The Companies Act 2013

29 chapters, 470 sections & 7 schedules

 COMPANY: What is it? [Sec.3]
 Section 3 (1) (i) of the Act defines: “A company means a
company formed and registered under this Act or an
existing company.”

 That is, a company is an association of persons united

for a common object

 It is a form of business organization where the funds of a

large number of investors are managed by a few persons
for the purpose of earning profits which are shared by all
the investors
 Essential Features of a Company
 Registration: Compulsory
 Separate legal entity: Distinct person
 Perpetual succession
 Artificial person: But not a Citizen
 Transferable shares
 Limited liability
 Common seal: Separate and independent legal
existence
 Separate property: Can dispose property in its name.
 Capacity to sue and be sued
 Types of Companies
 Royal Charter or Chartered Companies:
Treated as foreign companies.

 Statutory Companies: Formed under Special

Statutory Act of Parliament or State Legislature.
For e.g., RBI, SBI, IFCI, etc.
 Registered Companies: Are registered under the
Companies Act. These companies have MoA
and AoA for internal & external regulations.

 Under the Act the companies are either

 (i) Companies limited by shares,

 (ii) Companies limited by guarantee, or

 (iii) Unlimited Companies.

 Companies Limited by Shares:

 During the existence of the company or in the

event of winding up, a member can be called
up to pay the amount remaining unpaid on the
shares subscribed by him

 A company limited by shares may be a public

limited company or a private limited company
 Companies limited by guarantee:

 Companies may or may not have share capital

 Each member promises to pay a fixed sum of money

specified in the Memorandum in the event of liquidation of
the company for payment of debts and liabilities of the
company

 The amount promised is called ‘guarantee’

 The amount guaranteed by each member is in the nature of

reserve capital. Cannot be called upon except in the event of
winding up of company
Unlimited Companies:
Liability of the members is unlimited like an ordinary
partnership firm.
Section 12 gives choice to promoters to form a company with or
w/o limited liability.
A company not having any limit on the liability of its members
is called an ‘unlimited company.’
The articles of such a company shall state the number of
members with which the company is to be registered.
 Memorandum of Association
 It is the document which contains the rules regarding
constitution and activities or objects of the company.
 It is a fundamental charter of the company.

 The company is governed by it.

 The company is allowed to work within the

framework of it.
 By it outside world knows the state of affairs.
 It defines the extent and powers of the company.

 If the acts of the company are beyond the limits of the

MoA, such acts would be void and ultra vires.

 Directors are personally liable to make good the

Company’s loss if company’s money is spent on an

unauthorized object.
 Contents of MoA [Sec.13]
 Name of company with ‘Limited’ suffixed in case of
public company and ‘Private Limited’ suffixed for a
private company.
 Registered office of the company.

 Objects of the company.

 Liability of the members.

 Details of share capital of the company.

 Subscription clause.
 Alteration of MOA
 Alteration of Name clause
 special resolution and permission of Central Govt is required
 When name is identical then ordinary resolution is sufficient
 Change of Registered office
 From one premised to another premises BOD pass the
resolution
 One city to another city then special resolution: BODs
special resolution
 One state to other state: special resolution and confirmation
of Central Govt is needed
 Alteration of object clause: Special resolution-
within 30 days
 Alteration of liability clause: Members to give in
writing
 Alteration of capital clause: Articles have to
authorise
 Articles of Association
 Regulations of the company are prescribed by the Articles of
Association.
 It can be altered at any time according to the wishes of the
members.
 It is subordinate to the MoA and is under full control of the
members.
 Members can make their regulations through AoA subject to
Companies Act.
 It contains rules & regulations for the internal management of the
company subject to provisions of the Companies Act.
 Contents of AOA
 Classes of shares

 Procedure of making IPO

 Procedure of transfer of shares

 Forfeiture of shares

 Directors, appointment, remuneration, qualification

 Accounts and audit

 Payment of commission on shares
 Alteration of share capital and buyback of shares
 Borrowing powers of directors
 General meeting
 Voting rights
 Dividend and reserves
 Winding up