The Companies Act, 1956

Why study company law ? 
Most popular form of business organisation.
Why«««.? 

It provides an organisational framework
it is a means to an end 

A company is a person in Income-tax.  More than 60% of income-tax revenue
comes from corporate assessees
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Non-corporate form of business enterprises‡ Sole proprietorship ‡ Joint Hindu Family (HUF) ‡ Partnership Corporate Form of business enterprises ± ‡ Co-operative organisation ± Can be converted into a Producer company. ‡ Company ‡ Limited Liability Partnership (LLP)
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ME ANING OF A COMPANY A COMPANY IS AN ASSOCIATION OF PERSONS FOR SOME COMMON PURPOSE VIZ. REGISTERED OR INCORPORATED UNDER THE COMPANIES ACT WHERE BY IT AQUIRES CERTAIN ATTRIBUTES Separate Legal Entity Limited Liability Perpetual Succession Transferable Shares Separate Property Common Seal 3 . RESEARCH ETC. BUSINESS. CHARITY.

‡ The proportion of capital to which each member is entitled is his share. are members. and who share the profit and loss (as the case may be) arising there from. ‡ The common stock so contributed is denoted in money and is the capital of the company.‡ By a company is meant an association of many persons who contribute money or money¶s worth to a common stock and employ it in some trade or business. ‡ The persons who contribute it. ‡ The shares are always transferable although the right to transfer is often more or less restricted. (Lord Justice Lindley) 4 . or to whom it belongs.

a company can be defined as incorporated ³ an association. with a perpetual succession and a common seal ´. which is an artificial person created by law. (Haney) 5 .‡ On the basis of its characteristics. having a separate entity.

Characteristic Features of a Company Separate Legal entity Solomon v Solomon &Co. Limited liability of members Perpetual Succession 6 .Ltd.

 Separation of ownership from management  Transferable shares  Separate Property  Common Seal  Capacity to sue and being sued 7 .

‡ Lifting the veil means disregarding the corporate entity and paying regard to the realities behind the legal form ‡ When entity relies on its corporate personality as a shield to cover its wrongdoings 8 .Lifting the corporate veil ‡ Fictional veil between the company and its members.

62 & 63) 9 . Misrepresentations in prospectus (sec. 45) 2. Reduction of membership below the statutory minimum (sec.Statutory recognition of lifting of corporate veil Under Statutory Provisions 1.

Company under investigation 7. 147) 5. Fraud during winding up 8. Misdescription of name (sec.3. Piercing the veil in holding and subsidiary company relationships 6. Failure to return application money (sec. For violations of the provisions of other statues 10 . 69) 4. For ultra vires Act 9.

Lifting corporate veil in associated companies. 4. Lifting corporate veil for determination of the enemy character of the company. Lifting corporate veil in tax matters. 3. Lifting corporate veil where company is used for evasion of personal and statutory obligation.UNDER JUDICIAL DECISIONS 1. 11 . 2.

Lifting corporate veil where company is used to avoid welfare legislation.5. 7. 12 . 6. Lifting corporate veil for determining technical competence of the company. Lifting corporate veil where body corporate is used to commit fraud or improper conduct.

DIFFERENCE BETWEEN COMPANY & BODY CORPORATE  Is Company a Citizen?  Is a Company a property of the shareholders? 13 .

N. Body Corporate is wider than the term company  It has three distinct attributes: Separate legal personality Perpetual succession Common seal  Includes foreign company. PFI. AOP 14 declared as a BC by CG.g ONGC .Bank. e.

15 . ‡ As per Section 2 (7) of the Companies Act the word corporation is synonymous with body corporate. Every company is a body corporate but every body corporate is not a company.Distinction between Company and Corporation ‡ Generally speaking. an association of persons incorporated and clothed with legal personality separate from the persons constituting it is known as corporation.

Formalities and expenses ± to form a company with the authorized capital of ten lakhs registration fees is Rs. DDT etc. 6. 4. 27. 3. Greater tax burden. MAT. 2.Disadvantages of Corporate form 1. 16 Corporate Disclosures Separation of control from ownership. 5.200. Detailed winding up procedure . Greater social responsibility.

