Archive for the ‘Co-orporate and Business Laws’ Category.

INTERNATIONAL STANDARD SERIAL NUMBER (ISSN)

ISSN is an internationally accepted unique eight digit code used for identifying newspapers, magazines and other print or electronic periodicals. It was developed in the 1970s by the International Organization for Standardization (ISO). ISSN serves as an identification mode and is not indicative of any information such as place of origin, content of the periodical, quality/standard of information etc. It is a numeric code that does not have any intrinsic meaning. ISSN also does not confer title or IP of any nature.
Since ISSN is an identification mechanism, all issues of the periodical, magazine will have the same number. As opposed to ISBN (International Standard Book Number) which changes for each book, even if in a series, ISSN remains constant.

The assignment of the ISSN is done by the National Centre ISSN and for countries that do not have such centre, the International Centre ISSN, Paris assigns the number. The Indian National Centre for ISSN is located in New Delhi.

An application should contain the name of the periodical, frequency of publication, intended start date, name and address of publisher. For existing publications, a copy of the relevant issue along with details of the publisher will have to be furnished. Application and allocation of ISSN is currently free of cost.

Asked, what is the use of the ISSN when it does not confer right or title, it can be equated to having an UID in the digital or periodic world.

Authored by:
Naqsha H Biliangady
Advocate

AGREEMENTS IN RESTRAINT OF TRADE, EMPLOYMENT AND PROFESSION

Section 27 of INDIAN CONTRACT ACT, 1872, declares agreements by which any one is restrained from exercising a lawful profession, trade or business of any kind as void.
An exception is provided while selling of goodwill of a business. Accordingly one who sells the good-will of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits; so long as the buyer, or any person deriving title to the good-will from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business.
The Supreme court has in Superintendence Company of India ( P ) Ltd . vs . Sh . Krishan Murgai reported in AIR 1980 SC 1717, held that post service restraints are void under section 27 of the Indian Contract Act. In the given case there was a negative covenant not to serve anywhere else or enter into competitive business in similar lines. Supreme Court held that restriction contained is restraint of trade and therefore illegal and unenforceable under Section 27.
In Niranjan Shankar Golikari vs. The Century Spinning and Mfg . Co . Ltd , reported in AIR 1967 SC 1098, Supreme court has held that negative covenants which are operative during period of contract do not fall under Section 27.
In VV Sivaram and Ors . vs . Foseco India Limited reported in 2006(1)Kar LJ 386, Karnataka high court held that disclosure of confidential information after cessation of employment by an employee can be restrained and the same is not hit by section 27 of the Indian Contract Act..

THE DEPOSITORIES ACT, 1996

The act provides for the regulation of depositories in securities and matters connected there with.
The act provides for registration of depositories from the Securities and Exchange Board of India (Board). Before obtaining the registration certificate, the depository has to satisfy the Board that it has adequate systems and safeguards to prevent manipulations of records and transactions.
A depository shall enter into an agreement with one or more Participants as its agent. A person can enter into an agreement with a Depository through a Participant to avail the services of the Depository. The person who has entered into an agreement with the depository shall surrender the certificate of security to the issuer who in turn shall cancel the certificate of security and substitute in its records the name of the depository as the registered owner and inform the depository accordingly. The depository shall thereafter, enter the name of the person who had the surrendered the certificate of security as the beneficial owner in its records.
Every depository shall, on receipt of intimation from a participant, register the transfer of security in the name of the transferee. All securities held by a depository shall be dematerialised and shall be in a fungible form.
The depository shall be deemed to be the registered owner for the purposes of effecting transfer of ownership of security on behalf of a beneficial owner. The beneficial owner shall be entitled to all the rights and benefits and be subjected to all the liabilities in respect of his securities held by a depository.
A beneficial owner may with the previous approval of the depository create a pledge or hypothecation in respect of a security owned by him through a depository.
If a beneficial owner seeks to opt out of a depository in respect of any security he shall inform the depository accordingly. The depository shall on receipt of intimation make appropriate entries in its records and shall inform the issuer.
Any loss caused to the beneficial owner due to the negligence of the depository or the participant, the depository shall indemnify such beneficial owner. Where the loss due to the negligence of the participant is indemnified by the depository, the depository shall have the right to recover the same from such participant.
The Board has power to call for information and enquiry from any issuer, depository, participant or beneficial owner with respect to any security. Further the Board has the power to issue directions to any person associated with the securities market.
Penalties are imposed under section 19A to G for failure of performance or contravention of orders, direction etc of the Board by various players in the security market. Adjudicating officers adjudge the penalties.
Section 20 of the act provides for punishment for various offences. Only sessions courts can try an offence under this act. Section 22A deals with composition of offences and section 22B deals with immunities.
Appeals against the order of Board or adjudicating officers shall lie to Securities Appellate Tribunal. The act ousts the powers of civil court with respect to matters empowered to the Securities Appellate Tribunal. Any person aggrieved by any decision or order of the Securities Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order.
Depository shall, with the previous approval of the Board, make bye-laws consistent with the provisions of the Act and the regulations.

