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Aarti Singh, Azhar Hussain, Jyoti Nawlani, Nemchand Meena, Renuka Sharma
• The Companies Act is a successor to the Indian Companies Act of 1913 and is a consolidation of many successive Amendment Acts, statutory rules and principles laid down in decisions of the courts in India and England.
Protection of Minority Rights
Provide a minimum standard of good behaviour & business honesty
Safeguard the interest of stakeholders
Check transaction where there is a possibility of conflict of interest Provide a ceiling on the share of profits to management as remuneration
Objectives of Companies Act
To facilitate control
High standard of accounting and auditing
A fair disclosure of company in their annual published accounts
. 1956 defines company asA company formed and registered under the Act or an existing company formed and registered under any of the previous company laws.Sec.3 of Companies Act.
Features of a Company: .
• In the Companies Act. companies are classified as follows: Types of Companies Companies limited by shares Public Companies Deemed public Companies Companies limited by guarantee Private Companies Companies with unlimited liability .
The Companies Act also maintains three special types of companies namely: • Holding and Subsidiary companies • Government Companies • Investment Companies .
not a private company has a minimum paid-up capital of `5. as may be prescribed.00. no limit to the number of shareholders Public company minimum of 7 subscribers.000 or such higher paid-up capital. .
Private company Maximum 50 members shares cannot be transferred freely minimum paid capital of `1.00.000 or more . Cannot invite public to subscribe to its shares or debentures.minimum of two members.
3) Deemed public company: a private company incorporated in India. can be called as deemed public company in india . which is a subsidiary of a public company.
. stating the number of members with which it is registered and the amount of registered share capital if it has any. • An unlimited company must have Articles of Association. like the partners of a firm.Unlimited companies • A company not having any limit on the liability of its members is termed as unlimited company. • The members of an unlimited company are liable. for all its trade debts without any limit.
• The liability of the members of a guarantee company is limited by a fixed sum which is specified in the memorandum and beyond which they cannot be called upon to contribute. .
Government Companies .
Subsidiary Companies:.A company whose more than half of the nominal value of share capital is held by another company or another company controls the composition of board of directors of such company is known as Subsidiary Company.The Company which holds more than half of the nominal value of share capital of another company or controls the composition of board of directors of another company is known as Holding company. 2. . Holding Companies:.Holding and Subsidiary Companies • 1.
A company incorporated outside the region of a nation but has a place of business in the nation is known as Foreign Company. debentures or other securities.Foreign companies:. Investment Companies:.A company whose principal business is acquisition of shares. .
These persons are called promoters .Formation of Company • Company comes existence when a number of persons come together with an intention to do some business.
Process of Formation of Company . Name for the company Location of registered of the company Drawing up of Memorandum of Association Drawing up of Articles of Association Submitting documents to the Registrar Getting the company registered .
power of a company beyond which a company cannot go. . It lays down objects. scope of activities. limitations.Memorandum of Association • A Memorandum of Association is a fundamental document of a company which is also known as the Charter of the company.
It enable those who deal with the company to know about the permitted range of activities.I t cannot be adopted. limitations of the company. .Characteristics Of Memorandum of Association Essential to prepare MOA for registration. It is usually unalterable. It should be originally framed. It lays objects. serves as a basis of contract between the company and the outsiders.
Contents of MOA • THE NAME CLAUSE: Name which is confirmed by the Registrar should be stated in this clause. • REGISTERED OFFICE CLAUSE: This clause states the name of the state in which the Registered office of the company is to be situated. . The name with “Limited” as the last word of the name in case of public limited company and with “Private Limited” as the last word of the name in case of private limited company.
the subscribers express their desire and agreement to form a company. It shall also give the number and face value of the shares. THE LIABILITY CLAUSE: the nature and extent of liability of its members. agree to sign the memorandum and take specified number of shares . THE ASSOCIATION OR SUBSCRIPTION CLAUSE:.• THE OBJECT CLAUSE: Main objects to be pursued by the company on its incorporation and Objects incidental or ancillary to the attainment of main objects. THE CAPITAL CLAUSE: The amount of share capital with which the company is to be registered.
Articles of Association • The Articles of Association is a document of a company which contains the rules. . regulations or bye –laws for regulating the internal affairs of a company. • They are framed with the object of carrying out the aims and objects as set out in Memorandum of Association. • It defines the mode and form in which the business of the company is to be carried on.
IMPORTANCE OF AOA .
