FORMATION OF COMPANY AND MANAGEMENT OF COMPANY

PRESENTED BY:
AKSHAY AGRAWAL ANIKET WAMAN BRYAN RAJAN DHIRAJ PATEL GAURAV MISHRA MEKHLA KHUSHWAH SMITA THAKUR SHRUTI JAIN SAHILA SUMAN RISHABH SONKAR SATYADARSHI SAHA

INTRODUCTION
Definition of a company : An individual or association of individuals who share common purpose and unite in order to achieve a common goal. Companies Act 1956 is an act of the parliament of India enacted in 1956, which enabled companies to be formed by registration and set out the responsibilities of a company. It is administered by the Government of India through Ministry of Corporate affairs

FEATURES OF A COMPANY
Separate legal entity Limited liability

Perpetual succession
Common seal Transferability of shares

Types of Companies:On the basis of Incorporation: Statutory companies Registered companies On the basis of numbers: Private Company Public Company Special Privileges of a Private company

Continued
On the basis of Liability: Companies with Limited Liability Unlimited Companies

On the basis of control:

Holding Company Subsidiary Company

Requirements for a private company

Minimum 2 directors Minimum 2 shareholders Shareholder and director can be the same person Minimum share capital should be 1,00,000 Director identification number(DIN) for all the directors Digital signature certificate(DSC) for one of the directors

What do you mean by Formation

of a Company?
A Company comes into existence when a group of people come together with a view of forming an association to exploit the business

opportunities by bringing together; men,

material, money and management

FORMATION OF COMPANY

> Definition.
> Stages in formation.
DOCUMENTS OF COMPANIES

> Memorandum of Association (MoA)

> Article of Association (AoA)

> Prospectus of Association

STAGES OF FORMATION OF A COMPANY Promotion Stage

Selection of Name
Incorporation (Registration Stage). Raising the Share Capital Stage.

STAGES OF FORMATION OF COMPANY

Electronic Filling of Forms Incorporation of Company Certificate of Incorporation

ELECTRONIC FILING OF FORMS

MCA-21 project Registration of new companies. Filling of annual balance sheets. Inspection of documents .

Memorandum of association
Name & signature of subscriber.

Electronic process

INCORPORATION OF COMPANY
Preliminary decisions
Include private or public company What should be the capital.?

Modes of forming company

Its a private or a public company

Documents filled by registrar

Agreement List of directors

CERTIFICATE OF INCORPORATION
Legal document relating to the formation of a company or corporation. License to form a corporation issued by state government. Depends upon the legal system.

Example for :
CERTIFICATE OF COMMENCEMENT OF BUSINESS of VISWASGOLD INFRASTRUCTURES

Director Identification Number

It is an unique identification number issued by Ministry of Corporate Affairs(MCA) for an existing director or an intended person to be a director. Documents required for DIN application: Address Proof Identity proof

Continued
Educational Qualification Current Occupation Affidavit to be signed by an applicant( notarized on Rs 10 stamp) vide Ministry of company affairs. Note: All the documents should be self attested

Digital Signature Certificate:

DSC is the digital equivalent (i.e electronic format) of physical or paper certificates. A digital certificate can be presented electronically to prove your identity, to access information or services on the internet or to sign certain documents digitally

Requirements of DSC: DSC application form (duly signed by an applicant) All the documents required in DIN application form Note: All the documents require self attestation

DOCUMENTS OF COMPANIES
Memorandum of Association(MoA) Article of Association (AoA) Prospectus of Association

THE MEMORANDUM OF ASSOCIATION(MOA)

Memorandum of association is one of the documents which has to file with the registrar of companies at the time of incorporation of a company

It is a document which sets out the constitution of the company and is really the foundation on which the structure of the company is based

It contains the fundamental conditions upon which alone the company is allowed to be incorporated

A company cannot depart from the provisions contained in its memorandum

PURPOSE OF MEMORANDUM
The purpose of the memorandum is THREE fold. 1. The intending share holder who contemplates the investment of his capital shall know within what field it is to be put at risk. 2. Anyone who shall deal with the company shall know without reasonable doubt whether the contractual relation into which he contemplates entering with the company is one relating to a matter within its corporate objects. 3. Every subscriber to the memorandum shall take at least one share and shall write opposite to his name the number of shares taken by him.