AN OVERVIEW OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

The Securities and Exchange Board of India Act, 1992(herein after referred to as Act) established a Board called Securities and Exchange Board of India (hereinafter referred to as Board) with its head office at Mumbai. The Board consists of a chairman and 8 members.
Under section 11 of the act, the Board has wide and extensive powers to protect the interest of investors and to regulate the securities market.
Section 11AA of the act defines ‘Collective Investment Schemes’.
Under section 11 B of the act, the Board has power to issue directions and under section 11 C of the act, the Board has investigation powers.
Section 12 of the act provides for the registration of stock brokers, sub brokers, share transfer agents, bankers to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediaries.
Section 15 A to 15HB provides for heavy penalties which may run to lakhs or crores of rupees for various failures and defaults like failure to furnish information, return etc.
Section 15K to 15 S of the act provides for establishment, composition, staff, qualification, tenure, salary, filling up of vacancies, resignation and removal of presiding officers and members of Securities Appellate Tribunal. Any person aggrieved by an order of the Board or an adjudicating officer may prefer an appeal to the Tribunal within 45 days from the receipt of the said order from the Board or the adjudicating officer.
Section 15Y and section 20A ousts the jurisdiction of civil courts with regard to matters empowered to Board, adjudicating officers or Tribunal under the act.
Any person aggrieved by an order of Tribunal may file an appeal to Supreme Court within 60 days from the receipt of order.
Section 24 deals with punishments for various offences under the act. Section 24A provides for composition of offences.

HOW TO OBTAIN RNI REGISTRATION FOR A PUBLICATION

REGISTRAR OF NEWSPAPERS
Printing and publishing of newspapers and periodicals within India are governed by the Press and Registration of Books Act, 1867 and the Registration of Newspapers (Central) Rules, 1956.The Registrar of Newspapers or the Press Registrar maintains a register of newspapers and periodicals published in India.
The Office of the Registrar of Newspapers for India is headquartered in New Delhi, and has three regional offices at Calcutta, Mumbai and Chennai to cater to the needs of publishers in all corners of the country.

LEGAL STEPS TO START A NEWS PAPER
1. As a first stage, the applicant needs to go for title verification of the Publication. The title verification application needs to be filed before the jurisdictional District Magistrate. The District Magistrate will get the title verified from RNI.
2. After receiving the title verification letter from RNI, the applicant needs to file a declaration for authentication before District Magistrate. The declaration is in Form No.1.
3. Once the declaration is authenticated by District Magistrate, the newspaper needs to be published within 6 weeks if it is published once a week or oftener than that. In case of any other periodicity, the first issue should be published within 3 months from the date of authentication.
4. After the first issue is published, the applicant needs to file an application for registration. The application shall annex the following documents:
a. Title verification letter.
b. Authenticated declaration.
c. An affidavit for no foreign tie-up.
d. First issue and latest issue of the publication
e. Content intimation/ confirmation in the prescribed form.
f. Certificate intimating appointment of the printer.

