CORPORATE GOVERNANCE NOTES.docx module 1 tpo 5

U T T A R P R A D E S H
Annexure ‘CD – 01’
FORMAT FOR COURSE CURRICULUM
Course Title: Corporate Governance
Credit Units: 3
Level: UG
Course Code: LAW 343
Course Objectives:The Course coverage would enable the students to have an in-depth understanding of the Evolution, Development and the fundamental
theories and practice of corporate governance in India and abroad. Including a detailed insight into the concept, issues and practices that governs the corporate
sector and expert knowledge of the legal and regulatory framework.
Pre-requisites: Students should have Sufficient knowledge & understanding of Corporate laws especially Company Law with aptitude to comprehend the
working of managerial persons and practical implications of Corporate Governance.
Course Contents/Syllabus:
Weightage (%)
Module-I Introduction to Corporate Governance
20%
Corporate Governance: Meaning& Importance
Evolution of Corporate Governance
Principles of Corporate Governance
Theories of Corporate Governance
The role and purpose of the corporation
Globalization and Corporate Governance
Module II: Corporate and Board Management 25%
L TP/SSW/FW TOTAL
CREDIT
UNITS
300 0 3

Board of Directors –Composition, Role, Systems and Procedures, Board Meetings
Directors including Nominee Director, Shareholders Director & Independent Directors
Fiduciary relationship
Criminal liability of Directors, Mis-feasance, Mal Feasance & Non-Feasance
Rights, Duties and Responsibilities of Directors; Role of Directors and other Managerial Persons including
Executives.
Module III: Insolvency & Impact on Corporate Governance 20%
Insolvency & Bankruptcy Board
Compliances and Penalties under Insolvency & bankruptcy Code,2016
Controlling the Behavior of Stake Holders: like Corporate Debtor, Operative / Financial Creditor, Resolution
Professional, Resolution Plan
Adjudicating Authorities for Corporate Persons.
Offences & penalties under Chapter VII of Code
Module –IV: Corporate Governance and Corporate Responsibility 15%
Corporate social responsibilities: Global & Indian Perspective
Whistleblowers Protection
Corporate environmental responsibility
Module-V: Legal and Regulatory Framework of Corporate Governance 20%
Multifarious Regulatory Framework: ROC & Tribunal under Companies Law
Competition Commission /Tribunal
SEBI & its Report on Corporate Governance
Compliances under various Laws including Competition Laws, SEBI Laws, Taxation Laws, Money Laundering
Laws
Disclosure of information mandated by Law & consequence for non-compliance including penalties thereto

Corporate Governance: Meaning& Importance
What Is Corporate Governance?
Corporate governance is the system of rules, practices, and processes by which a company is directed and controlled.
Corporate governance essentially involves balancing the interests of a company's many stakeholders , which can include
shareholders, senior management, customers, suppliers, lenders, the government, and the community.
Corporate governance is the set of rules and regulations that regulate the conduct of members in the any company. Usually,
the responsibility for regulating the conduct of the members is given to the board of directors of a particular company, but
even their roles and conduct are regulated by legislation. Shareholders have to fulfil the duty of appointing a board of
directors, and in this way, they contribute to corporate governance. This governance also defines how a member must
continue his term in the company, how external and internal affairs are to be conducted, and what the procedure is for
different meetings of the board, like general meetings, annual meetings, etc.
We are all aware that a company has its own separate legal entity and it can sue and be sued in its name, own assets and
properties, appoint employees, enter into contracts, and have a seal of its own. This also means that its activities are separate
from the activities of its members, and so it is necessary to govern its conduct in order to avoid unlawful practices and
liabilities arising therefrom.
Most successful companies strive to have exemplary corporate governance. For many shareholders, it is not enough for a
company to be profitable; it also must demonstrate good corporate citizenship through environmental awareness, ethical
behavior, and other sound corporate governance practices.
IMPORTANCE OF Corporate Governance
Good corporate governance creates transparent rules and controls, guides leadership, and aligns the interests of
shareholders, directors, management, and employees.
It helps build trust with investors, the community, and public officials.
Corporate governance can give investors and stakeholders a clear idea of a company's direction and business integrity.
It promotes long-term financial stability, opportunity, and returns.
It can facilitate the raising of capital.
Good corporate governance can translate to rising share prices.
It can reduce the potential for financial loss, waste, risks, and corruption.
It is a game plan for resilience and long-term success.

The Principles of Corporate Governance
While there can be as many principles as a company believes make sense, some of the most common ones are:
Fairness: The board of directors must treat shareholders, employees, vendors, and communities fairly and with equal
consideration.
Transparency: The board should provide timely, accurate, and clear information about such things as financial
performance, conflicts of interest, and risks to shareholders and other stakeholders.
Risk Management: Another important principle of corporate governance is that it must be used to identify and Control the risks
beforehand rather than waiting for them to strike and affect the smooth functioning of a company. and inform all relevant parties
about the existence and status of risks.
Responsibility:. It must act in the best interests of a company and its investors. They must be responsible and
sensible enough to make wise decisions on all corporate matters. It must be aware of ongoing performance of the
company. Part of its responsibility is to recruit and hire a chief executive officer (CEO) .

Accountability: The management and board of directors are accountable for the working and functioning of a
company’s assets, its financial conditions, investments and capital, audits, litigations, liabilities, etc. They must be
answerable to the shareholders in order to build trust and healthy relations with them.
Agency theory
The relationship between principals (like company shareholders) and agents (like company directors) is defined by agency
theory. According to this theory, shareholders provide funds and capital to a company and so have a right to appoint the board of
directors to take decisions on all important matters of the company. It is possible to gather a large number of shareholders every
time to discuss company matters. So, to deal with such situations, they appoint a board of directors who makes decisions on their
behalf, keeping in mind their interests
This theory is based on the relationship between principal and agent and assumes that the agent will not work for its maximum
benefit at the cost of others’ interests. Managers, directors, and chief executive officers are termed as agents. One of the major
issues with this theory is that the agent who is given the responsibility to manage the affairs of a company may start abusing their

power and authority to gain personal benefits. They may provide misleading or false and fabricated information or manipulate the
accounts for this purpose. In order to avoid such problems and tackle the issue, an audit committee must be formed,
Apart from this, the shareholders and stockholders can suggest adopting certain principles and ethics to manage the internal
behaviour and conduct of the executives of a company.
Stewardship theory
This theory compares the executives and managerial personnel of a company with a steward who is expected to work hard and
maximise the profits gained from a project. This will also benefit the shareholders, as their return will be maximised. Shareholders
are only concerned with the profits and success of the company while the executives have to work in the front to gain profits and
benefits.
The theory assumes that the managers have no pecuniary interest or objective, and so they must be appointed to generate more
wealth and profit. This theory is in contravention of agency theory, and what the manager says is deemed to be correct and final.
But the question is who will ensure that the benefits of shareholders have been taken into consideration while making any decision.
For this reason, there is a need to have internal auditors, audit committees, and other executive officers.
Resource dependency theory
This theory deals with the resources required by a company to fulfil its targets and dealings. The board of directors has the
responsibility of providing necessary resources like skills, human resources, capital, information, technology, etc. to the company
with the help of their links and relations If all the resources were provided well within time, it would help in increasing the efficiency
and performance of a company. Directors can be divided into four groups: These are insiders, experts, specialists, and influential people
in the community for promotion.
Stakeholder theory
This theory states that the board of directors must take into consideration the interests of all the stakeholders, like employees,
vendors, manufacturers, business partners, and other people associated with a company, while making a decision. The interests of
all the stakeholders are equally important and must be valued.

