Law relating to companies

COMPANY LAW AND PRACTICE: A.K. Majumdar, Dr. G.K. Kapoor; Taxmann Allied Services (P) Ltd., 59/32, New Rohtak Road, New Delhi- 110005. Rs. 360.

AS OBSERVED by the authors "Legal framework is an important constituent of the business and corporate environment. No corporate entity can effectively work and survive without meeting its legal obligations. The law relating to companies is perhaps the most significant and all-pervasive amongst the various corporate legislations."

Following the British jurisprudence successive enactments on company law have been passed from time to time and the latest is the Companies Act of 2000.

In chapter one of the book under review, the authors have given the history of company legislations in England and our country. We are having the companies act right from 1850.

Since the book is meant for students in professional institutes the authors have dealt with the corporate and other allied laws topic-wise so that they may be useful to them for easy comprehension.

It is a pity that most of our laws are bristling with complexities containing explanations to sections apart from provisos and illustrations which, even persons with legal acumen find difficult to comprehend. Further almost every enactment entails more amendments from time to time.

Taking the topic "Meaning and nature of a company" the authors have sub-classified it under various headings starting with what a company is, its definition, and its characteristics. Apt quotations of eminent authors and jurists are given. How a company is incorporated, what is its legal entity and the distinction between private limited and public limited companies are elaborately explained, point-by-point.

Every company should have a common seal. It has to work through the agency of human beings, namely directors and other officers and employees, but it can be held bound by only those documents, which bear its signature. Common seal is the official signature of the company.'' While discussing the topics, the authors have given the number of the relevant sections denoting the subject discussed, instead of giving the text of the act. According to the authors the fagade of corporate personality might have to be removed to identify persons who are really guilty in case of fraud. This is known as "lifting the corporate veil."

Sometimes a very minute point may lead to hair-splitting arguments. Is the company a citizen? The authors have answered the question in the negative effectively.

Chapter three discusses all about companies, describing private and public limited companies, the distinction between the two on all aspects such as conversion of private company into public one, and also about statutory companies, limited companies, government companies, subsidiary companies, investment companies and public financial institutions.

Who the promoter of the company is, when promotion begins and ends, his legal position, duties, remedies against him in the event of breach of his duties, his liability, his remuneration, how to register a company, steps to be taken in this regard, certificate of incorporation, aspects about public issue of share on the basis of guideline of the SEBI, issue and non-issue of prospectus are all the important issues to be taken note of before launching any company and the authors discuss them in a lucid manner.

The important and main items &151; articles of association and memorandum of association, distinction between the two, contents, model forms which the company should have and which it should not have, who should sign, power as to alteration of articles, what is alteration, effect of alteration, and binding nature of articles of association on members, directors are all incorporated in chapter six.

Chapter seven discusses all about the prospectus of the company, as enunciated in the Companies Act. After giving the historical background about acceptance of public deposits, the authors furnish details about the meaning of deposits, register of deposits, payment of brokerage, exemptions, advertisements for inviting deposits, accepting them in joint names, return of the deposits and finally the duties of the company secretary regarding deposits and checklist.

The next chapter, a lengthy one, gives in-depth details about shares and there is one on the membership.

Companies are expected to maintain registers and file returns of all their activities; every aspect about this is given. No company can survive with its own funds. It has to make investments and borrow. Procedural aspects in this regard are given and also the issue of debentures of various kind, bonds, various kinds of warrants. How dividend is paid, what is the profit earned by the company, sources for dividend, provisions for depreciation, dividend on equity shares, preference shares, to whom it is payable, unpaid dividend are the subjects discussed in the next chapter.

Chapter 14 deals with all about directors, their appointment, election by rotation, remuneration, qualification, disqualification, duties, number of directors appointed by board, by the Central Government, removable by shareholders, by the Company Law Board, powers of the board of directors, tenure of appointment, general duties, their liability, criminal liability, appointment of managing director, and tenure of appointment.

The next one is very important for those taking the examination to become a company secretary. Starting from the definition of secretary, the authors explain everything about company secretary including practising company secretary.

Stipulations given in the Act have been vividly described under various sub-headings. Their duties and liabilities, and penalty leviable for default are also dealt with.

The next chapter has been devoted to holding of company meeting and general body meeting. The important matter about the companies is account and audit, which is explained in detail.

Winding up of companies is also equally important and the book deals with it, starting from modes of winding up and the procedure for winding up.

K. KRISHNAMURTHI

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