COMPANY LAW - NATURE OF COMPANY

Definition of Company: Voluntary association of persons, formed for some common purpose. It has no physical existence. Company has no body or soul. CHARACTERISTICS: Separate legal entity -Case law(SALOMON Vs. SALOMON & Co Ltd.), Limited liability for members, Perpetual succession, Common seal, Shares are Transferable, Separate property, Capacity to sue. It has nationality and residence but it is NOT a citizen.

LIFITING THE CORPORATE VEIL Company is a legal person distinct from its members. EXCEPTIONS: Protection of revenue (Case Law : Sir Dinshaw Maneckjee Petit.), Prevention of fraud, Determination of character of a company (case law: Daimler Co Ltd Vs. Continental Tyres & Rubber Co Ltd.), Co avoiding legal obligations, avoidance of welfare legislations, Protecting public policy. STATUTORY EXCEPTIONS: No. of members below mini. 7 or 2., Failure to refund application money, Misdescription of Co.s name, Fraudulent trading etc.. ADVANTAGES OF INCORPORATIO: Limited liability, Free Transferability of shares, Separate legal entity, control, Better management.

KINDS OF COMPANIES
UNINCORPORATED CO.: Large Partnerships which are not allowed now not regarded as distinct entities unlimited liability. Having more than 10 members for banking / more than 20 for other business illegal association. A.) ON THE BASIS OF INCORPORATION 1) Statutory Companies: RBI, LIC, UTI, Railways etc.. 2) Registered Companies : which are Registered under the Companies Act. B.) ON BASIS OF LIABILITY: a) COMPANIES LIMITED BY SHARES: Liability of members limited to amount of shares subscribed, Pvt. Ltd or Public Limited. b) COMPANIES LIMITED BY GUARANTEE: No profit motive, to promote art, science, culture sports etc., liability of members fixed to the amt. guaranteed, generally amount called up at the time of liquidation nature of reserve capital. P Ltd or Public Ltd. c) UNLIMITED COMPANIES: Company without limited liability. By a special resolution can re register into limited liability Company.

KINDS OF COMPANIES Cont..

C.)ON THE BASIS OF NUMBER OF MEMBERS: 1) PRIVATE LTD.CO: Mini. Paid-up capital Rs.1 Lakh, Restricts the right to transfer shares, limits the no. of members to 50 not including present or past employees, Prohibits invitation to public to subscribe for its shares or fixed deposits. Must have its own AOA. Formation- Min. 2 members, Minimum Directors 2. Quorum 2. Given certain special privileges under the Companies Act. 2) PUBLIC LTD CO : Mini. Paid-up capital Rs.5 Lakhs, Not a subsidiary of a Pvt Ltd Co., it can be listed or unlisted. Minimum 7 members & 3 Directors. Quorum : 5 Members personally present. Can invite public to subscribe for its shares or FDs. CONVERTION OF PVT LTD. TO PUBLIC LTD Co.: By default (more than 50 members, restriction on tr. of shares) By Choice. - Amend AOA, raise number of Directors, alter restrictions.

KINDS OF COs Cont..

D.)ON THE BASIS OF CONTROL : a) HOLDING COMPANY : When it can control another Co. by 1) Controlling composition of Board of Directors, 2) Holding of majority shares and 3) when it is a subsidiary of another subsidiary. b) SUBSIDIARY COMPANY: E.)ON THE BASIS OF OWNERSHIP: a) GOVERNMENT COMPANY: When a Govt. holds not less than 51% of the paid up capital. It is NOT a dept. of Govt. b) FOREIGN CO.: A Co. incorporated outside India and which has a place of business in India. c) ASSOCIATIONS NOT FOR PROFIT (Sec.25) Central Govt. can grant licence to associations formed NOT for profit, with limited liability without using the words Limited or Pvt Limited. For promoting commerce, science, charity etc.. To prohibit payment of dividend. Example: Chamber of commerce, associations etc.. d) ONE MAN CO. : When one person holds all most all shares. (Salomon V Salomon Co Ltd.) It is a separate legal entity distinct from its members

KINDS OF Cos.
PRODUCER COMPANY: Formation of co-operative business as Companies or to convert existing co-op. business into Cos. FEATURES: Minimum 10 members, formed as Pvt Ltd Co., but Pvt. Ltd may not form part of the name, Co-op. institutions can voluntarily transform into Producer Co., shares not to be traded. Shares can be transferred only with the approval of the Board. It cannot become a Public Ltd Co.. It will have MOM and AOA. It enjoys certain concessions, privileges under the law. OBJECTS: Matters relating to production, processing, manufacture, providing technical services, research, generation of power, insurance, welfare measures etc.. In the interest of its members. MEMBERSHIP: Individuals, producers institutions or both. It will have Min. 5 directors and Max. 15.