Company Law

BUSINESS, LABOUR LAW
AND COMPANY LAW

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Labour and Company Law Page |1
1. Payment Of Gratuity Act, 1972 2-10
2. Indian Partnership Act, 1932 11-23
3. Employees State Insurance Act, 1948 24-29
4. Employees Provident Fund and Miscellaneous Provision Act, 1952 30-39
5. Negotiable Instrument Act, 1881 40-46

Company Law, 2017 (Amended)
6. Company: Meaning and Features 48-50
7. Kinds of Companies 51-54
8. Formation of the Company 55-58
9. Memorandum Of Companies 59-62
10. Articles of Association 63-66
11. Meetings 67-72
12. Shares 73-78
13. Prospectus 79-80
14. Directors 81-83
Table of Content
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CHAPTER -1
GRATUITY ACT, 1972
Meaning of gratuity
Gratuity is a lump sum payment, which is paid by an employer to his employee for his past services when the
employment is terminated.
Thus, gratuity is gift from the employer to his employee.
Benefits of gratuity
It provides financial help to the worker after his retirement.
In case of death of employee, it gives financial assistance to his family.
Objective of the Act

The payment of Gratuity Act 1972 is a social security enactment. It is derived from the word `Gratuity` which
means `gift` or `present`. However, having being enacted as a social security from, it ceases to retain the
concept of a gift but it has to be seen as a social obligation by an employer towards his employee.
Application
The payment of Gratuity Act 1972 applies to the whole of India and so far as it relates to ports and plantations
it does not apply to the state of Jammu and Kashmir. It applies to:
a) Every factory , mine , oilfield , plantation , port and railway company:

b) Every shop or establishment within the meaning of any law for the time being in force in relation to
shops and establishment in the state, in which 10 or more person are or were employed on any day in
the preceding 12 months.
c) Such other establishment or class of establishment, in which 10 or more employees are or were
employed on any day in the preceding 12 months, as the Central Government may notify in this behalf.
Any shop or establishment shall continue to be governed by the Act even if the no. of its employees
comes below 10 persons at any time in the future.
Note: Once the act becomes applicable to an organization, it would continue to

apply to the same even if after the number of employees gets reduced below the
minimum.
Applicability to NGOs
Public charitable and religious trusts are also covered by this Act, provided that they are shops or
establishments within the meaning of the shops and Establishment Act applicable to their area of operation and
that 10 or person have been employed by them on any day in the preceding 12 months.
Eligibility
An employee who has rendered at least 5 years of continuous service in the organisation/ establishment shall be
eligible for gratuity.
Note: 5 years of continuous service shall not be necessary where termination of the
Payment
employmentofofGratuity
any employee is due to death or disablement.
Gratuity shall be paid to an employee on the termination of his employment after s/he has rendered continuous
service of not less than 5 years i.e. superannuation, retirement, resignation, death or disablement due to
accident or disease (Sec 4). The period of 5 years is not necessary if the termination of the employee is because
of death or disablement. In the case of death the amount is paid to the legal heirs. “Continuous Service” means
uninterrupted service which may be interrupted on account of, sickness, accident, leave, absence from duty
without (not being treated as break in service), lay-off, strike, lock-out or cessation of work not due to the fault
of the employee (Sec 2A).
Calculation of Gratuity
Gratuity is calculated at 15 days wages last drawn by the employee for each completed year of service. The
monthly wage is divided by 26 and multiplied by 15. In computing a completed year of service the period in
excess of six months shall be taken as a full year.
Gratuity = Monthly salary * 15/26 days * No. of years of service
Bonus, commission House Rent Allowance, any other Allowance and Overtime wages shall not be included
for calculation of last salary drawn.
Maximum gratuity payable under the act is ₹ 20, 00,000.
How to make payment of Gratuity
a) Application of Gratuity payment: Any person to whom Gratuity amount is payable shall make written
application for Gratuity for payment of Gratuity to the employer, within 30 days from the date on
which gratuity becomes payable. If employee knows date of retirement then he can make application
even before 30 days of retirement. In case of death of an employee, application is made by nominee.
b) Application can be made on plain paper: Application may be presented to the employer either by
personal service or by registered post with acknowledgement. Any Application filed after 30 days will
be entertained by employer only if there was sufficient cause for delay.
c) Employers duty to determine and pay gratuity: As soon as gratuity becomes payable, the employer is
required to determine the amount of Gratuity is payable and give notice in writing. To the person to
whom gratuity is payable and to the controlling authority thereby specifying the amount of gratuity
payable, whether or not application has been made in this regard by employee as studies above, the
employer is under obligation to pay the gratuity amount within 30 days from the date it become
payable. Simple interest @ 10% per annum will be levied on the after of the said period.
d) But no such interest shall be payable if the delay in payment is due to the fault of the employee and the
employer has obtained permission in writing from the controlling authority for the delayed payment on
this ground.
Recovery of Gratuity
If the Gratuity payable under the act is not paid by the employer within prescribed time, the controlling
authority shall, on an application made to it this behalf by the aggrieved person, issue certificate for that
amount to the collector and collector shall recover that amount for employer with compound interest at the rate
specified by central government. However, reasonable opportunity of being heard will be given to employer.
Settlement of Dispute
In case of dispute related to claim of gratuity, employer shall make application to controlling authority.
Controlling authority will settle the dispute.
Mode of Gratuity payment

The liability of gratuity can be settled in cash, through demand draft or Bankers Cheque.
Penalties – punishment
Failure to comply with the payment of Gratuity Act 1972 entails penalties (Sec. 9) are the following:
Details of violation penalty
 For avoiding any payment knowingly make any false statement or representation shall be punishable
with imprisonment up to 6 months or with fine upto ₹10, 000, 00 or both.
 Failure to comply with any provision to the Act of Rules Shall be punishable with imprisonment upto 1
year but will not be less than 3 month or with fine, which will not be less than ₹1,00,000 but may
extend up to ₹ 20,000,00 or with both.
 Any offence relating to nonpayment of gratuity under the Act Employer shall be punishable with
imprisonment for a term which shall not be less than 6 month but may extend to 2 years, unless the
court for reasons recorded decided for lesser term of imprisonment or a fine, which would meet
penalty.
Forfeiture of Gratuity
Gratuity can be forfeited {Sec 4(6)} where an employee has been terminated:
 For any act- Willful omission or negligence causing any damage or loss to destruction of any property
belonging to the employer, to the extent of such loss or damage.
 For riotous or disorderly conduct or any act to violence on his part.
 For any act which constitutes an offence involving moral turpitude, provided the offence has been
committed by him in the course of his employment.
Compulsory Insurance
The payment of Gratuity (Amendment) Act, 1987 has prescribed provision for compulsory insurance for
employer liability for payment towards the gratuity under the Act from the life insurance corporation of India
establishment under the life insurance corporation of India Act. 1956 or any other prescribed Insurer.
However, employer of an establishment belonging to or under the control of the central government or the state
government is exempted from operation of these provisions. (Section 4A)
Nomination (Sec 6)
 Each employee who has completed one year of service is requires to make a nomination for the
purpose of gratuity in case of his death. There can be more than one nominee in ‘Form F’.
 Nominees may be changed at any time by the employee, by giving a written notice to the employer in
‘Form H’.
Note: If no nomination has been made, it shall be paid to the legal heirs of the
deceased employee or If the heirs are minor, the share of such minor shall be
deposited by the controlling authority with a bank till he attains majority.

 If employee has no family at the time of making a nomination within 90 days of acquiring a family
shall submit a fresh nomination in ‘Form G’.
Protection of Gratuity
No gratuity payable under the act shall be liable to attachment in execution of any decree or order of any civil,
revenue or criminal court. However if the employee had agreed to a deduction from the amount due as gratuity
then that amount can be recovered.
Notice of Opening, change, closing of Establishment
 Opening: Once the payment of Gratuity Act becomes applicable to the establishment, a notice in
‘Form A’ has to be given by the employer to the controlling authority within 30 days.
 Change of address, name, employer or nature: Any change in name. Address, employer
or nature of business application shall make in ‘Form B’ within 30 days of change, etc.
 Close Down of Business: Where an employer proposes to close down the business he shall
submit a notice in ‘Form C’ to the controlling Authority at least 60 days before the intended closure.
Form A
[See sub – rule (1) of rule 3].
Notice of Opening
1. Name and address of the Establishment.

2. Name and designation of the Employer.
3. Number of persons employed.
4. Maximum number of persons employed on any day during the preceding twelve months with date.
5. Number of employees covered by the Act.
6. Nature of industry.
7. Whether seasonal.
8. Date of opening.
9. Details of Head Office/Branches.
a. Name and address of the head office. Number of employees.
b. Name and addresses of branches in India.
1.
2.
I verify that the information furnished above is true to the best of my knowledge and belief.
Place Signature of the employer
Date With name and designation
To
The Controlling Authority
……………………………………..
……………………………………..
1. Ins: by G . S . R 2868, dated 22nd

November, 1975
Form ‘B’
Notice of Change
Name and address of
The Establishment,
Take notice that following changes taken place with effect from…………………………. In the particulars
furnished by me in notice dated ……………………… on form ‘A’
Name.
Address.
Name of the employer.
Nature of business
Place Signature of the employer
Date with name and designation
TO
……………………………………..
………………………..
Form ‘C’
Notice of Closure
Take notice that it is intended to close down the establishment with effect from ………………………………. The
other details are furnished below:
1. Name and address of the establishment.

2. Name and address of the Head Office, if any.
3. Name and designation of the employer.
4. Number of persons in employment.
5. Number of employees entitled to gratuity.
6. Amount of Gratuity invoice
Place Signature of the

employer
Date with name and

designation
To
……………………………………….
………………………………………
Labour and Company Law P a g e | 10
Form ‘F’
TO
…………………………………………………………………………………………………………………………………………………………………………
…
[Give here name or description of the establishment with full address]
1. Shri/Shrimati/kumara …………………..Whose particulars are given in the statement bellow.
[Name in full here]
Hereby nominate the person (S) mentioned below to receive the gratuity payable after my death as also the
gratuity standing to my credit in event of my death before that amount has become payable has not been
paid and direct that the said amount of gratuity shall be paid in proportion indicated against the name (S) of
the nominee (S)
2. I hereby certify that the person (S) mentioned is a/are member (S) of my family within the meaning of clause
(h) of section (2) of the payment of Gratuity Act, 1972.
3. I hereby declare that I have no family within the meaning of clause (h) of section (2) of the said Act.
4. a. My father/mother/parents/is/are not dependent on me.
B. My husband father/mother/parents is/are not dependent on my husband.
5. I have excluded my husband from my family by a notice dated the to the controlling Authority in terms of the
proviso to clause (h) of section (2) of the said Act.
6. Nomination made herein invalidates my previous nomination.
Nominee (S)
Name in full with full Relationship with

address of
Chapter-2
CHAPTER -2
Partnership Act, 1932

The law of partnership is contained in the Indian Partnership Act, 1932, which came into force on 1st Oct.,
1932. This is based on the English Law on the subject as contained in the Partnership Act, 1890. It extends to
whole of India except Jammu & Kashmir.
Definition and Nature of Partnership:

Section 4 of the Partnership Act defines Partnership as “the relation between persons who have agreed to share
the profits of a business carried on by all or any of them acting for all”.
The analysis of the definition reveals that at least two persons need to associate to carry on partnership
business. The persons must associate to undertake certain business with the motive to share the profit. The
relationship must be contractual and there must be principal-agent relationship between or among the persons.
Partners: The persons who form themselves into a partnership are individual called ‘Partners’.
Partnership firm: The individual partners collectively known as partnership firm.
Firm name: The name in which the business is carried on is called firm. However law is not recognised the
firm as a separate entity distinct from the partner composing the firm.
Features of partnership
1. Existence of business- The objective of partnership must be to do some type of business. Business here means
any activity leading to earn profit. Persons joining together and agree to do charitable work or for formation of
any club for entertainment would not be treated as partnership due to absence of business include every trade
occupation and profession.
2. Number of persons- There must be at least two or more persons to form a partnership firm. As per Indian
Partnership Act the minimum number of person required at least 2 and maximum person is 10 in case of
banking business and 20 in case of any other business.( But according to Companies Act,2013 max. number of
members in a partnership firm is 100).
3. Contractual relationship- There should be contractual relationship between the persons forming partnership.
They have to mutually agreed and jointly decide go for any business activity as per agreed terms and
conditions. This may be either written or oral form among the partners.
4. Sharing of profits- Business is carried on to share the profits which should be divided among the partners in
agreed proportion.
5. Agency- Partnership contract is based on principle of agency. Each partner is an agent of other partners. The
business is carried on by all or any of them acting on behalf of all other partners. This means that every partner
is liable for the act of others.
6. Utmost good faith- The partner should have utmost good faith in each other. They should be true and honest.
They should present true accounts and must disclose true information to one another.
7. Unlimited liability- Like for sole proprietorship, every partner has an unlimited liability in respect of debts of
the firm. If the property all the Assets of the firm are insufficient to meet claims of the creditors, the private
property of the partners can be attached to meet the claims of the creditors.
8. Restriction on transfer of ownership- A partner cannot transfer his share in business to an outside person
without the consent of all other partners. This is because; the partnership agreement is based on contract among
individuals.
9. Capital contribution- Each partner contributes his share in the capital of the partnership firm. The capital
contribution need not to be equal or in any particular proportion. It must be as per the agreement that each
partner is bind to contribute the amount. A partner may be admitted to partnership with or without any
capital contribution.
10. Duration of partnership- The existence of the partnership firm continues at the pleasure of the partners.
Legally partnership comes to an end if any partner dies or becomes insolvent or retires. The remaining
partners may agree to continue the business under the original firms name after settling the claims of the
outgoing partner.
Partnership deed
A partnership deed also known as a partnership agreement is a document that outlines in detail the rights and
responsibilities of all parties to a business operation. It is helpful in preventing disputes and disagreements over
the role of each partner in the business and the benefits which are due to them.
The partnership deed normally carries the name of the business, the address of its principal place of business
and a short summary of the business. The partners intend to operate the deed gives important financial details
of the partnership such as the amount of capital to be invested by each partner, the ownership shares that each
partner is entitled to through this investment, the salaries to be paid to each partner and the method of
distributing the business income.
Note: Partnership deed is essential not mandatory.
Rules applicable in absence of partnership deed

