Executive Programme — Company Law: Principles, Administration & Secretarial Practice Flashcards

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Companies Act, 2013

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The principal statute governing companies in India, introducing modern concepts like One Person Companies, independent directors, mandatory CSR and enhanced compliance obligations. It replaced the Companies Act, 1956 and interacts with rules, notifications and judicial precedents.

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Corporate Personality

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The legal doctrine that a company is a separate legal entity distinct from its members, capable of owning property and entering contracts. This separation underpins limited liability and the ability to sue or be sued in the company's name.

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Limited Liability

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Shareholders' liability for company debts is generally limited to the unpaid amount on their shares, insulating personal assets from company liabilities. Exceptions arise where statutes or courts lift the corporate veil for fraud or sham arrangements.

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Perpetual Succession

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The concept that a company's existence continues regardless of changes in membership or death of shareholders, terminated only by lawful dissolution or winding up. This ensures continuity of operations and stability for creditors and investors.

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Share

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A unit of ownership in a company representing a specified part of its capital, entitling the holder to such rights as dividends and participation in assets as per the company's articles. Shares may be equity or preference in nature.

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Equity Share

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A share representing residual ownership with voting rights and entitlement to profits after preference claims; dividends are not guaranteed and depend on company performance. Equity shareholders typically control corporate decisions through voting.

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Preference Share

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A share that has preferential rights as to dividend and repayment of capital on winding up, often without the same voting rights as equity. Redemption and issue are subject to strict statutory conditions and timelines.

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Allotment of Shares

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The act by which a board or authorized committee appropriates unallocated shares to applicants, thereby creating members and their rights. Allotment must be by proper authority, timely, absolute and communicated to applicants.

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Share Certificate

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A physical or electronic document issued to a shareholder as prima facie evidence of title and the amount paid on shares. The company must issue certificates within statutory time limits and maintain records of issuance and duplicates.

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Securities Premium Account

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A statutory reserve where amounts received by a company over and above the face value of shares are credited; it can be used only for specified purposes such as writing off preliminary expenses or issuing bonus shares. Strict usage rules apply under the Act.

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Private Placement

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An offer of securities to a select group of persons rather than the public, governed by numerical limits and procedural safeguards like offer-cum-application forms and banking channel payments. Non-compliance can attract penalties and invalidation of allotment.

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Preferential Allotment

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Issuance of securities to identified persons on preferential terms requiring disclosures, valuation and shareholder approvals. It is subject to pricing norms and regulatory safeguards to protect existing shareholders.

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ESOP

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An Employee Stock Option Plan granting employees the option to buy company shares at a predetermined price after a vesting period. Options are non-transferable until exercised and companies must maintain registers and make required filings.

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Redemption of Preference

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The process by which redeemable preference shares are paid off as per terms; redemption must be made from profits or securities premium and in line with statutory timelines. Failure to redeem can require special approvals or restructuring measures.

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Register of Members

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A statutory record containing details of shareholders, their shareholding and other specified particulars; maintenance and updates are mandatory and used for compliance, voting and dividend distributions. Inspection rights and filing obligations attach to this register.

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Return of Allotment

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A statutory filing to the Registrar of Companies within prescribed time after allotting securities, detailing all allottees and share particulars. Non-filing or late filing attracts penalties and can affect the validity of allotment.

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Corporate Veil

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The conceptual barrier separating company liabilities and assets from those of shareholders, underpinned by separate legal personality. Courts may lift this veil in exceptional circumstances to hold individuals liable for misuse of corporate form.

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Lifting the Veil

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Judicial action to disregard the company's separate personality where the corporate form is used to perpetrate fraud, evade law or defeat public policy. The remedy is invoked cautiously and on strong factual foundations.

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MCA21

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The Ministry of Corporate Affairs electronic portal for filing statutory returns, incorporation documents and other compliance forms. Mastery of MCA21 procedures and timelines is essential for company secretaries to ensure regulatory compliance.

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XBRL

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eXtensible Business Reporting Language used for standardized electronic filing of financial statements to facilitate data analysis and regulatory review. Companies required to submit XBRL-tagged statements must ensure accuracy of mapping and timely submission.