NATURE AND KINDS OF COMPANIES

Company:
Section 3(1)(i) of the companies act says that “a company means a company
formed and registered under this act or an existing company” .

Salient Features of a Company:

1. Separate Legal Entity:

2. Limited Liability of Members:
3. Perpetual Succession:
4. Common Seal:
5. Separate Property Ownership:
6. Transferable Shares:
7. Capacity To Sue and Being Sued.
TYPES OF COMPANIES:

Private Company:

A private company is one which by its Articles:

1. Restricts the right to transfer its shares.
2. Limits the number of members to fifty, excluding the employees and ex employees,
3. Restricts the subscription of shares or debentures from general public [sec-3 [iii]].

Public Company:

A public company is one, which is not a private company. Thus, if the articles do not provide
the aforesaid three restrictions, it shall be a public company. A public company requires a
minimum seven number and there is no limit on the maximum members. The shares and
debentures of a public company are quoted on a stack exchange and are freely transferable.

Other Types Of Companies Under The Act

Within the private and public categories, there are certain types of companies which are
either public or private companies for example there are Government companies, Charitable
companies, Finance companies, Companies without share capital, Guarantee companies,
Holding/Subsidiary companies etc.

1. Holding and subsidiary companies.

2. Group and associate companies.
3. Deemed public companies (Sec 43 a company).
4. Government and Public Sector companies.
5. Charitable and non-profit making organisations.
6. Nidhi Company.
7. Company Limited by Guarantee.
8. Investment Company.
9. Unlimited Liability Company.
10. Statutory Company
11. FERA Company.
12. Foreign Company.
13. Non Banking Financial Company.

FORMATION OF A COMPANY
It is very easy to start a company. All that you need is two persons to start a private
company and minimum of seven persons to start a public company.

It is important to note that even existing ‘companies’ can join others in starting a company,
because a company is also a ‘person’ for all practical purpose. The persons who start a
company are called ‘promoters’ and the process of starting a company is called
‘incorporation’.

Steps for Incorporation Of A Company

1. NAME

2. MEMORANDUM & ARTICLES OF ASSOCIATION

3. ARTICLES OF ASSOCIATION

4. PREPARATION OF OTHER DOCUMENTS FOR INCORPORATION:

5. CERTIFICATE OF INCORPORATION

6. COMMENCEMENT OF BUSINESS

MEMORANDUM OF ASSOCIATION
According to section2(28) of the act “memorandum means the memorandum of association
of a company as originally framed or as altered from time to time in pursuance of any
previous company laws or of this act.

A memorandum contains the following clauses:

1. Name Clause
2. Registered Office Clause
3. Object Clause
4. Liability Clause
5. Capital Clause
6. Association
7. Stamp Duty And Witness
8. Doctrine Of Ultra Vires
Alteration procedure for memorandum of association
1. Alteration of Name Clause
2. Alteration of Registered Office Clause
3. Alteration of Object Clause
4. Alteration of Liability Clause
5. Alteration of Capital Clause
6. Alteration of Association
7. Alteration of Stamp Duty And Witness
8. Alteration of Doctrine Of Ultra Vires
ARTICLES OF ASSOCIATON

Articles usually provide for the following matters:

1. Exclusion wholly or in apart of Table A.

2. Common Seal, Its use and safe custody.
3. Alteration of Capital - how and to what extent.
4. Barrowings - the mode and the limit.
5. General Meetings - notice required, resolutions, voting rights, proxies etc.
6. Directors - their appointment, qualification, remuneration, powers, duties and
removal, names of first directors, minimum and maximum number of directors.
7. Dividends and reserve funds.
8. Accounts and audit.
9. Manager or secretary - appointment and remuneration.
10. Adoption of contracts entered in to the promoters.
11. Remuneration to promoters.
12. Special provisions for amalgamation.
13. Winding up.