 A company formed and registered under the

Companies Act- Companies Act

 Under Common Law – a legal person or legal entity

separate from and capable of surviving beyond the

lives of its members.
 The companies act,1956 has been amended from time
to time in response to the changing business
environment. These amendments include:
 The companies (amendment)act, 2000
 The companies (amendment)act, 2001
 The companies (amendment)act, 2002
 The companies (amendment)act, 2006
 The companies (amendment)act, 2013
 The companies (amendment)act, 2017
• Independent corporate existence (S.34)
• Salomon v. Salomon & Co.
• Kondoli Tea Co. Ltd. Re
• Limited liability
• Perpetual succession
• Separate property
• Transferrable shares
• Capacity to sue & be sued
• Prof. management
• Finances
1. Lifting the corporate veil
• Salomon Case
• Lee v. Lee’s Air Farming Ltd
a. Determination of character
Daimler Co v. Continental Tyre & Rubber Co
b. For benefit of revenue
• Athorpe v. Peter Schoenhofen Brewing Co
c. Fraud or improper conduct
• Gilford Motor Co v. Horne
d. Government Companies
• Personal liability of directors and menbers
a. Reduction in membership(s.45)
b. Misdescription of name(s.147)
c. Fradulent conduct of business (s.542)
d. Holding and subsidiary company.
2. Formality and expense.
3. Company is not a citizen.
1. Name Clause
2. Registered office Clause
3. Objects Clause
4. Liability Clause
5. Capital Clause
 Legal Requirements
1. Resembling names not allowed
 Previously registered company bearing that name
 Identical with or too nearly resembles a registered trade

mark
 Society of Motor Manufacturers and Traders Ltd v.

Motor Manufacturers and Traders Mutual Insurance

Co Ltd
 Use of the word “Limited” and Publication of name.
 License to drop “Limited” S.25

1. Companies formed for promotion of commerce, art,

science, religion, charity or any other useful object.
2. Company should apply its income in promoting its
objects and must prohibit the payment of dividend to
its members.
 Special resolution, with approval of Central
Government signified in writing.
 Undesirable or resembling name can be changed by

ordinary resolution with approval of Central

Government.
 Within 30 days of incorporation or commencement of
business, whichever is earlier, the exact place where
the registered office is to be located must be decided
and notice of the situation given to the Registrar who is
to record the same.
 Can shift from one place to another in the same city, town or
village.
 To shift from one city to another in the same state, a special
resolution t that effect must be passed. A notice must be given
to Registrar within 30 days.
 17A. Change of registered office within a State.—
 (1) No company shall change the place of its

registered office from one place to another within a

State unless such change is confirmed by the
Regional Director. 
 (2) The company shall make an application in the

prescribed form to the Regional Director for

confirmation under sub-section (1). 
 (3) The confirmation referred to in sub-section (1),

shall be communicated to the company within four

weeks from the date of receipt of application for such
change.
 The company shall file, with the Registrar a certified
copy of the confirmation by the Regional Director for
change of its registered office under this section, within
two months from the date of confirmation, together with
a printed copy of the memorandum as altered and the
Registrar shall register the same and certify the
registration under his hand within one month from the
date of filing of such document. 
 (5) The certificate shall be conclusive evidence that all
the requirements of this Act with respect to the alteration
and confirmation have been complied with and
henceforth the memorandum as altered shall be the
memorandum of the company.]
 Shifting of registered office from one state to another:
alteration of memorandum
 Special resolution of company
 Confirmation by Central Government.
 Main Objects
 Other objects
 States in which objects extend
 Reasons

a. Contributors know the purpose to which their

contribution can be lawfully applied.
b. Affords a certain degree of protection to the creditors
also.
c. Serves public interest.
 Ashbury Railway Carriage and Iron Co Ltd v. Riche
 Main Objects Rule of Construction
 German Date Coffee Co, Re
 Consequences of ultra vires transactions

1. Injunction
2. Personal liability of directors
3. Breach of warranty of authority
4. Ultra vires acquired property
5. Ultra vires contracts

6. Ultra vires torts

 Substantive limits
a. To enable the company to carry on its business more
economically or more efficiently
b. To enable the company to attain its main purpose by new
or improved means.
c. To enlarge or change the local area of the company’s
operations
d. To carry on some business which under existing
circumstances may conveniently or advantageously be
combined with the business of the company
 S. 17 Companies( Amendment) Act,1996 – a special
resolution and its filing with the registrar.
 Should be within the scope of permissible range of

alteration as outlined in S.17(1).

