DEFINITION OF COMPANY:

Sec 2(20): “company incorporated under the act or under the previous company law”

CHARACTERISTICS OF COMPANY:
1. INDEPENDENT CORPORATE EXISTENCE : SOLOMON VS SOLOMON & CO
2. LIMITED LIABILITY
3. PERPECTUAL SUCCESSION: GOPALPUR TEA CO LTD VS. PENHOK TEA CO LTD
4. SEPARATE PROPERTY: BACHA F GUZDAR VS. C.I.T AIR
5. TRANSFERABLE SHARES
6. COMMON SEAL: Before Amendment: compulsory
After Amendment: Deleted The Requirement Of Common Seal. (Authorisation Will Be Made
By Two Directors or a Director and a Company Secretary)

LIFTING OF COPORATE VEIL:

Where the court ignores the company and concern themselves directly with the members or
managers, the corporate veil may be said to have been lifted.
THE FOLLOWING ARE THE CASES WHERE CORPORATE VEIL IS LIFTED:
1. Trading with enemy
2. Matters concerning the law of tax, duties, and stamps
3. Avoidance of welfare legislation
4. Protect the public policy and prevent transactions contrary to public policy
5. Punish the real person who have violated the law
6. Avoiding legal obligations

CLASSES OF COMPANIES:
 ON THE BASIS OF INCORPORATION
 STATUTORY COMPANY
 REGISTERED COMPANY

 ON THE BASIS OF LIABILTY:

 COMPANY LIMITED BY SHARES: sec2(22)
 COMPANY LIMITED BY GUARANTEE: sec2(21)
 UNLIMITED COMPANY:sec2(92)

 ON THE BASIS OF MEMBERS:

 ONE PERSON COMPANY:sec2(62)
 A company which has only one person as a member.
  A company may be either
 A company limited by shares
 Limited by guarantee
 Unlimited company
 Hybrid of sole proprietor and company
 Features:
 Only one shareholder: natural person, Indian citizen, resident in India
 Nominee for the shareholder: <ditto>
 Director: minimum- 1, maximum-15
 Paid up capital : up to 50lakhs
 Turnover : up to 2 crores

 PRIVATE COMPANY:sec2(68)
 A company having minimum paid up share capital as may be prescribed and by its
articles.
 Restricts the right to transfer the shares
 Limits the no of members to 200
 Holding one or more shares jointly they shall be treated as a single member
 Person in employment and a former employee shall not be included in the no of
members
 Prohibits any invitation to public
 The amendment has omitted 1lakh or such higher paid up capital from the definition of
the private company. w.e.f.25.05.2015

 PUBLIC COMPANY:sec2(71)
 Which is not a private company
 Has a minimum paid up capital as prescribed
 Minimum: 7 members ; maximum: unlimited
 The amendment has omitted 5lakhs or such higher paid up capital from the definition of
public company. W.e.f.25.05.2015

 SMALL COMPANY:sec2(85)
 Other than public company
 Paid up share capital : does not exceed 50 lakhs or such higher amount (shall not
exceed 10 crores)
 Turnover : does not exceed 2 crores or such higher (shall not exceed 100 crores)
 The following cannot be small company:
 Holding or subsidiary company
 Section 8 companies
 Company governed under special acts.
 Advantages
 Holds 2 board meeting instead of 4 (gap shall not exceed more than 90 days)
 Not required to give cash flow statement with the fin.statement

 ON THE BASIS OF CONTROL:

 HOLDING COMPANY : sec2(46)
 If the other is its subsidiary
 SUBSIDIARY COMPANY : sec2(87)
  In which the holding company controls the composition of BOD
 Exercises more than one half of total voting power.

 ON THE BASIS OF LISTING:

 LISTED COMPANY : sec 2(52)
 UNLISTED COMPANY

 OTHERS:
 GOVERNMENT COMPANY: sec2(45)
 FOREIGN COMPANY: sec 2(42)
 ASSOCIATE COMPANY: sec 2(6)
 A company in which other company has
Significant influence

Control of at least 20% of total sh.capital

 DORMANT COMPANY:
 A company which is formed and registered for future projects.
 Has no significant accounting transactions
 Make an application to the registrar to obtain the status of DORMANT COMPANY.
 Transactions other than:
 Payment of fees to registrar
 Payment made to fulfill the requirement of act
 Allotment of shares
 Payment for maintenance of office and records.

 NIDHI COMPANY: sec 406

 A company incorporated with the object of cultivating the habit of thrift and savings.

