LegalCrystal – Blog

This article is based on the citation: 2007(6) AIR Kar R 151-judgement delivered by Hon’ble Justice N.Kumar of High Court of Karnataka wherein the Hon’ble Justice has threadbare the points with regard to distribution of excess profits by the Companies. For further detailed study , kindly refer the above citation.

When a Company prospers and earns profits it may do one of two things with the profits.  It may either distribute the profits by way of dividend among the shareholders or accumulate them. Ordinarily, these undistributed profits are employed in the business either in acquisition of fixed assets or as working capital and really represent an increase in the capital employed in the business. When these increase to a considerable extent, the issued capital of the company ceases to bear a true relation to the real capital employed in the business.  The company may, in such a case, decide to bring its issued capital into a true relationship with the capital actually employed in the business and may for that purpose capitalize its accumulated profits and issue fully paid up shares or debentures of a nominal value equal to the amount capitalize to its shareholders. These new shares or debentures are called as Bonus Shares or Bonus Debentures. They are not a gift from the company.  They are not issued gratuitously.  Their nominal value is paid in full by the capitalized profits or reserves of the company, which could otherwise have been distributed to the shareholders.

The Company may instead of issuing bonus shares, issue bonus debentures by capitalizing its accumulated profits. The accumulated profits which are capitalized remain in the coffers of the Company and no part of them actually goes into the pockets of the shareholders; the only change that takes place is that the accumulated profits which prior to capitalization were employed in the business as accumulated profits are thenceforth employed as part of the issued or loan capital of the Company according as the issue is of bonus shares or bonus debentures. The accumulated profits which might have been divided among the shareholders as dividend are impounded to increase the capital of Company and what the shareholders get is not any payment out of the accumulated profits but bonus shares or bonus debentures credited as fully paid-up. When such bonus shares or bonus debentures are issued, admittedly no money is paid by the shareholders for the bonus shares or bonus debentures issued to them.  There is no payment of the accumulated profits to the shareholders since no part of the accumulated profits is liberated to them.  The Company does not part with any of the accumulated profits nor do the shareholders receive any part of them.  But the accumulated profits are applied in paying up the capital sums which the shareholders would otherwise have had to contribute for the purchase of new shares or new debentures.

ACT NO. 12 OF 2003

[13th January, 2003.]

An Act to provide, keeping in view of the economic development of the country, for  the establishment of a Commission to prevent practices having  adverse  effect  on  competition, to  promote  and   sustain  competition  in markets, to protect the interests of consumers and  to  ensure  freedom of trade carried on by other participants in  markets, in India, and for matters connected therewith or incidental thereto.

BE it enacted by Parliament in the Fifty-third Year of the Republic of India as follows:-

CHAPTER I

PRELIMINARY

1.   Short title, extent and commencement-

1)   This Act may be called the Competition Act, 2002.

2)   It extends to the whole of India except the State of Jammu and       Kashmir.

3)   It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:

Provided that different dates  may   be  appointed  for   different provisions  of this Act and any reference in any such provision to the commencement  of  this  Act shall be construed as a reference  to  the coming into force of that provision.

2.   Definitions.-In this Act, unless the context otherwise requires -

a) “acquisition” means, directly or indirectly, acquiring or agreeing to acquire-

(i)   shares, voting rights or assets of any enterprise;  or

(ii)   control over management or control over assets of any enterprise;

b) “agreement” includes any arrangement or understanding or action in concert,-

(i)   whether or not, such arrangement, understanding  or  action  is formal or in writing;  or

(ii)   whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings;

c) “cartel” includes  an   association  of  producers,  sellers, distributors,  traders or service providers who, by agreement amongst  themselves,  limit,  control  or attempt to  control  the  production, distribution,  sale  or price of, or, trade in goods or provision  ofservices;

d) “Chairperson” means the Chairperson of the Commission  appointed under sub-section (1) of section 8;

e) “Commission” means the Competition Commission of India established under sub-section (1) of section 7;

f) “consumer” means any person who-

(i)   buys any goods for a consideration which has been paid or promised  or  partly  paid and partly promised, or under any system of  deferred payment  and includes any user of such goods other than the person who buys  such goods for consideration paid or promised or partly paid  or partly promised, or under any system of deferred payment when such use is  made  with the approval of such person, whether such  purchase  of goods is for resale or for any commercial purpose or for personal use;