 Liability Clause
 Capital Clause
 Subscription
 Articles when compulsory(S.26)
1. Unlimited companies
2. Companies limited by guarantee: and
3. Private companies limited by shares.
1. Binding on members in their relation to company
2. Binding on company in its relation to members
3. But not binding in relation to outsiders
4. How far binding between members

Alteration Of Articles
Special Resolution S.31
 Statement in lieu of prospectus (S.70)
 Prospectus[S.2(36)]: A prospectus means any

document described or issued as prospectus

and includes any notice, circular,
advertisement or other document inviting
deposits from the public or inviting offers
from the public for the subscription or
purchase of any shares in or debentures of a
body corporate.
1. Every prospectus to be dated [S.55]
2. Every prospectus to be registered [S.60]
3. Expert’s consent [S.58]
4. Disclosures to be made [S.56]
 Part I: General information
 Part II: reports relating to profit and losses and
assets and liabilities of the company
 Shelf prospectus [S.60-A]-any public financial
institution.
1. Damages for deceit
 Fraudulent misstatement
 Representation relating to fact
 Remedy of direct allottees
 Liability of company
2. Compensation under S. 62
Defences
 Withdrawal of consent
 Issue without knowledge
 Ignorance of untrue statement
 Reasonable ground for belief
 Statement of expert
 Rescission for misrepresentation
a. False representation
b. Of facts and not of law
c. Reliance and inducement
d. By or on behalf of company
 Limits of recission and loss of right

a. By affirmation
b. By unreasonable delay
c. By commencement of winding up
 Liabilityunder S.56
 Criminal liability for misrepresentation [S.63]
 Upto 2 yrs or fine up to Rs50,000 or both
1. Statutory meeting [S.165]
 First meeting of shareholders
 Within six months from the date of commencement

of business
Statutory report [S. 165(2)]
 Sent to shareholders 21 days before the day on which

the meeting is to be held.

 Repot must set out the following particulars

1. The total number of shares allotted, giving details

whether they are fully or partly paid-up and what
consideration has been received.
2. The total amount of cash received in respect of all shares
allotted.
3. An abstract of receipts, distinctly setting out the sources,
and payments made out of that, balance remaining in
hand, estimate of preliminary expenses, commission or
discount paid or to be paid on issue of shares.
4. Names, addresses and occupations of the directors,
managers and secretary and the changes, if any, that
have occurred since the date of incorporation.
5. Particulars of any contract to be submitted to the
meeting for approval and modifications done or
proposed, if any.
6. If the company has enter into any underwriting
contracts, the extent, if any, to which they have not
been carried out and the reason for the failure.
7. The arrears, if any, due on calls from every director
and manager.
8. Particulars of any commission on brokerage paid or
agreed to be paid in connection with the issue or
sale of shares or debentures to any director or to the
manager.
 One meeting every year.
 I meeting – within 18 months
 Sree Meenakshi Mills Co Ltd v Asst Registrar of Joint

Stock Companies
 Clause 47 of Table a- all meetings other than AGM
shall be known as EGM.
 Held by Directors on a requisition given by

shareholders of atleast one-tenth paid-up share

capital. In case of company without share capital,
members having one-tenth voting power.

 Power of National Company Law Tribunal to call

meeting [S.186]
 Meeting should be called by proper authority.
 Notice [Ss. 171-172]
 N.V.R.Nagappa Chettiar v Madras Race Club
 Contents of notice [Ss. 172 and 173]

a. General business
b. Special business
c. Explanatory statement
d. Private companies
e. Quorum [S.174]
 Chairman [S.175]
 Appointment by Court
 Voting

a. By show of hands [S.177]

b. Poll [S.179]
c. Voting by proxy [S.176]
d. Resolution by postal ballot [S.192-A]
e. Representation of companies and Government
[Ss.187 and 187A]
 Resolution

1. Ordinary resolution and

2. Special resolution
 A share is defined as, “a share in the share capital of
the company and includes stock”
 Share capital of the company is collected by issue of

shares.
 Share is one of the units into which total capital is

divided.
 The person who owns the share is called shareholder.
 Preference shares
 Equity shares
   Preference Shares
1. It offers a fixed rate of dividend.
2. Right to get capital on winding up, before anything is paid to
equity shareholders.

 Equity or Ordinary Share

1. These shares have voting rights.
2. It doesn’t offer a fixed rate of return.
3. They are not entitled to get capital on winding up, before paying to
preference shareholders.
 1. Cumulative Preference Shares
 They are those shares on which the dividend at a fixed

rate goes on cumulating till it is all paid. 

 2. Non-Cumulative Preference Shares

 These are those shares on which the dividend does not

cumulate
  3. Participating Preference Shares  Fixed rate
of dividend is guaranteed.  Entitled to share
the surplus profit. 4. Non-Participating
Preference Shares  Fixed rate of dividend is
guaranteed.  Does not share the surplus
profit. 5. Redeemable Preference Shares 
Shares which a company may repay after a fixed
period of time or earlier. 6. Irredeemable
Preference Shares  It do not carry the
arrangement for redemption.  Shares are
repayable only at winding up
 7. Convertible Preference Shares  It can be
converted into Equity shares within a certain
period. 8. Non-Convertible Preference Shares
 It cannot be converted into Equity shares.
 It is a share, which is not a preference share
is called equity share.  The whole of the
profit of a company is entitled to these
shareholders, after paying a fixed dividend to
preference shareholders.  They doesn't get a
fixed rate of dividend.  They will get back
their capital only after paying preference
share holders.

