COMPANY LAW

DR VASANTHI REENA WILLIAMS VVIET,

MYSURU
 CONTENTS
• Company
• Definition
• Features
• Types
• Corporate Veil and lifting of Corporate Veil( as
per Companies Act 2013).

DR VASANTHI REENA WILLIAMS VVIET,

MYSURU
 COMPANY
HISTORY:
Ship owners in England collected money from people
before a ship could sail . The benefits or loss from the
voyage was shared among the contributors. (concept
of shareholders company )
• An association of persons united for a common cause
or objective ( business).
• Partnership – mere collection of individuals
• Company- corporate body and a legal person having
status and distinct personality , separate from its
members.
DR VASANTHI REENA WILLIAMS VVIET,
MYSURU
 Companies Act , 2013
• ‘Company means a company incorporated under
this Act or under any previous company law’-
Companies Act 2013.

Lord Justice Lindley:

A Company is an association of many persons – who
contribute money or money’s worth- to a
common stock (capital) – employed for a common
purpose – proportion of capital contributed by
persons is his share- shares are transferable .
DR VASANTHI REENA WILLIAMS VVIET,
MYSURU
 COMPANY IN INDIA
• The Joint Stock Company came into existence in
India during the 17th Century
• In 1850, the first Companies Act was passed in
India
• In 1957, the concept of limited liability was first
introduced in India.
• The East India Company is a good example of
Joint Stock Company.
• The Companies Act of India was finalised in 1956

DR VASANTHI REENA WILLIAMS VVIET,

MYSURU
 FEATURES
• Artificial person
• Common Seal
• Compulsory incorporation
• Perpetual succession
• Limited Liability
• Share capital
• Separation of ownership and management
• Legal entity
• Large membership

DR VASANTHI REENA WILLIAMS VVIET,

MYSURU
 Advantages of Joint Stock Company
1. Limited liability
2. Continuity and stability of the company
3. Professional management
4. Large capital
5. Economies of scale
6. Legal status
7. Transferability of shares
8. Employment
9. Revenue to Government
10.Research and development
11.Economic development
DR VASANTHI REENA WILLIAMS VVIET,
MYSURU
 Disadvantage of Joint Stock Company

1. No business secrecy
2. Excessive government regulations
3. Delay in decision making
4. Lack of contact with customers due to large
scale of operations
5. Lack of contact with employees due to large
scale
6. Chances of exploitation of shareholders.
DR VASANTHI REENA WILLIAMS VVIET,
MYSURU
 TYPES OF COMPANIES
1. CHARTERED COMPANIES
2. STATUTORY COMPANIES
3. REGISTERED COMPANIES : Companies
registered under Companies Act 2013 or
earlier Act 1956 are called registered
companies. They may be either :
a) Companies limited by shares
b) Companies limited by guarantee
c) Unlimited companies
DR VASANTHI REENA WILLIAMS VVIET,
MYSURU
• PRIVATE COMPANIES:
Definition- A company which has a minimum paid-
up capital of Rupees one lakh or such higher paid
up capital as may be prescribed by its articles.
1. Restricts right to transfer its shares
2. Limits number of its members to 200 ( earlier
it was 50)
3. Minimum number of members is 2
4. Prohibits any invitation to the public to
subscribe to shares or debentures.
5. Prohibits any invitation or acceptance of
deposits from persons other than its members,
directors or their relatives.
DR VASANTHI REENA WILLIAMS VVIET,
MYSURU
• PUBLIC COMPANIES:
• Definition: A Public company means a company
which is
– Not a private company
– Has a minimum paid-up capital , as may be prescribed
– Is a private company which is a subsidiary of a public
company.
Minimum number of member is 7
No maximum limit of members
No restriction on transfer of shares
Not required to have minimum paid-up capital
Only shares of a public company are capable of being
dealt in on a stock exchange.
Public company must have minimum 3 directors.
DR VASANTHI REENA WILLIAMS VVIET,
MYSURU
 DISTINCTION BETWEEN PUBLIC COMPANY & PRIVATE
COMPANY
PUBLIC COMPANY PRIVATE COMPANY
Minimum number of member is 7 Minimum number of members is 2 ( except for
one person company)
No limit for maximum number of Private company cannot have more than 200
members members
Name of public company must end with Private company must add words Pvt. Ltd at
‘LIMITED’ the end of its name
Can issue prospectus to invite public to Private company cannot extend such invitation
subscribe to its shares to the public
No restriction on transfer of shares ( Private company may restrict right of members
demat form of transfer) to transfer shares
Public company can issues Share Public company cannot issue share warrants
Warrants
Must have at least 3 directors Private company may have 2 directors
Must hold statutory meeting to get Need not hold statutory meeting
business commencement certificate
DR VASANTHI REENA WILLIAMS VVIET,
MYSURU
 CONVERSION OF PRIVATE COMPANY
INTO PUBLIC COMPANY
• As per Companies Act 2013:
• 1. Special resolution: by amending its articles of
association.
• 2. Changing the name: by removing the word
Private before the word limited
• 3. Approval of the tribunal: Approval from the
Registrar of companies , etc
• 4. Filing with the Registrar: Within 15 days, any
alteration made should be filed with the Registrar
or companies in the prescribed format.
DR VASANTHI REENA WILLIAMS VVIET,
MYSURU
• ONE PERSON COMPANY:
• Definition: A company which has only one person
as a member and where legal and financial
liability is limited to the company only and not to
that person ( liability is limited)
• With introduction of one person company under
Companies Act 2013, any individual can start his
own company.
• One person company provides benefit of both
forms of business – Proprietorship & Company.
• One Person company shall be treated as a private
company for all legal purposes with only one
member.
DR VASANTHI REENA WILLIAMS VVIET,
MYSURU
• GOVERNMENT COMPANY:
• Definition: Any company in which not less than 51% of the paid-up
share capital is held by:
– The central government or
– Any state government or governments or
– Partly by central government and partly by one or more state
governments (a subsidiary of a government company will also be
treated as a government company.)
– BSNL, BHEL, State Trading Corporation of Indial LtdSAIL etc are
examples.
• Auditor of a government company shallbe appointed by
Comptroller and Auditor-General of India.
• Audit report to be submitted to Comptroller and Auditor General
of India.
• When central government is member, the annual report should be
laid before both houses of parliament along with audit report and
comments of comptroller and auditor-general of India
• In case state government is a member, the report shall be laid
before state legislature.
DR VASANTHI REENA WILLIAMS VVIET,
MYSURU
• FOREIGN COMPANY:
• Definition: Any company or body corporate
incorporated outside India which:
– Has a place of business in India , whether by itself
or through an agent, physically or through
electronic mode
– Conducts any business activity in India in any
other manner.

