Company Law and Corporate Governance
Company Law questions focus on the Companies Act, 2013, SEBI's listing regime and the Insolvency and Bankruptcy Code, 2016 - statutory thresholds and governance duties more than narrative case law.
Core rules
- Incorporation: ss.3–7; the certificate of incorporation is conclusive. Corporate personality is separate (Salomon v. Salomon, 1897); the veil is lifted for fraud, tax evasion, sham companies and statutory exceptions.
- Classification: private company (s.2(68)), public company (s.2(71)), small company (s.2(85)), one-person company. Section 149 requires 3 directors in a public company, 2 in private and 1 in an OPC, with at least one woman director for prescribed classes.
- Governance: independent directors (s.149(6)); audit committee (s.177); nomination and remuneration committee (s.178); related-party transactions (s.188) need board or shareholder approval by threshold; CSR under s.135 applies at net worth of Rs.500 crore or more, turnover of Rs.1,000 crore or more, or net profit of Rs.5 crore or more, with 2% of average net profit of the preceding three years.
- Remedies: oppression and mismanagement (ss.241–242); class action (s.245); investigation (s.210); strike-off (s.248); fraud (s.447).
- Insolvency: IBC corporate insolvency resolution process, resolution professional, committee of creditors, s.29A eligibility, the 330-day outer limit and liquidation.
- SEBI (LODR) Regulations, 2015, Regulation 17 governs board composition and chairperson separation.
Worked example
A listed company earns an average net profit of Rs.8 crore but has a turnover of Rs.1,200 crore. CSR applies even though the profit threshold is not met, because any one threshold suffices. The company must spend 2% of average net profit (Rs.16 lakh); any unspent amount goes to a specified fund under s.135(5)–(6), and failure attracts penalty under s.135(7).
Traps
- Treating CSR as voluntary.
- Applying s.188 without checking thresholds and audit committee approval.