This theory considers stakeholders and shareholders as the owners of a company who have a responsibility to manage its affairs
and control the management. But in actual practice, shareholders are only concerned about their shares and dividends. Another
argument of this theory is that the government, political bodies, trade unions,etc. also have the authority to manage the affairs of a
company but, the theory fails to take into consideration that a company is formed by a group of people and not by the government
so there must be no excess control or interference of government
Transaction cost theory
This theory tries to explain the aim behind the formation of a company and the reason for the expansion of business. According to
this theory, the aim is to minimise the transaction costs of the environment and bureaucratic costs within it. Another argument is
that when the external transaction cost is higher than the internal bureaucratic cost, it will affect the growth of a company as the
cost of its affairs will be cheaper than usual. The growth of a company can only be achieved if it uses cheaper resources to fulfil its
operations rather than costly resources that will result in the failure of operations and obligations.
Political theory
This theory states that there must be an approach to developing the support of shareholders by way of a vote. All the profits and
benefits gained by a company are also determined and affected by policies and strategies of the government that favour the growth
of a company and the expansion of the market.
What is globalization?
Impact of globalization
1. Rapid increase in competition
2. Development in technology (fast changing tech advancement)
3. Information/knowledge transfer
4. Integration of markets o Mobility of intellectual capital
5. Regulation/deregulation
6. Financial contagion- spread of financial crisis in one country to another creating a global crisis
7. Fund transfer amongst developed countries and emerging markets globally
•Good corporate governance practices by companies will result in a higher employee job satisfaction
levels and positively impact the work force

•Globalization can often result in exploitation of human resource and other resource, therefore, having
a robust corporate governance code will ensure employees and resources are not exploited.
• Globally, cyber security is taking the front-seat and therefore, corporate governance should focus on
and provide for cyber security
Evolution of Corporate Governance
The origin of corporate governance can be traced back to the 1970s in the United States of America. But the initial idea of
regulating the affairs of companies was developed in the year 1929, after the stock market crash, because of which a lot of
companies went bankrupt and the economy collapsed. In order to prevent further damage, the U.S. Congress passed two acts.
These are the Securities Act of 1933 and the Securities Exchange Act of 1934. Both the legislations provided governance for the
transaction of securities of a company.
phase one (1996-2008)
This phase is the starting phase of corporate governance in India. During this phase, the Ministry of Corporate Affairs and the
Securities and Exchange Board of India worked together to bring much needed principles of corporate governance. The aim was to
form audit committees and appoint independent directors and supervisors for the internal management of a company.
The Confederation of Indian Industries (CII) in 1996 took a great step and an initiative to draft a code that provides for
transparency in the affairs, security of investors’ interests, implementation of international standards on disclosure of information,
and builds confidence and trust among people. Mr. Kumar Mangalam Birla, the then chairman of SEBI, was told to form a
committee that concerned corporate governance. The committee, in its recommendations, mandated the companies to submit
annual reports and reports on corporate governance in order to help the shareholders know where the company stands in the
implementation of corporate governance. It also realised the importance of the audit committee and provided the structure for its
constitution and functions.

REPORT OF KUMARA MANGALAM BIRLA COMMITTEE
The Kumar Mangalam Birla Committee was set up in 1999 by SEBI after one of its members Shri Kumar Mangalam Birla. The
main objective of this committee was to view corporate governance from the perspective of the investors and shareholders
and to prepare a code of conduct that is suitable for corporate environment in India. The recommendations were broadly
divided into two categories namely mandatory and non-mandatory recommendations.
MANDATORY RECOMMENDATIONS
:The recommendations that are absolutely necessary for the corporate governance of an organization and those that can be
defined precisely and enforced through amendment of the listing agreement are referred to as mandatory recommendations.
Recommendations:-
1.This recommendation is applicable to those companies that are listed and has a paid up share capital worth . 3crores and
₹
above.
2.The board of directors should be an optimum mix of both executive and non-executive directors.
3.The audit committee should have minimum 3 independent directors out of which at least one should have financial and
accounting knowledge.
4.At least 4 meetings should be conducted in a year with a maximum gap of 4 months between 2 consecutive meetings.
5.The information must be shared to the shareholders with respect to their investments.
6.A separate committee for remuneration must be set up.
NON-MANDATORY RECOMMENDATIONS:
Those recommendations which are either desirable or which many require certain changes are referred to as non-mandatory
recommendations.

Recommendations:-
1.Role of chairman
2.Remuneration committee of board
3.Shareholders’ right for receiving half yearly financial performance.
4.Sale of whole or a substantial part of the undertaking.
5.Corporate restructuring
6.Further issue of capital
7.Venturing into new businesses
TCS COMPLIANCE WITH THE RECOMMENDATIONS ISSUED BY KUMAR MANGALAM BIRLA COMMITTEE
TCS which comes a under the brand known for trust the TATA group has inherited thelegacy of fair and transparent corporate
governance. It is a highly successful business and hassustained its position by adhering to high standards of principled
conduct through TCoC(Tata Code of Conduct).
(c) Clause 49
The Committee also realised the importance of auditing body and made many specific suggestions related to the constitution
and function of Board Audit Committees. At that time, SEBI reviewed it’s listing contract to include the recommendations.
These rules and regulations were listed in Clause 49, a new section of the listing agreement which came into force in phases of
2000 and 2003.
(j) JJ Irani Committee

The Government constituted a committee under the Chairmanship of Dr. J. J. Irani, Director, Tata Sons, with the task of advising the Government on the
proposed revisions to the Companies Act, 1956 with the objective to have a simplified compact law that would be able to address the changes taking place in
the national and international scenario, enable adoption of internationally accepted best practices as well as provide adequate flexibility for timely evolution of
new arrangements in response to the requirements of ever- changing business models. The Committee recommended that effective measures be initiated for
protecting the interests of stakeholders and investors, including small investors, through legal basis for sound corporate governance practices. With a view to
protect the interest of various stakeholders, the Committee also recommended the constitution of a “Stakeholders’ Relationship Committee” and provision of
duties of directors in the Act with civil consequences for nonperformance.
CADBURY COMMITTEE 1992
Recommendations
The board of management of all listed companies should comply with the code of best practice set out by the
committee.
As numerous companies as possible should aim at meeting its requirements.
The listed companies reporting at the ending on or after 31 December, 1992, should make a statement about their
compliance with the law in the report and accounts and give certain reasons for any areas of non-compliance.
Companies should publish their statement of compliance only after they have been the subject of review by the audit
committee.
Code of Best Practice
The recommendations largely reflected perceived best practice at the time. It included:
Separating the roles of CEO and chairman, If the two roles are combined in one person, it represents a considerable
concentration of power. It was thus recommended that there should be clearly accepted division of responsibilities at
the head of a company, which will ensure a balance of power and authority, such that no one individual has unfettered
powers of decision. (arbitrariness).
Having a minimum of three non-executive directors on the board.
The formulation of audit committees.
A more active role be taken by institutional investors in the development of good practice in corporate governance.
According to the committee report, Corporate Governance is the system by which companies are directed and controlled. It
encompasses the entire mechanics of the functioning of a company and attempts to put in place checks and balances
between the shareholders, employees, directors, auditors and the management.
The Cadbury committee report in a way kickstarted the corporate governance debate in India as well.

SEBI Committee / Narayana Murthy Committee 2003
In order to meliorate the condition of investor protection the Securities and Exchange Board of India (“SEBI”) constituted a
committee under the chairmanship of Narayan Murthy.
The Committee’s recommendations in the final report were selected based on parameters including their relative
significance, fairness, and accountability, and transparency, ease of implementation, verifiability and enforceability.
Gave two kinds of recommendations, mandatory and non-mandatory:
Mandatory Recommendations
The important mandatory recommendations focus on strengthening the responsibilities of audit committees; improving the
quality of financial disclosures, requiring corporate executive boards to assess and disclose business pitfalls in the annual
reports of companies; introducing responsibilities on boards to adopt formal codes of conduct; clearly defining the position of
nominee directors; and stock holder approval and improved disclosures relating to any kind of compensation paid to non-
executive directors.
Non-Mandatory Recommendations
These include moving to a governance where corporate financial statements are not qualified; constituting a system of
training of board members; and the evaluation of performance of board members.
Naresh Chandra Committee 2002
While SEBI was making efforts to introduce corporate governance norms among Indian corporates, the
Department of Company Affairs took another initiative in corporate governance. The Committee was

appointed as a high-level committee to examine various corporate governance issues by the Department of
Company Affairs on 21 August, 2002.
Mandatory recommendation:
Management of operation should provide a clear description in plain English of each material contingent
liability and its pitfalls, which should be accompanied by the auditor’s clearly worded comments on the
management’s view.
This is important because investors and shareholders should obtain a clear view of a company’s contingent
arrears as these may be significant risk factors that could adversely affect the company’s future financial
condition and results of operations.
CEO / CFO Certification: Mandatory recommendation:
For all listed companies, there should be a certification by the CEO (either the Executive Chairman or the
Managing Director) and the CFO (whole-time Finance Director or other person discharging this function)
which should state that, to the best of their knowledge and belief:
They have reviewed the balance sheet and profit and loss account and all its schedules and notes on
accounts, as well as the cash flow statements and the Directors’ Report.
These statements do not contain any material untrue statement or omit any material fact nor do they contain
statements that might be misleading.
These statements together present a true and fair view of the company, and are in compliance with the
existing accounting norms and / or applicable laws/ regulations
Corporate Governance Ratings:

It was suggested that corporate governance practices followed by companies should be rated using standing
models. It was also suggested that companies should be rated based on parameters of wealth generation,
maintenance and sharing, as well as on corporate governance.
Module 2
Board of Directors –Composition, Role, Systems and Procedures, Board Meetings
board of directors in a company means the collective body of the company’s executives.
The individuals at the highest level of management are responsible for the functioning of the company. These high-
level members of the company are called directors. Collectively, all directors as a group and the supreme acting
authority of the company are called ‘board of directors’
The board of directors are can be called the brain of the company. They are responsible for taking all the big decisions
and making policy changes. These decisions are taken in special meetings members of the board hold together, called
‘Board Meetings’.
What is the Role of a Board of Directors?
The board of directors provides oversight and strategic guidance to an organization. It's responsible for
making major decisions, setting policies, and ensuring the organization's long-term success.

