PAPER-II

CORPORATE LAWS - I
INTRODUCTION
General principles of contracts as well as law relating to certain special contracts of
personal relationships such as agency and partnership based on trust and good faith have
been covered in the previous semesters. Company contract is a special contract yet
different from that of agency and of partnership. A company is an artificial legal person,
recognized as such by law, with certain legal capacity and perpetual succession. It is
different from that of the people who constitute it. Management and capital provision are
separated. Even if the capital providers are the managers, they are agents of the company
and not the company itself. Also capital may be brought by a vast majority of the persons.
Under these special circumstances, there are many rules to be observed and adhered to
from formation stage to dissolving of a company. As recently as 2008, the Limited
Liability Partnership law became the reality and now LLP is also an artificial legal
person. But contracting is not the only way by which a company or LLP may be brought
into existence. We will study the law relating to statutory corporations as well. The
subject of corporate laws is therefore vast and taught in two papers, viz. Corporate Laws -
I and Corporate Laws - II, in semesters V and VI respectively, of the B.A./B.Com. LL.B.
(Hons) courses.
OBJECTS OF THE COURSE:
This course is aimed at making the students the best transactional/litigating corporate
lawyers, regulators, highly sensitive thinkers capable of influencing the economic well
being and posterity of the country while being able to effectively contribute in achieving
social and economic justice as envisioned in the Constitution. In order to fulfill the above
object, it’s imperative for the students to have conceptual clarity as well as the ability to
think critically and evaluate the existing framework with respect to its need, scope,
adequacy and future requirements. Corporate Laws I course is designed keeping the
above objects in mind. The functional understanding of the promotion and registration of

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company and LLP, corporate finance, rights and obligations of a capital provider and
adjudicatory mechanism under the corporate laws are to be covered in Corporate Laws I.
Laws relating to the (company) management etc. are to be covered in Corporate Laws II.
Reasons and justifications for rules relating to the above mentioned aspects of company
shall be discussed in adequate detail so as to ensure that the students develop independent
thinking, critical analysis and evaluating the existing domain knowledge and in order to
facilitate the same critical, evaluative and comparative approaches are to be used in
studying Corporate Laws I. The standard shall be comparable to the best of the national
and international law schools. To develop an understanding of the formation, registration
of companies and regulation of companies, relevant provisions of the Companies Act,
1956, including schedules, rules, departmental circulars, clarifications and notifications
made thereunder, their interpretation through decided case laws, scholarly theoretical
material, journal review articles, post independence corporate law developments
including the review of company law by the JJ Irani Committee and the Limited Liability
Partnership Act, 2008 would form part of the study material which are listed under the
specific modules in the following pages. In addition to the Companies Act, 1956, relevant
provisions of legislations relating to securities market and foreign exchange management
would also be discussed in brief.
LEARNING OBJECTIVES
1. To understand the historical development of corporation and regulation of
corporations by State
2. To appreciate the scheme of registration of the corporations and the rationale
behind various statutory requirements
3. To know the limitations of the authority of a company and the system of checks
and balances
4. To understand and appreciate the extent of the civil, criminal and tortuous liability
of a company
5. To examine the nature, scope and the constitutional validity of adjudicatory
mechanism under the Companies Act, 2013 and it’s functioning

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 6. To understand how corporate finance is being regulated by the state
7. To understand the statutory rights and obligations of a capital provider
8. To understand and to evaluate the regulation of stakeholders’ interface and the
interface between the company and the stakeholders
COURSE SUMMARY
Corporate Laws – I deals with promotion and incorporation by registration, consequences
of incorporation, interpretation of the constitutional documents of companies,
adjudicatory bodies, financial structure, raising of equity capital including issue of
prospectus, allotment of shares and certificates, depositories, transfer/transmission of
shares and membership rights. Cross reference will be made to the extent the Companies
Act, 2013 applies to the LLP.
The topics for this course are divided into five modules and ten units.
TEACHING METHODOLOGY
Corporate Laws – I will be taught by a combination of lectures and classroom
discussions. Being a branch of law essentially made of various statutes and decided cases
the interpretation of various statutory provisions and case laws will be an integral part of
teaching. Students are expected to read the full judgments in advance in order to
participate in the class room discussions. As part of project writing exercise, ample scope
would be made available to the students for their self learning, critical thinking, creativity
and development of research skills and techniques.
ASSESSMENT
Mid-semester (open book) as well as end-semester (closed book) shall be written exam.
In case of open book exam, the questions will be problem based. This is aimed at
checking the in-depth knowledge and analytical as well as advocacy skills of the students
in the subject. In case of closed book exam, a combination of problem as well as theory
based questions will be given. This will test, in addition to the skills as mentioned under
mid-semester exam, the retaining capacity as well as the recalling ability of candidates.
Students are strongly advised to read the full text of case laws from the reports which
would enable them to solve the legal problems in the exams.In case of closed book

