The Companies Act, 1956

An Act to consolidate and amend the law relating to companies and certain other associations

Introduction
Companies Act 1956 is an important piece of legislation. Empowers the Central Government to regulate the incorporate and winding of the company. Inspects the books of account and conduct special audit. Launches an inquiry into the affairs incase of violation of laws. If inspection reveals any frauds the action is initiated or it is referred to the CBI.

Definition
According to the companies Act,1956 the term company means a company formed and registered under the act or an existing company i.e. a company formed and registered under any of the previous company laws Various Amendment The companies Act (Amendment),2000 The companies Act (Amendment),2001 The companies Act (Amendment),2002 The companies Act (Amendment),2006

Objective of the Act

Provision for greater and effective control Recognition of the rights of the shareholders A ceiling on share of profit payable to the management A check on the transaction of the management A provision for investigation into the affairs of the company

Memorandum of Association
It is the document that govern the relationship between the company and the outside world. It lays down the name ,the type ,the objective and the authorized capital of the company. It also mention any other business company might like to venture into sometime in the future. It is one of the imp document required to incorporate o company in U.K., Ireland, India, Pakistan and Srilanka.

Article of Association
The Issuing of Shares Valuation of Intellectual Rights The Appointments of Directors Directors Meetings Management Decisions Transferability of Shares Special Voting Rights of a Chairman The Dividend Policy Winding-Up

Documents Required for Registration

MOA of the proposed company duly stamped. AOA of the proposed company duly stamped. Form no. 1 (Declaration of Compliance). Form no. 18 (notice of situation of registered office). Form no. 29 (for consent to act as director of a company). Form no.32 (particulars of directors, manager, or secretary) (in duplicate). Copy of the name availability letter issued by the ROC earlier. Power of Attorney on a stamp paper of the representative who appears for correction/alteration of any document. Other documents as ROC may require to be furnished.

Private v/s Public Company

Description Shareholders Private Minimum 2 ,Maximum 50 Public Minimum 7, No Limit on Maximum

Director
Paid-up capital Public Deposits Transfer Of Shares Commencement of Business

Minimum 2
Minimum Rs.100,000 Restrictions on Public Deposits Restricted as per AOA Possible after obtaining Certificate Of Incorporation

Minimum 3
Minimum Rs.500,000 No Restrictions No Restrictions Possible only after Commencement of Business within 6 months of getting Certificate of Incorporation

Share Capital
Capital refers to the amount invested in the company so that it can carry on its activities. In a company, capital refers to "share capital". Different Aspects of Share Capital are: Nominal, Authorized or Registered Capital Issued Capital Subscribed Capital Called-up capital Paid-up Capital

Types of Shares
Equity Shares Preference Shares
Cumulative or Non Cumulative. Redeemable and Non Redeemable participating or non participating

Conversion of Shares into Stock

Conversion of fully paid up shares can be effected by the ordinary resolution of the company in the general meeting. Notice of the conversion must be given to the registrar within 30 days of the conversion ,the stock may be converted into fully paid up shares following the same procedure.

Provisions for Conversion of Shares into Stocks

Only fully paid up shares can be converted into stock Direct issue of stock to the member is not lawful Stock is transferable in term of any fraction and in any amt of money AOA authorizes the BOD to fix Minimum amt of stock to be transferred Since the stock is not divided therefore it is not required to be numbered

Buy Back of Shares

Buy back of its own shares by a company is nothing but reduction of share capital. Buy back of its own share by a company is allowed without the sanction of the court. It is a process by which the company goes back to the holders of its shares and offer to purchase from them the shares that they sold.

Main Reasons Why a Company Would Opt for Buy Back

To improve shareholders value. As a defense mechanism against hostile take-over. Public signaling of the managements policy. A company may purchase its own shares out of :Its free reserves The securities premium amount or The proceeds of any shares or securities

Alteration of Capital
A Company limited by shares can alter the capital clause of its memorandum in any of the following ways provided that such changes is authorized by AOA of the company: Increase in share capital by issuing shares. Consolidate its share capital into shares of larger amount than its existing shares. Convert its fully paid up share into stock and viceversa. Diminishing the amount of share capital by the amount of the shares which is cancelled.

Further Issue of Capital

Rights issue of shares Issue of share at discount Issue of share at premium Issue of bonus share Sweat equity and Employee stock option

Transfer v/s Transmission

Transfer
By a deliberate act Requires the execution of formal instrument of transfer There must be adequate consideration Stamp duty is payable

Transmission
By operation of law Requires an evidence showing the legal entitlement There is no question of consideration Stamp duty is not payable

Meeting
A meeting is a gathering of two or more people that has been convened for the purpose of achieving a common goal by sharing information. Meeting may occur face to face or virtually.

Types of Meeting
General Meeting
Statutory meeting Annual general meeting Extra-Ordinary general meeting

Meeting of Board of Director Other Meeting

Meeting of Debenture holders Meeting of Creditors

Management
Management in all organizational activities is the act of getting people together ,to accomplish desired goals using available resources efficiently and effectively. Management comprises planning, organizing, staffing, directing and controlling an organization. Companies affairs is managed by the Directors.

Accountancy & Audit

Accountancy
Accountancy is the process of communicating financial information about a business entity to shareholders and managers. The communication is generally in the form of financial statements. The principles of accountancy are applied to business entities in three divisions of practical art, named accounting, bookkeeping and auditing.

Audit
An audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, but similar concepts also exist in project management, quality management, and energy conservation.

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