This article has been written by Ms. Kashvi Rajvansh, a first-year law student of Faculty of Law, University of Delhi.
ABSTRACT:
This article will discuss what are the legal implications in India with reference to corporate advisory as well as consulting services. We will observe what these terms mean, what they deal with as well as what are the rules and regulations that govern them. In addition to that we will see the ways of redressal when it comes to these services in India.
INTRODUCTION:
The legal aspects of corporate advisory in India is majorly governed by the Companies Act, 2013. The legal consulting services have multiple areas of practice and it takes highly knowledgeable advocates in the field for guidance. These lawyers may work alone or as part of an organisation. The legal consulting revolves around various laws such as corporate and commercial law, intellectual property law, real estate law, etc. In this paper we will discuss corporate and commercial law and their legal implications with reference to consulting services. Such laws are governed by the Companies Act, 2013 too.
BODY:
Corporate advisory mainly includes advice from lawyers about how to run a business or how to govern the corporate affairs of a company thus established, the contracts that are involved in a corporate set up and financial decisions that are to be taken. In the field of consulting services, in the case of corporate and commercial law, it requires learned advocates or lawyers to guide the corporate set up about the formation of companies, mergers and acquisitions, contracts and the dispute redressal.
The companies act describes these things in detail. Section 3 of the companies act states that in case of a public company, it may be formed by 7 or more persons and in case of a private company by 2 or more persons. Another case of a private company can also be a one-person company as per the section. They can create such a company by subscribing their names on a memorandum. The memorandum according to Section 4 states that it should contain the name of the company, in the case of a public company the word “limited” in its name and the word “private limited” in the case of a private company. However, if a company has been formed as per Section 8, which states that if a company has been formulated for charitable purposes, the rules of memorandum do not apply to them. The memorandum also states is that it should define the state in which the company will be situated, the objects for the purpose of the incorporation of the said company and any other necessary matter considered. It shall also state the liability of the members involved and specifies the requisites of companies having share capital and a one-person company.
When consulting services are under consideration, it includes more parts of corporate advisory itself. The legal implications of these are what lawyers and advocates advice to companies or individuals in the functioning or creating one. The lawyers and advocates often advice on the basis of the companies act as that is what addresses these issues involving a corporate setting like a company. Another most important thing to understand is contracts. This in India is governed by the Indian Contract Act, 1872.
The essentials of a contract include an offer from a proposer that is accepted by a proposee who then form a contract with consideration, an intention to form a legal obligation and a set of promises that is legally acceptable. In the formation of a company, a memorandum is required. However, to analyse the work of a company every dealing or doing requires a contract. SA company often deals with multiple things and people often for a chain of give and take things. In doing so, each company goes over multiple contracts, every time.
According to Section 9 of the companies act, the registration of a company effects into a certification of such registration. This certificate thus allows all members of the company to be a body corporate in the name as was listed in the memorandum.
In case of any disputes, or issues, there are various provisions provided in the Company law itself. According to Chapter 28 of the companies act, there are special courts that take care of matters under the law in case of any infringement. The lawyers and advocates may use these methods for redressal and advise companies for the same in their consultations. According to the above-mentioned section, all offences as committed under the clauses of companies act may be referred by the Central Government to a special court which has thus been established by the Government. The said Courts may be headed by a Sessions judge in cases that involve imprisonment of 2 years or more, and a Metropolitan Judge in case of all the other offences.
Chapter 29 of the Companies Act also provides for the punishments in cases of frauds. Chapter 27 of the same act also prescribes for a National Company Law tribunal as well as appellate tribunal. The Chairperson, unless otherwise stated, of the National Company Law tribunal is the chairperson of the appellate tribunal. The proceedings in the following case had to be dealt with the Companies (court) rules 1959.
A few cases in the light of company law with wrong legal advisory are:-
Union of India v. Delhi Gymkhana Club:
The case was filed as the ministry of corporate affairs felt that the affairs of ‘Gymkhana Club’ were being conducted in a way that was prejudicial in nature to public interest. Thus, it was appealed in the NCLT under Section 242(2) of the companies act which also states that if a case of oppression is filed then as per this section, the Tribunal may deal with such cases that showcase that the affairs of the company have been prejudicial to the public interest. It was appealed that a committee of two nominees be formulated to join the general committee of the company to monitor its activities. It was established that public interest as an element is not included in public interest. Thus, the grant or non-grant is non justiciable. It was even established how despite the prohibition as mentioned in Section 8(1)(c), the club had been paying dividend to the members in kind. The appellate held that it is indisputable that according to Section 242(4) of the companies act which states that the appellate may make an interim order in order to regulate the conduct of the company’s affairs. Thus, granting an interim order was held appealable. However, it was limited because the finding of such a request recorded in Tribunal with regard to the company’s petition. In the end it was established that the interim orders that were provided shall constitute of two members in the general committee and that it shall be appointed by the Union of India. Such an order shall also come into effect within two weeks from passing of this appeal.
