\ud83d\udcd6 Chapter I – Preliminary (Sections 1–2)

Section 1 – Short Title, Extent, Commencement

This Act is called the Companies Act, 2013. It extends to the whole of India. Different sections commenced at different dates as notified by the Central Government.

Section 2 – Key Definitions (for AIBE)

\ud83c\udfe2 Chapter II – Incorporation of Company (Sections 3–22)

Section 3 – Formation of Company

• Public company: 7 or more persons
• Private company: 2 or more persons
• OPC: 1 person (must name a nominee)
• Company may be limited by shares, limited by guarantee, or unlimited

Section 3A – Members Severally Liable in Certain Cases

If members fall below minimum (7 for public, 2 for private) and company carries on business for more than 6 months, every member who knows of this situation is severally liable for all debts contracted during that period.

Section 4 – Memorandum of Association (MOA)

The MOA must state: (a) Name clause, (b) Registered office clause (State), (c) Objects clause, (d) Liability clause, (e) Capital clause, (f) Nominee clause (for OPC only).

Section 5 – Articles of Association (AOA)

AOA contains internal rules for management of the company. Companies limited by guarantee without share capital and unlimited companies must have AOA. Companies limited by shares may adopt Table F (model articles in Schedule I).

Section 6 – Act to Override MOA and AOA

Any provision in MOA, AOA, or any agreement that is inconsistent with this Act shall be void to the extent of inconsistency. The Act always prevails.

Section 7 – Incorporation of Company

For incorporation, the following must be filed with the Registrar: MOA and AOA, declaration, address of registered office, KYC of subscribers/first directors, and consent of first directors. Registrar issues Certificate of Incorporation (COI), which is conclusive evidence of incorporation.

Section 8 – Companies with Charitable Objects (Section 8 Companies)

A company formed for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment, etc., may be incorporated as a Section 8 company. Such company must apply its profits for its objects and cannot pay dividend to its members.

Section 9 – Effect of Registration

From the date of incorporation, the company becomes a body corporate with a common seal, perpetual succession, capacity to hold property, and capacity to sue and be sued in its own name.

Section 10 – Effect of MOA and AOA

MOA and AOA bind the company and its members as if they had been signed by each member individually. Members must pay calls on shares as per MOA.

Section 10A – Commencement of Business

A company (having share capital) incorporated after the commencement of this section cannot commence business or exercise any borrowing powers unless a declaration is filed with the Registrar that every subscriber to MOA has paid for the shares agreed to be taken.

Section 12 – Registered Office

A company must have a registered office within 30 days of incorporation. The registered office determines the jurisdiction of the Registrar. Every company must display its name, registered office address, and CIN (Corporate Identity Number) outside its office and on all official documents.

Section 13 – Alteration of MOA

MOA can be altered by passing a special resolution. Change of name requires central government approval. Change of registered office from one state to another requires approval of the Central Government. Change of objects clause requires special resolution.

Section 14 – Alteration of AOA

AOA can be altered by passing a special resolution. A private company can be converted to a public company or vice versa by altering AOA (with required approvals).

Section 16 – Rectification of Name

If a company is registered with a name identical or similar to an existing company, the Central Government may direct it to change the name within 3 months.

Section 18 – Conversion of Companies

A company already registered may be converted from one class to another, e.g., private to public or unlimited to limited, by complying with applicable provisions.

Sections 19–22 – Important Administrative Provisions

• S.19: Subsidiary company cannot hold shares in its holding company
• S.20: Service of documents on company – can be served by registered post, email, or delivery at registered office
• S.21: Documents can be authenticated by an authorized officer or director
• S.22: Bills of exchange, promissory notes shall be signed by an authorized person on behalf of the company

\ud83d\udcc4 Chapter III – Prospectus and Allotment of Securities (Sections 23–42)

Section 23 – Public Offer vs. Private Placement

A public company may issue securities: (a) to the public through a prospectus, (b) through rights issue or bonus issue, (c) through private placement. A private company can issue securities through: rights issue, bonus issue, or private placement only (not public offer).

Section 24 – SEBI's Power

SEBI regulates the issue and transfer of securities of listed companies and public companies. The Central Government has power over unlisted companies.

Section 25 – Document Deemed to be Prospectus

Any document inviting offers from the public to acquire securities is deemed to be a prospectus even if not called so.

Section 26 – Contents of Prospectus

Every prospectus must contain: details of the company, financial statements, objects of the issue, details of promoters and directors, risk factors, and required declarations. No prospectus shall be issued unless it is dated and signed by every director.

Section 27 – Variation in Terms of Contract

Objects for which money was raised via prospectus cannot be varied without passing a special resolution and publishing it in newspapers. Dissenting shareholders must be given an exit option.

Section 29 – Dematerialization

Public offers must be made in dematerialized form (DEMAT). Securities must be in DEMAT form for public companies.

Section 30 – Advertisement of Prospectus

Advertisement of prospectus must include prescribed details. Any application form must be accompanied by or attached to a memorandum containing salient features of the prospectus.

Sections 31–32 – Shelf and Red Herring Prospectus

• S.31 Shelf Prospectus: Filed once for multiple issuances within a specified period (1 year)
• S.32 Red Herring Prospectus: Prospectus that does not include price or quantum of securities. Details are filled in after price is discovered through book-building.

Section 34 – Criminal Liability for Mis-statements

If a prospectus contains any untrue statement, every person who authorized the issue is punishable with imprisonment up to 10 years and/or fine.

Section 35 – Civil Liability for Mis-statements

Any person who subscribes for securities based on a prospectus containing untrue statements is entitled to compensation from promoters, directors, experts, etc.

Section 36 – Punishment for Fraudulent Investment Inducement

Any person who dishonestly induces another to invest money in securities is punishable under Section 447 (fraud provisions).

Section 38 – Punishment for Personation

Making a false application for securities in another's name is an offence punishable with imprisonment up to 3 years and fine.

Section 39 – Allotment of Securities

Minimum subscription must be received before allotment. If minimum subscription is not received within 30 days of issue of prospectus, all money must be refunded. Application money must be kept in a separate bank account.

