Companies Act, 1956

Presented by Group 7

• Vishal Agarwal 01

• Karan Mehta 15

• Neeta Pai 08

• Kavita Shetty 27

• Kishori Sawant 38

Index• Definition of a Company• Features Of Companies Act• Characteristics Of A Company• Lifting Of Corporate Veil• Types of Companies• Formation Of a Company• Promoters• Kinds Of Directors• Registration• Memorandum Of Association• Articles Of Association• Doctrine of Ultra Vires• Doctrine Of Constructive Notice• Doctrine Of Indoor Management• Kinds Of Meetings

Definition Of a Company

• According to Companies Act ,1956 “Company means a company formed and registered under this Act or an existing Company.”

• Company may be defined as a voluntary association of persons who have come together to carry on some business and sharing profits there from…

• It can also be defined as “an association of many persons who contribute money or money’s worth to a common stock and employ it in some common trade or business and who share profit or loss arising there from …”

Features Of a Company’s Act,1956

The Companies Act is the longest piece of legislation ever passed by our Parliament.

The Act consists of 658 sections and 15 schedules.

It extends the whole of India

It came into force on 1 April, 1956.

Characteristics Of a Company

An Artificial association created by Law Separate Property- Macaure vs. Northern Assurance Co. Ltd.

Perpetual Existence or succession Common Seal Transferability of Shares Capacity to sue and being sued- Rajendranath Nath

Dutta v. Shibendra Nath Mukherjee Separate Legal Entity- Saloman v. A Saloman Ltd

Contractual Rights Limitation Of Action Separate Management Termination Of Existence

Lifting Of Corporate Veil

The various cases in which corporate veil has been lifted are as follows:•Protection Of Revenue- Sir Dinshaw Maneckji Petit

•Prevention Of Fraud or improper Conduct- Jones v.Lipman

•Determination of the character of the company whether it is enemy- Daimler Co. Ltd. V. continental tyre & rubber co. ltd

•Where Company is a Sham- Gilford Motor Co.Ltd. v.Horne

•Company avoiding legal obligations•Company acting as agent or trustee of the shareholders- F.G.Film Ltd.

•Avoidance of Welfare Legislation•Where prospectus includes a fraudulent misrepresentation.

Companies

Private Co.-Hill Crest Realty Sdn. Bhd.v. Hotel Queen Road Public Co.

Basic Type

Companies

On the basis of incorporation

Registered Co.Statutory Co.(RBI,LIC,ONGC etc.)

Types Of Companies

Types Of Companies

Companies

Unlimited Co. Limited Co.

On the basis of liability

Co.s Limited by Guarantee Co.s Limited by Shares

Types Of Companies

Companies

Association not for Profit Holding and Subsidiary Co.

Other Classification

Government Co. Foreign Co.

Types Of Companies

Companies

Listed Co. Unlisted Co.

On the basis of Listing

Formation Of a Company

The process consists of 3 parts:

Promotion

Registration

Floatation

Promoters

Promotion is the first stage in the formation of a company Promotion involves identification of business opportunity, analysis of

it and taking steps in implementing it A company can have more than one Promoter Promoter can be individual, firm, an association of persons, or a

body corporate

Functions of a Promoter To Conceive Business Idea To Make detailed investigation To organize resources To Obtain the consent of persons willing to act as first directors To decide about the Name of the Co. To get necessary documents prepared To file the necessary documents with the Registrar

Kinds Of Directors

• The Companies Act, 1956 defined a term director and states that 'director' includes any person occupying the position of director, by whatever name called.

• In the ordinary sense a director is someone who administers, controls or directs the affairs of a company.

• Types of DirectorsOrdinary DirectorManaging DirectorWhole time/Executive DirectorAdditional DirectorsAlternate DirectorProfessional DirectorNominee Director

Registration

Seven or more persons in case of public limited and two or more persons in case of Private limited are required to subscribe to the memorandum of association in respect of registration of the company with or without limited liability

The following documents are required to the ROC of the state in which the registered office of the company is to situate for the purpose of registration of a company..

