What are the requirements of the Companies Act with regard to preparation and maintenance of accounts by foreign companies

Obligation of Foreign Companies regarding accounts (Sec. 594) Every foreign company shall, in every calendar year,

(a) make out a balance sheet and profit and loss account in such form, containing such particulars and including or having annexed or attached thereto such documents (including, in particular documents relating to every subsidiary of the foreign company) as under the provisions of this Act it would, if it had been a company within the meaning of. this Act, have been required to make

out and lay before the company in general meeting; and

(b) deliver three copies of those documents to the Registrar [Sec. 594(1)].

However, the Central Government may, by notification in the Official Gazette,

direct that, in the case of any foreign company or class of foreign companies, the requirements of clause (a) shall not apply or shall apply subject to such exceptions and modifications as may be specified in the notification [Provisio to Sub-section (1) of Sec. 594]

If any document as is mentioned in sub-section (1) is not in the English language, there shall be annexed to it a certified translation thereof [Sec. 594 (2)].

Further Sub-section (3) of Section 594 requires every foreign company to send to the Registrar three copies of a list in the prescribed form of all places of business established by the company in India as at the date with reference to which the balance sheet referred to in Sub-section (1) is made out.

Position Regarding World Accounts

Three copies of balance sheet and profit and loss account, including documents relating to every subsidiary of the foreign company, as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the law in that country, shall be filed with the Registrar.

The world accounts shall be delivered to the Registrar within a period of nine months from the close of the financial year of the foreign company. The Registrar at New Delhi may, however, extend this period by three months [Rule 18A of Companies (Central Government’s) General Rules and Forms, 1956].

shares are unlisted. Some of the common basis of allotment

(i) by lottery.

(ii) on pro-rata basis (Le., by allotting shares to each applicant in proportion to the number of shares applied for) or

(iii) by preferential treatment to small applicants.

3. Post-Allotmcnt Stcps. After the shares are allotted and allotment letters arc issued. the next step is to collect allotment money. Share certificates

will then be prepared from the Allotment List, which shall be duly sealed and signed at least by two directors. These share certificates are issued to the

members against allotment letters arid banker’s receipts within three months of allotment (Sec. ] B). A Register of Members is prepared. In this way, the

:illotment procedure is completed. .

WhItt is a Return of Allotment ‘! What lire its contents. . Ans. According to Section 75 of the Companies Act, 1956. a company

hnving a share capital making any allotment of its shares, has to file with the Registrar of Companies a statement called “Return of Allotment”

within 30 days of allotment. It must contain the following particulars and nmst be accompanied by the documents specified below:

(i) Particulars about the shares allotted for cash, the names, addresses and occupations of the allottees, and the amount paid or due and payable on each

share.

Fraudulently inducing Persons to Invest Money

Section 68 any person who, eitller knowingly or by recklessly making any
statement, promise or forecast which is false, deceptive or misleading, or by any dishonest concealment of material facts, induces or attempts to induce

another person to enter into or to offer to enter into any agreement for, or with a view to acquiring, disposing of; subscribing for, or underwriting hare, or

debentures or (ii) any agreement the purpose of which is to secure profit to any of the parties from the yield of shares or debentures or by referenc’ to

fluctuations in value of shares or debentures; shall be punishable with imprisonment for a teoo which may extend to 5 years or with fine which may extend

to Rs. 1,00,000 or vith both.

Alteration in the capital clause

Alteration in the capital clause may take any of the. following shapes:
(i) Alteration of share capital (Sections 94, 95 and 97).
(ii) Reduction of share capital (Sections 100 to 104).
(iii) Variation of the rights of the shareholders (Sections 106-107).
(iv) Re-arrangement of share capital (Section 391).
We shall explain these one by one in detail.
(z) Alteration of Capital. Power to alter capital Section 9t]. A
limited company having a share capital may, if so authorized by its Articles, alter its share capital as follows, that is to say, it may:
- increase nominal share capital by issuing new shares;
- consolidate and divide all or any parts of its share capital into shares of large amount;
- convert fully paid-up shares into stock or vice versa;
- sub-divide its shares or any of them, into shares of smaller amount; and
- cancel shares which have not been taken up and diminish the amount of its authorized capital by the amount of the shares to be cancelled.
A company can .make any of these alterations by simply passing an ordinary resolution, provided it is authorized by its Articles to do so. If the Articles do
not provide for it, then firstly Articles must be changed by passing a special resolution. Within 30 days of the date of passing the
resolution, notice must’ve given to the Registrar together with a copy of resolution and altered Memorandum, who will then register the altered
Memorandum. It is from tile date of passing the ordinary resolution that the change becomes effective. Any default will involve fine unto Rs. 500 on the
company and on every officer who is default for every day till default continues (Sec. 97). When authorized capital is increased an increased filing fee

should also be paid. In the following two cases, there is no necessity of passing a resolution by alteration of authorized capital where it stands increased

by reason of (a) an order made by the Central Government for conversion of any loans or debentures into shares of the company. .
(b) an order made by the Central Government on an application made by any public financial institution which proposes to convert any debentures or loans

with conversion clauses into shares of the company Sec. 94A (1) and (2)].
However. the company has to give the notice of increase of capital to the Registrar in the form of a return in the prescribed form within 30 days from the
date of tile receipt of the order of the Government. The Registrar will then make the necessary alteration in the Memorandum of the Company Sec. 94A
(3)].

registration prescribed by the Act are not complied with before the registration

Even though, the conditions for registration prescribed by the Act are not complied with before the registration was made e.g. all signatories to the
Memorandum are minors, or signatures of the signatories to the Memorandum are found to be forged or the Memorandum is found to be altered after
signatures or there were not seven subscribers to the Memorandum. Once the certificate of incorporation is issued, the court cannot go behind or its
validity cannot be questioned:
It may however be noted that if a company having illegal objects has been registered, the illegal objects do not become illegal by the issue of the Certificate

of Incorporation (Browman Vs. Secular Society Ltd. (1917) A.C. 406].
Thus, once the company has been created, the only method to extinguish it is to resort to the provisions of winding up. The certificate of incorporation,
even if it is irregular, cannot be cancelled Princess of Reuss v.. Bos).
Whereas a private company or a public company not having share capit:.1 can commence business immediately on incorporation, the public companies
having share capital have still to undergo two more stages before they commence business or exercise borrowing powers.
Under the capital subscription stage comes the task of obtaining the necessary capital for toe company.
It may be noted that the new' Comprehensive Guidelines for Disclosure and Investor Protection' 2000 have been issued by the Securities and Exchange
Board of India (SEBI) for compliance by the companies making capital issues to the public These guidelin6s are amended from time to time by the SEBI in
1he interest of investor public.