Various methods of securing borrowed money include: 1) Lien: Money can be raised by placing goods with the lender

while giving a right to retain the goods until the money is paid. A general lien, under section 171 of the Indian Contract Act, 1872 , is available to bankers, factors, wharfinger, attorneys of High court and policy brokers. 2) Pledge: section a72 of the Indian Contract Act, 1872 defines pledge as the bailment of goods as security for payment of a debt or performance of a promise. 3) Hypothecation: Hypothecation means creation of some claim in goods or related documents without transferring their possession to the lender but with an undertaking to give possession of the goods to the creditor upon failure to pay the principal debt with interest. Sometimes, advances and loans of the borrower are also hypothecated. This is called as hypothecation of the book of debts. This mode of charging book debts is more convenient than the assignment of book of debts. The borrower submits the statement of outstanding debts hypothecated to the bank from time to time as in the case of hypothecation against goods. The agreement and statement form the basis of the advance against the security of the book of debts. 4) Assignment: Assignment of debt may be made to the third party, thereby borrowing as a secured borrowing. Actionable claim may also be taken as a form of assignment. An actionable claim means a claim to any unsecured debt or any beneficial interest immovable property not in the possession of the claimant. 5)Mortgage: A mortgage is the transfer of a n interest in specific immovable property for the purpose of securing the payment of the money advanced or to be advanced by way of loan, an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability. 6) Charge: Section 100 of the transfer of Property Act defines a charge as follows: Where immovable property of one person is, by act of parties or operation of law made security for the payment of money to another and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property, and all the provisions which apply to a simple mortgage, shall so apply to such change. Charges are of two types viz. Fixed charge and floating charge. A fixed charge is made specifically to cover definite and ascertained assets of permanent nature such as land, building or heavy machinery. This type of charge passes legal title to certain specific assets, and the company loses the right to dispose of the property without the approval of charge holder though it retains the possession of the property. Floating charge is made on assets which change in the ordinary course of business from time to time e.g. stock-in-trade. The company can dispose off the assets or can convert them into some other assets without seeking permission of the lender. The purpose of creating a floating security is to allow a company to carry on its business in the ordinary course of business, as if no charge is created till the property charged attaches or becomes fixed or crystallizes. It was held in Maturi U. Rao v. Pendyla(1970), that the essence of a floating charge is that the security remains dormant until it is fixed or crystallized.

A company cannot create a further floating charge on the same assets to rank in priority to or in pari passu with the existing charge unless such power has been reserved by the company. Crystallization of floating charge is making the charge fixed and making the assets comprised therein as subject to the same restrictions as the fixed charge. A floating charge becomes a fixed charge, known as crystallised when: a. the company ceases to carry on its business or b. the charge holder intervenes by appointing a receiver or institutes a suit against the company to enforce the charge c. the company goes into liquidation d. The event specified in the charge takes place. A copy of every trust or deed creating or evidencing any charge has to be filed with the Registrar for registration within 30 days after the date of its creation and has to be verified as provided.

Exceptions to the Doctrine of Indoor Management: The following are exceptions where an outsider cannot claim relief on the grounds of indoor management: i. Knowledge of irregularity: If the outsider already had the knowledge of lack of authority of the person on behalf of the company but still enters into a contract with the same person, he cannot seek protection under the doctrine. ii. No knowledge of the articles: The rules assumes that the outsider has the knowledge of the memorandum and articles as these are public documents which have to be read b persons dealing with the company. iii. Negligence: The doctrine of indoor management does not encourage negligence. An outsider cannot enter into a contract with an officer of a company who ordinarily is not permitted to enter into a contract on behalf of the company. iv. Forgery: This is an obvious exception. The directors cannot be held responsible for the signatures they never made nor can the company do anything about it. v. Non- Existent authority of the company: If a contract has been entered into by an outsider which is ultra vires to the activities of the company itself, then there is no question of the contract being ultra vires.

Promoter: A promoter is the person who originates the scheme for the formation of the company, has the Memorandum of Association prepared, executed and registered, and finds the first directors, settles the terms of the preliminary contracts and prospectus and makes and arrangement for advertising and circulating the prospectus and placing. So in a general term a promoter is the person who possesses the intention to promote a company and who takes the required steps for incorporation steps for incorporation of the intended company. The promoter need not participate in the formation of the company. Any person who agrees with the intention and objects of the company and who brings in capital into the company will be regarded as a promoter. In India promoters generally secure the management of the company formed or are the persons who convert their own private business into a limited company, private or public and secure for themselves more or less controlling interest into the companys management.

Bonus Shares: A company is allowed to capitalise profits by issuing fully paid up shares to the members thereby transferring the sums capitalized from the profits and loss account or reserve account to the share capital. Such shares are known as bonus shares and are issued to the existing members of the company free of charge. Bonus shares are also called as capitalization shares. A company would like to have more working capital but it need not go into the market for obtaining fresh capital by issuing fresh shares. The necessary money is available with it and this money is converted into shares which really mean that the undistributed profits have been ploughed back into the business and converted into share capital. Bonus shares can be issued only if the articles so permit. An issue of bonus shares should be preceded by a Board Resolution approving the same. It should also be sanctioned by the shareholders in the General Meeting on the recommendation of the board of directors of the company.

Different kind of shares as envisaged under the Companies Act 1956 As per section 85 of the Companies Act 1956 , the share capital of the company limited by shares formed after the commencement of this Act shall be of two kinds: 1) Equity share capital- this kind of share comes with voting rights or with differential rights as to dividend, voting or otherwise in accordance with such rules and subject to such condition as may be prescribed. 2) Preference share capital- this kind of shares with respect to dividend, it carries or will carry a preferential right to be paid a fixed amount or an amount calculated at fixed rate, which may be either free of or subject to income tax, and secondly with respect to capital it carries on winding up or repayment of capital a preferential right to be repaid the amount of the capital paid up or deemed to have been paid.