CONTENT OF MoA : Sec 13

THE NAME CLAUSE. THE REGISTER OFFICE CLAUSE.

THE OBJECT CLAUSE.

THE CAPITAL CLAUSE. THE LIABILITY CLAUSE. THE ASSOCIATION CLAUSE. NOTE : The MoA must be signed by at least seven subscribers

in the case of

public company and two in case of private

company.

Articles of Association of a company

The Articles of Association is a document that contains the purpose of the company as well as the duties and responsibilities of its members defined and recorded clearly. It is an important document which needs to be filed with the Registrar of companies. Alteration of AoA is done by passing a special resolution. AoA should be printed, divided into paragraphs and serially

numbered.

CONTENT OF AoA
Article contain provision relating to the following matters: 1. Share capital rights of share holders variation of these rights payment of commission share certificates. 2. Lien on shares 3. Calls on shares 4. Transfers of shares 5. Transmission of shares 6. Forfeiture of shares 7. Conversion of shares into stock 8. Share warrants 9. Alteration of capital 10. General meetings and proceedings thereat 11. Voting rights of members ,voting and poll, proxies. 12. Dividends and reserves

PROSPECTUS :
Prospectus means any document described or issued as a prospectus inviting deposits from public or inviting offer from public for the subscription or

purchase of any shares , or debentures of the company.

CERTIFICATE

OF

LIEU

OF

PROSPECTUS

is issued by a public

company, where the company doesnt invite public subscription.

CONTENT OF PROSPECTUS:
Date of issue of prospectus. Name and register office of the company. Consent of Central Govt. for the present issue/compliance with the SEBI guidelines. Voting rights ,dividend ,expenses on issue etc. Name of the stock exchange. Punishment for fictitious application. Refund of issue if 90% min. subscription not received. Names and addresses of leading managers. Issue of allotment letter or refund within 10 weeks with interest.

Date of opening and closing of issues.

Date of opening and closing of issues.

Credit rating from CRISIL (CREDIT RATING INFORMATION SERVICES OF INDIA LIMITED) Terms of Underwriting & Risk Factors. Capital Structure of the company Terms and particulars of the issue. Restriction on transfer and transmission of

shares.

MANAGEMENT OF COMPANY

Definition : sec 2(13) Director may be defined as a person having control over direction ,conduct , management or superintendence of the affairs of the company . Only individuals can be directors of the company: (sec 253) According to the companies act 2006 has introduced provisions with respect to the director identification number , and it is been important that DIN is given to the directors . Number of directors : Every public company shall have at least three directors and every other company shall have two directors Increase or reductions in number of directors sec(258) Sanction by the central government sec (259)

APPOINTMENT OF DIRECTORS
1. 2. 3. FIRST DIRECTORS SEC(254 and clause 64 of table A) APPOINTMENT OF DIRECTORS BY THE COMPANY (SEC 255 to 257,263 and 264) APPOINTMENT OF DIRECTORS BY DIRCTORS (SEC 260,262 and 313) As additional directors (sec260) In a casual vacancy (sec262) As alternative director( sec313) Appointment of directors by the third parties Appointment by proportional representation (sec265) Appointment of directors by the central government sec(408)

POSITION OF DIRECTORS
It is very difficult to pinpoint the exact legal position of the directors of the company . They have been described by various names, some time as agent some time as truste and sometime as managing partners of the company . we can sonsider the positin of the directors from all these points of view Director as agent Director as employees Directors as officers Directors as trustee: directors are the trustees of the companys money and property Directors are trustees of the powers entrusted to them