Under the Partnership Act 1932, the following rules will be applicable in the absence of an agreement among
the partners:
 Profit and losses of the firm will be shared equally by the partners
 Interest on capital will not be allowed to any partner. In case of losses no interest will be allowed
 No interest will be charged on drawings of the partner
 If a partner has given a loan to the firm besides his share of capital he will be allowed 6% interest on such loan
 No salary or remuneration will be allowed to any of the partners
 A new partner can be admitted only with the consent of all the existing partners.
 Each partner has a right to participate in the proceedings of the business.
 Each partner has a right to inspect the accounts of the firm and can have a copy of the same.
Kinds of partners
The different kinds of partners in partnership firms according to the Partnership Act 1932 are as follows:
1) Active or managing partner- A person who takes active interest in the conduct and management of the
business of the firm is known as active or managing partner. It is also termed as working or managing partner.
He carries on business on behalf of other partners. He also bring the capital into the business. He is liable for all
the act of the firm.
2) Sleeping partner- A sleeping partner is a partner who does not take part in day to day affairs of the business.
Such a partner only contributes to the share capital of the firm. He is liable for the acts of the firm done by the
other partners. He also shares the profit and losses of the business.
3) Nominal partner- A nominal partner is one who does not have any real interest in the business but lends his
name to the firm without any capital contribution and doesn’t share the profits of the business. He will not
participate in profits and losses of the firm as a partner does. He is equally responsible to third parties for the
acts of the firm.
4) Partners in profit only- He only shares the profits of the business and would not be liable for its losses. He is
equally liable to the third party as other partners of the firm. He does not take any part in the business activity.
5) Minor partner- Minor is a person who has not completed the age of 18 years. He can be admitted to the
benefits of the firm with the consent of all other partners but in existing partnership only. He does not share the
losses of the firm. He cannot be a partner in a new partnership firm. He has the right of inspecting the books of
the firm. He has limited liability in the firm. He cannot actively take part in the business activity of the firm.
6) Partner by estoppel or holding out- If a person by his words or conduct holds out to another that he is a
partner and he will not be stopped from denying that he is a partner, the person who does become liable to third
parties to pay the debts of the firm is known as holding out partner. He is not a partner but deemed to be partner
by his activity. He has no right as a partner in the firm.
7) Special partners- These are the partners in limited partnership only. These types of partnership are not in
existence. They do not take part in the management of the affairs of the business and have no right to inspect
the books.
Who may not be the partners?

 Minor( not in new partnership but can be a partner in a existing partnership by the consent of all other partners)
 Person of unsound mind
 Members of HUF carrying on family business
Types of Partnership firm

There are two types of partnership:
Partnership
Unlimited Partnership Limited Partnership
Partnership Partnersh Particular

for fixed Term ip at will Partnership
1. Limited Partnership - Limited partnership is a form of business organization in which there is at least
one partner who has limited liability up to the amount of his capital and there is at least one partner who has
unlimited liability. In case of loss, the partners having limited liability are bound to bear up to the amount of
their capital and no more can be collected from them. The limited partners cannot take part in the
management of the firm but they can check and inspect the books of accounts. The registration of such firm is
compulsory. The partnership Act, 1932 does not deal with this kind of partnership So, it IS not formed in our
country. It is formed under the English law partnership Act 1907.
2. Unlimited Partnership- Unlimited partnership is a form of business organization in Which all

the partners have unlimited liability. In case of loss, if the assets of the firm are not sufficient to meet the
claims of the creditors, the personal property of the partners can also be used for this purpose. This type of
partnership is formed under; The Partnership Act 1932 and is further subdivided under the
following headings.
 Particular Partnership: According to section 8 of the partnership Act 1932, a person may become a
partner with another person in particular ventures or undertakings. So when a partnership is formed for the
completion of the particular venture, job or undertaking, the partnership is known particular partnership.
 Partnership at will: According to section 7 of The Partnership Act 1932, where no provision is made by
contract between the partners for the duration of their partnership, or for the termination of their
partnership, the partnership is ‘Partnership at Will” So when the partnership is formed for an indefinite
period of time or is nothing mentioned for the termination of the partnership, the partnership is said to be a
partnership at will.
 Partnership for fixed Term: When the partnership is formed for a definite (fixed) period of time the
partnership is known as a partnership for a fixed period. When the term of period expires, partnership comes
to an end.
Rights of a Partner
1) Every partner has a right to take part in the conduct and management of business.
2) Every partner has a right to be consulted and heard in all matters affecting the business of the partnership.
3) Every partner has a right of free access to all records, books and accounts of the business, and also to
examine and copy them.
4) Every partner is entitled to share the profits equally.
5) A partner who has contributed more than the agreed share of capital is entitled to interest at the rate of 6 per
cent per annum. But no interest can be claimed on capital.
6) A partner is entitled to be indemnified by the firm for all acts done by him in the course of the partnership
business, for all payments made by him in respect of partnership debts or liabilities and for expenses and
disbursements made in an emergency for protecting the firm from loss provided he acted as a person of
ordinary prudence would have acted in similar circumstances for his own personal business.
7) Every partner is, as a rule, joint owner of the partnership property. He is entitled to have the partnership
property used exclusively for the purposes of the partnership.
8) A partner has power to act in an emergency for protecting the firm from loss, but he must act reasonably.
9) Every partner is entitled to prevent the introduction of a new partner into the firm without his consent.
10) Every partner has a right to retire according to the Deed or with the consent of the other partners. If the
partnership is at will, he can retire by giving notice to other partners.
11) Every partner has a right to continue in the partnership.
12) A retiring partner or the heirs of a deceased partner are entitled to have a share in the profits earned with the
aid of the proportion of assets belonging to such outgoing partner or interest at six per cent per annum at the
option of the outgoing partner (or his representative) until the accounts are finally settled.
Duties of a Partner
1) Every partner is bound to diligently carry on the business of the firm to the greatest common advantage.
Unless the agreement provides, there is no salary.
2) Every partner must be just and faithful to the other partners.
3) A partner is bound to keep and render true, proper, and correct accounts of the partnership and must permit
other partners to inspect and copy such accounts.
4) Every partner is bound to indemnify the firm for any loss caused by his willful neglect or fraud in the conduct
of the business.
5) A partner must not carry on competing business, nor use the property of the firm for his private purposes. In
both cases, he must hand over to the firm any profit or gain made by him but he must himself suffer any loss
that might have occurred.
6) Every partner is bound to share the losses equally with the others.
7) A partner is bound to act within the scope of his authority.
8) No partner can assign or transfer his partnership interest to any other person so as to make him a partner in
the business.
Procedure for Registration

1) A firm may be registered at any time (not merely at the time of its formation but subsequently also) by filing
an application with the Registrar of Firms of the area in which any place of business of the firm is situated or
proposed to be situated.
 Application shall contain:-
 Name of the firm
 Place or principal place of business
 Names of any other places where the firm carries on business
 Date on which each partner joined the firm
 Name in full and permanent address of partners.
 Duration of the firm
 Application shall be signed and verified by all the partners or their duly authorized agents.
 Application shall be accompanied by prescribed fee as well as the following documents:

 Prescribed Registration Form for Incorporation of a firm. (Form No. 1 and Specimen of Affidavit)
 Certified true copy of the Partnership deed entered into.
 Ownership proof of the principal place of business
 Name of the firm should not contain any words which may express or imply the approval or patronage of the
government except where the Government of India has given its written consent for the use of such words as
part of the firm’s name.
2) When the Registrar of Firms is satisfied that the provisions of section 58 have been duly complied with, he
shall record an entry of the statement in the Register of Firms and issue a Certificate of Registration.
3) Penalty for furnishing false particulars (Section 70) : Any person who signs any statement, amending
statement, notice or intimation under this Chapter containing any particular which he knows to be false or
does not believe to be true or containing particulars which he knows to be incomplete or does not believe to
be complete, shall be punishable with imprisonment which may extend to three months, or with a fine or
with both.
4) Any alterations, subsequent to Registration shall be notified to the registrar:-
 Change in firm name and principal place of business (Section 60)--- These events shall require sending of a
new application form along with the prescribed fee, duly signed and verified by all the partners.
 Change relating to opening and closing of branches. (Section 61)--- When a registered firm discontinues
business at any place or begins to carry on business at any place, such place not being its principal place of
business, any partner or agent of the firm may send intimation thereof to the Registrar.
 Change in the name and permanent address of any partner (Section 62)--- When any partner in a registered
firm alters his name or permanent address, an intimation of the alteration may be sent by any partner or
agent of the firm to the Registrar.
 Change in the constitution of the firm and its dissolution [Section 63(1)] ---- When change occurs in the
constitution of the firm, any of the new, continuing or the outgoing partner, while when a registered firm is
dissolved, any person who was a partner immediately before the dissolution or the agent of any such partner
or person specially authorized on his behalf, may give notice of such a change to the Registrar, specifying the
date thereof.
 Under Section 63(2)---When a minor who has been admitted to the benefits of partnership in a firm attains
majority and elects to become or not to become a partner, he or his agent specially authorized in this behalf,
may give notice to the Registrar that he has or has not become a partner.
 Accordingly, the various forms prescribed under the Indian Partnership Act, 1932, for the alterations in the
registered partnership firm are:-
 Form No. II: For change of principle place of business & change in the name of the firm.
 Form No. III: For change of the other then principle place of business.
 Form No. IV: For change of name of the partners & permanent address of the partners.
 Form No. V: For change of constitution of firm on addition or retirement of partner.
 Form No.VI: For dissolution of the firm
 Form No. VII: For minor partner attains the age of majority.
Note: Partnership Act, 1932 does not provide for compulsory registration of firms. It is optional for
partners to set the firm registered and there are no penalties for non-registration.
Disadvantages of non-registration
Section 69 of the Act which deals with the effects of non-registration denies certain rights to an unregistered
firm. Under the Act:
1) A partner of an unregistered firm cannot file a suit in any court against the firm or other partners for the
enforcement of any right arising from a contract or right conferred by the Partnership Act unless the firm is
registered and the person suing is or has been shown in the Register of Firms as a partner in the firm.
2) No suits to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm
against any third party unless the firm is registered and the persons suing are or have been shown in the
Register of Firms as partners in the firm.
3) An unregistered firm or any of its partners cannot claim a set off (i.e. mutual adjustment of debts owned by
the disputant parties to one another) or other proceedings in a dispute with a third party. Hence, every firm
finds it advisable to get it registered sooner or later.
Reconstitution of a Partnership firm

Any change in the existing agreement is known as reconstitution of the partnership firm. Thus, the existing
agreement ends and a new agreement is formed with the changed relationship among the members of the
partnership firm and its composition.
Reconstitution of a partnership firm takes place whenever there is a change in the profit sharing ratio among
the partners, admission of a new partner, retirement of a partner and death or insolvency of a partner.
Forms of Reconstitution of a Partnership Firm