Section 40 – Stock Exchange Listing

Every company making a public offer must make an application to one or more recognized stock exchanges for listing. If securities are not admitted on a stock exchange, allotments are void and money must be refunded.

Section 42 – Private Placement

A company may issue securities to a selected group through private placement. Maximum 200 persons in a financial year (excluding QIBs and employees under ESOP). Offer must be made through a private placement offer letter. No fresh offer if previous allotment is pending. Application money must be refunded within 30 days if shares are not allotted.

\ud83d\udcb0 Chapter IV – Share Capital and Debentures (Sections 43–72)

Section 43 – Kinds of Share Capital

Share capital of a company limited by shares consists of: (a) Equity share capital – with or without voting rights; (b) Preference share capital – preferential dividend or repayment rights.

Section 44 – Nature of Shares

Shares and debentures are movable property and transferable as per the AOA.

Section 46 – Share Certificate

A share certificate is prima facie evidence of title to shares. It must be issued within 2 months of allotment or transfer. Must be under common seal (if any) and signed by at least 2 directors and the company secretary.

Section 47 – Voting Rights

Equity shareholders have voting rights on all matters. Preference shareholders have voting rights only on matters directly affecting their rights, or if dividend is unpaid for 2 years (cumulative) or 3 years (non-cumulative).

Section 48 – Variation of Shareholders' Rights

Rights attached to a class of shares may be varied with the consent of 3/4 of holders of that class (special resolution) or by court/tribunal order.

Section 52 – Share Premium

Securities premium can only be used for: issuing fully paid bonus shares, writing off preliminary expenses, writing off discount on issue of shares/debentures, buying back shares, or meeting certain expenses. Cannot be used to pay dividends.

Section 53 – Prohibition on Issue at Discount

A company cannot issue shares at a discount (below face value). Exception: sweat equity shares.

Section 54 – Sweat Equity Shares

A company may issue sweat equity shares to directors or employees for their know-how or intellectual property rights at a discount or for non-cash consideration. Must be approved by special resolution. Lock-in period of 3 years.

Section 55 – Preference Shares

A company cannot issue irredeemable preference shares. Preference shares must be redeemed within 20 years. Exception: infrastructure companies (up to 30 years).

Section 56 – Transfer of Securities

Transfer of securities must be in prescribed form (SH-4). Company must register transfer within 30 days of lodgment. Listed companies must use DEMAT form.

Section 58 – Refusal of Registration and Appeal

If company refuses to register transfer, it must send notice within 30 days. Aggrieved party may appeal to NCLT within 30 days of such notice.

Section 61 – Alteration of Share Capital

A company limited by shares may, if so authorized by AOA, alter its share capital by: increasing, consolidating, converting, subdividing, or cancelling (surrendering) unissued shares. Requires ordinary resolution.

Section 62 – Further Issue of Share Capital (Rights Issue)

When a company proposes to increase subscribed share capital, shares must first be offered to existing shareholders (rights issue) in proportion to their paid-up capital. Offer must remain open for 15–30 days. Shareholders may renounce their rights. Rights can also be forfeited if not exercised.

Section 63 – Bonus Shares

A company may issue fully paid bonus shares out of: free reserves, securities premium account, or capital redemption reserve account. Cannot issue bonus shares out of revaluation reserves. No bonus shares if company has outstanding fixed deposits or pending statutory dues.

Section 66 – Reduction of Share Capital

Requires: special resolution + confirmation by Tribunal (NCLT). Company can reduce share capital by extinguishing or reducing liability, cancelling paid-up capital, or paying off excess capital.

Section 67 – Restrictions on Purchase of Own Shares

Company cannot directly or indirectly give loans or purchase its own shares or shares of holding company (to prevent market manipulation). Employees' trusts are exceptions.

Section 68 – Buy-back of Securities

Company may buy back its own shares if: authorized by AOA, special resolution (or board resolution for up to 10% of total paid-up capital). Restrictions: debt-equity ratio ≤ 2:1 after buy-back; maximum 25% of paid-up capital per year. Bought-back shares must be extinguished within 7 days.

Section 70 – Prohibition on Buy-back

No buy-back within 1 year after buy-back, unless permitted. No buy-back if company has defaulted on repayment of deposits, debentures, or dividends.

Section 71 – Debentures

A company may issue debentures with or without voting rights. Debentures with voting rights cannot be issued. Secured debentures must have trust deed. Debenture Redemption Reserve (DRR) must be created. Debentures cannot be converted into shares unless approved by special resolution.

Section 72 – Power to Nominate

A holder of securities of a company may nominate (in prescribed form) a person to whom securities shall vest in the event of their death. Nomination facility is available for shareholders and debentureholders.

\ud83c\udfe6 Chapter V – Acceptance of Deposits (Sections 73–76A)

Section 73 – Prohibition on Acceptance of Deposits from Public

A company (other than a banking company) shall not invite, accept, or renew deposits from the public unless it complies with prescribed conditions. Even an eligible company must not accept deposits exceeding the limits prescribed.

Exceptions – A company may accept deposits from its members if it complies with conditions: pass a resolution at general meeting, obtain credit rating, create deposit insurance, file a return, and maintain liquid assets of at least 20% of amount maturing the following year.

Section 74 – Repayment of Deposits Accepted Before Commencement

All deposits accepted before the 2013 Act must be repaid within 1 year from commencement of this section, or on the date of maturity, whichever is earlier.

Section 75 – Damages for Fraud

Any depositor can sue the company for damages if deposits are not repaid due to fraud or misrepresentation. This does not affect criminal liability.

Section 76 – Eligible Companies Accepting Deposits from Public

A public company with net worth ≥ ₹100 crore or turnover ≥ ₹500 crore (eligible company) may accept deposits from public if it complies with conditions including: credit rating, deposit insurance, security creation, filing of return.

Section 76A – Punishment for Contravention

Contravention of Section 73 or 76: fine of minimum ₹1 crore to maximum ₹10 crore, plus imprisonment of minimum 7 years. Officers are personally liable.

\ud83d\udd12 Chapter VI – Registration of Charges (Sections 77–87)

Section 77 – Duty to Register Charges

Every company creating a charge on its property or assets must register it with the Registrar within 30 days of creation. On application, the Registrar may allow registration within 300 days (previously 60 days extended to 300 days with fee). After 300 days, only the Central Government can condone the delay.

