Constitution of India, Law

& Engineering
MS. ANKITA SHARMA

ASSISTANT PROFESSOR
KIET SCHOOL OF MANAGEMENT
OUTLINES
• Module 5 -Business Organizations and E-Governance:

•
Sole Traders, Partnerships: Companies: The Company’s Act:
Introduction, Formation of a Company, Memorandum of Association,
Articles of Association, Prospectus, Shares, Directors, General
Meetings and Proceedings, Auditor, Winding up.

•
E-Governance and role of engineers in E-Governance, Need for
reformed engineering serving at the Union and State level, Role of I.T.
• professionals in Judiciary, Problem of Alienation and Secessionism in
few states creating hurdles in Industrial development.
THE COMPANY ACT, 2013 [ ERSTWHILE 1956]
•
Company : Defined
The word company means an association formed by a
•
number of persons for some common object. When such an
association of persons is registered under the companies
act, it becomes an artificial person with perpetual
succession and common seal.
•

•
 Company : Defined
A company is defined as, ‘a company formed and registered under
this
• act or an existing company.’ An existing company means ‘a
company formed and registered under any of the previous company
laws.’ The definition given by the companies’ act does not define the
•
company clearly as to its features.
Chief Justice Marshall of U.S.A. has defined the term company, as ‘a
company is a person, artificial, invisible, intangible and existing only in
the contemplation of the law. Being a mere creature of law, it posses
only
• those properties which the charter of its creation confers upon it
either expressly or as incidental to its very existence.’
•
FORMATION OF COMPANY
•

A company may be formed for any lawful purpose by :

•
(a) seven or more persons, where the company to be
formed is to be a public company;
(b) two or more persons, where the company to be
formed is to be a private company; or
• (c) one person, where the company to be formed is to be
One Person Company that is to say, a private company,
•
 TYPES OF COMPANY
•

COMPANY : TYPES
•

•
 TYPES OF COMPANIES
Generally there are two common types of companies which are
registered
•
under this Act, they are :
1. Private company 2. Public company
However, there are other types of companies which are shown as
•
under:-
1. Chartered Companies: The companies which are incorporated
by a charter granted by the “Crown” in exercise of royal
prerogative Eg. East India Company.
•
2. Statutory Companies: The companies incorporated by means of
Statute of special Act of the parliament or any State Legislative
•
Eg. RBI, LIC etc.
3. Registered Companies: The companies registered under the
companies Act, 1956 or the earlier Companies Act.
Memorandum of Association
“Memorandum” means “Memorandum of Association of a company as
originally
•
framed and altered from time to time in pursuance of any
provisions of company laws or of this Act”
•

The Memorandum of Association is a document of great importance in

relation to the proposed company. It contains the objects for which the
company is formed and therefore identifies the possible scope of its
operations beyond which its action cannot go. It defines as well as
•
confines the power of company. If anything is done beyond these power
that will be ultra vires the Company and so void. Thus, it is evident that
the• memorandum is the charter and defines the limitation of the power
of a company.
 Memorandum of Association [Content Clauses]
•
1. Name clause
•
2. Registered office clause
3. Object clause
4. Liability clause
•
5. Capital clause
6. Association or Subscription clause
•
Memorandum of Association [Requirements to be stated]
There must be at least 7 persons in case of the public company and at least 2 persons in case
of the private company. Memorandum of a limited company to contain the following clauses:
1. The name of the company with limited as the last word in case of a public limited
•
company and with Private Limited as the last word in the case of a Private Limited
Company.
2. The state in which the registered office of the company is to be situated.
•
3. The objects of the company must be separated on two basis :
(i) The main objects of the company to be pursued by the company on its
incorporation and objects incidental to be fulfilment of the main object
(ii) Other objects which are not included above.
4. The amount of authorized share capital divided into shares of fixed amounts.
•
5. The liability of members is limited if the company is limited by shares or by
Guarantee.
6. In case of companies with objects not confined to one state, the state to whose
territories the objects extend.
•
 Articles of Association
The Articles of association of a company are subordinate to and are
controlled by the memorandum of association. The articles are framed
•
mainly for carrying out the aims and objects of the Memorandum of
Association. They accept the Memorandum of Association as the
charter
• of incorporation and so accepting if the articles proceed to
define the duties, rights and powers of the governing body. Companies
required to file the articles with the Registrar of Companies:- The
following are the companies, which are required to file the articles
with Registrar of Companies.
•
1. Company limited by guarantee
2. Unlimited company
3. Private Company limited by shares
•
 Articles of Association [Contents]
✔ Exclusion wholly or in part of table A.
•
✔ Adoption of preliminary contracts.
✔ Number and the value of shares
•
✔ Allotment of shares
✔ Call on shares
✔ Transfer and transmission of shares
✔ Forfeiture of shares
•