RESTRICTIONS ON APPOINTMENT OF THE DIRECTORS

A person shall not be capable of being director appointed directors of a company by thr articles and shall also not be named as a director or proposed director in the prospectus unless before the regestration of the articles , or the publications of the prospectus as the case may be , he or his agent authorised . 1. signed and failed with the registor of consent in writing to act as such director 2. Signed the memorandum for his qualifications shares if any ;or 3. Taken his qualifications shares if any from the company and paid or agreed to pay for them or 4. Signed and filed with the registar an undertaking in writing to take from the company his qualifications share sif any and pay for them ; or 5. Made and filed with the registrar an affidavit to the effect that his qualifications shares are registered in his name 6. This section does not apply to the private company

NUMBER OF DIRECTORSHIPS SEC 275,277 TO 279

No persons to be a director of more than 15 companies( sec 275) Exclusion of certain directorships (sec 278) A private company which is neither a subsidiary nor a holding company of a public company An unlimited company An associations not carrying a buiness for profit or which prohibits the payment of a dividend A company in which such person is only an alternate director

DISQUALIFICATIONS OF DIRECTORS
1. 2. 3. 4. A person of unsound mind An undischarged insolvent A person whose calls in respect of share of the company held for more than 6 months have been arrear A person who is already a director of a public company Has not filed annual accounts and annual returns for any three continuous financial years commencing on and after the first day of april 199 ; or Has failed to repay its deposits or interest thereon on due date redeem its debentures on the date or pay dividend and such failure continues for one year or more

VACATIONS OF OFFICE AND REMOVAL OF DIRECTORS (SEC 283

The office of the director shall become vacant if he He fails to obtain within 2months of his appointment or at any time thereafterceases to hold the share qualification, if any , reuired of him by the articles of the company He is adjudged to be of unsound mind He applies to be adjudicated an insolvent He is adjudged an insolvent He is convicted by a court of any offence involving moral turpitude and sentenced in respect there of imprisonment for not less than 6 months He fails to pay any call in respect of shares of the company held by him with in 6 months from the last date fixed for the payment of the call . The cental govt may by notification in the official gazette removes this disqualifications He fails to make disclosure to the board of directors with regard to any contract with the company in which he is directly or indirectly interested.

REMOVAL OF DIRECTORS
directors may be removed by the shareholders( sec284) Apply to the case of a director appointed by the central government under sec408 authorise in the case of aprivate company removal of a director holding office for life on april 1, 1952 Apply to the case of a company which has adopted the system of electing 2/3 of its directors by the principle of proportional representation 1. central government (sec 388-B to 388-E) 2. Removal by company law board (sec402)

MANAGERIAL REMUNERATION
Managerial remuneration is compensation for services provided to a company in a managerial capacity. This can include cash payments, along with benefits like stock options, health insurance, and bonuses. Over maximum managerial remuneration (sec198) remuneration not to exceed 11 percent , under the sec 349,350, 351 If the company does not make any profit then the director will not bee given any remuneration and will given any remuneration by the previous approval of central government if required

MEETINGS OF DIRECTORS
(SECTION-285) NUMBER OF MEETINGS-ONCE IN EVERY THREE MONTHS NOTICE OF MEETINGS QUOROM FOR MEETINGS

POWERS OF DIRECTORS
GENERAL POWERS OF THE BOARD(SECS-291) CAN NOT DO ACTS WHICH ARE TO BE DONE BY THE COMPANY IN GENERAL MEETINGS BOARD SHALL USE ITS POWER SUBJECT TO THE PROVISIONS CONTAINED IN THE COMPANIES ACT.

POWERS USED FOR BOARD MEETINGS (SECTION-292)

CAN CALL SHAREHOLDERS IF UNPAID SHARES ISSUE DEBENTURES BORROW MONEYS OTHER THAN DEBENTURES INVEST THE FUNDS OF COMPANY MAKE LOANS

POWERS USED IN GENERAL MEETING (SECTION-293)

TO SELL, LEASE,DISPOSE OR SUBSTANTIALLY OF THE WHOLE UNDERTAKING OF THE COMPANY. TO REMIT OR GIVE TIME FOR REPAYMENT OF ANY DEBT DUE TO THE COMPANY TO INVEST IN COMPULSORY ACQUISITION USING THE MOUNT OF COMPENSATION. TO CONTRIBUTE TO CHARITABLE AND OTHER FUNDS NOT DIRECTLY RELATING TO BUSINESS OF THE COMPANY WELFARE.

