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MB0051 Unit 12 Companies Act, 1956

MB0051 Unit 12 Companies Act, 1956

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Published by: Sensorica Evanescere on Sep 19, 2011
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Unit-12-Companies Act, 1956
 Structure:12.1 IntroductionObjectives12.2 Formation of a CompanyPromotionRegistration (Secs.12 and 33)Availability of nameFloatation12.3 Memorandum of AssociationMeaning and purposeForm and contentsAlteration of memorandum12.4 Articles of AssociationMeaning and purposeRegistration of articlesSubject matter of articles12.5 ProspectusContents of a prospectusStock Exchange Board of India guidelines relating to disclosure on prospectus12.6 SharesClasses of sharesPreference shareEquity shareCumulative Convertible Preference Shares (CCPs)
Deferred or founder‟s shares
Non-voting sharesSweat equity shares12.7 Directors12.8 General Meetings and ProceedingsNeed for meetingsStatutory meeting (Sec.165)Annual General Meeting (AGM) (Secs.166-168)Extra-ordinary Meeting (EGM) Sec.16912.9 Auditor12.10 Winding up of CompaniesModes of winding upWinding up by the court12.11 Summary12.12 Terminal Questions12.13 Answers12.1 IntroductionIn the earlier units, you came to know about the Foreign Exchange Management Act. Inthis unit you will study about the Companies Act, 1956.The
Companies Act, 1956 defines the word „company‟ as a company formed and registered
under the Act or an existing company formed and registered under any of the previouscompany laws (Sec.3). This definition does not bring out the meaning and nature of thecompany into a clear perspective. Also Sec.12 permits the formation of different types of companies. These may be (i) companies limited by shares, (ii) companies limited byguarantee and (iii) unlimited companies. The vast majority of companies in India are withlimited liability by shares.ObjectivesAfter studying this unit, you should be able to:l Describe formation of companyl Define shares and directorsl Explain meetings and resolutionsl Define auditor
l Describe how to winding-up a company12.2 Formation of a CompanyThe whole process of formation of a company may be roughly divided, for convenience,into three parts. These are: (i) Promotion; (ii) Registration and (iii) Floatation.12.2.1 PromotionPromotion is a term of wide import denoting the preliminary steps taken for the purposeof registration and floatation of the company. The persons who assume the task of promotion are called promoters. The promoter may be an individual, syndicate,association, partnership or company.
Who is a promoter?
This term has not been defined under the Act, although the term isused expressly in Secs.62, 69, 76, 478 and 519.12.2.2 Registration (Secs.12 and 33)
Secs.12 states that, “any seven or more persons or where the company to be formed will
be a private company, two or more persons, associated for any lawful purpose may, bysubscribing their names to a memorandum of association and otherwise complying withthe requirements of this Act in respect of registration form an incorporated company, withor without l
imited liability.”
 12.2.3 Availability of nameSec.20 states that a company cannot be registered by a name, which in the opinion of theCentral Government is undesirable. Therefore, it is advisable that promoters find out theavailability of the proposed name of the company from the Registrar of Companies. Forthe purpose, three names in order of priority should be filed.The following two documents, though not required to be filed for the purpose of registration, are usually delivered along with the aforesaid documents.(i) The address of the registered office of the company (Sec.146).(ii) Particulars regarding directors, manager and secretary, if any (Sec.303).These two documents are required to be submitted within thirty days of registration of thecompany.12.2.4 FloatationWhen a company has been registered and has received its certificate of incorporation, it is
ready for „floatation‟, that is to say, it can go ahead with raising capital sufficient to
commence business and to carry it on satisfactorily.Sec.70 makes it obligatory for every public company to take either of the following twosteps: (i) Issue a prospectus in case public is to be invited to subscribe to its capital, or (ii)
Submit a „statement in lieu of prospectus‟ in case capital has b
een arranged privately. Itmust be done at least 3 days before allotment.Self Assessment Questions1. The persons who assume the task of promotion is known as __________(a) Acceptors(b) Motivators

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