Companies Act

Te r m I I I
PGDM FT (2008 2010)
1 Company Law

G r o u p I st

Name
Rajat Jhingan

Company Law

Companies Act
Agenda:
What is a Company? Ty p e s o f C o m p a n i e s . The Promoters. D i r e c t o r s i n a C o m p a n y. The Shareholding Pattern.
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Definition of a Company:
It mean an association of individuals formed for some common purpose.

It is an artificial person created by law , with a fixed capital, divided into transferable shares, with perpetual succession and common seal.

Company Law

As defined in Companies Act 1956, Section 3 (1) (i) and (ii): A company formed and registered under this Act or an existing company. An existing company means a company formed and registered under any of the former Companies Act A voluntary incorporated association which is an artificial person, created by law with limited liability having common seal and perpetual succession

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Company : Characteristics
Separate Legal Entity. Limited Liability. Perpetual Succession. Common Seal.

Transferability of Shares.
Capacity to Sue.
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Classification of Companies.

Classification of Companies
On the basis of Incorporation On the basis of number of Members.

On the basis of Liability

On the basis of Control.

On the basis of Ownership.

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Classification (Contd.)
On the Basis of INCORPORATION.
1. Statutory Companies.

2. Registered Companies.

On the basis of LIABILITY.

1. Limited by Share. 2. Limited by Guarantee. 3. Unlimited Liability.
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Classification (Contd.)
On the Basis of MEMBERS:
1. Private Companies.

2. Public Companies.

On the basis of CONTROL

1. Holding Company. 2. Subsidiary Company.

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Classification (Contd.)
On the Basis of OWNERSHIP:
1. Government

2. Non Government.

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Promoters.
1. Promotion 2. Legal position of promoters. 3. Promoters Liability. 4. Promoters remuneration. 5. Pre-incorporation contract.

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Directors: Definition
Sec. 2 (13) defines director as any person occupying the position of authority to act on behalf of the company

The directors of a company are collectively known as board of

directors'. On the analogy of the representative form of

government, they are elected representatives of shareholders.
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 First Directors

Appointment by the company.

Appointment by the directors

Appointment of Directors

Appointment by third parties. By proportional representation. By the central government.

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 As agents Position As employees. As officers of directors: As trustees.

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Disqualifications of Directors.
Unsound Mind. Undischarged Insolvent Applied to be adjudicated. Convicted by Court. Calls in respect of shares, been in arrear . Sec. 203 : Fraud or misfeasance. All ready a director of a public company.
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SHARES

Definition:
A share is an interest of a shareholder in a company. The capital of a company is divided into certain indivisible units of a fixed amount called shares. an interest having a money value & made up of diverse rights specified under Articles of Association It includes stock except where a distinction between a stock & a share is expressed or implied. [ Sec.2 (46)]
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SHARES A share is evidenced by a share certificate. [Sec. 84] Each share is distinguished by appropriate number. [Sec. 83] A bundle of rights and obligations.

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Shares
Have a nominal Value May not be so. Equal denomination. Directly issued to the public. Transferable in whole numbers. Always bear a distinctive number.

Stocks
Have no nominal Value Always full paid up. Can be of Unequal Denomination. Cannot be issued directly. Transferable is small fractions Fractions does not bear distinctive number.

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Preference Shares [ sec 85 (1)]

Have Preferential right to be paid dividend during the life time of a company. Preferential right to the return of capital when the company goes into liquidation.

Equity Shares [Sec 85 (2) ]

With reference to any company limited by shares.
Company Law

Sweat Equity Shares.

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Preference Shares (Types)

Cumulative Prefrence Shares Non-Cumulative prefrence shares. Participating prefrence shares. Non participating prefrence shares. Convertible prefrence shares. Non-Convertivle prefrence shares. Redeemable prefrence shares. [Sec. 80]
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Application & Allotment of Shares

1. 2. 3. 4. 5. 6.

Minimum subscription [Sec. 69 (1) ]. Application Money [ Sec 69 (3) to (6) ]. Effect of irregular allotment [ Sec. 7]. Opening up of subscription list [ Sec. 72]. Shares and debentures to be listed on stock exchange [Sec 73]. Return as to allotments [Sec 75].

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Buy-back of shares. [Sec. 77-A] Company is allowed to purchase its own shares from: Its free reserves. Securities premium account. Proceeds of earlier issue. Conditions for buy back. Authorized by its Articles. Resolution passed in its general meeting. Must not exceed 25 % of reserves. Must be listed on stock exchange and regulated by SEBI.
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Company Law

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