The board is responsible for selecting and appointing the executive leadership, including the CEO. They participate in
the hiring process, assess candidates, and ensure qualified individuals are chosen to lead the organization.
Shaping the organization’s culture and vision
Board of Directors Composition 149
Section 149 of the Companies Act states that every company’s board of directors must necessarily have a minimum of
three directors if it is a public company. two directors if it is a private company and one director in a one person
company.
The maximum number of members a company can assign as directors is 15. However, the company can pass a special
resolution in a general meeting to allow for assigning more than fifteen members to the board of directors.
The maximum number of companies that an individual can become a director of, is 20 companies.
At least one director, who has lived in India for a minimum of 182 calendar days of the previous year, shall be
appointed by every company’s board. It is a mandatory rule.
At least, one woman director must be appointed by the company.
All listed companies must have at least one-third proportion of their board of directors as independent directors.
According to Section 149 of the Companies Act, 2013 the board of directors of each company consists only of natural
persons or individuals. This means that a legal person, company, or association may not be appointed as a director.
Composition of Board of Directors in a listed company

The board has a combination of executive and non-executive directors with at least one female director
and at least fifty percent of the members of the board consist of non-executive directors.
If the chairman of the board of directors is a non-executive director, at least one-third of the board of
directors is made up of independent directors, and if the said entity has an executive chairman, then at
least half of the board of directors must consist of independent directors.
What is a Board Meeting? 173
A Board Meeting is a formal meeting of the board of directors of an organization and any invited guests, held at definite intervals and
as needed to review performance, consider policy issues, address major problems and perform the legal business of the board.
Presided over by a chairperson of the organization, the quorum, rules, and responsibilities for board meetings will be documented in
the organization's operating agreements and may need to meet government requirements. These minutes must contain all relevant
information related to the meeting and decisions made in the course of such meetings, a legal document published according to the rules
governing that board's operations.
For the effective functioning and management, it is imperative that board meetings be held at frequent intervals. For
this, Section 173 of Companies Act, 2013 provides –
In the case of a Public Limited Company, the first board meeting has to be held within the first 30 days, since the
incorporation date. Additionally, a minimum of 4 board meetings must be held in a span of one year. Also, there
cannot be a gap of more than 120 days between two meetings.
In the case of small companies or one person company, at least two meetings must be conducted, one in each half of
the financial year. Additionally, the gap between the two meetings must be at least 90 days. In a situation where the
meeting is held at a short notice, at least one independent director must be attending the meeting.

Notice of Board Meeting
The notice of Board Meeting refers to a document that is sent to all directors of the company. This document informs
the members about the venue, date, time, and agenda of the meeting. All types of companies are required to give notice
at least 7 days before the actual day of the meeting.
Quorum for the Board Meeting
The quorum for the Board Meeting refers to the minimum number of members of the Board to conduct a valid Board
Meeting. According to Section 174 of Companies Act, 2013, the minimum number of members of the board required
for a meeting is 1/3rd of a total number of directors.
At any rate, a minimum of two directors must be present. However, in the case of One Person Company, the rules of
Section 174, do not apply.
Participation in Board Meeting
All directors are encouraged to actively attend board meetings and in case that’s not possible at least attend the
meetings through a video conference. This is so that all directors can take part in the decision-making process.
Directors including Nominee Director, Shareholders Director & Independent Directors 149
Company directors – board members – fall into two major categories: executive directors and non-executive directors.
The big difference is that non-executive directors do not participate in the day-to-day operations of the organisation.
While executive directors are responsible for such things as running the business, recruitment, managing people, and
entering into contracts, non-executive directors are there to provide advice to the board.

Shareholders Director means a director who represents the interest of shareholders, and elected or nominated by such
shareholders who are not trading members or clearing members, as the case may be, or their associates and agents;
shareholder Designee means a person designated for election to the Board of Directors by the Shareholders
Independent Director – Directors who have knowledge or network in a particular area or a particular field can be termed as
independent directors. Usually, companies hire ex-officials for such roles because they have the industrial expertise and the
experience which is required to run a company smoothly. Women directors can also be appointed as independent directors.
The Companies Act of 2013 also assigns different roles to Independent Directors in order to ensure the Board's independence
and fairness. An Independent Director is a member of the Board of Directors who does not hold any stock in the company and
has no financial ties to it other than the fees it earns for serving on the board. According to the Companies Act of 2013,
Schedule IV
Tenure – The term of independent director must not exceed 5 (five) years. They can be elected again for a second term. A
cooling period of 3 years is compulsory after the expiry of the second term. Companies are allowed to appoint independent
directors for less than 5 years, however a person cannot be appointed for more than 2 (two) terms.
All independent directors should meet at least once a year in the absence of non-independent directors and other members of the
company so that they can evaluate the performances of the company’s chairperson, other directors, and the Board.
Nominee Director
if it is authorized by the Articles of Association (AOA) of a company then the Board may appoint any person as a director
nominee
They represent the stakeholders on the board of directors. To put it in simple terms, a nominee director is a representative of the
stakeholder who protects the stakeholder’s interest. Their job is to see that the company does not function in a manner detrimental
to the interest of the stakeholders they represent.
Appointment – Nominee directors are appointed by an agreement (either Shareholder’s agreement or financing agreement)
between the company and the stakeholder. The stakeholders are responsible for the payment of such nominee directors they may
appoint. A nominee director must act in good faith and the interest of the company even if they are nominated by the
stakeholders.

8.Small Shareholders Director
Any person who holds shares of the nominal value of not more than Rs. 20,000 in a Public Company is called a small shareholder.
These small shareholders are allowed to elect a director in a listed company. Thus, directors elected by these small shareholders are
called Small shareholders Directors. According to Section 151 of the Companies Act, 2013 every listed company may have 1 (one)
director elected by such small shareholders.
Thus, a small shareholder director can be appointed by a Company if –
1.The Company is a Public Company;
2.The Company has at least 1000 or more small shareholders;
Only if these two criteria exist, the listed company can have one director elected by a small shareholder.
Appointment – The appointment of such a director is optional and that is why there are hardly any companies that have a small
shareholder director. The Company can appoint a small shareholder director either on its own or on the application made by a small
shareholder.
Rule 7 of Companies (Appointment and Qualification of Directors) Rules, 2014 lays down certain provisions relating to Small Share-
Holder Director which are as follows –
1.At least 1000 small shareholders, or 1/10
th
of the small shareholders, whichever is less, should provide a written notice to
the Company. But the notice should be provided 14 days before the General Meeting.
Criminal liability of Directors, and fiduciary relationship
The director of a company is responsible for smooth carrying out the business and managing the day to day affairs of the company.
They are appointed by the shareholders for the efficient and effective running of the company as professionals.
The relationship existing between a director and the shareholder is that of a ‘fiduciary’ one (i.e. based on trust). Therefore, directors
are exposed to liabilities whether it may be ‘civil’ or ‘criminal’ in nature which arises due to breach of duties by them.
As stated above, a fiduciary relationship exists between a director and a company, i.e., the directors have to act in the company's best interest.
However, if they fail to do so, liability is imposed. Liability can be civil or criminal.