Section 78 – Application for Registration

If a company fails to register, the chargeholder itself may apply for registration within 30 days of creation. The Registrar shall give notice to the company.

Section 79 – Section 77 Applies to Certain Matters

Registration of charge also applies to acquisition of property subject to existing charge and modification of terms of existing charge.

Section 80 – Date of Notice of Charge

Registration of charge gives constructive notice to all subsequent holders. After registration, everyone is deemed to have notice of the charge.

Section 81 – Register of Charges

Registrar must maintain a register of all charges for each company. This register is open to inspection by any person.

Section 82 – Company to Report Satisfaction of Charge

When a charge is satisfied (fully paid off), the company must file intimation with the Registrar within 30 days.

Section 83 – Registrar's Power to Register Satisfaction

If no intimation is received, the Registrar may register satisfaction on his own after issuing notice to the company and chargeholder.

Section 84 – Intimation of Receiver or Manager

If a receiver or manager is appointed over charged property, the company must file notice with Registrar within 30 days of appointment or cessation.

Section 85 – Company's Register of Charges

Every company must keep its own internal register of charges at its registered office. Open for inspection by members and creditors.

Section 86 – Punishment for Contravention

Failure to register charge: fine on company and every officer in default.

Section 87 – Rectification by Central Government

Central Government may allow rectification in the Register of Charges in case of omission or misstatement, on application.

⚙️ Chapter VII – Management and Administration (Sections 88–122)

Section 88 – Register of Members

Every company must maintain a register of members. For a company limited by shares, register must contain name, address, occupation, folio no., shares held, and date of entry. Listed companies must maintain register through RTA (Registrar and Transfer Agent).

Section 89 – Declaration of Beneficial Interest

If shares are held by a person but beneficial interest belongs to another, both must declare this to the company in prescribed forms.

Section 90 – Register of Significant Beneficial Owners

Every company must maintain a register of significant beneficial owners (SBOs), i.e., persons holding 10% or more beneficial interest. SBOs must file a declaration with the company.

Section 92 – Annual Return

Every company must file an annual return with the Registrar within 60 days of AGM. It contains: address, principal activities, members, directors, debentureholders, shareholding pattern, etc. The annual return of a listed company or company with turnover ≥ ₹10 crore must be signed by a Company Secretary in practice.

Section 96 – Annual General Meeting (AGM)

Every company (except OPC) must hold an AGM. First AGM within 9 months of end of first financial year. Subsequent AGMs: within 6 months of end of financial year. Gap between two AGMs must not exceed 15 months. AGM must be held at registered office or same city as registered office.

Section 100 – Extraordinary General Meeting (EGM)

EGM may be called by the Board on its own or on requisition of members holding ≥ 1/10th of paid-up voting capital. Requisitionists may themselves call the meeting if the Board fails to call it within 21 days of receiving requisition.

Section 101 – Notice of Meeting

Notice must be given at least 21 days before the meeting. Shorter notice permitted if consent of at least 95% of members is obtained. Notice must contain business agenda and explanatory statement for special business.

Section 102 – Explanatory Statement

Explanatory statement must accompany the notice for all special business (non-routine items). It must disclose all material facts including nature of concern or interest of directors.

Section 103 – Quorum for Meetings

• Public company with ≤ 1000 members: quorum = 5 members
• Public company with 1001–5000 members: quorum = 15 members
• Public company with > 5000 members: quorum = 30 members
• Private company: quorum = 2 members

Section 105 – Proxies

A member can appoint any person as proxy to attend and vote on their behalf. Proxy must be filed with company at least 48 hours before the meeting. A proxy can vote only on a poll, not on show of hands. A member can appoint only 1 proxy at the same time. Proxy has no right to speak at the meeting.

Section 107 – Voting by Show of Hands

At general meetings, decisions are initially taken by show of hands (1 vote per member). Result can be challenged by demanding a poll.

Section 108 – Voting through Electronic Means (e-voting)

Every listed company or company with ≥ 1000 members must provide e-voting facility. Members who have voted by e-voting cannot vote again at the meeting.

Section 109 – Demand for Poll

Poll may be demanded by members holding ≥ 1/10th of voting rights, or by minimum 5 members present (for resolutions requiring 3 or more directors present).

Section 110 – Postal Ballot

Certain resolutions notified by the Central Government must be passed only by postal ballot (including e-voting). One Person Companies and companies with ≤ 200 members may be exempt.

Section 114 – Ordinary and Special Resolutions

• Ordinary Resolution: Simple majority (more than 50% of votes cast)
• Special Resolution: At least 3/4 of votes cast in favour

Section 117 – Filing of Resolutions

Certain resolutions and agreements must be filed with the Registrar within 30 days. Includes special resolutions and agreements relating to appointment of managing director, etc.

Section 118 – Minutes

Every company must maintain minutes of all general meetings and Board meetings within 30 days of the meeting. Minutes shall be signed by the Chairman. Minutes are evidence of proceedings.

Section 121 – Report on AGM

Every listed public company must file a report on AGM with the Registrar within 30 days of the conclusion of the AGM.

\ud83d\udcb5 Chapter VIII – Declaration and Payment of Dividend (Sections 123–127)

Section 123 – Declaration of Dividend

Dividend shall only be declared out of: (a) profits of the company after providing for depreciation, (b) accumulated profits transferred to free reserves (with restrictions), or (c) money provided by Central/State Government as guarantee. Dividend cannot be declared from capital. Dividend must be deposited in a separate scheduled bank account within 5 days of declaration. Dividend is payable only in cash (cheque/warrant/electronic mode). No dividend on equity shares if company has defaulted on accepting deposits.

Interim dividend may be declared by the Board during the financial year or before the AGM out of surplus profits.

Section 124 – Unpaid Dividend Account

If dividend declared is not paid or claimed within 30 days, the company must transfer it to an "Unpaid Dividend Account" in a scheduled bank within 7 days of expiry of 30 days. This remains in the account for 7 years.

