Sebi case law

SEBI vide its order dated August 19, 2015 imposed a penalty of Rs. 10 lakhs on the Director of Manappuram Finance Limited for breach of SEBI (Prohibition of Insider Trading) Regulations. The brief facts of the case are as follows :

1. The wife of the Directors sold shares of the Company without seeking pre-clearance from the Compliance Officer.

2. The Director submitted that 

(i) his wife was financially independent 

(ii) trading without pre-clearance was only a technically slip that would not warrant any penalty - an opinion from reputed law firm was also submitted to support these views.

 (iii) he had discussed at the board meeting of the Company about the intention of his wife to sell the shares of the Company.

3. SEBI observed and ruled that 

(i) financial independence is immaterial in case of spouse 

(ii) trading without pre-clearance is a violation of regulation and hence penalty would follow 

(iii) the discussion of the wife proposed trade at the board meeting is not substantiated with agenda or minutes of the meeting and 

(iv) penalized the Director for violation of Regulations and Internal code of conduct.

Key Take away : Personal Transaction Policy and SEBI Insider Trading norms need to be followed in letter and spirit. SEBI does not take into account any technicalities or intention of the parties. You may note that the Director in this case was about 90 years old retired civil servant without any blemish but still had been penalized for the unintentional error.

COMMENCEMENT OF BUSINESS

Section 11 of Companies Act, 2013

COMMENCEMENT OF BUSINESS:

1. A company having share Capital shall commence its business nd borrowing powers only:

- after filing declaration by the director in Form INC- 21.

- Directors should ensure that subscribers of MOA has paid the value of shares agreed to be taken by him.

- further ensure that the company has filed Form INC-22 within prescribed time of its Incorporation.(i.e., filing verfication of registered office)

- if company requiring registration from regulators like RBI, SEBI, IRDA etc., such approval should be obtained.

2. Such declaration in Form INC - 21 should be filed within 180 days from the date of incorporation.

3. In case of default in filing, Registrar can take action under sec. 248 of companies act, 2013 to remove the name of the company (striking off)  from the Register of Companies.

Note:

** section 11 applies both public and private limited companies having share capital.

** Registrar can take action to remove name of the company u/s.248:

- when company fails to commence its business within one yr of its incorporation, or

- does not compiled sec. 11(1)  (i.e., default in filing INC- 21 within 180 days of its incorporation)

Using 'national' in the name

  Use of word "NATIONAL" in the name of companies or Limited Liability Partnership: MCA has been clarified on 11/02/2014 that no company or LLP should be allowed to be registered with the word ‘National’ as part of its title unless it is a government company and the Central / State government(s) has a stake in it.

Here is the MAC circular : http://www.mca.gov.in/Ministry/pdf/General_Circular_2_2014.pdf 

Company information and Registration around the world

Company details and Registration in various countries

http://www.rba.co.uk/sources/registers.htm

Company Directory

http://www.rba.co.uk/sources/directs.htm

Company law around the world:

http://en.wikipedia.org/wiki/List_of_company_registers#Singapore

Certificate of Incorporation

The Certificate of Incorporation is actually a Simple Doucment which contains the date of registration ,Name of the company incorporated and also where the company was incorporated.The Registrar of Companies in India  is the responsible for issuing the Certificate of Incorporation to Companies.Usually it takes about 2-3 days after submitting the Memorandum and Articles of Association of the Company along with the other documents required for incorporation  with the Registrar of Companies .If the Registrar of Companies  satisfy that the submitted documents has Complied  with the procedures and provisions under the Companies Act,1956 and other Statutory Legislations for the time being in force, then the Registrar of  Companies will issue the Certiifcate of Incorporation.After issuing of Certificate of Incorporation only, the Company will be considered as Legal Entity and  register itself with the other statutory authorities according to the nature of business.Without the Certificate of Incorporation, A  company could not able to open a Bank Account and register with VAT, PAN(Permanent Account Number) & TAN (Tax Account Number) for deducting TDS.For applying of the above facilities, a company should handover the copy of Certificate of Incorporation with the concerned authorities.(e.g. for applying of Importer-Exporter Code,Service Tax ,Central Excise & Customs Act , Copy of Certificate of Incorporation is mandatory).

As per Section 35 of the Companies Act,1956 "A Certificate of Incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the requirements of this Act have been complied with in respect of registration and matters precedent and incidental thereto, and that the association is a company authorised to be registered and duly registered under this act.".

