Differences between the Memorandum of Association Vs.

Articles of Association

1. Objectives: Memorandum of Association defines and delimits the objectives of the

company whereas the Articles of association lays down the rules and regulations for the
internal management of the company. Articles determine how the objectives of the company
are to be achieved.

2. Relationship: Memorandum defines the relationship of the company with the outside world
and Articles define the relationship between the company and its members.

3. Alteration: Memorandum of association can be altered only under certain circumstances

and in the manner provided for in the Act. In most cases permission of the Regional Director
or the Tribunal is required. The articles can be altered simply by passing a special resolution.

4. Ultra Vires: Acts done by the company beyond the scope of the memorandum are ultra-
vires and void. These cannot be ratified even by the unanimous consent of all the
shareholders. The acts ultra-vires the articles can be ratified by a special resolution of the
shareholders, provided they are not beyond the provisions of the memorandum.

Prospectus

Section 2(70) of the Companies Act, 2013 defines a prospectus as ‘A prospectus means Any
documents described or issued as a prospectus and includes any notices, circular,
advertisement, or other documents inviting deposit from the public or documents inviting
offer from the public for the subscription of shares or debentures in a company.’ A prospectus
is not merely an advertisement. 

A document shall be called a prospectus if it satisfies two things:

1. It invites subscription to shares or debentures or invites deposits.
2. The aforesaid invitation is made to the public.

Contents of a prospectus

1. Address of the registered office of the company.

2. Name and address of company secretary, auditors, bankers, underwriters etc.
3. Dates of the opening and closing of the issue.
4. Declaration about the issue of allotment letters and refunds within the prescribed time.
5. A statement by the board of directors about the separate bank account where all monies
received out of shares issued are to be transferred.
6. Details about underwriting of the issue.
7. Consent of directors, auditors, bankers to the issue, expert’s opinion if any.
8. The authority for the issue and the details of the resolution passed therefore.
9. Procedure and time schedule for allotment and issue of securities.
10. Capital structure of the company.
11. Main objects and present business of the company and its location.
12. Main object of public offer and terms of the present issue.
13. Minimum subscription, amount payable by way of premium, issue of shares otherwise
than on cash.
14. Details of directors including their appointment and remuneration.
15. Disclosure about sources of promoter’s contribution.
16. Particulars relation to management perception of risk factors specific to the project,
gestation period of the project, extent of progress made in the project and deadlines for
completion of the project.

INTRODUCTION TO SHARES [Sec. 2(84)]

'Share' means a share in the share capital of a company and includes stock.

Meaning of 'share'

A share is the smallest unit into which the share capital of a company is divided. A share thus
represents such proportion of the interest of the shareholders as the amount paid up thereon
bears to the total capital payable to the company. It is a measure of the interest in the
company’s assets to which a person holding a share is entitled.

KINDS OF SHARE CAPITAL

Kinds of share capital

Share capital shall be of 2 kinds, namely:

a) Preference share capital; and

 Preference Share capital carrying a preferential right with respect to dividend and
repayment of capital is termed as preference Share capital.

b) Equity share capital

i. with voting rights; or

ii. with differential rights as to dividend, voting or otherwise, in accordance with
such rules as may be prescribed by CG.

Example: Tata Motors in 2008 introduced equity shares with differential voting rights
called ‘A’ equity shares in its rights issue. In the issue, every 10 ‘A’ equity shares
carried only one voting right but would get 5 percentage points more dividend than
that declared on each of the ordinary shares.

Since ‘A’ equity share did not carry the similar voting rights, it was being traded at
discount to other common shares having full voting. Other companies which have
issued equity shares with differential voting rights (popularly called DVRs) are Future
Retail, Jain Irrigation among others.

