\ Registration of prospectus

u/s 60: a prospectus has to be registered and a copy delivered to ROC and then it can be issued to the public The prospectus must be issued to the public within 90 days of date of registration If any default is made in registration, issue or documentation of prospectus , a penalty of Rs. 50000 is to be payable
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Various types of prospectus

SHELF PROSPECTUS: u/s 60 A a prospectus issued by any financial institution or bank for one or more issues of securities is called a shelf prospectus Any PFI, PS bank or a scheduled bank whose main object is financing shall file a shelf prospectus An information memorandum must also be issued with the first issue to public giving all the details of the company A public company making an issue of securities may circulate information memorandum to public prior to filing a prospectus
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 RED HERRING PROSPECTUS: it is a prospectus which does not have details of either the prioce or number of shares being offered or the amount of issue. The cash price is not disclosed but the number of shares and upper and lower price bands are disclosed Only after the bidding process , the details of the final price are included and submitted to ROC, which rthen shall be called as prospectus
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 Abridged prospectus: it is to mean a memorandum containing such salient features of prospectus as may be priscribed. It accompanies the application form of public issues

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RESOLUTIONS
The questions which come for consideration At a general meeting of a company are presented in the form of motions. The motion is discussed and closes for discussion by voting from the members If the motion receives majority the motion shall be put to poll The motion is carried to become a resolution ACCORDING TO ICA 1956, there are three types of resolutions
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u/s 189(1): ORDINARY RESOLUTION

An OR is a resolution which ois passed at a GM by a simple majority of votes The votes may be cast by members in person or by proxy, where proxies are allowed Matters discussed in OR: 1. ISSUE OF SHARES AT A DISCOUNT 2. ALTERATION OF SHARE CAPITAL 3. RE-ISSUE OF REDEEMED DEBENTURES 4. ADOPTION OF STATUTORY REPORT 5. APPOINTMENT OF AUDITOPRS AND THEIR REMUNERATION
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189(2) SPECIAL RESOLUTION

RULES OF SPECIAL RESOLUTION: - The intention to propose the resolution as a SR has been duly specified in the notice calling the general meeting - The votes cast in favor of resolution shall nopt be less than 3 times the number of votes cast against the resolution. - Proxies are also counted for where ever allowed - a copy of the same after the resolutiontaken shall be submitted to the ROC within 30 days of passing such resolution
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Matters to be discussed in SR: - Change of name of company - Alteration of articles of the company - Variation of shareholders rights - Reduction in share capital conversion of uncalled capital into reserve capital - Fixation of remuneration of directors - Applying to court for winding up of company - Removal of the registered office of the company outside the local limits of , village, city, state
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u/s 190: Resolutions requiring a special notice

It is a different kind of ordinary resolution It is a notice of intention to move a resolution to be given to the company by the proposer The notice shall be given not less than 14 days prior to the meeting at which the resolution is to be moved A special notice is required for a resolution in the following cases: 1. Appointment of an auditor other than the retiring ones 2. Removal of a director 3. Appointment of a director who has been removed
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AUDIT OF BOOKS OF ACCOUNTS

Audit is examination of accounts to establish the correctness It is done with a two fold purpose: 1. Detection and prevention of errors 2. Detection and prevention of fraud u/s 224: appointment of an auditor is mandatory and an ordinary resolution is passed
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Accounts and audit of companies

Every company must maintain proper books of accounts of its affairs. The following transactions must be entered in the books of accounts of the company which must be kept at its registered office : all sums of money received and expended by the company and the matters in respect of which the respect of which the receipt and expenditure took place; all sales and purchases of goods by the company; and

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 the assets and liabilities of the company. in the case of a company engaged in production, processing, manufacturing or mining activities, such particulars relating to utilization of material or other items of cost as may be prescribed relating to certain class of companies as the Central Government may require
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 The books of accounts must comply with the following conditions : The books must give a true and fair view of the state of affairs of the company or the branch office, if any, and explain its transaction. The books must be kept on accrual basis and according to double entry system of accounting
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Place of keeping thew books

Every company must keep its books of account at its registered office. However, some of the books of account may be kept at such other place in India as the Board of Directors may decide, provided a notice in writing giving full address of that other place along with requisite filing fee is filed with the Registrar of Companies within seven of such decision
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Branch accounts
If the company has a branch office, the books of account relating to transactions at the branch office may be kept at that branch office, but proper summarized reports and statements must be sent to the registered office or such other place where the books are kept, at intervals of not more than three months. The books of account of the branch must give a true and fair view of the affairs of the branch and clearly explain its transactions.
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Persons responsible for accounts

The following persons are responsible for maintaining the books of accounts of a company : The managing director or manager; If the company has neither a managing director nor manager, then every director of the company; Every officer and other employee who has been authorized and to whom responsibility to maintain the books has been allotted by the Board of Directors.