 PUBLIC FINANCIAL INSTITUTIONS: sec 2(72)

 LIC
 Infrastructure development finance company limited
 UTI
 Institutions notified by central govt
 Such other institutions notified by central govt in consultation with RBI
 No institution shall be notified unless:
 It has been established under central or state acts (or) Govt.company.

 JOINT VENTURE COMPANY:

 Joint arrangements
 Parties have joint control of arrangements have rights to the net assets.

CONVERSION OF COMPANIES:
 CONVERSION OF PUBLIC TO PRIVATE:
 By passing special resolution after altering its articles.
 The alterations made shall take effect only with the approval of the tribunal. [sec 14(1)]
  Changes can be taken place in Name, no of members, prospectus, etc.,

 CONVERSION OF PRIVATE INTO PUBLIC COMPANY:

 By passing special resolution after altering articles.
 Once altered, such company shall cease to be a private company.
 Changes in name, no of members, prospectus can takes place.

 FILING WITH REGISTRAR:

 Alterations of articles
 Order of tribunal approving alterations
 Copy of altered articles
To be filed with the registrar with 15 days.

WHEN COMPANY MUST BE REGISTERED: [SEC 464]

 A partnership firm should be registered as a company to carry out a business in case its no:
of members exceeds its prescribed limit.
 This shall not apply to
 HUF (or)
 Partnership governed by special acts.
 In contravention: FINE:1LAKH
 Association formed with excess members will be an illegal association.
 Will nave no legal existence
 Members contributed can able to recover before amount being used for illegal
purpose.[Greeberg VS Cooperstein]

INCORPORATION OF COMPANY:
 FORMATION OF COMPANY:

PROMOTERS

TAKE ENCESSARY
FORMS THE CONCEIVES IDEA
STEPS FOR
COMPANY FOR FORMING
REGISTRATION

 [Sec 3] BASIC REQUIREMENTS FOR FORMING COMPANY.

 PUBLIC COMPANY: 7 or more persons can form.
 PRIVATE COMPANY: 2 or more persons.
 ONE PERSON COMPANY: 1 person can form.
If no: of members reduced below the above said and the company carries on business more
than 6 months, every member is liable to debts of the Company.
 PROCEDURE FOR INCORPORAION:

 FILING DOCUMENTS AND INFORMATION WITH THE REGISTRAR:

 Memorandum and articles duly signed by subscribers.
 Declaration by persons
 Who engaged in formation (CA, CMA, CS IN PRACTICE)
 Who named in the articles (DIRECTORS, MANAGERS, MD)
As that requirements are complied with.
 Declaration by subscribers and first directors as
 He is not convicted any offence
 He is not found guilty during last 5 years.
 All documents filed are true, correct and complete.
 Address for correspondence till the registered office is established.(30 days’ time is given
for establishment after its incorporation)
 Particulars of every subscribers:
 Individual: name, surname, res.address, proof of identity.
 Body corporate: particulars as may be prescribed.
 Particulars of first directors: name, surname, res.address, proof of identity.
 Particulars of involvement of first director in other firms and his consent to act as director of
the company.

 ISSUE OF CERTIFICATE OF INCORPORATION:

 The registrar registers all the documents and issues certificate of incorporation.

 ALLOTMENT OF CIN:
 After issuance of certificate of incorporation, the registrar allots corporate identity number.

 MAINTAINENCE OF COPIES OF ALL DOCUMENTS AND INFORMATIONS:

 Till its dissolution.

 FURNISHING FALSE OR INCORRECT INFORMATION OR SUPPRESSION OF MATERIAL FACTS:

 If in case any person is aware, then he is liable for action under sec 447.

 COMPANY INCORPORATED BY FURNISHING FALSE OR INCORRECT OR SUPPRESSING

MATERIAL FACTS:
 Promoters
 First directors
 Persons given declaration
Shall be liable for action under sec447.

 ORDER OF TRIBUNAL: (a company got incorporated by furnishing false information)

 After given a reasonable opportunity of being heard and taking into consideration the
transactions entered into, the tribunal may direct
 The liability as unlimited.
 Removal of name from ROC.
 Winding up of the company.
 FORMATION OF OPC:
 The MOA should indicate the nominee’s name.
 The nominee should give his prior written consent and it should be filed with the registrar.
 The nominee is given the right to withdraw his consent.
 The nominee’s name can also be changed and it should be intimated to the registrar.
 The change in nominee name shall not be an alteration in MOA.
 A natural person, Indian citizen, resident in India
 Shall be eligible to incorporate OPC.
 Shall be eligible to become a nominee.
 Minor cannot become member or nominee of OPC.
 A person shall not incorporate or become a nominee for more than one company.
 OPC can convert itself to public or private company. But it cannot converted to or incorporate
as section 8 company.
 OPC cannot carry out non-banking fin.investment activities.
 OPC cannot voluntarily convert into any kind unless 2 years have expired after incorporation.
 Expect when the paid up share capital has exceeded beyond ₹50 lakhs (or) turnover
exceeded ₹2 crores.
 In contravention: FINE : ₹10,000/-
Contravention continues: every day ₹1,000/-.