General Meetings
The Companies Act, 2013 ('CA 2013') for the first time has laid down the duties of directors
in unequivocal terms in section 166. In summary, the general duties of directors under the
CA 2013 are as follows:

 to act in accordance with the articles of the company, in other words, to act within
powers;
 to act in good faith in order to promote the objects of the company for the benefit of
its members as a whole;
 to act in the best interest of the company, its employees, shareholders, community
and for the protection of environment;
 to exercise due and reasonable care, skill and diligence and independent judgment;
 to avoid direct or indirect conflicts of interest;
 to avoid undue gain or advantage either to himself or relatives, partners or
associates; and
 not to assign his office to any other person;
WINDING UP OF A COMPANY

As per section 270 of the Companies Act 2013, the procedure for winding up of a company
can be initiated either –

a)      By the tribunal or,

b)      Voluntary.

I.  WINDING UP OF A COMPANY BY A TRIBUNAL:-

As per Companies Act 1956, a company can be wound up by a tribunal on the basis of the
following reasons:

1. Suspension of the business for one year from the date of incorporation or suspension of
business for whole year.

2.  Reduction in number of minimum members as specified in the act (2 in case of private
company and 7 in case of public company)
But with the introduction of new Companies Act 2013, these above stated grounds for
winding up have been deleted and some new situations for winding up have been inserted.

As per new Companies Act 2013, a company can be wound up by a tribunal in the below
mentioned circumstances:

1. When the company is unable to pay its debts

2. If the company has by special resolution resolved that the company be wound up by the
tribunal.

3. If the company has acted against the interest of the integrity or morality of India, security
of the state, or has spoiled any kind of friendly relations with foreign or neighboring
countries.

4. If the company has not filled its financial statements or annual returns for preceding 5
consecutive financial years.

5. If the tribunal by any means finds that it is just & equitable that the company should be
wound up.

6. If the company in any way is indulged in fraudulent activities or any other unlawful
business, or any person or management connected with the formation of company is found
guilty of fraud, or any kind of misconduct.

 II. FILING OF WINDING UP PETITION:-

Section 272 provides that a winding up petition is to be filed in the prescribed form no 1, 2 or
3 whichever is applicable and it is to be submitted in 3 sets. The petition for compulsory
winding up can be presented by the following persons:

 The company
 The creditors ; or
 Any contributory or contributories
 By the central or state govt.
 By the registrar of any person authorized by central govt. for that purpose

Consumer Protection Act, 1986

 Consumer

A consumer is defined as a person who buys any good or avails a service for a consideration. 
It does not include a person who obtains a good for resale or a good or service for
commercial purpose.  It covers transactions through all modes including offline, and online
through electronic means, teleshopping, multi-level marketing or direct selling.

Unfair Trade Practice?

An unfair trade practice refers to that malpractice of a trader that is unethical or fraudulent.
These practices cause an inconvenience or grievance to consumers.

-falsely represents a good or service to be of a particular standard, quality, grade and so on.

– Falsely represents any re-built, second-hand, reconditioned, renovated or old goods as new.

– Represents that a good or service has sponsorship, approval, uses, benefits and so on which
they do not have. The same could apply to the seller or service provider.

-Makes a misleading or false representation regarding the need and usefulness of any good or
service. 

– Provides to the public any warranty or guarantee of the performance of the length of the life
of the product. A service can be continued till deemed satisfactory.

– Gives a misleading image of the good, service or trade like the price of the product.
 Redressal machinery

Consumer Disputes Redressal Commission

Consumer Disputes Redressal Commissions (CDRCs) will be set up at the district, state, and
national levels. 

A consumer can file a complaint with CDRCs in relation to: (i) unfair or restrictive trade
practices; (ii) defective goods or services; (iii) overcharging or deceptive charging; and (iv)
the offering of goods or services for sale which may be hazardous to life and safety. 

Complaints against an unfair contract can be filed with only the State and National Appeals
from a District CDRC will be heard by the State CDRC. 

Appeals from the State CDRC will be heard by the National CDRC. 

Final appeal will lie before the Supreme Court.

 

Jurisdiction

The District CDRC will entertain complaints where value of goods and services does not
exceed Rs one crore. 

The State CDRC will entertain complaints when the value is more than Rs one crore but does
not exceed Rs 10 crore. 

Complaints with value of goods and services over Rs 10 crore will be entertained by the
National CDRC.