Application of Company Law to Different Sectors B Com Notes | EduRev

Company Law

B Com : Application of Company Law to Different Sectors B Com Notes | EduRev

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Introduction

Companies Act 2013 is applicable to other sectors such as Banking companies, insurance companies, electricity companies etc. However, the act excludes these companies from its purview for some sections which are governed under the special acts under which these companies are formed.

Application of Companies Act to Insurance, Banking, Electricity Supply and Other Companies Governed By Special Acts

Section 1(4) of the Companies Act 2013 states that the provisions of this Act shall apply to—

  1. Companies incorporated under this Act or under any previous company law;
  2. Insurance companies, except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938 or the Insurance Regulatory and Development Authority Act, 1999;
  3. Banking companies, except in so far as the said provisions are inconsistent with the provisions of the Banking Regulation Act, 1949;
  4. Companies engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of the Electricity Act, 2003;
  5. Any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; and
  6. Such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification, specify in this behalf, subject to such exceptions, modifications or adaptation, as may be specified in the notification.

Exceptions Provided Under Companies Act 2013 to Specific Sectors. 

The following are the important sections that excludes certain sectors from the applicability of that particular section in Companies Act 2013.

1. Section 67(3)- Financial assistance for purchase of shares

Section 67 (2) states that no public company shall give, whether directly or indirectly and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of, or in connection with, a purchase or subscription made or to be made, by any person of or for any shares in the company or in its holding company.

Section 67 (3) states that nothing in Section 67 (2) shall apply to the lending of money by a banking company in the ordinary course of its business;

2. Proviso to Section 73(1)- Prohibition to Accept deposits

Section 73. (1) states that On and after the commencement of this Act, no company shall invite, accept or renew deposits under this Act from the public except in a manner provided under this Chapter.

Proviso to Section 73(1) states that nothing in this sub-section shall apply to a banking company and nonbanking financial company as defined in the Reserve Bank of India Act, 1934 and to such other company as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf.

3. Proviso to Section 129(1)- Financial Statement

Section 129 (1) states that the financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III.

The proviso to Section 129(1) states that nothing contained in this 129(1) shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity, or to any other class of company for which a form of financial statement has been specified in or under the Act governing such class of company. Further the financial statements shall not be treated as not disclosing a true and fair view of the state of affairs of the company, merely by reason of the fact that they do not disclose—-

  • in the case of an insurance company, any matters which are not required to be disclosed by the Insurance Act, 1938, or the Insurance Regulatory and Development Authority Act, 1999;
  • in the case of a banking company, any matters which are not required to be disclosed by the Banking Regulation Act, 1949;
  • in the case of a company engaged in the generation or supply of electricity, any matters which are not required to be disclosed by the Electricity Act, 2003;
  • in the case of a company governed by any other law for the time being in force, any matters which are not required to be disclosed by that law.

Proviso to Section 179(3) - Powers of the Board to borrow

Section 179(3) states that the Board of Directors of a company shall exercise certain powers specified in the section on behalf of the company by means of resolutions passed at meetings of the Board. The borrowing powers of the Board is covered under Section 179(3)(d)

The proviso to Section 179(3) states that the acceptance by a banking company in the ordinary course of its business of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise, or the placing of monies on deposit by a banking company with another banking company on such conditions as the Board may prescribe, shall not be deemed to be a borrowing of monies or, as the case may be, a making of loans by a banking company within the meaning of this section.

Explanation to Section 179(3) states that nothing in clause (d) shall apply to borrowings by a banking company from other banking companies or from the Reserve Bank of India, the State Bank of India or any other banks established by or under any Act.

Proviso to Section 180(1)- Special resolution for Borrowing

Section 180. (1) states that the Board of Directors of a company shall exercise the certain powers only with the consent of the company by a special resolution

Borrowing money, where the money to be borrowed, together with the money already borrowed by the company in excess of aggregate of its paid-up share capital and free reserves, apart from temporary loans obtained from the company’s bankers in the ordinary course of business, requires special resolution under section 180(1)(c).

Proviso to Section 180(1) states that the acceptance by a banking company, in the ordinary course of its business, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise, shall not be deemed to be a borrowing of monies by the banking company within the meaning of this clause.

Section 186- Intercorporate Loan

Section 186 prescribes limits upto which a company shall give any loan/guarantee/provide security in connection with a loan to any other body corporate. This section also mandates certain disclosures, maintenance of registers etc.,

Section 186 (11) states that nothing contained in Section 186, except sub-section (1), shall apply—

(a) to a loan made, guarantee given or security provided by a banking company or an insurance company or a housing finance company in the ordinary course of its business or a company engaged in the business of financing of companies or of providing infrastructural facilities;

Section 186(1) states that without prejudice to the provisions contained in this Act, a company shall unless otherwise prescribed, make investment through not more than two layers of investment companies:

Section 189 – Register of Contracts

Section 189 (1) states that every company shall keep one or more registers giving separately the particulars of all contracts or arrangements to which sub-section (2) of section 184 (Contract in which director is interested)or section 188(Related Party transactions) applies, in such manner and containing such particulars as may be prescribed and after entering the particulars, such register or registers shall be placed before the next meeting of the Board and signed by all the directors present at the meeting.

Section 189(5) (b) states that nothing contained in sub-section (1) shall apply to any contract or arrangement by a banking company for the collection of bills in the ordinary course of its business.

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