(ii)   hires  or avails of any services for a consideration  which  has been paid or promised or partly paid and partly promised, or under any system  of  deferred  payment  and includes any  beneficiary  of  such services  other than the person who hires or avails of the services for  consideration paid or promised, or partly paid and partly promised, or  under  any system of deferred payment, when such services are  availed of with the approval of the first-mentioned person whether such hiring or  availing of services i for any commercial purpose or for  personal use;

g)   ”Director  General” means the Director General  appointed  under sub-section  (1) of section 16 and includes any Additional,  Joint, Deputy or Assistant Directors General appointed under that section;

h) “enterprise” means a person or a department of the Government, who or  which  is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles  or  goods, or the provision of services of any kind,  or  in investment,  or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate,  either  directly  or through one or more of its  units  or is  located at the same place where the enterprise is located or at  a different  place  or  at different places, but does  not  include  any activity of the Government relatable to the sovereign functions of the Government  divisions  or subsidiaries, w ether such unit or division  or subsidiary  nt including all activities carried on by the  departments of  the  Central  Government  dealing with  atomic  energy,  currency, defence and space.

Explanation.-For the purposes of this clause,-

(a)  ”activity” includes profession or occupation;

(b) “article” includes  a new article and “service” includes  a  new service;

(c)  ”unit” or “division”, in relation to an enterprise, includes-

(i)   a  plant  or  factory established for  the  production,  storage, supply, distribution, acquisition or control of any article or goods;

(ii)   any  branch  or  office established for  the  provision  of  any service;

i)    ”goods” means goods as defined in the Sale of Goods Act, 1930  (8 of 1930) and includes-

(A)  products manufactured, processed or mined;

(B)  debentures, stocks and shares after allotment;

(C)  in relation to goods supplied, distributed or controlled in India, goods imported into India;

j) “Member”  means  a  Member  of  the  Commission  appointed  under sub-section (1) of section 8 and includes the Chairperson;

k) “notification“  means  a notification published in  the  Official Gazette;

l)    ”person” includes-

(i)   an individual;

(ii)   a Hindu undivided family;

(iii)  a company;

(iv)  a firm;

(v)   an  association  of  persons or a body  of  individuals,  whether incorporated or not, in India or outside India;

(vi)  any  corporation established by or under any Central,  State  or Provincial  Act  or a Government company as defined in section 617  of the Companies Act, 1956 (1 of 1956);

(vii) any  body  corporate  incorporated by or under the  laws  of  a country outside India;

(viii) a co-operative society registered under any law  relating  to co-operative societies;

(ix)  a local authority;

(x)  every artificial juridical person, not falling within any of  the preceding sub-clauses;

CHAPTER V

DUTIES OF DIRECTOR GENERAL

41. Director-General to investigate contraventions -

1)   The Director General  shall,  when  so  directed  by  the  Commission,  assist  the Commission  in investigating into any contravention of the  provisions of this Act or any rules or regulations made there under.

2)   The  Director General shall have all the powers as are  conferred upon the Commission under sub-section (2) of section 36.

3)  Without prejudice to the provisions of sub-section (2),  sections 240 and 240A of the Companies Act, 1956 (1 of 1956), so far as may be, shall  apply  to an investigation made by the Director General or  any other  person  investigating under his authority as they apply  to  an  inspector appointed under that Act.

CHAPTER VI

PENALTIES

42. Contravention of orders of Commission -

1)   Without prejudice to the provisions of this Act, if any person contravenes,civil prison for a term which  may  extend to one year, unless in the meantime the  Commission directs  his release  and he shall also be liable to a penalty not exceeding rupees ten lakhs. without  any reasonable  ground,  any order of the Commission, or any condition or restriction subject  to which any approval,  sanction  direction  or exemption  in relation to any matter has been accorded, given, made or  granted  under this Act or fails to pay the penalty imposed under this Act,  he  shall  be liable to be detained in

2)   The  Commission may, while making an order under this Act,  issue such directions to any person or authority, not inconsistent with this Act,   as   it  thinks  necessary  or  desirable,   for   the   proper implementation  or execution of the order, and any person who  commits breach  of,  or  fails to comply with, any obligation imposed  on  him  under  such direction, may be ordered by the Commission to be detained in  civil  prison  for  a term not exceeding one year  unless  in  the to  a penalty not exceeding rupees ten lakhs.  Meantime the Commission directs his release and he shall also be liable

43. Penalty for failure to comply with directions of Commission and Director-

General.-If any person fails to comply with a direction given by-

a)   the Commission under sub-section (5) of section 36; or   b)   the  Director  General  while exercising powers  referred  to  in sub-section (2) of section 41, the  Commission  shall impose on such person a penalty of  rupees  one lakh for each day during which such failure continues.

