Mnemonics: The Companies Act, 2013 | Business Laws for CA Foundation PDF Download

The Companies Act, 2013, provides the legal framework for corporate governance in India, making it a cornerstone for CA Foundation students. This topic covers company formation, management, and compliance, equipping students with knowledge of statutory obligations. The mnemonic that follows helps students memorise critical provisions, ensuring a clearer understanding of this complex legislation.
Mnemonic: CORP - Company Organisation, Regulations, Procedures.

Let’s dive into the world of companies with these catchy memory tools!

Meaning of a Company

Mnemonic: C-LEGAL

• C - Corporation: A company is like an invisible superhero, created by law, existing only on paper!
• L - Legal Identity: It’s a separate entity, living its own life apart from its owners, like a grown-up child!
• E - Exists by Charter: Its powers come from a legal “birth certificate” (charter), defining what it can do.
• G - Group Incorporated: A gang of people united under one legal umbrella, acting as a single “artificial person.”
• A - Artificial Person: Not a human, but it can act like one—buying property or signing contracts!
• L - Longevity: Like a vampire, it lives forever, unaffected by members coming or going.

Mnemonic Explanation: Imagine a company as a “C-LEGAL” superhero: Created by law, with its own identity, powers from a charter, acting as a united group, artificial yet active, and immortal! This mnemonic locks in the core idea of a company’s legal existence.

Features of a Company

Mnemonic: SPACe-L

• S - Separate Legal Entity: A company is like a spaceship, separate from its crew (members). It owns property, signs contracts, and faces lawsuits alone. Case: In Macaura vs. Northern Assurance (1925), Macaura couldn’t claim insurance for company property because it wasn’t his—it belonged to the company!
• P - Perpetual Succession: Like a river flowing endlessly, the company keeps going even if members die or leave.
• A - Artificial Legal Person: Born through law, not nature, it acts like a person (owns assets, sues) but can’t marry or go to jail!
• C - Common Seal: Think of it as the company’s signature stamp, used by directors to seal official deals.
• L - Limited Liability: Shareholders are like players in a game—only their “bet” (unpaid shares) is at risk, not their personal wealth.

Mnemonic Explanation: Picture a “SPACe-L” spaceship: Separate from its crew, perpetually flying, artificially created, sealed with a stamp, and limiting risks to its players. This mnemonic captures the five key features that make a company unique!

Instances Where Corporate Veil Can Be Lifted

Mnemonic: FRET

• F - Friendship/Enmity: Courts peek behind the veil to check who’s controlling the company, especially in war-like scenarios. Case: Daimler Co. Ltd. vs. Continental Tyre checked if the company was an enemy in disguise!
• R - Revenue Protection: The veil is lifted to protect government taxes, like catching a tax dodger. Case: S. Berendsen Ltd. ensured tax revenue wasn’t lost.
• E - Evasion of Tax: If the company is a mask to dodge taxes, courts rip it off! Case: Juggilal vs. CIT exposed tax evasion tricks.
• T - True Owner (Sham): Courts uncover the real owners hiding behind fake companies. Case: Dinshaw Maneckjee Petit revealed a sham setup.

Mnemonic Explanation: Think of “FRET” as a court nervously fretting over shady companies! It uncovers hidden truths in cases of friendship/enmity, revenue protection, tax evasion, or sham setups, making it easy to recall when the corporate veil is pierced.

Classes of Companies

Mnemonic: IL-COF-SNDG

I- Incorporation:

• O: One-Person Company—solo hero running the show with just one member!
• P: Private Company—keeps shares private, limits members like an exclusive club.
• P: Public Company—open to all, selling shares to the public like a market stall.

L- Liability:

• S: Shares—members risk only their unpaid shares, like betting only pocket change.
• G: Guarantee—members promise a fixed amount if the company fails, like a safety net.
• U: Unlimited—no cap on liability, members risk everything!

C- Control:

• H: Holding Company—big boss controlling other companies.
• S: Subsidiary Company—follows the holding company’s lead.
• A: Associate Company—has a partner with significant influence, like a close ally.

O- Other:

• F: Foreign Company—born abroad but working in India, like an international guest.
• G: Government Company—51%+ owned by the government, like a public servant.
• S: Small Company—cozy private company with low turnover/capital.
• N: Nidhi Company—savings club for members, lending within the group.
• D: Dormant Company—sleeping, no business activity.
• C: Charitable Company—exists to do good, like a nonprofit superhero.

Mnemonic Explanation: Imagine “IL-COF-SNDG” as a quirky company name! It organizes the types of companies into Incorporation (solo or group), Liability (limited or not), Control (who’s the boss), and Other (special cases), helping you recall the full classification like a pro.

Classification Based on Members

Mnemonic: OPP

• O - One-Person Company: One brave soul running the entire company alone!
• P - Private Company: A close-knit group, restricting share transfers and member numbers.
• P - Public Company: Welcomes everyone, selling shares to the public like a big party.

Mnemonic Explanation: Think of “OPP” as “One Private Party”! It captures the three member-based types: a solo One-Person Company, a private exclusive club, and a public open party, making it super easy to remember.

Classification Based on Control

Mnemonic: HAS

• H - Holding Company: The kingpin controlling other companies like a puppet master.
• A - Associate Company: A buddy with significant influence, not full control.
• S - Subsidiary Company: The loyal follower under a holding company’s rule.

Mnemonic Explanation: “HAS” sounds like “has control”! Picture a Holding company ruling, an Associate advising, and a Subsidiary obeying—perfect for recalling control-based classifications.

Classification Based on Access to Capital

Mnemonic: LU

• L - Listed Companies: Shares traded on the stock market, like stars shining in public view.
• U - Unlisted Companies: Shares kept private, like a hidden treasure.

Mnemonic Explanation: “LU” is short and sweet, like choosing between a Loud (Listed) stock market star or an Unseen (Unlisted) private gem. It nails the capital access classification!

Mode of Registration/Incorporation

Mnemonic: P-FID

P - Promoters: The dreamers who spark the company idea and push for its creation, not boring accountants or lawyers!

F- Formation (Section 3):

• Public: 7+ people, like a big team; Private: 2+ buddies; OPC: 1 lone wolf.
• Sign the memorandum and follow registration rules, like setting up a new club.

I- Incorporation:

• Filing: Submit declarations (no crimes, no fraud, true docs), subscriber/director details, and an address.
• Certificate: Registrar hands out a shiny Certificate of Incorporation with a unique CIN (company ID).
• Maintenance: Keep all filed papers safe at the registered office until the company’s end.

D- Declarations (False):

• Lying or hiding facts during filing? That’s fraud under Section 447!
• Tribunal can shake things up: change management, impose unlimited liability, kick the company off the register, or shut it down.

Mnemonic Explanation: “P-FID” sounds like “perfect fit” for company creation! Picture Promoters dreaming, Formation setting the team, Incorporation filing the paperwork, and false Declarations getting caught—your roadmap to registration!