1) Change in the profit sharing ratio among the Existing Partners
Sometimes the partners may decide to change their profit sharing ratio due to factors like change in their roles
in the firm, change in their capital contribution ratio, etc. Any change in the old profit sharing ratio will amount
to a reconstitution of the partnership firm.
For example, A, B, and C were partners in a firm sharing equal profits. Due to some reasons, C shifts to
another city and is therefore unable to take part in the business actively. Thus, it is decided that now the new
profit sharing ratio shall be 2:2:1. This amounts to the reconstitution of a firm.
2) Admission of a Partner
A firm has a right to admit a new partner at any time during his life time. A new partner is admitted in a
business due to requirement of more capital or may be to take advantage of the experience and competence of
the newly admitted partner or to increase the goodwill and reputation of the business.
A new partner can be introduced into a firm as a partner only with the consent of all existing partners. A person
who is introduced as a partner into firm does not become liable for any acts of the firm done prior to his
becoming a partner.
The liability of a new a partner commences from the date of his admission and he is not liable for the acts
relating to the period prior to his becoming partner.
3) Retirement of a partner
Any partner may, with the consent of all the other partners or in terms of the deed of partnership where
Partnership is at will, by giving notice in writing to all partners, to that effect, dissolve the Partnership or retire
from Partnership.
A retiring partner, however, continues to be liable to third parties even if the liability is taken over by the
remaining partners.
4) Dissolution of Partnership firm
The dissolution of a firm means discontinuance of its activities. When the working of a firm is stopped and the
assets are realised to pay various liabilities it amounts to dissolution of the firm. The dissolution of a firm
should not be confused with the dissolution of partnership. When a partner agrees to continue the firm under
the same name, even after the retirement or death of a partner, it amounts to dissolution of partnership and not
of firm.
The remaining partners may purchase the share of the outgoing or deceased partner and continue the business
under the same name; it involves only the dissolution of partnership. The dissolution of firm includes the
dissolution of partnership too. The partners have a contractual relationship among themselves. When this
relationship is terminated it is an end of the firm.
A firm may be dissolved under the following circumstances:
1) Dissolution by Agreement (Section 40): A partnership firm can be dissolved by an agreement

among all the partners. Section 40 of Indian Partnership Act, 1932 allows the dissolution of a partnership firm
if all the partners agree to dissolve it. Partnership concern is created by agreement and similarly it can be
dissolved by agreement. This type of dissolution is known as voluntary dissolution.
2) Dissolution by Notice (Section 43): If a partnership is at will, it can be dissolved by any partner
giving a notice to other partners. The notice for dissolution must be in writing. The dissolution will be effective
from the date of the notice, in case no date is mentioned in the notice, and then it will be dissolved from the
date of receipt of notice. A notice once given cannot be withdrawn without the consent of all the partners.
3) Compulsory Dissolution (Section 41): A firm may be compulsorily dissolved under the following
situations:
a) Insolvency of Partners: When all the partners of a firm are declared insolvent or all but one partner is
insolvent, then the firm is compulsorily dissolved.
b) llegal Business: The activities of the firm may become illegal under the changed circumstances. If
government enforces prohibition policy, then all the firms dealing in liquor will have to close down their
business because it will be an unlawful activity under the new law. Similarly, a firm may be trading with the
businessmen of another country. The trading will be lawful under present conditions.
After some time a war erupts between the two countries, it will become a trading with an alien enemy and
further trading with the same parties will be illegal. Under new circumstances the firm will have to be
dissolved. In case a firm carries on more than one type of business, then illegality of one work will not amount
to dissolution of the firm. The firm can continue with the activities which are lawful.
4) Contingent Dissolution (Section 42): In case there is no agreement among partners regarding certain
contingencies, partnership firm will be dissolved on the happening of any of the situations:
a) Death of a Partner: A partnership firm is dissolved on the death of any of the partner.
b) Expiry of the Term: A partnership firm may be for a fixed period. On the expiry of that period, the firm
will be dissolved.
c) Completion of Work: A partnership concern may be formed to carry out a specified work. On the
completion of that work the firm will be automatically dissolved. If a firm is formed to construct a
road, then the moment the road is completed the firm will be dissolved.
d) Resignation by a Partner: If a partner does not want to continue in the firm, his resignation from
the concern will dissolve the partnership.
5) Dissolution through Court (Section 44): A partner can apply to the court for dissolution of the firm
on any of these grounds:
a) Insanity of a Partner: If a partner goes insane, the partnership firm can be dissolved on the petition of
other partners. The firm is not automatically dissolved on the insanity of a partner. The court will act only on
the petition of a partner who himself is not insane.
b) Misconduct by the Partner: When a partner is guilty of misconduct, the other partners can move the
court for dissolution of the firm. The misconduct of a partner brings bad name to the firm and it adversely
affects the reputation of the concern. The misconduct can be in business or otherwise. If a partner is jailed for
committing a theft, it will also affect the good name of the firm though it has nothing to do with the business.
c) Incapacity of a Partner: If a partner other than the suing partner becomes incapable of performing his
duties, then partnership can be dissolved.
d) Breach of Agreement: When a partner willfully commits breach of agreement relating to business, it
becomes a ground for getting the firm dissolved. Under such a situation it becomes difficult to carry on the
business smoothly.
e) Transfer of Share: If a partner sells his share to a third party or transfers his share to another person
permanently, other partners can move the court for dissolving the firm.
f) Regular Losses: When the firm cannot be carried on profitably, then the firm can be dissolved. Though
there may be losses in every type of business but if the firm is incurring losses continuously and it is not
possible to run it profitably, then the court can order the dissolution of the firm.
g) Disputes among Partners: Partnership firm is based on mutual faith. If partners do not trust each other,
then it will not be possible to run the business. When the partners quarrel with each other, then the very basis of
partnership is lost and it will be better to dissolve it.
Form No. 1 Filing Fee Rs. 3/-

(Affix Court fee Stamp).
THE INDIAN PARTNERSHIP ACT, 1932

Application for Registration of Firm by the Name
Presented and forwarded to the Registrar of Firm for filing by
We, the undersigned being the partners of the firm M/s *

hereby apply for registration of the said firm and for that purpose supply the following particulars in pursuance
of section 58 of the Indian Partnership Act, 1932:-
The firm name*
Places of Business Principal Place

Other Places
Name of partners in full Date of joining the firm Permanent address in full
1.
2.
3.
4.
5.
6.
Duration of the firm:-
Station:- Date:-
Signature of all partners or their specially

authorised agents.
(*) Enter the name of the firm.

If any partner is a minor the fact whether he/she is entitled to the benefit of partnership should be set out
herein.
I,......................................................... son of ......................................................................, aged ........
years of .............................. religion do hereby declare that the above statement is ture and correct to the best
of my knowledge and belief.
Date ............................ Signature ..............................................
Witness (Name, address & signature with official rubber stamp)
I, ........................................................ son of .................................................................., aged ............

years of ............................... religion do hereby declare that the abovestatement is ture and correct to the best
Date ............................. Signature...............................................
I, ........................................................ son of ...................................................................., aged ..........

years of ................................ religion do hereby declare that the abovestatement is ture and correct to the best
Date.............................. Signature ...............................................
I, ........................................................ son of
.................................................................,
aged .............
years of ............................... religion do hereby declare that the abovestatement is ture and correct to the best
Date............................... Signature ..............................................
I, ........................................................ son of ................................................................, aged ..............

Date............................. Signature ...............................................
I, ........................................................ son of ..............................................................., aged ...............

Date............................. Signature ...............................................
N.B :- 1. This form must be signed by all partners or their agents specially authorised in this behalf in the
presence of a witness who must be either a Gazetted Officer, Advocate, Magistrate 1st class or Registered
Chartered Accountant with their official rubber stamp.
2. Making a false, untrue or incomplete statement is punishable under section 70 of the Indian Partnership
Act, 193
Chapter-3
Employee State Insurance Act, 1948
Introduction
It is pioneering measure in social insurance in India. The Health Insurance was first discussed in 1927 by
Indian legislature. ESI Act was originally called “workmen’s state insurance bill, 1946”. Then it came
into force on 19th April, 1948.
The Employee State Insurance Act (ESIC), 1948, is a piece of social welfare legislation enacted primarily
with the object of providing certain benefits to employees in case of sickness, maternity and employment
injury and for providing medical benefits to employees of factories and establishments, and their
dependents. This act becomes a wider spectrum than factory act, in the sense that the factory act is
concerned with the health, safety, welfare, leave etc. of the workers employed in the factory premises
only. But the benefits of this act extend to employees whether working inside the factory or establishment
or elsewhere or they are directly employed by the principal employee or through an intermediate agency,
if the employment is incidental or in connection with the factory or establishment.
The ESI Act is a social welfare legislation enacted with the object of providing certain benefits to
employees in case of sickness, maternity benefits, pension to dependents of deceased workers and
compensation of fatal or other injuries and diseases.
Applicability
The ESI Act extends to whole of India.
It applies to all the factories including Government factories (excluding seasonal factories), which
employ 10 or more employees and carry on a manufacturing process with the aid of power and 20
employees where manufacturing process is carried out without aid of power. The act also applies to shops
and establishments. Generally, shops and establishments employing more than 20 employees are covered
by the Act.
The applicability of the scheme is explained through a flow chart below:
Your mind is a powerful thing. When you fill it with positive thoughts,
your life will start to change.
Note: The scheme under the act also supports restaurants, motor road transports,
newspaper establishments and undertakings, movies and preview theatres, hotels,
shops. The threshold for coverage of establishment is 20 employees in Maharashtra
and Chandigarh.
Non Applicability
The act doesn’t apply to any member of:
 Indian Navy
 Indian Military
 Indian Air Forces
Coverage
This Act covers all employees including casual, temporary or contract employees drawing wages less
than ₹21,000 per month.
Note: The ceiling limit has been raised from ₹7,500 to ₹10,000 w.e.f 1.10.06. Later
on it was increased to ₹15,000 in 2010. Now the present ceiling limit is ₹21,000.
Benefits
The section 46 of the Act envisages following six social security benefits:-
 Medical Benefits: Full medical care is provided to an Insured person and his family
members from the day he enters insurable employment. There is no ceiling on expenditure on the
treatment of an Insured Person or his family member. Medical care is also provided to retired and
permanently disabled insured persons and their spouses on payment of a token annual premium
of Rs.120/-
Full Medical Care Hospitalisation facilities, drugs, dressing, etc.
consultation with the specialists, special medicines,

Expanded Medical Care special laboratory tests and X-Ray examinations
to young children of insured persons, vaccines like diphtheria,

Immunization pertusis, polio, tetanus, measles, mumps, rubella, tuberculosis etc.
provided artificial limbs, hearing aids, and artificial appliances like

Supply of special aids spinal supports, cervical collars, walking calipers, crutches, wheel
chairs and cardiac pace makers
 Sickness benefit: Sickness Benefit in the form of cash compensation at the rate of 70 per
cent of wages is payable to insured workers during the periods of certified sickness for a
maximum of 91 days in a year. In order to qualify for sickness benefit the insured worker is
required to contribute for 78 days in a contribution period of 6 months.
Sickness Benefit
Extended Sickness Enhanced

Benefit Sickness Benefit
 Extended Sickness Benefit- SB extendable upto two years in the case of 34

malignant and long-term diseases at an enhanced rate of 80 per cent of wages. An IP
suffering from certain long term diseases is entitled to ESB, only after exhausting
Sickness Benefit to which he may be eligible.
Note: For the list of diseases visit https://www.esic.nic.in/extended-sickness-

benefit
 Enhanced Sickness Benefit- Enhanced Sickness Benefit equal to full wage is

payable to insured persons undergoing sterilization for 7 days/14 days for male and
female workers respectively.
It was introduced w.e.f 1.8.1976 as an incentive to IPs/IWs for undergoing Vasectomy
/Tubectomy. Insured Persons eligible to ordinary sickness benefit are paid enhanced
sickness benefit at 100% of average daily wages for undergoing sterilisation operations
for family welfare. Duration of enhanced Sickness Benefits is upto 7 days in the case of
Vasectomy and upto 14 days in the case of the Tubectomy from the date of operation or
from the date of admission in the hospital as the case may be. The period is extendable in
case of post-operative complications.
 Maternity Benefit: Maternity Benefit for confinement/pregnancy is payable for Twenty

Six (26) weeks, which is extendable by further one month on medical advice at the rate of full
wage subject to contribution for 70 days in the preceding Two Contribution Periods.
 Disablement benefits: There are 2 types of Disablement Benefits:
Disablement Benefit
Temporary Sickness Permanent Sickness

Benefit Benefit
 Temporary Disablement- From day one of entering insurable employment &

irrespective of having paid any contribution in case of employment injury. Temporary
Disablement Benefit at the rate of 90% of wage is payable so long as disability
continues.
 Permanent Disablement- The benefit is paid at the rate of 90% of wage in the
form of monthly payment depending upon the extent of loss of earning capacity as
certified by a Medical Board.