44. Penalty for making false statement or omission to furnish material information.-If any person, being a party to a combination -

a)   makes  a statement which is false in any material particular,  or knowing it to be false;  or

b)   omits to state any material particular knowing it to be material, such  person shall be liable to a penalty which shall not be less than rupees fifty lakhs but which may extend to rupees one crore, as may be determined by the Commission.

45. Penalty for offences in relation to furnishing of information -

1)   Without prejudice to the provisions of section 44, if any person, who furnishes or is required to furnish under this Act any particulars, documents or any information,-

(a)  makes any statement or furnishes any document which he knows  or has reason to believe to be false in any material particular;  or

(b)  omits to state any material fact knowing it to be material;  or

(c)  willfully alters, suppresses or destroys any document  which  is required to be furnished as aforesaid, the  Commission shall impose on such person a penalty which may extend to rupees ten lakhs.

2)   Without prejudice to  the provisions of  sub-section (1), the Commission may also pass such other order as it deems fit.

46. Power to impose lesser penalty -

The Commission may, if  it  is satisfied  that  any producer, seller, distributor, trader or  service provider  included  in any cartel, which is alleged to  have  violated section  3,  has  made a full and true disclosure in respect  of  the alleged  violations  and  such disclosure is vital, impose  upon  such producer,  seller,  distributor, trader or service provider  a  lesser penalty  as it may deem fit, than leviable under this Act or the rules or the regulations:

Provided that lesser penalty shall not be imposed by the Commission in cases  where proceedings for the violation of any of the provisions of this  Act or the rules or the regulations have been instituted or  any investigation  has  been directed to be made under section  26 before making of such disclosure:  Provided further that lesser penalty shall  be  imposed  by the Commission only in respect of a producer,  seller,  distributor,  trader  or service provider included in the cartel,  who first made the full, true and vital disclosures under this section:

Provided  also  that the Commission may, if it is satisfied that  such producer,  seller, distributor, trader or service provider included in the cartel had in the course of proceedings,-

a)   not  complied with the condition on which the lesser penalty  was imposed by the Commission;  or

b)   had given false evidence;

c)   the disclosure made is not vital, and  thereupon  such producer, seller, distributor, trader or  service provider may be tried for the offence with respect to which the lesser penalty  was  imposed  and shall also be liable to the  imposition  of penalty  to which such person has been liable, had lesser penalty  not been imposed.

45. Penalty for offences in relation to furnishing of information -

1)   Without prejudice to the provisions of section 44, if any person, who furnishes or is required to furnish under this Act any particulars, documents or any information,-

(a)  makes any statement or furnishes any document which he knows  or has reason to believe to be false in any material particular;  or

(b)  omits to state any material fact knowing it to be material;  or

(c)  willfully alters, suppresses or destroys any document  which  is required to be furnished as aforesaid, the  Commission shall impose on such person a penalty which may extend to rupees ten lakhs.

2)   Without prejudice to  the provisions of  sub-section (1), the Commission may also pass such other order as it deems fit.

46. Power to impose lesser penalty -

The Commission may, if  it  is satisfied  that  any producer, seller, distributor, trader or  service provider  included  in any cartel, which is alleged to  have  violated section  3,  has  made a full and true disclosure in respect  of  the alleged  violations  and  such disclosure is vital, impose  upon  such producer,  seller,  distributor, trader or service provider  a  lesser penalty  as it may deem fit, than leviable under this Act or the rules or the regulations:

Provided that lesser penalty shall not be imposed by the Commission in cases  where proceedings for the violation of any of the provisions of this  Act or the rules or the regulations have been instituted or  any investigation  has  been directed to be made under section  26  before making of such disclosure:  Provided further that lesser penalty shall  be  imposed  by the Commission only in respect of a producer,  seller,  distributor,  trader  or service provider included in the cartel,  who first made the full, true and vital disclosures under this section:

Provided  also  that the Commission may, if it is satisfied that  such producer,  seller, distributor, trader or service provider included in the cartel had in the course of proceedings,-

1. Short title, commencement and extent.

1)         This Act may be called the Companies Act, 1956.

2)         It shall come into force on such date2* as the Central Government may, by notification in the Official Gazette, appoint. 3[(3) It extends to the whole of India: 4  * * * * *] 5[Provided 6* * * that it shall apply to the  State  of Nagaland subject to such modifications, if any, as the Central Government  may, by notification in the Official Gazette, specify.]