DR VASANTHI REENA WILLIAMS VVIET,

MYSURU
• HOLDING & SUBSIDIARY COMPANY
• Definition: A company which controls another
company is known as ‘holding company’ and
company so controlled is called ‘subsidiary
company’
• It is a parent company that owns 51% or more
stake in a company.
• COMPANIES WITH CHARITABLE OBJECTS
• Companies aimed at promoting commerce, art,
science, education, research, social welfare,
religion, charity, protection of environment etc.
• Not for profit
• Prohibits payment of dividend to its members
DR VASANTHI REENA WILLIAMS VVIET,
MYSURU
• GLOBAL COMPANY: refers to company that operated
in more than one country.
• Also referred to as multinational company or
transnational company.
• They plan activities on a global basis.
• BODY CORPORATE : Means a corporate entity which
has a legal existence.
• Definition: Body corporate include a private company,
public company, OPC, small company, Limited Liability
Partnerships, Foreign company etc.
• Body corporate also includes a company incorporated
outside India.
• ( it does not include a cooperative society registered
under any law and any other body corporate notified
by the central government

DR VASANTHI REENA WILLIAMS VVIET,

MYSURU
• LISTED COMPANY- If a company's shares can
be traded on a stock exchange , it is called a
listed company.
• It is the securities of a company that are listed
and not the company.
• India’s top listed companies
– India Oil Corporation Ltd,
– Reliance Industries Ltd
– Tata Motors Ltd
– Tata Steel Ltd etc.

DR VASANTHI REENA WILLIAMS VVIET,

MYSURU
 CHARTERED
COMPANY

STATUTORY
COMPANY

INCORPORATED REGISTERED COMPANY LIMITED BY

COMPANY ( MSY BE SHARE
OPC/
PUBLIC/PRIVATE)

COMPANY LIMITED BY
GUARANTEE
COMPANIES

UNLIMITED
COMPANY

UNINCORPORATED

DR VASANTHI REENA WILLIAMS VVIET,

MYSURU
 Lifting of corporate veil
• As a general rule, a corporation is a legal
entity distinct from its shareholders.
• The concept of lifting corporate veil is not
only for shareholders but for benefit of the
company as well.
• Bringing transparency into company activities.

DR VASANTHI REENA WILLIAMS VVIET,

MYSURU
 Salomon Vs Salomon
FACTS: (1896)
Salomon made leather boots and his sons wanted to become business partners so he
turned his business into a limited company. His wife and five children became the
share holders of the company.
Salomon took 20,001 of the company’s 20,007 shares . The company also gave Salomon
10,000 pounds in debentures. On the security of his debentures Salomon received an
advance of 5,000 pounds from another person.
However the business did not flourish and the company was put into liquidation. Out of
the assets realised 5,000 pounds was paid to the person and the remaining 1,055
pounds was claimed by salomon as he was a debenture holder. This meant that the
unsecured creditors would not get anything.
The court ruled that salomon was the majority shareholder and accordingly was sought
to be made personally liable for the company's debts
The salomon principle provides that a company is regarded as a legal person separate
from its directors, shareholders employees etc. Therefore a company can be sued in
its own name and hold assets separately from its shareholder.
This case led to the declaration of lifting of corporate veil

DR VASANTHI REENA WILLIAMS VVIET,

MYSURU