Beruflich Dokumente
Kultur Dokumente
1956
Contents
FEATURES
TYPES
FORMATION
COMMENCEMENT
DOCTRINES
DIRECTORS
METHODS OF RAISING CAPITAL
MEETINGS
WINDING UP
FEATURES
Types
Public
Private
Holding and Subsidiary
Companies limited by
shares/guarantee/unlimited
Corporations
Public Financial Institutions
FORMATION
PROMOTER and his role
Pre Incorporation Contracts
Documents for Incorporation
MOA
AOA
Agreement with MD/Director/manager
Qualification shares
Statutory Declaration.
Effects of Incorporation
Commencement
Not required in the case of Private
Companies
Link with prospectus
Minimum subscription
Directors shares
DOCTRINES
CORPORATE VEIL
ULTRA VIRES
CONSTRUCTIVE NOTICE
INDOOR MANAGEMENT
CORPORATE GOVERNANCE
DIRECTORS
ROLE
TYPES
APPOINTMENT
POWERS
Role of Directors
Section 291 which states that the
Board of Directors can do all those
acts which a company can do. This
leads to the principle of Agency i.e.
the Board of Directors are agents of
the company. However it may be
noted that this applies to the whole
Board and not individual Directors.
TYPES
Managing Director
Whole Time Director
Part Time Director
Independent Director
Nominee Director
Additional Director
Alternate Director
APPOINTMENT
By the Articles of Association
By the Shareholders
Characteristics of a
Company
Separate Legal Entity
Limited Liability
Perpetual Succession
Limited Liability
The liability of the members of the company is
limited to contribution to the assets of the
company up to the face value of shares held by
him.
A member is liable to pay only the uncalled
money due on shares held by him when called
upon to pay and nothing more, even if liabilities
of the company far exceeds its assets.
On the other hand, partners of a partnership firm
have unlimited liability i.e. if the assets of the
firm are not adequate to pay the liabilities of the
firm, the creditors can force the partners to make
good the deficit from their personal assets.
This cannot be done in case of a company once
the members have paid all their dues towards the
shares held by them in the company.
Perpetual Succession
A company does not die or cease to exist
unless it is specifically wound up or the task
for which it was formed has been completed.
Membership of a company may keep on
changing from time to time but that does not
affect life of the company. Death or
insolvency of member does not affect the
existence of the company.
There is a very good saying. Even where
during war all the members of a private
company, while in general meeting was killed
by a bomb, the company survived; not even
a hydrogen bomb could have destroyed it.
Separate Property
A company is a distinct legal entity. The
companys property is its own. A member
cannot claim to be owner of the companys
property during the existence of the company
Transferability of Shares
Shares in a company are freely transferable,
subject to certain conditions, such that no
shareholder is permanently or necessarily
wedded to a company. When a member
transfers his shares to another person, the
transferee steps into the shoes of the
transferor and acquires all the rights of the
transferor in respect of those shares.
Common Seal
A company is a artificial person and does
not have a physical presence. Therefore, it
acts through its Board of Directors for
carrying out its activities and entering into
various agreements. Such contracts must
be under the seal of the company. The
common seal is the official signature of the
company. The name of the company must
be engraved on the common seal. Any
document not bearing the seal of the
company may not be accepted as authentic
and may not have any legal force.
Company
A Company is association of
persons who have come
together for a specific purpose
Has a separate legal entity as
soon as it is incorporated under
law
Liability of shareholders of a
limited company is limited to
the extent of unpaid share
Property belongs to the
company and not to its
members
Shares may be transferred
without the permission of the
other members, in absence of
provision to contrary in AOA
Public co: 7-Unlimited members
Private co: 2-50 Members
Decision of the majority prevails
Partnership
Partnership firm is sum total of
persons who have come together
to share the profits of the
business carried on by them or
any of them
It does not have a separate legal
entity
Liability of the partners is
unlimited
Property of the firm belongs to
the partners and they are
collectively entitled to it
A partner cannot transfer his
shares in the partnership firm
without the consent of all other
partners
Banking biz: 2-20 members
Other business: 2-10 members
100 % consensus is required for
any decision
On the death of any partner, the
partnership is dissolved unless
there is provision to the contrary
Illegal Association
Consequences of nonRegistration
Law does not recognize an illegal association.
An illegal association cannot enter into any
contract, cannot sue any members or any
outsider, and cannot be sued by any members
or outsiders for any of its debts. The members
of the illegal association are personally for the
obligations of the illegal association. A member
may be liable to a fine of Rs. 1000. Any
member of an illegal association cannot sue
another member in respect of any matter
connected with the association.
TYPES OF COMPANIES
Company Law, 1956
Public co
7Unlimited
members
Minimum
number of
directors
is 3
Private co
2-50 Members
Restricts the right of
members to transfer
its shares
Limits the number of
its members to fifty
Prohibits an invitation
to the public to
subscribe to any
shares in or the
debentures of the
company
Minimum number of
directors is 2
Companies Deemed to be
Public limited Company
Where at least 25% of the paid up share
capital of a private company is held by one
or more bodies corporate
Where the annual average turnover of the
private company during the period of three
consecutive financial years is not less than
Rs. 25 crores
Where not less than 25% of the paid up
capital of a public company limited is held by
the private company
Where a private company accepts deposits
after the invitation is made by advertisement
or renews deposits from the public
Company limited by
guarantee
is a registered company
having the liability of its
members limited by its MOA
to such amount as the
members may respectively
thereby undertake to pay if
necessary on liquidation of
the company.