2. Definitions.

In this Act, unless the context otherwise requires –

1)         ”Alter” and “alteration” shall include the making of additions and omissions;

2)         “articles” means  the  articles of  association  of  a company as originally framed or as altered from time to  time in  pursuance of any previous companies law or of  this  Act, including, so far as they apply to the company, the regulations contained, as the case may be, in Table B in  the Schedule  annexed to Act No. 19 of 1857 or in Table A in  the First Schedule annexed to the Indian Companies Act, 1882,  (6 of 1882.) or in Table A in the First

1.   This Act has been extended to Goa, Daman and Diu by Regulation 12  of  1962 (with modifications), s. 3 and Sch.: to Dadra  and  Nagar Haveli by Regulation 6 of 1963, s. 2 and Sch. I and to Pondicherry by Regulation 7 of 1963, s. 3 and Sch.1.The  provisions  of this Act shall apply to Goa, Daman and Diu, subject to the exceptions, modifications and adaptations contained  in the  Schedule  to G.S.R. 615, dated the 24th April, 1965  (Gazette  of India,  Pt.   II, Sec. 3(i), p. 670).  Amended in its application  to Goa, Daman and Diu by Reg.  11 of 1963, s. 9.

2.   1st April, 1956, vide Notification No. S.R.O. 612, dated  8-3- 1956, Gazette of India, Extraordinary, 1956, Pt. II, Sec. 3, p. 473.

3.   Subs.  by Act 62 of 1956 s. 2 and Sch.,  for  sub-section  (3) (w.e.f. 1-11-1956).

4.   Proviso omitted by Act 25 of 1968, s. 2 and  Sch.  (w.e.f. 15-8-1968).

5.   Ins. by Act 31 of 1965, s. 2 (w.e.f. 15-10-1965).

6.   The word “further” omitted by Act 25 of 1968, s. 2  and  Sch. (w.e.f. 15-8-1968).  Schedule annexed to the Indian Companies Act, 1913, or in Table A in Schedule I annexed to this Act;

3)         ”associate”, in relation to a managing agent, means any  of the following, and no others –

(a)        where the managing agent is an individual; any partner or relative of such individual; any firm in which such individual, partner or relative is a partner; any private company of which such individual or any such partner, relative or firm is the managing agent or secretaries and treasurers or a director or the manager; and any body corporate at any general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the following, namely, such individual, partner or partners, relative or relatives, firm or firms; and private company or companies;

(b)        where the managing agent is a firm: any member of such firm; any partner or relative of any such member; and any other firm in which any such member, partner or relative is a partner; any private company of which the firm first mentioned, or any such member, partner, relative or other firm is the managing agent, or secretaries and treasurers, or a director, or the manager; and any body corporate at any general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the following, namely, the firm first mentioned, any such member or members, partner or partners, relative or relatives, other firm or firms and private company or companies;

(c)        where the managing agent is a body corporate:

(i)         Any subsidiary or holding company of such body corporate; the managing agent or secretaries and treasurers, or a director, the manager or an officer of. The body corporate or of any subsidiary or holding company thereof; any partner or relative of any such director or manager; any firm in which such director, manager, partner or relative, is a partner;1 * * *

(ii)         any other body corporate at any general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the following, namely, the body corporate and the companies and other persons specified in paragraph (i) above; and 2[(iii)any subsidiary of the other body corporate referred to in paragraph (ii) above: Provided that where the body corporate is the managing agent of the other body corporate referred to in paragraph (ii) above, a subsidiary of such other body corporate shall not be an associate in  relation to the managing agent aforesaid ; and]

(d)        where the managing agent is a private company or a body corporate having not more than fifty members: in addition to the persons mentioned in sub clause (c),  any member of the private company or body corporate;

Explanation.-If one person is an associate in relation to another within the meaning of this clause, the latter shall also be deemed   to be an associate in relation to the former within its meaning;

4)         ”Associate”, in relation to any secretaries and treasurers, means any of the following, and no others –

(a)        where the secretaries and treasurers are a firm: any member of such firm; any partner or relative of any such member; and any other firm in which any such member, partner or relative is a partner any private company of which the firm first-mentioned, or any such member, partner, relative or other firm is the managing agent, or secretaries and treasurers, or a director, or the manager ; and any body corporate at any general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the following, namely, the firm first-mentioned, any such member or members, partner or partners, relative or relatives, other firm or firms, and private company or companies;

(b)        where  the secretaries and treasurers are a body corporate –

(i)         any subsidiary or holding company of such body corporate; the managing agent or secretaries and treasurers, or a director, the manager or an officer of the body corporate or of any subsidiary or holding company thereof ; any partner or relative of any such director or manager; any firm in which such director or manager, partner or relative, is a partner; 1 * * *