✔ Alteration of capital
•
 Articles of Association [Contents]
✔ Share certificates
•
✔ Conversion of shares into stock
✔ Voting right and proxies
•
✔ Meeting
✔ Directors and their appointment
✔ Borrowing powers
✔ Dividend and reserves
•

✔ Accounts and audit

✔ Winding up
•
•

•
 Public Company Vs. Private Company

•
 Public Company Vs. Private Company

•
 Public Company Vs. Private Company

•
 Conversion : Public company to Private Company
The conversion can take place in following ways:
• 1. A Public company can be converted into a private
company by altering the articles, incorporating the
•
three restrictions, mentioned in section.
2. Approval of the central government is necessary for
converting a Public company into a private company.
3. Special resolution is to be passed within 30 days, after
•
obtaining the approval of the Central Government for
conversion.
•
4. The word private Ltd. is used.
5. The conversion of a public company into a private
company does not affect the identity of the company.
•
Conversion : Private company to Public Company
There are three ways through which the conversion
•

of a private company into a public company takes

places.
1. Conversion by default
•
2. Conversion by operation of law
3. Conversion by choice
•
Conversion : Private company to Public Company
Conversion by default:
• ✔
A private company gets converted into a public company automatically
(that is if it permits free transferability of shares, if its membership exceeds
50 or when it extends invitation to the public to subscribe to shares or
•
debentures or to make deposits.)
✔ As a result of this the private company will not be able to enjoy the
privileges and exemptions conferred on it and the provisions of the
companies Act shall apply to it as if it were a public company.
•✔ Further, if the company wants to remain a private company, than it should
apply to the Company Law Board for relief.
✔ However, the CLB on being satisfied, that the failure to comply with the
•
condition was accidental or due to inadvertence or to some other reason, it
may grant relief from such consequences, as aforesaid
Conversion : Private company to Public Company
Conversion by the operation of Law:
There
• are four circumstances which would force a private company
to become a public company. They are :
•
✔ Where 25% or more its paid-up share capital is held by one
or more bodies corporate or public company.
✔ Where the average annual turnover is not less than 25 crores
for three consecutive financial years.
✔ Where a private company holds out not less than 25% of the
•
paid-up share capital of a public company.
✔ Where the private company accepts by invitation or renews
•
deposits from the public, other than from its members or
directors and their relatives, than the private company will
become a public company, the day it accepts the deposits.
THE COMPANY ACT, 2013 [ ERSTWHILE 1956]
Conversion : Private company to Public Company
•
Conversion by choice:
A private company may be its own choice becomes a public company.
• The steps necessary for this purpose are as follows:

✔ Special Resolution: A private company desiring to become

public company must pass a special resolution to this regard.
✔ A copy of resolution so passed must be filed with the Registrar
•
of companies within 30 days.
✔ Increase in number of directors : If the numbers of directors
are less than three, it should be raised to three.
•
✔ Increase in membership : If the numbers of member is less
than 7, it should be raised to 7.
✔ Raising of paid up capital to the minimum, prescribed for public
companies that is Rs. 5 Lakhs.
 Prospectus :
•

Where a company allots or agrees to allot any

•
securities of the company with a view to all or any of
those securities being offered for sale to the public,
any document by which the offer for sale to the
public is made shall, for all purposes, be deemed to
•
be a prospectus issued by the company. It shall be
dated and signed.
•
 Prospectus should contain :
(a )state the following information, namely:
✔ names and addresses of the registered office of the company, company
•
secretary, Chief Financial Officer, auditors, legal advisers, bankers, trustees, if
any, underwriters and such other persons as may be prescribed;
✔ dates of the opening and closing of the issue, and declaration about the issue
• of allotment letters and refunds within the prescribed time;
✔ a statement by the Board of Directors about the separate bank account
where all monies received out of the issue are to be transferred and
disclosure of details of all monies including utilised and unutilised monies
out of the previous issue in the prescribed manner;
✔ details about underwriting of the issue;
•
✔ consent of the directors, auditors, bankers to the issue, expert‘s opinion, if
any, and of such other persons, as may be prescribed;
•
✔ the authority for the issue and the details of the resolution passed therefor;
✔ procedure and time schedule for allotment and issue of securities;
 Shares
• The share capital of a company limited by shares shall be
of two kinds, namely:
• (a) 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; and
(b) preference share capital Provided that nothing
•
contained in this Act shall affect the rights of the
preference shareholders who are entitled to participate
in the proceeds of winding up.
•
Shares [Types]
✔ Equity shares are representative of stakes in ownership of a company. If,
for instance, Ms. Priya holds Rs. 10 lacs worth of equity shares in
•
Company M with issued and paid up share capital of Rs 1 crore then the
stake holding is 10 %.

