COMPANY LAW

A Company is an association of individuals formed for some common purpose- It is a voluntary association of persons formed to carryout business of profit or to promote art, education or charitable purpose. It has no physical existence. Sec 3(1) (i) of the Companies Act 1956 states that a company means a company formed & registered under

this act. Lindly defines a Co. as By a company is meant an association

of many persons who contributes money to a common stocks and employ it for a common purpose.

Co. Law in India owes its origin to the Eng. Co. Law. In the 16th
C trading was done through charted companies in England. The East India company etc.. were in corporated by the Queen,
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by the grant of Royal Charter. A formal company law was enacted in 1856. Through this limited liability was introduced in England for the first time.

SALIENT FEATURES OF A REGISTERED CO:

1. Voluntary Association 2. Incorporated Association

3. Independent Legal Entity

4. Separate Property 5. Legal Restrictions 6. Perpetual Succession 7. Common Seal 8. Share Capital
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10. Limited Liability.

11. Transferability of Shares.

12. Ownership and Management.

Kinds of Companies :.
Companies can be classified on the basis of incorporation,

liability of members, and number of members on the basis of

incorporation, company may be classified as 1. Chartered Companies

2. Statutory Companies and 3. Registered Companies.

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On the basis of liabilities, Co. can be classified as companies with liability limited by shares and companies with liability limited by guarantee and companies with unlimited liabilities. On the basis of number of members, companies can be classified as private companies and public companies.

Differences between private Co. and public Co. are given below :

Private Co. 1. Minimum number 2, should not exceed 50

Public Companies max. 1. Minimum No. 7, No limit for max.

2. Minimum paid up capital Rs. 1 2. Minimum paid up capital Rs. 5 lakh lakh
3. Cannot invite public to subscribe 3. Can invite public to subscribe for for shares shares / debentures 4. Can immediately proceed to 4. Shall have to wait for allotment make allotment of shares after its of shares till requisite minimum incorporation number of applications are received 5. Can immediately commence 5. Shall wait till certificate for business commencement is received 6. Not necessary to hold statutory 6. Has to hold statutory meetings meetings 5

7. Quorum is 2

7. Quorum is 5

8. No restriction of transfer of 8. Can be freely transferred shares 9. MOA to be signed only 2 9. At least 7 members members

10. No need for more than 2 10. There must be atleast 3 Directors
11. Directors- no age restriction 11.Upto 65

12. Previous approval from Central 12. Approval is mandatory Govt. is not required for grand of loan to Directors
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13. No right to receive Balance 13. Members have the right Sheet 14. Name should end private Ltd. 14. Should end with limited

15. Members have no right to 15. Has right to receive audited receive balance sheet balance sheet. 16. Name should end with private 16. Name should end with the word ltd. ltd. 17. Free for further issue of capital 17. Further capital can be issued to existing members.

18. Can be wound up only if its 18. Can wound up if its members members fall short of two. fall short of seven.
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Differences between Partnership and Companies Partnership 1. Minimum No. 2 Companies 1. Minimum No. 7

2. Collectively called Firm can 2. Co. & share holders are negotiate with outsider distinctive share holders cannot represent Co. 3. Property of the firm collectively 3. Property of the Co. is owned by the partners exclusively the property of the Co. 4. Any partner can dispose or 4. No such right to share holders modify or pledge property of the firm 5. Every partner individually and 5. Share holders are not collectively responsible for the responsible for the decision of the action of the firm Co.
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6. Unlimited Liability 7. Partner is the agent of the firm

6. Limited Liability 7. Share holder is not agent

8. A partner cannot transfer interest 8. A share holder is free to transfer

without consent of other partners.

his interest

9. A partner cannot enter into 9. Both rights are available agreement with the firm nor he can start a competing business 10. On death of a partner, 10. Not dissolved

partnership is dissolved 11. Powers are regulated by contract 11. MOA and Articles to be deed implied agreement or explicit registered
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REGISTRATION / INCORPORATION : A Company is said to be incorporated when it is registered with the Registrar of Co.- the promoters have to first of all decide upon the proposed form of the Co. It may be a private company or a public co.,/ ltd or un ltd co. in case of public Co. any seven persons and in case of a private Co. any two persons may join to form a Co. They may also

have to decide the name of the company

If the registrar is satisfied that all the requirements under the Act have been complied with he shall register the co. and issue a certificate

of incorporation under his hand seal. Two documents are required

1. Memorandum of Association 2. Articles of Association
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RACING OF CAPITAL : 1. On incorporation, a Public Co. may file a copy of the prospectus before the Registrar and on the specific date it will be issued to the public. Consequently applications are received from the public for purchasing shares. A private co. can commence business and borrow money as soon as it is incorporated.