(ii)         any other body corporate at any general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the following, namely, the body corporate and the companies and other persons specified in paragraph (i) above; and 2 [ (iii) any subsidiary of the other body corporate referred to in paragraph (ii) above: Provided that where the body corporate is the secretaries and treasurers of the other body corporate referred to in paragraph (ii) above, a subsidiary of such other body corporate shall not be an associate in relation to the secretaries and treasurers aforesaid; and]

(c)        Where the secretaries and treasurers are a private company or a body corporate having not more than fifty members: in addition to the persons mentioned in sub-clause (b), any member of the private company or body corporate;

Explanation.-If  one  person is an associate in  relation  to another  within the meaning of this clause, the latter  shall also  be deemed to be an associate in relation to the  former within its meaning;

SCHEDULE III

(See section 70)

FORM OF STATEMENT IN LIEU OF PROSPECTUS TO BE DELIVERED TO REGISTRAR BY A COMPANY WHICH DOES NOT ISSUE A PROSPECTUS OR WHICH DOES NOT GO TO ALLOTMENT ON A PROSPECTUS ISSUED, AND REPORTS TO BE SET OUT THERE-IN

FORM OF STATEMENT AND PARTICULARS TO BE CONTAINED THEREIN

PART I

THE COMPANIES ACT, 1956

Statement in lieu of Prospectus delivered for registration by [Insert the name of the company.] Pursuant to section 70 of the Companies Act, 1956

Delivered for registration by the nominal share capital of the Rs…… company.

Divided into…………………..shares of Rs…….each.

“     ”  Rs…….each.

“     ”  Rs…….each.

Amount (if any) of above capital…shares of Rs…….each. which consists of redeemable preference shares.

The earliest date on which the company has power to redeem these shares.

Names, addresses, descriptions and occupations of –

(a)        directors or proposed directors;

(b)        managing director or proposed managing director;

(c)        managing agent or proposed managing agent;

(d)        secretaries  and  treasurers  or proposed secretaries and treasurers;

(e)        manager or proposed manager.

Any  provision in the articles of the company,  or in any contract irrespective of the time when  it was   entered  into, as to  the appointment  of  and remuneration payable to the persons referred  to in  (a),  (b),  (c),  (d)  and  (e) above.

If the share capital of the company is  divided into different  classes of  shares, the right of voting  at meetings  of the company conferred by, and  the rights in  respect of capital and dividends attached  to, the several classes of shares respectively.

Number and amount of shares and             1    shares of Rs.. fully paid debentures agreed to be issued as fully or partly paid up otherwise

2    shares upon which Rs. per than in cash.

share credited as paid. The consideration for the intended              3    debentures     Rs……..

issue of those shares and debentures.Number, description and amount of any shares or debentures which any person has or is entitled to be given an option to subscribe for, or to                  4    Consideration:

acquire from, a person to whom                        1.   ….shares of Rs… and

they have been allotted or agreed                           debentures of Rs……

to be allotted with a view to his

offering them for sale.

Period during which the option is exercisable.    2.   Until

Price to be paid for shares or                           3.

debentures subscribed for or

acquired under the option.

Consideration for the option or the                    4.   Consideration:

right to option.

Persons to whom the option or the                   5.   Names and  addresses –

right  to  option was given or, if given to existing shareholders or debenture holders as such, the relevant shares or debentures. Names, occupations and addresses of vendors of property purchased or acquired, or proposed to  be  purchased  or acquired by the company except  where the contract for its purchase or acquisition was entered into in the ordinary course of the business intended to be carried on by the company or the amount of the purchase money is not material.

Amount (in cash, shares or debentures) payable to each separate vendor.

Amount (if any) paid or payable (in Total purchase price Rs. cash, shares or debentures) for Cash                 Rs .   each such property, specifying                         Shares              Rs. amount (if any) paid or payable                         Debentures        Rs. for goodwill.                                                                            ————- Goodwill            Rs.

Short particulars of every transaction relating to each such property which was completed within the two preceding years and in which any vendor to the company or any person who is, or was at the time thereof a promoter director or proposed director of the company had any interest, direct or indirect.

Amount (if any) paid or payable as                    Amount paid . . .

commission for subscribing or                          payable

agreeing to subscribe or procuring

or agreeing to procure subscriptions

for any shares or debentures in the

company; or

Rate of the commission…………                       Rate per cent………..