  It is issued to employees or directors of a
company at discounted rate.  Issued for
consideration other than cash. It must follow
these conditions; 1. Authorised by special
resolution in general meeting. 2. Number,
price, consideration (if any) and classes
should be specified in the resolution. 3. The
company must complete one year. 4. Equity
shares of those company must be listed in
recognised stock exchange
  It is issued to employees or directors of a
company at discounted rate.  Issued for
consideration other than cash. It must follow
these conditions; 1. Authorised by special
resolution in general meeting. 2. Number,
price, consideration (if any) and classes
should be specified in the resolution. 3. The
company must complete one year. 4. Equity
shares of those company must be listed in
recognised stock exchange
 POWERS
 The directors. powers are normally set out in the

articles. The shareholders cannot control the way in

which the Board of Directors act provided its actions
are within the powers given to the Board
 Section 291 of Companies Act, 1956 provides for

general powers of the Board of directors.

 Section 292(1) of the Companies Act, 1956 provides that
the Board of directors of a company shall exercise the
following powers on behalf of the company and it shall do
so only by means of resolution passed at meeting of the
Board:
 (a) the power to make calls on shareholders in respect
of money unpaid on their shares;
 (aa)the power to authorize the buy-back referred to in the
first proviso to clause (b) of sub-section (2) of section 77A;
 (b) the power to issue debentures;
 (c) the power to borrow moneys otherwise than on
debentures;
 (d) the power to invest funds of the company; and
 (e) the power to make loan.
 1. Statutory Duties:
 (A) To file return of allotment [S.75]
 (B) Not to issue irredeemable preference share or shares
or share redeemable after 20 years [S.80]
 (C)To disclose interest (Section 299-300): In respect of
contracts with director
 (D)To disclose receipt from transfer of property (sec.
319)
 (E) To disclose receipt of compensation from transferee
of shares (Sec.320)
 (F) Duty to attend Board meetings
 (G) To convene statutory, Annual General meeting (AGM)
and also extraordinary general meetings [ Section 165,166
&169].
 (H) To prepare and place at the AGM along with the balance
sheet and profit & loss account a report on the company’s
affairs including the report of the Board of Directors (Section
173, 210 & 217).
 (I) To authenticate and approve annual financial statement
(Section 215).
 (J) To appoint first auditor of the company (Section 224).
 (K) To appoint cost auditor of the company (Section 233B).
 (L) To make a declaration of solvency in the case of
Members’ voluntary winding up (Section 488).
 (A) Duty of good faith
 (B) Duty of care
 (C) Duty not to delegate
 1. Liability to the company:
 (A) Breach of fiduciary duty
 (B) Ultra vires acts
 (C) Negligence
 (D) Mala fide acts
 Liability to third parties
 Liability under the Companies Act:
 (A) Prospectus
 (B) With regard to allotment
 (C) Unlimited liability
 (D) Fraudulent trading
 Liability for breach of warranty
 2. Liability for breach of statutory duties
 3. Liability for acts of co-directors
 4. Criminal liability
 (i) Section 44(4) . filing of prospectus or statement in lieu
of prospectus containing untrue statement. Penalty . Two
years imprisonment or / and fine up to Rs. 50000.
 (ii) Section 58A(5) . failure to repay deposits within the
prescribed time limit as specified under sub sections (3) and
(4) of section 58A. Penalty . Up to five years imprisonment
and fine.
 (iii) Section 58A(6) - Accepting deposits or inviting
deposits in excess of the prescribed limits. Penalty . up to five
years imprisonment and fine.
 (iv) Section 63 - Issuing a prospectus containing untrue
statement. Penalty .Imprisonment upto two years or/ and fine
upto Rs. 50000.
 (v) Section 68 - Knowingly making a false, deceptive or
misleading statement and there by inducing persons to invest
money. Penalty . Imprisonment upto five years or/ and fine
upto Rs. 1,00,000.
 (vi) Section 73 . Failure to repay excess application money.
Penalty . Default in repayment of application money and
interest is punishable with fine upto Rs.50000 but if repayment
is not made within six months from the expiry of eight day,
also with imprisonment for a term upto one year.
 (vii) Section 84(3) . Fraudulently renewing a share
certificate or issuing a duplicate share certificate. Penalty .
Imprisonment upto six months or/andfine upto Rs.1,00,000.
 (viii) Section 105 . Concealing name of creditor or
misrepresenting the nature and the amount of the debt or claim
of any creditor. Penalty . Imprisonment upto
 one year or/ and fine or both.
 (ix) Section 202(1) . Undischarged insolvent acting as director.
Penalty .Imprisonment upto two years or/ and fine upto Rs. 50000.
 (x) Section 207 . Default in distributing dividends. Penalty .
Simple imprisonment upto three years and fine up to Rs. 1000 for
every day during
 which the default continues.
 (xi) Section 209A . Failure to assist Registrar or any officer so
authorized by Central Government in inspection of books of
account, etc., of the company.
 Penalty . Imprisonment for a term not exceeding one year and fine
to be notless than Rs. 50000.
 (xii) Section 210(5) . Failure to lay balance sheet, profit &
loss account, etc., at the annual general meeting. Penalty .
Imprisonment upto six months or/ and
 fine upto Rs. 10000.
 (xiii) Section 211(8) . Failure to comply with section 211
regarding form of balance sheet and matters to be stated
therein and the content and
 disclosures to be made in the profit and loss account. Penalty .
imprisonment upto six months or/ and fine upto Rs. 10000.
 (xiv) Section 217(5) . Failure to attach to balance sheet a
report of the Board of directors. Penalty . Imprisonment upto
six months or / and fine upto Rs. 20000.
 (xv) Section 221(4) . Failure to supply information to
auditors. Penalty .Imprisonment upto six months or / and fine
upto Rs. 50000.
 (xvi) Section 233B(11) . Audit of cost account of the
company -Default in complying with the requirements of the
section. Penalty . Imprisonment for a term that may extent to
three years or with fine which may go upto Rs. 50000 or with
both.
 (xvii) Section 250(9) . Failure to honour restrictions upon
shares and debentures imposed by the CLB. Penalty .
Imprisonment upto six months or /and fine upto Rs. 50000.
 (xviii) Section 293A(5) . Contribution to political party or
for political purpose in contravention of section 293A.
Penalty . Imprisonment upto three years and fine.
 (xix) S. 295(4) . Grant of loan to directors without
obtaining previous approval of the Central Government.
Penalty . Simple impr. upto six months or fine upto Rs. 50000.
 (xx) S.299(4) . Failure to disclose interest in a contract or
arrangement. Penalty. Fine which may extend to Rs. 50000.
 (xxi) S. 308(3) . Failure to disclose shareholdings. Penalty .
Impr. upto two years or / and fine upto Rs. 50000.
 (xxii) S. 371 . Giving loans to other bodies corporate in
excess of the limit prescribed under s. 370. Penalty . Fine
upto Rs. 50000 or simple impr. upto six months.
 (xxiii) S. 407 . Any person, whose agreement has been
terminated or set aside under section 402, knowingly acts as
a managing or other director before expiry of a period of five
years from the date of termination, without approval of the
CLB, attracts criminal liability. Penalty-Impr. upto one year or
/ fine upto Rs. 50000 S. 407(2)].
 (xxiv) S. 488(3) . False declaration of company.s solvency.
Penalty .Imprisonment upto six months or / and fine up to Rs.
50000.
 (xxv) S. 209(8) . Non-compliance with the requirement of
maintenance of proper books of account. Penalty . fine not
less than Rs. 50000 and also with imprisonment not exceeding
one year for each offence committed.
 Types of winding up [S.425]
 1. Compulsory winding up under the order of the

