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COMPANY LAW

MEANING OF COMPANY A company means an association of persons formed for some common object it involves two ideas.
(a) The members of the associations are so numerous it can not be described as a firm or a partnership. (b) Member may transfer his interest in the association without the consent of other members.

DEFINITION. A company is an association of many persons who contribute money or moneys worth to a common stock and employ it is some trade or business, and who shares the profit and loss (as the case may be arising there from)

COMPANY LAW
DISTINCTION BETWEEN A COMPANY AND A PARTNERSHIP
FORMATION ENTITY NUMBER OF MEMBERS CONTINUITY TRANSFER OF INTEREST LIABILITY MANAGEMENT LIMITED COMPANY ACCOUNTS & AUDIT OBJECTS WINDING UP

CHARACTERISTICS OF A COMPANY
AN ARTIFICIAL PERSON CREATED BY LAW INDEPENDENT LEGAL ENTITY PERPETUAL SUCCESSION COMMON SEAL LIMITED LIABILITY TRANSFERABILITY OF SHARES

SEPARATION OF OWNERSHIP AND MANAGEMENT.

CLASSIFICATION OF JOINT STOCK COMPANIES

INCORPORATED

UN-INCORPORATED

BY ROYAL CHARTER

BY SPECIAL ACT OF PARLIMENT

BY INCORPORATION UNDER THE COMPANY LAW

PRIVATE COMPANY

SINGLE MEMBER COMPANY

PUBLIC COMPANY

ACCORDING TO LIABILITY

LIMITED LIABILITY COMPANIES

UNLIMITED LIABILITY COMPANIES

COMPANIES LIMITED BY SHARES

COMPANIES LIMITED BY GUARANTEE

DIFFERENCES BETWEEN A PUBLIC COMPANY AND A PRIVATE COMPANY PUBLIC COMPANY


1. 2. 3. 4. A public company can invite subscription from the public. A public company does not have restriction on transfer of shares. A public company should have at least seven members. There is no restriction on upper limit of the members. 1. 2. 3. 4.

PRIVATE COMPANY
A private company cannot invite subscription from the public. Transfer of shares is restricted in a private company. A private company should have at least two members. Maximum members cannot exceed 50 members. However, the employee members are not counted for the purpose of deciding upper limit and joint shareholders are counted as one. A private company is not required to obtain certificate for commencement of business and it can commence business just after its incorporation. There is no requirement to raise subscription by a private company. minimum

5.

A public company has to seek certificate for commencement of business. A public company has to raise minimum subscription before obtaining certificate for commencement of business. A public company is required to file prospectus or statement in lieu of prospectus for obtaining certificate for commencement of business. A public company is required to file its accounts with the register.

5.

6.

6.

7.

7.

There is no requirement of filing of prospectus or statement in lieu of prospectus by a private company except when a private company converts into a public company. Filing of accounts is not required by private company.

8.

8.

PUBLIC COMPANY
9. Auditors qualification chartered accountant. is prescribed as 9.

PRIVATE COMPANY
No qualification is prescribed for an auditor of a private company except when it has paid up capital exceeding Rs.3 million. No restriction is imposed for investment in associate companies and undertakings. No restriction is imposed on the business of a Chief Executive. No reporting of beneficial ownership is required. A private company is not required to hold a statutory meeting. A private company is not required to file statutory report.

10. 11. 12. 13. 14.

Investment in associate undertakings is restricted.

companies

and

10. 11. 12. 13. 14.

Chief Executive of a public company cannot engage in a competitive business. Beneficial ownership of listed public companies is controlled and reported. A public company is required to hold a statutory meeting once in its life. A public company is required to file statutory report.

15.

Quorum for a general meeting of a public company is two members present in person having not less than 25% voting power of their own account or through proxies. However, quorum in case of listed company, shall be ten members present in person having voting power as aforesaid.
Minimum number of members should be three in case of unlisted public company and seven in case of listed company. Minimum number of directors should be three in case of unlisted public company and seven in case of listed company.

15.

Quorum for a general meeting of a private company is two members present in person having not less than 25% voting power of their own account or through proxies. However, quorum in case of SMC is presence of the sole member personally or though proxy.

