Companies Act, 2013
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Companies Act, 2013
Act may be called the Companies Act, 2013
It extends to the whole of India.
The Act is divided into:
 29 Chapters which consists of 470 Sections
7 Schedules
Out of the 470 Sections, 98 have been published in the Official Gazette on the 12th
day of September, 2013
(The remaining provisions of this Act shall come into force on such date as the Central
Government by notification in the Official Gazette specifies)
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Companies Act, 2013
Applicability of the Act:
The provisions of this Act shall apply to—
(a) Companies incorporated under this Act or under any previous Company Law;
(b) Insurance Companies, except in so far as the said provisions are inconsistent with
Insurance Act, 1938 or the Insurance Regulatory and Development Authority Act, 1999
(c) Banking Companies, except in so far as the said provisions are inconsistent with the
Banking Regulation Act, 1949
(d) Companies engaged in the generation or supply of electricity, except in so far as the
said provisions are inconsistent with the Electricity Act, 2003
(e) Any other Company governed by any special Act for the time being in force;
(f) Such Body Corporate, incorporated by any Act for the time being in force, as the
Central Government may specify
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INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
CHAPTER-I : PRELIMINARY
(Sections 1-2)
2
***Definitions
2
CHAPTER-II : INCORPORATION & MATTERS INCIDENTAL THERETO
(Sections 3-22)
19
Subsidiary company not to hold shares in
its holding company
42
21
Authentication of documents, proceedings
& contracts
54
22
Execution of bills of exchange, etc.
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47 & 48

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
CHAPTER-III : PROSPECTUS & ALLOTMENT OF SECURITIES
(Sections 23-42)
23
***Public offer & Private placement
24
Power of SEBI to regulate issue & transfer
of securities
55A
25
***Deemed Prospectus
64
29
Public offer of securities to be in DEMAT
mode
30
Advertisement of prospectus
31
Shelf Prospectus
60 A
32
Red-herring Prospectus
60 B
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-
68 B
66

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
33
***Issue of application forms for securities
56 (3)
34
Criminal liability for mis-statements in
prospectus
63
35
***Civil liability for mis-statements in
prospectus
62
36
Punishment for fraudulently inducing
persons to invest money
68
37
Action by affected persons
38
Punishment for personation for acquisition,
etc. of securities
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-
68 A

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
39
***Allotment of securities by company
69 & 75
40
***Securities to be dealt in stock exchange
73 & 76
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INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
CHAPTER-IV : SHARE CAPITAL & DEBENTURES
(Sections 43-72)
44
Nature of shares or debentures
82
45
Numbering of shares
83
49
Calls on shares of same class to be
maintained on uniform basis
91
50
Company to accept un-paid share capital
although not called-up
92
51
Payment of dividend in proportion to
amount paid-up
93
57
Punishment for personation of
shareholders
116
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INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
58
Refusal of registration & appeal against
refusal
111 & 111 A
59
Rectification of register of members
111 & 111 A
60
Publication of authorised, subscribed &
paid-up capital
148
65
Unlimited company to provide for reserve
share capital on conversion
98
69
Transfer of certain sums to Capital
Redemption Reserve account
70
***Prohibition for Buy-back in certain
circumstances
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77 AA
77 B

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
CHAPTER-VI : REGISTRATION OF CHARGES
(Sections 77-87)
86
Punishment for contravention
142
CHAPTER-VII : MANAGEMENT AND ADMINISTRATION
(Sections 88-122)
91
Power to close register of members, deb’
or other security holders
154
100
***Calling of EGM
169
102
Explanatory Statement
173
103
Quorum for meetings
174
105
***Proxies
176
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INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
106
Restriction on voting rights
107
Voting by show of hands
111
Circulation of members’ resolution
112
Representation of president & governors in
meetings
113
***Representation of corporations at
meetings
187
114
Ordinary & Special Resolution
189
116
Resolution passed at adjourned meeting
191
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181-183
177 & 178
188
187 A

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
CHAPTER-VIII : DECLARATION & PAYMENT OF DIVIDEND
(Sections 123-127)
127
Punishment for failure to distribute
dividends
207
CHAPTER-IX : ACCOUNTS OF COMPANIES
(Sections 128-138)
133
Central govt. to prescribe accounting
standards
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211 (3C)