 Dependents benefits: Dependent Benefits paid at the rate of 90% of wage in the form of
monthly payment to the dependents of a deceased Insured person in cases where death occurs due
to employment injury or occupational hazards.
 A widow can receive this benefit on a monthly basis for life or till remarriage.
 A son or daughter can receive this benefit till he or she attains 18 years of age.
 Other Benefits:
 Funeral Expenses: An amount of ₹15,000/- is payable to the dependents or to the
person who performs last rites from day one of entering insurable employment.
 Confinement Expenses: An Insured Women or an I.P.in respect of his wife in case

confinement occurs at a place where necessary medical facilities under ESI Scheme are
not available.
Contribution
The contribution payable to the Corporation in respect of an employee shall comprise of employer's
contribution and employee's contribution at a specified rate. The rates are revised from time to time.
Currently, the employee's contribution rate (w.e.f. 1.1.97) is 1.75% of the wages and that of employer's is
4.75% of the wages paid/payable in respect of the employees in every wage period.
For newly implemented areas, the contribution rate is 1% of wages of Employee and 3% payable by
Employers for first 24 months (w.e.f. 06.10.2016)
Note: Employees in receipt of a daily average wage upto Rs.137/- are exempted from
payment of contribution. Employers will however contribute their own share in
respect of these employees.
Collection of Contribution
An employer is liable to pay his contribution in respect of every employee and deduct employees
contribution from wages bill and shall pay these contributions at the above specified rates to the
Corporation within 15 days of the last day of the Calendar month in which the contributions fall due. The
Corporation has authorized designated branches of the State Bank of India and some other banks to
receive the payments on its behalf.
Contribution Period and Benefit Period

There are two contribution periods each of six months duration and two
corresponding benefit periods also of six months duration as under.
Contribution Period Cash Benefit Period
1st April to 30th Sep. 1st Jan. of following year to 30th June.
1st Oct. to 31st March 1st July to 31st Dec.
Duties of Employers
1. It is the duty of the employer to register the factory or establishment online under the Act, within
15 days when the Act becomes applicable to the factory or the establishment. This can also be
done by submitting Form 01 to the Regional office.
2. The employer will submit a Declaration Form in respect of all coverable employees in the unit
within 10 days from the date of registration.
3. He shall report to E.S.I authorities of any accident in place of employment, within 24 hours.
4. He shall submit half yearly Return of Contribution by 12th May/11th Nov. every year.
Penaties
1. Penalty for false statement- imprisonment upto 6 months and/or fine upto ₹2000
2. Penalty for non compliance with provisions- imprisonment or fine or both.
3. Penalty for failure to pay a contribution- imprisonment from 6 months to 3 years with
₹5000. In severe cases minimum imprisonment is 1 year with fine ₹10,000.
Chapter-4
Employees Provident Funds and Miscellaneous Provisions Act, 1952

The Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 applies to all states in India
except Jammu and Kashmir. The purpose of a provident fund is to provide financial security and
stability to elderly people on retirement. When one begins employment, they are expected to contribute
on a regularly basis (typically monthly) to their PF fund. The employer is also expected to contribute to
its employee’s retirement fund.
This act is an important piece of Labour Welfare legislation enacted by the Parliament to provide social
security benefits to the workers. At present, the Act and the Schemes framed there under provide for three
types of benefits:
 Employees Provident Funds Scheme, 1952

 Employees’ Pension Fund, 1976
 Employees Deposit Linked Insurance Fund, 1976
In Oct 2014, the Employees Provident Fund Organization (EPFO) launched a Universal Account Number
(UAN) where every employee was given a unique Provident Fund (PF) account number which is not
associated with the a particular employer. Therefore, an employee can now change a job without having
to transfer funds from one account to another.
Applicability
The Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 applies to:
 Any business or establishment within these industries (Industry List) or any activity notified by
Central Government in the Official Gazette
 Employs 20 or more employees (including contract workers)
 Applicable to cinema theaters with over 5 employees
 Once registered, a business will continue be applicable and liable under the Act even if the
employee count falls below 20 persons
Note: Business that does not meet the criteria above can choose to voluntarily
register with the EPFO under Section 1(4) if the employer and employees are both
willing.
Does not apply to

 Factories or establishments employing less than 20 employees. However, once Act becomes
applicable, it continues to apply even if subsequently, the number is lower than 20
 Banks doing business in more than one State
 Coal mines
 Units established under Cooperative Societies Act employing less than 50 workers and working
without aid of power
 Other establishments belonging to or under control of Central Government or State Governments
and whose employees are entitled to benefits of contributory provident fund or pension.
 Tea factories in Assam
 Exemption granted by Central Government by a special notification.
Which Employees are eligible for PF?
Benefits to Employees
 Tax Benefit:
PF contribution is eligible for Income Tax deduction U/S 80C. Apart from that, the interest rate
earned is exempt from income tax.
 LifeLong Pension
While employers and employees both contribute 12% of wages in EPF, 8.33% of the employer's
share is diverted towards the Employees' Pension Scheme (EPS). According to the retirement
fund body, 10 years of contributory membership ensures lifelong pension under Employees'
Pension Scheme 1995.
 Insurance benefit
Then there are the benefits promised under the Employees Deposit Linked Insurance (EDLI)
Scheme, which is an insurance cover provided by the EPFO. The registered nominee will receive
a lump-sum payment in the event of the death of the person insured, during the period of the
service. Last February, EPFO enhanced the minimum assurance limit under this scheme to ₹2.5
lakh, up from ₹1.5 lakh previously. The maximum assurance benefit is capped at ₹6 lakh.
Note: Any employee who has an EPF account automatically becomes eligible for this
scheme but he/she does not need to make any contribution towards it. On the other
hand, the contribution of an employer stands at 0.5% of the basic salary or a
maximum of ₹75 per employee per month. If there is no other group insurance
scheme, the maximum contribution is capped at ₹15,000 per month.
 Premature withdrawal option

The body allows its members to make partial withdrawals after 5-10 years of service for meeting
specific needs including medical treatment, home loan repayment and unemployment. For e.g:
 Up to 50% of an employee's share of contribution to the EPF can be withdrawn for

marriage or education purposes and
 An amount up to 36 times the monthly wage plus dearness allowance can be withdrawn
for house construction.
 EPFO also allows withdrawal of up to 90% of the accumulation in the PF account for
repaying a home loan.
 The retirement fund body also gave its subscribers an option to withdraw up to 75% of
their total PF balance after one month of unemployment. This will be a non-refundable
advance, which means that a member can withdraw money without closing his account.
 Members would also have an option to withdraw the remaining 25% of their funds and
opt for a final settlement of their accounts after completion of two months of
unemployment under the new provision. Alternatively, they can choose to retain their
account with the EPFO, which can be used after finding another job.
 Accumulation plus interest upon retirement, resignation and death

EPF balance and interest on that keeps on accumulating and can be withdrawn on retirement,
resignation or death of the employee.
Contribution
A provident fund is created with a purpose of providing financial security and stability to employees. A
person starts his contribution in the PF fund once he joins a company as an employee. The contributions
are made on a regular basis. The primary purpose of PF fund is to help employees save a fraction of their
salary every month so that he can use the same in an event that the employee is temporarily or no longer
fit to work or at retirement.
Contribution Accounts Administrations

Accounts
Total
EPF EPS EDLI EPF EDLI
Employe 12 0 0 0 0 12
e
Employer 3.67 8.33 0.5 1.10 0.01 13.6

1
Total 15.67 8.33 0.5 1.10 0.01 25.6

1
Employers and employees both contribute @12% of wages in contribution accounts. Further, the
employers also contribute towards administration of the benefits under the EPF & MP Act.
Note: The rate of contribution for certain category of establishments is 10%.

These are:-
 Any establishment in which less than 20 employees are employed
 Any sick industrial company and which has been declared as such by
the Board for Industrial and Financial Reconstruction
 Any establishment which has at the end of any financial year has
accumulated losses equal to or exceeding its entire net worth, and
 Any establishment in following industries: - Jute, Beedi, Brick, Coir
and Guar gum Factories.
 The above contribution is to be deposited within 15 days of close of every month. For late
deposition, Interest @12% and penalty may be levied.
 EPF account carries interest @ 8.55% on monthly remaining balance.
EPF WITHDRAWAL
When can be EPF WITHDRAWN?
One may choose to withdraw EPF completely or partially. EPF can be completely withdrawn under any
of the following circumstances:
a) When an individual retires from employment

b) When an individual remains unemployed for a period of 2 months or more. Here, it needs a
mention that the fact that the individual is unemployed for more than 2 months has to be
certified by a gazette officer.
c) Partial withdrawal is allowed in cases such as marriage, education, purchase of land,
construction of a house or home loan repayment.
Note: The fund withdrawal from the EPFO before the completion of 5 years of
continuous service is subject to tax. The principal, as well as the accrued interest,
is subject to tax. Withdrawals as a result of unemployment owing to ill-health or
termination, however, do not attract tax.
According to the scheme, an EPFO member can withdraw the entire amount standing to the credit
of the fund in the following cases:
1) On retirement from service after attaining the age of 55 years. A member who has not attained
the age of 55 years at the termination of the service shall withdraw the full amount standing to
his/her credit.
2) A member can withdraw the total amount from the retirement kitty on retirement on account
of permanent and total incapacity for work due to bodily or mental infirmity. This incapacity has
to be certified by a medical practitioner. A member who is suffering from tuberculosis or leprosy
even if contracted after leaving the service of an establishment on grounds of illness but before
the payment has been authorized, shall be deemed to have been permanently incapacitated for
work.
3) In cases of migration from India for a permanent settlement abroad, the withdrawal is allowed.
In cases of taking employment abroad, withdrawal is allowed
4) The withdrawal is allowed if the service is terminated in case of mass or individual

retrenchment. The payment shall be made after completing a continuous period of at least 2
months from the date of unemployment from the date on which the member makes the
application for withdrawal.
5) Earlier the members were allowed to withdraw the full amount if the member ceases to be an
employee. It was allowed if the member continued to remain unemployed for at least two months
immediately preceding the date on which he makes an application for withdrawal. Recently, the
rules have changed and members are allowed to withdraw 75% of the accumulated corpus after a
month of the termination of service. If unemployed for two months, the members have the option
to withdraw the remaining 25% for a final settlement. However, this two-month period is not
applied in case of a female member resigning from the establishment for the purpose of getting
married.
According to the Employees’ Provident Fund scheme, there are 14 other cases when an EPFO member
can partially withdraw the money.
1) Withdrawal of money from the EPFO fund is allowed for the post-matriculation education
of a member’s son or daughter. However, the withdrawal is limited to 50 per cent of the
member’s share in the contribution.
2) The withdrawal is allowed for the member’s marriage, the marriage of his or her daughter,
son, sister or brother. However, the withdrawal is limited to 50 per cent of the member’s
share in the contribution.
Note: In both the cases, the withdrawal is allowed only when the member has
completed seven years of membership of the fund.
3) If employees are rendered unemployed without any compensation for more than 15 days, in
case a firm is closed down, or when an employee does not receive his/her wages for a
continuous period of two months or more, money can be withdrawn from the EPF pot.
4) In cases where the employee is dismissed or retrenched and the same is challenged by the
member in a court of law, the member is allowed withdrawal up to 50 per cent of the amount
in the fund.
5) If a factory or similar establishment remain closed for more than six months, the member
can withdraw 100 per cent of the employer’s contribution and interest if he continues to
remain unemployed and no compensation is paid to him.
6) Illness due to tuberculosis, leprosy, paralysis, cancer, mental derangement or heart ailment
etc allows withdrawal from the EPF pot. The lower of the member’s basic wages and
dearness allowances for six months or member’s share of contribution with interest is
allowed to be withdrawn.
7) If a member’s property is damaged by unforeseen natural calamities like floods and
earthquakes or riots, he/she can seek lower of ₹5,000 or 50 per cent of his/her contribution
from the EPF money.
8) A member may be allowed a non-refundable advance from the EPFO account if there is a
cut in the supply of electricity to a factory in which he is employed. The state government
has to certify that the cut in the supply of electricity was enforced in the area. Also, the
employer has to certify that the fall in the member’s pay was due to the cut in the supply of
electricity.
9) Withdrawal from the EPFO kitty is allowed to a physically-handicapped member for
purchasing equipment required to minimize the hardship. The member is required to
produce a medical certificate from the competent medical practitioner. The lowest of the
member’s basic wages and dearness allowance for six months or, his/her own share of
contributions with interest thereon or the cost of the equipment is allowed to be withdrawn.
10) Withdrawal up to 90 per cent of the EPF amount is allowed, the later of the attainment of the
age of 54 years or within one year before actual retirement on superannuation.
11) EPF withdrawal of up to 90 per cent of the total corpus at any time after attaining the age of
55 years by the member is allowed, if the amount is to be transferred to the Life Insurance
Corporation of India for investment in Varishtha Pension Bima Yojana.
12) EPFO members can withdraw money for construction of house or purchase of a house/flat to
live or purchase of a construction site. The member is required to have completed five years’
membership of the EPFO.
13) In order to pay the outstanding principal and interest of a loan, withdrawal is allowed from
the amount standing to the credit of the member in the fund. Withdrawal is allowed if the
loan is obtained in the member’s name or spouse’s name or taken jointly by the member and
the spouse.
14) EPFO members can withdraw money for construction of house or purchase of a dwelling
house/flat. It includes a flat in a building jointly owned with others. The purchase or
construction must be from the Central government, state government or a housing agency
under a housing scheme. A five years’ membership with the EPFO is required to be
completed.
Procedure for EPF withdrawal
Broadly, withdrawal of EPF can be done either by:
a. Submission of a physical application for withdrawal

b. Submission of an online application
Submission of a physical application

For this, one can download the new composite claim (Aadhar)/ composite claim form (Non-Aadhar)
from:
LINK: https://www.epfindia.gov.in/site_en/Downloads.php
The new composite claim form (Aadhaar) can be filled and submitted to the respective jurisdictional
EPFO office without the attestation of the employer.
The new composite claim form (Non- Aadhaar) can be filled and submitted to the respective
jurisdictional EPFO office with the attestation of the employer.
Submission of an online application

Interestingly, the EPFO has very recently come up with the online facility of withdrawal which has
rendered the entire process easier and less time-consuming.
Prerequisite: To apply for withdrawal of EPF online through EPF Portal, make sure that the
following conditions are met:
1. UAN (Universal Account Number) is activated and the mobile number used for activating the
UAN is in working condition.
2. UAN is linked with your KYC i.e. Aadhaar, PAN and bank details along with the IFSC code.
Steps to apply for EPF withdrawal online:
Step1: Go to the UAN portal by clicking

https://unifiedportal-mem.epfindia.gov.in/memberinterface/
Step 2: Login with your UAN and password and enter the captcha
Step 3: Go to the tab Online Services’ and select the option ‘Claim’ from the drop-down menu.
Returns
Provident Fund return must be filed by all entities every month .The due date is 25 th of each
month.Further, Final return is due on 25th of April for the year ended 31st March
Chapter – 5
Negotiable Instrument Act, 1881
The Negotiable Instruments Bill was passed by the Council and received assent on December 9, 1881.
The Act came into force from March 1, 1882.
The Act applies to the whole of India except the Indian Paper Currency Act, 1871,
What Is a Negotiable Instrument?