VOLUNTARY WINDING UP OF A COMPANY

1. A company can be voluntarily wound up under the following circumstances:
a. If the period fixed for the duration of the company has expired and company passes a resolution for winding up in a general meeting.
b. If the company passes a special resolution to wind up voluntarily.

2. When a company has passed a resolution for a voluntarily winding up it shall within 14 days give a notice of the resolution in the official gazette and also in some newspaper. A voluntary winding up is deemed to have commenced from the time when the resolution of voluntary winding up is passed by the company. A company shall cease all its all business activities once a winding up process is commenced.

3. The directors of the company or the board of directors shall make a declaration to the effect that they have made a full enquiry into the affairs of the company and that the company has no debts or that it will be able to pay its debts within 3 years from the commencement of the winding up process. This declaration needs to be made within 5 weeks immediately preceding the date of passing of resolution for winding up and the same needs to be delivered to the Registrar for registration before the date of resolution. The declaration needs to be accompanied by a copy of the report of the auditors of the company.

4. The winding up where a declaration is made and delivered to the Registrar is known as “A Members voluntary winding up” and winding up in which the declaration is not made and delivered is known as “A creditors voluntary winding up”.

PROVISIONS APPLICABLE TO MEMBERS VOLUNTARY WINDING UP:
1. The company in general meeting shall appoint one or more liquidators for the purpose of winding up the affairs and distributing the assets of the company. On the appointment of the liquidator all the powers of the Board of directors and of the managing director and whole time directors shall cease, except for the purpose of giving notice of appointment of the liquidators to the Registrar.

2. The company shall give notice to the registrar of the appointment of the liquidator within 10 days of the appointment.

3. The Liquidator has powers to transfer whole or part of the business or property of the winding up company to another company.

4. If the Liquidator is of the opinion that the company is not able to pay its debts in full within the period stated in the declaration under Sec.488 than he shall summon a meeting of the creditors and shall lay before the meeting a statement of assets and liabilities of the company.

5. If the winding up process is continuing for more than 1 year, then the liquidator shall call a general meeting of the company at the end of each year and present an account of his acts and dealings and of the conduct of the winding up during the preceding year.

6. Once the affairs of the company are fully wound up, the liquidator shall make up an account of the winding up and call a general meeting of the company to lay the account before it. The meeting shall be called by advertisement published in the official gazette and in some newspaper. Within one week after the meeting the liquidator shall send to the registrar and the official liquidator a copy each of the account and shall make a return to each of them of the holding of the meeting. The registrar shall register the account and the returns forthwith.

7. The official liquidator on receiving the account and return shall make a scrutiny of the books and papers of the company and if found that the affairs of the company have not been conducted in the manner prejudicial to the interest of its members or to public interest than he shall make a report to that extent to the tribunal and the company shall stand dissolved. If the finding of the official liquidator is otherwise, the tribunal can direct the official liquidator to make further investigation into the affairs of the company.

8. On the receipt of the report of the official liquidator on further investigation the tribunal either make an order that the company stands dissolved or make such other order.

HOW TO OBTAIN BBMP TRADE LICENCE?

1.As per Section 353 of The Karnataka Municipal Corporation Act 1976, the owner or occupier of every place, where trade/business as mentioned in Schedule X of the said act are carried on and which are within the limits of the Corporations shall apply and obtain from the said corporation, a license (Trade Certificate). Without the said certificate such trades cannot be carried on in such places. As per this provision, either the business owner or the premise owner can apply and get the trade license. However if the occupier of the premise (the business owner who is occupying the premise on rent or lease) applies to the corporation, having satisfied all other eligibility, the corporation cannot refuse the same saying that the same will be issued only in the name of the owner of the premise.

2. Schedule X of the Karnataka Municipal Corporations Act 1976 lists the trades and industries which require a trade licence from the concerned municipal authorities. In Bangalore, BBMP issues trade licences to various shops and industries within its jurisdiction. The health department of BBMP is in charge of these matters. The health officer of BBMP can close a trade premises which does not have a trade licence.