✔ Preference shares Preference shares also commonly known as preferred

stock, is a special type of share where dividends are paid to shareholders
• prior to the issuance of common stock dividends. Consequently, if a
company lands into bankruptcy, preference shareholders are issued
dividends first or have the first right to the company’s assets before
• common stock investors. For preference shareholders, the dividend is
fixed however, they don’t hold voting rights as opposed to common
shareholders.
 Directors
1. Numbers of directors are minimum 3 in case of public
•
company, 2 in case of a private company & 1 in case of one
person company. Maximum limit is 15.
2. Every company should have at least one director who has
•
stayed in India for at least 182 days in the last calendar
year.
3. In case of listed company at least one third of the directors
should be independent. Minimum number of independent
• directors will be specified by the central government.
4. Provided that a company may appoint more than fifteen
directors after passing a special resolution:
•
5. Provided further that such class or classes of companies as
may be prescribed, shall have at least one woman director.
 Independent Director
An independent director in relation to a company, means a director other than a
managing director or a whole-time director or a nominee director,
•
✔ who, in the opinion of the Board, is a person of integrity and possesses relevant
expertise and experience.
✔ who is or was not a promoter of the company or its holding, subsidiary or associate
•
company.
✔ who is not related to promoters or directors in the company, its holding, subsidiary
or associate company.
✔ none of whose relatives has or had pecuniary relationship or transaction with the
company, its holding, subsidiary or associate company, or their promoters, or
directors, amounting to two per cent. or more of its gross turnover or total income
•
or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower,
during the two immediately preceding financial years or during the current financial
year.
•
Duties of the Director
1. Subject to the provisions of this Act, a director of a company shall act in accordance with
•
the articles of the company.
2. A director of a company shall act in good faith in order to promote the objects of the
company for the benefit of its members as a whole, and in the best interests of the
•
company, its employees, the shareholders, the community and for the protection of
environment.
3. A director of a company shall exercise his duties with due and reasonable care, skill and
diligence and shall exercise independent judgment.
4. A director of a company shall not involve in a situation in which he may have a direct or
indirect interest that conflicts, or possibly may conflict, with the interest of the company.
•
5. A director of a company shall not achieve or attempt to achieve any undue gain or
advantage either to himself or to his relatives, partners, or associates and if such director
•
is found guilty of making any undue gain, he shall be liable to pay an amount equal to
that gain to the company.
6. If a director of the company contravenes the provisions of this section such director shall
be punishable with fine which shall not be less than one lakh rupees but which may
extend to five lakh rupees.
 Meetings
✔ Every company shall hold the first meeting of the Board of Directors
•
within thirty days of the date of its incorporation and thereafter
hold a minimum number of four meetings of its Board of Directors
• every year in such a manner that not more than one hundred and
twenty days shall intervene between two consecutive meetings of
the Board.
✔ A meeting of the Board shall be called by giving not less than seven
•
days‘ notice in writing to every director at his address registered
with the company and such notice shall be sent by hand delivery or
by post or by electronic means.
•
Meetings
✔ Provided that a meeting of the Board may be called at shorter notice to
• transact urgent business subject to the condition that at least one
independent director, if any, shall be present at the meeting.
✔
•
Provided further that in case of absence of independent directors from
such a meeting of the Board, decisions taken at such a meeting shall be
circulated to all the directors and shall be final only on ratification
thereof by at least one independent director, if any.
✔ The participation of directors in a meeting of the Board may be either in
•
person or through video conferencing or other audio visual means, as
may be prescribed, which are capable of recording and recognising the
•
participation of the directors and of recording and storing the
proceedings of such meetings along with date and time.
 Meetings
✔ Every officer of the company whose duty is to give notice
•
under this section and who fails to do so shall be liable to
a penalty of twenty-five thousand rupees.
•
✔ A One Person Company, small company and dormant
company shall be deemed to have complied with the
provisions of this section if at least one meeting of the
Board of Directors has been conducted in each half of a
•
calendar year and the gap between the two meetings is
not less than ninety days.
•
•
Meeting Quorum
✔ The quorum for a meeting of the Board of Directors of
• a company hall be one-third of its total strength or
two directors, whichever is higher, and the
participation of the directors by video conferencing or
by other audio visual means shall also be counted for
•
the purposes of quorum