A negotiable instrument is a signed document that promises a sum of payment to a specified person or the
assignee.
A negotiable instrument is a transferable, signed document that promises to pay the bearer a sum of
money at a future date or on demand.
A Negotiable Instrument is that document that includes a ‘promise to pay’ a certain amount of money to
the bearer of the document. It’s a mode of transferring debt from one person to another. Negotiable
instrument are always in written form.
Because they are transferable and assignable some negotiable instruments may trade on a secondary
market.
Three classes of negotiable instruments are popular:
 Cheque
 Promissory Note
 Bill of Exchange
Essential features of a Negotiable Instrument

 It must be in writing
 It must be signed by the maker or drawer
 There must be a promise or an order to pay
 The promise or order must be unconditional
 It must call for payment in the form of money and money only
 It should call for the payment of certain sum
 The property in the instrument passes by mere delivery
 The consideration is also presumed to have been passed
 "At sight", 'On presentment" and "After sight"
 Negotiation by delivery and Negotiation by Endorsement
List of Negotiable Instruments according to English

Common Law
 Bank Notes
 Bill of Exchange
 Cheque
 Promissory Notes
 Banker's Draft
 Dividend Warrant
 Share Warrant
 Share Certificate
 Treasury Bills
 Holder in due course
 Travellers cheque
Cheque
A Cheque is a Negotiable Instrument. It is a bill of exchange drawn on a specified banker and not
expressed to be payable otherwise than on demand.
The modern definition of a cheque includes the electronic image of a truncated cheque or a cheque in
electronic form.
Note:
 A cheque in electronic form means a cheque which contains the exact mirror
image of a paper cheque, and is generated, written and signed in a secure system
ensuring the minimum safety standards with the use of digital signature (with or
without biometric signature) and a symmetric crypto system.
 Truncation means conversion into another form. A truncated Cheque means that
the physical cheque is converted into an electronic image.
Essential features of a Cheque

 It must be an order in writing
 It is an unconditional order
 It must be drawn on a banker
 Signature
 Payable to order or bearer
 Date
Note: A Cheque can be an open cheque or an uncrossed cheque. An open cheque is

the bearer cheque. It is payable over the counter on presentment by the payee to the
paying banker. While a crossed cheque is not payable over the counter but shall be
collected only through a banker. The amount payable for the crossed cheque is
transferred to the bank account of the payee.
What is Crossing of Cheque?
A cheque is a negotiable instrument. During the process of circulation, a cheque may be lost, stolen or the
signature of payee may be done by some other person for endorsing it. Under these circumstances the
cheque may go into wrong hands.
Crossing is a popular device for protecting the drawer and payee of a cheque. Both bearer and order
cheques can be crossed. Crossing prevents fraud and wrong payments. Crossing of a cheque means
"Drawing Two Parallel Lines" across the face of the cheque. Thus, crossing is necessary in order to have
safety. Crossed cheques must be presented through the bank only because they are not paid at the counter.
Kinds of crossings
 General Crossing
 Special Crossing
1. General Crossing
Generally, cheques are crossed when
 There are two transverse parallel lines, marked across its face or
 The cheque bears an abbreviation "& Co. "between the two parallel lines or
 The cheque bears the words "Not Negotiable" between the two parallel lines or
 The cheque bears the words "A/c. Payee" between the two parallel lines.
A crossed cheque can be made bearer cheque by cancelling the crossing and writing that the crossing
is cancelled and affixing the full signature of drawer.
2. Special or Restrictive Crossing
When a particular bank's name is written in between the two parallel lines the cheque is said to be
specially crossed.
Specimen of Special or Restrictive Crossing
The payment of such cheque is not made unless the bank named in crossing is presenting the
cheque. The effect of special crossing is that the bank makes payment only to the banker whose
name is written in the crossing. Specially crossed cheques are safer than generally crossed
cheques.
Promissory Note
A Promissory Note is an instrument in writing, not being a currency note, a cheque or a bill of exchange,
containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or
to the order of, a certain person, or to the bearer of the instrument
Essentials of a promissory note

1. The promissory note must be in writing.
2. The promissory note must contain an undertaking to pay.
3. The promise to pay must be unconditional one.
4. It must be signed by the maker.
5. The maker must be a certain person.
6. The undertaking must be to pay a certain and definite sum of money only.
7. It must be payable on demand or at a fixed or determinable future time.
8. The payment must be in legal money of the country and not in the form of food, grain or animal.
9. Revenue stamps or requisite value under the stamp Act of the country should be affixed.
10. Other matters of form like number, date, place etc. are usually found given in notes, but they are not
essentials in law.
11. A bank note or a currency note is not a promissory note within the meaning of this section.
12. A promissory note cannot be made payable to bearer on demand.
Parties to Promissory Note

1. Drawer: The one who makes the promise to another, to pay the debt is the drawer of the instrument.
He/ She are the debtor or borrower.
2. Drawee: The one, in whose favour the note is drawn, is the drawee. He/ She is the creditor who
provides goods on credit or lender, who lends money.
3. Payee: The one, to whom payment is to be made, is the payee of the negotiable instrument.
The drawee and payee can be the same person when the amount is to be paid to the person in whose
favour the note is drawn. However, when the amount is to be paid to another person, on the order of the
drawee, meaning that if the drawee transfers the instrument in favour of another person then, in that case,
payee would be different.
Further, the party that owes money to another party holds the promissory note and after discharging the
obligation completely, the drawee or payee (whatever the case may be) cancels the note and returns to the
drawer.
Bill of Exchange
Bill of exchange can be understood as a written negotiable instrument, that carries an unconditional order
to pay a specified sum of money to a designated person or the holder of the instrument, as directed in the
instrument by the maker. The bill of exchange is either payable on demand, or after a specified term.
In a business transaction, when the goods are sold on credit to the buyer, the seller can make the bill and
send it to the buyer for acceptance, which contains the details such as name and address of the seller and
buyer, amount of bill, maturity date, signature, and so forth.
Special Benefits of bill of exchange:

 A bill of exchange is a double secured instrument.
 In case of immediate requirement, a Bill may be discounted with a bank.
ESSENTIAL ELEMENTS OF BILL OF EXCHANGE

 It must be in Writing.
 Order to pay
 Drawee
 Signature of the Drawer
 Unconditional Order
 Parties
 Certainty of Amount
 Stamping
 Cannot be made Payable to Bearer on Demand
PARTIES TO A BILL OF EXCHANGE

1. Drawer: The maker of a bill of exchange is called the drawer.
2. Drawee: The person directed to pay the money by the drawer is called the drawee.
3. Payee: The person named in the instrument, to whom or to whose order the money are directed
to be paid by the instruments are called the payee.
Company
Law
Companies
Act,2017
Chapter-6
Company: Meaning and Features
Meaning
There are many definitions of a Company by various legal experts. However, Section 2(20) of the
Companies Act, 2013, defines the term ‘Company’ as follows: “Company means a company incorporated
under this Act or under any previous company law.”
A company is a legal entity formed by a group of individuals to engage in and operate a business—
commercial or industrial—enterprise. A company may be organized in various ways for tax and financial
liability purposes depending on the corporate law of its jurisdiction.
Characteristics of Company
Transferability
of Shares
Incorporated
Limited
Association
Liability
Artificial
Common Seal Company Person
Independent
Legal Entity
Perpetual
Separate
 Incorporated Association- A Property
Co. must be incorporated or registrated under Co. Act,
2013.Minimum number of members required for the purpose-
 Public Co.- 7
 Private Co.- 2
 One Man Company- 1
 Artificial Person- A co. is created by the law with certain rights and duties.
 Independent Legal Entity- A co. has a legal entity distinct and separate from its
constituent members (shareholders). It is an autonomous body, self-controlling and self-
governing.
 Separate property- The corporate property is clearly distinguished from the members’
property. Members have no direct proprietary rights to the company’s property but merely their
‘shares’.
 Perpetual Existence- A Co. being an artificial person death, insolvency or retirement of its
members leaves the Co. unaffected. Members may come and go but the Co. can go on forever.
 Common Seal- A Co. cannot sign like natural persons. Common seal is the official signature
of a Co.
 Limited Liability- Its members are not as such liable for its debts.
 Transferability of shares- One can sell one’s share of ownership rights to an interested
buyer as the shares of a company are transferable.
Lifting Of Corporate Veil

The principle of veil of incorporation is a legal concept that separates the personality of a
corporation from the personalities of its shareholders and protects them from being personally liable for
the company’s debts and other obligations. While a company is a separate legal entity, the fact that it can
only act through human agents that compose it, cannot be neglected. Since an artificial person is not
capable of doing anything illegal or fraudulent, the façade of corporate personality might have to be
removed to identify the persons who are really guilty. This is known as lifting of the corporate veil.
At times it may happen that the corporate personality of the company is used to commit frauds and
improper or illegal acts. Since an artificial person is not capable of doing anything illegal or fraudulent,
the façade of corporate personality might have to be removed to identify the persons who are really
guilty. This is known as ‘lifting of corporate veil’.
One of the main characteristic features of a company is that the company is a separate legal entity distinct
from its members. The most illustrative case in this regard is the case decided by House of
Lords- Salomon v. A Salomon & Co. Ltd.
In this case, Mr. Solomon had the business of shoe and boots manufacture. ‘A Salomon & Co. Ltd.’ was
incorporated by Solomon with seven subscribers-Himself, his wife, a daughter and four sons. All
shareholders held shares of UK pound 1 each. The company purchased the business of Salomon for
39000 pounds, the purchase consideration was paid in terms of 10000 pounds debentures conferring
charge on the company’s assets, 20000 pounds in fully paid 1 pound share each and the balance in cash.
The company in less than one year ran into difficulties and liquidation proceedings commenced. The
assets of the company were not even sufficient to discharge the debentures (held entirely by Salomon
itself) and nothing was left to the insured creditors. The House of Lords unanimously held that the
company had been validly constituted, since the Act only required seven members holding at least one
share each and that Salomon is separate from Salomon & Co. Ltd.
Chapter-7
Kinds of Companies
Types of Companies
On the basis of Incorporation
On the basis of Liability
On the basis of members
According to Domicile
Miscellaneous
1. On the basis of Incorporation
Chartered Statutory Registered

Company Company Company
a) Chartered Company- The crown in exercise of the royal prerogative has power to create a
corporate. Such Co. are called chartered Co. These types of Co. do not exist in India.
Example:- East India Co., Bank of England
b) Statutory Company- A Co. may be incorporated by means of a special act of the parliament or
any state legislature.
Example- LIC of India, RBI, Food Corporation of India, Delhi Metro Rail Corporation (DMRC)
c) Registered Company- Company registered under Companies Act, 2013 or earlier Company Act.
(eg. Company Act 1956)
2. On the basis of Liability
Company Company Unlimited

Limited by Limited by Company
Shares Guarantee
d) Company limited by Shares- When the liability of the members of a company is limited to the
amount if any unpaid on the shares, such a company is known as a company limited by shares.
Where the shares are fully paid up, no further liability rests on them.
e) Company limited by Guarantee- It is a registered Co. in which the liability of members is limited
to such amount as they may undertake to contribute to the assets of the co. in the event of its
being wound up. Thus, the liability of its members is limited to the amount of Guarantee
undertaken by them.
f) Unlimited Co.- A co. not having a limit on the liability of its members is termed as unlimited Co.
Such Co. are not popular in India.
3. On the basis of number of its members

g) Public company- A public company means a Co. which is not a private Co. There must be atleast
seven persons to form a public Co. It does not restrict the maximum number of members. It does
not prohibit any invitation to the public to subscribe for any shares. It requires adding the word
“Ltd.” at the end of its name.
h) Private Company- A private Co. means a Co. which by its articles of association:
 Restrict the right to transfer its share.