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Preparation of Balance Sheet and Profit and Loss Account

The company has to prepare its balance sheet and profit & loss account from the books of account maintained by it. Every Balance Sheet of a company must give a true and fair view of the state of affairs of the company as at the end of the financial year and must be in the prescribed format.

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Form of Balance Sheet

Part 1 to Schedule VI of the Companies Act, 1956 gives the format in which the balance sheet is to be prepared. The schedule specifies 2 types of formats, the horizontal format and the vertical format. A company can prepare its balance sheet in either of the 2 formats. In the horizontal format, the liabilities including the share capital are placed on the left side and assets of all types on the right
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 The balance sheet and profit & loss account of a company must be signed on behalf of the Board of directors by two directors out of whom one must be the managing director, where there is one and the manager, or secretary, if any. The balance sheet and profit and loss account must be approved by the Board of directors before they are submitted to the auditors for the purpose of audit. The report of the auditors must be attached to the balance sheet and profit & loss account.
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Filing of Annual Accounts with the Registrar

Every company must file with the Registrar : within 30 days from the day on which the annual accounts, auditors report and the directors report were presented at the annual general meeting, three certified copies of these documents signed by the managing director, manager or secretary of the company or if there be none of these by a director of the company
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Filing of Annual Accounts with the Registrar

These accounts may be inspected and copies thereof may be obtained by any member of the public at the Registrar of Companies on payment of the requisite fee. However, no person other than a member of the company is entitled to inspect, or obtain copies, of the profit and loss account in the case of the following types of companies :- a private company which is not a subsidiary of public company; - a private company whose entire paid-up capital is held only by one or more bodies corporate incorporated outside India; or
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Filing of Annual Accounts with the Registrar

- a private company which is deemed to be a public company by virtue of Section 43A, if the Central Government directs that it is not in the public interest that any person other than a member of the company should be entitled to inspect or obtain copies of the profit and loss account of the company

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Directors' Report
The report of the Board of Directors must be attached to every balance sheet presented at the annual general meeting. The report must contain information regarding the following matters : The state of affairs of the company The amount, if any, which it proposes to carry to any reserves in such balance sheet The amount of dividend recommended
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 Conservation of energy, technology absorption, foreign exchange earnings and outgo. Names, designations and other particulars of all employees drawing more than Rs. 50000/- p.m. in the company Details of any material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the company to which the balance sheet relates and the date of the report
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Details necessary for a proper understanding of the state of the company's affairs and which are not, in the Board's opinion, harmful to the business of the company or of any of its subsidiaries, in respect of changes which have occurred during the financial year : in the nature of company's business; in the company's subsidiaries or in the nature of the business carried on by them; and generally in the classes of business in which the company has an interest
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Auditors of Other Companies

It is the duty of the auditor conduct the audit of the books of accounts of the company and to make his report to the members of the company on the accounts examined by him, and on every balance sheet, every profit and loss account and on every other document declared by the Act to be part of or annexed to the balance-sheet or profit and loss account and laid before the company in general meeting during his tenure of office.

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The auditors report, besides other things necessary in any particular case, must expressly state whether, in his opinion and to the best of his information and according to explanation given to him, the accounts give the information required by the Act and in the manner

whether the balance-sheet gives a true and fair view of the company's affairs as at the end of the financial year and the profit and loss account gives a true and fair view of the profit or loss for the financial year;
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 whether he has obtained all the information and explanations required by him for the purposes of his audit; whether in his opinion, the profit & loss account and balance sheet referred to in his report comply with the accounting standards recommended by the Institute of Chartered Accountants of India;
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 whether, in his opinion, proper books of account as required by law have been kept by the company, and proper returns for the purposes of his audit have been received from the branches not visited by him; whether the company's balance sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns
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 The auditor must submit a copy of his audit report to the Comptroller and Auditor-General of India who shall have the right to comment upon or supplement, the audit report in such manner as he may think fit.