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16.

Minimum number of members should be two in case of private company and one in case of a single member company. Minimum number of directors should be two in case of private company and one in case of a single member company.

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17.

DIFFERENCES BETWEEN A PRIVATE COMPANY AND A SINGLE MEMBER COMPANY (SMC) PRIVATE COMPANY
1. 2. 3. A private company cannot invite subscription from the public. Transfer of shares is restricted in a private company. A private company should have at least two members.

SINGLE MEMBER COMPANY (SMC)


1. 2. 3. Same. Transfer of shares is restricted and shall be at the will of single member only. An SMC shall have only one member. However, it can be converted into two member private company just by inducting another person as a member. It has only one member.

4.

Maximum members cannot exceed 50 members. However, the employee members are not counted for the purpose of deciding upper limit and joint shareholders are counted as one. A private company is not required to obtain certificate for commencement of business and it can commence business just after its incorporation. There is no requirement to raise subscription by a private company. minimum

4.

5.

5.

Same.

6.

6.

Same.

7.

There is no requirement of filing of prospectus or statement in lieu of prospectus by a private company except when a private company converts into a public company.

7.

Same.

PRIVATE COMPANY
8. Filing of accounts is not required by a private company except where private company is subsidiary of a public company.
No qualification is prescribed for an auditor of a private company except when it has paid up capital exceeding Rs.3 million. No restriction is imposed for investment in associate companies and undertakings. No restriction is imposed on the business of a Chief Executive.

SINGLE MEMBER COMPANY (SMC)


8. Same.

9.

9.

Same.

10. 11.

10. 11.

Same. Same.

12.
13. 14.

No reporting of beneficial ownership is required.


A private company is not required to hold a statutory meeting. A private company is not required to file statutory report.

12.
13. 14.

Same.
Same. Same.

15.

A private company is not obliged to appoint a company secretary.


Quorum for a general meeting of a private company is two members present in person having not less than 25% voting power of their own account or through proxies.

15.

An SMC is obliged to appoint a company secretary.


Single member can be present personally or through proxy. Second present person shall be the company secretary.

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16.

FORMATION OF A COMPANY
DEFINITION. A company comes into existence after going through a series of processes. The process can be broadly grouped under the following stages: PROMOTION. Promotion may be defined as the discovery of business opportunities and the subsequent organizations of funds, property and managerial ability into a business concerns for the purpose of making profit there from. STEPS IN PROMOTION
DISCOVERY OF IDEA DETAILED INVESTIGATION ASSEMBLING FINANCING & PREPOSITION

IN CORPORATION & REGISTRATION


ASCERTAINMENT OF NAME OF REGISTRAR COMPANY FROM

LICENSE ARRANGE, UNDER WRITERS, BROKERS, BANKERS, SOLICITORS, AUDITORS, SIGNATORIES TO THE MEMORANDUM OF ASSOCIATION
CAPITAL SUBSCRIPTION COMMENCEMENT OF BUSINESS

MEMORANDUM OF ASSOCIATION
DEFINITION. It is a document which sets out the constitution of a Company and as such, it is the foundation on which the structure of the company is based. It defines its relation with the outside world and the scope of its activities. PREPARATION OF MEMORANDUM
PUBLIC LIMITED COMPANY PRIVATE LIMITED COMPANY SINGLE MEMBER COMPANY 7 SIGNATORIES 2 SIGNATORIES 1 SIGNATORY

CONTENTS OF MEMORANDUM OF ASSOCIATION


NAME OF CLAUSE SITUATION CLAUSE OBJECT CLAUSE LIABILITY CLAUSE

CAPITAL CLAUSE ASSOCIATION CLAUSE SUBSCRIPTION & ASSOCIATION CLAUSE

ARTICLE OF ASSOCIATION
DEFINITION. The articles are the rules made by the company for the internal management of its affairs and for carrying out the objects of the company. DISTINCTION BETWEEN MEMORANDUM & ARTICLE OF ASSOCIATION. SCOPE COMPLUSION OF FILING STATUS ALTERATIONS STATUTORY CONSEQUENCES

SHARE CAPITAL
MEANING IN ORDINARY SENSE It means a particular amount of money with which a business is started MEANING OF CAPITAL IN COMPANY LAW The word capital is used in the following senses:
Nominal or Authorized Capital. It is the nominal value of the shares which a company is authorized to issue by its memorandum Issued or subscribed capital It is the value of the Shares actually issued. Paid up Capital It is the amount paid on the share issued.