 Limits the number of its members to 50.
 Prohibit any invitation to public to subscribe for any shares or debentures of the Co.
 Where 2 or more persons hold 1 or more shares in a co. jointly, they are treated as
single member.
 Minimum number of members- 2
 Maximum number of members-200
 Required to add words “Pvt. Ltd.” at the end of its name.
On the basis
of members
Public Private
Company Company
4. According to Domicile
Foreign Domestic
Company Company
i) Foreign Company- It means a company incorporated outside India and having a place of work or
business in India.
j) Domestic Company- A company formed and registered in India.
5. Miscellaneous
Govt. Holding and One Man

Company subsidiary Company
Company
k) Government Company- It means any company in which not less than 5% of the paid up share
capital is held by the Central Govt., and/or by any State Govt. or Governments or partly by the
Central Government and partly by one or more State Govt. The subsidiary of a Govt. Co. is also a
Govt. Co.
l) Holding and subsidiary Co.- A co. is known as the holding Co. of another Co. A Co. is also
known as the subsidiary of another Co. when control is exercised by the latter over the former
called a subsidiary Co.
m) One Man Company- This is a co. in which one man holds practically the whole of the share
capital of the co. and in order to meet the statutory requirements of minimum no. of members,
some dummy members hold one or 2 shares each. The dummy members are usually nominees of
principal shareholder.
Chapter-8
Formation of the Company
The formation of a company is a very broader concept. The process and legal formalities for
establishing a particular company in own or another country are passed from different stages. The stages
and formation of company notes are:-
 Promotion stage of company formation,

 Registration or Incorporation stage of company formation,
 Commencement of business stage of company formation.
During the formation of a company, they require many legal documents such as the memorandum of
associations, articles of association, etc.
The introduction factor is a very major factor to determine the procedures and process of incorporation
of a company.
In this, the first step of Formation of a Company is to prepare valid documentation called
a Memorandum of Association (MoA). MOA of any company involves valid fundamental conditions so
that the nature of a company can be easily ascertained.
Under the Formation of a Company Act 2013, it is assumed that every company has its Memorandum
documentation because it is also the charter of the company. If seen, the company’s MoA works to keep
their external affairs in control while the Articles of Association (AoA) of the company works to keep
control of the internal affairs of the company.
At the time of registration of the company, there are certain conditions which require the approval of the
Registrar for the purpose of company’s registration. In order to fulfil the registration, the company will
have to include its name and headquarters where it will be located in its documents, after that, they will
get an order to get their company registered.
At the time of formation, they will also have to tell that our company is a public limited company or a
private limited company.
As you know, the Memorandum has a very large legal document so that we also called the charter of the
company and the principal document of the company. Likewise, no company can register without the
Memorandum of Association, because it helps to describe the rights and objects of the company.
Memorandum of Association (MoA) is a very important document for any company because this
document contains various legal documents like member’s names, signatures, address, and their holding
shares also.
Stages of formation of a Company
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1) Promotion Stage
This is the first stage of Formation of a Company and the word promotion refers to the allocation of
various activities designed for a particular company or enterprise. At the time of this stage, the company
needs a lot of things for the establishment like capital, property, business objects, efficiency, and so on.
The persons, who initiate the particular business or company, are known as promoters and any promoter
need will-power, capacity, diligence, courage, foresightedness, self-respect to start a business and become
successful. Promotion of a company is the combination or sum total of all the activities related to the
incorporation of a company. The promotion stage includes various stages to fulfil the desired results of
the first stage:-
 Discovery of an Idea- Discovery of an idea means finding or thinking about a

particularly new idea for establishing the new business. This step is a very important step
to initiate or expand the new business because it helps to provide the framework attitude
of the new business.
 Take Action- After the time of initiation, the promoters reached the investigation stage
for collecting the particular source of data from the market.
After the time of the investigation, now is the time to assemble the resources of the
company and keep it in a safe place and prepare it for your company’s formation.
2) Registration or Incorporation Stage
This is the second stage of formation of a company and at this stage, it is compulsory to decide the
name, location, and legal documentation of the company. This stage is very important because, in this
stage, the companies transfer our legal documents to the registrar office at the registrar of the
company. Incorporation brings a company into existence as a separate corporate legal entity. A
company may be formed by:
 Seven or more persons, where the company to be formed is to be public company.

 Two or more persons, where the company to be formed is to be a private company,
 One person, where the company to be formed is to be One Person Company that is to say, a
private Company.
The name of the members should be subscribed in Memorandum of Association (MOA).
The promoters have to go through the following preliminary steps before applying for
incorporation of the proposed company:
a. A company cannot be registered with a name which is considered to be undesirable in the

opinion of the Central Govt. the name should not be identical with or resemble too nearly
to the name of an existing company or registered company. Promoters are advised to
make an application in the Form1 A to ascertain the availability of maximum six names
in order of their preference.
b. A fee of ₹500 has to be paid alongside and the digital signature of the applicant
proposing the company has to be attached in the form.
c. After the name approval the applicant can apply for registration of the new company by
filing the forms (i.e. Form 1, 18 and 32) within 60 days of name approval.
d. Arrange for the drafting of the memorandum and articles of association by solicitors,
vetting the same by Registrar of the Companies and printing of the same.
e. The MOA and AOA must be signed by atleast 7 minimum members ( as the case may
be) along with address, description, occupation, etc. in the presence of atleast one
witness.
Certificate of Incorporation
Certificate of Incorporation is a legal document relating to formation of a company which confirms the
name by which the company is registered under the Companies Act and the date of incorporation. The
Registrar of Companies (ROC) issues certificate of incorporation in the prescribed form on the basis of
submission of the required documents and information laid down by the Companies Act.
3) Commencement of Business
This is the last stage of Formation of a Company and it means, at this stage, the company gets a legal
approval certificate from the registrar office for the purpose of running a specific company or business.
When a company’s legal documents are verified by any registrar under section 149(1) and section 149(2),
then the company gets a legal certificate to run the business.
Chapter-9
Memorandum of Association
Meaning
Memorandum of Association is the main document of a company which defines the powers and
objectives of a company. It lays down the fundamental conditions upon which alone the company is
allowed to be formed. It is also termed as Chartered or constitution of the company because it
governs the relationship of the company with the outside world.
Purpose of Memorandum
 It enables the shareholder to know the field of activity or to what purpose his money is going
to be utilized by the company and what risk he is taking in making the investment.
 Anyone who is dealing with the company will know whether the transaction he intends to
make with the company is within the objects of the company and not beyond the ultra vires
of its objectives.
Memorandum is required to be printed particulars about the signatories to the memorandum as

well as the witness, as to their address, description, divided into paragraphs, numbered
consecutively and signed by atleast seven persons (two in case of a private company) in the
presence of atleast one witness who will attest the signatures. The particulars about the
signatories to the memorandum as well as the witness, as to their address, description, occupation
etc., must also be entered.
Memorandum of association is a public document, therefore, every person who deals with the
company is presumed to have sufficient knowledge of its contents. It is open for public
inspection.
A company, on being required by a member, is bound to supply to him with a copy of its
memorandum on payment of the prescribed fee. The copy must be sent within seven days. In
case the company makes default in complying with this requirement, the company, and every
officer of the company who is in default shall be punishable for each offence, with a fine of
₹1000 per day till the default continues or ₹1 lakh whichever is less.
Clauses of Memorandum of Association

Memorandum must have the following clauses:
1) Name Clause
2) Situation Clause
3) Objects Clause
4) Liability Clause
5) Capital Clause
6) Subscription Clause
Name Clause
A company being a distinct legal entity must have a name of its own in order to establish its separate
identity.
 The last words of the company must end with the words ‘limited’ or ‘private limited’ as the case
may be. It is not necessary that the word ‘company’ should form part of the name.
 It should clearly mention the whole name of the company.
 If there is any default it will lead to a fine of ₹1,000 per day or ₹1, 00,000 whichever is less.
Situation Clause
Memorandum of association must state the name of the State in which the registered office of the
company is to be situated. The registered office clause is important for two reasons.
1) It determines the domicile of the company.This in turn establishes the jurisdiction of the High
Court of the State in which the registered office is situated.
2) It is at the registered office were the company’s statutory books are normally kept, and to which
notices and other communication can be sent.
Note: A company need not carry on its business at its registered office. Nor
there is any bar to having a registered office in one state and carrying on
business in another. But every company must have a registered office within
15 days of its incorporation.
Object clause
The most important clause in the memorandum of association of a company is the object clause. It is
object clause which lays down the objects of the company. A company cannot do anything beyond or
outside its objects and any act done beyond them will be ultra vires and void.
Liability Clause
Liability clause mentions the liability of the members of the company. In case of a company limited by
shares, Memorandum of Association must have a clause to the effect that the liability of the members is
limited to the extent of the amount of unpaid portion of the shares held by them.
In case of a company limited by guarantee, it must state the amount which each member undertakes to
contribute to the assets of a company in the event of its being wound up.
In case of a company having a share capital, the amount of share capital with which the company is to be
registered and the division thereof into shares of a fixed amount and the number of shares with the
subscribers to the memorandum agree to subscribe which shall not be less than one share and the
number of shares each subscribers to the memorandum intends to take indicated opposite his name.
In case of One Person Company, the name of the person, in the event of death of the subscriber, shall
become the member of the company.
Capital Clause
Capital clause must state the amount of share capital with which the company is to be registered which
is usually called authorised or registered capital or nominal capital. Further, division of registered share
capital into shares of a fixed amount is also required to be given in the memorandum. Each subscriber
must take at least one share and write opposite his name the number of shares he takes.
Subscription Clause
This clause states that the persons subscribing their signatures at the end of the Memorandum are
desirous of forming themselves into an association in pursuance of the memorandum. MOA must be
signed by atleast minimum members, as the case may be, in the presence of atleast one witness. Full
address, description, occupation, etc. of the subscribers and witness must be written. In the case of a
company having share capital, each subscriber is also required to take atleast one share and to write
opposite his name the number of shares he agrees to take.
Alteration of Memorandum of Association

A company may alter the provisions of its Memorandum of Association by passing a special resolution
and after complying with the procedure specified in the act.
Doctrine of Ultra-Vires
‘Ultra’ means beyond, and ‘Vires’ means powers. MOA of a company defines the powers of a company.
Any act done contrary to or in excess of the scope of the activity of the company as laid down by its
Memorandum of Association is Ultra-Vires and shall be wholly void and not binding on the Company
Acts ultra-vires the company can neither be legalised nor ratified even with the consent of all the
members of the company.
Chapter-10
Articles of Association
An article of Association is an important document of a company. It contains rules, regulations and bye-
laws for the internal administrations of the company. Articles regulate the internal management of the
company and also govern the relationship between the company and its constituent members by
prescribing their rights and obligations.
Contents of the article

The Articles of Association of a company usually deal with the following matters:
i. Definition of important terms and phrases.

ii. Share capital and rights attached to different classes of shares.
iii. Procedure as to making of calls and forfeiture of share.
iv. Appointment of managerial personnel e.g., directors, managing directors etc., their rotation,
powers and duties.
v. Rules as to:
a) Transfer and transition of shares
b) Issue of share certificate
c) General meetings
d) Common seal of the company
e) Dividend, reserves and capitalization of profits
f) Accounts and audit
g) Lien on shares
h) Remuneration of managerial personnel
i) Issue of redeemable preference shares
j) Paying commission and fixing rate their off
k) Winding up of the company
l) Paying interest out of capital
Regulation contained in the Articles of Association must not go beyond the powers of the company as
laid down by the Memorandum of Association nor violate any of the requirements of the Companies Act.
All clauses in the Articles which are ultra-vires the Memorandum or the Companies Act, shall be null and
void.
Binding Effects of Memorandum and Articles

