater heights, or even can sink companies with selfish motives.   Directors are the people who overlook day to day activities and finances of the companies. They are crucial in administration of the company. They also look into optimum utilization of resources of the company.   In this post we will cover below things   Who is Director Position of Director Number of Director Appointment and Disqualification Vacancies, Removal, Resignation Power,Duties and Liabilities of Director Who is Director Who is director ? "Director is Director..!!". Section 2(13) of the Companies Act 1956 defined director as Director is any person, occupying the position of Director, by whatever name called. Modernized definition in Sec...

Introduction This post will cover below things: What is winding up Modes of winding up Compulsory winding up by Tribunal Voluntary winding up by Members and Creditor ( This is discussed here ) Grounds for Winding up by Tribunal Consequences of Winding up order Conclusion Winding up by Tribunal and voluntary winding up by Members and Creditors are discussed in two different posts. This post will confine to winding up by Tribunal What is winding up ? It's in short a legal process which will put an end to corporate personality. It's a process whereby the existing company's affair are brought to an end. It is complex situation (And sad also) where the company which came into existence with aspiration to grow higher with passage of each day but turn off their entire business either voluntarily or by the tribunal's involvement. It's process by which the properties of the companies are administered (and finally sold) for the benefits of it's members and creditors. The ...

Introduction In this post we have discussed winding up by tribunal. Here we will discuss the winding up of company by creditor and members. Objective outline for this post is as below(Two points about liquidator is common for both type of voluntary winding up) : Circumstances under which voluntary winding up carried out Voluntary winding up by members Declaration of solvency General procedure Appointment/Removal of liquidator Voluntary winding up by Creditors Meeting of creditor Publication or resolution Appointment of liquidator by creditor Consequences of appointment of liquidator Power/Duties of liquidator The End of Company-Section 318 Before going into winding process, let us understand the difference between winding process and dissolution of company. Winding up is the process to sell off stock, pay off creditors, and distribute any remaining assets to partners or shareholders. It's process to realize the assets and distribute that to all the stakeholders. Dissolution is gene...

Generally Subsidiary company CANNOT hold a shares of Holding Company. Its now allowed. Section 19 of Companies Act puts some restriction on having shares by subsidiary company. Section 19 also provides for exception in which subsidiary company can hold the shares of Holding company In below circumstances Subsidiary Company can hold the shares of Holding company: When the subsidiary company is the legal representative of deceased member of of the holding company. For example X  Ltd is holding company and Y Ltd is subsidiary company. Y Ltd is also legal heir of Mr. A who is member of X Ltd. After Mr A dies, his shares in X Ltd will pass on to Y Ltd, thus enabling subsidiary company to hold a share of holding company When the subsidiary Company is trustee and the holding company or any of it's subsidiaries is not beneficially interested under trust. In this case subsidiary company holds the share as trustee When subsidiary company had shares in Holding Company even before...

Introduction Here we will discuss different forms of business organization. We will also have a look at advantages and disadvantages of each one of them. We will cover 5 forms of Business Organization Sole Proprietorship Hindu Undivided Family Partnership Firm Company Co-operative society Sole Proprietorship This one is the simplest and oldest form of business organization. Tea Vendor, a Kirana Store, Small Shops are example of this type of business organization. Here individual have exclusive control over business. He may use his own skills and individuals, or may employ few individuals. Few points about Sole Proprietorship This is owned by ONE man/woman/any gender. but only by One person Absolute control over business Liability of Sole Proprietor is unlimited. You may loose your house for repayment! better go for one person company Individual earns all the profits. :) No government regulations to control the sole proprietorship No need for formal r...

Introduction Can you reserve the name of the company ? For how long you can reserve the name of the company ? What gives you right to reserve the name of the company? What's the procedure ? We will answer some of these questions here. Reservation of Name What gives you right to reserve a name? Section 4 clause 4 states that you can go for reservation of name. You just have to state to registrar the name of the proposed company.   For what period you can reserve the name ? Registrar will go through documents and will reserve the name. For up to 60 days you can reserve the name. If Company is not incorporated in those days the reserved name will be cancelled.  And fees you paid will also be gone. Consequences of giving wrong information If in application you state something wrong, then there are two scenario If Company is not incorporated ,then Registrar would do following thing Cancel the reserved name Impose fine up to 1 Lakh If Compa...

Introduction In previous post we have seen the definition and importance of Memorandum of Association. In this we will have a look at content and form of MoA. Before going into details, below is the image of summary of MoA from Reliance Industries MoA . It pretty much describe what MoA is all about. Let's discuss in bit detail form and contents of MoA. Contents of Memorandum of Association Name MoA will Contains the name of the company. If it's public company, then it will contain something like Reliance Ltd . If it's private company it will contain "Private Ltd" after company name. Like Patanjali Private Ltd. Ltd and Private Ltd will be appended based on what type the company is. Adding "Ltd" or "Private Ltd" after company name is not applicable for Section 8 company. Address MoA will have address, including State name and address of registered office. If Registered office is yet not verified, it will contain t...