DIRECTORS
APPOINTMENT OF DIRECTORS PUBLIC LIMITED COMPANY - 7 PRIVATE LIMITED COMPANY - 2 SINGLE MEMBER COMPANY - 1

MODES OF APPOINTMNET BY ARTICLE CONSENT SUBSCRIBED/SIGNED THE MEMORADUM GENERAL MEETING CASUAL VACANCY QUALIFICATION: QUALIFICATION SHARE

DIRECTORS
DISQUALIFICATIONS NOT TAKEN UP HIS QUALIFICATION SHARE AN UN-DISCHARGED INSOLVENT
VACATION OF OFFICE CEASES TO HOLD SHARES OR FAILS TO OBTAIN THEM BECOMES OF UNSOUND MIND IS ADJUDGED AN INSOLVENT FAILS TO PAY CALLS WITHIN SIX MONTHS HOLDS AN OFFICE OF PROFIT UNDER THE COMPANY WITHOUT SANCTION AT A GENERAL MEETING ABSENTS HIMSELF FROM THREE CONSECUTIVE MEETINGS OF BOARD OF DIRECTORS (BOD) WITHOUT LEAVE. ACCEPTS A LOAN FROM THE COMPANY.

DIRECTORS
REMOVAL REMUNERATION POSITION
AGENT TRUSTEE POWERS (AS PER ARTICLES)

DISABILITIES
AN UN-DISCHARGED BANKRUPT CANNOT ACT AS DIRECTOR CANNOT ASSIGN HIS OFFICE TO ANOTHER PERSON NOT ENTITLED FOR IDEMNITY FOR NEGLIGENCE / BREACH OF DUTY / TRUST

LIABILITIES
OUT SIDER COMPANY
ULTRA VIRUS ACTS NEGLIGENCE BREACH OF TRUST MISFEASANCE CRIMINAL LIABILITY

RESOLUTIONS
ORDINARY RESOLUTION: This is passed by a majority of members present at a general meeting. SPECIAL RESOLUTION: This passed at one meeting by a 3/4th majority of the members present in person or by proxy provided notice of such meeting specifying the intention to propose resolution is given at least 21 days before the date of meeting.

PURPOSES OF SPECIAL RESOLUTION:


TO CHANGE OF NAME OF THE COMPANY TO ALTER THE MEMORANDUM TO ALTER ARTICLES OF THE COMPANY TO REDUCE THE CAPITAL TO CONVERT ANY PORTION OF THE CAPITAL, UNCALLED INTO RESERVE CAPITAL. TO APPOINT INSPECTORS TO INVESTIGATE THE AFFAIRS OF THE COMPANY TO WIND UP A COMPANY VOULNTARILY.

FILING OF COPIES OF RESOLUTION


TO BE FILED WITHIN 15 DAYS FROM PASSING THEREOF WITH REGISTRAR OF COMPANIES.

VOTES & POLL PROCEDURE OF VOTING PROXY


MINUTES OF MEETING ENTERED IN MINUTES BOOK COPY PROVIDED TO MEMBERS

SPECIAL RESOLUTION
PURPOSE TO ALTER THE MEMORANDUM OF ASSOCIATION WITH THE PERMISSION OF THE SECP TO ALTER THE NAME OF THE COMPANY TO OMIT THE WORD LIMITED AND / OR PRIVATE LIMITED FROM THE NAME OF THE COMPANY TO ALTER THE ARTICLES OF ASSOCATION OF THE COMPANY TO REDUCE THE SHARE CAPITAL OF THE COMPANY TO MOVE THE REGISTERED OFFICES OF THE COMPANY FROM ONE PLACE TO ANOTHER TO REQUEST SECP TO APPOINT AN INSPECTOR TO INVESTIGATE INTO THE AFFAIRS OF THE COMPANY TO APPOINT CERTAIN PERSONS AS DIRECTORS TO FIX REMUNERATION OF DIRECTION TO MAKE LIABILITIES OF THE DIRECTORS UNLIMITED