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u/s 227-231

Powers/Rights of an Auditor Right of access to books of account and vouchers Right to receive information and explanations. Right of access to books and papers of branches Right to receive notices of general meetings and to attend those meetings. Right to make representation where another person is being appointed as auditor.

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DUTIES OF AN AUDITOR
To give a report to the members on the accounts,
books of account, balance sheet and profit and loss account examined by him. Where any matter reported upon is answered in the negative or with a qualification the report shall include reasons for such qualification with factual position. To attend those general meetings of a listed company, either himself or through authorized person, in which the balance sheet, profit and loss account and the auditors' report are to be considered.
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Rights of an auditor
To make report for inclusion in prospectus. To certify receipts and payments account in the statutory report To make report on declaration of solvency in case of voluntary winding up. To exercise reasonable care and skill in carrying out his duties and make such inquiries as considered necessary.
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u/s 233-A: Special audit

233A: Power of Central Government to direct special audit in certain cases: (1) Where the Central Government is of the opinion (a) that the affairs of any company are not being managed in accordance with sound business principles or prudent commercial practices; or (b) that any company is being managed in a manner likely to cause serious injury or damage to the interests of the trade, industry or business to which it pertains; or
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SPECIAL AUDITOR
(c) that the financial position of any company is such as to endanger its solvency; the Central Government may at any time by order direct that a special audit of the company' s accounts The chartered accountant or the company' s auditor appointed to conduct a special audit as aforesaid is referred to as the special auditor
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S E B I
SECURITIES EXCHANGE BOARD OF INDIA It was formed officially by the Government of India in 1992 with SEBI Act 1992 being passed by the Indian Parliament. SEBI is headquartered in the business district of Bandra Kurla Complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmedabad
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Controller of Capital Issues-CCI

Controller of Capital Issues was the regulatory authority before SEBI came into existence; it derived authority from the Capital Issues (Control) Act, 1947.

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 Initially SEBI was a non-statutory body without any statutory power. However in 1995, the SEBI was given additional statutory power by the Government of India through an amendment to the securities and Exchange Board of India Act 1992. In April, 1998 the SEBI was constituted as the regulator of capital market in India under a resolution of the Government of India.
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Functions and responsibilities

SEBI has to be responsive to the needs of three groups, which constitute the market:

the issuers of securities the investors the market intermediaries.

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SEBI has three functions rolled into one body: quasi-legislative, quasi-judicial quasi-executive.

It drafts regulations in its legislative capacity, It conducts investigation and enforcement action in its executive function It passes rulings and orders in its judicial capacity. Though this makes it very powerful, there is an appeals process to create accountability. There is a Securities Appellate Tribunal which is a threemember tribunal
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Powers of SEBI
For the discharge of its functions efficiently, SEBI has been invested with the necessary powers which are: to approve bylaws of stock exchanges. to require the stock exchange to amend their bylaws. inspect the books of accounts and call for periodical returns from recognised stock exchanges. inspect the books of accounts of a financial intermediaries.
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 compel certain companies to list their shares in one or more stock exchanges. levy fees and other charges on the intermediaries for performing its functions. Grant licence to any person for the purpose of dealing in certain areas. delegate powers exercisable by it. prosecute and judge directly the violation of certain provisions of the companies
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SEBI Committees
Technical Advisory Committee Committee for review of structure of market infrastructure institutions Members of the Advisory Committee for the SEBI Investor Protection and Education Fund Takeover Regulations Advisory Committee Primary Market Advisory Committee (PMAC) Secondary Market Advisory Committee (SMAC)
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 Mutual Fund Advisory Committee Corporate Bonds & Securitization Advisory Committee Takeover Panel SEBI Committee on Disclosures and Accounting Standards (SCODA)

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 High Powered Advisory Committee on consent orders and compounding of offences Derivatives Market Review Committee Committee on Infrastructure Funds

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VARIOUS REGULATIONS
SEBI (insider trading) Regulations, 1992 SEBI(underwriters) Regulations, 1993 SEBI (debenture trustee) Regulations, 1993 SEBI(portfolio managers) Regulations, 1993 SEBI( FII) Regulations, 1995 SEBI(mutual fund), 1996 SEBI(Issue of sweat equity) Regulations, 2002
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