Section 125 – Investor Education and Protection Fund (IEPF)

After 7 years in Unpaid Dividend Account, the amount is transferred to the IEPF. Shares for which dividend has not been paid for 7 consecutive years are also transferred to IEPF. Shareholders may claim back from IEPF.

Section 126 – Right to Dividend Held in Abeyance

If transfer of shares is pending registration, the right to dividend is held in abeyance until registration is complete.

Section 127 – Punishment for Failure to Pay Dividend

If declared dividend is not paid within 30 days, the company and every officer in default is liable to imprisonment up to 2 years and fine of minimum ₹1000 per day of default.

\ud83d\udcca Chapter IX – Accounts of Companies (Sections 128–138)

Section 128 – Books of Account

Every company must maintain books of account and other relevant books and papers at its registered office. Minimum retention period: 8 years. For companies under investigation: as long as investigation requires. Books may be kept in electronic form. Branch offices must also maintain accounts.

Section 129 – Financial Statement

The Board must prepare financial statements for each financial year. Financial statements must give a true and fair view and comply with accounting standards. For holding companies, consolidated financial statements are mandatory. Statement must be laid before AGM.

Section 130 – Re-opening of Accounts

Accounts can be re-opened on order of: Central Government, Income Tax authorities, SEBI, or any court or tribunal. Voluntary re-opening requires Tribunal (NCLT) approval.

Section 131 – Voluntary Revision

If the Board believes financial statements or Board's report are not in compliance with law, they may prepare revised statements with NCLT's approval within 3 years of original filing.

Section 132 – National Financial Reporting Authority (NFRA)

NFRA is constituted by the Central Government to: recommend accounting and auditing standards, monitor and enforce compliance, investigate accountants for misconduct. NFRA has power to debar CA or CA firms.

Section 133 – Accounting Standards

The Central Government may prescribe accounting standards (Indian AS / Ind AS) on recommendation of NFRA and in consultation with ICAI.

Section 134 – Board's Report

Financial statements must be signed by at least 2 directors and the CEO/Manager/CS. The Board's report must include: extract of annual return, number of Board meetings, Directors' Responsibility Statement, internal financial control statement, CSR policy (if applicable), related party transaction details, and explanation for qualifications in auditor's report.

Section 135 – Corporate Social Responsibility (CSR)

CSR applies to companies with: net worth ≥ ₹500 crore, or turnover ≥ ₹1000 crore, or net profit ≥ ₹5 crore in any financial year. Such companies must spend at least 2% of average net profit of preceding 3 years on CSR activities. CSR Committee of the Board is mandatory. Unspent CSR amount must be transferred to a specified fund within 6 months of financial year end.

Section 136 – Right to Copies

A company must send copies of financial statements (including auditor's report and Board's report) to every member, debentureholder, and trustee at least 21 days before AGM.

Section 137 – Filing with Registrar

Every company must file copy of financial statements with the Registrar within 30 days of AGM. Companies that need not hold AGM (OPC) must file within 180 days from end of financial year.

Section 138 – Internal Audit

Certain classes of companies (as prescribed) must appoint an internal auditor. The internal auditor may be a CA, CWA (Cost Accountant), or any other professional as decided by the Board.

\ud83d\udd0d Chapter X – Audit and Auditors (Sections 139–148)

Section 139 – Appointment of Auditors

Every company must appoint an individual auditor or firm of auditors. First auditor is appointed by the Board within 30 days of incorporation. If Board fails, members appoint at EGM within 90 days. Subsequent auditors are appointed at AGM for a term of 5 years. Auditor must be a Chartered Accountant.

Rotation of Auditors: Listed companies and certain other companies must rotate individual auditors after 5 years and audit firms after 10 years. A person who served as auditor cannot be re-appointed for 5 years (cooling off period) after completing the maximum term.

Section 140 – Removal / Resignation of Auditor

An auditor can only be removed before expiry of term with: special resolution + Central Government's prior approval. If auditor resigns, he must file the reason for resignation with the company and the Registrar within 30 days. Auditor who resigns must also give a statement on whether any fraud is suspected.

Section 141 – Eligibility and Disqualifications

A person is not eligible to be auditor if: (a) holding shares of the company; (b) indebted to the company for more than ₹5 lakh; (c) has given a guarantee for ₹1 lakh or more; (d) is a director/employee of the company; (e) is a person whose relative is a director/employee; (f) is in full-time employment elsewhere; (g) is convicted of fraud and 10 years have not elapsed.

A firm is eligible only if majority of partners are Chartered Accountants and all partners are duly qualified. An auditor of a holding company cannot audit its subsidiary.

Section 142 – Remuneration of Auditors

Remuneration of first auditor is fixed by Board. Subsequent auditors' remuneration is fixed at AGM. Auditor's remuneration must be disclosed in the financial statements.

Section 143 – Powers and Duties of Auditors

Auditor has the right to: access books of accounts, attend general meetings, receive all information necessary. Auditor must report on: whether financial statements give a true and fair view, compliance with accounting standards, adequacy of internal financial controls, and any fraud found during audit. If fraud above ₹1 crore is detected, auditor must report to Central Government; below ₹1 crore, report to audit committee/Board.

Section 144 – Auditor Not to Render Certain Services

An auditor cannot render the following services to the company being audited (or its holding or subsidiary): accounting/bookkeeping, internal audit, investment banking, insurance, management services, actuarial services, or any prescribed service. This is to maintain independence.

Section 145 – Auditor to Sign Reports

Only the individual auditor, or the partner of the audit firm responsible for the audit, must sign the audit report. Audit report must be in prescribed form.

Section 146 – Auditors to Attend AGM

An auditor is entitled to attend any general meeting of the company and to receive notices and communications. Auditor may make a statement at the AGM on matters that concern him as auditor.

Section 147 – Punishment for Contravention

If an auditor willfully certifies a false statement, he is liable to imprisonment up to 1 year and fine up to ₹25 lakh. If fraud is committed by the auditor, punishment under Section 447 applies (imprisonment up to 10 years).

Section 148 – Cost Audit

The Central Government may order cost audit for certain companies in specified industries. The cost auditor must be a Cost and Works Accountant (CWA/CMA).