 EFFECT OF REGISTRATION: (sec 9)

 From the date of incorporation, company shall be capable of
 Having perpetual succession
 Common seal with power to acquire
 Hold and dispose of property
 To sue and be sued
 Becomes a legal person separate from incorporators – {STATE TRADE CORPORATION OF
INDIA VS.COMMERCIAL TAX OFFICER AIR }
 Comes into existence a binding contract between company and its members – {HARI
NAGAR SUGAR MILLS LTD. VS. S.S.JHUNJHUNWALA AIR }
 Legal personality emerges.

 CERTIFICATE AS CONCLUSIVE EVIDENCE: (SEC 35 OF 1956 ACT)

 A certificate of incorporation shall be the conclusive evidence. {JUBILEE COTTON MILLS
LTD. vs. LEWIS }
 The certificate was made conclusive for the purpose of incorporation, not for legalize the
illegal object. {PERFORMING RIGHT SOCIETY vs. LONDON THEATRE OF VARIETIES}
 Even if the two signatures were done by a single person and if the signatories were all
minors, the certificate would still be a conclusive. {BOWMAN vs. SECULAR SOCIETY LTD}

 EFFECT OF MOA AND AOA: (SEC 10)

 Where the MOA and AOA when registered shall bind the company and members as if they
had been signed in an agreement to observe provisions of MOA and AOA.
 A number of relationships are formed between diff.parties and the company:
 BETWEEN THE MEMBERS AND COMPANY: MOA and AOA forms the contract between
both.
 BETWEEN MEMBER INTER SE: The AOA forms a contract between each individual
shareholder. {WOOD vs. ODESSA WATER WORKS CO.}
  BETWEEN THE COMPANY AND THE OUTSIDERS:
 The MOA and AOA do not form contract between company and outsiders.
 Even though, an outsider is entitled to assume that contract has been entered into with
him and required to be carried out under AOA and MOA. {ROYAL BRITISH BANK vs.
TURQUAND}

 COMMENCEMENT OF THE BUSINESS

 SEC 11 provides that company having sh.capital shall commence business only after fulfilling
certain conditions.
 However the above provision has been deleted after the amendment.

 REGISTERED OFFICE OF THE COMPANY: (sec 12)

 The residence and nationality of the company will be determined by the reg.office.
 Also determine the jurisdiction of the court.
 REGISTERED OFFICE: From the 15th day of incorporation company shall have reg.office
capable of receiving and acknowledging communications and notices.
 VERIFICATION OF REG.OFFICE: within 30 days of incorporation. Form –INC -22.
 LABELLING OF COMPANY:
 Paint (or) affix its name, address of reg.office in the visible position, in legible letters, and in
languages which is generally used in that locality.
 Name shall be engraved legibly in common seal.
 Name, address, telephone number, fax number, e-mail or website address shall be
printed in business letters, bill heads, notices, etc.
 Name printed on hundies, promissory notes, BOE, ETC.
 NAME CHANGE BY COMPANY: In case of changes in name during last 2 years, new name
has to be affixed along with the former name.
 IN CASE OF OPC: The words “ONE PERSON COMPANY” shall be affixed in brackets below
the name of such company.
 NOTICE OF CHANGE TO REGISTRAR: Every change has to be filed with the registrar
within 15 days.
 CHANGE BY PASSING SP.RESOLUTION: The registered office can be changed only by
passing sp.resolution. [BOTH EXISTING COMPANY AND NEW COMPANY]
 CHANGE OF REG OFFICE FROM ONE JURISDICTION TO ANOTHER: The change has to
be confirmed by the regional director.
 COMMUNICATION AND FILING OF CONFIRMATION:
 Within 30 days from the date of receipt of application by the regional director -->
communicated to the company.
 Within 60 days of confirmation it should be filed with the registrar.(new)
 The new registrar shall certify within 30 days from the date of such confirmation.
 THE CERTIFICATE SHALL BE THE CONCLUSIVE EVIDENCE THAT ALL THE
REQUIREMENTS HAVE BEEN FULFILLED.
 In default, penalty of ₹1000/- everyday during which default continues ….shall not exceed ₹1
lakh

 ACT TO OVERRIDE MOA, AOA, ETC.(SEC 6)

 THE ABOVE PROVISION IS YET TO COME.
 THE PROVISION SHALL BE VOID.
 MEMORANDUM OD ASSOCIATION
(SEC 399) The memorandum is a public document.
Every person entering into the contract shall have the knowledge of the conditions in MOA.

