UNIT -5

VINITA
SHARMA
DISTICTION BETWEEN COMPANY &
PARTNERSHIP
200
MEMORANDUM OF
ASSOCIATION
ARTICLES OF
ASSOCIATION
DISTICTION BETWEEN MOA &
AOA
PROSPECTUS
PROSPECTUS
 SHARES
The Investment or the Capital of a Company is divided into a fixed number of units having a
small amount of each units are called as SHARES.

TYPES OF SHARES
1.EQUITY SHARES
2. PREFRENCE SHARES

MEANING OF EQUITY SHARES

Equity Shares are issued to the General Public and are non-redeemable in nature.
Investors in such shares hold the right to vote, share profits and claims the assets of a
company. Equity Shares are long term financing sources for a company.

MEANING OF PREFERENCE SHARES

Preference Shares are those which have preferences over Equity Shares, preference
as to Payment of Dividend and Preference as to Return of Capital in the event of winding
up of a company.
 Directors
Directors are the persons appointed to direct and supervise the affairs of a company. The company's
business is consigned in the hands of directors. Team of directors of the company is collectively known as its
Board of Directors.
According to Chapter XI, Section 149 of the Companies Act 2013, every company must have a Board of
directors, the composition of which should be as follows:
Public Company: A minimum of three and a maximum of fifteen directors should be appointed. Also, at least
one-third of the directors must be independent.
Private Company: Minimum of two and a maximum of fifteen directors are required for a private company.
One Person Company (OPC): A minimum of one director must be appointed.
Duties of a company’s directors under the Companies Act, 2013
A director must function in line with the company’s Articles of Association.
A director must act in the best interests of the company’s stakeholders, in good faith and promote the
company’s objectives.
A director shall use independent judgment in carrying out his responsibilities with due care, skill and
diligence.
A director should constantly be aware of potential conflicts of interest and endeavour to avoid them in the
best interests of the firm.
Before authorizing related party transactions, the director must verify that appropriate considerations have
taken place and that the transactions are in the company’s best interests.
 Annual General Meeting Under the Companies Act, 2013
An Annual General Meeting (AGM) is held to have an interaction between the
management and the shareholders of the company. The Companies Act, 2013 makes it
compulsory to hold an annual general meeting to discuss the yearly results, auditor’s
appointment and so on.
All companies except one person company (OPC) should hold an AGM after the end of
each financial year. A company must hold its AGM within a period of six months from
the end of the financial year.
The time gap between two annual general meetings should not exceed 15 months.
Procedure to Hold an AGM
The company must give a clear 21 days’ notice to its members for calling the AGM. The
notice should mention the place, the date and day of the meeting, and the hour at
which the meeting is scheduled. The notice should also mention the business to be
conducted at the AGM. A company should send the notice of the AGM to:
•All members of the company including their legal representative of a deceased
member and assignee of an insolvent member.
•The statutory auditor(s) of the company.
•All director(s) of the company.
The matters discussed or business transacted in an AGM consists of:
Consideration and adoption of the audited financial statements.
Consideration of the Director’s report and auditor’s report.
Dividend declaration to shareholders.
Appointment of directors to replace the retiring directors.
Appointment of auditors and deciding the auditor’s remuneration.
Apart from the above ordinary business, any other business may be conducted as a special business of
the company.
Company Auditor
Company Auditor is an individual appointed for preparing an independent audit report of the company.
They can be either appointed by the company’s Board of Directors, Shareholders, Central Government or
Comptroller and Auditor General of India (C&AG) accordingly.
An individual must have expert knowledge and a practising certificate from the Indian Institute of
Chartered Accountants for becoming a company auditor.
Qualifications
For becoming a company auditor one should have any one of the following qualifications:
1.Chartered Accountant
2. Confined State Auditor
The certificate holder issued by the law entitling him to act as a company’s auditor in India holds the right
to become an auditor of a company.
Disqualification of Auditors
Following persons are not qualified for the appointment as auditor of a company:
•A Body Corporate.
•An Officer or Employee of the company.
•A Partner or Employee of an Officer or Employee of the company.
•A person who, or his relative, or his partner is holding any security in the company or subsidiary
company or holding company or associate company or subsidiary of such holding company.(Note –
Security means an instrument which carries voting rights.)
•A person who, or his relative, or his partner is indebted, in excess of such amount as may be prescribed
(the sum prescribed is Rs. 5 lakh) by the company.
•A person or a firm who, whether directly or indirectly, has business relationship of such nature as may
be prescribed with the company.
•A person whose relative is a director or is in the employment of the company as a director or key
managerial personnel.
•A person who is in the employment elsewhere or a person or a partner of a firm holding appointment as
its auditor, if such persons or partner is at the date of such appointment or reappointment holding
appointment as auditor of more than 20 companies.
•A person who has been convicted by a court of an offence involving fraud & a period of 10 years has not
been elapsed from the date of such conviction.
Appointment of first auditor
Section 139(6) of Companies Act, 2013
•Appointed by the board of directors within one month of the date of registration of the
company.
•Appointed shall hold office until the conclusion of the first Annual General Meeting.
•Appointment should be by valid resolution at the board meeting.
•In case the board does not exercise its power in this regard, the board shall inform
members of the company who shall appoint the first auditor within 90 days at an
extraordinary general meeting.
Appointment of First Auditor in case of Government Company
•Appointed by CAG within 60 days of registration of the company.
In case CAG does not appoint the first auditor within the said period of 60 days, the
Board shall appoint the first auditor within next 30 days.
•In case of failure of the Board to appoint the first auditor within the said period of 30
days, the Board shall inform the members of the company who shall appoint
•The first auditor shall hold office till the conclusion of the first AGM.
RIGHTS OF AUDITOR
 Removal of Auditor
•Removal of auditor before the expiry of his term
Previous approval of Central Government must be obtained within 30 days of passing of the
Board resolution.
The company shall hold the general meeting within 60 days of receipt of approval of CG for
passing the special resolution.
Before taking any action for removal, the auditor shall be given a reasonable opportunity of
being heard.
•Resignation by Auditor
When an auditor resigns, he is required to file a statement in the prescribe form.The
statement shall be filed with
the company
the Registrar
CAG in case of a Government Company.The statement shall be filed within 30 days from the
date of resignation.
 Winding Up
•Winding up is the process of liquidating a company. While winding up, a company
ceases to do business as usual. Its sole purpose is to sell off stock, pay off creditors, and
distribute any remaining assets to partners or shareholders.
•The two main types of winding up are compulsory winding up and voluntary winding
up.
Compulsory Winding Up
•A company can be legally forced to wind up by a court order. In such cases, the
company is ordered to appoint a liquidator to manage the sale of assets and distribution
of the proceeds to creditors.
Voluntary Winding Up
•A company's shareholders or partners may trigger a voluntary winding up, usually by
the passage of a resolution. If the company is insolvent, the shareholders may trigger a
winding-up to avoid bankruptcy and, in some cases, personal liability for the company's
debts.