Professional Documents
Culture Documents
1956
Characteristics of a Company
1. 2. 3. 4. 5. 6. 7. 8. 9. Incorporated Association Artificial legal Person Separate legal Entity Perpetual Succession Limited Liability Transferable Shares Common Seal Separate Property Capacity to Sue and Being Sued
Kinds Of Companies
A) On the basis of mode of Incorporation: Chartered Companies Statutory Companies Registered Companies B) On the basis of Liability of Members Limited by Shares Limited by Guarantee Unlimited C) On the basis on the number of members Private Public D) Others: Govt. Companies, Foreign company, Holding and subsidiary company
Not more than 12 without the approval of the central govt. At least 2/3rd of Directors must retire by rotation Not more than 11% of net profit.( not mere than 5% to a sgl.Director) Rs 5 Lakh Can accept deposits from public Must do so
1.
Promotion
Registration/Incorporation Flotation/Raising of Capital Commencement of Business
Promotion
Registration/Incorporation of Company
The Promoters of the company will submit the following documents with the Registrar of Companies for the registration of company: Memorandum of Association The article of association A list of persons who have consented to act as directors of the proposed company A statutory declaration of compliance. Any agreement with the relevant persons of the proposed company.
Registration/Incorporation of Company
steps: a) Issue a prospectus to invite public for subscription b) Deliver a statement in lieu of prospectus where the company has either not issued the prospectus or it has issued the prospectus , has not proceeded to allot any shares offered to the public for subscription
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 The minimum subscription in cash has been raised Every director of the company has paid in cash his qualification shares , a proportion payable on application and allotment on the shares offered for public subscription. No money is liable to be repaid to applicants for any shares or debentures which have been offered for public subscription by reason for any failure to apply for, or to obtain permission for the shares of debentures to be dealt in any recognized stock exchange
Commencement of Business
A statutory declaration duly verified by one of the directors or the secretary in the prescribed form that the above conditions have been complied with, is filed with the registrar Where the company has not issued prospectus it has to satisfy the following conditions: A statement in lieu of the prospectus if filed with the Registrar Every director of the company has paid in cash his qualification shares , a proportion payable on application and allotment on the shares. A statutory declaration duly verified by one of the directors or the secretary in the prescribed form that the above conditions have been complied with, is filed with the registrar. When the company has compiled with the above conditions the Registrar will issue a certificate to commence business.
Memorandum of Association
Meaning and Importance MOA of a company is its charter and defines the limitations of the powers of the company It is not unalterable Content: i) Name of the Company: with limited and private limited as the last word(s) of the name ii) Registered Office iii) Objects of the company : main objects , Incidental and ancillary objects, other objects not included in first two.
Memorandum of Association
iv) Liability: A declaration is made that the liability of the members is limited. v) Capital-The amount of authorized share capital divided into shares if fixed amount vi) Association or Subscription: The initial members are called subscribers, who sign the memorandum in the presence of one witness
Articles of Association
Prospectus
Prospectus means any document described or 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,or debentures of a body corporate.
Prospectus
Pre-Requisites of Prospectus
Prospectus
Deemed Prospectus- When a company allots shares or debentures to the public through the medium of Issue Houses, then the issue houses invite subscription from the public through their own offer document. This is also called prospectus by implication. Statement in Lieu of Prospectus- Where a public company does not invite public to subscribe for its 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- is a prospectus ,which does not have complete particulars on Price of securities offered and quantum of securities offered. E.g.-Jet Airways, Suzlon
Membership
Persons who collectively constitute the company as a corporate entity are members or shareholders a) The subscribers to the memorandum 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 company may not have a share capital Struck off from the list Applies for registration Subscriber to a memorandum
Person who owns a bearer share warrant is a shareholder A legal representative of a member
Minor Insolvent Partnership Firm Foreigner Company Trade Union or Society President of India
A company with more than fifty members shall keep an index of members
Name address and occupation Share held by each member and the amount paid up on those shares Date at which each person was entered in the register as a member Date at which any person ceased to be a member
Termination of Membership
Transfers his shares Shares are forfeited by the company Surrenders his shares Shares are sold by the company to enforce its lien Dies Is adjudged insolvent Shares have been redeemed by the company Rescind the contract of membership on fraud or misrepresentation
Director
A company is an artificial legal person and the directors as a 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 as director, no corporate body corporate, association or firm
Qualifications of a director
No academic, professional or share qualification Articles may provide for any qualifications Where share qualification is fixed by articles then the act provides a) Qualification shares must be taken within 2 months after appointment Nominal value of qualification shares must not exceed Rs. 5000 or one share where its value exceeds Rs. 5000 Share warrants will not count for this purpose
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 by central government 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
The board of directors of a company shall be entitled to exercise all such powers and to do all such acts and things, as the company is authorized to exercise and do. The following powers are: The power to make calls The power to issue debentures The power to borrow money otherwise than on debentures The power to invest funds The power to make loans The power to buy back of shares
Sale, lease or disposal of the undertaking Showing any concession regarding payment of debts Make investment of the amount of compensation received Contribution to charitable Borrowing monies exceeding the aggregate of the paid up capital and free reserves of the company
Duties /Limitations
Good faith Reasonable care Disclose interest Participate in the communities Attend board meetings
Company meeting
General meeting
Kinds of Meetings
Meetings of a Company
Shareholders
Directors
General Meetings
Class meetings
Statutory Meetings
Statutory Meetings
Object When held Not required to be held Notice Statutory report In case of default
Board Meetings
When to hold:Atleast once in every three calendar months and 4 meetings every year Notice: To be given to every director in writing. No form or period of notice is laid down. Usually a weeks notice is sufficient. The notice must state the date, time and place of meetings. Quorum:1/3 of the total strength or two, whichever is higher. Passing of resolution by circulation is permissible
Motion A proposal under consideration by members in a meeting before it is voted upon 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
Any motion voted upon and agreed to in a meeting and entered in minutes. A motion passed with or without amendment is called resolution Types of Resolution Ordinary resolution Special resolution Resolutions requiring special notice
Winding up of a Company
Company dissolved Winding up a company is a process whereby its life is ended and its property administered for the benefit of its creditors and members. An administrator called liquidator, is appointed and he takes control of the company, collects its assets, pays its debts and finally distributes any surplus among the members in accordance with their rights
Winding up of a Company
Winding up of a company differs from insolvency of an individual in as much as a company cannot be made insolvent under the insolvency law. Even a solvent company can be wound up.
Modes of winding up
Compulsory winding up under orders of the National company law Tribunal NCLT Voluntary Winding up The power of the court are transferred to the National Company Law Tribunal by the company (Amendment)Act 2002. The central government is in the process of formation of this Tribunal
Liquidator
To conduct proceeding in winding up To make a report To take custody of companys property To comply with directions of the creditors or contributories or the committee of inspection To summon meeting of creditors and contributories To obtain directions from the tribunal To keep statutory books To get accounts audited Central governments control of liquidator Information as to a pending winding up