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
CHAPTER-XI : APPOINTMENT & QUALIFICATIONS OF DIRECTORS
(Sections 149-172)
161
***Appointment of additional, alternate &
nominee director
162
Appointment of directors to be voted
individually
263
163
Option to adopt principle of proportional
representation
265
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260, 262 & 313

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
CHAPTER-XII : MEETINGS OF BOARD & ITS POWERS
(Sections 173-195)
176
Defects in appointment of director not to
invalidate actions taken
290
180
Restrictions on powers of board
293
181
Company to contribute to bonafide &
charitable funds
182
Prohibition & restrictions regarding political
contributions
293 A
183
Power of Board to make contribution to
National Defense Fund
293B
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293 (1) (e)

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
185
Loan to directors
295 & 296
192
Restriction on non-cash transactions
involving directors
-
194
Prohibition on forward dealings in
securities by KMP
-
195
Prohibition on insider trading of securities
-
CHAPTER-XIII : APPOINTMENT & REMUNERATION OF MANAGERIAL PERSONNEL
(Sections 196-205)
202
Compensation for loss of office
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318

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
CHAPTER-XXII : COMPANIES INCORPORATED OUTSIDE INDIA
(Sections 379-393)
379
Application of Act to foreign companies
591
382
Display of name, etc of foreign company
595
383
Service on foreign company
596
386
***Interpretation
602
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INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
CHAPTER-XXIII : GOVERNMENT COMPANIES
(Sections 394-395)
394
Annual report on govt. companies
619A
CHAPTER-XXV : COMPANIES TO FURNISH INFORMATION OR STATISTICS
(Section 405)
405
Power of CG to direct companies to furnish
information
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615

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION
CHAPTER-XXVII : NATIONAL COMPANY LAW TRIBUNAL AND APPELLATE TRIBUNAL
(Sections 407-434)
407
Definitions
10 FD
408
Constitution of National Company Law Tribunal
10 FB
409
Qualification of President and Members of Tribunal
10 FD
410
Constitution of Appellate Tribunal
10 FR
411
Qualifications of Chairperson and Members of Appellate
Tribunal
10 FR
412
Selection of members of Tribunal & Appellate Tribunal
10 FX
413
Term of office of President, Chairperson and other
members
10 FE & 10
FT
414
Salary, allowances and other terms & conditions of
service of members
10 FG & 10
FW
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INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
CHAPTER-XXVIII : SPECIAL COURTS
(Sections 435-446)
439
Offences to be non-cognizable
443
Power of CG to appoint company
prosecutors
624 A
444
Appeal against acquittal
324 B
445
Compensation for accusation without
reasonable course
446
Application of fines
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-
626

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
CHAPTER-XXIX : MISCELLANEOUS
(Sections 447-470)
447
Punishment for fraud
448
Punishment for false statements
628
449
Punishment for false evidence
629
450
Punishment where no specific penalty or
punishment is provided
451
Punishment in case of repeated default
-
452
Punishment for wrongful withholding of
property
630
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-
629 A

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
453
Punishment for improper use of “Limited”
or “Private Limited”
456
Protection of action taken in good faith
635 A
457
Non-disclosure of information in certain
cases
635 AA
458
Delegation by CG of its powers and
functions
459
Power of CG or Tribunal to accord approval,
etc.
637 A
460
Condonation of delay in certain cases
637 B
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631
637

INDEX OF THE NOTIFIED SECTIONS
NOTIFIED
SECTION
HEADING
CORRESPONDING
SECTION IN THE
COMPANIES ACT,
1956
461
Annual Report by CG
462
Power to exempt class or classes of
companies from provisions of this Act
-
463
Power of court to grant relief in certain
cases
633
467
Power of CG to amend schedules
641
468
Power of CG to make rules relating to
winding up
643
469
Power of CG to make rules
642
470
Power to remove difficulties
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638
-

