BALASAHEB THACKERY LAW COLLEGE

“KAMAL GAURI HIRU PATIL SHISHAN SANSTHA’S”

NAME : DINESHKUMAR RAMBRIKSH YADAV

ROLL NO. : 13

SUBJECT : Company Law

YEAR : Second YEAR LLB

SEMESTER : III

ACDEMIC YEAR : 2020-21

PROFESSOR IN CHARGE : Ad. Pooja Chavhan Madam

1) Meaning of Resolution.

A Company being an artificial person, any decision taken by it shall be in the form of a
Resolution. Accordingly, a resolution may be defined as an agreement or decision made by the
directors or members (or a class of members) of a company. A proposed resolution is a motion.
When a resolution is passed a company is bound by it.
The resolutions could be on just about any subject in case of Board meetings since they are
ultimately responsible for running the Company. The Act generally specifies the matters in
respect of which resolutions are required to be passed by the members in general meetings.
Basically, there are three types of resolutions:
1) Ordinary Resolution,
2) Special Resolution
3) Unanimous Resolution.

In case of Board Meetings, there is no concept of Special Resolutions and also unanimous
resolutions are required in very few cases.

However, in case of general meetings, all three are covered. Section 114 of the Companies Act,
2013 defines an Ordinary and Special Resolutions.
It states: “(1) A resolution shall be an ordinary resolution(Sec 114 (1) ) if the notice required
under this Act has been duly given and it is required to be passed by the votes cast, whether on a
show of hands, or electronically or on a poll, as the case may be, in favour of the resolution,
including the casting vote, if any, of the Chairman, by members who, being entitled so to do,
vote in person, or where proxies are allowed, by proxy or by postal ballot, exceed the votes, if
any, cast against the resolution by members, so entitled and voting.
(2) A resolution shall be a special resolution when—

(a) the intention to propose the resolution as a special resolution has been duly specified
in the notice calling the general meeting or other intimation given to the members of the
resolution;
(b) the notice required under this Act has been duly given; and
 (c) the votes cast in favour of the resolution, whether on a show of hands, or
electronically or on a poll, as the case may be, by members who, being entitled so to do, vote in
person or by proxy or by postal ballot, are required to be not less than three times the number of
the votes, if any, cast against the resolution by members so entitled and voting.”
Other than these two, there is also a concept of a unanimous resolution implying
approval of all the members present and voting, without a single vote cast against it. Initially, as
per Companies Act 1956 only one resolution required unanimous approval in the general
meeting and the same has also been covered under section 162 (1) of the Companies Act 2013
which states that:
“At a general meeting of a company, a motion for the appointment of two or more
persons as directors of the company by a single resolution shall not be moved unless a proposal
to move such a motion has first been agreed to at the meeting without any vote being cast against
it.” However, in addition to above, for private companies, the Companies Act 2013 also inserts
one more resolution which requires unanimous approval of all the members.
As per sub-section 4 of section 5 for inclusion of “entrenchment provision” in the
Articles of Association of an already existing Company, it should be “agreed to by all the
members of the company in the case of a private company and by a special resolution in the case
of a public company.” Other than these all other specified matters require either an ordinary or a
special resolution.
2) Memorandum of Association

Introduction
The formation of a company takes place when a number of people come together for achieving a
specific purpose. This purpose is usually commercial in nature. To incorporate a company, an
application has to be filed. This application is required to be submitted with a number of
documents to Registrar of Companies ROC. One of the mandatory and important documents
required to be submitted for incorporation is Memorandum of Association.

Definition
MOA is a legal document which describes the purpose for which the company is formed. It
defines the powers of the company and the conditions under which it operates. It is a document
that contains all the rules and regulations that govern a company’s relation with the outside
world.

Section 2(56) of the Companies Act, 2013 defines Memorandum of Association.

“Memorandum” means the Memorandum of Association of a company as originally framed or
as altered from time to time in pursuance of any previous company law or of this Act.

Importance of Memorandum of Association.

Every company formed in India under Companies Act is required to have MOA, without
which a company cannot legally be formed. This requirement applies to all types of Companies

Features of Memorandum of Association

1. It defines the scope & powers of a company, beyond which the company cannot operate.
2. It is used in the registration process; without it the company cannot be incorporated
3. It helps anyone who wants to enter into a contractual relationship with the company to
gain knowledge about the company
4. It is also called the charter of the Company, as it contains all the details of the company,
its members and their liabilities
Form of Memorandum.

Memorandum of a Company should is prepared according to the respective form specified in

Tables A,B,C,D and E of the Schedule 1 section of 4 of the Company Act 2013.

Table Form
Table-A MOA of a Company limited by Shares
Table-B MOA of a Company limited guarantee and not having share
capital
Table-C MOA of a Company limited by guarantee and having share
Capital
Table-D MOA of an unlimited Company and having Share Capital
Table -E MOA of an unlimited Company and not having Share Capital

Contents of Memorandum of Association

Section 4 of the Companies Act states that the memorandum of association of every company
must contain the following clauses
1. Name Clause
According to the first clause the memorandum must state the name of the company by
which it wants to be known subjected to the following restrictions:
a) The name of the company must not be identical with an existing company.
b) No company will have the name which is undesirable in the opinion of the
government.
c) The name must not mislead the public. For example, a company will not be allowed
to use a name, which is prohibited under the Emblems and Names (Prevention of
Improper Use) Act, 1950.
d) The company must not use any names which suggest any connection with the
government or state Patronage without the prior approval of the government
e) The name of a private company limited by shares, must end with ‘Private Limited’

2. Situation or Registered Office Clause

This clause requires the memorandum to mention the name of the state in which the
registered office of the company is to be situated. A company must have its registered
office ready within 15 days from its incorporation and within 30 days of its
incorporation, the verification of its registered office should be done. This is done in
order to fix the domicile of the company. It must be noted that the domicile is the place
of registration of the company and may or may not be the residence of the company.
 Residence of the company will be the place from where the management and control of
the business is carried out.