•
Power of the board
The Board of Directors of a company shall exercise the following powers on behalf of the
company
• by means of resolutions passed at meetings of the Board, namely
✔ to make calls on shareholders in respect of money unpaid on their shares.
✔ to authorise buy-back of securities.
•
✔ to issue securities, including debentures, whether in or outside India.
✔ to borrow money.
✔ to invest the funds of the company.
✔ to grant loans or give guarantee or provide security in respect of loans.
✔ to approve financial statement and the Board‘s report.
• ✔ to diversify the business of the company.
✔ to approve amalgamation, merger or reconstruction.
✔ to take over a company or acquire a controlling or substantial stake in another
•
company.
✔ any other matter which may be prescribed.
•
Auditors
Every company shall, at the first annual general meeting,
• appoint an individual or a firm as an auditor who shall
hold office from the conclusion of that meeting till the
conclusion of its sixth annual general meeting and
thereafter till the conclusion of every sixth meeting and
•
the manner and procedure of selection of auditors by the
members of the company at such meeting shall be such
• as may be prescribed.
 Auditors
✔ Provided further that before such appointment is made, the
• written consent of the auditor to such appointment, and a
certificate from him or it that the appointment, if made, shall be
in accordance with the conditions as may be prescribed, shall be
•
obtained from the auditor.
✔ Provided also that the certificate shall also indicate whether the
auditor satisfies the criteria.
✔ Provided also that the company shall inform the auditor
• concerned of his or its appointment, and also file a notice of
such appointment with the Registrar within fifteen days of the
•
meeting in which the auditor is appointed.
 Auditors
• No listed company or a company belonging to such class
or classes of companies as may be prescribed, shall
• appoint or re-appoint :
✔ an individual as auditor for more than one term of
five consecutive years.
✔ an audit firm as auditor for more than two terms of
•
five consecutive years.

•
•
Auditors [Appointment]
✔ A person shall be eligible for appointment as an auditor of a
•
company only if he is a chartered accountant.
✔ Provided that a firm whereof majority of partners practising in
India are qualified for appointment as aforesaid may be
appointed by its firm name to be auditor of a company.
✔ Where a firm including a limited liability partnership is
•
appointed as an auditor of a company, only the partners who
are chartered accountants shall be authorised to act and sign
• on behalf of the firm.
•
Auditors [Powers & Duties]
Every auditor of a company shall have a right of access at
• all times to the books of account and vouchers of the
company, whether kept at the registered office of the
company or at any other place and shall be entitled to
require from the officers of the company such
•
information and explanation as he may consider
necessary for the performance of his duties as auditor
• and amongst other matters inquire into the following
matters, namely : [given in the next slide]
Auditors [Powers & Duties]
✔ whether loans and advances made by the company on the basis of
• security have been properly secured.
✔ where the company not being an investment company or a banking
company, whether so much of the assets of the company as consist of
•
shares, debentures and other securities have been sold at a price less
than that at which they were purchased by the company.
✔ whether loans and advances made by the company have been shown
as deposits.
✔
• whether personal expenses have been charged to revenue account.
✔ where it is stated in the books and documents of the company that any
shares have been allotted for cash, whether cash has actually been
•
received in respect of such allotment, and if no cash has actually been
so received.
 Winding Up
•

Winding up may happen

• • Through tribunal or,
• Voluntary

•
 Winding Up [Through tribunal]
A company may, on a petition under section 272, be
•
wound up by the Tribunal,
(a) if the company is unable to pay its debts;
•
(b) if the company has, by special resolution, resolved
that the company be wound up by the Tribunal;
(c) if the company has acted against the interests of the
sovereignty and integrity of India, the security of the
•
State, friendly relations with foreign States, public order,
decency or morality;
•
 Winding Up [Through tribunal]
(d) if the Tribunal has ordered the winding up of the
•

company under chapter 19 (sick company);

(e) if on an application made by the Registrar or any other
•
person authorised by the Central Government by
notification under this Act, the Tribunal is of the opinion that
the affairs of the company have been conducted in a
•
fraudulent manner or the company was formed for
fraudulent and unlawful purpose;
•
•
Winding Up [Through tribunal]
(f) if the company has made a default in filing with the
• Registrar its financial statements or annual returns for
immediately preceding five consecutive financial years; or
(g) if the Tribunal is of the opinion that it is just and
equitable that the company should be wound up.
•