The number of shares, if any, which persons  have agreed  to  subscribe for a commission. If it is proposed to acquire any business, the amount, as certified by the persons by whom the accounts of the business have been audited, of the net profits of the business in respect of each of the five years immediately preceding the date of this statement, provided that in the case of a business which has been carried on for less than five years and the accounts of which have only been made up in respect of four years, three years, two  years or one year, the above requirements shall have effect as if references to four years, three years, two years or one year, as the case may be, were substituted for references to five years, and in any such case the statement shall say how long the business to be acquired has been carried on. Where the financial year with respect to which the accounts of the business have been made up is greater or less than a year, references to five years, four years, three years, two years, and one year in this paragraph shall have effect as if references to such number of financial years as in the aggregate, cover a period of not less than five years, four years, three years, two years or one year, as the case may be, were substituted for references to three years,  two  years  and  one year respectively.

Estimated amount of preliminary Rs……………. expenses.

By whom those expenses have been paid or are payable.

Amount paid or intended to be paid             Name of promoter.

to any promoter.                                       Amount Rs.

Consideration for the payment                    Consideration:

Any other benefit given or intended             Name of promoter:

to be given to any promoter.                       Nature and value of benefit:

Consideration for the benefit.                      Consideration:

Dates of, parties to, and general nature of –

(a)        contract  appointing or fixing the remuneration of directors, managing director, managing agent, secretaries   and  treasurers,  or manager; and

(b)        every other material  contract (other  than (i) contracts entered into in the ordinary course of the business intended to be carried on by the company or (ii) entered into more than  two  years  before the delivery of this statement).

Time  and  place at which  (1)  the contracts or copies thereof or (2)

(i) in the case of a contract not reduced into writing, a memorandum giving full particulars  thereof, and (ii) in the case of a contract wholly or partly in a language other than  English, a copy  of  a translation thereof in English or embodying a translation in English of the parts in the other language, as the case may be, being a translation certified in the prescribed  manner to be a correct translation, may be inspected.

Names and addresses of the auditors of the company (if any).

Full particulars of the nature and extent of the interest of every director, managing director, managing agent, secretaries and treasurers or manager in the promotion of or  in the property proposed to be acquired by the company, or where the interest of such a  director consists  in being a partner in a firm, the nature and extent of the interest of the firm, with a statement of all sums paid or agreed  to be  paid to him or to the  firm  in cash  or shares, or  otherwise,  by any person either to induce him  to become, or to qualify him  as, a director, or otherwise for services rendered  by him or by the firm in connection  with the  promotion  or formation of the company.

(Signatures  of the persons  above-

named  as  directors  or   proposed         ———————————————————-

directors,   or  of  their   agents               ———————————————————-

authorized in writing.)                             ———————————————————-

Date

REPORTS TO BE SET OUT

PART II

1.         Where it is proposed to acquire a business, a report made by accountants (who shall be named in the statement) upon –

(a)        the profits or losses of the business in respect of each of the five  financial years immediately preceding the delivery of the statement to the Registrar; and

(b)        the  assets and liabilities of the business as at the last date to which the accounts of the business were made up.

2.         (1)        Where it is proposed to acquire  shares in a body corporate which by reason of the acquisition or anything to be done in consequence thereof or in  connection  therewith will become a subsidiary of the company, a report made by accountants (who shall be named in the statement) with respect to the profits and  losses  and assets and liabilities of the other body corporate in accordance with sub-clause (2) or (3)  of this clause, as the case may require, indicating how the profits or losses of the other body corporate dealt with by the report would, in respect of the shares to be acquired, have concerned members of the company, and what allowance would have fallen to be made, in relation to assets and  liabilities so dealt with, for holders of other shares, if the company had at all  material times held the shares to be acquired.

(2)        If the other body corporate has no subsidiaries, the  report referred to in sub-clause (1) shall –

(a)        so far as regards profits and losses, deal with the profits or losses of the body corporate in respect of each of the five financial years immediately preceding the  delivery of the statement to the Registrar; and

(b)        so far as regards assets and liabilities, deal with the assets and liabilities of the body corporate as at the last date to which the accounts of the body corporate were made up.

(3)        If the other body corporate has subsidiaries, the report referred to in sub-clause (1) shall –

(a)        so far as regards profits and losses, deal separately with the other body corporate profits or losses as  provided by sub-clause (2) and in addition deal either –

(i)         as  a whole with the combined profits or losses of  its subsidiaries so far as they concern members of the other body corporate; or

(ii)         individually with  the  profits or losses of each subsidiary, so far as they concern members of the other  body corporate;

or, instead of dealing separately with the other body corporate’s profits  or  losses, deal as a  whole  with the profits or losses of the other body corporate and, so far  as they concern members of the other body corporate,  with  the combined profits or losses of its subsidiaries; and

(b)        so far as regards assets and liabilities,  deal separately with the  other body corporate’s assets and liabilities  as provided by sub-clause (2) and, in addition, deal either –

(i)         as a whole with the combined assets and liabilities of its subsidiaries, with or without the other body  corporate’s assets and liabilities; or

(ii)         individually with the assets and liabilities of each subsidiary; and shall indicate, as respects the assets and liabilities of the subsidiaries, the allowance to be made for persons other than members of the company.

