Professional Documents
Culture Documents
Indian Companies Act
Indian Companies Act
CHARACTERISTICS OF A COMPANY
1.
2.
3.
4
4.
5.
6.
7.
8.
9.
Incorporated Association
Artificial
A tifi i l legal
l
l Person
P
Separate legal Entity
Perpetual Succession
Limited Liability
Transferable Shares
Common Seal
Separate Property
Capacity to Sue and Being Sued
KINDS OF COMPANIES
Public Company
No restriction
Freely transferable
Prospectus is issued
Necessary
Directors are required to retire by rotation At least 2/3rd of Directors must retire by
rotation
Managerial Remuneration No restriction Not more than 11% of net profit.( not
mere than 5% to a sgl.Director)
Can be registered with a paid up capital of Rs 5 Lakh
Rs. 1 lakh
Can not accepts deposits from public
Must do so
1.
Reduction of Membership
Misrepresentation of Prospectus
Fraudulent Conduct of Business
Failure to return application money
Mis description of name
Mis-description
Non-payment of tax
Liability of ultra -Vires acts
p
2)) Under Judicial Interpretations:
FORMATION
O
O AND INCORPORATION
CO O
O OF
O A COMPANY
CO
Promotion
Registration/Incorporation
Flotation/Raising of Capital
Commencement of Business
PROMOTION
g
Promotion refers to the entire p
process through
which a company is brought into existence.
It starts with the conceptualization
p
of the birth of the
company with an objective for which it is to be
formed.
The persons who conceive the company and invest
the initial funds, are known as promoters.
REGISTRATION/INCORPORATION OF COMPANY
REGISTRATION/INCORPORATION
GS
O
CO O
O OF
O COMPANY
CO
COMMENCEMENT OF BUSINESS
Every private company and a company not limited by shares
can
commence business immediately on receipt of
certificate of
incorporation. But a public company limited
by shares is debarred
from commencing business on
borrowing money without the
certificate of commencement
of business
Where a company has issued Prospectus
COMMENCEMENT OF BUSINESS
MEMORANDUM OF ASSOCIATION
MEMORANDUM OF ASSOCIATION
ARTICLES OF ASSOCIATION
p y
Charter of Company
Defines the scope of
activities
Supreme Document
Must for every company
Strict restrictions
restrictions, some
alterations may require
sanction of central govt.
Act ultra-vires is wholly
void and cant be ratified
PROSPECTUS
y document described or
Prospectus means any
issued as a prospectus and includes any notice, circular,
advertisement or other document inviting offers from the
public for the subscription and purchase of shares in
in, or
debentures of a body corporate.
PROSPECTUS
Pre-Requisites
P R
i it off Prospectus
P
t
PROSPECTUS
Deemed Prospectus- When a company allots shares or
debentures
to
off Issue
Houses,
d b t
t the
th public
bli through
th
h the
th medium
di
I
H
then the issue houses invite subscription from the public
through their own offer document. This is also called
prospectus
t by
b implication.
i li ti
Statement in Lieu of Prospectus- Where a public
company
does not invite public to subscribe for its shares
shares, but arranges
to get money from private sources>The promoters here need
not issue a prospectus but are required to draft prospectus
Red Herring Prospectus
Prospectus- is a prospectus ,which
which does not
have complete particulars on Price of securities offered and
quantum of securities offered. E.g.-Jet Airways, Suzlon
MEMBERSHIP
a)) The
Th subscribers
b ib
tto th
the memorandum
d
b) Who agrees in writing to become member and whose
name appears in the register of members
c) Who holds equity share capital and whose name is
entered as beneficial owner in the records of the depository
The agreement in writing to take shares of the company
The registration of name in the register of members
MEMBER/SHAREHOLDER
/
S.no
Shareholder
Member
Is a member
May not be a
shareholder because
the
h company may not
have a share capital
A legal
g representative
p
of a member
Applies
pp
for
registration
Subscriber to a
memorandum
Minor
Insolvent
Partnership
P t
hi Fi
Firm
Foreigner
Company
Trade Union or Society
President of India
Membership by subscription
Membership
p by
y application
pp
and registration
g
y Rights
g
Statutory
Contractual/otherwise
TERMINATION OF MEMBERSHIP
DIRECTOR
y is an artificial legal
g person and the directors as a
A company
body endow the artificial legal person with human face than
can act and react.
The person through whom a company acts and does its
business, and termed as director.
An individual can be appointed
pp
as director,, no corporate
p
body corporate, association or firm
C
Cannot
hold a office
ff
off more than ffifteen
f
companies
QUALIFICATIONS OF A DIRECTOR
APPOINTMENT OF DIRECTORS
First director
Appointment of directors by company
Appointment of directors by the board
Appointment of directors by third parties (nominee director)
Appointment of directors by proportional representation
Appointment
A
i t
t by
b central
t l governmentt
Appointment by small shareholders
Consent for appointment
Written consent is required to be signed and files with the
registrar and the company
REMOVAL OF DIRECTORS
Byy shareholders
By Central Government
By Tribunal
DUTIES /LIMITATIONS
Good faith
Reasonable care
Disclose interest
Participate in the communities
Attend board meetings
Actions malafide
Incompetent to act
Deadlock in the board
COMPANY MEETING
General meeting
Requisites of valid meeting
Notice of meting must be proper and adequate
Chairman of the meeting
Quorum
Voting
Agenda
Minutes
KINDS OF MEETINGS
Meetings
of a Company
Shareholders
General Meetings
Statutory Meetings
Extra Ordinary
Meetings
Class meetings
Annual General
Meetings
Directors
Creditors/
Debenture holders
STATUTORY MEETINGS
Object
When held
Not required to be held
Notice
St t t
Statutory
reportt
In case of default
y to hold
Which company
When to be held
Gap between two AGM
First AGM
Subsequent AGM
E t
Extension
i off time
ti
maximum
i
3 months
th
Business to be transacted
Notice 21 days
Default
BOARD MEETINGS
MOTION
Rules
Should be positive in terms and should always be in writing
Within power, scope and relevant to business
Comply with the provisions of the Act, memorandum and
articles
Duly proposed by any member in a meeting
Should not be withdrawn before consent
RESOLUTION
y motion voted upon and agreed
g
g and
Any
to in a meeting
entered in minutes. A motion passed with or without
amendment is called resolution
Types of Resolution
Ordinary resolution: Simple majority of the members voting
at a g
general meeting.
g
Special resolution: Members present should not be less than
three times the votes cast against the resolution.
Resolutions requiring special notice: Resolution should be
given to the company not less than 14 clear days before the
g at which it is to be moved.
meeting
WINDING UP OF A COMPANY
Company dissolved
Winding
g up
p a company
p y is a p
process whereby
y its life
is ended and its property administered for the
benefit of its creditors and members. An
administrator called liquidator,
liquidator is appointed and he
takes control of the company, collects its assets,
pays its debts and finally distributes any surplus
among the
th members
b
iin accordance
d
with
ith th
their
i rights
i ht
WINDING UP OF A COMPANY
MODES OF WINDING UP
Voluntary Winding up
The power of the court are transferred to the National
Company Law Tribunal by the company (Amendment)Act
2002. The central g
government is in the p
process of formation
of this Tribunal
G O
GROUNDS
S FOR
O WINDING
G UP BY THE TRIBUNAL (NCLT)
C
The company
Any Creditor
Any Contributor
Any combination of creditor
creditor, contributory acting jointly or
separately
The registrar
Any person authorized by the central government
The official liquidator
The central government and the state government
Workers of a company cannot prefer a winding up petition
against the company
LIQUIDATOR