Procedure laid down

under the companies

act,1956
Submitted To-Dr. Jyotsna Sharma
Submitted By-Yuvika
MBA-3
22-MBA-007
Companies Act,1956
 The Companies Act 1956 was an Act of the Parliament of India,
enacted in 1956, which enabled companies to be formed by
registration, and set out the responsibilities of companies, their
directors and secretaries.It was repealed and replaced by the
Companies Act 2013.
 It extends to the whole of India
Features of the Companies Act, 1956 are –
 a) Independent Legal Entity –
 From its integral members, a company has a legal organization that is separate and sharp. It is a self-
controlling, autonomous body and is self-governing. In any of the ways it likes, it has the right to
share out any kind of property for which it is the owner. It also has the right to open a bank account,
can enter into deals, the company can do contracts with the shareholders, and can be sued by the
company or the shareholder can sue the company.
 b) Incorporated Association –
 Under the Companies Act 1956, the companies which are formed in India must be registered. The
registrations of formal documents are required with the Registrar of the Companies for a company’s
incorporation. The motives for which a company is formed are present in the Memorandum of
Association.
 c) Limited Liability –
 As a company holds a separate legal entity, the members are not claimable for it, so the company
cannot utilize the shareholder’s private property to satisfy the liable ones.
 d) Common Seal –
 A common seal is a legal entity that represents all the decisions made on the behalf of a
company as it cannot take on its own. The company has artificial personalities who are
called directors, they perform as representatives of the company.
 e) Perpetual Existence –
 A company itself is an artificial body that does not have any restrictions like age or factors
like death, insolvency, retirement, etc. which do not impact the company’s status. There is
no allotted life span for perpetual existence. A company’s existence can only be ended by
laws.
 f) Transferability of Shares –
 Shareholders of a private company cannot transfer shares like a Public Limited Company
as they have restrictions to do that. To a buyer who is interested to buy, the person can sell
his part of ownership to him because the company’s share is transferable. Public company
shares are easy to transfer.
Types of companies
There are 11 types of registrations for a company under the Companies Act 1956-
 Private company
 Public company
 Companies limited by shares
 Companies limited by guarantee
 Unlimited company
 Section 25 company
 Government companies
 Foreign companies
 profitable or non profitable companies
The Act lays down the legal procedures
for mergers or acquisitions :-
 Permission for merger:- Two or more companies can amalgamate only when
the amalgamation is permitted under their memorandum of association. Also,
the acquiring company should have the permission in its object clause to carry
on the business of the acquired company. In the absence of these provisions in
the memorandum of association, it is necessary to seek the permission of the
shareholders, board of directors and the Company Law Board before affecting
the merger.
 Information to the stock exchange:- The acquiring and the acquired
companies should inform the stock exchanges (where they are listed) about the
merger.
 Approval of board of directors:- The board of directors of the individual
companies should approve the draft proposal for amalgamation and authorise
the managements of the companies to further pursue the proposal.
 Application in the High Court:- An application for approving the draft
amalgamation proposal duly approved by the board of directors of the
individual companies should be made to the High Court.
 Shareholders’ and creators’ meetings:- The individual companies
should hold separate meetings of their shareholders and creditors for
approving the amalgamation scheme. At least, 75 percent of
shareholders and creditors in separate meeting, voting in person or by
proxy, must accord their approval to the scheme.
 Sanction by the High Court:- After the approval of the shareholders
and creditors, on the petitions of the companies, the High Court will pass
an order, sanctioning the amalgamation scheme after it is satisfied that
the scheme is fair and reasonable. The date of the court’s hearing will be
published in two newspapers, and also, the regional director of the
Company Law Board will be intimated.
 Filing of the Court order:- After the Court order, its certified true copies
will be filed with the Registrar of Companies.
 Transfer of assets and liabilities:- The assets and liabilities of the
acquired company will be transferred to the acquiring company in
accordance with the approved scheme, with effect from the specified
date.
 Payment by cash or securities:- As per the proposal, the acquiring
company will exchange shares and debentures and/or cash for the
shares and debentures of the acquired company. These securities will be
listed on the stock exchange.