The first Indian Act, regarding companies , was the Joint Stock Companies Act, 1850.

This was based upon the English Companies Act, 1844. The Act of 1850 was replaced by Joint Stock Companies Act 1857 which introduced the principle of limited liability for the first time in India. Acts relating to companies were passed in 1860, 1866, 1882, 1895, 1910 and 1913 The Act of 1913 remained in force upto 1956. The Govt. of India appointed in 1950 , an expert committee under the chairmanship of Sri C.H.Bhaba to suggest how the Company Law can be reformed. The Companies Act of 1956 is based on the recommendations of the committee which has been amended several times since 1960.

 The

Companies Act extends to the whole of India except that

It shall apply to the state of Nagaland subject to such modifications, if any, as the Central Government may, by notification in the official gazette specify.---Sec. 1(3) The Central Govt. can modify the Act in its application to Nidhis or a Mutual Benefit Society, subject to issuing notification on this subject.-- Sec. 620A. Subject to issuing a notification, the Central Govt. can modify and provide special provisions as to companies in Goa, Daman and Diu.Sec. 620 B The same provisions have been applied to Jammu and Kashmir.Sec. 620C.

According to Sec.3(1)(i) of the Companies Act, 1956, Company means a company formed and registered under this Act or an existing company. Existing Company means a company formed and registered under any of the earlier Company Laws. A Company may be defined as a voluntary association of persons who have come together to carry on some business and sharing the profit there from. It is an artificial person created by law, formed for the purpose of business, registered under law having an independent legal entity, a distinctive name, common seal and perpetual succession.

Lord Justice Lindley defines a company as an association of many persons who contribute money or moneys worth to a common stock and employ it for a common purpose. The common stock is the capital of the company, the persons who contribute it are members and the proportion of capital to which each member is entitled is his share.

Registration

A company comes into existence only after registration under Companies Act. But a statutory corporation is formed by an Act of the Legislature. In case of partnership , registration is not compulsory.

Voluntary Association

A Co. is formed by choice and consent of the members.

A Co. is managed by the Board of Directors, MD or Manager. A shareholder cannot participate in the management . A company cannot work without a capital. It must have a registered office.

Management

Capital

Registered office

Separate legal entity

A company is a separate legal entity means it is different from its members. It works as a individual body. It can make contracts, open a bank account, can sue and be sued by others.

Artificial person
A company is a purely a creation of law. It is invisible, intangible and exists only in the eyes of law. It has no soul, no body, but has a position to enter or exit into a contract. In short it can do every thing just like a natural person.

Perpetual existence sec 34(2)

Section 34(2) of the act states that an incorporated company has perpetual life. The life of the company is not related to the life of the members . Law create the company and law alone can dissolve it. The existence of the company is not affected by death, insolvency, retirement or transfer of share of members.

Common seal

A company being an artificial person can not work as a natural being. Therefore, it has to work through its directors, officers and other employees. Common seal used as a official signature of a company.

Limited liability

It means that the liability of a member shall be limited to the value of the share held by him, he cannot be called upon to bear the loss from his personal property

Transferability of share (Sec 82)

The share of a company are freely transferable. The shareholder can transfer his share to any person without the consent of other members. A company cannot impose absolute restrictions on the rights of member to transfer their shares

 Not

a citizen Residence No fundamental rights Social objective Separate property

1. CHARTERED COMPANIES These companies are incorporated under a special charter such as the East India company, The Bank of England. The Company Act does not apply to it. 2. STATUTORY COMPANIES These companies are incorporated by special act of legislature( act of parliament or state legislature) e.g. municipal councils, universities, central banks and government regulators. RBI, UTI , SBI

3. REGISTERED COMPANIES These companies registered under the Indian Companies Act, 1956 are called registered companies. To become a registered company one has to take the certification of incorporation from the registrar.

COMPANY LIMITED BY SHARE [sec12(2)a] companies in which the liability of its members is limited to the extent of the amount unpaid on the shares held by a particular member.