REQUIREMENTS OF MOA OF THE COMPANY:

(SEC 4):
 CONTENTS OF MOA:
 Name
 Place
 Object
 Liability
 Share capital with which the company is incorporated.
 APLLYING FOR THE NAME OF THE COMPANY:
 The name shall not be identical or resembles the name of an existing company.

 In cases company uses such names:

 It constitutes an offence
 Is undesirable in the opinion of the cent. Govt

 A company shall not register with a name which contains any word which is likely to give the
impression that the company is connected with the cent. Govt (or) state. Govt (or) any local
authority.

 Such word can be used with the prior approval of central govt.

 RESERVATION FOR THE NAME OF THE COMPANY:

 A company may reserve the name by making application to the registrar, who may
approve or reject.
 The name of proposed company. (or)
 The name which is proposed.

 The name shall be reserved for

 20 days new company.
 60 days existing company.

 In case, the name reserved by furnishing wrong information :

 Company not incorporated: the reserved name shall be cancelled. And the person
involved is liable to a penalty of ₹1 lakh.
 Company incorporated: after being heard;
 Directs to change the name within 3 months after passing ordinary resolution. (or)
 Take action for striking off the name from register.
 Makes petition for winding up.

 FORMS AND SCHEDULE TO MOA: TABLE A, B, C, D, AND E IN SCHEDULE 1.

  Any provision in MOA or AOA, the guarantee company not having share capital shall
not give any person rights to participate in the divisible profits other than its member.
in contrary, shall be void.

DOCTRINE OF ULTRA VIRES

 The term “ultra vires” means “beyond their powers”.

ALTERATIONS OF MOA:
 PROCEDURE OF ALTERATIONS: (SEC13)

 Alteration by special resolution

 Name change of the company;
 With the approval of the central government.
 Such approval is not required in case of addition or deletion of the word “private” during
conversion.
 Change of name shall not be allowed in default of
 Filing with registrar:
 Annual returns
 Financial statements
 Any documents
 Repayment of matured deposits or debentures, etc.

 Entry in register of company:

 Shall register new name in place of old one and issues a new certificate of incorporation
only then it becomes effective.

 Change in registered office:

 Shall have effect only on approval by central govt.

 Dispose of the application of change of place of the registered office:

 The central govt shall dispose within 6 days. Only when
 The alteration has consent of creditors, debenture-holders, etc.
 Provisions made to discharge of all debts and liabilities.
 Adequate security has been provided.

 Filing with registrar:

 The special resolution
 The approval of the central govt

 Filing of the certified copy of the order with the registrar: Any alterations results in
change in registered office of the company, a certified copy of order from central govt
approving alterations shall be filed with both the registrar.

 Issue of fresh certificate of incorporation: by the new registrar.

 Change in object: if there is any unutilized money which is raised through prospectus, shall
not change its object unless sp.resolution through postal ballot is passed.
  Details of such resolution in newspaper and website.
 Disagreeing shareholders will be given an opportunity to exit.

 Registrar to certify the registration on the alteration of the objects: within a period of 30
days from the date of sp.resolution.

 Alteration to be registered: shall have effect only on register of alterations.

 RECTIFICATION OF NAME OF MOA:

 Central govt to issue direction:
 (SECTION 16) the central govt directs the company to rectify its name within a period
of 3 months (or) 6 months.

 Notice of change to the registrar:

 Within a period of 15 days from the date of such change.

 Default:
 Company: fine of ₹1000 (default continues)
 Every officer: ₹5000 to ₹1 lakh.

Articles of association
The AOA of company are its rules and regulations which are framed to manage its internal
affairs.
 CONTENTS OF AOA:
 Regulations for management:
 Inclusion of matters: may include such additional matters.
 Contain provisions for entrenchment: contains specified provisions of the articles may be
altered only if conditions or procedures are complied with.
 Manner of inclusion of the entrenchment provision: only be made either on formation or by
amendment agreed to by all the members of company in case of private company and by
sp.resolution in case of public company.
 Notice to the registrar of the entrenchment provisions: where the articles contain
entrenchment provisions in articles, the company shall give notice to the registrar.
 Forms of articles: table F, G, H, I and J in schedule 1.
 MODEL ARTICLES:
 Company may adopt all or any of the regulations contained in the MOA.
 Company registered after the commencement of this act: shall not modify or exclude any of
the regulations from model articles.
 Nothing in this shall not apply for the companies registered under previous law unless it is
amended.