\ud83d\udc54 Chapter XI – Appointment and Qualifications of Directors (Sections 149–172)

Section 149 – Board of Directors Composition

• Every public company: minimum 3 directors
• Private company: minimum 2 directors
• OPC: minimum 1 director
• Maximum directors: 15 (can be increased by special resolution)
• Every listed company must have ≥ 1/3 independent directors
• Every public company with ≥ 3 directors must have at least 1 woman director
• Every listed entity must have at least 2 independent directors

Independent Director (S.149)

• Not a promoter or employee of the company or its subsidiary
• No material pecuniary relationship with the company in the past 2 years
• Not a relative of any director/KMP of the company
• Term: up to 5 consecutive years; re-appointment for another 5 years possible but then 3-year cooling off period required
• Must give a declaration of independence annually

Section 152 – Appointment of Directors

Directors are appointed at general meeting (AGM). First directors are specified in AOA or appointed by subscribers to MOA. 2/3 of total directors of a public company are subject to retirement by rotation. Directors must file consent to act as director (Form DIR-2).

Sections 153–158 – DIN (Director Identification Number)

• S.153: Every person who is or intends to become a director must apply for DIN
• S.154: DIN must be obtained before appointment
• S.155: No person shall obtain or possess more than one DIN
• S.156: Company must inform Registrar of any change in particulars of director
• S.157: Company to inform Registrar of DIN of its directors
• S.158: Obligation to indicate DIN in all correspondence

Section 160 – Right to Stand as Director

Any person (not being a retiring director) may stand for directorship by giving 14 days' notice to the company and depositing ₹1 lakh (refundable if elected or gets ≥ 25% votes).

Section 161 – Additional, Alternate, and Nominee Directors

• Additional director: Appointed by Board; holds office until next AGM
• Alternate director: Appointed to act for absent original director; cannot hold office longer than the absent director
• Nominee director: Appointed by third parties (banks, financial institutions)

Section 164 – Disqualification of Directors

A person is disqualified if: convicted of any offence punishable with imprisonment ≥ 6 months (5-year disqualification); company has failed to file annual returns or financial statements for 3 consecutive years; company has defaulted on repayment of deposits, debentures, or dividends for ≥ 1 year.

Section 165 – Maximum Directorships

A person cannot be a director in more than 20 companies at any time. Maximum 10 public companies. This limit does not include directorship in Section 8 companies.

Section 166 – Duties of Directors

• Act in good faith in the best interests of the company, its employees, shareholders, community, and environment
• Exercise duties with due care and diligence
• Not involve in situations of conflict of interest
• Not achieve undue personal gain at the expense of the company
• Not assign their duties to others

Section 167 – Vacation of Office of Director

A director vacates office if: absent from all Board meetings for 12 months without leave; becomes disqualified; convicted of certain offences; fails to pay calls on shares held; convicted of moral turpitude.

Section 168 – Resignation of Director

A director may resign by giving notice to the company. Company must intimate the Registrar within 30 days. Director must also file his own intimation with Registrar. Resignation is effective when notice is received by the company.

Section 169 – Removal of Director

A director (except a director appointed by Tribunal) may be removed by ordinary resolution at a general meeting. Special notice of 14 days required. Director must be given opportunity to be heard. Director can make a representation to be read at the meeting.

\ud83c\udfdb️ Chapter XII – Meetings of Board and Its Powers (Sections 173–193)

Section 173 – Meetings of Board

Board must meet at least 4 times a year. Maximum gap between two consecutive Board meetings: 120 days. First Board meeting must be held within 30 days of incorporation. Participation via video conferencing is permitted for most items except: approval of financial statements, CSR, related party transactions (physical presence required).

Section 174 – Quorum for Board Meetings

Quorum = 1/3 of total strength of Board (rounded up) or 2 directors, whichever is higher. If quorum cannot be met due to disqualification or interest, the meeting can still proceed with remaining directors if quorum is met.

Section 175 – Passing of Resolution by Circulation

Resolutions may be passed by circulation (without a meeting) if approved by majority of directors entitled to vote. But certain matters (like financial statements) cannot be decided by circulation.

Section 177 – Audit Committee

Mandatory for: listed companies, and certain specified companies. Minimum 3 directors, majority of whom must be independent directors. Chairperson must be independent director. Powers: oversee financial reporting, review auditor's reports, recommend appointment/removal/remuneration of auditor, review related party transactions.

Section 178 – Nomination and Remuneration Committee

Mandatory for: listed companies and specified public companies. Minimum 3 directors, all non-executive, at least 1/2 must be independent. Powers: identify persons for senior positions, lay down criteria for independence, formulate remuneration policy.

Section 179 – Powers of Board

Board may exercise all powers of the company including making calls on shares, authorizing buy-back, issuing debentures, borrowing money, investing company funds, granting loans, and approving financial statements. Certain powers can be delegated; others cannot.

Section 180 – Restrictions on Board's Powers

The Board can exercise the following powers only with special resolution of general meeting: (a) sell/lease/dispose of substantial undertaking; (b) remit/give time to directors for repayment of calls; (c) borrow money in excess of paid-up capital + free reserves + securities premium (i.e., net worth).

Section 181 – Contributions to Political Parties

Company (except a government company) may contribute to political parties. Amount cannot exceed 7.5% of average net profits of preceding 3 financial years. Approval by special resolution required.

Section 182 – Prohibition on Political Contributions

No contributions to registered political parties by: government companies, companies in existence for less than 3 years.

Section 184 – Disclosure of Director's Interest

A director must disclose his interest in any company, firm, or body corporate at the first Board meeting (Form MBP-1). This must be renewed every year. Interested director cannot vote on the resolution concerning the matter in which he is interested.

Section 185 – Loan to Directors

No company shall advance any loan, including book debt, or give any guarantee or security in connection with any loan to: any director of the company or its holding, subsidiary, or associate company; or any person in whom a director is interested. Exceptions include: loans to MD/WTD as part of service conditions; loans to employees on same terms.

Section 186 – Loans and Investments

A company's investments in securities, loans to bodies corporate, or guarantees/securities shall not exceed the limit of: 60% of paid-up share capital + free reserves + securities premium, OR 100% of free reserves + securities premium – whichever is higher. Exceeding this limit requires special resolution and approval of the Public Financial Institution (if any term loan is outstanding).