COMPANY LIMITED BY GUARANTEE The liability of members is limited to a fixed amount which members undertake to contribute to the assets of the company in case of its winding up. UNLIMITED COMPANIES wherein members are liable for the debts of the company irrespective of their interest in the company

PRIVATE COMPANIES [sec 3(1)(iii)] A private company is one which has a minimum paid-up capital of Rs. 1,00,000 and by its Article of association restricts the right to transfer its share, if any limits the maximum number of its member to 50 and min of 2 prohibits any invitation to the public to subscribe for any share or debenture of the company.

PUBLIC COMPANY [SEC 3(1)(iv)] A public company means a company which has a paid-up capital of Rs.5 lakh and by its article (i) Does not limit the max number of its member but min must be 7. (ii) Does not prohibit any invitation to the public to subscribe for any share in, or debentures, of the company.

HOLDING AND SUBSIDIARY COMPANY (Sec 4) If a company can control the policies of another company i) through the ownership of more than 50% of its shares or ii) through control over the composition of its Board of Directors, the former (i.e. the controlling company) is called holding company The company over which control is exercised (i.e. the controlled company) is called the subsidiary company. e.g. P Co. holds 20 shares of Q Co. The subscribed share capital of Q Co. consists of 50 shares. By an agreement between the companies P Co. has the power to appoint 3 directors in Q Co. The articles of Q Co. provides that there shall be only 4 directors. P Co. is a holding Company and Q Co. is its subsidiary.

GOVERNMENT COMPANY (sec617) a government company means any company in which at least 51% of the paid up share capital is held by the central government or by any state government or partly by one or more state Government. Foreign Company [Sec. 591(1)] It means any company incorporated outside India which has an established place of business in India. Where a min of 50 % of the paid-up share capital of a foreign company is held by one or more citizens of India or by one or more bodies corporate in India.

Association not for profit (Sec. 25)

According to Sec. 13, the name of a limited company must end with the word Limited in case of a public company, and with the words Private Limited in the case of a private company. Sec 25 of the Act, permits the registration , under the licence granted by the Central Government, of an association not for profit with limited liability without using the word Limited or the words Private limited to its name.

One Man Company

This is usually private in which one man holds practically the whole of the share capital of the company, and in order to meet the statutory requirement of minimum number of members, some dummy members who are mostly his relations or friends, hold just 1or 2 shares each. e.g. A private company is registered with a share capital of Rs. 5,00,000 divided into 5,000 shares of each. Of these shares 4,999 are held by A and one share is held by As wife, B. This is a one-man company.

Prohibition of LARGE PARTNERSHIPS (Sec.11)

Illegal association: A company, association or partnership consisting of more than 10 persons for the purpose of carrying on banking business and of more than 20 persons for the purpose of carrying on any other business with the object of earning profits can be legally formed only when it is registered under the Companies Act, 1956. If it is not registered under the Companies Act, it is an illegal association and has no legal existence. An association of more than 20 persons which exist not for acquisition of gain but for some other purpose such as the promotion of art, charity, religion, science, etc., does not require registration.

Penalty for improper use of words limited and Private Limited(Sec.631):

If any person or persons carry on business under any name of which the word limited or private limited is or are the last words, that person or each of these persons, unless duly registered public or private company, may be punishable with fine which may extend to Rs. 500 for every day upon which that name has been used.

 The

first step in the formation of the company is to prepare memorandum of association. It is one of the documents which has to be filed with registrar of the companies at the time of incorporation of a company. It is a vital document, tells about the object of the companys formation ,the power of the company as well as the boundaries beyond which the action of the company can not go.

 It

defines the rights and liabilities of the members. It shows the capital structure of the company It shows the object of the company It specifies the state in which the registered office of the company is situated. It shows the constitution of the company It specify the conditions under which the company has been incorporated.

 Rights

of different classes of shareholder. Use of common seal of the company. Different classes of shares and their right. Appointment , powers, duties, salary of MD, manager, and secretary. Borrowing power of directors. Voting rights of member . Board meetings and proceedings. Winding up company.

