Key Compliance Requirements Under the Companies Act, 2013

Posted on Nov 8, 2025 in Law & Jurisprudence

Foreign Company Registration in India

A company incorporated outside India refers to a foreign company that has been incorporated in a country other than India, but maintains a presence or conducts business in India.

Mandatory Registration with the RoC

A foreign company is required to register with the Registrar of Companies (RoC) in India if it meets the following criteria:

  1. Establishes a place of business: The foreign company sets up a branch office, liaison office, project office, or any other place of business in India.
  2. Carries on business activities: The foreign company engages in business activities in India, such as sales, marketing, or manufacturing.

Application Filing Requirements

A foreign company must file an application with the RoC in India, submitting required documents and information, including:

  • Certificate of Incorporation: A certified copy of the company’s certificate of incorporation from its home country.
  • Memorandum and Articles: A certified copy of the company’s memorandum and articles of association.
  • Details of Directors and Key Personnel: Information about the company’s directors, key personnel, and authorized representatives in India.
  • Financial Statements: The company’s financial statements for the previous financial year.

Circumstances Requiring Filing

A foreign company files an application primarily for the following reasons:

  • Establishing a Presence: To establish a branch office, liaison office, project office, or any other place of business in India.
  • Conducting Business Activities: To carry on business activities in India, such as sales, marketing, manufacturing, or providing services.
  • Compliance with Indian Laws: To comply with Indian laws and regulations, including tax laws and corporate governance requirements.

By registering with the RoC, a foreign company establishes a legitimate presence in India and conducts business activities in compliance with Indian laws and regulations.

Corporate Meetings: Types and Calling Procedure

Understanding the different kinds of meetings in a company and the procedure required to call them is crucial for corporate governance.

Types of Company Meetings

  1. Shareholders’ Meetings:
    • Annual General Meeting (AGM)
    • Extraordinary General Meeting (EGM)
  2. Board Meetings:
    • Regular board meetings
    • Special board meetings
  3. Committee Meetings:
    • Audit committee meetings
    • Nomination and remuneration committee meetings
    • Stakeholders’ relationship committee meetings

Procedure to Call a Meeting

Board Meetings

  1. Notice: The notice of the board meeting must be given to all directors, specifying the date, time, place, and agenda.
  2. Frequency: Board meetings are held at regular intervals, as specified in the company’s articles of association.
  3. Quorum: The required quorum for the meeting must be determined. The meeting is adjourned if the quorum is not met.

Shareholders’ Meetings

  1. Notice: The notice of the shareholders’ meeting must be given to all shareholders, specifying the date, time, place, and agenda.
  2. Requisition: An EGM can be called upon requisition by shareholders holding a specified percentage of shares.
  3. Quorum: The required quorum for the meeting must be determined. The meeting is adjourned if the quorum is not met.

Key Statutory Requirements

  • Notice Period: The notice period for meetings varies, but it is typically 21 days for AGMs and EGMs.
  • Agenda: The agenda for the meeting must be clearly specified in the notice.
  • Quorum: The quorum for the meeting must be determined, and the meeting must be adjourned if the quorum is not met.

The specific procedure for calling a meeting may vary depending on the company’s articles of association and applicable laws.

Winding Up by the National Company Law Tribunal (NCLT)

The National Company Law Tribunal (NCLT) holds the authority to order the winding up of a company under specific circumstances defined by law.

Grounds for Winding Up

The NCLT can order winding up based on the following grounds:

  1. Inability to Pay Debts: The company is unable to meet its financial obligations and pay its debts.
  2. Special Resolution: The company has voluntarily passed a special resolution for winding up.
  3. Just and Equitable: The NCLT is satisfied that it is just and equitable to wind up the company (a broad discretionary ground).
  4. Default in Statutory Filings: The company has defaulted in filing financial statements or annual returns for a specified continuous period.
  5. Inactive Company: The company has remained inactive for a prolonged period.

Winding Up Procedure

  1. Petition: A petition is filed with the NCLT by an authorized party (e.g., a creditor, shareholder, or the company itself).
  2. Notice: The NCLT issues a notice to the company and other relevant stakeholders.
  3. Hearing: The NCLT conducts a hearing and considers the evidence presented.
  4. Order: If the NCLT is satisfied that the statutory grounds for winding up are met, it passes an order for winding up.

Consequences of a Winding Up Order

  • Liquidation: The company’s assets are liquidated (sold), and the proceeds are distributed among creditors and shareholders according to legal priority.
  • Dissolution: Following liquidation, the company is dissolved, and its legal existence ceases.

The NCLT’s power to order winding up ensures corporate accountability regarding financial obligations and provides a formal mechanism for resolving corporate disputes and insolvency.

Understanding Debentures: Features, Types, and Risks

A debenture is a type of debt instrument used by companies to raise capital from investors. It essentially acknowledges a loan made to the company.

Key Features of Debentures

  • Debt Instrument: A debenture formally acknowledges a loan made to the issuing company.
  • Fixed Income: Debentures typically offer a fixed rate of interest, commonly known as the coupon rate.
  • Maturity Period: They possess a specific maturity period, after which the company repays the principal amount to the holder.
  • Secured or Unsecured: Debentures can be secured (backed by specific company assets) or unsecured (not backed by assets).
  • Transferable: Debentures can generally be easily transferred or traded among investors.

Types of Debentures

  1. Convertible Debentures: These instruments grant the holder the option to convert them into equity shares of the company after a specified period.
  2. Non-Convertible Debentures (NCDs): These cannot be converted into equity shares.
  3. Redeemable Debentures: These can be redeemed (repaid) by the company after a specific period or upon maturity.
  4. Irredeemable Debentures: These are perpetual in nature and cannot be redeemed by the company during its lifetime (though rare in modern finance).