Corporate criminal liability can be defined as a crime which has been committed by individual or board of director in course of their occupation
commit such acts or omission which is forbidden by law and with guilty mind, whether it is for the benefit of the corporation or any individual or
the association of individuals.
Historically, corporate criminal liability was not identified because it was a common notion that commissioning crime requires mens rea. Since a
company does not have a mind of its own, there cannot be mens rea, due to which the concept of corporate criminal liability was not recognized.
However, with time judiciary started realizing the idea of corporate criminal liability. In Iridium India Telecom Limited v. Motorola Incorporated &
Ors.,8 the Supreme Court, for the first time, said that a company could be a part of a criminal conspiracy and can be held criminally liable.
The legal action can also be initiated against the defaulting director by the Company, on the grounds that the director owed a duty to the
Company. Apart from the Company, the shareholders (minimum 100) can also file a case against the director under section 245 of the
Companies Act.
Section 166 of the Companies Act, 2013, mentions about the fiduciary duties of the directors. If the director takes the undue advantage, then, it
shall be held liable to pay an amount equal to that gain to the company and he shall be liable to pay fine which may extend to Rs. 5,00,000/-. –
These are the various sections under which a director of a company can be held criminally liable for any contravention of the provisions specified
under the Companies Act, 201
Section 34 – Issue of Prospectus with untrue or misleading statements
will be subject to imprisonment which may extend from minimum 10 (ten) years.
Section 229 – Penalty for False statement and destruction of documents
This section provides for a penalty for furnishing false statement, mutilation or destruction of documents by any person bound to cooperate
during an investigation. If the statement made by him turn out to be false he shall be liable for punishment under the provisions of Section 447.
Section 118 – tampering with the minutes
These minutes must contain all relevant information related to the meeting and decisions made in the course of such meetings. Further, sub-
clause 12 of the section contains the provision for punishment in case a person-in-charge is found guilty of tampering with the minutes. He shall
be liable for imprisonment for a period extending up to 2 years or a fine which may be upto 1 lakh rupees or both.
Section 447 – Penalty for fraud
This section is related to commission of fraud by any person of the company or wrongful loss to shareholders or wrongful gain to himself, such
person shall be liable for imprisonment for period of 10 years or fine which shall be equal to amount of fraud and not any less but which may also
extend to three times of the amount involved.

Section 449 – Penalty for providing false evidence to authorities
This section deals with punishment for providing false evidence. According to this, if any person intentionally provides false evidence in the
course of the examination upon oath or in the form of deposition, affidavit or winding up process of the company. Then, in that case, such person
would be liable for imprisonment of which may extend to 10 or fine which may go up to 10 lakh rupees.
Rights, Duties and Responsibilities of Directors; Role of Directors and other Managerial Persons including Executives.
Rights and Duties of Directors in a Company
In order to create policies that would yield high results, directors must have a vision. To achieve high levels of success,
they must set the company’s goals. They must be able to conduct the company’s objectives. Then there is the director’s
function and responsibilities. Directors have various safeguards in place to protect themselves and the company’s
interests. Below is the description of the Rights of Directors.
Director’s Individual Rights
1.Inspection of books of accounts.
2.Right to receive board meeting notices.
3.The right to obtain circular resolution draft.
4.The right to a sitting fee.
5.The right to speak in General Meetings.
6.Inspection of board meeting minutes is a legal right.
7.He has the right to record his dissent.
8.Right to vote and participate in Board meetings.
9.The ability to claim travel, lodging, and other expenditures.
10.The right to call board meetings.
11.Right to request an alternate director from the board of directors.
Collective Rights in a Company
1.Right to prohibit share transfers
2.The right to choose a Chairman
3.Right to nominate a Managing Director and make dividend recommendations

4.Investment approval authority.
The Duties Of The Directors Are Stipulated As Follows In Section 166 Of The 2013 Act:
Act in good faith and in accordance with the Company’s Articles of Association
To act in the best interests of the Company and its stakeholders in order to promote the Company Act’s objectives.
Exercise due and reasonable care when performing obligations.
To make independent decisions.
Not to get engaged in a situation where his interests are at odds with the Companies.
He is unable to delegate his duties to anyone else.
To avoid gaining an unfair advantage or profit.
A director must behave in compliance with the company's Articles of Association
A director must act in the best interests of the company's stakeholders and promote the company's objectives in good faith.
A director should always be mindful of potential conflicts of interest and strive to prevent them in the best interests of the
company
Confidentiality of confidential proprietary knowledge, business secrets, inventions, and unpublished prices must be maintained
and should not be revealed until the board has authorized it or the legislation requires it
\ He is unable to delegate his duties to anyone else.
If a company director violates the provisions of this section, he or she will be fined not less than one lakh rupees but not more
than five lakh rupees.
The Companies Act of 2013 also assigns different roles to Independent Directors in order to ensure the Board's independence
and fairness. An Independent Director is a member of the Board of Directors who does not hold any stock in the company and
has no financial ties to it other than the fees it earns for serving on the board. According to the Companies Act of 2013,
Schedule IV
Protecting and promoting the interests of all stakeholders, especially minorities shareholders.
In the event of a conflict of interest among the stakeholders, acting as a mediator.
Any unethical activity, code of ethics breach, or alleged fraud in the company should be reported honestly and impartially.

Liabilities Of Directors
For any and all acts harmful to the company’s interests, the directors might be held jointly or collectively liable. Despite the
fact that the director and the Company are different entities, the director may be held responsible on behalf of the Company
in the following situations:
Directors who fail to make the necessary disclosures under the SEBI (Acquisition of Shares & Takeovers) Regulations,
1997 and SEBI (Prohibition of Insider Trading) Regulations, 1992 can face legal action from SEBI.
Refunding of share application or excess in share application fee
To pay for qualification shares
Civil Liability for Prospectus Misrepresentation
Tax Liability:
Unless a Director or a Former Director can show that the non-recovery or non-payment of taxes is due to gross negligence
or violation of duty, any present or past Director (during the defaulter's time period) will be liable to pay the tax deficit as well
as any penalties.
The Following Are Some Criminal Liabilities Associated With A Director's Actions:
Bounced or dishonored checks: Under the Negotiable Instruments Act of 1881, a Director's signature on a dishonored
check may result in criminal charges, in addition to the company's income tax violations under the 1961 Income Tax
Act.
A shareholder can bring an action against the company and its directors for matters that are in violation of the
company's Memorandum or Articles and that no majority shareholder can sanction.
Directors and the corporation could be held liable if the majority of shareholders engage in "fraud on the minority," or
discriminatory conduct. As a result, this is an extremely valuable clause for Directors to be aware of and strive to take
advantage of as much as possible.
The Companies Act requires a corporation to purchase insurance to cover itself against losses caused by its directors.
A director may also purchase insurance to compensate for losses incurred due to liability to the company, with the
premium charged by the company.

Key Managerial Personnel
Key Managerial Personnel refers to a group of people who are in charge of maintaining the operations of the
company. Accounting Standard 18(AS-18) states that Key Managerial Personnel (KMP) are people who have
authority and responsibility for planning, directing and controlling the activities of the reporting enterprise.
Chief Executive Office, Cheif Financial Officer, Company Secretary, Whole Time Director are the Key Managerial
Personnel.

Key Managerial Personnel
The term ‘personnel’ refers to a group of people working together, instead of one person. The Key
Managerial Personnel are the decision makers. They are accountable for the smooth functioning of
company operations.
The members of the Board of Directors do not necessarily get involved in the day to day operations of the
company. Their job is to supervise the company as a whole, not micromanage. The Board of Directors sets
goals and objectives for the company. The key managerial personnel is the one who actually works on these
goals and objectives to be achieved.

Key Managerial Personnel under Companies Act, 2013
Under Section 2 of the Companies Act 2013, Key Managerial Personnel in reference to a company are as
follows:
Chief Executive Officer/Managing Director
 Company Secretary
Whole Time Director
Chief Financial Officer
Chief Executive Officer/Managing Director
The managing director or chief executive officer is responsible for running the whole company. Also, the
managing director has authority over all operations and has the most power in a managerial hierarchy.
He is also responsible for innovating and growing the company to a larger scale. In many countries, a
managing director is also called a Chief Executive Officer (CEO).
Company Secretary
A company secretary is a senior level employee in a company who is responsible for the looking after the
efficient administration of the company. The company secretary takes care of all the compliances with
statutory and regulatory requirements.

He also ensures that the targets and instructions of the board are successfully implemented. However, in
some countries, a company secretary is also called a corporate secretary.
Whole Time Director
A Whole Time Director is simply a director who devotes the whole of his working hours to the company. He
is different from independent directors in the sense that he has a significant stake in the company and is
part of the daily operation. A managing director may also be a whole time director.
Chief Financial Officer
Chief Financial Officer (CFO) is a senior level executive responsible for handling the financial status of the
company. The CFO keeps tabs on cash flow operations, does financial planning, and creates contingency
plans for possible financial crises.
Appointment of Key Managerial Personnel
Section 203 of the Companies Act 2013 has the provisions for the appointment of key managerial
personnel. The Board appoints them. Also, the Board of Directors is responsible to fill any vacancies in the
KMP within a period of six months.
It is mandatory for any listed company and any company with a paid up capital of more than or equal to 10
lakhs to appoint a whole time KMP. Further, a company with at least 5 lakhs paid-up capital is required to
employ a full-time company secretary(who is also a KMP).