PROVISIONS APPLYING TO PARTS I AND II OF THIS SCHEDULE

PART III

3.         (1)        In  this Schedule, the expression “vendor” includes a vendor as defined in Part III of Schedule II.

(2)        Clause 31 of Schedule II shall apply to the interpretation of Part II of this Schedule as it applies to the  interpretation  of Part II of Schedule II.

4.         If in the case of a business which has been carried on, or of a body corporate which has been carrying on business, for less than five financial years, the accounts of the business or body corporate have only been made up in respect of four such  years,  three  such years, two such years or one such year, Part II of this Schedule shall have effect as if references to four financial years, three  financial years, two financial years or one financial year, as the case may be, were substituted for references to five financial years.

5.         Any report required by Part II of this Schedule shall either –

(a)        indicate by way of note any adjustments as respects the figures of any profits or losses or assets  and  liabilities dealt with  by  the report which appear to the  person  making  the report necessary; or

(b)        make those adjustments and indicate that adjustments have been made.

6.         Any report by accountants required by Part II of this Schedule –

(a)        shall be made by accountants qualified under this Act for appointment as auditors of a company; and

(b)       shall not be made by any accountant who is an officer or servant, or a partner or in the employment of an officer  or servant,  of  the company or of the company’s  subsidiary or holding  company or of a subsidiary of the company’s  holding company.

For  the purposes of this clause, the expression “officer”  shall include a proposed director but not an auditor.

FORM OF STATEMENT AND PARTICULARS TO BE CONTAINED THEREIN

SCHEDULE IV

[See section 44(2)(b)]

FORM OF STATEMENT IN LIEU OF PROSPECTUS TO BE DELIVERED TO REGISTRAR BY A PRIVATE COMPANY ON BECOMING A PUBLIC COMPANY AND REPORTS TO BE SET OUT THEREIN

PART I

FORM OF STATEMENT AND PARTICULARS TO BE CONTAINED THEREIN

THE COMPANIES ACT, 1956

Statement in lieu of Prospectus delivered for registration by [Insert the name of the company.]

Pursuant to clause (b) of sub-section (2) of section 44 of the Companies Act, 1956.

Delivered for registration by

The nominal share capital of the  Rs………… company.

Divided into…                           shares of Rs…each.

“      ” Rs…each.

“     ” Rs…each.

Amount (if any) of above capital shares of Rs….each. which consists of redeemable

preference share.

The earliest date on which the company has power to redeem these shares.

Names, addresses, descriptions and occupations of –

(a)        directors or proposed directors;

(b)        managing director or  proposed managing director;

(c)        managing agent or proposed managing agent;

(d)        Secretaries and treasurers or proposed secretaries and treasures;

(e)        manager or proposed manager.

Any  provision in the  articles of the company, or in any contract irrespective  of the time  when it was entered  into, as to the appointment of and remuneration payable to the persons referred to in (a), (b), (c), (d) and (e) above.

Amount of shares issued  Shares  .  .  .  ………..Shares.

Amount  of commission paid or payable in connection therewith.

Amount of discount, if any, allowed on the issue of any shares, or so much thereof as has not been written off at the date of the statement.

Unless more than two years have lapsed since the date on which the company  was entitled  to commence business –

Amount of preliminary expenses                          Rs………….

By whom those expenses have been

paid or are payable.

Amount paid or intended to be paid                     Name of promoter:

to any promoter.                                               Amount Rs …….

Consideration for the payment.                            Consideration:

Any other benefit given or intended                      Name of promoter:

to be given to any promoter.                                Nature and value of benefit:

Consideration for the benefit.                               Consideration:

If the share capital of the company

is divided into different classes of

shares, the right of voting at

meetings of the company conferred by,

and the rights in respect of capital

and dividends attached to, the

several classes  of shares respectively.

Number and amount of shares and                      1. shares of Rs….fully paid.

debentures issued within the two

years preceding the date of this                           2.   …shares    upon which Rs….

statement as fully or partly paid up                            per share credited as paid.

otherwise than for cash or agreed

to be so issued at the date of this

statement.