ARTICLE OF ASSOCIATION
OBLIGATORY REGULATION OF TABLE A
THE FOLLOWING ARE THE OBLIGATORY REGULATIONS OF TABLE A AND THE ARTICLES OF ASSOCIATION OF EVERY COMPANY SHALL ALWAYS BE DEEMED TO INCLUDE THEM.
REGULATION 56 REGULATION 66 HOW A RESOLUTION SHALL BE DEEMED AS PASSED DEPOSIT OF PROXIES AT COMPANYS OFFICE

REGULATION 71
REGULATION 78 REGULATION 79 REGULATION 80 REGULATION 81 REGULATION 82 REGULATION 95 REGULATION 97 REGULATION 105

GENERAL POWER OF COMPANY VESTED IN DIRECTORS


ROTATION AND RETIREMENT OF DIRECTORS WHICH DIRECTORS TO RETIRE RE-ELECTION GTENERAL MEETING MAY FILL UP VACANCIES RETIRING DIRECTORS TO ACT TILL SUCCESORS APPOINTED DECLARATION OF DIVIDENDS DIVIDENDS OUT OF PROFITS ONLY INSPECTION BY MEMBERS

REGULATION 107
REGULATION 112 TO 116

PROFIT AND LOSS ACCOUNT


PROVISIONS AS TO NOTICES

MEETINGS OF SHAREHOLERS
ORDINARY MEETING STATUTORY MEETING EXTRA-ORDINARY MEETING NOTICE OF MEETING QUORUM CHAIRMAN OF MEETING

MODES OF WINDING UP OF A COMPANY


MEANING
THE IQUIDATION OR WINDING UP OF A COMPANY IS PROCEEDING IN WHICH ALL ITS AFFAIRS ARE WOUND UP, ITS RIGHTS & LIABILITIES AND THE CLAIMS OF ITS CREDITORS BY ITS MEMBERS TO THE EXTENT OF WHICH THEY MAY BE NECESSARTY.

MODES OF WINDING UP
COMPULSORY WINDING UP BY THE COURT VOLUNTAY WINDING UP WINDING UP UNDER THE SUPERVISION

WINDING UP OF A COMPANY DOES NOT NECESSARILY INDICATE THAT IT IS BANKRUPT. THE COMPANY MAY BE SOLVENT BUT IT MAY BE WOUND UP I.E FOR THE PURPOSES OF RE-CONSTRUCTION OR AMALGAMATION. FOLLOWING ARE THE DIFFERENT MODES OF WINDING UP OF A COMPANY: BY COURT COMPULSORY WINDING UP.

VOLUNTARY WINDING UP WHICH MAY BE SUBDIVIDED INTO: MEMBERS WINDING UP

CREDITORS WINDING UP

WINDING UP UNDER THE SUPERVISION OF COURT

MODES OF WINDING UP OF A COMPANY


VOLUNTARY WINDING UP
EXPIRY OF FIXED PERIOD FOR THE DURATION OF COMPANY. BY SPECIAL RESOLUTION BY EXTRA ORDINARY RESOLUTION

A VOLUNTARY WINDING UP COMMENCES AT THE TIME OF THE PASSING OF THE RESOLUTION AUTHORIZING IT.

CLAUSES OF VOLUNARY WINDING UP


MEMBERS VOLUNTARY WINIDING UP CREDITORS VOLUNTARY WINDING UP WINDING UNDER SUPERVISION OF THE COURT BY A SPECIAL OR EXTRA ORDINARY RESOLUTION SUPERVISION ORDER ISSUED BY THE COURT

MODES OF WINDING UP OF A COMPANY


COMPULSORY WINDING UP
BY RESOLUTION TO BE WOULD UP BY THE COURT DEFAULT IN FILLLING STATUTORY MEETING STATUTORY REPORT OR HOLDING

DOES NOT COMMENCE/SUSPENDED BUSINESS WITHIN ONE YEAR FROM ITS IN-CORPORATION

MEMBERS FALL BELOW SEVEN AND IN CASE OF PRIVATE COMPANY TWO


UNABLE TO PAY ITS DEBTS THE COURT IS OF THE OPINION THAT IT IS JUST AND EQUITABLE THAT IT SHOULD BE WOND UP DEEMED UNABLE TO PAY ITS DEBTS.