Subject to the provisions of this Act, the memorandum and articles shall, when registered, bind the
company and members thereof to the extent as if they respectively had been signed by the company and
by each member, and contain covenants on its and his part to observe all the provisions of the
memorandum and of the articles.
Thus, the articles bind the company to its members, the members to the company and the members to
each other. They constitute a contract between a company and its members in respect of their rights and
liabilities as members. A member may sue the company, just as the company may sue members to
enforce and restrain any breach of the articles.
1. Binding upon the company: Company is bound to the members to observe and follow
the articles. In case of company commits a breach of its articles, members can restrain
the company from doing so, by bringing and injunction against the company. Members
may sue to restrain a company from doing any ultra-vires or illegal acts or from acting on
a resolution obtained by fraud or which is inconsistent with the articles. Members may
also sue the company for the enforcement of their personal rights under the articles, e.g.,
right to receive dividend which has been declared.
2. Binding upon members: Articles of association is a contract of the most sacred
character between the company and each member binding the members to the company
under the statutory Covenant. Shares are applied for and purchased and membership is
granted on the basis of the company's memorandum and articles. the prospectus cannot
be used for changing the terms already settled between the members and the company
through the memorandum and articles. Articles are taken to be signed and agreed to be
observed by each member. Members are bound by the articles just as if every one of
them had contracted to conform to them. A company can sue its members for the
enforcement of its articles as well as for restraining their breach.
3. Binding between Members: The contractual force given to the articles is limited to
the matters arising out of company’s relationship of the members and does not extend
beyond the company relationships. The articles constitute contract between each member
and the company. Such rights can only be enforced by or against a member through the
company.
4. Binding upon the outsiders: The memorandum and articles do not constitute a
contract between the company and the third party. Neither the company nor the members
of the company is bound to the outsiders to give effect to the provisions of the
memorandum and the articles.
Alteration of Articles
A company has an inherent power to alter its articles. Companies Act states that a company may
alter its articles by passing a special resolution to this effect. A company may even change its
articles with retrospective effect. Any provision making articles unalterable is regarded as bad in
law. Company cannot deprive itself, by an express provision in the articles or independent
contract, of the power to alter its articles. However, there are certain limitations or restrictions on
the power of the company to alter its articles of the association.
Difference between Memorandum of Association and

Articles of Association
Basis of Memorandum of Association Articles of Association

Difference
Meaning It is the charter of the company, Articles of association contain the rules
contains fundamental conditions upon and regulations to govern the internal
which the company is granted management of the company.
Incorporation.
Purpose Memorandum defines the objects and Articles form the bye-laws of the
powers of the company. It fixes up the company and provide those regulations
scope and extent of the activities of the by which the objects and powers of the
company. company can be carried out.
Alteration Different clauses of the memorandum In case of articles of association a

cannot be easily altered. These can be company has inherent power to alter it.
altered for specified purposes and in Members can alter the articles by
accordance with the mode prescribed passing the special resolution provided
by the act. Alteration of some of these other conditions are satisfied.
requires the permission of the Tribunal Permission of the Tribunal or the
while in other cases approval of the government is not required for ordinary
central government is necessary. alterations.
Subordination Memorandum of association cannot An article of association is subsidiary

include any clause contrary to the to both the Companies Act and the
provisions of the Companies Act. memorandum. Articles cannot be
framed in contravention of the

provisions of the Companies Act and
the memorandum.
Ratification Acts done by a company beyond the Acts of a company beyond the articles
scope of the memorandum are are simply irregular and not void and
absolutely void and cannot be ratified can easily the confirmed or
even by a unanimous vote of all the subsequently ratified by the
shareholders. shareholders.
Chapter-11
Meetings
Meetings are required to be held from time to time for taking decisions regarding appointments,
remunerations, declaration of dividend, bonus etc.
Members of the company have the right to participate in the fundamental corporate decision making and
a point their representatives (termed as directors) to run the company on their behalf. These rights are
ensured by the meetings of members of the company. Meetings of the members of a company, called
general meetings are required to be held from time to time.
Kinds of General Meetings

 Annual General Meeting
 Extra-Ordinary General Meeting
Note:- According to Co. Act,1956, there is another meeting called statutory

meeting which should be held within 15 months from the date of
incorporation. This meeting has been dropped by Co. Act, 2013.
Annual General Meeting (AGM)

Annual General Meeting is a regular General Meeting of the members of a company which is held
annually. This meeting provides an opportunity to the members of the company to review working of the
company and express their views on the management of the company. The purpose of calling the
meeting is to transact the ordinary business of the company. The ordinary business consists of:
 Consideration of financial statements and reports of the board of directors and auditors
 Declaration of dividends
 Appointment of directors in place of those who are retiring
 Appointment and fixing of the remuneration of auditors of the company
Statutory Requirements of AGM

1. It is mandatory for every company to hold an AGM except one Man Company.
2. The first AGM of a company must be held within 9 months from closing of the first financial
year of the company.

3. Subsequent AGM must be held by the company each year within 6 months of closing of financial
year but interval between any two AGM may not be more than 15 months.
Note:- Registrar may, however, for any special reason, extend the time with
in which AGM should be held by a period not exceeding three months.
4. It is the duty of the board of directors to call the AGM.
5. Company must call the AGM at the registered office or at the some other place within the city in
which registered office is situated.
6. AGM must be held on any day except national holiday.
7. It must be held during the business hours.
8. Company must give at least 21 days clear notice it should be either written or through electronic
mode.
Note:- 21 days clear notice means excluding the day it is dispatched and received.
9. If default is made in holding a meeting of the company, company and every officer of the
company who is in defaulter shall be punishable with fine upto ₹5000 per day during which
default continues.
Extra- Ordinary General Meeting

1. When the directors have to transact some immediate and emergent business for which they
cannot wait till the next AGM, the meeting so conduct is known as EGM.
2. The board of directors may also call an EGM on the requisition of members ( in case of
company having share capital, members holding not less than 1/10th of paid up share capital
carrying voting rights and in case of company not having share capital, members holding at
least one tenth of voting power).
3. Board of directors must proceed to call a meeting for the consideration of the matters within 21
days of deposit of requisition at the registered office. The meeting must be held by the directors
on a day not later than 45 days from the date of deposit of requisition.
4. On default of the directors to call meeting within 45 days, the meeting may be called by the
requisitionists themselves within three months from the date of requisition.
Note:- Requisitionists shall call the meeting in the same manner in which it
is called by board of directors. If registered office is not available, meeting
shall be held anywhere. They shall claim all the expenses of meeting from
the company. Resolution passed at the meeting shall be binding upon the
company.
Procedure of a Valid General Meeting

1. Proper authority
Authority to call a General Meeting is of board of directors. The notice of the meeting should be
issued under their authorities. Single director has no power to convey a meeting.
2. Notice
Notice of meeting should be given to:
 Every member of the company

 Every person who is nominee of deceased member
 Auditors of the company
 Every director of the company
Note:- Co. may serve notice on the members either personally or by pre-
paid post or by advertisement in newspaper.
Contents of the notice
 Name of the meeting, day, place and hours of the meeting (EGM can be held on any day
including a holiday and beyond the working hours).
 Nature of the business is also to be specified, i.e., general business or special business
(general business includes consideration of annual accounts, declarations of dividends,
remuneration of directors, appointments of auditors and their remuneration, bonus etc.
Special business includes particulars of interest, any new project etc.)
Agenda
Agenda gives guidance on information of the matter to be discussed in the meeting. It sets out the
chronological order in which various item shall be discussed. It is prepared by secretary in
consultation with the chairman of the Managing Director.
3. Place of the meeting
AGM is to be held by a company at its registered office or at some other place in the same city, town
or village where the registered office is situated.
Note:-
1. Private company can hold its AGM at any other place if it has fixed the place of the
meeting by the articles of association or it has fixed place by a resolution by the members.
2. The central government has the power to grant exemption to any company from this
provision.
4. Quorum
Minimum number of members required to constitute a valid meeting is called Quorum. Any
resolution passed at the meeting without quorum shall be invalid.
In case of a public company:
 5 members personally present if the number of members as on the date of meeting is not
more than 1000
 15 members personally present if the total number of members is between 1000 and 5000
 30 members personally present if the total number of members is exceeding 5000
Note:- 1. If a company wants to increase the number of Quorum then it should mention in
articles of association
2. If the quorum is not present within half an hour from the time appointed from holding a
meeting then the meeting shall stand adjourned to the same day in the next week at the
same time and same place
5. Chairman
A general Meeting of the company is to be regulated by a chairman who regulates and supervises the
proper conduct of the business at the meeting. He decides all the questions arise in the meeting. He
should be in the best interest of the company. Usually, articles of association provide the mode of
appointment of the chairman of the meeting. If it is not provided in the articles of association, the
members personally present at the meeting shall elect one of them to be the chairman
Note:-Chairman of the original meeting shall be the chairman of the

adjourned meeting.
6. Proxy
 A personal representative of the member at a meeting that is a person authorised to vote
on behalf of a member at a meeting is called proxy.
 Member of a private company is not entitled to appoint a proxy
 Any person can be appointed as a proxy weather he is member of a company or not. In
case the proxy is not the member of the company, he shall have no right to speak at the
meeting.
 Proxy must be appointed by filling a proxy form attached to the notice of the meeting.
This form must be submitted by the members to the company at least 48 hours before the
meeting.
 A proxy is revocable; it can be revoked at any time.
 A minor member cannot be appointed as a proxy.
7. Voting at General Meeting

Vote can be done either by show of hands or by poll.
S.No Show of Hands Poll
1. Each member has one vote only Members have the votes as per the voting
rights held by them
2. Proxies are not allowed to vote. Proxies are allowed to vote.
3. Decisions of voting by show of hands Decision of voting by poll is never

are cancelled as soon as poll is cancelled.
demanded.
Note:- Voting also can be done by postal ballot which includes vote by post
or through any electronic mode
Minute book
Minutes means written record of the proceedings of meeting. It is the main evidence of the correct
record of the decision of a meeting. Every company shall make entries of minutes of all proceedings
of every General Meeting within 30 days of the conclusion of such meeting in a a bound/ bind book
kept for that purpose with their pages consecutively numbered. Each page of every book shall be
signed by the chairman within the period of 30 days.
Note:- In the event of death or inability of the chairman within that period, it is
signed by the board of directors.
If default is made in complying with the provisions of minute book, the company shall be liable to
the penalty of ₹25000 and every officer of the company who is in fault shall be punishable with the
fine of ₹5000.
The minute book shall be kept open for inspection for at least two hours at the registered office.
Every member shall be entitled to inspect it free of cost during business hours. He can also request
for a copy of it and company should send it within 7 days on the payment of prescribed fees.
Resolutions
There are two types of resolutions
 Ordinary resolution
 Special resolution
Ordinary resolution- It is passed by a simple majority of votes at a General Meeting. It includes

the casting vote in favour exceeds the votes cast against the decisions.
For example- Passing of annual accounts, declaration of dividends, appointment of directors and
auditors, issue of shares, bonus etc.
Special resolution- It must be passed by a majority of three fourth of the votes cast in the favour of
the resolution. The intention to pass the special resolution must be mentioned in the notice of the
meeting. A copy of the special resolution is required to submit with the arrows within 30 days of passing
of resolution.
For example- Alteration of memorandum of articles, alteration of articles of association, reduction of
the share capital, etc.
Chapter-12
Shares
Capital of a company termed as share capital, is divided into units. Each unit is called share.
Kinds of share
These are of two types
 Equity shares
 Preference shares
Equity shares
These shares carry voting rights in a company. They did not carry fix rate of dividend and if
company is not able to pay a dividend in a particular year, equity shareholder shall not claim the
dividend in subsequent year. Hence, rate of risk of Return for equity shareholders is very high since
if the profit left after payment of all the liabilities and interest then it is provided to equity
shareholders.
Preference shares
Preference shares are those shares which carries preferential rights with respect to the payment of
dividend, redemption of preference share capital at the time of winding up or expiry of period. It
carries a fixed rate of dividend and preference shareholder does not have any right to vote unless their
rights affected. If company does not pay the dividend in any particular year, preference shareholders
have the right to claim the dividend in subsequent years.
Types of share capital

1) Authorised Share Capital-
It is the maximum amount of share capital a company can reach for the time being. This means the
number and par value of each share that a company may issue. It is mentioned in companies
memorandum and is also termed as 'nominal' or 'registered' capital.
2) Issued Share Capital

It is that value of shares which are offered for subscription within the limit of authorised share
capital.
3) Subscribed share capital

It is that portion of issued capital which has actually been subscribed and allotted. This includes any
bonus shares issued to the shareholders.
4) Paid up share capital

It is the percentage of subscribe Share Capital for which consideration in cash or otherwise has been
received. This includes bonus shares allotted by the company.
Note:
 If applications received are more than Issued Share Capital, it is called over
subscription. In this case, company allots the shares on Pro-rata basis.
 If applications received are less than issued share capital then it is called under
subscription it is usually in initial public offerings (IPO's).
 A company can offer the shares to the public at par or above par value or below
value.
For example- In the chart (on next page)
 If company issued shares of ₹10 each, it is called at par.
 If company issue shares at rupees 15 each, it is called at premium.
 If company issue shares at rupees 8 each, it is called a discount.
Authorised Share Capital