Redemption of Preference shares. .Contents of Articles The articles of a company usually contain regulations relating to the following maters: » » » » » » » » » Share Capital and rights attached to different classes of shares. General Meetings. Calls on shares. Transfer and Transmission of shares. Rights of members. Forfeiture of shares. Constitution of Board of Directors. Rights of members in General meetings.
Prospectus • According to Companies Act. circular. advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in. “prospectus" means any document described or issued as a prospectus and includes any notice. a body corporate. • If No Public Issue. or debentures of. then a company shall issue a “Statement in lieu of Prospectus” • A private company does not issues prospectus because is prohibited from making any invitation to the public .
Certificate of Commencement of Business • A certificate of commencement of business is issued by registrar after filing of a declaration by a director or secretary stating that the company has collected the minimum subscription stated in the prospectus and that the directors have taken the qualification shares .
have to be submitted to the Registrar of Companies of the state in which it is proposed to locate the registered office of the company.Consent to act as Director . if any.notice of situation/ change of situation – Form 32.Appointment of Directors – Form 29.Registration of Company • The MOA and AOA. • Following documents should also be submitted: – Form1 declaration of compliance with the requirements of Companies Act 1956 – Form 10.
• The executive authority is usually exercised by Board of Directors. most of whom are normally elected by the shareholders. • The Board of a public company should consist of minimum 3 members and 2 in case of a private company . its activities have to be carried out by persons authorised for that purpose.Board of Directors • The company being an artificial person.
Of unsound mind Undischarged insolvent Applied to be adjudicated as an insolvent and his application is pending. Not paid call moneyznd six months have elapsed from the date of payment An order has been passed from court in pursuance of section 203 .A person shall not be capable of being appointed director of a company. Convicted by a court of any offence involving moral turpitude and sentenced thereof to imprisonment for not less than six months and not less than five years has elapsed from the date of expiry of the sentence.
.Meeting of Directors The companies Act contains the following provisions relating to board meeting. • Notice of Meetings: Notice of every meeting of the board of directors of a company shall be given in writing to every director for the time being in India and at his usual address in India. • Quorum of Meetings: The quorum of the board shall be 1/3 of its strength or two directors which ever is higher. • Number of Meetings: In the case of every company a meeting of its board of directors shall be held at least once in every 3 months and at least 4 such meetings shall be held in every year.
Powers of the Board of Directors GENERAL POWERS • The BODs may exercise all powers of the Company and can do all such acts and things that the Company can do. MOA.. . AOA and the resolutions of the Company. But these powers must be according to provisions of Companies Act.
additional directors or alternate directors. Powers only at the meetings: To fill casual vacancies in the Board. and To make loans..Make calls on shareholders in respect of money unpaid • To buy-back its shares • To issue debentures • To borrow other than debentures • To invest funds of the Co. . • To sanction a contract in which a director is interested • To recommend the rate of dividend to be declared.POWERS • Power to.
Restrictions on Powers of Directors The BODs of a public Co. » Borrow money exceeding the aggregate of the paidup capital and free reserves. . cannot exercise the following powers without the consent of the shareholders in general meeting: » Sell or lease the undertaking of the Co. » Contribute to any charitable not directly related to the business of the Co. » Remit or give time for the re-payment of any debt » Invest otherwise than in trust securities.
Inter-Corporate Investments • According to section 372 of the Companies Act. the BOD of a company is entitled to invest in any shares of any other body corporate upto 10% of the subscribed capital of such other body corporate subject to following: – The aggregate of investments made in all other companies shall not exceed 30% of the subscribed capital of investing company – The aggregate of investments made in all other companies in same group(under same management) shall not exceed 20% of the subscribed capital of investing company .
. » The name of a defunct company may be removed from the register of companies of registrar » A company may be wound up under Part VII of the Companies Act.Winding Up of Companies A company registered under Companies Act can cease to exist by any one of the following legal methods: » If a company transfers its undertaking(s) to any other company under a scheme of reconstruction or amalgamation.
Voluntary wind up may be: o At the instance of members or creditors or o Under the provision of court .• There are two principal modes of winding up of a company: – Voluntary wind up – Compulsory wind up Voluntary wind up: A declaration of insolvency by the Board at its meeting is necessary for Voluntary wind up of a company by its members.
less than 2 in case of private company and less than 7 in case of public company » Unable to pay debts .Compulsory wind up • A company may be wound up by court. if the company: » By special provision resolved that it be wound by court » Made default in delivering the statutory report to the registrar or in holding the statutory meeting » Does not commence its business within a year from date of its incorporation » Number of members is reduced.