CHAPTER-I
SECTION 407: Definitions
PRELIMINARY
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Section 2 : Definitions
New definitions added:
1. Control:
“control” shall include the right to appoint majority of the directors or to control the
management or policy decisions exercisable by a person or persons acting
individually or in concert, directly or indirectly, including by virtue of their
shareholding or management rights or shareholders agreements or voting
agreements or in any other manner.
2. Key Managerial Personnel:
• The Chief Executive Officer or the managing director or the manager;
• The company secretary;
• The Chief Financial Officer if the Board of Directors appoints him;
• Such other officer as may be prescribed.
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Section 2 : Definitions
3. One Person Company:
One Person Company means a company which has only one person as a Member.
4. Promoter:
who has been named as such in a prospectus or is identified by the company in the annual
return referred to in section 92; or who has control over the affairs of the company, directly
or indirectly whether as a shareholder, director or otherwise; or In accordance with whose
advice, directions or instructions the Board of Directors of the company is accustomed to act.
Provided that nothing in sub-clauses (b) and (c) shall apply to a person who is acting in a
professional capacity.
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Section 2 : Definitions
5. “Related party”, with reference to a company, means—
• A director or his relative.
• A key managerial personnel or his relative.
• A firm, in which a director, manager or his relative is a partner.
• A private company in which a director or manager is a member or director.
• A public company in which a director or manager is a director or holds along with his
relatives, more than two per cent. of its paid-up share capital.
• Any body corporate whose Board of Directors, managing director or manager is accustomed
to act in accordance with the advice, directions or instructions of a director or manager.
• Any person on whose advice, directions or instructions a director or manager is accustomed
to act:
Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or
instructions given in a professional capacity.
Any company which is—
 a holding, subsidiary or an associate company of such company; or
a subsidiary of a holding company to which it is also a subsidiary;
such other person as may be prescribed.
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Section 2 : Definitions
6.‘‘Small company’’ 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:
Provided that nothing in this clause shall apply to—
 a holding company or a subsidiary company;
 a company registered under section 8; or
 a company or body corporate governed by any special Act;
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Section 2 : Definitions
7. Relative
with reference to any person, means any one who is a related to another, if they are• members of a Hindu Undivided Family.
• they are husband and wife, or
• one person is related to the other in such manner as may be prescribed.
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Section 2 : Definitions
Other New definitions added:
Accounting Standards
Associate Company
Auditing Standards
Authorized Capital
Books Of Accounts
Called Up Capital
Charge
Charted Accountant
Expert
Financial Institution
Financial Statement
Independent Director
Interested Director
Global Depository Receipt
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Section 2 : Definitions
“Financial year”, In relation to any company or body corporate, means the period ending
on the 31st day of March every year, and where it has been incorporated on or after the
1st day of January of a year, the period ending on the 31st day of March of the following
year, in respect whereof financial statement of the company or body corporate is made
up:
Provided that on an application made by a company or body corporate, which is a holding
company or a subsidiary of a company incorporated outside India and is required to follow
a different financial year for consolidation of its accounts outside India, the Tribunal may,
if it is satisfied, allow any period as its financial year, whether or not that period is a year:
Provided further that a company or body corporate, existing on the commencement of this
Act, shall, within a period of two years from such commencement, align its financial year as
per the provisions of this clause.
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Section 2 : Definitions
“Private company” means a company having a minimum paid-up share capital of one lakh
rupees or such higher paid-up share capital as may be prescribed, and which by its articles
•restricts the right to transfer its shares;
•except in case of One Person Company, limits the number of its members to two hundred:
Provided that where two or more persons hold one or more shares in a company jointly,
they shall, for the purposes of this clause, be treated as a single member:
Provided further that—
 persons who are in the employment of the company; and
persons who, having been formerly in the employment of the company, were members of
 the company while in that employment and have continued to be members after the
employment ceased, shall not be included in the number of members; and
prohibits any invitation to the public to subscribe for any securities of the company.
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Section 2 : Definitions