When ever company changes the name of the company during the course of the business  and company has shifted its registered office from one state to other state then Registrar of the companies will issue fresh Certificate of Incorporation with effect to the changes.

So the Certificate of Incorporation is the primary document of the Company and it is very essential to keep safe and preserve it permanently.

When to conduct the Annual General Meeting

As per Section 166 of the Companies Act,1956 Every Company, which is Public or Private, limited by Shares or Guarantee, with or without share capital or Unlimited Company is required to be conduct Annual General Meeting once a year.Every Company must in each year hold an Annual General Meeting not more than fifteen months from the date of Last  annual general meeting of a company.No  approval from regulatory authority is required for hold such Meeting.

As per Section 210 (3) (b) of the Companies Act,1956  everry company is required to hold its subsequent Annual General Meeting within six months from the end of the Financial year.

While reading Sections 166 and 210(3)(b) of the Companies Act,1956 there seems to be some contradictions between the provisions.If the Company follows section 166 and conducts Annual General Meeting within 15 months from the end of the Last Annual General Meeting( taking into consideration of Three Months extended time  given by Registrar of Companies),there could be non-compliance of Section 210(3)(b), for not holding the Annual General Meeting within Six Months from the end of the Financial year.

To overcome the non-compliance situation, the Department of Company Affairs (Now Ministry of Corporate Affairs) has advised that the Annual General Meeting of the Company to be held earlier of the following dates : vide its Circular No.8/45(166)64-PR dated 12-01-1965:

-Six Months from the date of Close of the Financial year.(Section 210(3)(b)

-Within 15 Months from the Last Annual General Meeting.(Section 166(1)

- Last Date of Next Financial year.

Therefore in my opinion, a company can convene a Annual General Meeting within the Periods advised by the Ministry of Corporate Affairs to avoid the Penalty and Contravention of the Sections 166 and 210 of the Companies Act,1956.

MEMBERSHIP OF THE COMPANY

A Company is composed of members,though it has its own entity distinct from members.The Members of a company are the persons who,for the time being,constitute the company, as a corporate entity.


According to section 41 of the Companies Act,1956 defines who are the members as follows:

(1) The Subscribers of the memorandum of a company shall be deemed to have agreed to become members of the Company, and on registration, shall be entered as members in its register of members;
(2) Every other person who agrees in writing to become a member of a company and whose name is entered in its register of members shall, be a member of the company;
(3) Every person holding equity share capital of a company and whose name is entered as beneficial owner in the records of a depository shall be deemed to be a member of the concerned company

In Case of a company limited by shares, the shareholders are the members.Generally speaking, every shareholder is a member and every member is a shareholder.But there is an exception to this statement,a person may be a holder of shares by transfer but would not become its member until the transfer is registered in the books of the company in his favour and his name is entered in the register of members.

Who can become a Member?

In Addition to an Individual, the following may also become a Member of the company

(i) A Company -it must have powers in MOA & AOA to make investments in other Body Corporates

(ii) A registered Co-operative Society

(iii) A Non-resident Indian- No shares can be  issued or transferred to him without the General or Special Approval of Reserve Bank of India and he cannot be admitted as Member of the Indian company without the General or Special Permission of the Reserve Bank of India.

(iv) Minor-Minor is incapable to enter into the contract for being a Member but the Guardian of the Minor could apply for the issue of shares on behalf of the Minor  and the company can allot shares to the guardian.When the minor attains the age of majority,he becomes entitled for the dividend and other benefits of the shareholder.

(v) HUF : Hindu Undivided Family is represented by its Karta.In case of HUF,the shares can be allotted to the name of the Karta in HUF.

(vi) Registered Trade Unions

(vii) Joint Shareholders


Who cannot become a Member?
1.Partnership Firm

2.Legal Representative

3.Pawnee

4.Public Office

5.Membership by a Subsidiary Company to its Holding Company


CESSATION OF MEMBERSHIP:

A person may cease to be a member on the following grounds:

(i) on surrender of shares

(ii) on transfer of shares

(iii) on Buyback of shares

(iv) on death of member

(v) By rescission  of contract of Membership on grounds of misrepresentation or mistake.

(vi) on forfeiture of shares

(vii) on bankrupcty of member/