ALTERATION OF ARTICLES: (SEC 14)

 Alteration by sp.resolution
 Alteration includes conversion of companies:
 Filing of alterations with the registrar:
 Alteration of articles
 Copy of order of tribunal
  Copy of altered articles
Within a period of 15 days.
 alterations noted in every copy:
 In default
 company and every officers:₹1000 for every copy without such alterations.(sec 15)
COPIES OF MOA, AOA, ETC., TO BE GIVEN TO THE MEMBERS: (SEC 17)
 Shall be sent to the members on their request within 7 days from payment of fees.

 In default, the company and every officer ₹1000 each day of defaults (or) ₹1lakh
[W.E.L]

DOCTRINE OF INDOOR MGMT:

 It protects OUTSIDERS against the company.

 It confined with internal possession.
 E.g.: public subscription.
DOCTRINE OF CONSTRUCTIVE NOTICE:

 Protects company against the outsiders.

 Confined to external possession.
 E.g.: MOA, AOA.
CONVERSION OF COMPANIES ALREADY REGISTERED: (SEC 18)

 By alteration of MOA and AOA.

 File an application to the registrar.
 Issue certificate of incorporation.
 No effect on the debts, liabilities, etc. incurred before conversion.

NIDHI COMPANIES
SEC 406 NIDHI means a company which has been incorporated as a NIDHI with the object
of

 Cultivating the habit of thrift and savings amongst its members.

 Receiving deposits from and lending to its members only, for their mutual benefits, and
 Which complies with such rules as are prescribed by the central govt for regulation of such
class of companies.
SEC 462 The central govt has exempted various provisions of the act for Nidhi
companies.[W.E.F. 5TH JUNE 2015]
APPLICATION OF NIDHI RULES 2014:
It applies to

 SEC 620A (1) Companies which had been declared as a NIDHI or MUTUAL BENEFIT
SOCIETY.
 SEC 620A (1) Companies functioning on the lines of NIDHI or MBS but not either
applied or applied and waiting for the notification.
 SEC 406 companies incorporated as NIDHI.
INCORPORATION AND INCIDENTAL MATTERS:
1. Requirements for incorporation:
 Shall be a public company and shall have a min.paidup eq.sh.capital of ₹5 lakhs
 Shall not issue pref.shares
 If pref.shares had been issued before, shall be redeemed.
 Shall not have any objects other than the aforesaid objects.
 The name shall have the last name as NIDHI LIMITED.
2. Requirements for min.no.of.members, net owned funds, etc.
 Nidhi shall within one year ensures that it has
 Not less than 200 members.
 Net owned funds of ₹10 lakh or more.
 Un-encumbered term deposits of not less than 10% of O/S deposits.
 Ratio of net owned funds to deposits of not more than 1:20.
 Within 90 days from the closure of 1st financial year, Nidhi shall file returns with the
registrar duly certified by CA (or) CMA (or) CS in practice.
3. General restrictions and prohibitions:
No Nidhi shall:
 Carry on the business of chit fund, hire purchase finance, leasing finance, insurance or
acquisition of securities.
 Issue pref.shares, debentures (or) any debt instrument.
 Open any current account
 Acquire another company by purchase of securities (or) control the composition of board
of directors unless it has passed sp.resolution and also obtained the previous approval
of regional director.
 Carry on any business. May provide locker facilities on rent to members subject to the
rental income not exceeding 20% of gross income.
 Accept deposits or lend other than its members (or) to any body corporate.
 Pledge any of the assets.
 Partnership arrangements
 Issue advertisements
 Pay any brokerage or incentives
4. Share capital and allotment:
 Shall issue eq.shares of nominal value of not less than ₹10/- each
 No service charge will be levied.
 Shall allot at least a minimum of 10 equity shares or shares equivalent to ₹100/-.
5. Membership:
 Shall not admit a body corporate or trust.
 Shall ensures that membership is not reduced to less than 200 members at any time.
 Minor shall not be admitted as member
6. Net owned funds:
 Shall maintain net owned funds of not less than ₹10lakh or such higher as central. Govt
specifies.
7. Branches:
 May open branches only if it has earned profit after tax continuously.
ACCEPTANCE OF DEPOSITS BY NIDHIS:

 Shall not accept deposits exceeding 20 times of its net owned funds. (as per its latest audited
financial statement)
 Ratio shall also apply to incremental deposits. (1:20)
 The application form shall contains the following:
 In case of non-payment of the deposits, the depositor may approach the registrar of
companies.
 In case of deficiency in servicing its depositors, the depositors may approach:
 National consumers disputes redressal forum
 State consumer disputes redressal forum
 District consumer disputes redressal forum
 A declaration by the BOD representing the application form is true and correct and has
complied with all the rules.
 A statement that cent. Govt does not undertake any responsibility for the financial
soundness or opinions expressed by Nidhi.
 The deposits accepted by Nidhi are not insured or guaranteed by either cent. Govt or
RBI.
 A verification clause by the depositors that he had read and understood the financial
and other particulars.
 Nidhi shall obtain proper intro of depositors and keep on its record the evidence of the
depositors.
 For the purpose of intro of depositors, Nidhi shall obtain documentary evidence in the form of
proof of identity and address.

Deposits:
 Accepting period of deposits:
 Fixed deposit:
 Minimum: 6 months
 Maximum: 60 months
 Recurring deposits:
 Minimum: 12 months
 Maximum: 60 months
 Relating to mortgage loans, the max.period shall correspond to the repayment
period.
 The max.balance in savings account shall not exceed ₹1lakh and the rate of interest
shall not exceed 2% above the rate payable on savings account by nationalized banks.
 May offer interest on fixed and recurring deposits a rate not exceeding the maximum
rate prescribed by the RBI.
 Fixed and recurring deposit account shall take possession by the depositor subject to
the conditions.

Un-encumbered term deposits:

 Shall invest in un-encumbered term deposits which shall not be less than 10% of the o/s
deposits.

Loans:
 Provides loans only to its members.
  Shall subject to the limits
 Shall give loans to its members only against the securities.

Rate of interest:
 The rate charged on loan shall not exceed 7.5% above the highest rate of interest on
deposits.
 Shall be calculated on reducing balance method.

Dividend:
 shall not declare dividend exceeding 25% or such higher amount specified by regional
director and subject to following conditions:
 an equal amount is transferred to general reserve
 No default in repayment of matured deposits and interest.
 Has complied with all rules as applicable.

Auditor:
 Individual auditor: not more than 1 term of 5 consecutive years.
 Auditing firm: not more than 2 terms of 5 consecutive years.

Filing of half yearly return:

Shall file half-yearly return in the FORM NDH-3 within 30 days from the conclusion of
each half year duly certified by CA, CMA, and CS IN PRACTICE.
Auditor’s certificate:
Shall furnish a certificate every year that the company has complied with all the
provisions and in case of non-compliance, he shall specifically state that.
Penalty for non-compliance:
FINE: ₹5000
If continues, ₹500 every day.

Producer Company
SECTIONS 581A TO 581ZT UNDER PART IX-A
OBJECTS AND FORMATION OF A PRODUCER COMPANY:
Producer company means a body corporate having objects or activities specified in
SECTION 581B and registered as a producer company under the companies act 1956.
The objects of the producer company as per sec 581B:

 Production, harvesting, procurement, grading, pooling, handling, marketing, selling,

export of primary produce of the members.
 Preserving, drying, canning, and packaging of produce.
  Manufacture, sale or supply of machinery, equipment or consumables.
 Providing education on mutual assistance principles to its members & others.
Rendering technical services, consultancy services, training, R&D for promotion of the
interest of its members.
 Generation, transmission and distribution of power, conversion & communication
relatable to primary produce.
 Insurance of producers or their primary produce.
 Promoting techniques of mutuality & mutual assistance.
 Welfare measures for the benefit of members.

Formation and registration:

 The formalities are similar as applicable for all companies. The requirements of part-IXA
should also be complied. (SECTION 581C)
 Producer Company should submit
 MOA
 AOA

Duly signed by the subscribers to the MOA, to the registrar. [581G (1)]
Effect of incorporation of Producer Company (SEC 581K):
The sh.holder of the inter-state co-operative society immediately before the date of
registration of Producer Company shall be deemed to be registered as a shareholder of the
producer company o the extent of the face value of the shares held by such sh.holder.

Membership and voting rights of members (581D):

 A person, who has any business interest which is not in conflict with business of the
producer company, shall become a member.
 Articles of any producer company provide for the conditions on membership, and the
manner in which voting rights shall be exercised by the members.