3. The Licence issued expires on 31st March each year. The application for renewal needs to be done before last day of February each year. For renewal of trade licence, an affidavit on a Rs. 100/- stamp paper needs to be filed. The said affidavit shall state that trade will continue to be carried on as per regulations and other laws in force.

4. If a person has multiple trades in the same premises, then he needs to pay a compounded fee equal to twice the highest fee payable for the trades or commodities he is dealing in.

5. Apart from the trade licence fee, a separate fee needs to be paid for using power or generator. One needs to pay either for the sanctioned power load or generator whichever is of higher capacity.

6. The various trades and industries are mentioned in Schedule X of the Act and the applicable fees are also mentioned.

7. BBMP has also setup special trade health licence clinics which functions from 1st Feb to 15th Feb every year where renewal applications are accepted and processed. These clinics function under the various zones. New applications for trade licence should be handed over only at the BBMP range offices.

8. Documents required for the trade licence are as follows:
i) Property owner’s consent letter.
ii) Property tax paid receipt.
iii) NOC from the neighbours.
iv) Building Plan of the trade premises.
v) Occupancy Certificate.
vi) Khata Certificate.

9. Normally the inspection of the premises will be done within 3 working days. Maximum time period for the issuance of trade license is 7 days.

SOME FAQs ABOUT DISSOLUTION OF A PARTNERSHIP

1. What are the circumstances in which a partnership firm is compulsorily dissolved?

A. A firm is dissolved-
       a) By the adjudication of all the partners or of all partners but one as insolvent or,
       b) By the happening of any event which makes it unlawful for the business of the firm to be carried on or for the      partners to carry it on in partnership.

2. What are the contingencies on the happening of which a partnership firm is dissolved?
 
A. Subject to contract between the partners a firm is dissolved -
a) If constituted for a fixed term, by the expiry of that term
b) If constituted to carry out one or more adventures or
    undertakings by the completion thereof.
c) By the death of a partner.
d) By the adjudication of a partner as an insolvent.

3. What is meant by partnership at will?
A. Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is said to be at will.

4. How can a partnership at will be dissolved?
A.Where the partnership is at will the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.

5. For a partnership at will when is the firm treated as dissolved?
A. The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice.

6. What are the circumstances in which a court can dissolve a partnership firm?
A. At the suit of a partner, the Court may dissolve a firm on any of the   following grounds, namely:
a) That a partner has become of unsound mind.
b) That a partner, other than the partner suing, has become in any way    permanently incapable of performing his duties as partner.
c) That a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business.
d) That a partner, other than the partner suing, willfully or persistently commits breach of agreement relating to the management of the affairs of the firm or the conduct of its business, or otherwise so conducts himself in matter relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him.
e) That a partner, other than the partner suing has in any way transferred the whole of his interest in the firm to a third party.
f) That the business of the firm cannot be carried on save at a loss.
g) On any other ground which renders it just and equitable that the firm should be dissolved.

7. What is the extent of liability of partners for acts done after dissolution?
A. After the dissolution of a firm, the partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm if done before the dissolution until public notice is given of the dissolution.

8. What are the instances where the authority of the partner to bind the firm and mutual rights and obligations of the partner continue even after dissolution?
A. After the dissolution of a firm the authority of each partner to bind the firm, and the other mutual rights and obligations of the partners, continue notwithstanding the dissolution, so far as may be necessary to wind up the affairs of the firm and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise.
                 
9. Can a partner carry on similar business using firm’s name?
A. After a firm is dissolved, every partner or his representative may in the absence of a contract between the partners to the contrary, restrain any other partner or his representative from carrying on a similar business in the firm name or from using any of the property of the firm for his own benefit, until the affairs of the firm have been completely wound up.

            Provided that where any partner or his representative has bought the goodwill of the firm, the said partner can use the firm name.

10. What is meant by goodwill of a firm?
•It is the value of reputation and connection which a firm establishes over time due to its integrity, efficient services to customers, quality of its products, industry etc.
•It is a commercial rather than a legal term.
•Supreme Court has held that the goodwill is an intangible asset of a firm. It is the whole advantage whatever it may be of the reputation, and the connections formed with the customers together with the circumstances which make the connections durable. 
 