•
 Winding Up [Who can file the petition : Sec. 272]
(a) the company;
(b) any creditor or creditors, including any contingent or
• prospective creditor or creditors;
(c) any contributory or contributories;
• (d) all or any of the persons specified in clauses (a), (b)
and (c) together;
(e) the Registrar;
(f) any person authorised by the Central Government in
•
that behalf; or
(g) in a case falling under clause (c) of sub-section (1) of
•
section 271, by the Central Government or a State
Government.
 Winding Up [Voluntary]
•
A company may be wound up voluntarily,
(a) if the company in general meeting passes a
•
resolution requiring the company to be wound up
voluntarily as a result of the expiry of the period
for its duration, if any, fixed by its articles or on the
occurrence of any event in respect of which the
•
articles provide that the company should be
dissolved; or
•
(b) if the company passes a special resolution that
the company be wound up voluntarily
IMPORTAMCE OF e Governance
•
• Information delivery is greatly simplified for citizens and businesses.
• It gives varied departments’ information to the public and helps in
• decision making.
• It ensures citizen participation at all levels of governance.
• It leads to automated services so that all works of public welfare is
available to all citizens.
• It revolutionizes the functions of the government and ensures
• transparency.
• Each department and its actions is closely monitored.
• Public can get their work smartly done and save their time.
•
• It provides better services to citizens and brings government close to
public. Public can be in touch with the government agency.
• It cuts middlemen and bribery if any from the picture.
CHALLENGES FACED BY e Governance
•

• Technical
• • Infrastructural
• Privacy & Security
• Lack of training & awareness
•
• Lack of qualified persons
• Availability of the digital technology
•
ALIENATION & SECESSIONISM
•
• Alienation is defined as the feeling that you have
no connection with the people around you or that you are
• not part of a group.
• Secessionism is the ideology of becoming independent and
no longer part of a country, area, organization, etc.

•
ALIENATION & SECESSIONISM
•
• Most secessionist movements those in India draw their
sustenance from ethnic, religious and cultural factors
•
• The common grievance that the concerned communities share
is the nature of their incorporation into the Indian state.
• The basis of their claims tends to rest on the argument that in
the confusion following the end of the British Raj, India simply
•
appropriated the autonomy of several distinct regions and
communities.
• In other words, the ‘national territorial formation’ technique
•
of New Delhi directly clashed with the aspirations of many
‘autonomy seeking’ communities and regions.
 IT INITIATIVES IN THE JUDICIARY
•
List of Business Information System (LOBIS):
All the cases having the same law point(s) to be decided by the
courts can be grouped and posted before one bench.
This has helped the courts in faster disposal of cases.
•
It has become easier to recall dismissed cases when review
petitions are filed.
The system has been effective in generating instantaneous
statistical reports.
It has helped Registry of Supreme Court in streamlining its day to
day activities to achieve one of the main objectives of COURTIS
Project
 INFORMATION TECHNOLOGY ACT 2000
• Offences
• [67A] Punishment for publishing or transmitting of material
containing sexually explicit act, etc., in electronic form [
imprisonment up to 5 yrs or fine up to 10 lac INR or both if first
• timer ; imprisonment up to 7 yrs or fine up to 10 lac INR or both if
repeated.]
• [67B] Punishment for publishing or transmitting of material
depicting children in sexually explicit act, etc., in electronic
[ imprisonment up to 5 yrs or fine up to 10 lac INR or both if first timer ;
imprisonment up to 7 yrs or fine up to 10 lac INR or both if repeated.]
• [71] Penalty for misrepresentation [imprisonment up to 2 yrs or fine
up to 1 lac INR or both ]
 ASSIGNMENT
1. Define company. How a company is formed? Explain in short various
• types of companies.
2. Compare & contrast a public limited company & a private limited
company.
3. What do you mean by Memorandum of Association & Articles of
Association. Explain them.
4. Why a prospectus required to be presented along with the issuance of
securities(shares etc.)? What are the basic contents of the prospectus?
5. What is a share? Explain various types of shares & share capitals.
6. Who are independent directors?
7. Describe the general body meeting procedure. What do you mean by the
quora of the meeting?
8. Discuss the roles, duties, functions & responsibilities of auditors.
9. Explain the process of winding up a company. Who is a liquidator?
10. Describe the role of engineers in e governance.
THANK YOU!!!