MCA-21 ELECTRONIC FILING OF FORMS Ministry of Corporate Affairs (MCA) has launched a programme for managing the work relating to filing of documents, etc with Registrar of Companies (ROCs), and getting approval from the Ministry of Affairs. The physical filing of all forms has been discontinued and converted into electronic filing. It is almost a paperless working of MCA except in a few cases where paper work is unavoidable due to legal and statutory requirements. Presently, winding up procedures have not been covered in the programme. This project is termed as MCA-21. This project became fully operational on 15-9-2006. MCA-21 project is designed to fully automate all process related to enforcement and compliance of legal requirements under Companies Act, 1956.

The following nine matters are covered under MCA-21 project since 15-9-06:

Registration and incorporation of new companies Filing of annual returns and balance sheets. Filing of forms for change of name/address/directors details Registration, modification and verification of charges. Inspection of documents. Issue of certified copies. Application for permissions required under various provisions of Company Law. Approvals from Central Govt. Regional Director and ROC.(It will be sent physically by post) Investor grievance redressal.

MCA-21 Scheme does not cover matter relating to liquidation of Companies.

Companies (Amendment) Act, 2006 has been passed to make legislative changes for introduction of e-filing. New Sections 610B to 610 E have been inserted to and made effective from 16-09-2006.

Sec. 610B: Provisions relating to filing of applications, documents, inspection, etc., through electronic form Sec. 610 C : Power to modify Act in relation to electronic records (including the manner and form in which electronic records shall be filed)

Sec. 610D: Providing of value-added services through e-form

Sec. 610E: Application of provisions of Information Technology Act, 2000

Secure Electronic Data: A Data Centre has been set up at Delhi to serve as Secure Electronic Registry for storage and retrieval of all records. A Disaster Recovery Centre has been set up at Chennai for back up of electronic registry in event of technical breakdown or man-made or natural disaster. The operation can be revived in 12 hours. Website to be accessed: User has to access www.mca.gov.in to upload the forms, inspect the documents and get other details.

If the proposed name of the company is approved, then the following documents duly stamped together with the necessary fees are to be filed with the Registrar of Companies(for the State in which the registered office of the company is to be situate):
1. 2.

The Memorandum of Association duly signed by the subscribers. The Articles of Association, if any, signed by the subscribers to the MoA. A public company limited by shares need not have its own Article of Association instead may adopt Table A in Schedule I to the Act.

3.

The agreement, if any which the company proposes to enter into with any individual for appointment as its managing or whole-time director or manager[Sec. 33(1)].
A list of directors who agreed to become the first directors of the company and their written consent to act as directors and take up qualification shares (Sec.266)

4.

5. A declaration stating that all the requirements of the Companies Act and other formalities relating to registration have been complied with. Such declaration shall be signed by any of the following persons: an Advocate of the Supreme Court or of a High Court; or an attorney or a pleader entitled to appear before a High Court: or a secretary or a chartered accountant in whole-time practice in India, who is engaged in the formation of the company: or A person named in the Articles as a director, manager or secretary of the company[Sec. 33 (2)]
Then within30 days of the date of incorporation of the company, a notice of the situation of the registered office of the company shall be given to the Registrar who shall record the same (Sec.146)

If the Registrar is satisfied as to the compliance of statutory requirements, he retains and registers the Memorandum, the Articles and other documents filed with him and issues a Certificate of Incorporation, i.e., of the formation of the company [Sec. 33(3)] By issuing certificate of incorporation, the Registrar certifies under his hand that the company is incorporated and in the case of a limited company, that the company is limited. (Sec.34) Conclusiveness of certificate of incorporation (Sec.35) A Certificate of Incorporation is conclusive evidence that the requirements of the Act have been complied with in respect of registration the association is a company authorised to be registered under the act and has been duly registered. the date borne by the certificate of incorporation is the date of birth of the company, i.e., the date on which the company comes into existence.

When a company is registered and a certificate of incorporation is issued by the Registrar, three important consequences follow: 1. The company becomes a distinct legal entity. 2. The company acquires a perpetual succession. 3. The companys property is not the property of the shareholders.