Companies not covered by the Companies Act i) Statutory companies ii) Chartered Companies 17 . B. The Companies not covered by the Companies Act.KINDS OF COMPANIES A. 1956. 1956. The Companies covered by the Companies Act.

Sec 3 (1) (iii) b) Public Company .Sec 3(1)(iv) These companies may be: i) Companies with liability limited by shares. ii) Companies with liability limited by guarantee. 18 .Companies covered by the Companies Act a) Private Company . iii) Companies with unlimited liabilities (Unlimited Companies).

3. Government Companies. Companies Limited by Guarantee 3. Foreign Companies 4. Unlimited Companies OTHER COMPANIES 19 1.COMPANIES COVERED BY THE COMPANIES ACT PUBLIC PRIVATE NOT COVERED BY THE COMPANIES ACT STATUTORY CHARTERED THESE COMPANIES MAY BE 1. Holding and Subsidiary Companies . Companies not for profit 2. Companies Limited by Shares 2.

companies iii. Companies not for profit ii. Foreign companies iv. public and private companies may be organized as I.From the point of view of liability. Holding and subsidiary companies Advantages and Privileges of Private Companies i) Formation ii) Business iii) Meetings iv) Board of Directors 20 . Government.

Number of Members 2. Transfer of Shares 3.FEATURES OF PRIVATE COMPANIES A PRIVATE COMPANY Means a Company which has a minimum paid-up Capital of Rs. Invitation for Public Subscription 4.00 lac AND 1. 1. Invitation or Acceptance of Deposits Minimum2 Maximum 50 Restricted No public Offer for Shares or Debentures Not allowed from persons other than its members. directors or their relatives 21 .

5 lac which is a pvt company & subsidiary of a public company 22 .FE ATURE OF PUBLIC COMPANIE S S A PUBLIC COMPANY means a company which Is formed by at least Seven Persons and which is not a a private company which has a paid-up capital of Rs.

Distinction of a Private Company and a Public Limited Company Number of Members Number of Directors Transfer of Shares Public Subscription Commencement of business Allotment of Shares Statutory Meeting Managerial Remuneration Index of members 23 .

4] d. Holding and subsidiary Companies [Sec. Investment company 24 .Other Companies a. Foreign Companies [Sec 591] c. Companies not for profit (or Association not for profit) [Sec 25] e. Government company [Sec 617] b. Public financial institutions f.

an HUF is not an illegal association even if he number of members exceed 20 or 10. (b) It is formed for the purpose of earning profits. (d)It is not a Joint Hindu Family (i.Trust Act).e.ILLEGAL ASSOCIATION [SEC 11] An association or partnership is an illegal association if all the following conditions are satisfied : (a)The number of persons carrying on business exceeds 20 (10 persons in case of banking business). 25 ..g. as the case may be). Cooperative Societies Act . (c)It is not registered under the Companies Act or formed under any other Indian law (e.

ITR 457) 26 .ILLEGAL ASSOCIATION [SEC 11] EXCEPTIONS ‡ Associations µnot for profit-making¶ Joint Hindu Family ‡ Effects of an illegal association ± Members personally liable and punishable with fine upto Rs. ( KS Chattiar vs ITO 1957.000. An illegal association is liable to be taxed. 10.

Conversion by choice [Sec.Conversion of private company into a Public company 1. Conversion by operation of law 3. Conversion by default [Sec. 44] Conversion of a public company into a Private company Defunct Company Meaning of Officer who is in default Sec 5 27 . 43] 2.

I CENTRAL GOVERNMENT (Ministry of Company Affairs) REGIONAL DIRECTOR REGISTRAR OF COMPANIES 28 .ADMINISTRATION OF COMPANIES ACT .

JURISDICTION OF COURTS Supreme Court National Company Law Appellate Tribunal National Company Law Tribunal 29 .