“Public company” means a company which—
(a) is not a private company;
(b) has a minimum paid-up share capital of five lakh rupees or such higher paid-up capital, as
may be prescribed:
Provided that a company which is a subsidiary of a company, not being a private company,
shall be deemed to be public company for the purposes of this Act even where such subsidiary
company continues to be a private company in its articles
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Section 2 : Definitions
4. “Officer who is in default”,
For the purpose of any provision in this Act which enacts that an officer of the company who
is in default shall be liable to any penalty or punishment by way of imprisonment, fine or
otherwise, means any of the following officers of a company, namely:—
whole-time director;
•
key managerial personnel;
•
where there is no key managerial personnel, such director or directors as specified by the
Board in this behalf and who has or have given his or their consent in writing to the Board
to such specification, or all the directors, if no director is so specified.
•
Any person who, under the immediate authority of the Board or any key managerial
personnel, is charged with any responsibility including maintenance, filing or distribution
of accounts or records, authorizes, actively participates in, knowingly permits, or knowingly
fails to take active steps to prevent, any default.
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Section 2 : Definitions
•
Any person in accordance with whose advice, directions or instructions the Board of
Directors of the company is accustomed to act, other than a person who gives advice to the
Board in a professional capacity.
•
Every director, in respect of a contravention of any of the provisions of this Act, who is
aware of such contravention by virtue of the receipt by him of any proceedings of the Board or
participation in such proceedings without objecting to the same, or where such contravention
had taken place with his consent or connivance;
•
In respect of the issue or transfer of any shares of a company, the share transfer agents,
registrars and merchant bankers to the issue or transfer.
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CHAPTER-II
SECTION 407: Definitions
INCORPORATION OF COMPANY
AND MATTERS INCIDENTAL
THERETO
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Section 19- Cross- holdings in holding companies
Section 42
Companies act, 1956
1) Applied to any body corporate
Section 19
Companies act ,2013
1) Applies only to companies and
not to body corporates
*** Applicability of this section has been aptly restricted to companies
instead of body corporates .
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Section 19- Subsidiary company not to hold shares in its holding
company
19. (1) No company shall, either by itself or through its nominees, hold any shares in
its holding company and no holding company shall allot or transfer its shares to any of its
subsidiary companies and any such allotment or transfer of shares of a company to its
subsidiary company shall be void:
Provided that nothing in this sub-section shall apply to a case—
(a) where the subsidiary company holds such shares as the legal representative
of a deceased member of the holding company; or
(b) where the subsidiary company holds such shares as a trustee; or
(c) where the subsidiary company is a shareholder even before it became a
subsidiary company of the holding company:
Provided further that the subsidiary company referred to in the preceding proviso
shall have a right to vote at a meeting of the holding company only in respect of the shares
held by it as a legal representative or as a trustee, as referred to in clause (a) or clause (b) of
the said proviso.
(2) The reference in this section to the shares of a holding company which is a company
limited by guarantee or an unlimited company, not having a share capital, shall be construed
as a reference to the interest of its members, whatever be the form of interest.
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Section 21- Authentication of documents, proceedings
and contracts
Section 54
Companies act, 1956
Section 21
Companies Act, 2013
1) Applied only to authentication of
documents and proceedings
1) Apart from authentication of
documents and proceedings it also
applies to contracts
2) May be signed by a director, the
manager, the secretary or other
authorised officer of the company
2) May be signed by a key managerial
personnel or an officer of the
company duly authorised by the
Board in this behalf.
3) Need not be under its common
seal.
3) The words ‘need not be under its
common seal’ have been omitted
*** Specific exemption affixing the common seal has been removed.
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Section 21- Authentication of documents, proceedings
and contracts
21. Save as otherwise provided in this Act,—
(a) a document or proceeding requiring authentication by a company; or
(b) contracts made by or on behalf of a company,
may be signed by any key managerial personnel or an officer of the company
duly authorised by the Board in this behalf.
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Important definition
Section 2 (51) “key managerial personnel”, in relation to a company, means—
(i) the Chief Executive Officer or the managing director or the manager;
(ii) the company secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer; and
(v) such other officer as may be prescribed;
Section 2 (49) “officer” includes