11. Can a partner who has bought the goodwill of the firm, use the firm name after dissolution of firm.
A.Yes.

12. What happens to a partnership firm of 2 partners when one of the partners resigns?
A. It gets dissolved.

13.Under what circumstance the individual asset of a partner becomes a partnership firm asset?
To be treated as partnership firm property, the individual property of a partner needs to be explicitly agreed by the partner to be brought in as a partnership asset.
Even if a partner uses his personal property to do business of the firm, it does not become a property of a firm unless he specifically agrees to do so.

 

PROCEDURE FOR REMOVAL OF A DIRECTOR OF A PRIVATE COMPANY

The procedure to be followed is as follows:
a. A Company by ordinary resolution in an Annual general meeting or an extra ordinary General meeting   can remove a director.
b. Special Notice about the resolution to remove a director shall be issued to the members.
c. A copy of the said notice to be send to the director to be removed also.
d. The director shall be given an opportunity of being heard in the meeting.
e. If the director gives any written representation to the notice, then the said representation shall be given to all members.
f. If the representation could not be given to all members, then the Director can request the said representation to be read out in the meeting.
g. The members can pass an ordinary resolution, by simple majority and remove the director.
h. The Company shall within 30 days from the removal of a director file Form No.32 and a copy of the resolution with the Registrar

LIMITED LIABILITY PARTNERSHIP

The Limited Liability Act, 2008 brought to India a special form of business entity by name Limited Liability Partnership for the first time. Till then we had partnership and limited liability companies. This new form of business identity, combines several features of partnership and limited liability companies; yet it has its own unique features too.
 
A Limited Liability Partnership (LLP) is a body corporate and is a legal entity separate from that of its partners. It has perpetual succession. Any change in the partners will not affect the existence, rights or liabilities of the LLP.

An individual or body corporate may be a partner in an LLP. Every LLP shall have at least two partners. Every LLP shall have at least two designated partners who shall be individuals and at least one of them shall be a resident of India. Every designated partner of an LLP shall obtain a Designated Partner Identification Number (DPIN) from the central government.

A designated partner is responsible for all compliances and liable for all penalties under the LLP Act, 2008 on behalf of the LLP. Every LLP shall have a registered office to which all communications and notices may be addressed.

A registered LLP can sue and be sued. It can acquire, own, hold and dispose movable and immovable properties. It can have a common seal and can do and suffer lawful acts and things as body corporate.

Every Limited Liability Partnership shall have the words ‘Limited Liability Partnership’ or the acronym ‘LLP’ as the last word of its name. Every LLP shall ensure that its invoices, correspondences, and publications bear the name and address of the registered office and the registration number as well as a statement that it is having limited liability.

The mutual rights and duties of the partners of a limited liability firm as well as the rights and duties between the partners and the firm shall be governed by the provisions of the act as well as the terms in the partnership deed.  

A person may cease to be a partner of an LLP:- 
a) On his death or dissolution of LLP
b) If he is declared to be of unsound mind by a competent court,
c) If he has applied to be adjudged as an insolvent or declared as an   insolvent.
 
If there is any change in the name or address of the partner LLP shall file a notice with the registrar within 30 days of such a change.
Every partner of an LLP is for the purpose of business of LLP an agent of LLP but not of other partners. An LLP is not bound by anything done by a partner in dealing with a person if:
a) The partner in fact has no authority to act for LLP in doing a particular act.
b) The person knows that he has no authority or does not know or believe him to be a partner of LLP.

If an LLP or its partners carryout any act with an intention to defraud creditors or any other person or for any fraudulent purpose, liability of LLP and partners shall be unlimited.

A partner can contribute to an LLP in the form of tangible or intangible property. Tangible property may include movable or immovable property. Intangible property may include money, promissory notes, contract for services etc. The obligation of a partner to contribute money, property or other benefit shall be as per LLP agreement.