•MOA•AOA

•Agreement with any of its managing director, whole time director or manager

Registration

Steps for registration•Availability of Name-The company cannot be registered by a name which in the opinion of the central govt. is undesirable . The promoters should file with the ROC for the availability of NAME

•Certificate of Incorporation-When the required documents have been filed with registrar and the necessary fees have been paid the Registrar if satisfied with all the formalities will issue a certificate of incorporation under his signature..This certificate serves as a birth certificate for the company

Case Study-Jubilee Cotton Mills v. lewisThe roc issued a COI on JAN 8TH dated JAN 6TH which was the date he recd. The documents. On 6th the company makes an allotment of shares to Lewis

Held: the allotment was not void

Memorandum of Association

MOA is a document which governs the relationship between the company and the outside world Name Clause: Governed by Emblems and Names Act, seal to be present on all business letters and notice Domicile Clause: Ascertains Domicile and Nationality of a CompanyObjects Clause: Explains utilization of shareholders funds and a guide to outsidersLiability Clause: It states the liability of the company is limitedCapital Clause: It must state the authorized capital of the companyAssociation or subscription clause: willingness of the subscribers to associate and form a company

•MOA can be altered for change of name , registered office , objects clause etc.

Articles of Association

AOA contain rules and regulations of the internal management of the company1.Powers ,duties ,liabilities rights of Directors and Members2.Rules for meetings of the Company3.Dividends4.Borrowing Powers of the Company5.Calls on shares6.Transfer and Transmission of shares7.Forfeiture of shares8.Voting powers of members etc.

Doctrine Of Ultra Vires

• A company exists only for the objects which are expressly stated in its objects clause or which are incidental to or consequential upon these specified objects.

• Any act done outside the express or implied objects is ultra vires• The ultra vires act are null and void ab initio.• Violation of MOA is ultra vires the company

Case Study- Ashbury Railway Carriage and Iron Co. v.RicheThe company had in its object clause to make and sell or lend on hire railway carriages and

wagons and all kinds of railway plant fittings , machinery and rolling stock and carry on the work of mechanical engineers and general contractor..The company contracted to finance construction of railway bridge in belgium , which was ratified by the members .But later cancelled the contract on the grounds that contract was beyond its object clause. The aggrieved party contended that the contract came well within the object ”general contractor”.

Held :That the term General contractor must be taken to indicate the making generally of such contracts as were connected with the business of mechanical engineers and therefore beyond objects of the company…

Doctrine of constructive Notice

• As per Companies Act ,1956 Memorandum and Articles Of Association when registered ,become public documents and then they can be inspected by anyone on payment of Nominal Fee.

• Any person who contemplates entering into a contract with the company has the means of ascertaining and is thus presumed to know the powers of the company and the extent to which they have been delegated to the directors.

Case Study- Kotla Venkataswamy v. Ram MurthyThe articles provided that all deeds and documents of the company shall be signed

by the MD , Secretary and a working director. A mortgage deed was accepted with the secretary and working directors signature only.

Held: the deed was invalid.

Doctrine of Indoor Management

The Doctrine of Indoor Management allows all those who deal with the company to assume that the provisions of the articles have been observed by the officers of the company. They are not bound to enquire into the regularity of the internal proceedings.

Case Study: The Royal British Bank v. TurquandThe directors of a company were authorized by the articles to borrow on bond such sums of money as should from time to time, by a resolution of the company in general meeting, be authorised to be borrowed. The directors gave a bond to T without the authority of any such resolution. The question arose whether the company was liable on bond.

Held: The company was liable on the bond ,as T was entitled to assume that the resolution of the company in general meeting had been passed.

Kinds Of Meeting

Meetings

Meeting of shareholders

Meeting of Directors

Meeting of creditors and debentures

General Meetings

Class Meetings

Statutory Meeting

Annual General Meeting

Extraordinary General Meeting