tribunal
 2. Voluntary winding up
 a. Members’ voluntary winding up
 b. creditors’ voluntary winding up
1. Special resolution
2. Default in holding statutory meeting
3. Failure to commence business
4. Reduction in membership
5. Inability to pay debts
a) Statutory notice
b) Decreed debt
c) Commercial insolvency
6. Just and equitable
a) Deadlock
b) Loss of substratum
c) Losses
d) Oppression of minority
e) Fraudulent purpose
f) Incorporated or Quasi-Partnership
g) Default in filing balance-sheet, etc
h) Acts of company against Sovereignty of India
i) Winding up under circumstances of S.424-G
 Petition by company
 Creditor’s petition [S.439(2)]
 Contributory’s petition
 Registrar’s petition
 Central government’s petition
 Central government or State government’s petition.
 Appointment of liquidator [S.448]
 Provisional Liquidator
 Statement of Affairs [S.454]
 Report by Official Liquidator [S.455]
 Custody of company’s property [S.456]
 Powers of Liquidator [S.457]
 Committee of inspection [S.464]
 General powers of Tribunal
 Dissolution of company [s.481]
 By ordinary resolution
 By special resolution

Members’ voluntary winding up [S.498]

 Reconstruction in winding up
 Duty to call Creditor’s meeting
 Final Meeting and Dissolution [S.497]

 Creditor’s voluntary winding up [S.499]