What is a Company ?

Section 3(1) of Indian Companies Act,1956 defines company as mentioned below.

Company means a company formed and registered under this Act or an existing company .

What is a Company ?
Existing company means a company formed and registered under any of the previous companies laws specified below:(a) any Act or Acts relating to companies in force before the Indian Companies Act,1866 and repealed by that Act; (b) the Indian Companies Act,1866; (c) The Indian Companies Act,1882; (d) The Indian Companies Act,1913;

Characteristics of a company
1.Separate Legal Entity[Saloman vs.Saloman(1897)] 2.Limited Liability 3.Perpetual Succession 4.Common Seal 5.Transferability of Shares 6.Separate Property 7.Capacity to Sue

Lifting or piercing he Corporate Veil

From the juristic point of view, a company is a legal person distinct from its members [Soloman vs.Soloman(1897)]This principle may be referred to as the veil of incorporation.The effect of this principle is hat there is a fictional veil(and not a wall) between the company and its members.

Exceptions: 1.Protection of revenue 2.Prevention of Fraud or improper conduct 3.Determination of character of a company whether it is enemy. 4.Company avoiding legal obligations. 5.Company acting as a trustee or agent of shareholders. 6.Avoiding of welfare legislations. 7.Protecting public policy.

Lifting or piercing he Corporate Veil

Statutory Exceptions: 1.Number of members below statutory minimum [Sec.45] 2.Failure to refund application money [Sec.69(5)]

3.Mis-description of companys name [Sec.147(4)]

4.Fraudulent trading [Sec.542]

5.Holding and subsidiary companies.

Company distinguished from Partnership

1.Regulating Act 2.Mode of Creation 3.Legal Status 4.Liability of Members 5.Management 6.Transferability of shares 7. Authority of members 8. Powers 9. Restrictions on powers 10.Insolvency of firm and winding up of a company 11.Debts 12.Dissolution,& 13.Number of members: Minimum and Maximum

Kinds of Companies
CLASSIFICATION OF COMPANIES IS DONE; 1. On the basis of Incorporationa) Statutory Companies b)Registered Companies 2. On the basis of Liabilitya)Companies Limited by Shares b)Companies Limited by Guarantee c)Companies with unlimited Liability 3.On the basis of Number of Membersa) Private Company b) Public Company 4.On the basis of Controla)Holding Company b)Subsidiary Company 5.On the basis of Ownershipa)Government Company b)Non-Government Company

What is Private Company ?

Private Company means a company which has a minimum paid up capital of one lakh rupees or such higher paid up capital as may be prescribed, and by its Articles(a) restricts the right to transfer its shares, if any (b) limits the number of its members to fifty not including (i) persons who are not in the employment of the company; and (ii) persons who, having been formerly in the employment of the company, were members of of the company while in that employment ceased,and (c) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company; (d) prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives.

What is a Public Company?

Public Company means a company which(a) is not a private company; (b) has a minimum paid up capital of five lakh rupees /such higher paid up capital, as may be prescribed; (c) is a private company which is a subsidiary of a company which is not a private company.

Distinction between a Private company and Public company

1.Minimum Capital 2.Minimum number 3.Maximum number 4.Number of Directors[Sec.252] 5.Restriction on appointment of directors[Sec.266] 6.Restriction on invitation to subscribe for shares

Distinction between a Private company and Public company

7.Transfer [Sec.82] 8.Special Privileges 9.Quorum [Sec.174] 10.Managerial Remuneration[Sec.198].

Special Privileges of Private Company

1.Number of members 2.Allotment before minimum subscription. 3.Prospectus or Prospectus in lieu of prospectus. 4.Issue of new shares 5.Kinds of shares

Special Privileges of Private Company

6.Commencement of business 7.Index of members 8.Statutory Meeting and Statutory Report 9.Demand for poll 10.Managerial Remuneration 11.Number of directors 12.Rules regarding directors

When does a private company become public company ?

A private company may become a public company by1.Conversion by default:[Sec43].Where a default is made
by a private in complying with the essential requirements of a private company(Restriction on transfer of shares, limitation of the number of members to 50 and prohibition of invitation to the public to buy shares or debentures), the company ceases to enjoy the privileges and exemptions conferred on a private company.In such a case, the provisions of the Companies Act apply as if it were not a private company.

When does a private company become public company ?

1.Conversion by default:[Sec43]
may relieve the company from the consequences as aforesaid, if it is of opinion that the noncompliance was accidental or due to inadvertence or other sufficient cause.It may, however , impose such terms and condition as seem it just and expedient.

When does a private company become public company ?

2.Conversion by Choice or Volition [Sec.44]. If a private company so alters its Articles that they do not contain the provisions which make it a private company, it shall cease to be a private company as on the date of the alteration.It shall then file with the Registrar, within 30 days, either a prospectus or a statement in lieu of prospectus.When this is done , the company becomes a public company.

.2.Conversion by Choice or Volition [Sec.44].

A private company which becomes a public company shall also1.File a copy of the resolution altering the Articles, within, 30 days of passing thereof, with the Registrar 2.take steps to raise its membership to at least 7 if it is below that number on the date of conversion, and also increase the number of its directors to more than 2 if it is below that number. 3.alter the regulations contained in the Articles which are inconsistent with hose of a public company.

Conversion of a Public company in to Private company ?

The Act itself does not empower a Public Company to turn itself into a Private Company, but does not prohibit such a conversion either. A Public company may be converted into a Private company by altering the articles incorporating the four restrictions mentioned in Sec 3(1) (iii).

1. It would require changing the name of the company by a special resolution. 2. Some alterations in the Articles of Association of the company. 3. A copy of the special resolution has to be filed with the Registrar within 30 days and when the approval of the central Government for conversion is obtained a copy of such approval shall also be filed within a month.

After a Public Company is converted into a Private company, a copy of the special resolution authorising the conversion and altering the articles shall be included in every copy of the articles issued thereafter.