3. Objects Clause
The object clause determines the purpose for which the company has been set up and it
determines the capacity of the company. A company is not legally entitled to conduct any
business activity that is not specifically mentioned in its object clause.

The objects are classified into three categories: main object, ancillary object, and other
objects that will be pursued to accomplish the main object. However, the following
points must be noted while preparing Objects clause:
a) The objects of the company must be stated specifically and must not be
ambiguous statements.
b) The objects of the company must not be illegal
c) They must not be against the provisions of the companies act
d) They must not be against the public policy of the country

4. Liability Clause

The fourth clause of memorandum of every company states the liability of its members,
i.e. whether the liability of its members is limited by shares, or limited by guarantee or is
unlimited.

a) In case of company limited by shares, members cannot be called upon to pay more
than what remains unpaid. If his shares are fully paid, the liability of shareholders is
nil.
b) In case of company limited by guarantee, the liability clause must state the amount
each member has to pay at the time of the liquidation of the company.
c) In case of unlimited company, the liability of members is unlimited and personal
assets of the members can be used.

5. Capital Clause (only in case of a company having share capital)

This clause requires all companies limited by liability to mention the amount of capital
with which the company is formed. The capital of the company must be divided into
smaller fixed value units which are known as shares. There is no legal limit on the
amount of share capital. A company cannot issue share capital exceeding the amount
mentioned in the capital clause.

6. Association and Subscription Clause

 According to this clause the memorandum must mention the amount of authorized share
capital and the amount of shares taken by each subscriber/member. The following are the
statutory

a) The memorandum must be signed by each subscriber in the presence of at least one
witness who attest the signatures.
b) Each subscriber must take at least one share; and
c) Each subscriber must write the number of shares held by him

d) According to section 12, there should be at least two persons subscribing to

Memorandum of Association in case of private company and seven in case of public
company.

7. Succession Clause (only in the case of OPC)

According to this clause the memorandum must state the name of the person who shall
become the member of the company in the event of death of the subscriber. The above
clauses are compulsory and are designated by companies Act as ‘conditions”, on the basis of
which alone a company can be incorporated.

Printing and Signing of Memorandum of Association

The memorandum of association must be printed and signed by each member (7 members in
case of Public Company and 2 in case of Private Company and 1 in case of One Person
Company). The memorandum should be signed in the presence of at least one witness who
will attest the signatures of the subscribers of memorandum.

In case of one person company (OPC), the name of the nominee must be mentioned in the
Memorandum of Association. In case of death or incapability the nominee shall become the
member of the company.
3) What is Dividend

The word “Dividend” has origin from the Latin word “Dividendum”. It means a thing to be
divided. Dividend means the portion of the profit received by the shareholders from the
company’s net profit, which is legally available for distribution among the members. Therefore,
dividend is a return on the share capital subscribed for and paid to its shareholders by a
company. Dividend defined under section 2(35) of the Companies Act, 2013, includes any
interim dividend.
Dividend: As per Section 2(35) of Companies Act, 2013 defines the term as including any
interim dividend.
 Dividend is basically the share of profit distributed among shareholders.
 Ordinary meaning of dividend is a share of profits, whether at a fixed rate or otherwise,
allocated to holders of shares in a company.
 Dividend can be paid on Equity or preference shares both.
 The word “Dividend” has origin from the Latin word “Dividendum”. It means a thing to
be divided.
There are two types of dividends:

1) Interim dividends
2) Final dividends.
1) Interim dividends
The Act defines Dividend in terms of interim dividends which refer to the dividend
declared by company’s board during any time of the year before official closing of
financial year and calling of Annual General Meeting. According to the Act the
company can declare interim dividend out of profits accumulated of current or previous
financial years. The provisions of the Act which are generally for final dividend are
applicable to interim dividends also

Features of interim dividend

 It is declared by board of directors in one financial year out of surplus generated in

profit and loss accounts and out of profits in which interim dividend is bound to be
declared. It has been held in Judgments that mere
 declaration by the directors in a general meeting does not obligate them to pay
dividends as the decision can be rescinded.

 If the company registers loss before the stipulated declaration of dividends, it has to
be declared at an average rate calculated on the basis of dividends declared in
previous 3 financial years.
 It is deposited in a scheduled bank account within five days of the declaration. The
same is irrespective of intervening holidays.

2) Final dividends
The dividends declared by the company after closing of the financial year and
approval of Board of Directors in AGM. The term Dividend used except in the
definition in Companies Act, 2013 refers to final dividends only. Majority of the
provisions for both Interim and Final are same but there are some differentiated
provisions for the Interim dividends in the Act. The liability on default arises
only in case of declaration of Final Dividend and not Interim dividend.

Declaration of dividends

Section 123 of Companies Act 2013 lays down guidelines for the conditions
when the companies are permitted to declare or pay dividends in a financial year.

Source for payment of Dividend:

Dividend can be paid out of Followings mentioned below: Section- 123 (1)(a)
i. Profit of the current year after providing of the depreciation; or
ii. Profit of the previous financial year or years after providing for depreciation for previous
years; or
iii. Out of the money provided by Central or State Government for payment of dividend in
pursuance of guarantee given by that, if any.