company

an association of a number of individuals formed

for some common object. When such an
association is registered under the Companies
Act.
It is an artificial person created by law with a
common seal and Perpetualexistance

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 Features
1. Association of persons
2. Compolsury regestration
3. Common seal
4. Perpetual existance
5. Ownership and management separate
6. Limited liability
7. Transferability of shares.
8. Capacity to sue and be sued
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 TYPES OF COMPANY
• Private limited company:
• Public limited company
• govt company : where more than 51% is held
by govt
• Foreign company : incorporated outside india
and operating in india
• One person company

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 Share capital
The share capital is the most important
requirement of a business. It is divided into a
‘number of indivisible units of a fixed amount.
These units are known as ‘shares’. 
The person who is the owner of the shares is
called ‘Shareholder’ and the return he gets on
his investment is called ‘Dividend’.

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 Types of shares:

According to Section 86 of the Companies Act, a

company can issue only two types of shares
• (a) Preference and
• (b) Equity.

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 Preference Shares.
• The law defines preference share capital as
that part of the share capital of a company
which fulfills both the following conditions
namely:
• (i) It carries a preferential right in respect of
the dividends;
• (ii) It carries preferential right in regard to the
repayment of capital.

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 Equity Shares
Equity shares are those shares which are not preference
shares. These shares do not enjoy any preferential
rights. They rank after the preference shares for the
purpose of dividend payment and repayment of
capital. The rate of dividend is also generally not fixed
and may vary from year depending upon the profit of
the company. This rate of dividend is recommended
by the directors of the company. They are the real
owners of the company. They have voting rights in the
management of the company 

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 Issue of shares
Share issue is the process by which companies
pass on new shares to shareholders, who may
themselves be new or existing shareholders.
Companies can issue sharesto both individuals
or corporate bodies

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PROCEDURE OF ISSUE OF SHARES
When Company has been registered, the
following procedure is adopted by the company
to collect money from the public by issuing of
shares:
1. Issue of prospectus
When a Public company intends to raise capital by
issuing its shares to the public, it invites the
public to make an offer to buy its shares
through a document called ‘Prospectus’
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It also includes the opening date and the closing
date of the issue, amount payable with
application, at the time of allotment and on
calls, name of the bank in which the
application money will be deposited,
minimum number of shares for which
application will be accepted, etc.

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 To receive application
The amount payable on application for share
shall not be less than 5% of the nominal
amount of share.
 Each application form along with application
money must be deposited by the public in a
schedule bank and get a receipt for the same.
The company cannot withdraw this money
from the bank till the procedure of allotment
has been completed 
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 Allotments of shares
Allotments of shares means acceptance by the
company of the offer made by the applicants
to take up the shares applied for. The
information of allotment is given to the
shareholders by a letter known as ‘Allotment
Letter’

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 To make calls on shares
The remaining amount left after application and
allotment money due from shareholders may
be demanded in one or more parts which are
termed as ‘First Call’ and ‘Second Call’ and so
on. 

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 Modes of issue of shares
A company can issue shares in two ways:
• For cash.
• For consideration other than cash.

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 Issue of shares for cash
Issue of shares for cash: When the shares are
issued by the company in consideration for
cash such issue of shares is known as issue of
share for cash. In such a case shares can be
issued at par or at a premium or at a discount.
Such issue price may be payable either in lump
sum along with application or in installments
at different stages

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