Law For Engineers Session 6 - Company Law

Course Code : HSC201A
Course Title : Law for Engineers
Course Leaders:
Adv. Chidanand G Kulkarni
cgk1963@gmail.com
Namrata Kabra
namrata.kabra12@gmail.com
Ruchira Negi
ruchiranegi@ymail.com
Agam Sharma
agam2995@gmail.com
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©M. S. Ramaiah University of Applied Sciences Directorate of Transferable Skills and Leadership Development
Course Details
 Course: Law for Engineers
 Department: Directorate of Transferable Skills and

Leadership Development
 Head of the Department: Mr. Jyothi Shankar G
 Faculty: Engineering & Technology
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Session No. 6
Company Law
At the end of this session, students will be able to:
 Differentiate between sole trader, partnership, limited liability

partnership and company
 Explain the basic provisions of Companies Act 2013 regarding
 Incorporation of a company
 Management and administration of a company
 Appreciate the principles of Good Corporate Governance
 Discuss the basics of SEBI Act
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Forms of Business
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Sole trader (Proprietorship)
• A person who does business for himself is
engaged in the operation of a sole
proprietorship.
• Many small businesses operate as sole
proprietorships and they often require
minimum amount of investment.
• A sole proprietorship is NOT a separate
legal entity, like a partnership or a
corporation.
• No legal formalities are necessary to
create sole proprietorship other than
appropriate licenses.
• A sole proprietor has total flexibility in
managing and controlling the business.
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Partnership
• An association of two or more persons
engaged in a business enterprise in
which the profits and losses are shared
proportionally
• It may be created by a formal
agreement, but may be based on an
oral agreement or just a handshake
• The maximum number of partners can
be 50 (as per the current rule)
• The partners are collectively called a
firm
• In a partnership firm there is a joint
and several liability
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Limited Liability Partnership
 LLP is an alternative corporate business form that gives the
benefits of the flexibility of a partnership and limited liability of a
company
 The LLP can continue its existence irrespective of changes in
partners
 The LLP is a separate legal entity, is liable to the full extent of its
assets but liability of the partners is limited to their agreed
contribution in the LLP
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Limited Liability Partnership
 Further, no partner is liable on account of the un-authorized
actions of other partners
 Mutual rights and duties of the partners within a LLP are
governed by an agreement between the partners
 Since LLP contains elements of both ‘a corporate structure’ as
well as ‘a partnership firm structure’ LLP is called a hybrid
between a company and a partnership
 The Limited Liability Partnership is required to have at least
two partners but there is no limit on the maximum number of
partners
 Limited Liability Partnerships is a new concept in India and is
governed by 'Limited Liability Partnership Act, 2008’
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Company
• A company is a corporate body and a legal person having
status and personality distinct and separate from the
members constituting it.
• Since a corporate body (i.e. a company) is the creation of law,
it is not a human being, it is an artificial juridical person (i.e.
created by law). It is a separate “person” in it self.
• It has many rights, obligations, powers and duties prescribed
by law.
EXAMPLES
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Company (Contd.)
• It is an association of many persons who contribute money or
money’s worth to a common stock
• Employ that common stock in some trade or business and
share the profit and loss arising there from
• The common stock so contributed is denoted in money and is
the capital of the company
• The persons who contributed in it or form it, or to whom it
belongs, are members
• The proportion of capital to which each member is entitled is
his “share”
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Lobbying and Legislation
 Lobbying is the act of attempting to influence decisions made
by officials in a government, most often legislators or
members of regulatory agencies
 Lobbying is done by many types of people, associations and
organized groups, including individuals in the private sector,
corporations, fellow legislators or government officials,
or advocacy groups (interest groups)
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The Companies Act 2013
• “An Act to consolidate and amend the law relating to

companies.”
• The Indian Companies Act 2013 replaced the earlier existing
Companies Act of 1956.
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Provisions of Companies Act 2013
Incorporation of a company
 Company may be formed for any lawful purpose by—

a) seven or more persons, where the company to be formed
is to be a public company,
b) two or more persons, where the company to be formed is
to be a private company.
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Stages of Incorporation of a Company
I. Pre incorporation stage