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examination, only the Bare Act (without any commentary or short notes or both) is
allowed in the examination hall.
NOTE: All students SHALL keep their own copy of the bare Companies Act, 2013
as amended up to date during the class hours. Alternatively, one may use the
corporate laws manual published by any of the publishers.
COURSE CONTENTS
MODULE I
UNIT 1 - INTRODUCTION
Nature of business organisation and kinds of business organisations
 Corporation – nature and definition; Types and the historical development of
incorporated companies; emergence of principle of limited liability
Companies under the Companies Act, 1956; Limited Liability Partnership (LLP)
Features of company and Limited Liability Partnership
Differences between a Partnership under the 1932 Act and a Company/LLP
Development of Company Law in England and India
Major Amendments to the Companies Act, 2013
• Producer Companies
• Board of Company Law Administration; Company Law Board
• NCLT and NCLAT
UNIT 2 – SPECIAL CONTRACTS RESULTING IN BODY CORPORATES
 Promoters– meaning, position, duties and liabilities
Memorandum of Association and Articles of Association: Meaning, Significance
and Contents
Scope and Significance of Modern Company and LLP Contracts
• Parties to the contract and other stakeholders
• Registration and Incorporation of Companies
• Resultant Body Corporate : Nature and Meaning

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 • Identification of Legal Relationships amongst the stakeholders inter se, if
any, and between the stakeholders and the company
Registered office and publication of name
Certificate of Incorporation
Certificate of Commencement of Business
An Overview of the Structure of Company and LLP Laws
• Structure of Corporate Law
• Protection of Stakeholders’ Interest under the Corporate Law
• Freedom of Contract vis-à-vis Corporate Law
Select Special Features of Company Contract
 Concept of Corporate Personality and other associated features
 Doctrine of Lifting of Corporate Veil
 Concept of Limited Liability
 Exceptions to Limited Liability
MODULE II
UNIT 3 – ADJUDICATORY BODIES
Ordinary Civil Courts : Jurisdiction in relation to company matters
High Court : Original and appellate jurisdiction in relation to company matters
Company Law Board : Structure and Composition, Significance, Jurisdiction,
Powers and Functions
NCLT and NCLAT : Creation, Scope, Significance, Jurisdiction, Powers and
Functions
Recent changes in the mechanisms
UNIT 4 – INTERPRETATION AND ALTERATION OF MEMORANDUM AND ARTICLES
Interpretation of MoA and AoA
Alterations in Memorandum of Association and in Articles of Association
Restrictions on such Alterations
A Comparative Analysis of MoA and AoA

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 Conflict between MoA and AoA
Distribution of corpora authority
UNIT 5 – CORPORATE THIRD PARTY DEALINGS AND LIABILITY
Corporate Control
Company Third Part Contracts and Contractual Capacity
Rules of Attribution
The doctrines of constructive notice, indoor management and ultra-vires
Pre-incorporation, preliminary and post-dissolution contracts
Corporate Criminal Liability
Corporate Tortuous Liability
Corporate Liability v. Limited Liability: A Social Cost Analysis
MODULE III
UNIT 6 – FORMATION OF CAPITAL AND RAISING OF EQUITY CAPITAL
Concept of capital and financing of companies
Kinds of capital and Contracts to subscribe for shares
Classes and types of shares; equity with differential rights.
Issue of shares at par, premium and discount.
Private Placement and Statement in lieu of Prospectus
Information Memorandum: Contents and Registration
Public Issue
Prospectus:
 Meaning, Definition and Kinds
 Abridged prospectus
 Red-herring prospectus
 Shelf prospectus
 Contents and Registration
 Misrepresentations in prospectus and civil and criminal liability for such
misrepresentations.

