CAPITAL INFUSION AND DISTRIBUTION OF ASSETS IN A COMPANY: COMPANY LAW AND INSOLVENCY AND BANKRUPTCY CODE 2016
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Abstract
The Company Act 2013 is one of the biggest legislations and indeed very hard to grab because of the dynamism in corporate world. This legislation changes with every new development. Insolvency and Bankruptcy is one such development.
Insolvency and Bankruptcy Code (IBC) is an important legislation due to various reasons but one amongst them is the inter relationship of the said law with the Companies Act.
If Companies Act 2013 were to be seen independently, then the law contains provisions for, from the incorporation to the winding up of a company. The law is a substantive as well as procedural legislation. The act deals with the different facets of the company from its management, audit, mergers, and meetings till the closure of company business as winding up.
A company undoubtedly needs funds to initiate business and further to run business. A very famous saying among businessmen is “If one wants to do business, do with others people’s money and not with yours”
Under Companies Act 2013, provisions are made for both (a) public and (b) private company to raise funds, however the modality certainly varies. If a company is listed, capital can be raised from equity finance and debt finance. In a case where the company is a private company the capital can be floated through the route of private placement. Thus the ways or modes may be different but participation of outside party is facilitated to raise funds and carry on the business. If a person invests in a company through equity finances instruments, he is a shareholder or owner of the company to the extent of his share. On the other hand if a person is investing in company through debt finance instruments then he will be a creditor of the company and as such is eligible for fixed returns.
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