(1 lakh x ₹10/share)
Issued Share Capital Uniisued Share Capital

(60,000 x 10) (40,000 x 10)
Subscribed Unsubscribed
Share Capital Share Capital
(40,000 x 10) (20,000 x 10)
Called Up Uncalled
Capital Capital
(40,000 x 7) (40,000 x 3)
Paid-Up share Unpaid Share

Capital Capital
(35,000 x 7) (5000 x 7)
Statutory Provisions on Allotment of Shares

 Registration of Prospectus- In case public offers of shares, a company is required to file
a copy of prospectus with ROC.
 Minimum subscription- The amount stated in the prospectus as minimum subscription
must have been subscribed within 30 days of the issue of prospectus. As per the SEBI
guidelines, the minimum subscription is 90% of the entire issue.
Note:-According to SEBI, 30 days period is extended to 60 days
 Application money- A sum of at least 5% of the nominal value of shares must be

received in cash by the company as application money.
 Money should be kept in a scheduled bank.
 Return of application money- If the minimum subscription has not been
subscribed within 30 days the amount so received shall be returned within 15 days from the
closure of issue. If default is made company has to pay interest @ 15% per annum.
 Return of allotment- Company shall file with the ROC the number of shares allotted
to shareholders, their names, addresses, occupations, amount paid for due or payable on each
share.
Buy- Back of Shares

Purchase by the company of its own shares is known as buyback of shares. A company can purchase its
own shares when:
a) The buyback is authorised by its articles.

b) A Special resolution has been passed in General Meeting of the company. However, if the
buyback is up to ten percent of total paid up equity capital and free reserves of the company, the
board of director by passing a resolution at its meeting may authorize for such buyback.
c) The amount involved in buyback must not be more than 25% of the total paid up capital and free
Reserves.
d) Debt equity ratio of the company must not be more than 2:1 after such buyback.
e) All the shares for buyback are fully paid up.
Sources of Buy-Back
A company may purchase its own shares out of:
 Its free Reserves, or

 Securities premium account, or
 proceeds for any shares
Note:- , where a company purchases its own shares out of free Reserves, then a sum equal to the
nominal value of the shares purchased shall be transferred to Capital redemption reserve (CRR).
Methods of Buy-Back
 From the existing shareholders on a proportionate basis
 From the open market
 By purchasing the shares earlier issued to employees of company under a scheme, i.e.,
stock option or sweat equity.
Note:- Buyback must be completed within 12 months from the date of passing the resolution.
A company shall after the completion of the buyback file, with the registrar and SEBI, a return
containing the prescribed particulars relating to the buy back within 30 days of such completion.
Issue of Shares at Premium

A company can issue its shares at a premium, i.e., for a value higher than the face value. It need not be
given in the articles of association. When a company issue shares at a premium, amount received on
premium shall be transfer to securities premium account. Securities premium account may be applied by
the company:
a) Towards the issue of unissued shares of the company to the members of the company as fully
paid bonus shares
b) In writing of the preliminary expenses of the company;
c) In writing of the expenses of, or the commission paid or discount allowed on, any issue of shares
or debentures of the company;
d) In providing for the premium payable on the redemption of any redeemable preference shares or
of any debentures of the company;
e) For the purchase of its own shares or other securities.
Employee Stock Option (ESOP)

Companies Act 2013 defines employees stock option (ESOP) as: "the option given to the
directors,officers or employees of a company or of its holding company or subsidiary company or
companies, if any, which gives such directors, officers or employees, the benefit or right to purchase, or
to subscribe for,the shares of the company at a future date at a predetermined price".
The provisions relating to the issue of ESOPs are as follows:
1) Employee under an ESOP scheme- Employee means:

 A permanent employee of the company who has been working in India or outside India; or
 A director of the company; or
 An employee of a subsidiary or of holding company.
2) Procedural requirements
 Special resolution is required by the members of the company
 Minimum lock in period is 1 year
 Non-transferability of shares
Sweat Equity Shares

It means share issued by a company to its employees or directors at a discount for consideration other
than cash for providing know how to the company. For the issue of sweat equity shares a special
resolution must be passed by the company. It should not be issued before one year from the date of
commencement of business. The minimum lock in period is 3 years.The rights, limitations, restrictions
and provisions applicable to equity shares are applicable to sweat equity shares also.
Bonus Shares
When a company accumulates a large surplus, it may convert this surplus into capital by issuing fully
paid shares representing increased capital. Such shares are termed as bonus shares. They are issued to
existing shareholders at free of cost on the proportionate basis. It can be issued out of:
 Free Reserves; or
 Or securities premium account;
 Or capital redemption reserve
Note:- No issue of Bonus share shall be made by capitalising reserves created by

the revaluation of the assets.
Conditions on issue of Bonus shares.

A company may capitalise its profits or reserves for the purpose of issuing fully paid up bonus shares
when-
 It is authorised by its articles

 It has,on the Recommendation of the board, been authorised in the General Meeting of the
company
 It has not defaulted in payment of interest or principle in respect of fixed deposits or debt
securities issued by it
 It has not defaulted in respect of the payment of statutory dues of the employees, such as,
contribution to provident fund, gratuity and bonus.
 The partly paid up shares, if any outstanding on the date of allotment, are made fully paid up
 It compliance with such conditions as may be prescribed.
Chapter-13
Prospectus
It means any document described or issued inviting offers from the public to subscribe to share capital. It
is essential for a public company to issue a prospectus for offering the shares to the public for capital
requirement.
Requirement as to prospectus
 Obligation of SEBI Regulation, 2009- The company is required to file a draft offer document
through merchant banker, at least 30 days prior to registering the prospectus with the ROC.
 It must be dated
 It must be registered
 It should disclose all the material and true facts.
Types Of Prospectus
a) Abridged Prospectus
It is a memorandum containing the silent features of a prospectus. It is a brief version of a prospectus
to cut the cost involved in the publication of large number of prospectus which a company has to bear
for issue of the application forms for shares or debentures in case of public offer.
However, in the following cases a company cannot issue abridged prospectus:
 In relation to shares or debentures which are not offered to the public.

 When application form is issued to enter into an underwriting agreement with respect to shares or
debentures.
 Where offer is made only to existing members of the company.
Note:- in case of any default, company shall be liable to a penalty of ₹

50,000 for each default.
b) Shelf prospectus
It is a prospectus issued by any financial institution or bank for one or more issues of the shares or
debenture specified in prospectus. A company is required to issue a prospectus each time it access
the capital market. It leads to unnecessary repetition for a company which makes more than one offer
of securities in near to mobilize funds from the public.Hence, " shelf prospectus" can be issued
instead of main prospectus which is valid for a specified period during which offers of shares is
made.
c) Red Herring Prospectus

Red Herring Prospectus is issued to potential investors, but does not have complete particulars on the
price of the shares offered and quantum of shares to be issued.The front page of the prospectus
displays a bold red disclaimer stating that information in the prospectus is not complete and may be
changed.
Chapter-14
Directors
Directors are the persons appointed to direct and supervise the affairs of the company. According to
Companies Act, 2013, director means a director appointed to the board of a company.
Every company shall have a board of director consisting of individuals as directors and shall have:
 A minimum number of three directors in case of public company.

 A minimum number of two directors in case of private company.
 One director in case of one man company.
 Maximum of 15 directors. However, a company appoint more than 15 directors after passing the
special resolution.
 In certain companies as prescribed in the Act, shall have at least one woman director. { listed
company, are having paid up capital of ₹100 crores, or having turnover of ₹ 300 crores}.
 Every company shall have at least one director who has stay in India for total period of not less
than 182 days in the previous calendar year.
Classification of directors
 Shadow director
Any person whose instructions the directors of a company normally comply is a shadow director.
In other words, where a person who is not a director has such an influence over the company's
director that those director are forced to act in accordance with that person's instruction.
 De facto director
A defective director is a person who has not been formally appointed or who is disqualified to be
appointed as director, but who is holding himself out as a director. Such director in effect
occupies the position of, and acts as if he were, a director.
 First director
Directors who act as the directors of the company immediately after the formation of the
company are called first directors. They are appointed by the promoters of the company. They
shall hold the office only till the first AGM.
 Rotational directors
These are directors who are liable to retire by rotation,i.e, by turn. However, they may be
reappointed again after the retirement.
 Permanent director
These directors are not liable to retire by rotation. While a public company may Appoint 1/3rd of
the total directors as permanent directors, private company may have all of their directors as
permanent directors.
 Additional director
Additional directors are in addition to the directors of the company appointed at the AGM.
Powers, rights and duties of additional director are same as of directors. They hold the position of
the directors till the next AGM of the company.
 Alternate director
It means a person who is nominated to act in place of another director during his/ her absence.
The articles of association of a company may allow Such appointment with the agreement of
majority of directors.
 Women director
The following company shall appoint at least one woman director
1) Every listed company
2) Every other public company having:
 Paid up capital of ₹100 crores or more.
 Turnover of ₹ 300 crores or more.
Note:- women director shall be appointed within 6 months from the date of Incorporation.
 Nominee director
He is a director who is nominated to the board by a major shareholders or other contractual
stakeholders such as Bank of initial institution to represent and safeguard their interest.
 Independent director
It means a director other than a managing director or whole time director or nominee director:
1) Who is a person having expertise and experience,
2) Who is not a promoter of the company or its holding or subsidiary
3) Who is not related to promoters or directors of the company, its holding or subsidiary
4) None of whose relatives has relationship or transaction with the company, its holding or
subsidiary.
An independent director shall hold office for a term upto 5 consecutive year on the board of the
company, but shall be eligible for reappointment by passing a special resolution
Note:- he shall not hold office for more than 2 consecutive terms.
Qualifications of independent director

An independent director shall possesses appropriate skills, experience and knowledge in one or two fields
of finance, law, management, sales, market, corporate, governance, research, administration or technical
operation related to company's business.
Number of independent directors

Every listed company required to have at least 1/3rd of total directors as independent directors. But in
following cases company shall have at least two directors as independent directors:
 Public company having paid up capital of ₹ 10 crores or more.

 Public company having turnover of ₹ 100 crores or more.
 Public company which have outstanding loans, debentures and deposits exceeding ₹ 50 crores.
Number of directorships
No person shall hold office as a director, including alternate directorship, in more than 20 companies at
the same time. Provided that the maximum number of public company in which he is appointed as a
director shall exceed 10.
Who are appointed as director

Only individual can be appointed as a director of a company who has been allotted the director Identity
Number (DIN).
Notes
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Company Law

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BUSINESS, LABOUR LAW

AND COMPANY LAW

C-9/119, Ist Floor(Above Indian Bank), Sector-8, Rohini-110085;

1. Payment Of Gratuity Act, 1972 2-10

2. Indian Partnership Act, 1932 11-23

3. Employees State Insurance Act, 1948 24-29

4. Employees Provident Fund and Miscellaneous Provision Act, 1952 30-39

5. Negotiable Instrument Act, 1881 40-46

7. Kinds of Companies 51-54

8. Formation of the Company 55-58

9. Memorandum Of Companies 59-62

10. Articles of Association 63-66

11. Meetings 67-72

12. Shares 73-78

13. Prospectus 79-80

14. Directors 81-83

GRATUITY ACT, 1972

Thus, gratuity is gift from the employer to his employee.

In case of death of employee, it gives financial assistance to his family.

Objective of the Act

a) Every factory , mine , oilfield , plantation , port and railway company:

Note: Once the act becomes applicable to an organization, it would continue to

Gratuity = Monthly salary * 15/26 days * No. of years of service

Maximum gratuity payable under the act is ₹ 20, 00,000.

How to make payment of Gratuity

Mode of Gratuity payment

Details of violation penalty

Notice of Opening, change, closing of Establishment

[See sub – rule (1) of rule 3].

1. Name and address of the Establishment.

Place Signature of the employer

Date With name and designation

The Controlling Authority

1. Ins: by G . S . R 2868, dated 22nd

[See sub – rule (1) of rule 3].

Name and address of

Name of the employer.

Place Signature of the employer

Date with name and designation

The Controlling Authority

[See sub – rule (1) of rule 3].

1. Name and address of the establishment.

Place Signature of the

Date with name and

The Controlling Authority

[See sub – rule (1) of rule 3].

[Give here name or description of the establishment with full address]

1. Shri/Shrimati/kumara …………………..Whose particulars are given in the statement bellow.

[Name in full here]

4. a. My father/mother/parents/is/are not dependent on me.

B. My husband father/mother/parents is/are not dependent on my husband.

Name in full with full Relationship with

Partnership Act, 1932

Definition and Nature of Partnership:

Partnership firm: The individual partners collectively known as partnership firm.

Note: Partnership deed is essential not mandatory.

Rules applicable in absence of partnership deed

 No interest will be charged on drawings of the partner

 No salary or remuneration will be allowed to any of the partners

 Each partner has a right to participate in the proceedings of the business.

Who may not be the partners?

 Person of unsound mind

 Members of HUF carrying on family business

Types of Partnership firm