Presentation by.. Neha..Himali..chintan..Raj..

HIRAL MAM ( LAB )

Classification of Companies
1. Chartered Company 2. Statutory Company 3. Registered Company

Private Company
Minimum capital of 1 lac or such higher capital as may be prescribed and must 1. Prohibit invitation to public to subscribes for its shares and debentures. 2. Restrict rights to transfer shares 3. Limit its employees to 50 4. Prohibit any invitation or acceptance of deposits from persons other than its members.

Public Company
A. Is not a Private company. B. Has a minimum capital of 5 lacs rupees or such higher capital as may be prescribed. C. Is a private company which is a subsidiary of a company which is not a private company.

Difference between Private and Public Company

1. Minimum persons 2. Maximum persons 3. Minimum capital requirement 4. Right to transfer shares

5. Issue of prospectus 6. Acceptance of deposits from public 7. Certificate required 8. Holding of meetings

9. Written consent of directors 10. Appointment of directors ( Resolution) 11. Retirement of directors 12. Addition in number of directors

13. Forming of quorum 14. Managerial remuneration 15. Privileges to private company 16. Issue of share warrants

Special Privileges and Exemptions available to private company

1. Only 2 members 2. No compulsion to minimum subscription 3. Can allot shares without issuing prospectus 4. Freedom to issue new shares to outsiders

5. Any kind of shares and disproportionate voting rights 6. Certificate of commencement is not compulsory 7. No index of members 8. Holding of meeting is not compulsory

9. Only 2 members can form the quorum 10. Polling arrangement

Less than 7 members by one person More than 7 members by 2 persons

11. Minimum 2 directors 12. Appointment of directors by single resolution

13. No written consent of directors required 14. Directors need not retire by rotation 15. No restriction on appointment or advertisement of directors 16. No notice is required in case of new appointment of directors

17. No restriction on managerial remuneration 18. Direct and indirect financial assistance to its members for purchase or subscription of its own shares 19. Provisions of sec85 and 89 are not applicable 20. Provisions of sec 108A are not applicable

21. Provisions of general meetings are not applicable 22. No inspection of books by third party 23. No written consent of directors required 24. May provide for additional disqualifications for directors

25. No restriction on power of board of directors 26. May provide special grounds for vacation of office by directors 27. No restriction on provision of loan 28. A person in a private company can work as MD for as many number of companies as he likes

Types of Companies

Company Limited by Shares Company Limited by Guarantee

Company Limited by Shares as well as Guarantee Unlimited Company

Private Company Deemed to be Public Company

Companies Act 1956 - Section 43A : i.

If 25% or more of its paid up share capital is held by a public company or a deemed public co. EXCEPT where the said percentage is held by a public co. as a trustee or executor/administrator for any individual. If it holds 25% or more paid up share capital of a public company Average annual turnover for last 3 FY is Rs 25 crores or more If it invites, accepts or renews public deposits

ii.

iii.

iv.

Private Company Deemed to be Public Company

Companies Amendment Act, 2000 Section 43A(11)

Section 43 (as discussed in previous slide) made inoperative

Companies Amendment Act, 2000 Section 3(1)(iii)

Private company will be deemed to be public company if it invites, accepts or renews public deposits

Companies Amendment Act, 2000 Section 43A(2A)

The department of Company is taking a view that by virtue of sub-section (11) all deemed public companies, existing on the date of the amendment, would have an option to revert to the status of a private company and in order to facilitate this, sub-section (2A) has alone been made applicable after the amendment. For this, the company has to inform ROC.

Conversion of Private Company into a Public Company

Section 44 :
1) Special Resolution in General Meeting to alter AOA 2) Number of members & No. of directors

3) Name
4) Filing of Special Resolution & SLP to ROC

Conversion of Public Company into a Private Company

No express provision in the Act
1) Special Resolution in General Meeting to alter AOA & include necessary

limitations

2) Name 3) Central Government approval 4) Filing of altered articles with ROC 5) Filing of Special Resolution with ROC

Section 25 Companies
Formed for solely promoting art, commerce, science, literature, charity,

religion; and other useful objects.

purpose.

To be granted a license by the Central government recognized for such

Required to apply its profits only for promoting its objects and not for

other purposes.

Prohibition on payment of dividend out of its profits to its members.

Examples :

The Mica Chamber Of Commerce, Methodist Church Of India, Ravindranath Medical Foundation,
WWF INDIA FOUNDATION

Section 25 Companies
Eligibility Criteria : i. Sec 25 Companies can be either Private / Public Company having a

limited liability.

ii. A license is required to be obtained from Central Government for this

purpose.

iii. Deletion of words private limited or limited from its name

Section 25 Companies

Privileges & Advantages of Sec 25 Companies

A partnership firm is allowed to be its members, but on the dissolution of the

firm, its membership of the association or company shall cease. No Minimum requirement of share capital in comparison to other Companies. Required to maintain books of accounts only for 4 years (normally 8 yrs). Can increase the no. of directors without obtaining prior permission from Central Government. Free to determine & hold the time, place & date of Annual General Meeting. Notice for AGM to be given for short period of 14 days only (normally 21 days). Board meetings to be held only once in every 6 months but should held 4 meetings in a year. Exempt from applicability of CARO (Companies Auditors Report Order). Low fees are required to be paid in comparison to other Companies for registration. At present Rs. 50 is required to be paid. Not require to stamp their Memorandum & Articles of Association. Publication of Name: A section 25 company has been exempted from the provisions of section 147 and as such is not required to mention its name and address as required in case of all other companies.

