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What is a company
A company is an artificial person created by law. A company means a group of persons associated together for the attainment of a common end, social or economic.
Definition of a company
According to Sec (1), A company formed and registered under the act. According to Sec (3) of the act, on incorporation a company becomes a body corporate or a corporation with a perpetual succession and a common seal. According to Lord justice Lindley , IT is an association of many persons who contribute money or moneys worth to a common stock and employ it in some trade or business, and who share the profit and loss arising there from.
A company is an incorporated assosiation which is an artificial person having seperate legal entity and perpetual sucession, a common seal and capital Comprise of transferable shares and carrying limited libility
CHARACTERSTICS OF A COMPNAY
Incorporated Assosiation Artificial legal person Separate legal entity Limited liability Perpetual succession Common seal Transferability of shares Separate property Capacity to sue
Incorporated Association: a company must register under prevalent companies act Artificial Legal Person Created by process other than natural birth Does not have physical attributes Invisible and exist only in the eyes of law No body, no soul, no conscience Though it can enter in contract, has rights and duties like natural person, it can be fined. But cannot sent to jail or cant take oath
Seperate legal entity; A company is a legal person having juristic personality entirely distinct from and independent of the individual persons who are for the time being its members. It has right to own and transfer the title to property in any way it like It can sue and be sued in its own name In mathematical language it is defined as n+1th person. N stands for total members, 1th person for company itself
Common Seal Being a legal entity , it can be bound by only those documents which bear its signature. Law has provided for the use of common seal with the name of the company engraved on it as substitute for its signature.
Any document bearing the common seal of the company will be legally binding on the company
Limited libility The libility of the members for the debt of the company is limited to the amount paid on their shares
No share holder can called upon to pay more than the nominal or face value of shares held by him in case of company with limited libility
Transferability of shares
Shares of public company are freely transferable and members can dispose of their shares when ever they like without the permission from company or members In private company some restiction on the right to transfer is essential in its article as per section 3(1)(iii)
Incorporation of company
Company is brought into existance by legal process called incorporation This is effect by registration with the registrar of companies After the promotional work before getting registed following steps has to be taken To ascertain from registrar of companies the availability of name
get a letter of intent from industries developement and regulation act if the company comes with the purivew of the act
To fix up brokers, bankers, solicitors,auditors and signatories to the memorandum To get Memorandum and Articles of Association prepared and printed
After taking the above preliminery steps promoters make an application to registrar of companies of the state Application must accompanied with Memorandum of association duly stamped signed and witnessed Article of Association properly stamed and duly signed Agreement if any with the manager or directorsappointed Written consent of directors to act for the company
The notice of address of the registerd office of the company A satuatory declaration stating that legal requirements are complied with , it must be signed by Advocate of Supreme court or High court
Along with documents necessary filing fees and registration fees at prescribed rates are also paid
Registrar of companies will scrutinize these documents and if they are in order he will register the company and will issue a certificate of incorporation
Registrar will allocate a Corporate Identity Number
Classification of Companies
Companies
Cos. With limited liability Ltd. Ltd. Registered companies By By shares guarantee Statutory companies Unlimited liability
Private company
Public company
Subsidiary company
Nongovernment
Registered Companies: These are the companies which are formed and registered under the companies Act, 1956 or were registered under any of the earlier companies act.
Insurance, banking, electric supply company though registerd but govern by insurance act, banking regulation act and electric supply act
2. Companies limited by guarantee A company having liability of its members limited by its memorandum to such amount as members may respectively there by undertake to the assets of the company in the event of being wound up
Unlimited Company
There is no limit on the liability of the members. The liability in such cases would extend to the whole amount of the companys debts and liabilities. Here the members cannot be directly sued by the creditors. When the company is wound up, the official liquidator will call upon the members to discharge the liability. The details of the number of members with which the company is registered and the amount of share capital has to be stated in the Articles of Association (AOA).
Public company
A public company means a company which
Has a minimum paid up capital of Rs.5 lakh or such high paidup capital, as may be prescribed
Subsidiary company
A company is known as a subsidiary of another company when control is exercised by the latter over the former called a subsidiary company.
Company controlling composition of Board of Directors Holding of majority of shares Subsidiary of another subsidiary
Partly by the central government and partly by one or more state governments.
E.g.: State Trading Corporation of India Limited Minerals and Metals Trading Corporation of India limited
Non-government company
Foreign companies
Foreign Company
A company incorporated outside India, but having a place of business in India. If it does not have a place of business in India but only has agents in India it cannot be considered to be foreign company.
Memorandum of Association
It is the charter of the company It contains the fundamental conditions upon which the company can be incorporated It contains the objects of the companys formation The company has to act within objects specified in the MOA It defines as well as confines the powers of the company Any thing done beyond the objects specified in the MOA will be ultra vires. Their transactions will be null and void
The Liability Clause- What is the liability of its members.. limited by shares or guarantee or unlimited, there can be alteration in the liability clause The Capital Clause - The amount of the nominal capital of the company, number of shares in which it is to be divided alteration of the capital clause etc
The Association or Subscription clause- Where the subscribers to the MOA declare that they respectively agree to take the number of the shares in the capital. It has to have the following: a) They have to sign in the presence of two witnesses, who attest the signatures, b) The subscriber to take at least one share.
Articles of Association
It is the companies bye- laws or rules to govern the management of the company for its internal affairs and the conduct of its business. AOA defines the powers of its officers and also establishes a contract between the company and the members and between the members inter se It can be originally framed and altered by the company under previous or existing provisions of law.
AOA plays a subsidiary part to the MOA Any thing done beyond the AOA will be considered to be irregular and may be ratified by the shareholders. The content of the AOA may differ from company to company as the Act has not specified any specific provisions Flexibility is allowed to the persons who form the company to adopt the AOA within the requirements of the company law The AOA will have to be conversant with the MOA, as they are contemporaneous documents to be read together. Any ambiguity and uncertainty in one of them may be removed by reference to the other.
Content of Articles
Share capital Lien on shares Calls on shares Transfer and transmission of shares Forfeiture of the shares Surrender of the shares General meetings Alteration of the capital Directors etc.. Dividends and reserves
Account and audit Borrowing powers Winding up Adoption of the preliminary contracts etc.