MEMORANDUM OF ASSOCIATION
It is the basic document containing rules regarding constitution, activities and objects of the Co. It is a fundamental document to be filed with

the Registrar at the time of incorporation. Co. is governed by the

MOA. Co. can function only with in the frame work of MOA. Company can not exceed the powers conferred under the MOA.
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It is a public document and can be Inspected by anybody. The shareholders can find out the purpose for which money is going to be used by the Co. It should contain the following fundamental clauses. 1. Name clause. 2. Registered office clause 3. Objective clause

4. Liability clause
5. Capital Clause 6. Association & Subscription clause.

ARTICLES OF ASSOCIATION
It is the by law of the Co. It is a document which regulate the internal
administration of the Co. who should be the M.D. what are his powers,
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and duties- and functions of the share holders. While the MOA is the foundation of the Co. the articles of association are the rules and regulations for managing the internal affairs and for the benefit of

share holders. The article should not contain any thing against the Co.
act or the memorandum. It must be in accordance with the general law and public policy. The articles may contain the business of the Co. share

capital, procedure for allotment of shares , transfer of shares , alteration

of share capital, borrowing power, rules regarding meeting, voting rights, dividends, keeping books of accounts etc.. DIRECTORS A Director is the most important person in the functioning of a Co. MD is also a Director. The Co. law does not stipulate qualification but has 13

prescribed certain disqualification. Directors are collectively called Board of Directors. He must hold at least one share- must be major and not insolvent must not be of unsound mind Should not have

committed an offence punishable for not less than six months for moral
turptitudeness after five years he can be considered. A person cannot be a Director in not more than 20 companies at a time. Absence in 3

consecutive meeting of the board will be disqualified if no leave of

absence is applied. This will be recorded in the minutes. POWERS 1. Director is the agent of the Co. - acts done by the directors are for & on behalf of the Co. Exclude them from personal liability provided they are with in the scope their authority. The relationship between the
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company and Directors is that of principal and agent - however they also exercise independent powers. 2. Directors are Trustees.

3. As managing partners. 4. Directors as employees.

DUTIES : 1. Fiducial duties(Should act in good faith-personal interest should not

conflict with Co. interest- no secret profiting).

2. Duty of care & Skill. 3. Duty to attend board meeting. 4. Duty not to delegate. 5. Duty to disclose interest. 6. Statutory Duties.
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MEETING A company expresses its will through resolutions passed regularly in the meeting of shareholders and their elected representatives. One

meeting of the share holders is compulsory in every year. Different kinds of meeting. 1. Meeting of Directors (meeting of board of directors, committees of

the board).
2. Meeting of members. a. Statutory meeting

b. Annual general meeting

c. Extra ordinary general meeting d. class meeting
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3. Meeting of creditors & debentures. a. meeting of debenture holders b. meeting of creditors.

WINDING UP
It is a process of putting an end to its life all affairs are closed or wound up. At the time of winding up, the assets and properties of the

company are realised these assets are distributed among creditors and
share holders in the manner laid down in the Act. It involves realisation of assets, payment of liabilities to creditors and distribution of surplus if any among the members of the Co.

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Reasons 1. The main object of the Co. for which it was established have been accomplished 2. Impossible to carry out the main business or objects. 3. Sold the business to another Co. 4. The Co. is not in a position to pay its debt.

Mode of Winding Up
Winding up by the Tribunal and voluntary winding up. A Co. may wind up compulsorily on the following circumstances.

1. Special resolution .
2. Default in holding statutory meeting. 3. Failure to comments business.
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4. Reduction of members 5. Inability to pay debts 6. Just and equitable reasons

7. Defaulting filing P & L account, Balance Sheet or annual return.

8. Acted against the law. 9. Sick industrial co. *_________________________*

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