WINDING UP OF COMPANY
WINDING UP IS A PROCESS BY WHICH A COMPANY IS DISSOLVED. THE PROCESS OF WINDING UP OF A COMPANY IS THAT A LIQUAIDATOR IS APPOINTED WHO IS ENTRUSTED WITH THE DATES DETAILED AS UNDER:

Selling of the assets of the company Paying off liabilities of the company If there is any deficiency to pay in creditors, the contributories (shareholders) called up to pay If there is any surplus after cleaning the liabilities, it may be distributed to the contributories according to their rights. After going through the above process, the Registrar of companies removes the name of the company from the Register of Companies.

COMPLSURY WINDING UP OF COMPANY


CONCEIVED OR BROUGHT FORTH FOR, OR IS OR HAS BEEN CARRUING ON UNLAWFUL OR FRAUDUIENT ACTIVITES. CARRYING ON BUSINESS NOT AUTHORISED BY MEMORANDUM CONDUCTING ITS BUSINESS IN A MANNER OPPRESSIVE TO AY OF ITS MEMEBERS OR PERSON CONCERNED WITH THE FORMATION OR PROMOTION OF THE COMPANY OR THE MINORITY SHAREHOLDERS. RUN AND MANAGED BY PERSON WHO FAIL TO MAINTAIN PROPER AND TRUE ACCOUNTS, OR COMMIT FRAUD, MISFEASANCE OR MALFEASANCE IN RELATION TO THE COMPANY. MANAGED BY PERSONS WHO REFUSE TO ACT ACORDING TO THE REQUIREMENTS OF THE MEMORANDUM OR ARTICLES, OF THE PROVISIONS OF THE COMPANIES ORDINANCE OR FAIL TO CARRY OUT THE DIRECTION OF DECISIONS OF THE COURT OR THE REGISTRAR OR THE SECP GIVEN IN THE EXERCISES OF POWERS UNDER THE ORDINANCE
IF, BEING A LISTED COMPANY, IT CEASES TO BE SUCH COMPANY, OR

IF THE COURT IS OF THE OPINION IT IS JUST AND EQUITABLE THAT THE COMPANY SHUOLD BE WOULD UP.

REASONS FOR WINDING UP OF A COMPANY


A COMPANY MAY BE WOUND UP DUE TO ONE OR MORE OF THE FOLLOWING REASONS:

The main objects of the company for which it was established have been accomplished It has become impossible to carry one the main objects of the company The company has sold the business or the undertaking to another company or an individual The company is not in a position to pay its debts in full or it has become insolvent.

CASES IN WHICH COMPANIES MAY BE WOUND UP BY COURT (SECTION 305)


A COMPANY MAY BE WOUND UP DUE

IT THE COMPANY BY SPECIAL RESOLUTION, RESOLVED THAT THE COMPANY BE WOUND UP BY COURT

IF DEFAULT IS MADE TO DELIVERING THE STATUTORY REPORT TO THE REGISTRAR OR IN HOLDING THE STATUTORY MEETING OR ANY TWO CONSECUTIVE ANNUAL GENERAL MEETING. IF THE COMPANY DOES NOT COMMENCE ITS BUSINESS WITHIN A YEAR FROM ITS INCORPORATION, OR SUSPENDS ITS BUSINESS FOR A WHOLE YEAR IF THE NUMBER OF MEMBERS IS REDUCED, IN THE CASE OF PRIVATE COMPANY BELOW TWO OR IN CASE OF ANY OTHER COMPANY BELOW SEVEN IF THE COMPANY IS UNABLE TO PAY ITS DEBTS.