Section 188 – Related Party Transactions

A company cannot enter into certain transactions with related parties (sale/purchase of goods, services, property, leasing, appointment of agent or employment) without: Board's approval (and in certain cases, shareholder's ordinary resolution). Listed companies require shareholder approval (ordinary resolution) where the value exceeds 10% of annual turnover or ₹100 crore. The interested director/member cannot vote on the resolution.

Section 189 – Register of Contracts with Related Parties

Every company must maintain a register of contracts/arrangements in which directors are interested. Open for inspection by members.

\ud83d\udc51 Chapter XIII – Managerial Personnel (Sections 196–205)

Section 196 – Appointment of Managing Director

A company (other than a private company) cannot appoint any person as MD, WTD, or Manager for more than 5 years at a time. Re-appointment is possible but not earlier than 1 year before expiry of tenure. A person below 21 or above 70 years cannot be appointed except with shareholders' special resolution (for above 70).

Section 197 – Overall Maximum Managerial Remuneration

Total managerial remuneration payable by a public company to all directors (executive and non-executive), including MD, WTD, and Manager, shall not exceed 11% of net profits of the company in a financial year. If no profits or inadequate profits, remuneration may be paid as per Schedule V with Central Government approval (in some cases, only shareholders' approval).

• MD or WTD: maximum 5% of net profits
• If more than one MD/WTD: maximum 10% collectively
• Non-executive directors (sitting fees + commission): maximum 1% of net profits (3% for companies without MD/WTD)

Section 198 – Calculation of Net Profits

Net profits for managerial remuneration are calculated as per the formula in Section 198 (additions: depreciation provisions, taxes, excess managerial remuneration; deductions: normal depreciation, capital losses, etc.).

Section 203 – Key Managerial Personnel (KMP)

Every listed company and public company with paid-up share capital ≥ ₹10 crore must have the following KMP: MD or CEO or Manager, Company Secretary (CS), and Chief Financial Officer (CFO). Whole-time director may also be a KMP. A single individual cannot hold the position of Chairman and MD/CEO simultaneously (for listed companies from April 2020).

Section 204 – Secretarial Audit

Secretarial Audit is mandatory for: listed companies, and public companies with paid-up capital ≥ ₹50 crore or turnover ≥ ₹250 crore. Secretarial audit must be conducted by a Company Secretary in practice (PCS). Report must be annexed to the Board's report.

Section 205 – Functions of Company Secretary

CS is responsible for: ensuring that the company complies with applicable secretarial standards, provides assistance to Board in conduct of meetings, manages investor relations, files returns and documents with Registrar, ensures maintenance of registers, and assists in corporate governance.

\ud83d\udd0e Chapter XIV – Inspection, Inquiry, and Investigation (Sections 206–229)

Section 206 – Power of Registrar

The Registrar may call for information, explanation, or documents from the company if it appears that the company is not carrying on its business or is not complying with the law.

Section 207 – Conduct of Inspection

Inspectors appointed by the Central Government may enter premises, inspect documents, examine any person, and may seize books and documents. The company's officers must cooperate fully.

Section 208 – Report on Inspection

After inspection, the inspector submits a report to the Central Government. The report is admissible as evidence in legal proceedings.

Section 210 – Investigation by Central Government

The Central Government may order an investigation if: (a) the Tribunal on receipt of a report or on petition by not less than 100 members or members holding 1/10th of voting rights orders it; (b) company by special resolution resolves to investigate; (c) in public interest.

Section 211 – Serious Fraud Investigation Office (SFIO)

SFIO is a multi-disciplinary body comprising experts from various departments (finance, law, IT, forensic accounting) to investigate corporate fraud. The Central Government may assign cases to SFIO. SFIO has powers of a civil court. Once SFIO takes over investigation, no other investigating authority can investigate the same matter.

Section 212 – Investigation by SFIO

If SFIO investigation reveals fraud: the arrested person is not entitled to bail if the court believes the charge is prima facie true, unless special reasons are recorded. This is stricter than ordinary criminal law.

Section 213 – Investigation of Company's Affairs

The Tribunal may order investigation on application by: (a) members holding ≥ 1/10th of issued share capital, or (b) any court.

Section 216 – Investigation of Ownership

Central Government may investigate membership to determine true beneficial ownership of the company (to identify those controlling the company).

Section 241 (also relevant here) – Petition for Prevention of Oppression

This is dealt with under Chapter XVI below.

\ud83e\udd1d Chapter XV – Compromises, Arrangements, and Amalgamations (Sections 230–237)

Section 230 – Power to Compromise

When a compromise or arrangement is proposed between a company and its creditors (or any class of them) or members (or any class of them), an application may be made to the Tribunal (NCLT). The Tribunal may order a meeting of creditors or members. The compromise is binding if: agreed to by a majority in number representing 3/4 in value (of creditors/members present and voting) + sanctioned by the Tribunal.

Section 231 – Power of Tribunal to Enforce Compromises

The Tribunal can enforce the compromise and make orders to ensure implementation. All parties, including the company, are bound by the Tribunal's order.

Section 232 – Merger and Amalgamation

Two or more companies may merge or amalgamate. Application to Tribunal required. The Tribunal will fix a date for meetings of creditors and members. Scheme must be approved by 3/4 in value. Tribunal considers interests of creditors, members, and public. On sanction, the Tribunal issues an order that is filed with the Registrar.

Section 233 – Fast Track Merger

Small companies and holding company with its wholly-owned subsidiary can merge using a simplified fast-track process without Tribunal's approval. Only Central Government approval required. This process is faster and cheaper.

Section 234 – Merger with Foreign Company

A foreign company may merge with an Indian company or vice versa, subject to RBI regulations and compliance with applicable laws.

Section 235 – Power to Acquire Shares of Dissenting Shareholders (Squeeze Out)

If a company acquires 90% or more shares of the target company through a scheme, it may compulsorily acquire the remaining shares from dissenting shareholders within 4 months of the scheme. The price must be fair.

Section 236 – Purchase of Minority Shareholding

When a company holds 90% or more shares of a class in another company, it may buy out remaining shareholders. Minority shareholders may also require the acquirer to buy their shares at a fair price.

