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Company Law

Company Law

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Published by Gaurang Rajak

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Published by: Gaurang Rajak on Aug 31, 2010
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09/04/2010

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Definition of a Company

According to Companies Act 1956, ³A Company means an artificial person in the eyes of law which have voluntary association of persons or individuals who formed for some common purpose, in which their capital is divisible into parts known as shares, formed for perpetual succession under a Common Seal´ L.J.Lindley defines a company as ³ an association of many persons who contribute money or money¶s worth to a common stock, and employ it in some common trade or business(i.e; for a common purpose) and who share the profit or loss arising therefrom´

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Features of a Company Separate Legal Entity Limited Liability Perpetual Succession Common Seal Transferability of shares Separate property Capacity to sue 2 .

RBI.g.Kinds of Companies Classification based on Incorporation Statutory Companies ± created by special act of Legislature e. Railways etc ‡ ‡ Registered Companies ± Under Companies Act 1956 Classification based on Liability ‡ Limited Companies .by shares & Guarentee ‡ Unlimited Companies 3 . SBI. LIC.

minimum 2 directors.Kinds of Companies Classification based on Members ‡ Pubic Company ± Minimum number is 7 & maximum unlimited.00. minimum paid-up capital of Rs. minimum 3 directors. 1.000.00.000. 5. minimum paid-up capital of Rs. etc 4 . Total Managerial Remuneration cannot exceed 11% of Net Profits etc ‡ Private Company ± Minimum number is 2 & maximum is 50.

Kinds of Companies Classification based on Control ‡ Holding Companies ‡ Subsidiary Companies Classification based on Ownership ‡ Government Company ‡ Non-Government Company 5 .

Advantages Companies are designed as to make it easy to raise capital. Companies have the ability to subdivide their capital into small amounts. allowing them to draw in huge numbers of investors who also benefit from the sub-division by being able to sell on small parts of their investment. 6 .Company . Limited liability also minimises the risk for investors and is said to encourage investment.

7 .Company ± Advantages (cont. The constitution of the company provides a clear organisational structure which is essential in a business venture where you have large numbers of participants.) It is also said to allow managers to take greater risk in the knowledge that the shareholders will not lose everything.

) It is also said to allow managers to take greater risk in the knowledge that the shareholders will not lose everything.Company ± Advantages (cont. The constitution of the company provides a clear organisational structure which is essential in a business venture where you have large numbers of participants. 8 .

Collect certificate of incorporation by holder of Power of Attorney from the office of Registrar of companies.) duly typed on stamp paper and signed Filing of documents in the office of Registrar of Companies Submission of required papers like Statutory declaration of compliance. (c) (d) (e) (f) (g) 9 . Drafting of Memorandum of Association & Articles of Association duly typed on stamp paper and signed by the promoters or Directors or persons holding Power of Attorney Prospectus or statement in lieu of Prospectus (in case of public co.Formation of Company Formation of a company involves following procedures (a) (b) Approval of name of the company from the office of Registrar of companies. Power of Attorney Payment of filing Fees.

Memorandum of Association Memorandum of association is a document which contains the fundamental conditions upon which the company is allowed to be incorporated Contents of Memorandum ‡ Name Clause ‡ Registered office clause ‡ Object Clause ‡ Liability Clause ‡ Capital Clause ‡ Association Clause 10 .

Audit and borrowing Powers ‡ Winding Up 11 .Articles of Association Articles of association is a document which contains the rules. Remuneration. regulations and bye-laws for the internal management of the affairs of a company Contents of Articles ‡ Share capital. Accounts. Powers of Directors ‡ Dividends & Reserves. Transfer of Shares etc ‡ General Meetings & their proceedings ‡ Appointment. Forfeiture. Qualifications. Rights of Shareholders etc ‡ Call.

Prospectus It is a document which invites deposits from the public or inviting offers from the public for the subscription of shares or debentures of a company. Contents of Prospectus ‡ Part I of Schedule II  General Information ± Name & Address of the regd office of the company. Name of the stock exchanges where application is made for listing. Prospectus is a window through which an investor can look into the soundness of a company¶s venture. Name of the Underwriters etc  Capital Structure of the company  Terms & Conditions of Issue  Company¶s Management structure and Various Projects undertaken etc 12 .

Solicitors/Advocates. Bankers etc  Experts opinion obtained  Name and addresses of the company Secretary. Bankers to the company B. Legal Advisor. Auditors. Financial Information  Report by the Auditors  Report by the Accountants C.Prospectus Contents of Prospectus ‡ Part II of Schedule II A. General Information ± Consent of Directors. Lead Managers. Statutory and other information  Minimum Subscription  Underwriting Commission and brokerage etc. 13 .

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