any director, manager or key managerial personnel or any person in accordance
with whose directions or instructions the Board of Directors or any one or more
of the directors is or are accustomed to act;
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Section 22 - Execution of bills of exchange, etc
Section 47 & 48
Companies Act, 1956
Section 22
Companies Act, 2013
NO CHANGE
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Section 22 - Execution of bills of exchange, etc
22. (1) A bill of exchange, hundi or promissory note shall be deemed to have been
made, accepted, drawn or endorsed on behalf of a company if made, accepted, drawn, or
endorsed in the name of, or on behalf of or on account of, the company by any person
Acting under its authority, express or implied.
(2) A company may, by writing under its common seal, authorise any person, either
generally or in respect of any specified matters, as its attorney to execute other deeds on
Its behalf in any place either in or outside India.
(3) A deed signed by such an attorney on behalf of the company and under his seal
shall bind the company and have the effect as if it were made under its common seal.
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CHAPTER-III
SECTION 407: Definitions
PROSPECTUS AND
ALLOTMENT OF SECURITIES
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Section 23 - Public offer and private placement
(New Section)
Companies Act, 1956
1) No corresponding section
Section 23
Companies Act, 2013
1) New provision
*** Issue of securities by different types of companies have been streamlined.
Issue shall be in accordance with applicable rules, regulations and
guidelines of the Companies Act, 2013 as well as ICDR Regulations, 2009.
Types of issues have been classified as follows:
For public companya) Public offer
b) Private placement (Not yet notified)
c) Rights or bonus issue
For private company- (NYN)
a) Private placement
b) Rights or bonus issue
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Section 23 - Public offer and private placement
(New Section)
The term private placement has been defined in explanation II (ii) of section 42 as
follows-
"private placement" means any offer of securities or invitation to subscribe
securities to a select group of persons by a company (other than by way of public
offer) through issue of a private placement offer letter and which satisfies the
Conditions specified in this section.
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Section 23 - Public offer and private placement
(New Section)
23. (1) A public company may issue securities—
(a) to public through prospectus (herein referred to as "public offer") by complying with
the provisions of this Part; or
(b) through private placement by complying with the provisions of Part II of this Chapter
(not notified); or
(c) through a rights issue or a bonus issue in accordance with the provisions of
this Act and
in case of a listed company or a company which intends to get its securities listed also
with the provisions of the Securities and Exchange Board of India Act, 1992 and the
rules and regulations made thereunder.
(2) A private company may issue securities— (not notified)
(a) by way of rights issue or bonus issue in accordance with the provisions of
this Act; or
(b) through private placement by complying with the provisions of Part II of this Chapter.
Explanation.—For the purposes of this Chapter, "public offer" includes initial public
offer or further public offer of securities to the public by a company, or an offer for sale of
securities to the public by an existing shareholder, through issue of a prospectus.
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Section 24 - Power of Securities and Exchange Board
to regulate issue and transfer of securities, etc.
Section 55A
Companies Act, 1956
Section 24
Companies Act, 2013
1) No such provision in
section 55A of Companies
Act, 1956
1) The SEBI shall, in respect
of matters specified by the
section to be administered
by it, exercise the powers
conferred upon it under
sub-sections (1), (2A), (3)
and (4) of section 11,
sections 11A, 11B and 11D
of the Securities and
Exchange Board of India
Act, 1992.
2) Reference to statement in
lieu of prospectus
2) Such reference omitted
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Section 24 - Power of Securities and Exchange Board
to regulate issue and transfer of securities, etc.
24. (1) The provisions contained in this Chapter, Chapter IV and in section 127 shall,—
(a) in so far as they relate to —
(i) issue and transfer of securities; and
(ii) non-payment of dividend,
by listed companies or those companies which intend to get their securities listed on
any recognised stock exchange in India, except as provided under this Act, be administered
by the Securities and Exchange Board by making regulations in this behalf;
(b) in any other case, be administered by the Central Government.
Explanation.—For the removal of doubts, it is hereby declared that all powers relating to all other matters
relating to prospectus, return of allotment, redemption of preference shares and any other matter
specifically provided in this Act, shall be exercised by the Central Government, the Tribunal or the
Registrar, as the case may be.
(2) The Securities and Exchange Board shall, in respect of matters specified in subsection (1) and the
matters delegated to it under proviso to sub-section (1) of section 458, exercise the powers conferred
upon it under sub-sections (1), (2A), (3) and (4) of section 11, sections 11A, 11B and 11D of the
