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THE

COMPANY
ACT 1956
Propaganda of Presentation
COMPANY
COMPANY ACT 1956
OBJECTIVES OF COMPANY ACT 1956.
ADVANTAGES A COMPANY HAVE THROUGH
INCORPORATION
TYPES OF COMPANIES.
MEMORANDAM OF ASSOCIATON.
ACTICLE OF ASSOCIATION.
STEP OF INCORPORATION OF A COMPANY.
DOCUMENTS NEEDED FOR REGISTRATION.
COMPANY
In a simple words a company may be defined as a
voluntary association of persons who have come together
for carrying on some business like the promotion of
commerce , art ,science, religion, charity or any other
object and sharing the profits there from.
Section 3(1)(i) of the Companies Act, 1956 defines a
company as: “a company formed and registered under this
Act or an existing Company”.
‘Existing Company’ means a company formed and
registered under any of the earlier Company Laws.
Company act 1956
The company act came into force from 1 April 1956.
 The act was based upon the recommendation of
company law committee appointed under the
chairmanship of Mr. C. H. Bhaba on 25 -10-1950.
The committee submitted its report in 1952. The Indian
company act extends to the whole India.
Objective of company act 1956
1. Development of a company because a corporate form of
business organisation constitute a very important sector of
economy.

2. Protect the interest of large number of share holder as they


have a separate ownership from management in joint stock
companies.

3. Safe guard the interest of the creditors so that they have


there money on time
.
4. To equip the government with necessary powers so
that the interest of the consumer, labors and
suppliers can be protected.

5. To attain the ultimate goal of the economic policy


that is establishing a socialistic pattern of society
ADVANTAGES THAT A ORGANISATION ENJOY THROUGH
INCORPORATION UNDER COMPANY ACT 1956..

1 SEPERATE LEGAL ENTITY


2.ARTIFICIAL PERSON
3.PERPETUAL EXISTENCE
4.COMMAN SEAL
5.LIMITED LIABILITY
6.CAPACITY TO SUE OR TO BE SUED
7.TRANSFERABILITY OF SHARE
Separate legal entity
A company is an separate legal entity
means it is different from its members. It
works as a individual body.
It can make contracts, open a bank
account, can sue and be sued by others.
The law has recognised that even if a
person holds virtually all the shares, the
right and obligations of the company shall
be different from its members.
Artificial person
A company is a purely a creation of law. It is invisible,
intangible and exists only in the eyes of law.
It has no soul, no body, but has a position to enter or
exit into a contract, to appoint a people as its
employees
In short it can do every thing just like a natural
person.
Perpetual existence [sec 34(2)]
Section 34(2) of the act states that an incorporated
company has perpetual life.
The life of the company is not related to the life of the
members . Law create the company and law alone can
dissolve it.
The existence of the company is not affected b y
death, insolvency, retirement or transfer of share of
members.
Limited liability
It means that the liability of a member
shall be limited to the value of the share
held by him, he cannot be called upon to
bear the loss from his personal property.
Common seal
A company being an artificial person can
not work as a natural being.
Therefore, it has to work through its
directors, officers and other employees.
Common seal used as a official signature of
a company.
Transferability of share sec(82)
The share of a company are freely
transferable. The shareholder can transfer
his share to any person without the consent
of other members.
A company cannot impose absolute
restrictions on the rights of member to
transfer their shares
Capacity to sue and be sued
When a company incorporated it acquire a
separate and independent legal personality.
As a legal person it can be sue and be sued
in its own name.
Types of companies
(Registered under company act 1956)
INCORPORATED
1.CHARTERED COMPANIES
These companies are incorporated under a special
charter such as the east India company. The bank of
England. the company act does not apply to it.
2.STATUTORY COMPANIES
These companies are incorporated by special act of
legislature( act of parliament or state legislature)
example of such companies are RBI, UTI, LCI
REGISTERED COMPANIES
companies registered under the Indian Companies
Act, 1956 are called registered companies.
To become a registered company one has to take the
certification of incorporation from the registrar.
COMPANY WITH LIABILITY
 COMPANY LIMITED BY SHARE [sec12(2)a]
companies in which the liability of its members is limited to the extent of
the amount unpaid on the shares held by a particular member.

 COMPANY LIMITED BY GUARANTEE


The liability of members is limited to a fixed amount which members
undertake to contribute to the assets of the company in case of its winding
up.

 UNLIMITED COMPANIES
wherein members are liable for the debts of the company irrespective of
their interest in the company
Number of members
PRIVATE COMPANIES [sec 3(1)(iii)]
A private company is one which, by its Article of
association
- restricts the right to transfer its share, if any
- limits the maximum number of its member to fifty
- prohibits any invitation to the public to subscribe for
any share or debenture of the company.
PUBLIC COMPANY [SEC 3(1)(iv)]
A public company means a company which is not a
private company. In other words, a public company,
means a company which by its article does not-
(i)limit the number of its member.
(ii)prohibit any invitation to the public to subscribe for
any share in, or debentures, of the company.
companies according to control
HOLDING AND SUBSIDIARY COMPANY
where a company has control over another company,
it is known as the holding company
The company over which control is exercised is called
the subsidiary company.
ownership
GOVERNMENT COMPANY (sec617)
a government company means any company in which
at least 51% of the paid up share capital is held by the
central government or by any state government or
partly by one or more state Government.
MEMORENDUM OF ASSOCIATION
The first step in the formation of the company is to
prepare memorandum of association. it is one of the
documents which has to be filed with registrar of the
companies at the time of incorporation of a company.
It is vital document, tell about the object of the
company’s formation ,the power of the company as
well as the boundaries beyond which the action of the
company can not go.
Importance of memorandum
It defines the rights and liabilities of the members.
It shows the capital structure of the company
It shows the object of the company
It specifies the state in which the registered office of
the company is situated.
It shows the constitution of the company
It specify the conditions under which the company
has been incorporated.
Article of association
Contents of article of association
Rights of different classes of shareholder.
Use of common seal of the company.
Different classes of shares and their right.
Appointment , powers, duties, salary of MD,
manager, and secretary.
Borrowing power of directors.
Voting rights of member .
Board meetings and proceedings.
Winding up company.
Step of incorporation of company
Incorporation of a company
1. First of all promoter has to decide whether they want to
form a public company or a private company.
2. Decide the state wherein the registered office of the
company is to be situated.
3. Name of the company. The promoters should decide
upon at least three suitable names and ascertain from
the Registrar of companies whether the name by which
the company is to be started is available or not .
Necessary care should be taken while selecting the name
that it must not be identical or too nearly resemble the
name of any existing company.
Cont….
4. The promoter should obtain a letter of intent(to be converted
into an Industrial license) under industry act 1951, if the
company’s business comes within the licensing requirement of
this act.

5. The promoters should also fix UNDERWRITRS, BROKERS,


BANKERS, AUDITORS AND SIGNATORIESOF THE MEMORANUM.

6. Then Company should prepare Memorandum of association and article


of association.

7. Finally submit all the required documents to the registrar.


Documents needed for
Registration
Memorandum and article of article and association
duly stamped, signed and witnessed.
Statement of nominal capital of the company.
Agreement (if any) with any individual for
appointment of any manager and director.
Any other agreement, if referred to in the memora..
And article of association
The statutory declaration in form no 1 is to filled
stating that all the requirement of the company act
and the rules three under have been complied with.

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