Section 237 – Global Settlement / Arrangement

The Tribunal's sanction of a scheme operates as a discharge and is binding on all parties (including dissenting creditors who were part of the represented class).

⚔️ Chapter XVI – Prevention of Oppression and Mismanagement (Sections 241–246)

Section 241 – Application to Tribunal

Any member of a company may apply to the Tribunal if: (a) company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member; or (b) material change in management has occurred that is likely to be prejudicial to the company.

Eligibility to file petition: At least 100 members (or 1/10th of total members, whichever is less) in a company limited by shares, or members holding ≥ 1/10th of issued share capital. For companies not having share capital: ≥ 1/5th of total members.

Section 242 – Powers of Tribunal

The Tribunal, after hearing, may: (a) regulate future conduct of affairs; (b) purchase minority shares at a price fixed by Tribunal; (c) terminate, set aside, or modify any agreement; (d) set aside any fraudulent transaction; (e) appoint a administrator to manage the company; (f) provide for any other appropriate order including winding up.

Section 243 – Consequence of Termination or Modification

If the Tribunal terminates or modifies an agreement involving a managing director or director, such person cannot be appointed again in that company for 5 years without Tribunal's permission.

Section 244 – Right to Apply

Details of who can file petition are elaborated here (consistent with Section 241). The Tribunal may allow any member to present the petition if it believes it is just and equitable. The Central Government may file a petition in the public interest.

Section 245 – Class Action Suits

Members and depositors may collectively file a class action suit against the company, its directors, auditors, or any expert. Threshold: 100 members or members holding ≥ 1/10th of shares (or depositors: 100 or 1/10th of total depositors).

The Tribunal can award compensation and restrain the company from acting in a manner prejudicial to the interests of members/depositors. Applicable to listed companies, companies with paid-up capital ≥ ₹10 crore, or companies with ≥ ₹100 crore deposits.

Section 246 – Application of Certain Provisions

Provisions relating to evidence and interim orders under this Chapter are specifically applicable to proceedings for prevention of oppression and mismanagement.

⚰️ Chapter XX – Winding Up (Sections 270–365)

Section 270 – Modes of Winding Up

A company can be wound up in two ways: (a) by the Tribunal (compulsory winding up); (b) voluntary winding up.

Section 271 – Grounds for Winding Up by Tribunal

• Company unable to pay its debts
• Company resolves by special resolution to be wound up by Tribunal
• Company acted against sovereignty/security of India
• Tribunal finds it just and equitable to wind up the company
• Company has made a default in filing financial statements/annual returns for 5 consecutive years
• Fraudulent conduct of affairs

Section 272 – Petition for Winding Up

A petition for winding up by the Tribunal may be presented by: the company, creditors, any contributory, the Registrar, Central/State Government, or SEBI (for listed companies).

Section 273 – Powers of Tribunal on Winding Up Petition

On receipt of petition, Tribunal may: dismiss it, make an interim order, appoint a provisional liquidator, or make a winding up order.

Section 275 – Appointment of Liquidator

On winding up order, the Tribunal appoints an official liquidator from the panel maintained by the Central Government. Liquidator is an officer of the Tribunal.

Section 278 – Effect of Winding Up Order

A winding up order operates in favour of all creditors and contributories equally, as if made on application of all.

Section 279 – Stay of Suits

Once a winding up order is made, no suit or legal proceeding can be commenced against the company without Tribunal's leave.

Section 290 – Powers of Liquidator

Liquidator can: carry on business, bring/defend legal proceedings, sell company's property, draw bills of exchange, do all things necessary for winding up the affairs.

Section 326 – Overriding Preferential Payments

In winding up, the following are paid in priority: (a) workmen's dues for preceding 24 months; (b) dues owed to secured creditors (pari passu with workmen's dues for 24 months).

Section 327 – Preferential Payments

Priority payments in winding up (after workmen's dues): government taxes (up to 12 months), local authority dues, employees' wages (up to 12 months), provident fund/pension contributions, employee compensation.

Section 329 – Fraudulent Preferences

Any transfer/payment made within 6 months before winding up with intent to prefer a creditor over others may be set aside by the Tribunal.

Section 339 – Liability for Fraudulent Trading

If winding up reveals that any business was carried on with intent to defraud creditors, the persons knowingly party to it are personally liable for all debts of the company.

Section 361 – Summary Procedure for Liquidation

For companies with assets not exceeding ₹1 crore, a summary winding up procedure is available. Conducted by official liquidator without Tribunal's formal involvement in each step.

Voluntary Winding Up

Under the 2013 Act, voluntary winding up is now primarily governed by the Insolvency and Bankruptcy Code, 2016 (IBC). Section 304 onwards provide for voluntary winding up but companies may use IBC route. Member's voluntary winding up: company is solvent; Directors must give solvency declaration. Creditors' voluntary winding up: company is insolvent; creditors take control.

\ud83c\udf0d Foreign Companies (Sections 379–393)

Section 379 – Applicability

Provisions relating to foreign companies apply to any company or body corporate incorporated outside India that has a place of business in India (whether by itself or through an agent, physically or through electronic mode).

Section 380 – Documents Required to be Delivered

Within 30 days of establishing a place of business in India, a foreign company must file with the Registrar: (a) charter/MOA/AOA or equivalent constitutive documents; (b) list of directors and secretary; (c) particulars of at least one authorized person in India; (d) address of principal place of business in India.

Section 381 – Accounts of Foreign Companies

Foreign companies must maintain books of accounts in India (or send copy to India) and file accounts in prescribed form with the Registrar within 6 months of end of financial year.

Section 382 – Display of Name and Country of Incorporation

Foreign companies must display their name, country of incorporation, and limited liability (if applicable) at every place of business, on all letterheads, and all official documents.

Section 384 – Debentures of Foreign Companies

Foreign companies may issue prospectus or offer debentures in India subject to SEBI regulations.

Section 387 – Winding Up

A foreign company may be wound up as an unregistered company even if it is dissolved in its home country.

Section 392 – Punishment

Contravention by a foreign company: fine up to ₹3 lakh; for continuing default, ₹50,000 per day.

