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INTRODUCTION TO COMPANIES ACT 1956

What is a company
• A company is an artificial person created by law. • A company means a group of persons associated together for the attainment of a common end, social or economic.

Definition of a company
• According to Sec (1), “A company formed and registered under the act”. • According to Sec (3) of the act, “on incorporation a company becomes a body corporate or a corporation with a perpetual succession and a common seal.” • According to N.D.Kapoor,” IT is a voluntary association of persons formed for some common purpose, with capital divisible into parts, known as shares, and with a limited liability. It is a creation of the law and is sometimes known as an artificial person with a perpetual succession and a common seal. IT exists only in the eyes of the law, I.e., it is regarded by the law as person, just as a human being. But it has no physical existence.”

CHARACTERSTICS OF A COMPNAY
• • • • • • • Separate legal entity Limited liability Perpetual succession Common seal Transferability of shares Separate property Capacity to sue

Classification of Companies
Companies

On the basis of incorporation

On the basis of liability

On the basis Of no. of members

On the Basis Of control

On the Basis Of ownershi

Cos. With limited liability Ltd. Ltd. Registered companies By By shares guarantee Statutory companies Unlimited liability

Private company

Holding company government

Public company

Subsidiary company

Nongovernment

Classification on the basis of incorporation
• Statutory companies: These are created by special act of the legislature
– E.g.: The Reserve bank of India – The Life Insurance corporation – The Unit Trust Of India

• Registered Companies: These are the companies which are formed and registered under the companies Act, 1956 or were registered under any of the earlier companies act.

Classification on the basis of liability
• • • • • • • • • • • • • • • • 1. Companies with limited liability: A. Companies limited by shares E.g.:Infrastructure Corporation of Andhra Pradesh Limited, MSEB Holding Company Limited, Maharashtra State Power Distribution Company Limited, Maharashtra State Power Generation Company Limited and Maharashtra State Power Transmission Company Limited. B. Companies limited by guarantee E.g.: Schools & Educational Establishments Clubs & Associations Charities and Organisation intending to apply for charitable status Churches & other Places of Worship Trade or Research Associations 2. Unlimited companies E.g.: Jonathan Rose co.,
– – Wicks Group of companies Suyog system and Software pvt. Ltd.

Classification on the basis of number of members • Private company
– A private company means a company which has a minimum paid up capital of Rs.1,00,000 or such higher paid up capital as may be prescribed , and by articles• (a) restricts the right to transfer its shares, if any. This restriction Is meant to preserve the private character of the company • (b) limits the number of its members to 50 not including its employee-members • ( C) prohibits any invitation to the public to subscribe for any shares in or debentures of the company • (d) prohibits any invitation or acceptance of deposits from persons other than its members, directors and their relatives

• Public company
– A public company means a company which
• Has a minimum paid up capital of Rs.5 lakh or such high paidup capital, as may be prescribed

Classification on the basis of control
• Holding company
– A company is known as the holding company of another company if it has control over that other company.

• Subsidiary company
– A company is known as a subsidiary of another company when control is exercised by the latter over the former called a subsidiary company.
• Company controlling composition of Board of Directors • Holding of majority of shares • Subsidiary of another subsidiary

Classification on the basis of ownership
• Government company
– A Government Company means any company in which not less than 51% of the paid-up share capital is held by
• The central government or • Any state government or governments or

– Partly by the central government and partly by one or more state governments.
• E.g.: State Trading Corporation of India Limited • Minerals and Metals Trading Corporation of India limited

• Non-government company
– Foreign companies

MNCS/ TRANSNATIONAL COMPANY
• A multinational corporation is a business enterprise that retains direct investments overseas and that maintains value-added holdings in more than one country. A firm is not really multinational if it just engages in overseas trade or as a contractor to foreign firms • They are also called transnational companies

BLUE CHIP COMPANIES
• A blue chip stock is the stock of a wellestablished company having stable earnings and no extensive liabilities. The term derives from casino, where blue chips stand for counters of the highest value. Most blue chip stocks pay regular dividends, even when business is faring worse than usual. They are valued by investors seeking relative safety and stability, though prices per share are usually high. Typically, such stocks are perceived to offer reliable returns, low yield, and low risk.

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