Section 25 Companies

Disadvantages or Obligations of Sec 25 Companies

Ensure that the profits or other incomes are applied for promoting the objects only. Cannot alter its objects clause in the Memorandum without taking prior written approval of

central Government. If the Central Government has imposed some conditions and regulations upon the company for granting a licence under section 25 then such a company is bound by such conditions and has to ensure adequate compliance with them. Where such conditions and regulations have been imposed then such conditions and regulations are required to be included in the Articles or/and memorandum of the company as may be directed by the government. Ensure that profits are not distributed as dividends to its members. Section 25 Company is regarded as a company within the meaning of the Income Tax Act, 1961 and as such its income is taxable according to the applicable rates similar to those applying to other companies.

Revocation of license The Central Government after giving reasonable opportunity of hearing can revoke the license by passing a speaking order. The license may at any time be revoked by the Central Government, and upon revocation, the Registrar shall enter the word" Limited" or the words" Private Limited" at the end of the name upon the register of the body to which it was granted; and the body shall cease to enjoy the exemption granted by this section: Provided that, before a license is so revoked, the Central Government shall give notice in writing of its intention to the body, and shall afford it an opportunity of being heard in opposition to the revocation.

Government company

According to Section 617 of the Indian Companies Act 1956, a Government company means, "any company in which not less than 51percent of the share capital is held by the Central Government or any State Government or partly by the Central Government and partly by one or more State Governments".

 Features of Government Companies:

(1) Formation: Government company is formed & registered under Indian Companies Act, 1956, either as a Private company or Public company. (2) Ownership: It may be partly or wholly owned by Government. State Government or Central Government or both may own the Government Company. If it is partly owned by Government then at least 51% of the capital must be taken over by the government. (3) Management: Management of Government company is vested in the hands of Board of Directors. The Directors may be nominated by government or even the shareholders can appoint the Board of Directors. (4) Separate Legal Status: A Government company, like a joint stock company is an incorporated association & artificial person having a common seal & perpetual succession. It has a separate legal entity from its owners.

(5) Body Corporate: A Government company is incorporated under the Indian Companies Act, 1956. It enjoys the status of body corporate. "It can enter into contract in its own name & can acquire properties in its own name. It can sue & can sued by others. (6) Employees: The employees & other staff members in government company are appointed by the company itself. The employees are neither government servants nor they work under civil servants; the government may in exceptional cases nominate some top executives. (8) Approval of Accounts: Government company has to place its Annual Accounts & Annual Reports for the approval of Legislature Assembly or Parliament as it is compulsory as per the act. (9) Flexibility: A government company enjoys full flexibility in its operations. It is free to adopt different changing policies according to changing business environment. (10) Exemptions: A government company is exempted from Budgetary Accounting & Audit. But, its Auditors are appointed by the government as per the guidance of controller & Auditor General of India

foreign company

Liaison office or project office it has to comply with some other provisions. Section 591 to 608 of companies' Act

Under Indian companies Act 1956

 FOREIGN COMPANIES UNDER INDIAN COMPANIES ACT, 1956

Section 591 to 608 of the companies act, 1956 contains the provisions related to the entities incorporated outside India or foreign companies. Sections 591 say that sections 592 to 608 shall apply to all foreign companies. These sections put an obligation upon the foreign companies to submit their information's to the registrar of companies regarding like accounting information, registration of charges on properties held by it in India, etc.

DEFINITION OF FOREIGN COMPNY.. .

 According to section 591 foreign companies are the: (a) Companies incorporated outside India which, after the commencement of this Act, establish a place of business within India; and (b) Companies incorporated outside India which have, before the commencement of this Act, established a place of business within India and continue to have an established place of business within India at the commencement of this Act. A place of business means premises where there is a physical or visible indication that the company may be contacted there.

 It is necessary to mention here that a foreign company is different from a foreign controlled company. According to RBI a company could be treated as a foreign controlled company if , (a) 40 per cent or more of its shares were owned in any one country outside India, (b) it was a subsidiary to a parent company in any country registered abroad, (c) 25 per cent or more of its shares were owned by a foreign-controlled Indian Joint Stock Company, which was not a managing agent, and (d) it was a company managed by a foreign-controlled managing agency company. A foreign company of which more than 50% paid up capital is held by Indian citizen or bodies corporate would attract more provisions.

LIMITED LIMITED LIABILITY PARTNERSHIP

A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore exhibits elements of partnerships and corporations. In an LLP, one partner is not responsible or liable for another partner's misconduct or negligence. This is an important difference from the traditional unlimited partnership under the Partnership Act 1890, in which each partner has joint and several liability.

Features

Limited liability of partners. Body corporate with perpetual succession ( Continuous corporation ). Minimum 2 partners without any ceiling on maximum number.

Very simple registration formalities Detailed LLP Agreement is not mandatory but if not done, certain inherent provisions will apply viz. equal share in profit/loss, no remuneration can be paid to partners.

 Acts of one partner will not be binding on other partners. They bind only to the LLP. Liability of LLP must be met out of property of LLP only. The LLP Act 2008 is to come into force from 1-42009. This date is not notified yet.

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