Benefits for Investors

  • Fixed Income: Debentures provide a regular and predictable stream of income.
  • Lower Risk: Debentures are generally considered lower-risk investments compared to equity shares, as debt holders have priority during liquidation.
  • Diversification: Investing in debentures can help diversify an investment portfolio.

Associated Risks

  • Credit Risk (Default Risk): The company may default on interest or principal payments.
  • Interest Rate Risk: Changes in market interest rates can negatively affect the market value of existing debentures.
  • Liquidity Risk: Debentures, especially those of smaller companies, may not be easily sold or traded on the secondary market.

Debentures can be an attractive investment option for those seeking regular income and relatively lower risk. However, it is essential to carefully evaluate the terms and conditions of the debenture and the company’s creditworthiness before investing.

Public vs. Private Companies: Key Distinctions

Characteristics of Public Companies

A public company is characterized by the following features:

  • Offers Shares to the Public: Public companies can issue shares to the general public, often through an Initial Public Offering (IPO).
  • Listed on a Stock Exchange: They are typically listed on a recognized stock exchange, such as the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE).
  • Greater Transparency: Public companies are required to disclose extensive financial information and other operational details to the public and regulatory bodies.

Characteristics of Private Companies

A private company operates under the following restrictions and characteristics:

  • Restricts Share Ownership: Private companies restrict the ownership of shares to a limited number of people, typically founders, family members, or private investors.
  • Not Listed on a Stock Exchange: Private companies are not listed on any stock exchange.
  • Less Transparency: Private companies generally have fewer disclosure requirements compared to public companies.

Key Differences in Structure and Compliance

  1. Ownership Structure: Public companies have a broader ownership base, whereas private companies maintain a more restricted ownership structure.
  2. Funding Options: Public companies can raise substantial capital from the public via IPOs and follow-on offerings, while private companies rely primarily on private funding sources (e.g., venture capital, angel investors).
  3. Regulatory Requirements: Public companies are subject to more stringent regulatory requirements and disclosure obligations imposed by SEBI and the Companies Act compared to private companies.

The decision regarding a public or private company structure depends heavily on the company’s long-term goals, funding requirements, and ownership preferences.

Preventing Oppression and Mismanagement (CA 2013)

The Companies Act, 2013, includes robust provisions to prevent oppression and mismanagement within companies, thereby safeguarding investor interests and protecting public interest. Chapter XVI of the Act, specifically Sections 241–246, addresses these crucial provisions.

Key Definitions

  • Oppression: The Act defines oppression as conduct that is burdensome, harsh, and wrongful, affecting a company’s members or being prejudicial to its overall interests. Examples include siphoning company assets, unfairly diluting shareholders’ rights, or making decisions that harm the majority.
  • Mismanagement: Mismanagement involves inefficient, careless, or dishonest management practices, such as financial irregularities, negligence, or actions leading to significant financial losses.

Available Remedies

Aggrieved parties have several remedies:

  • Application to NCLT: Members or shareholders can apply to the National Company Law Tribunal (NCLT) if they believe the company’s affairs are being conducted in an oppressive or prejudicial manner.
  • Powers of NCLT: The NCLT has broad powers to pass orders regulating the company’s future conduct, ordering share purchases, or even winding up the company if deemed necessary.
  • Class Action Suits: Minority shareholders or depositors are empowered to file class action suits against the company or its directors for actions prejudicial to the company’s interests.

Who Can Apply to the NCLT?

  • Members: In a company having share capital, at least 100 members or not less than 1/10th of the total number of its members (whichever is less) can apply to the NCLT.
  • Central Government: The Central Government can also apply to the NCLT if it believes the company’s affairs are being conducted in a manner prejudicial to public interest.

Consequences for Delinquent Parties

  • Penalties: Delinquent directors or officers can face fines, imprisonment, or both for proven oppressive or mismanaged actions.
  • Liability: Directors or officers can be held personally liable for damages or losses caused to the company due to their wrongful actions.

Registration of Charges and Certificates (CA 2013)

The Companies Act, 2013, mandates that companies register charges with the Registrar of Companies (RoC). A charge is defined as a security interest created over a company’s assets to secure a loan or debt obligation.

The Registration Process

  1. Creation of Charge: The company formally creates a charge over its assets in favor of the lender.
  2. Filing of Charge: The company must file the particulars of the charge with the RoC using the prescribed form within 30 days of its creation.
  3. Verification and Certification: The RoC verifies the particulars submitted and subsequently issues a Certificate of Registration.

The Certificate of Registration

The Certificate of Registration serves as conclusive evidence that the charge has been legally registered. It typically contains essential details, including:

  • Charge ID: A unique identification number assigned to the charge.
  • Company Details: The name and registered office address of the company.
  • Charge Particulars: The amount, type, and specific details of the charge created.

Importance of Registration

Registering charges provides several critical benefits:

  • Public Notice: It provides public notice of the charge, allowing stakeholders to accurately assess the company’s financial position and liabilities.
  • Priority: Legally registered charges hold priority over any unregistered charges.
  • Protection: Registration protects the financial interests of both lenders and creditors.

Consequences of Non-Registration

Failure to register charges as required by the Act can lead to severe consequences:

  • Invalidity: The charge may be deemed invalid against liquidators and other creditors of the company.
  • Penalties: The company and its defaulting officers may face significant penalties and fines.

Compliance with charge registration requirements is an essential step in securing loans and debts under the Companies Act, 2013.