Download Understanding the Concept of a Company: Definition, Characteristics, Types, and Winding Up and more Slides Law in PDF only on Docsity! Com panies Act 1956
COMPANIES ACT 1956 Definition of a company Section3(1)(ii) An existing company means accompany formed and registered under any of the previous companies . Characteristics of a Company Separate Legal Entity Limited Liability Perpetual Succession Separate Property Transferability of Shares Common Seal Capacity to sue and being sued Separate Management Distinction between Company and Partnership PARTNERSHIP No separate legal entity Unlimited liability Property --> partner Shares not freely transferred. Death of partner: partnership is dissolved COMPANY Separate legal entity Limited liability Property --> Company Shares freely trans. Perpetual succession Types of Companies Public limited companies Private limited Companies Limited Co. & Unlimited Companies: Limited by shares Limited by Guarantee Section 25 companies Holding & Subsidiary Companies Government Companies Foreign Companies Types of Companies in India DESCRIPTIONS PRIVATE COMPANY PUBLIC COMPANY Whether a Foreigner can be Director Yes Yes Whole Time Director (WTD) / Managing Director (WTMD): Appointment Appointment not compulsory and No restriction on appointment Appointment : Not compulsory, If paid up capital < Rs. 5 Cr. Compulsory. If paid up capital => Rs.5 Crs WTD / WTMD: Remuneration No restriction As per schedule XIII, otherwise permission of Central Government. Foreigner as WTM D / WTD No restriction With the approval of Central Government Types of Companies in India DESCRIPTIONS PRIVATE COMPANY PUBLIC COMPANY Loan to Director etc. Yes With the previous approval of Central Government Contracts with Director etc. Yes With the consent of Board, If paid up capital of the company is (One) 1 Cr. or more, approval of Central Govt. is necessary Loan, Investment & Guarantee by the company No restriction Some restrictions Private Limited company Restricts the right of members to transfer its shares. Limits the number of its members to fifty. Prohibits an invitation to the public to subscribe to any shares in or the debentures of the company. Must have minimum paid up capital of Rs. 1 lakh or such higher amount which may be prescribed. prohibit any invitation or acceptance of deposits from persons other than its members, directors or their relatives. Formation of Company certificate of registration will be conclusive evidence – (Jublee cotton mills Vs Lewis) 1 •Promotion 2 •Registration /incorporation of company 3 •Memorandum of association 4 •The article of association 5 •A list of persons who have consented to act as directors of the proposed company. 6 •A statutory declaration of compliance 7 •Any agreement with the relevant persons of the proposed company. 8 •R.O.C (REGISTRAR OF COMPANY) will allot-Corporate Identity Number(C.I.N.) for co’s registered after Nov 1 ,2000 9 •Floatation/ raising of capital 10 •Commencement of business Memorandum of Association (The charter that contains the powers of the co.) Name Clause Registered Office Clause Object Clause Main Object, ancillary objects & other objects. Doctrine of Ultra Vires Liability Clause Capital Clause Association Clause Articles of Association Rules and regulations of the internal management Contract between the company and its members and also between the members themselves. Specifies the rights and duties of the members and directors. Can be altered by passing a special resolution in GM. Modes of Winding Up A Company may be wound up in any of the following modes: 1. By the Court i.e. compulsory winding 2. Voluntary winding up, which may be (a) Member's voluntary winding up; (b) Creditor's voluntary winding up; 3. Winding up subject to supervision of the Court The Company cannot be dissolved except by order of dissolution by the Court. Some more points… A public company must have at least 7 members and a private company must have at least 2 members. Every public company must have at least 3 directors and every private company must have at least 2 directors. Annual General Meeting must be held by every type of company, once a year. Every company must in each year hold an AGM. Not more than Some more points… 15 months must elapse between two annual general meetings. Resolutions mean decisions taken at a meeting. An ordinary resolution is one, which can be passed by a simple majority. A special resolution is one in regard to which is passed by a 75 % majority only. 15 months must elapse between two annual general meetings. Doctrine of constructive notice The memorandum and articles when registered with the registrar become public documents and accessible to all. They can be inspected on payment of a nominal fee. Therefore,there is a presumption that any outsider dealing with company has read and understood these documents. (case: Kotla Venkataswamy Vs C.Ramamurthy) case of mortgage Doctrine of Indoor Management The rule of constructive notice proved too inconvenient for business transactions. Particularly where the directors or other officers of the company were empowered under the articles to exercise certain powers subject only to certain prior approvals or sanctions of the shareholders. Whether those sanctions and approvals had Meaning: Persons dealing with the company in good faith have a right to assume that the internal requirements prescribed in public documents(Memorandum and articles)have been observed. In other words persons are not bound to enquire into regularity of internal proceedings. There are certain exceptions to this doctrine and they can be summarized as: a) Where the outsider had knowledge of irregularity. b) In case of forgery. c) Negligence on the part of the outsider. d) Acts outside scope of apparent authority.