Securities and Exchange Board of India Act, 1992.
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Section 25 – Document containing offer of securities
for sale to be deemed prospectus
Section 64
Companies Act, 1956
Section 25
Companies Act, 2013
NO CHANGE
*** Any document by which offer for sale to the public is made shall be deemed to be a
prospectus issued by the company. All enactments and rules related to prospectus and
liability in respect of any mis–statements etc are applicable to such document.
It will be presumed that allotment or agreement to allot securities was made with an
intention to offer the securities for sale if it is shown that –
i.
An offer of the securities for sale to the public was made within six months
after the allotment or agreement to allot; or
ii.
At the date when the offer was made, the whole consideration had not been
received by company for such securities;
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Section 25 – Document containing offer of securities
for sale to be deemed prospectus
25. (1) Where a company allots or agrees to allot any securities of the
company with a view to all or any of those securities being offered for sale
to the public, any document by which the offer for sale to the public is
made shall, for all purposes, be deemed to be a prospectus issued by the
company; and all enactments and rules of law as to the contents of
prospectus and as to liability in respect of mis-statements, in and
omissions from, prospectus, or otherwise relating to prospectus, shall
apply with the modifications specified in subsections (3) and (4) and shall
have effect accordingly, as if the securities had been offered to the public
for subscription and as if persons accepting the offer in respect of any
securities were subscribers for those securities, but without prejudice to
the liability, if any, of the persons by whom the offer is made in respect of
mis-statements contained in the document or otherwise in respect
thereof.
(2) For the purposes of this Act, it shall, unless the contrary is proved, be
evidence that an allotment of, or an agreement to allot, securities was
made with a view to the securities being offered for sale to the public if it
is shown—
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Section 25 – Document containing offer of securities
for sale to be deemed prospectus
(a) that an offer of the securities or of any of them for sale to the public was made
within six months after the allotment or agreement to allot; or
(b) that at the date when the offer was made, the whole consideration to be
received by the company in respect of the securities had not been received by it.
(3) Section 26 as applied by this section shall have effect as if —
(i) it required a prospectus to state in addition to the matters required by that
section to be stated in a prospectus—
(a) the net amount of the consideration received or to be received by the
company in respect of the securities to which the offer relates; and
(b) the time and place at which the contract where under the said securities have
been or are to be allotted may be inspected;
(ii) the persons making the offer were persons named in a prospectus as directors of
a company.
(4) Where a person making an offer to which this section relates is a company or a
firm, it shall be sufficient if the document referred to in sub-section (1) is signed on
behalf of the company or firm by two directors of the company or by not less than
one-half of the partners in the firm, as the case may be.
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Section 29 - Public offer of securities to be in
dematerialised form
Section 68B [inserted by Companies
(Amendment ) Act, 2000 w.e.f
13/12/2000]
Companies Act 1956
Section 29
Companies Act 2013
1) Every public company making an IPO of 1) It is compulsory for every company
any security for Rs. 10 crores or more
making a public offer and for such
was required to issue the same in
other classes of companies as maybe
demat form
prescribed to issue securities in demat
form irrespective of the size of the
issue
2) Such enabling provision is not there.
2) The enabling provision is now created
*** There was no provision in the Companies Act, 1956 to encourage companies to
adopt dematerialisation. However , this provision will now also encourage companies
which are not hit by the section to voluntarily adopt dematerialisation.
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Section 29 - Public offer of securities to be in
dematerialised form
29. (1) Notwithstanding anything contained in any other provisions of this Act,—
(a) every company making public offer; and
(b) such other class or classes of public companies as may be prescribed,
shall issue the securities only in dematerialised form by complying with the
provisions of the Depositories Act, 1996 and the regulations made thereunder.
(2) Any company, other than a company mentioned in sub-section (1), may convert its
securities into dematerialised form or issue its securities in physical form in accordance with
the provisions of this Act or in dematerialised form in accordance with the provisions of the
Depositories Act, 1996 and the regulations made thereunder.
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Draft Rules
Dematerialisation of securities
(a) For the purposes of section 29, the entire holding of the promoters of every public
company making a public offer of any security shall be held only in dematerialised
form:
Provided that the entire holding of the promoters in the securities of the company held