Roles and Responsibilities of Key Management Personnel
The KMPs are basically are basically responsible for taking the most important decisions and managing all
the employees. They are also liable if they do not follow compliances laid down by the Companies Act 2013.
The growth and development of the company depend on the effectiveness of the KMPs at their jobs. The
main responsibilities and functions of the KMP are:
As per Section 170 of the Companies Act, the details about the securities held by the KMPs in the
company or its holdings and subsidiaries must be disclosed and thus recorded in the Registrar.
KMPs have a right to voice their opinion especially in meetings of the Audit Committee. However,
they don’t have a voting right.
According to Section 189, Companies Act, KMPs should disclose their interests in other companies
and associations, at least within 30 days of the start of the employment period.
Module3
Insolvency & Bankruptcy Board
a major economic measure, aimed at aligning insolvency laws with international standards

Objective of the Code
a) promote entrepreneurship and availability of credit;
b) ensure the balanced interests of all stakeholders and
c) promote time-bound resolution of insolvency in case of corporate persons, partnership firms and individuals
WHO DOES IT APPLY TO?
•Any Company incorporated under the Companies Act, 2013;
•Any other company incorporated by any special statute;
•Any Limited Liability Partnership (“LLP”) firm registered under the Limited Liabilities Partnership Act, 2008;
•Any partnership registered under the Partnership Act, 1932; and
•Any individual person.

corporate insolvency resolution process (CIRP) dealt with under Sections 7 and 10 of IBC, 2016.
Insolvency of corporate persons deals with the insolvency of a corporate bodies like a private limited company or limited
company. Licensed insolvency professionals would execute the process for insolvency resolution under the supervision of
adjudicating authority.

For CDs facing insolvency, the Code spells out two processes: insolvency resolution (CIRP) and liquidation. When
insolvency is triggered under the IBC, all attempts are made to resolve the insolvency in a time-bound manner. If the
attempt fails, the company, or the CD, will be liquidated.
The winding up under the Companies Act is triggered once the net worth of the company had eroded, one of the key
features of the IBC is the early detection of insolvency.
Unlike previous regimes, insolvency is triggered under the IBC by a simple payment default of one crore rupees -
section 4 of the Code with effect from March 24, 2020
Time line- 180 days to max 330 days for the entire process
Corporate Insolvency
A company is declared insolvent if the company is inefficient to settle its debts to the creditors. There are two ways to evaluate the
corporate insolvency:
The cash-flow test is the company currently or in the future, be unable to pay its debts when they fall due for payment.
The balance sheet test is the value of the company’s assets less than the number of its liabilities, taking into account future liabilities.
Corporate Insolvency Resolution Process (CIRP)
Corporate Insolvency Resolution Process is a recovery mechanism for creditors. If a corporate becomes insolvent, a financial creditor, an operational
creditor, or the corporate itself may initiate CIRP.
After making an application then CIRP is initiated. CIRP is the process through which it is determined whether the person who has defaulted is
capable of repayment or not (IRPs will evaluate the assets and liabilities to determine the repayment capability). If a person is not capable of
repaying the debt the company is restructured or liquidated

Who can initiate the CIRP
It is necessary to understand that if any default is committed by a corporate debtor (person who has taken the loan or the amount
from a creditor or bank), the CIRP process can be initiated by means of filing an application before the Adjudicating Authority in the
provided manner. It is also ideal to note that CIRP can be initiated by a financial creditor as well and there is no bar on the same.
Thus, CIRP may be initiated by either:
1.Financial creditor (FC) under Section 7. Banks or other financial institutions are examples of financial creditors.
2.An operational creditor (OC) under Section 9. Vendors and suppliers, employees, government etc. are examples of operational creditors.
3.A corporate applicant of a corporate debtor under Section 10 of the Code.
Stages in the CIRP process
Step 1: Application To The NCLT
A creditor of a corporate (financial or operational), or the company, can request to the NCLT (National Company Law Tribunal). It is used to admit that the
company enters the CIRP (Corporate Insolvency Resolution Process). For this, creditors must show the failure of payment of a debt which is more than one
Lakh rupees, and the NCLT has to pass an order either admitting or denying the application within 14 days.
The financial and an operational creditor have to satisfy separate requirements when making their requests before the NCLT. A financial creditor needs to
furnish the report of the default. The IBC(Insolvency and Bankruptcy Code, 2016) creates a new class of record keepers known as Information Utilities.
Then the operational creditor needs first to make a demand for his unpaid debt. By an ongoing dispute, it is open to the corporate debtor to defend the
claim.
Step 2: Appointment of Interim insolvency Resolution Professional
When a corporate debtor is accepted into the CIRP (Corporate Insolvency Resolution Process), it checks the board of directors. Further, the management is
placed under an independent “interim resolution professional”. From this and till the end of the CIRP (Corporate Insolvency Resolution Process), the
management ceases to have any control over the activities of the company.

Step 3: Moratorium
Moreover, a moratorium takes part which prohibits the following:
Continuing or beginning of any legal matters on the corporate debtor
Transfer of its assets
Execution of security interest
Recovery of property as an owner
Discontinuing or termination of the supply of basic goods and services, the moratorium lasts till the corporate debtor is in CIRP process.
Step 4: Verification and analysis of claims
Now, the interim resolution professional will summon, verify claims made by the corporate debtor’s creditors also, list them. After that, in 30 days of the
acceptance into CIRP (Corporate Insolvency Resolution Process), from the COC (Committee of Creditors), comprising all the financial creditors of the
corporate debtor.
Step 5: Appointment of the resolution professional
The COC (Committee of Creditors) appoints an independent person to operate as the “resolution professional” for the remainder of the CIRP (Corporate
Insolvency Resolution Process). The resolution professional will be the same person or the same person as the interim resolution professional depending
upon COC.
Step 6: Acceptance of the Resolution Plan
A resolution plan for the restructuring of the corporate must be approved within 180 days from the commencement of CIRP by creditors.
All person, management, the creditors, or a third party can propose such a resolution plan. It is the duly of resolution professional to check that the plan
satisfies the criteria set up in the IBC(Insolvency and Bankruptcy Code, 2016).
If a plan is accepted within this period and is sanctioned by the NCLT
The Committee of Creditors may approve a resolution plan by VOTING a minimum of 66% of the voting share of the Financial
creditors. The Resolution Professional should submit a resolution to the National Company Law Tribunal. The resolution plan is

approved by a COC, followed by which the National Company Law Tribunal gives the order to approve the plan should be binding on
corporate debtors and their employee, members, creditors, guarantors, and other stakeholders involved in that plan
If no resolution plan is accepted in this period
If the resolution plan is not approved, then NCLT is obliged to order the liquidation of the corporate debtor. Upon approval of liquidation, COC appoints
the liquidator to sell the assets of the corporate debtor and share them among the stakeholders.
1. Adjudicating Authority in relation to insolvency resolution and
liquidation for corporate persons
Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and
personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the
registered office of the corporate person is located – section 60(1) of Insolvency Code, 2016.
1.2 Jurisdiction of NCLT
The National Company Law Tribunal shall have jurisdiction to entertain or dispose of applications and claims while exercising
jurisdiction. These are overriding provision, even if contrary to any other law – section 60(5) of Insolvency Code, 2016.
2. Appeals and Appellate Authority
Any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law
Appellate Tribunal – section 61(1) of Insolvency Code, 2016.
The appeal shall be filed within 45 before the National Company Law Appellate Tribunal. This period can be extended by NCLAT if
sufficient cause is shown – section 61(2) of Insolvency Code, 2016.
3. Appeal to Supreme Court on question of law

