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Co Law
Co Law
Co Law
Company
Company means company registered under
the Companies Act, 1956.
Characteristics of a company :
1. It is an association of persons. In the case
of private limited company, there must
be at least two members and maximum
fifty. In case of public limited company,
there must be at least 7 members.
2. According to Sec. 11 of the Partnership
Act, 1932, a concern with banking
business cannot have more than 10
members and for any other business,
cannot have more than 20 members. Such
association with more than 10 or 20
members can carry on business provided
that is registered under the Companies
Act.
3. A Company must be registered under the
Companies Act, 1956.
4. It is an artificial person.
5. An incorporated company have its separate
existence and the law recognises it as a legal
person distinct from its members.
6. Perpetual Existence – Members may
come and go, but company is in existence
unless it is wound up.
7. It Can sue and be sued in its own name.
8. It can hold and dispose property – The
property of the company is not the property
of individual shareholders.
Formation of a Company
1. The formation is generally done by a
promoter : He is the person who takes all steps
necessary to form a company. He generates
ideas for forming a business set up and for this
he can consult, contract persons.
2. Registration and Incorporation : For this
purpose, the following documents are to be filed
with the Registrar of Companies of the State in
which the Registered Office of the Company is
situated:
a) Memorandum of Association containing the
constitution and the formation of the company.
b) Articles of Association of the Company containing
the rules and regulations.
c) A declaration by an Advocate or Chartered
Accountant or Director of the Company that the
requirements of the Act have been complied
with relating to registration.
d) List of persons who have consented to become
Directors of the Company and their consent
letter.
If approved by Registrar, he will issue a
Certificate of Incorporation, it shall be conclusive
evidence that all the requirements of the Act
have been complied with respect to registration
and matters incidental thereto.
Certificate of Commencement of
Business.
After getting incorporation certificate, a
private limited company can commence
business but a public limited company
requires another certificate before starting
business i.e., Certificate of
Commencement of Business.
Types of Companies
1. Chartered Company : It is regulated by
the government charter. E.g., East India
British Company.
2. Registered Company : A registered
Company is a company registered under
the Companies Act, 1956.
3. Statutory Company : A company which
is created by a special Act of legislature
and is governed by the provisions of that
Act.
4. Company with limited Liability :
(1) Companies limited by shares – Where
the liability of the members of a company
is limited to the amount unpaid on the
shares, such a company is known as a
company limited by shares. If the shares
are fully paid, the liability of the members
holding such shares is nil.
(2) Companies limited by guarantee –
Where the liability of the members of a
company is limited to a fixed amount
which the members undertake to
contribute to the assets of the company in
the event of its being wound up, the
company is called a company limited by
guarantee.
5. Company with unlimited liability – A
company without limited liability is known
as an unlimited company. In case of such
a company, every member is liable for the
debts of the company.
6. Private Company – Private company can
be formed by two or more persons by
submitting Memorandum of Association
and Articles of Association. But
i. Must prohibit an invitation to public to
subscribe.
ii. Restrict rights of members to transfer
shares.
A Public Company may or may not invite public
to subscribe to its share capital.
Privileges for a Private Company are
1) Minimum 2 persons are required.
2) A private company can proceed to allot shares.
3) It need not issue prospectus.
4) It need not offer further shares to the existing
shareholders.
5) It can issue any kind of shares.
6) It can commence business immediately.
7) It need not hold statutory meeting.
8) It should have two directors.
9) There is no restriction on managerial
remuneration.
7. Holding and Subsidiary Companies –
Where a company has control over
another company, it is known as the
holding company and the company over
which control is exercised is called the
subsidiary company.
A company is deemed to be under the
control of another if
1) The parent co. controls the composition
of Board of Directors or
2) The parent co. holds more than half in
nominal value of its equity shares.
3) Both of the above.
8. Government Company – It means any
co. in which not less than 51% of the
paid up share capital is held by
1) Central Govt.
2) By any state Govt.
3) Partly by both.
The subsidiary of a Govt. Co. shall also be a
Govt. Co.
9. Joint Stock Company – A co. having
Share capital held as transferable as stock
or dividend and formed for its members,
the shareholders.
It has a legal entity distinct from its
members.
Shareholders are not liable for debts of
the company.
It has perpetual Succession.
The shareholders are the part owners of
the joint stock company, yet the
management is entrusted with the
selected directors.
It has common seal.
Memorandum of Association
It is very important document of the
company.
According to Doctrine of Constructive notice,
anybody dealing with the company shall be
deemed to have knowledge of the
documents.
The documents- Memorandum of Association
(MOA) & Articles of Association (AOA) are
filed with Registrar of Companies.
The preparation of MOA is an important
step in the formation of a company.