Consideration for the issue of those                     3.   debentures. for Rs….. each.

shares or debentures

4.   Consideration:

Number, description and amount of                      1 shares of Rs….. and debentures

any shares or debentures which                          of Rs……

any person has or is entitled to be given an option to subscribe for, or to acquire from, a person to whom they have been allotted or agreed

to be allotted with a view to his offering them for sale.

Period during which the option                                   2.   Until

is exercisable.

Price to be paid for shares                                        3.

or debentures subscribed for or acquired under the option.

Consideration for the option                                       4.   Consideration: or right to option.

Persons to whom the option or the                            5.   Names and addresses: right  to  option was given or, if given to existing shareholders or debenture holders as such, the relevant shares or debentures. Names, addresses, descriptions  and occupations of vendors of  property

(1)purchased or—-acquired by the company within  the   two   years preceding   the   date   of    this statement or (2) agreed or proposed to be purchased or acquired by  the company, except where the  contract for its purchase or acquisition was entered into in the ordinary course of business and there is no connection between the  transaction  and the company ceasing to be a private company or where the amount of  the purchase  money  is  not  material.

Amount  (in cash, shares or  debentures) paid  or  payable  to  each separate vendor.

Amount paid or payable in cash,                               Total purchase price Rs……

shares  or  debentures for each

such property, specifying the                                    Cash                 Rs….

amount paid or payable for good                                Shares              Rs. …

will.                                                                         Debentures       Rs….

Goodwill             Rs….

Short  particulars of every  trans-action   relating  to   each   such property which was completed within the two  preceding years and in which any  vendor to the company or any person  who is, or was at the  time thereof,  a promoter,  director  or proposed  director of  the  company

had any interest direct or indirect.

Amount (if any) paid or payable as                            Amount paid………..

commission for subscribing or                                  Amount payable …….

agreeing to subscribe or procuring                            Rate per cent……… or  agreeing to procure subscriptions for any shares or debentures in the company; or rate of the commission.

The number of shares, if any, which persons have agreed to subscribe for a commission.

If  it is proposed to  acquire  any business, the amount, as certified by the persons by whom the accounts of the business have been audited, of the net profits of the business in respect of each of the five years immediately  preceding   the date of this  statement,  provided that  in  the case of a  business which has been carried on for  less than five years, and the  accounts of which have only been made up in respect of four years, three years, two  years or one year,  the  above requirements  shall have effect as if references to four years,  three years,  two years or one  year, as the  case may be, were  substituted for  references to five years,  and in  any  such case,  the statement shall say how long the business  to be  acquired has been  carried  on. Where the financial year with respect to which the  accounts of the business have been  made  up is greater or  less than  a  year, references  to  five years, four years, three years, two years  and one year in this  paragraph shall have effect  as if references   to  such number of financial years as, in the aggregate, cover a period of  not less  than five years, four  years, three years, two years or one year, as the case may be, were substituted for references to three years,  two  years  and  one  year respectively.

Dates  of, parties to, and  general nature of –

(a)        Contract appointing or fixing the remuneration of directors, managing director, managing  agent, secretaries and treasurers or manager; and

(b)        every other material  contract other  than (i)  contracts  entered into in the ordinary course of the business intended to be carried on by the company or (ii) entered into more than  two  years  before  the delivery of this statement.

Time  and  place at which  (1) the contracts  or copies thereof; or (2) (i) in the case of a  contract not reduced into writing, a memorandum giving full  particulars thereof, and (ii) in the case of a contract  wholly  or partly in a language other than English, a copy of  translation thereof in English or   embodying  a  translation   in English of the parts in the other language, as the case may be,  being a translation  certified in  the prescribed manner to  be a correct translation, may be inspected.

Names and addresses of the auditors of the company.

Full particulars of the nature and extent of the interest of every director, managing director, managing agent, secretaries and treasurers or manager,  in   any property purchased or acquired by the company within the two years preceding   the date of this statement or proposed to be purchased or acquired   by the company or, where the interest of such a director consists in being a partner in a firm, the nature and extent of the interest of the firm, with a statement of all sums  paid or agreed to be paid to him or  to the  firm  in cash  or  shares,  or otherwise, by any person either to induce him to become or to qualify him as, a director,  or  otherwise for services rendered or to be rendered to the company by him or by the firm.

Rates  of  the dividends (if any) paid  by the company in respect  of each class of shares in the company in each of the five financial years immediately preceding the date of this statement or since the incorporation of the company, whichever period is shorter.

Particulars  of the cases in which no dividends have been paid in respect of any class of shares in  any of these years.

—————————————————————————–

(Signatures  of the persons  above named as directors or proposed

directors or of their agents authorized in writing.)

Date………………….