Share certificate: Meaning: Share certificate is a document issued by the company and is an evidence that the person named therein is the holder of specified number of shares of the company.It can only be issued in pursuance of a Board Resolution and on surrender of the letter of allotment if issued. Essential requirement to be fulfilled in issuing of share capital are as follows: 1. Must be issued under the common seal of the company. 2. Should be signed by two directors or persons authorised to sign on their behalf and the secretary or any another person appointed by the Board for the said purpose. 3. Certificate is also subject to stamp duty as per the relevant Stamp Act of the state.

Secured and Unsecured borrowing: Borrowing may either be secured or unsecured. If the borrowing is backed by an asset of the company then it will be a secured borrowing. The market value of such an asset is always supposed to be not less than the secured loan or advance. An unsecured loan is not backed by any asset. In the same sense a loan or advance not fully covered by the security will be treated as partly secured.

Prospectus: Definition:Section2(36) defines a prospectus as any document described or issued as a prospectus and includes any notice, 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 or debentures of a body corporate. A prospectus is an invitation issued to a purchase/subscribe shares or debentures of the company. The provisions of the Act relating to prospectus apply only if it is issued to the general public. A single private communication will not be taken as an issue of prospectus. In Pramatha Nath Sanyal vs. Kali Kumar Dutt(1925) a newspaper advertisement stating that some shares were still available for sale according to the terms of the prospectus of the company which could be obtained on application was held to be a prospectus. Prospectus is an important document as it is the only communication from the company to the public inviting them to invest in the company. Provision regarding the dating of Prospectus: Section 55 specifies that every prospectus has to be dated. These date unless proved contrary will be taken as the date of publication of the prospectus. This is necessary to determine the various time limits that are to be met mandatorily under the various provisions of the Act. The date of publication of the prospectus should be differentiated from the date of its issue. While the date which appears on the prospectus is the date of publication, the date of issue is the date on which the prospectus first appears as an

advertisement. A prospectus cannot be issued until it is registered with the Registrar on or before the date of its publication.

Characteristic features of a company: 1) Independent corporate entity: One of the important features of a company is its separate legal entity once it is Incorporated or registered under the Companies Act, 1956. It exists as an independent legal person and has its own entity distinct from the person who constitutes it. The company enjoys rights and liabilities which are not same as that of its members. ( Case of Saloman vs Saloman & Co. Ltd (1897) ) 2) Limited liability: The members of a limited company are only liable to contribute towards payment of its debt to a limited extent. No member can be called upon to pay anything more than the unpaid value of the shares held by him or the amount guaranteed by him. 3) Separate property: The wealth of the shareholders and the wealth of the company are separate. A member does not even have an insurable interest in the property of the company. An incorporated companys wealth is clearly distinguished from that of its members. 4) Perpetual succession: A company once incorporated will never die. Being an artificial person it cannot be incapacitated by illness and it does not have an allotted life span. Also as the company is distinct from its members, the death, insolvency or retirement of its members leaves the company unaffected and will continue to be the same entity with the same privileges and immunities, estates and possessions. 5) Transferable Shares: The Company Act provides that the shares or other interests of any member in a company shall be movable property, transferable in the manner provided by the articles of the company. A member may sell his share in the market without having to withdraw the capital from the company.

Retrenchment: Section 2(oo) of Industrial Dispute Act defines Retrenchment as the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as punishment inflicted by way of disciplinary action. However it is to be noted that retrenchment does not include: (a) Voluntary retirement of the workman, (b) Retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf, (c) Termination of the service of the workman as a result of the non renewal of the contract of the employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein (d) Termination of the service of a workman on the ground of continued ill- health

(i) Dividend: In two ways term dividend under the Companies Act, 1956 may be defined in two ways. In case where a company is a going concern, it represents that portion of the profits which are distributed among the shareholders of the company. In case of a company which is to be wound up, it represents a distribution of the companys realized assets among the creditors and the contributories according to their rights. The power to pay dividend is inherent in a company and is not derived from the Companies Act or the Memorandum or Articles of association, though the articles generally regulate the manner in which the dividends may be declared. (ii) Lay Off: Sec, 2(kkk) of the Industrial dispute Act defines Lay off as the failure, refusal or inability of an employer to give employment to a workman: a. Whose name is borne on the muster- rolls of his industrial establishment, and b. Who has not been retrenched. The failure, refusal or inability to give employment may be due to1. Shortage of coal, power or raw materials, or 2. The accumulation of stocks, or 3. The breakdown of machinery, or 4. Natural calamity or for any other connected reason Strike: Sec.2(q) defines strike as: (a) A cessation of work by a body of persons employed in any industry acting in combination, or (b) A concerted refusal of any number of persons who are or have been so employed to continue work or to accept employment, or (c) Refusal under a common understanding of any number of such persons to continue to work or to accept employment.

(iii)

Yes, a minor can become a member of a company but with certain underlying exceptions. Any person who is Sui Juris can become a member i.e any person who is competent to enter into a contract may be a member of a company. Such competency is governed by the Indian Contract Act 1872. So under this definition a minor cannot become a member but under the Companies Act 1956 a minor can become a member of the company but it goes with the risk that in case the company suffers loss or is wound up then the minor cannot be made liable for the payment of such debts or borrowings.