 Decide the type of Company to
be formed.
 Place where the office is to be
situated.
 Deciding the name of the Co.
 Application of availability of
name.
 Preparation of Memorandum
of Association and Articles of
Association
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II. Incorporation stage
 Filing of application of Registration and required documents

with registrar of Companies.
 Filing a declaration from professional (advocate/ charted
accountant / company secretary) that all rules and requirements
have been complied with.
 Filing of an affidavit from each of the subscribers to the
memorandum and directors, that he is not convicted of any
offence in under company law during the preceding five years
and that all the documents filed with the Registrar contain
information that is correct and complete and true to the best of
his knowledge and belief.
 Filing of particulars of details of Subscribers and Directors.
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After receiving and verifying the documents, the registrar issues
a Certificate of incorporation which is the conclusive proof that
the company has been registered.
A unique corporate identity number is allotted to the company,
which is a distinct identity for the company
III. Post Incorporation stage
• Verification of Registered office within 30 days of registration.
• Maintenance and preserving at its registered office the
copies of all documents and information as originally filed till
its dissolution.
Punishment (If company is company is incorporated
by furnishing incorrect information.)
Imprisonment : 6 months to 10 years and fine

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Management and Administration
 A company is composed of members, though it has its own
entity distinct from members
 The members of a company are the persons who, for the
time being, constitute the company, as a corporate entity.
 However, a company, being an artificial person, cannot act
on its own. It, therefore, expresses its will or takes its
decisions through resolutions passed at validly held
Meetings
The primary purpose of a Meeting is to
ensure that a company gives reasonable
and fair opportunity to those entitled to
participate in the Meeting to take
decisions as per the prescribed
procedures 17
Management and Administration
 The decision making powers of a company are vested in the
Members and the Directors and they exercise their respective
powers through Resolutions passed by them
 General Meetings of the Members provide a platform to
express their will in regard to the management of the affairs
of the company
 Convening of one such meeting every year is compulsory.
Holding of more general meetings is left to the choice of the
management or to a given percentage of shareholders to
exercise their power to compel the company to conduct a
meeting
 Chapter VII of the Companies Act, 2013 and Companies
(Management and Administration) Rules, 2014 deal with the
legal and procedural aspects of management and
administration of companies
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What is Good Corporate Governance?
• The system of rules, practices and processes by which a

company is directed and controlled
• Corporate governance essentially involves balancing the
interests of the many stakeholders in a company - these
include its shareholders, management, customers, suppliers,
financiers, government and the community
• Since corporate governance also provides the framework for
attaining a company's objectives, it encompasses practically
every sphere of management, from action plans and internal
controls to performance measurement and corporate
disclosure
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Principles of Good Corporate
Governance
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Securities And Exchange Board Of India Act,
1992 (SEBI Act)
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1992 (SEBI Act)
 Object : It is an Act to provide for the establishment of a
Board to
• protect the interests of investors in securities,
• to promote the development of securities market, and
• to regulate, the securities market.
 SEBI has to be responsive to the needs of three groups,
which constitute the market:
• the issuers of securities
• the investors, and
• the market intermediaries.
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1992 (SEBI Act)
 SEBI performs three functions:

• drafting regulations in its legislative capacity,
• conducting investigation and enforcement action in its executive
function, and
• passing orders in its judicial capacity.
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Summary
• The different forms of business are sole proprietorship,
corporation, and partnership
• Each has advantages and disadvantages
•A person who does business for himself is engaged in the
operation of a sole proprietorship
• An association of two or more persons engaged in a
business enterprise where the profits and losses are
shared proportionally is called a partnership
• LLP is an alternative corporate business form that gives
the benefits of the flexibility of a partnership and limited
liability of a company
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Summary
• A company is a corporate body and a legal person having
status and personality distinct and separate from the
members constituting it
• The Companies Act 2013 is “An Act to consolidate and

amend the law relating to companies.”
• The stages of incorporation of a Company are pre-

incorporation, incorporation, and post-incorporation
• Corporate governance involves balancing the interests of

the many stakeholders in a company - its shareholders,
management, customers, suppliers, financiers, government
and the community
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Summary
• The principles of good corporate governance are
accountability, responsibility, equitable treatment,
transparency, vision to create long-term value, and ethics
• SEBI was established to:
• Protect the interests of investors in securities
• Promote the development of securities market
• Regulate the securities market
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Course Code : HSC201A

Course Title : Law for Engineers

 Course: Law for Engineers

 Department: Directorate of Transferable Skills and

 Head of the Department: Mr. Jyothi Shankar G

 Faculty: Engineering & Technology

 Differentiate between sole trader, partnership, limited liability

• “An Act to consolidate and amend the law relating to

 Company may be formed for any lawful purpose by—

I. Pre incorporation stage

 Filing of application of Registration and required documents

Imprisonment : 6 months to 10 years and fine

• The system of rules, practices and processes by which a

 SEBI performs three functions:

• The Companies Act 2013 is “An Act to consolidate and

• The stages of incorporation of a Company are pre-

• Corporate governance involves balancing the interests of

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