COMPANY LAW: Introduction

• Company: features
– Separate legal entity
– Perpetual succession
– Limited liability
• Major constituents of company
– Shareholders/members
– Directors
 Advantages& disadvantages of
corporate entity
• Advantages
– Limited liability
– Independent legal entity
– Transferable shares
– Professional management
– Large capital can be raised
• Disadvantages
– High costs of formation
– High running costs
– Closure difficult
 Formation of company
• Promoters
• Name approval
• Documents to be submitted alongwith application
for incorporation of company
– memorandum and articles
– Proposed agreements with managers/managing director
– Declaration of HC or SC advocate/practicing CA/CS
• Subscribers to memorandum: number
• Registration of memorandum and articles
• Certificate of incorporation
 Memorandum of Association
• Clauses in memorandum
– Name clause
– Registered office clause
– Objects clause
– Liability clause
– Capital clause
– Subscribers’ declaration
• Objects clause: its importance
• Doctrine of ultra vires
 Articles of Association
• Nature of articles: rules and bye laws for
general administration of company
• Printed, divided into paragraphs, numbered,
signed by subscribers, attested
• Articles mandatory in case of Private
companies limited by shares
• Articles and memorandum constitute
contracts between members and company
 Contents of Articles
• Model articles: Table ‘A’(Schedule I of the
Companies Act)
• Some standard provisions
– Share capital
– Transfer, transmission of shares
– Powers of directors and other provisions relating to
Board
– Dividends
– Meetings of members
• Articles subordinate to memorandum
• Memorandum and articles subordinate to the Act
 Articles of private company
• Articles must contain provisions for
– Restrictions on right to transfer shares
– Restricting membership to 50
– Prohibition on invitation to public to subscribe
for its shares/debentures
– Prohibition on invitation or acceptance of
deposits from persons other than its
members/directors or their relatives