POLITICAL CONTRIBUTION (SECTION-293-A)

Amount contributed in on financial year should not exceed 5% of its average net profit Resolution authorizing the making of the contribution should be passed in board meeting. Amount of contribution should be shown in the P/L A/C during the financial year.

DUTIES OF DIRECTORS
FIDUCIARY DUTIES 1)EXERCISE THEIR POWERS HONESTLY AND BONA FIDE FOR THE BENEFIT OF THE COMPANY AS A WHOLE 2)SHOULD NOT HAVE A CONFLICT BETWEEN THEIR DUTIES TO THE COMPANY AND PERSONAL INTEREST

 DUTIES OF CARE, SKILL AND DILIGENCE DIRECTORS SHOULD CARRY OUT THEIR DUTIES WITH REASONABLE CARE AND EXERCISE DEGREEE OF SKILL AND DILIGENCE. STANDARD OF CARE a)The type of nature of work b)Division of powers between directors and other directors c) General usages and customs in that type of business d)Whether directors work remuneratively

OTHER DUTIES OF DIRECTORS

TO ATTEND BOARD MEETINGS NOT TO DELEGATE FUNCTIONS EXCEPT FEW TO DISCLOSE HIS INTEREST

CONTRACTS IN WHICH DIRECTORS ARE INTERESTED

BOARDS SANCTION REQUIRED(SECTION 297) DISCLOSURE OF INTEREST BY DIRECTORS (SECTION-299) INTERESTED DIRECTOR NOT TO PARTICIPATE OR VOTE IN BOARDS PROCEEDINGS. REGISTER OF CONTRACTS The date of contract or arrangement The names of the parties thereto The principal terms r condition thereof The name of directors voting for and against the contract and the names of those remaining neutral INSPECTION OF REGISTER

LIABILITIES OF DIRECTORS
LIABILITIES OF THIRD PARTIES
UNDER THE ACT INDEPENDENTLY OF THE ACT

LIABILITY TO THE COMPANY

ULTRA VIRES ACT NEGLIGENCE BREACH OF TRUST MISFEASANCE

LIABILITY FOR BREACH OF STATUTORY DUTIES LIABILITY FOR ACTS OF HIS CO-DIRECTORS

VALIDITY OF ACTS OF DIRECTORS (SECTION-290)

De facto and de jure directors A director who is not duly appointed but acts as a director is called De facto (director) and is as much as liable as a de jure (properly appointed).

DISABILITIES OF DIRECTORS
Avoidance of provisions relieving directors of liability (sec-201) Undischarged insolvent disqualified from being appointed directors (sec-274) No person to be a director of more than 20companies (sec-275) Restrictions on powers of Board (sec-293) Loans to directors (sec-295)

 Boards sanction for certain contracts in which particular directors are interested (sec-297) Prohibition of assignment of office by director (sec-312) Directors not to hold office or place of profit (sec-314)

MANAGING DIRECTOR
A director who is entrusted with substantial powers of management which would not otherwise be exercisable by him.

APPOINTMENT (SECTION-269)
COMPULSORY APPOINTMENT OF MANAGING OR WHOLE-TIME DIRECTOR OR MANAGER PRIOR APPROVAL OF THE CENTRAL GOVERNMENT UNLESS APPOINTMENT IS IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SCHEDULE 13 PROVISIONS RELATING TO APPOINTMENT WHERE IT REQUIRES APPROVAL OF THE CENTRAL GOVERNMENT APPOINTMENT IN CONTRVENTION OF THE REQUIREMENTS OF SCHEDULE 13.

DISQUALIFICATION OF MANAGING DIRECTOR (SEC. 267)

Suspends Undischarged insolvents Has at anytime been convicted by a Tribunal

THANK YOU!