Dhananjay Mishra vs Dynatron Services Pvt. Ltd. & Ors:
This case was filed for the reasons of oppression and mismanagement and that the Appellant did not appoint and thus refused to do so, on the board of directors, a seat to Mr. Krishnamurthy and Mr. Avadesh Mishra in the second Memorandum of Understanding. The National Company Law Tribunal exercised its executive jurisdiction as per the Companies Act of 2013. In the following case, the Tribunal judged that the decision of whether a dispute is capable of being decided by arbitration or whether by the companies act was brought about in three cases. One of which is Haryana Telecom Ltd. V. Sterlite Industries India ltd. It states under sub section 1 of section 8 that the decision to contemplate whether it had to be decided by arbitration or not lies in front of the person to whom the appeal has been brought forth to. The power with respect to winding up of a company has been provided in the companies act and thus shall be heard forward in the court. In the above- mentioned case, the Apex court made it clear that in such cases the matter even after referring to companies act shall be brought forth to the arbitrators. It was established that the statutory powers rendered onto the tribunals makes it an appropriate forum to decide for such cases and thus under that view the bringing of this case for a different order is not justifiable. The appeal was thus dismissed and the order of the Tribunal upheld.
Smruti Shreyans Shah vs The Lok Prakashan Ltd & Ors:
The case was filed with an intention to gain assent for an independent director on the board of directors. Additionally, it was alleged of acts of mismanagement as well as oppression in the company. The Tribunal admitted the company’s petition that they were eligible to file this petition as it was well under the stipulated time to do so. It was stated after findings in the case that the alleged acts of oppression and mismanagement were just operational issues in the functioning of the company. The case was established to be correctly a prima-facie whilst having deadlock entailing consequences such as non-filing of statutory compliances, board as well as general meetings, etc. as per the companies act under section 242(2). The Tribunal did however state that it did not support the appointment of an independent director to be appointed as the chairman, however, it also couldn’t have completely left behind the interests of the company and the jeopardy of the stakeholders of the company. They, thus, proposed to modify the interim order and instead of the appointment of an independent director, asked to appoint a retired judge in the case who would then lead the single member committee for oversight and supervision. This person will guide the Board of Directors who shall function in his supervision and any interim order thus passed in this case shall stand vacated.
CONCLUSION:
We have observed with this article how the Companies Act very widely covers the legal implications of corporate advisory as well as consulting services by acting as a handbook for the lawyers and advocated in case of any issues arising in a company. From the establishment of the company to the issues face as well as the remedies thus offered, the act covers everything. It defines punishments as well as the required jurisdiction of the established tribunals and courts for redressal.
REFERENCES:
The companies Act, 2013
Case Laws:
Union of India v. Delhi Gymkhana Club (2021)
https://indiankanoon.org/doc/104728120/
Dhananjay Mishra vs Dynatron Services Pvt. Ltd. & Ors (2019)
https://indiankanoon.org/doc/63928879/
Smruti Shreyans Shah vs The Lok Prakashan Ltd & Ors
https://indiankanoon.org/doc/188421388/
Blogs and articles:
Famous Cases under Company Law written by ArMo_Legal and the link for the same is https://www.legalserviceindia.com/legal/article-8705-famous-cases-under-company-law.html
Corporate Law Advisory written on accace and the link is https://accace.com/advisory/legal/corporate-law-advisory/
Corporate Advisory by Anant Merathia and associates and the link is https://www.amalaw.in/service/corporate-advisory/
What is legal consultant and legal consultancy services by advocate Ajay Gautam and the link is https://debtindia.wordpress.com/2024/01/03/what-is-legal-consultant-and-legal-consultancy-services/
Corporate Advisory services by IFCI and the link is https://www.ifciltd.com/?q=en/content/corporate-advisory-services