Appeal against order of NCLAT can be filed to the Supreme Court within 45 days from the date of receipt of such order on a question
of law arising out of such order under this Code within forty-five days. This period can be extended by Supreme Court by further 15
days – section 62 of Insolvency Code, 2016.
Of course writ jurisdiction of High Court and special leave petition (SLP) powers of Supreme Court, granted under Constitution of
India, remain unaffected.
4. Civil court not to have jurisdiction where NCLT or IBBI has jurisdiction
No civil court shall have jurisdiction in respect of any matter in which the Adjudicating Authority or
IBBI
is empowered by, or under,
this Code to pass any order and no injunction shall be granted by any court or other authority in respect of any action taken or to be
taken in pursuance of any order passed by such Adjudicating Authority or
IBBI
under this Code – section 231 of Insolvency Code,
2016.
5. Expeditious disposal of applications
The Insolvency and Bankruptcy Code specify strict time limits for each action. If action is not completed within specified time, the
National Company Law Tribunal or the National Company Law Appellate Tribunal can grant extension upto ten days – section 64(1) of
Insolvency Code, 2016.
No injunction by Court – No injunction shall be granted by any court, Tribunal or authority in respect of any action taken, or to be
taken, in pursuance of any power conferred on the National Company Law Tribunal or the National Company Law Appellate Tribunal
under this Code.
Offenses by insolvency professional agency or insolvency professional
OFFENSES PENALTIES
Sec 70(2) If an insolvency professional deliberately contravenes the provisions of this code. •Imprisonment – Max. 6

months
•Fine –Max. 5 lakh
•Both
Sec. 185 If an insolvency professional deliberately contravenes the provisions of the insolvency
and bankruptcy for individuals and partnership firms
•Imprisonment- Max. 6
months
•Fine –Max. 5 lakh
•Both
Offences by any person on whom the resolution plan is binding
Section 74(3), any person on whom the approved resolution plan is binding, contravenes any of the terms of such
resolution plan or abets such contravention.
•Imprisonment –
Max.5 years
•Fine –
Max. 1 crore
•Both
Offenses by creditors or operational creditor
OFFENSES PENALTIES
74(2) Where any creditor violates the provisions of the
moratorium, any person who knowingly or willfully authorized
or permitted such contravention by a creditor.
•Imprisonment –
Min. 1 year
Max.5 years
•Fine –

min. 1 lakh
Max. 1 crore
•Both
Sec. 76 Where an operational creditor has wilfully or knowingly
concealed in an application made by him under section 9 the
fact that the corporate debtor had notified him of a dispute in
respect of the unpaid operational debt or the full and final
repayment of the unpaid operational debt; or any person who
knowingly and willfully authorised or permitted such
concealment, the operational creditor or person
•Imprisonment
– Min. 1 year
Max. 5 years
•Fine –
Min. 1 lakh
Max. 1 crore
•Both
Offenses By bankrupt
OFFENSES PENALTIES
186(a) If the bankrupt knowingly makes a false representation
or wilfully omits or conceals any material information while
making an application for bankruptcy by a debtor
•Imprisonment- Ma
x. 6 months
•Fine –Max. 5 lakh
•Both
Sec. 186(b) If the bankrupt fraudulently has failed to provide or
deliberately withheld the production of, destroyed, falsified or
altered, his books of accounts, financial information and other
records under his custody or control.
•Imprisonment- Ma
x. 1 year
•Fine –Max. 5 lakh
•Both
Sec. 186(c) If the bankrupt has contravened the restrictions
under section 140 or the provisions of section 141
•Imprisonment- Ma
x. 6 months

•Fine –Max. 5 lakh
•Both
Sec. 186(d) If the bankrupt has failed to deliver the possession
of any property comprised in the estate of the bankrupt under
his possession or control, which he is required to deliver under
section 156
•Imprisonment- Ma
x. 6 months
•Fine –Max. 5 lakh
•Both
Sec. 186(f) If the bankrupt has absconded or attempts to
abscond after the bankruptcy commencement date
•Imprisonment- Ma
x. 1 year
•Fine –Max. 5 lakh
•Both
•Both
Offenses committed by the officer of the corporate debtor or the corporate
debtor and the subsequent penalties
OFFENSES PENALTIES
Section 68, where a Corporate Debtor,
Within the twelve months immediately after the insolvency commencement date
willfully concealed any property or any debt, fraudulently removed any part of the property, of the
value of ten thousand or more, or
wilfully concealed, destroyed or made a false entry in, or altered any document relating to the
property of the corporate debtor or its affairs, or
At any time after the insolvency commencement date, taken in pawn or pledge, or otherwise received the
property knowing it to be so secured, transferred or disposed of.
•Imprisonment
Max.5 years
•Fine –Max. one
1crore
•Both
Sec. 71 On and after the insolvency commencement date, destroys, mutilates, alters or falsifies any books,
papers or securities, or makes or is in the knowledge of making of any false or fraudulent entry in the
•Imprisonment– Min. 3
Years Max.5 Years

accounts with the intention to defraud any person.
•Fine –Min. 1
Lakh Max. 1 Crore
•Both
Module 5
What is NCLT?
National Company Law Tribunal is a quasi judicial body which was set up to resolve the disputes which are arising in Indian
companies. It is the successor to the Company Law Board. It is governed by the rules framed by the central government.
POWERS AND FUNCTION
1. Class Action
An application shall be filed by the members or depositors under section 245 of the companies act, 2013 stating that
the affairs have been conducted in the manner which is prejudiced to the interest of the company.
The orders which are passed by the tribunal shall be binding on the members, depositors, auditors, advisers, experts,
consultants and any other persons who are associated with the company.
2. Deregistration
If a company furnishes either false or incorrect information or by suppressing any material facts, information, or
any declarations passed by the company at the time of incorporation of the company the tribunal pass orders as
per section 7(7) of the companies act, 2013
Pass such orders as it thinks fit.
Pass orders for winding of the company.
Direct the liability of members shall be unlimited.

3. Oppression and Mismanagement
When the affairs have been conducted in a prejudicial manner which is against the member or the company or
the public. or
When material change is brought by the company which is against the creditor, debenture holder and
shareholders of the company any member of the company can file the complaint to the tribunal under section
241 of the companies act, 2013
4. INVESTIGATING POWERS
After the application is filed by the members or non-members of the company under section 213 of the
companies act 2013, tribunal finds out:
a. Affairs of the company have been conducted only with the intent to defraud the creditors;
b. Business is conducted in a fraudulent or unlawful purposes.
Business is being conducted in such a way it is oppressive to its members
d. Persons who are engaged in the formation of the company or management of its affairs were either guilty of
fraud, misfeasance, misconduct towards the company or any of its members
than every officer who is in default and person who is engaged in formation of the company or managing affairs
shall be punishable for fraud.
5. Reopening of accounts
A company can reopen the accounts when it is found out that earlier accounts are prepared in the fraudulent
manner or when the affairs of the company were mismanaged the company can file the complaint to the tribunal
under section 130 of the companies act, 2013.
6. Refusal to transfer shares
If a company whether it is a private which is limited by share or publie company which refuses to register the
transfer of shares of the transferor the company shall send a notice to the transferor and transferee within thirty
days under section 58 of the companies act, 2013

7.Conversion of Public company into Private Company
When a company converts from public into a private company the approval of tribunal is required under decision under
section 13 to section 18 of companies act, 2013 along with the rule 13 of the companies (incorporation) rule 2014.
8. Annual General Meeting
If the company cannot or has not held an Annual General Meeting as required under the Companies Act or a required
Extraordinary General Meeting, then the Tribunal has powers to call for a General Meetings.
9. Winding up of the company
A company may be wound up the tribunal under any of the grounds which is mentioned under section 242 of the
companies act, 2013.
ADDITIONAL FUNCTIONS
1. Power of the tribunal to freeze the assets of the company.
2. Power to change the financial year of the company registered.
Conclusion
NCLT is the successor of the Company Law Board, With the establishment of NCLT there will be a speedy remedy in
resolving the company law disputes and it will be disposed expeditiously.
The Tribunal and the Appellate Tribunal is bound by the rules laid down in the Code of Civil Procedure and is guided by the principles of
natural justice, subject to the other provisions of this Act and of any rules that are made by the Central Government. The Tribunal and
the Appellate Tribunal has the power to control its own procedure.Further,
no civil court has the jurisdiction to consider any suit or proceeding with reference to any matter which the Tribunal or the Appellate Tribunal is
empowered to decide.