in physical form up to the initial public offer shall be converted in dematerialized
form before such issue and thereafter such promoter shareholding shall only be held
in dematerialized form.
(b) Any issue of securities by a listed company should be made only in dematerialised
form.
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Section 30 – Advertisement of prospectus
.
Section 66
Companies Act 1956
Not necessary to specify
- the contents of the memorandum or
- the signatories thereto or
- the number of shares subscribed for
by them in the advertisement .
Section 30
Companies Act 2013
Must specify
- the objects
- the liability of members and
- the amount of share capital of the
company, and
- the names of the signatories to the
memorandum and
- the number of shares subscribed for
by them, and
- its capital structure.
*** This is with a view to increase the disclosures made by the company so that
the potential investors get a better picture of the scope of their investment.
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Section 30 – Advertisement of prospectus
30.Where an advertisement of any prospectus of a company is published in any
manner, it shall be necessary to specify therein the contents of its memorandum as
Regards the objects, the liability of members and the amount of share capital of the
company, and the names of the signatories to the memorandum and the number of
shares subscribed for by them, and its capital structure.
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Section 31 – Shelf prospectus
Section 60A
Companies Act, 1956
Section 31
Companies Act, 2013
1) This facility was available only to financial
institutions, public sector banks or
scheduled banks whose main object is
financing.
1) Any class or classes of companies, as may
be provided by SEBI may avail shelf
prospectus.
2) Defined ‘financing’.
2) This has been omitted
3) The time period for filing the information
memorandum was ‘three months prior to
making of subsequent issue’
(Rule 4CCA Of General Rules and Forms)
3)
The time period for filing the information
memorandum has been reduced to ‘one
month prior to making of subsequent
issue’ (Draft Rules)
*** The scope of institutions availing the facility of shelf prospectus has been
widened and will be specifically prescribed by SEBI
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Section 31 – Shelf prospectus
31. (1) Any class or classes of companies, as the Securities and Exchange Board may
provide by regulations in this behalf, may file a shelf prospectus with the Registrar at the
stage of the first offer of securities included therein which shall indicate a period not exceeding
one year as the period of validity of such prospectus which shall commence from the date of
opening of the first offer of securities under that prospectus, and in respect of a second or
subsequent offer of such securities issued during the period of validity of that prospectus,
no further prospectus is required.
(2) A company filing a shelf prospectus shall be required to file an information
memorandum containing all material facts relating to new charges created, changes in the
financial position of the company as have occurred between the first offer of securities or the
previous offer of securities and the succeeding offer of securities and such other changes as
may be prescribed, with the Registrar within the prescribed time, prior to the issue of a
second or subsequent offer of securities under the shelf prospectus:
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Section 31 – Shelf prospectus
Provided that where a company or any other person has received applications for the
allotment of securities along with advance payments of subscription before the making
of any such change, the company or other person shall intimate the changes to such
applicants and if they express a desire to withdraw their application, the company or
other person shall refund all the monies received as subscription within fifteen days
thereof.
(3) Where an information memorandum is filed, every time an offer of securities is
made under sub-section (2), such memorandum together with the shelf prospectus shall
be deemed to be a prospectus.
Explanation.—For the purposes of this section, the expression "shelf prospectus"
means a prospectus in respect of which the securities or class of securities included
therein are issued for subscription in one or more issues over a certain period without
the issue of a further prospectus.
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Draft Rules
Shelf prospectus
For the purposes of sub-section (2) of section 31, the information memorandum shall be
prepared in Form No. 3.2 and filed with the Registrar along with the fee as provided in
Annexure ‘B’ within one month prior to the issue of a second or subsequent offer of
securities under the shelf prospectus.
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Section 32 - Red herring prospectus
Section 60B
Companies Act, 1956
Section 32
Companies Act, 2013
1) Envisaged filing of IM, redherring prospectus and
final prospectus
1) Envisages filing of redherring prospectus and
final prospectus
2) Every variation as made
and highlighted in
accordance with above
shall be individually
intimated to the persons
invited to subscribe
2) No intimation is required
to be given individually to
subscribers in case of any
variations between the red
herring prospectus and the
final prospectus
*** The act has restricted this section to red- herring