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What is a Company?

 The term Company is used to describe an


association of a number of persons,
formed for some common purpose and
registered according to the law (relating to
companies).
Objectives & Purposes
 Encourage investments in companies by providing
certain facilities, e.g. limitation of liability, transferability of
shares etc.
 Ensure proper administration of the funds and assets of
companies in the interest of the investors.
 Prevent malpractices by directors and managers.
 Arrange for investigation into the affairs of companies.
 Provide for effective audit in dealing with cases of
dishonesty and fraud in the corporate sector.
Essential Features
 Registration  Limited Liability
 Voluntary Association  Transferability
 Legal Personality  Legal/Statutory Obligations
 Contractual Capacity  Not a Citizen
 Management  Residence
 Capital  Fundamental Rights
 Permanent Existence  Social Objective
 Registered Office  Centrally Administrated
 Common Seal  "Lifting the veil" of the company

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Essential Features (Rearranged)
 Contractual Capacity  Registration
 Capital  Registered Office
 Common Seal  Fundamental Rights
 Not a Citizen  Residence
 Central Administration  Voluntary Association
 Legal Personality  Permanent Existence
 Legal/Statutory Obligations  Social Objective
 Limited Liability  Transferability
 "Lifting the veil" of the company
 Management
Company: A Property of Shareholders?
 The traditional view that the company is the property of the
shareholders is now an exploded myth.
 According to the new socio­economic thinking, a company is a social
institution having duties & responsibilities towards the community
in which it functions.
 Maximization of social welfare should be the legitimate goal of a
company
 Shareholders should not be regarded as proprietors of the company,
but merely as suppliers of capital entitled to no more than
reasonable return
 the company should be responsible not only to shareholders but also
to workers, consumers and the other members of the community
and should be guided by considerations of national economy and
progress.
D. Is a Company a Property of the Shareholders?
The traditional view that the company is the property of the shareholders is now an exploded myth. A company according
to the new socio­economic thinking, is asocial institution having duties and responsibilities towards the community
in which it functions. Maximisation of social welfare should be the legitimate goal of a company and shareholders
should be regarded not as proprietors of the company, but merely as suppliers of capital entitled to no more than
reasonable return and the company should be responsible not only to shareholders but also to workers,
consumers and the other members of the community and should be guided by considerations of national economy
and progress.

E. Types of companies:
There are two types of companies-Public and Private.

a) Private Company:
A private company is one which, by its articles,
I. restrict the right of the members to transfer their shares, if any ;
II. limit the number of its members (not counting its employees) to 50 and
III. Prohibits any invitation to the public to subscribe for any shares in, or debentures of, the Company.

Private companies may be limited by shares or limited by guarantee. There cannot be a private company with unlimited
liability.

b) Public Company:
All companies other than private companies are called public companies .Public companies may be classified into three
types :
1. companies limited by shares,
2. companies limited by guarantee, and
3. unlimited companies.
Statutory Public Company:
Non-Profit Associations:
the Central Government may by licence, permit the omission of the words Limited or
Private Limited in the case of companies which are formed for promoting
commerce, art, science, religion, or any other useful object, and which are non-
profit and non dividend paying organisations (e.g., Chambers of Commerce). The
licence given may be withdrawn, if the company ceases to fulfill the conditions
mentioned in Sec. 25.

F. Differences between a private & a public company:


Number of members; Restrictions on transfer of shares; Restriction on invitation to
public; Restriction on name; Prospectus; Issue of rights shares; Commencement of
business; Statutory meeting and statutory report; Managerial remuneration;
Number of directors; Rules regarding directors; Company's own shares; Procedure
of meeting; Memo of contract:

G. Jurisdiction of court:
Suits relating to the constitution of a company and its winding up 'are ordinarily dealt
with in the High Court of the area in which the registered office of the company is
situated. Suits of other types (e.g., money suits) by or against the company, where
would try is determined by the rules regarding jurisdiction of courts as laid down in
the Civil Procedure Code.

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