Power to seek assistance of Chief Metropolitan Magistrate.
De-registration of Companies.
Declare the liability of members unlimited.
De-registration of companies in certain circumstances when there is registration of companies is obtained in an illegal or wrongful manner.
Remedy of oppression and mismanagement.
Power to hear grievance of refusal of companies to transfer securities and rectification of register of members.
Protection of the interest of various stakeholders, especially non-promoter shareholders and depositors.
Power to provide relief to the investors against a large set of wrongful actions committed by the company management or other consultants and
advisors who are associated with the company.
Aggrieved depositors have the remedy of class actions for seeking redressal for the acts/omissions of the company which hurt their rights as
depositors.
Powers to direct the company to reopen its accounts or allow the company to revise its financial statement but do not permit reopening of accounts.
The company can itself also approach the Tribunal through its director for revision of its financial statement.
Power to investigate or for initiating investigation proceedings. An investigation can be conducted even abroad. Provisions are provided to
assist investigation agencies and courts of other countries with respect to investigation proceedings.
Power to investigate into the ownership of the company.
Power to freeze assets of the company.
Power to impose restriction on any securities of the company.
Conversion of public limited company into private limited company.
If the company cannot or has not held an Annual General Meeting as required under the Companies Act or a required Extraordinary General
Meeting, then the Tribunal has powers to call for a General Meetings.
Power to alter the financial year of a company registered in India.
National Company Law Appellate Tribunal (NCLAT)
Appeal from order of Tribunal can be raised to the National Company Law Appellate Tribunal (NCLAT). Appeals can be made by any person aggrieved by an
order or decision of the NCLT, within a period of 45 days from the date on which a copy of the order or decision of the Tribunal.
On the receipt of an appeal from an aggrieved person, the Appellate Tribunal would pass such orders, after giving an opportunity of being heard, as it
considers fit, confirming, changing or setting aside the order that is appealed against. The Appellate Tribunal is required to dispose the appeal within a
period of six months from the date of the receipt of the appeal.

Meaning
•Sec 2(75) – a registrar, or an additional or joint , a deputy or an assistant registrar having the duty of registering
companies and is discharging various functions under this Act.
•ROCs are the field officers who deal directly with the companies registered or intended to be registered within their
territorial jurisdiction
•Given wide powers for the administration of the Act
•There is ROC for each State of India
•Full time officer appointed by the Central Govt
roles
•Registering new companies – register and issue certificates of incorporation , verifying documents
• Maintaining records- maintaining accurate and up-to-date records of all registered companies and LLPs.
maintaining records of changes in company details such as company’s name, registered office and BOD
• Filling annual returns ensuring that companies file their annual returns and financial statements on time
• Investigate non-compliance - taking action against companies that fail to file their annual returns or financial
statements on time
•Provide guidance and resources to public on starting and managing a company
•Providing public access to company records – including financial statements and annual returns on its website
•Facilitating e- filing and online services- making registering and maintaining more efficient
• Inspecting company records to ensure compliances with the laws and regulations
Duties of Registrar
•Duties after the documents are filed with him by the Companies for registration, record or filing
•Companies ( Registration Offices and Fees) Rules , 2014
•He is required to examine or cause to be examined the document received or filed by or with ROC- make a decision
within 30 days from the date of filing of the document
•If any such document is found to be defective or incomplete in any respect, the ROC shall direct the company to rectify
the defect within 15 days
•No such document shall be registered , recorded or filed until the defect is rectified or the document is completed by
the company and the requisite filing fee is paid

•If the document recorded invalid by Registrar , it may be rectified by the person or company only by fresh filing with
payment of fee and additional fee
Powers of the ROC
•Sec 96- ROC is empowered to extend the time of holding the AGM of a company ( other than the first AGM) by a
period not exceeding 3 months.
•Sec 209 ROC is empowered to apply to the Special Court for an order for the seizure of the books and papers of a
company where the ROC has reasonable grounds to believe that such books and papers relating to the company may
be destroyed , mutilated , altered , falsified or secreted
•Sec 248- ROC has the power to strike the name of a company off the register of companies after complying with the
procedure laid down in the section
SEBI
•The Securities and Exchange Board of India (SEBI)– Regulator of the financial markets in India that was established
on 12
th
April 1988.
•It was initially established as a non-statutory body, i.e. it had no control over anything but later in 1992, it was declared
an autonomous body with statutory powers. he
•This regulatory authority plays an important role in regulating the securities market of India.

Role of SEBI
•A watchdog for all the capital market participants
•Main purpose is to provide such an environment for the financial market enthusiasts that facilitate the efficient and
smooth working of the securities market.
•main participants of the financial market are taken care of:
• issuers of securities,
• investors, and
•financial intermediaries
Objectives of SEBI
•Protection to the investors
•Prevention of malpractices
•Fair and proper functioning
Protective Function
•Checking price rigging
•Prevent insider trading
•Promote fair practices
•Create awareness among investors
•Prohibit fraudulent and unfair trade practices
Regulatory Functions
•Designing guidelines and code of conduct for the proper functioning of financial intermediaries and corporate.
•Regulation of takeover of companies
•Conducting inquiries and audit of exchanges
•Registration of brokers, sub-brokers, merchant bankers etc.
•Levying of fees
•Performing and exercising powers
•Register and regulate credit rating agency

Development Functions
•Imparting training to intermediaries
•Promotion of fair trading and reduction of malpractices
•Carry out research work
•Encouraging self-regulating organizations
•Buy-sell mutual funds directly from AMC through a broker
Organizational Structure:
SEBI Committee Makes Recommendations On Corporate Governance In India Mr. Uday Kotak. Committee
With a view to enhance the standards of corporate governance of listed entities in India, the Securities and Exchange
Board of India (SEBI) constituted the Committee on Corporate Governance (Committee) in June 2017 under the
chairmanship of Mr. Uday Kotak. The Committee submitted its report (Report) to SEBI on 05 October 2017
recommending various revisions to the existing corporate governance regime and the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015 (SEBI LODR).
Some of the key recommendations of the Committee are:

(a) to the composition and role of the board of directors, inter alia:
increase the minimum number of directors of a listed entity to 6 (six);
appoint at least 1 (one) “independent” woman director;
a director to attend at least half of the total number of board meetings held over the relevant period,
quorum of every meeting of the board of directors of the listed entity to be one-third of its total strength or 3 (three)
directors, whichever is higher, including at least 1 (one) independent director;
permit a person above 75 (seventy five) years of age to continue or be appointed as non-executive director only after
approval by shareholders’ special resolution;
permit a person to hold office as a director (including alternate directorship) in only 8 (eight) listed entities at the same
time (of which independent directorships shall not exceed 7 (seven) listed entities), with effect from 1 April 2019 and
not more than 7 (seven) listed entities with effect from 1 April 2020;
ensure that the chairperson of the board, of all listed entities which have more than 40% (forty percent) public
shareholding at the beginning of a financial year, shall be a non-executive director; and
increase the minimum number of board meetings to 5 (five) in a year at least once a year, the board to specifically
discuss strategy, budgets, board evaluation, risk management, environment, sustainability and governance and
succession planning;
(b) to the institution of independent directors, inter alia:
at least half of the board of directors to be independent directors and with effect from 1 April 2019 for the top 500 (five
hundred) listed companies and with effect from 1 April 2020 for all other listed entities;
independent director not to be member of the promoter group of the listed entity and should give declaration of his/ her
independence

minimum total remuneration in aggregate of INR 500,000 (Rupees five hundred thousand) per annum, for top 500 (five
hundred) listed entities
Module 4
Corporate Social Responsibility
Companies take their resources from society to run their business successfully and thus, these companies morally have a duty
to give back something to the society beyond their commitments to investors or shareholders. This is the basic idea behind
‘Corporate Social Responsibility’
CSR includes corporations being economically responsible, embracing fair trade, improving labor practices, giving back to the
community, mitigating environmental damage, and increasing employee satisfaction.

health sector, sanitation and drinking sector, promoting education, gender equality, environment, eradication of poverty, hunger
and malnutrition, national heritage, art and culture, sports, contribution to any fund set up by the central government, the welfare
of minority communities, technology, rural development, etc.
Corporate social responsibility is a business strategy currently used by many companies that attaches a social aspect
to them.
The public and businesses are subject to the many benefits of corporate social responsibility. First, it benefits society,
as companies contribute a part of their revenue. Secondly, the company gains by earning a reputation and thus,
making profits.
Corporate social responsibility is a very prominent approach adopted by most businesses. Some popular examples of
corporate social responsibility include Starbucks, Apple, and Levi Strauss, among others.
The benefits of CSR extend to both society and the company. Thus it is necessary to carefully weigh the impacts of CSR
initiatives and design them to maximize the positive effects.
Types of CSR
There are four important types of corporate social responsibility:
Environmental CSR – Companies focus on environmental protection and conservation in this category. They launch
initiatives to reduce pollution or emission, offset carbon footprint, recycle waste, and use renewable energy sources.
Ethical CSR – The ethical responsibility of a business has to do with the moral values and ethical beliefs of organizations. It
usually covers all the stakeholders of the company – employees, suppliers, and investors. Issues like gender equality,
reasonable working hours, high minimum wage, etc., fall under ethical CSR.