The liability of the members
to pay the guaranteed
amount arises only when
the company has gone into
liquidation and not when it
is a going concern.
A guarantee company may
be a company with share
capital or without share
capital.
Government Companies
Any company in which not less than 51% of the
paid up share capital is held by the Central
Government or any State Government or partly
by the Central Government and partly by the
one or more State Governments and includes a
company which is a subsidiary of a government
company.
Government Companies are also governed by
the provisions of the Companies Act.
However, the Central Government may direct
that certain provisions of the Companies Act
shall not apply or shall apply only with such
exceptions, modifications and adaptions as may
be specified to such government companies.
PROMOTION AND
FORMATION OF A
COMPANY
Company Law, 1956
forming
The process of forming a company can
be divided into four distinct stages:
Promotion
Registration or incorporation
Capital Subscription
Commencement of Business
Promotion
This is the first stage in the formation of a company. It refers to the
entire process by which a company is brought into existence.
It starts with the conceptualization of the birth a company and
determination of the purpose for which it is to be formed.
Promoters
The persons who conceive the company and invest the initial funds
are known as the promoters of the company.
The promoters enter into preliminary contracts with vendors and
make arrangements for the preparation, advertisement and the
circulation of prospectus and placement of capital.
However, a person who merely acts in his professional capacity on
behalf of the promoter (e.g. lawyer, CA, etc) for drawing up the
agreement or other documents or prepares the figures on behalf of
the promoter and whom the promoter pays is not a promoter.
Promoter Duties
He must not make any secret profit out of
the promotion of the company. Secret
profit is made by entering into a
transaction on his own behalf and then
sell to concerned property to the company
at a profit without making disclosure of
the profit to the company or its members.
He must make full disclosure to the
company of all relevant facts including to
any profit made by him in transaction with
the company.
Incorporation of the
company
Registration
The promoters must make a decision
regarding the type of company i.e. a
public company or a private company
or an unlimited company, etc and
accordingly prepare the documents for
incorporation of the company.
In this connection the Memorandum
and Articles of Association (MA & AA)
are crucial documents to be prepared.
Certificate of
Incorporation
Once all the above documents have been
filed and they are found to be in order, the
Registrar of Companies will issue
Certificate of Incorporation of the Company.
This document is the birth certificate of the
company and is proof of the existence of
the company.
Once, this certificate is issued, the
company cannot cease its existence unless
it is dissolved by order of the Court.
Commencement of Business
A private company or a company having
no share capital can commence its
business immediately after it has been
incorporated. However, other companies
can commence their activities only after
they have obtained Certificate of
Commencement of Business. For this
purpose, the following additional
formalities have to be complied with:
MEMORANDUM OF ASSOCIATION
Memorandum of Association of a
company is its charter & defines the
limitations of the powers of a company. It
contains the fundamental condition upon
which alone the company is allowed to be
incorporated
- Lord Cairns
MEMORANDUM OF ASSOCIATION
Definitions
Memorandum of Association of a company as
originally framed or as altered from time to time in
pursuance of any previous companies law or of this
Act
Sec.2 (28)
MEMORANDUM OF ASSOCIATION
FORM OF
MEMORANDUM OF ASSOCIATION
CONTENTS OF MEMORANDUM OF
ASSOCIATION
Six Clauses
Name
Liability
Objects
Registered
office
Capital
Association
or subscription
Rich Contended :
Firstly, that the contract in question came well
within the meaning of the words general
contractors, and, was therefore, within the powers
of the company, secondly, that the contract was
ratified by the majority of the shareholders.
Void Ab Initio
Injunction
Personal Liability of Directors
Acquisition of Property that is Ultra Vires
Directors personally liable to third parties
Special Resolution.
Written Approval of Central Government.
No Approval of Central Government is
necessary if the change of name involves only
the addition or deletion of the word Private.
Change by ordinary resolution and approval of
Central Government when name is identical or
too closely resembles the name of an existing
company.
ARTICLES OF ASSOCIATION
Definition
Article means the articles of association of a
company as originally framed or as altered from
time to time in pursuance of any previous
companies laws or of this Act
Sec.2 (2)
ARTICLES OF ASSOCIATION
CONTENTS OF ARTICLES
CONTENTS OF ARTICLES
CONTENTS OF ARTICLES
Procedure :
Alteration by passing a special resolution.
Copy of resolution to be sent to registrar
within 30 days.
Copy of altered articles to be registered
within 3 months of passing of resolution.
Memorandum of
Association
Articles of Association
Charter of Company
Supreme document
has
read
&
understood
the
documents.
It is a negative doctrine, acting only against
the outsiders & not the company.
Thank You