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 Allotment of Shares
Minimum Subscription Requirement
Dematerialisation and rematerialisation of securities
Cost v. Benefit of demat form
Share certificates and share warrants.
Call on shares.
Forfeiture and surrender of shares.
Bonus issues; rights issues; issue of sweat equity shares.
Private placement
Qualified Institutions Placement
UNIT 7 – DEBT CAPITAL
Borrowings: Meaning, Types
Loans from Banks and Financial Institutions
Debentures: Characteristics and Kinds
debenture stock, bonds
Debenture trust deed and trustees
Contracts to subscribe for debentures and other securities excluding shares
Conversion of and redemption of debentures
Issue of Debentures and Charges
Debt Capital and Company Charges
 Securing of debts– creation, modification and satisfaction of charges
 Kinds of Charges: Fixed and Floating
 Perfection of Charges
 Crystallisation of Floating Charges and its effects
New developments in corporate debt financing
 Reconstruction of Financial Assets
 Asset Management Companies
 Enforcement of Security Interest

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 MODULE IV
UNIT 8 – TRANSFER AND TRANSMISSION OF SHARES
 Transfer of Shares
 Transfer Procedure in physical mode; Share Certificates, Uncertified
Shares
 Transfer Procedure in Depository mode
 Forged or Fraudulent Share Transfers
 Transmission of Shares
 Nomination
 Share Warrants
Warranties and indemnities on Share Sales
Overview of dealings in Securities in Secondary Market
 Companies’ lien on shares

UNIT 9 - MEMBERSHIP RIGHTS, CLASS RIGHTS, MINORITY PROTECTION

Membership Rights; Statutory and Contractual Rights
Class Rights and Alteration of Class Rights
 Oppression and Mismanagement – Meaning, scope, locus standi; powers of
NCLT/NCLAT and of the Union government
Remedies available for shareholders
MODULE V
UNIT 10 – MAINTENANCE OF CAPITAL
Rule relating to the maintaining of share capital for the benefit of the company, its
members and its creditors.
Alteration of share capital
Reduction of capital
Buy-back of shares

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 REFERENCES

STATUTORY MATERIALS
1. The Companies Act, 2013
2. The Limited Liability Partnership Act, 2008
3. The Securities and Exchange Board of India Act, 1992
4. The Securities Contract (Regulation) Act, 1956
5. The Depositories Act, 1996
6. The Banking Companies Act, 1949
7. The Foreign Exchange Management Act, 1999
8. Other relevant Rules, Regulations and By-Laws issued from time to time
BOOKS
1. Y.V. Chandrachud (2004), A. Ramaiya Guide to Companies Act, Lexisnexis
Wadhwa, Nagpur.
2. A.A. Berle and G.C. Means (1991), The Modern Corporation and Private
Property, Transactional Publishers.
3. Brian R. Cheffins (1997), Company Law: Theory, Structure, and Operation,
Clarendon Press, Oxford.
4. Eilís Ferran, Company Law and Corporate Finance, OUP,1st Indian Edition, 2003.
5. John H. Farrar, Farrar’s Company Law, Butterworths, London
6. Majumdar and Kapoor (2008), Company Law and Practice, 13th ed., Taxman.
7. Nicholas Bourne on Principles of Company Law (1998), 3rd ed., Cavendish
Publishing Ltd.
8. Palmer’s Company Law, Stevans, London.
9. Paul L. Davies and Sarah Worthington (2016), Gower and Davies Principles of
Modern Company Law, Sweet and Maxwell, London.
10. Robert R. Pennington (2001), Pennington’s Company Law, (8th Ed.) London:
Butterworths.

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 11. Ross Grantham and Charles Rickett, Corporate Personality in the 20th Century,
Hart Publishing, Oxford, 1998.
12. Stephen M. Bainbridge (2002), Corporation Law and Economics, Foundation
Press.
13. Susan Barber (2003), Company Law, Old Bailey Press, London.
COMMITTEE REPORTS
 The Report of the Committee on Company Law Amendment, 1945. (Cohen
Report)
 Report of the Company Law Committee, 1962. (Jenkins Committee)
 Report of the JJ Irani Committee on Company Law, 2002.
Note: Other readings and list of cases shall be given in the detailed syllabus.
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