Philanthropic CSR – Businesses’ donations and contributions made to charity are considered philanthropy. Helping
malnourished children or rescuing people in war-torn regions come under this.
Economical CSR –A company should not just make profits but also practice fair measures like paying taxes responsibly to
support the economy.
Example
Netflix and Spotify
From a social point of view, organizations, for example, Netflix and Spotify offer incentives to help their workers and families.
Netflix provides 52 weeks of paid parental leave, which can be taken whenever, whether it is the intermediate year of the
kid’s life or some other time that suits their requirements as compared to other tech organizations, which usually has 18
weeks.
Example #1
Let’s begin with a simple example. Firm PQR sells electronic devices and appliances. Due to the mounting concern about e-
waste management, PQR has decided to introduce an e-waste collection program. Through this program, individuals who
own a PQR product can collect and sell any e-waste to their nearest PQR store by weight.
That is, customers can sell 1 pound of e-waste for $5. Also, customers selling e-waste from PQR products will get an
additional $3 per pound. The firm will recycle the collected e-waste. Customers will be able to visit their PQR membership
account and check the contributions made by them and others. They can also view the total quantity of e-waste recycled,
recycling videos, etc.
Through this program, PQR sells itself. For example, only those individuals who own a PQR product can participate in this
program, encouraging others to buy from the company. Also, it has a good image among the public for addressing a
significant issue. Further, the company can segregate the components and sell them as scrap
Importance

CSR in today’s world is a huge part of corporate governance and a company’s ethics. Even if not mandatory, every
company has a social responsibility. However, it should not be considered an expenditure but an investment for better long-
lasting gains.
CSR is important because it can increase the reputation and project an ethical image of the firm. Hence, people are
generally motivated to buy from such firms, as they too want to be a part of their contribution to society. Moreover, it creates
a bond between the company and the people, thus ensuring customer loyalty.
Often, governments provide subsidies to such firms, as they are contributing to the fulfillment of national goals. The
subsidies include tax credits, rebates, and other incentives. These factors help companies improve sales and avail
incentives, thus, increasing profits.
CSR regulations in India
Traditionally, CSR in India has been seen as a philanthropic activity but after the introduction of Section 135 of the Companies Act
2013, India became the first country to have statutorily mandated CSR for specified companies.
Eligibility for undertaking CSR
According to subsection 1, if a company fulfills any of the below-mentioned conditions in its last preceding ‘financial year’, it shall
constitute a CSR Committee:
The net worth of a company being five hundred crore rupees or more.
Turnover of a company being one thousand crore rupees or more.
The net profit of the company being five crore rupees or more.
The Committee that would be formed must have three or more directors including one independent director.

Duties of a CSR Committee
Formulating and recommending a CSR policy
Monitoring the CSR policy of the company
Recommending the amount of expenditure which has to be spent during the undertaking
Treatment of an unspent CSR amount
If the company fails to spend the amount specified for CSR, then the board has to compulsorily specify reasons for not
doing that in the report (made under clause (o) of Section 134(3)) and the unspent amount needs to be transferred to a
fund specified in Schedule VII. This is to be done within six months of the expiry of the financial year. The reasons along
with transfer of amount to fund have to be done unless the unspent amount is related to an ongoing project which is
referred to under subsection 6.
If an amount is spent more than the requirements which are provided under this subsection by the company, then such a
company may set off the excess amount against the requirement to spend under this subsection for such a number of
succeeding financial years and in a manner that may be prescribed.
Examples of CSR in India
In India, some successful companies undertake CSR projects on a large scale. For example, The Tata Group, an Indian multinational
conglomerate manufacturer of airplanes, automobiles, and other products works for bringing a significant improvement in the
community, alleviating poverty, helping people through various self-help groups, and carrying out many projects in the field of
education. Another example can be Ultratech Cement, the biggest cement company in India which is involved in a lot of social work
with a focus on healthcare and family welfare programs, infrastructure, environment, education, sustainable livelihood, and social
welfare across 407 villages.

China
China was among the first countries in the world to mention the phrase ‘CSR’ in its corporate statute. Company Law of the People’s
Republic of China 2006 states that a company shall undertake “social responsibility” in doing the business.
Indonesia
Limited Liability Company Act 2007 of Indonesia requires explicitly that the companies in the sector of natural resources or any
connection with such resources are under an obligation of implementing environmental and social responsibility.
United Kingdom
The UK Companies Act, 2006 takes the approach of making CSR a legal duty as a part of the fiduciary duty of directors. The law
requires directors to have regard to two things, one is to long-term programs and another is to various factors of CSR including the
interests of suppliers, environment, consumers, and employees.
Comparison of CSR regulations in India with that of other countries
The 2014 Rules prohibited a company from investing the amount of CSR in activities that are beneficial only to the employees of the
company and their families
After analyzing CSR laws in India, it is clear that the country mixes two factors under this regime: traditional philanthropy and
strategic projects. CSR in India operates at places where there is a lack of resources such as toilets and schools. A community’s
need is a major factor under the CSR regime on which India broadly places a top priority. In contrast to this, CSR in wealthier or
major countries like Canada and Australia utilizes CSR funding mostly to cultural institutions and such countries prefer
implementing green business practices. CSR is approached with the intrinsic skills of the business in such countries.
CSR in India is understood in a way that allows businesses to mitigate the negative impact its activities have caused on the local
communities which means that social wellbeing and business success are framed and perceived as antithetical in India.
Whistleblowers Protection

Whistleblowing is defined as an act of disclosing information by an employee or any concerned stakeholder
about an illegal or unethical conduct within an organization.
A whistleblower is a person who informs about a person or organization engaged in such illicit activity.
Whistleblowers report illegal, unsafe, or fraudulent activities within a private or public organization.
In recent years, the number of whistleblowing complaints has risen in the corporate sector, with Wipro and
State Bank of India (SBI) facing most of them in 2018.
Whistleblower Protection
Whistleblowers are protected from retaliation should the information provided be confirmed to be true. This protection includes
prohibiting the accused company from taking adverse or harmful actions against the reporter. Antagonistic activities include
demotion, termination, reprimands, and other punitive reactions. Whistleblower protection also prohibits the company from
pursuing legal action against the whistleblower to recoup losses incurred during the investigation or imposed penalties.
In certain circumstances, more protection may be offered where threats of physical violence against the whistleblower or
associates and family of the whistleblower are found.
key Highlights of Whistleblower Protection Act, 2014
The act establishes a mechanism to receive complaints related to disclosure of allegations of corruption
or wilful misuse of power or discretion, against any public servant, and to inquire or cause an inquiry
into such disclosure.
oThe act also provides adequate safeguards against victimization of the person making such
complaints.

It allows any person, including a public servant, to make a public interest disclosure before
a Competent Authority. The law has elaborately defined various competent authorities. For instance,
Competent authority to complaint against any union minister is the Prime Minister.
The law does not allow anonymous complaints to be made and clearly states that no action will be
taken by a competent authority if the complainant does not establish his/her identity.
oThe maximum time period for making a complaint is seven years.
Exemptions: The act is not applicable to the Special Protection Group (SPG) personnel and officers,
constituted under the Special Protection Group Act, 1988.
Court of Appeal: Any person aggrieved by any order of the Competent Authority can make an appeal
to the concerned High Court within a period of sixty days from the date of the order.
Penalty: Any person who negligently or mala-fidely reveals the identity of a complainant will be
punishable with imprisonment for a term extending up to 3 years and a fine which may extend up to Rs
50,000.
oIf the disclosure is done mala-fidely and knowingly that it was incorrect or false or misleading,
the person will be punishable with imprisonment for a term extending up to 2 years and a fine
extending up to Rs. 30,000.
Annual Report: The Competent Authority prepares a consolidated annual report of the performance
of its activities and submits it to the Central or State Government that will be further laid before each
House of Parliament or State Legislature, as the case may be.
The Whistleblowers Act overrides the Official Secrets Act, 1923 and allows the complainant to make
public interest disclosure before competent authority even if they are violative of the later act but not
harming the sovereignty of the nation.

oIn 2015, an amendment bill was moved that proposes, whistleblowers must not be allowed
to reveal any documents classified under the Official Secrets Act of 1923 even if the purpose is
to disclose acts of corruption, misuse of power or criminal activities. This dilutes the very
existence of the 2014 Act.

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