⚖️ NCLT, NCLAT, and Related Provisions (Sections 407–434)

Section 407 – Definitions

Defines terms specific to NCLT/NCLAT: "Appellate Tribunal" means NCLAT; "Tribunal" means NCLT; "President" means President of NCLT; "Chairperson" means Chairperson of NCLAT.

Section 408 – Constitution of NCLT

National Company Law Tribunal (NCLT) is constituted by the Central Government. It consists of a President and Judicial and Technical Members. NCLT exercises all powers previously held by the Company Law Board, the Board for Industrial and Financial Reconstruction (BIFR), and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR), and courts for company matters.

Section 410 – Constitution of NCLAT

National Company Law Appellate Tribunal (NCLAT) is constituted by the Central Government as the appellate body for appeals from NCLT orders. NCLAT orders are further appealable to the Supreme Court.

Section 419 – Jurisdiction of NCLT

NCLT has jurisdiction over matters arising under the Companies Act and IBC. The President of NCLT distributes business among benches.

Section 420 – Orders of Tribunal

NCLT may make, amend, modify, set aside, or rescind any order. Any party aggrieved by an NCLT order may appeal to NCLAT within 45 days.

Section 421 – Appeal from NCLT to NCLAT

Any person aggrieved by an order of NCLT may appeal to NCLAT within 45 days of the order. NCLAT may admit appeal even after 45 days if sufficient cause is shown.

Section 423 – Appeal to Supreme Court

Any person aggrieved by an order of NCLAT may file an appeal to the Supreme Court within 45 days on any question of law arising from the order.

Section 424 – Procedure Before Tribunal

NCLT follows a summary procedure. It is not bound by the Code of Civil Procedure but is guided by the principles of natural justice. NCLT has powers of civil court for: summoning witnesses, requiring discovery of documents, receiving evidence on affidavit, issuing commissions.

Section 425 – Power of Tribunal

NCLT may make interim orders and final orders. It may stay operation of any order from which appeal has been filed.

Section 430 – Civil Court Not to Have Jurisdiction

No civil court has jurisdiction over matters that NCLT or NCLAT has jurisdiction over. Injunctions from civil courts are barred.

Section 432 – Right to Legal Representation

A party before NCLT may appear in person or be represented by an authorized representative (including a Chartered Accountant, Company Secretary, Cost Accountant, or advocate).

Section 433 – Limitation

The Limitation Act, 1963 applies to proceedings before the NCLT/NCLAT as it applies to courts. No application is to be admitted beyond the period of limitation prescribed.

Section 434 – Transfer of Pending Proceedings

All proceedings before High Courts and CLB (Company Law Board) that were pending on the commencement of this section have been transferred to NCLT.

⚡ Special Courts and Penalties (Sections 435–465)

Section 435 – Special Courts

The Central Government may establish Special Courts for trial of offences under the Act. A Sessions Court judge or an additional sessions court judge is appointed as a Special Court judge.

Section 436 – Offences Triable by Special Courts

Offences punishable with imprisonment of 2 years or more are triable by Special Courts. Other offences are tried by Judicial Magistrate / Metropolitan Magistrate.

Section 439 – Offences by Companies

If an offence is committed by a company, every person who at the time of commission was in charge of and responsible for conduct of the company is deemed guilty. Officer can avoid liability by proving it was committed without their knowledge or they exercised due diligence.

Section 441 – Compounding of Offences

Certain offences under the Companies Act can be compounded (settled) by paying an amount to the Regional Director or Central Government. Offences punishable with fine only can be compounded; offences punishable with imprisonment (even if fine also) can only be compounded by Special Court. No compounding if investigation under SFIO is pending.

Section 446A – Factors for Penalty

Factors considered when imposing penalties: size of company, nature and duration of default, whether default was repeated, whether it was deliberate, whether loss to any person resulted, and whether default caused harm to public interest.

Section 446B – Lesser Penalties for One Person Companies and Small Companies

OPCs and small companies (and their officers) are liable to half the penalty prescribed for normal companies. This provides relief for small businesses.

Section 447 – Punishment for Fraud

Most important section for AIBE. "Fraud" includes any act, omission, concealment of any fact, or abuse of position committed with intent to deceive, gain undue advantage, or injure interests of the company, shareholders, creditors, or any other person. Punishment: imprisonment of minimum 6 months to maximum 10 years + fine (minimum = amount involved in fraud, maximum = 3 times that amount). If fraud involves public interest or ≥ ₹10 lakh or 1% of company's turnover: minimum 3 years imprisonment.

Section 448 – Punishment for False Statements

Whoever knowingly makes a false statement, omits material fact, or signs false documents is punishable under Section 447 (fraud provisions). This applies to any return, report, certificate, balance sheet, prospectus, or other document.

Section 449 – Punishment for False Evidence

Giving false evidence before Tribunal, court, or any authority acting under this Act: imprisonment up to 7 years and fine.

Section 450 – Punishment for Contravention Where No Specific Penalty

Where the Act does not provide a specific penalty, the company and every officer in default: fine up to ₹10,000 + continuing fine of ₹1,000 per day.

Section 451 – Punishment for Repeated Default

If a company or officer has been convicted of an offence under this Act, and commits the same offence again within 3 years: double the maximum penalty provided for that offence.

Section 452 – Punishment for Wrongful Withholding of Property

Any officer or employee who wrongfully withholds company property or applies it for personal use: imprisonment up to 2 years and/or fine of minimum ₹1 lakh, maximum ₹5 lakh.

Section 447 Important Penalties Table

Section 454 – Adjudication of Penalties by ROC

The Registrar may adjudicate penalties for certain violations. Person aggrieved may appeal to the Regional Director within 60 days, and then to NCLT.

Section 455 – Dormant Company

A company that has not been carrying on any business or operation, has not made any significant transaction, or has not filed financial statements and annual returns for 2 consecutive years may apply to the Registrar to obtain "dormant" status. Benefits: reduced compliance requirements. Minimum 1 director required.

Section 464 – Prohibition of Association for Profit without Registration

No association or partnership consisting of more than 50 persons (for business with profit motive) can be formed without registering as a company. Violation: every member is punishable with fine up to ₹1 lakh each.