Benefits to member (SEC 581E):

 Every member of Producer Company shall initially receive only such value for the
products supplied & the withheld price may be disbursed later in cash or shares in
proportion to their supply.
 Every member shall receive only a limited return on sh.capital contributed. However
member may be allotted bonus shares. (SEC 581ZJ)
 Surplus after provision for payment of limited return and reserves disbursed as
PATRONAGE BONUS either in cash or by shares.
MEMORANDUM OF PRODUCER COMPANY: (SEC 581F):

 Name of the company with PRODUCER COMPANY LIMITED.

 Location
 Main objects
 Name and address of the persons who have subscribed to the MOA.
 Amount of share capital with which the company is registered and divisions into shares.
 Name, address, and occupation of the subscribers.
 Liability
 Number of shares held opposite to subscriber’s name.
  Territories the objects extended.
ARTICLES OF ASSOCIATION: (SECTION 581G);

 Qualifications, conditions for continuance or cancellation of member, terms, condition

and procedure for transfer of shares.
 Manner of ascertaining patronage and voting right based on patronage.
 1. Manner of constitution of the board, 2. Its powers and duties, 3. Mini & maxi no.of
directors, 4. Manner of election, 5. Appointment of directors, 6. Retirement by rotation.
 1. Election of the chairman, 2. Term of office of directors and the chairman, 3. Manner of
voting at the general or special meetings, 4. Procedure for voting, 5. Powers of the
chairman, 6. Circumstances under which the chairman may exercise a
casting vote.
 Circumstances under which withheld price is to be determined and distributed.
 Manner of disbursement of patronage bonus.
 Matters of issue of bonus shares out of general reserves.
 Credit, loans or advance which may be granted to members.
 Rights of members to obtain info relating to general business of the company.
 Authorisation for division, amalgamation, merger, creation of subsidiaries and entering
into joint ventures.

THE ARTICLES SHOULD ALSO CONTAIN THE FOLLOWING MUTUAL ASSISTANCE

PRINCIPLES:
 Membership shall be voluntary
 Only single vote irrespective of the shares holding.
 Company shall be administered by a board and the board shall be accountable to
members.
 Limited return on share capital.
 Surplus from operations shall be distributed in an equitable manner by:
 Providing for the development of business
 Providing for common facilities.
 Provisions shall be made for the education of members, employees, others.
Management:
No.of members: (SECTION: 581O)
PRODUCER COMPANY: at least 5 DIRECTORS & not more than 15.
INTER-STATE CO-OPERATIVE SOCIETY INCORPORATED AS A PRODUCER
COMPANY: may have MORE THAN 15 DIRECTORS for the PERIOD OF ONE YEAR
FROM INCORPORATION.

General meeting:
 Matters to be transacted at general meeting;
(SEC 581S):
 Approval of budget and adoption of annual accounts.
 Approval of patronage bonus.
 Issue of bonus shares.
 Declaration of limited return and decision on the distribution of patronage.
  Specify the conditions and limits of loans.
 Quorum: (SEC 581Y)
 ONE-FOURTH OF THE TOTAL MEMBERSHIP

 VOTING RIGHTS: (SEC 581Z)

 Every member shall have 1 vote.
 In case of equal votes, chairman shall have casting votes except in case of election
of chairman.
FORMATION OF NO-FOR PROFIT MAKING COMPANIES
(SECTION 8)
A not-for profit organization uses its surplus revenues to further achieve its purpose or mission,
rather than distributing its surplus income to the shareholder as profit or dividends.
Registration:
 The object of promoting commerce, art, science, sports, education, research, social welfare,
religion, etc.
 Intends to apply its profits in promoting its objects
 Prohibits the payment of any dividend to its members, & the CG allow to be registered as ltd
company without the addition of the word “limited” or “pvt ltd”.
 Shall enjoy all the privileges and be subject to all the obligations of limited company.
 Firm may be a member of the company.
 Shall not alter the provisions of its MOA or AOA except with the previous approval of the CG.
 May convert itself into any other kind of companies.
 The CG revokes the license granted to a company, if the company contravenes any of the
requirements. Directs the company to convert its status and change its name to add the word
“limited” or “pvt ltd”.( only after the company is given a reasonable opportunity of being heard)
 A copy of every such order shall be given to the registered.
 Where a license is revoked, directs the company be wound up or amalgamated with another
company registered.
 CG provides for such amalgamation to form a single company with such constitution as may
be specified.
 On winding up after the satisfaction of its debts and liabilities, any asset they may be
transferred to another section 8 company or may be sold and proceeds thereof credited to
the REHABILITATION AND INSOLVENCY FUND formed under SECTION 269.
 Shall amalgamate with another section 8 company.
 Company in default:
 FINE : ₹10 LAKHS TO ₹1 CRORE
 Directors and every officers:
 IMPRISONMET: THREE YEARS.
 FINE: ₹25,000 TO ₹25 LAKH.
License under section 8 for existing companies:
A limited company registered under this act, shall make an application in FORM NO. INC.12
to the registrar for a license.
The license shall be in FORM NO.INC.16 or FORM.NO.INC.17.
 The registrar may direct the company to insert in its MOA or in its AOA such conditions of
the license.
The application shall be accompanied by the following documents:

 MOA & AOA

 Declaration as given in FORM NO.INC.14 by an advocate, a CA, a CMA or CS in practice,
that the MOA & AOA have been drawn up in conformity with the provisions of section 8.
 The financial statement, board’s report & audit reports of two financial years
immediately preceding the date of application or one year in case company functioned only
for one year.
 A statement showing in detail the assets and the liabilities of the company on the date of
application.
 An estimate of the future annual income and expenditure for next 3 years specifying the
sources of income and the objects of expenditure.
 Certified copy of resolutions approving registration of the company.
 Declaration by each person making application in FORM NO.INC.15.

PROCEDURE RELATING TO FOREIGN COMPANIES CARYING ON BUSINES

IN INDIA
SECTION 2(42)
Foreign company means 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, and
 Conducts any business activity in India in any other manner.

Inspection, inquiry or investigation: (section 228)

The provision under chapter XIV of the act shall apply mutatis mutandis to foreign
companies.

{MEANING}
With the necessary changes having been made or with consideration of the respective
differences.
Merger into a company registered under this act or vice versa: [section (234(2)]:
Foreign company may with the prior approval of the reserve bank of India merge into a
company registered under this act.
The terms and conditions of the scheme of merger may provide for the payment of
consideration to the shareholders of the merging company in cash, or in depository receipts or
partly both.
Winding up as an unregistered company: (section 376)
A foreign company ceases to carry on business on India may be wound up as an
unregistered company.
Foreign company shall be deemed to be an Indian company for this purpose: (section 379)
 1. Where not less than 50% of the paid up share capital (equity, pref, or partly both) of a
foreign company is held by

 one or more citizens of India (or)

 one or more corporates incorporated in India (or)
 both
Whether singly or in the aggregate
2. Shall comply with provisions as may be prescribed to the business carried on by it in India
as if it were a company incorporated in India.
Registration with the registrar of companies: [section 380(1)]

 Every foreign company shall within 30 days of establishment of business in India deliver to
the registrar for registration: (section 592(1) of companies act 1956)
 MOA and AOA
 Full address of the reg.office of the company.
 List of directors and secretary of the company.
 Name and address of one or more persons resident in India authorized.
 Particulars of opening and closing of a place of business in India.
 Declaration that none of the directors or authorized representatives in India has ever
been debarred from formation of companies & mgmt. in India or abroad.
 Where any alteration is made, the foreign company shall within 30 days of such alteration
deliver to the registrar.
Balance sheet and profit and loss account [section 381(1)]

 Every foreign company shall in every calendar year:

 Make out a balance sheet and P&L
 Deliver a copy of those documents to the registrar
 If balance sheet and P&L is not in English language, the translation shall be annexed.
 A copy of a list of places of business established by the company in India as at the date with
reference to which the balance sheet is made out.
Display of name of the company: (section 382)

 Every foreign company shall

 Conspicuously exhibit the name of the company and the country in which it is
incorporated, letters easily legible in English characters and also in languages in general
use in that locality.
 The name and country to be stated in all business letters, bill heads, letter papers, and
all notices
 If the liability of the members of the company is limited:
 To be stated in every prospectus, business letters, bill heads, notices, etc.
 To be conspicuously exhibit on the outside of every office.
Issue of prospectus and Indian depository receipts: [section 391(1)]
Penalty for contravention: (section 392)

 Foreign company:
 Fine : ₹1 lakh to ₹3 lakhs
 In case of continuing offence: extend to ₹50,000/-
 For officers:
 Imprisonment which may extend to 6 months (or)
 Fine: ₹25,000/- to ₹5 lakh (or
 Both
CONVERSION OF LLPs INTO PRIVATE LTD COMPANIES AND VICE VERSA
1. Section 366 of companies’ act 2013 the company includes partnership firm,
cooperative society, or any other business entity formed under any other law.
2. The govt of India have framed the companies’ rules 2014 and the LLP could be converted
into public or Pvt Company.
3. Such LLPs should have seven or more partners on the date of conversion.
4. The act further states that on conversion be transferred in the name of converted entity “LLP”.