FOR IPCC ( CO.LAW) Holding and Subsidiary Companies: (Sec. 4) 1. ● A company is known as holding company of the another company, if it has control over that other company. ● A company is deemed to be a holding company of another if, but only if, that other company is subsidiary. A company is known to be subsidiary company in following cases: • Where a holding company controls the composition of Board of Directors of another company, the latter company becomes subsidiary. • Where a holding company holds more than half in the value of equity share capital of another company. • Where a company is subsidiary of another company which itself subsidiary of controlling company. The former company becomes subsidiary of controlling company. Prohibition o large partnerships or illegal associations (Sec. 11) Meaning: A company, association or partnership is deemed to be an illegal association or a large partnership under the Companies Act, 1956 if 1. The number of persons carrying on business is more than • 10 persons for banking business; • 20 persons for any other business 2. It is formed for the purpose of earning profits 3. It is not registered under Companies Act, 1956. 4. It is not formed under Indian Law. Consequences of illegal association: These are as follows: 1. Personal liability: Every member of an illegal association is personally liable for all liabilities incurred in the business, and is punishable with the fine which may extend to Rs.10,000. 2. Contracts • An illegal association cannot enter into a contract, nor can it sue any member or outsider, not even if the company is subsequently registered. • It can not sue or be sued for it6s debts due it or from it. • No member of this association can sue any other member in respect of any matter connected with the association. Winding up An illegal association cannot be wound up under the companies act either at the instance of - a creditor - a member; or - the association itself Note: There is a penalty for improper use of word ‘Limited’ and ‘Private Limited’ of a fine up to Rs.500 for every day upon which that name has been used. (Under Sec. 631). . Public Financial Institutions 1. The following financial institutions shall be regarded. For the purpose of companies Act, as public financial institutions, namely: • ICICI • The Industrial Finance Corporation of India (IFCI) • The Unit Trust of India (UTI) • Life Insurance Corporation of India (LIC) • Industrial Development Bank of India (IDBI) 2. The Central Government may specify any other institution to be a public financial institution. But no institution shall be so specified unless- • It has been established or constituted by or under any Central Act, or • Not less than 51 percent of the paid up capital of such an institutions is held or controlled by the Central Government. 3. The Central Government has so far specified 38 institutions to be public financial institutions. Important among them are as follows: • The Industrial Reconstruction Bank of India (IRBI) • General Insurance Corporation of India • National Insurance Company Limited • New India Assurance Company Limited • National Housing Bank • Export-Import Bank of India • Small Industries Development Bank of India Officer who is in default (Sec. 5) The expression ‘officer who is in default’ means all the following officers of a company namely: 1. the managing director or directors. A managing director pleaded that he was no longer a managing director when the complaint was filed, the court held that the material date was not the date of filing of the complaint but that of committing the offence, i.e. the date of issuing the cheque [Sri Kanth (GS) v. Lakshmi Financiers, (1999)98 Comp. Cas. 321 (AP)] 2. the whole time director or directors 3. the manager 4. the secretary 5. any person in accordance with whose directions or instructions, directors are accustomed to act. 6. any person charged by the board of directors with responsibility of complying with any provision, provided the person so charged has given his consent in this behalf to the board of directors; 7. Where any company does not have any of the officers specified in the clauses (a) to (c), any director who may be specified by the board of directors in this behalf or where no director is so specified, all the directors. Where a person has neither been managing director nor has been involved in the normal course of the business, he is relieved of the criminal liability [H. Nanjudiah v. V. Govindan, Registrar of Companies (1986) 59 Comp. Cas. 356 (Bom.)] Notes: • Sec. 5 is applicable to both public and private companies. • The officer could not be prosecuted for defaults relating to the period before his joining [ C.V. Siva Prasad v. ROC (1997) 88 Comp. Cases 420] • If there is a managing or whole time director ort manager, it would be against the principal of natural justice and fair dealings if the proceedings are launched against ordinary directors without examining their involvement in default [G. Vijayalakshmi v. SEBI (2000) 100 Comp. Cases 726 ] Relative: (Sec. 6) A person is deemed to be a relative of another if • They are members of Hindu Undivided Family (HUF) • They are husband and wife; or • The one is related to other in the manner indicated in Schedule I-A to the Act. Schedule I-A 1. Father • Father’s father • Father’s mother 2. Mother • Step mother; • Mother’s mother; • Mother’s father 3. Son • Step son • Son’s wife • Son’s son • Son’s son’s wife • Son’s daughter • Son’s daughter husband 4. Daughter • Step daughter • Daughter’s husband • Daughter’s son • Daughter’s son’s wife • Daughter’s daughter • Daughter’s daughter’s husband 5. Brother • Step brother • Brother’s wife 6. Sister • Step sister • Sister’s husband Notes: 1. Wife’s brother is not included in the above list of relatives. 2. The term relative is relevant in following cases: - definition of a private company [Sec. 3 (i) (iii)] - power of Central Government to prohibit the appointment of sole selling agents in certain cases [Sec. 294- AA] - Loans to directors [Sec. 295] - Board’s sanction to be required for certain contracts in which particular directors are interested (Sec. 297) - Disclosure of interest by director (Sec. 299) - Director, etc, not to hold office or place of profit (Sec. 314).. ..Aisha..
Posted on: Fri, 23 Aug 2013 09:16:54 +0000
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