4.Company Law Slides

7/28/2019 4.Company Law Slides

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Company law

By Prof. Mayur Malviya


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Object

Company law has been enacted to consolidate

and amend law relating to companies andcertain other associations.

1) To encourage investments

2) To ensure proper administration

3) To prevent malpractices

4) To allow for investigations

Prof. Mayur Malviya


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Company [Sec.3]

Sec.3(1)(i) A company means a company

formed and registered under this act or anexisting company.

an artificial person, created by law with

limited liability having a common seal and

perpetual succession.

Prof. Mayur Malviya


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CHARACTERISTICS OF A COMPANY

An Incorporated

Association

Artificial legal person

Common capital&limited liability

Transferable shares

Separate legal entity

Perpetual existence

Common seal

Separate property

Capacity to sue & tobe sued

Not a citizenProf. Mayur Malviya


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Doctrine of Lifting the Corporate VeilJudicial Interpretation

Protection of Revenue

Com an as an a ent of

Statutory Exceptions

No. of members below statutoryminimum

Shareholders

Company formed by certain personsto avoid their own valid contractual

obligation

Company formed for some fraudulentpurpose

Company formed is against publicinterest or Public policy

Fa ure to re un app cat on money

Misdescription of Companys name

Fraudulent trading

Holding and subsidiaryProf. Mayur Malviya


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Protection of Revenue. (Case Study Jugilal vsCommissioner of Income Tax)

Prevention of Fraud or Improper conduct.(Case Study Johns vs Lip man)

Company is a Sham. (Case Study GilfordMotor Co Ltd vs Horne)

Determination of the character of the

company. (Case Study Daimler Co Ltd vsContinental Tyre & rubber Co.)

Prof. Mayur Malviya


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Types of CompanyOn the basis of Incorporation

Chartered Companies

Statutory companies

Registered Companies

On the basis of Liability

- Limited by shares

- Limited by guarantee- Unlimited Company

Prof. Mayur Malviya


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On the basis of Number of members:

- Private Company- Public Company

On the basis of Control:

- Holding Company

- Subsidiary Company

Prof. Mayur Malviya


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On the basis of Ownership:

- Government

- Foreign

One Man Company

Prof. Mayur Malviya


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Private Company Private Company [Sec.3(1)(iii)] is a Company

which by its articles of association:Limits the no. of its members to 50, excluding

em lo ees who are members or ex-em lo ees

who were and continue to be members.Restricts the rights of transfer of shares, if any.

Prohibits any invitation to the public tosubscribe for any shares or debentures of theco.

Prof. Mayur Malviya


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Public company According to Sec.3(1)(iv), A Public Company is

one which is not a Private Company.

Prof. Mayur Malviya


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Difference between Private Company

& Public CompanyCriteria Private [Sec.3(1)(iii)] Public [Sec.3(1)(iv)

1. Minimum Capital 1 Lakh 5 Lakhs

2. Number of members Minimum is 2 maximum is50

Minimum is 7. Norestriction on maximum.

3. Minimum numbers of Two Three

4. Mode of appointment ofdirectors

Consent letter is notrequired

Consent letters by thedirectors is required

5. Subscription for shares No invitation to the public Public may be invited toand can subscribe

6. Transferability of shares Members restricted intransferring shares

Members can transfer theirshares freely

7. Minimum quorum Two Five

8. Managerial remuneration No restriction Should not exceed 12% ofthe profits

Prof. Mayur Malviya


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Conversion of Private into Public

Conversion of PrivateCompany into aPublic Company

By Default By Operation of Law By Choice

Prof. Mayur Malviya


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Conversion of Public into Private1) The co. in general meeting has to pass special resolution foraltering the articles so as to include therein the necessary

restrictions, limitations and prohibitions, and to delete any

provision inconsitent with the restrictions

2) Word Private should be added before limited.

.

articles for converting a public company into a private

company should be obtained.

4) Within one month of the date of the receipt of the approval,

a printed copy of the altered articles must be filed with theregistrar.

5) Within 30 days of the passing of the special resolution, a

printed or typed written copy thereof should be filed with

the registrar. Prof. Mayur Malviya


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Formation of Companies

Stages in

PromotionRegistration/Incorporation

Capitalsubscription/

Floatation

Commencementof Business

Prof. Mayur Malviya


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Promotion Stage Discovery of business opportunity

Conduct of preliminary investigation

Assembling

Financing

Prof. Mayur Malviya


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Role of Promoter Ideation

Arranging resources Preparing preliminary documents

Preliminary investigation

Preliminary Contracts Naming the company

Finance

Appoint bankers, brokers, solicitors andunderwriters

Obtaining license

Prof. Mayur Malviya


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Incorporation Availability and approval of the name Filing of documents

MOA

AOA

Notice

A reements

Return containing first directors particulars List of directors

Written consent

Statutory declaration

Undertaking of shares for qualification shares

Payment of fee

Registration

Certificate of incorporationProf. Mayur Malviya


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Commencement of business Prospectus or Statement in lieu of prospectus

Minimum subscription

Qualification shares

Return of allotment Declaration

Statutory declaration Certificate of commencement of business

Prof. Mayur Malviya


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Memorandum of association Sec.2(28).

Memorandum means the memorandum ofassociation of a company as originally framed

of any previous companies law or of this act.

Establish the relationship between the

company and the outside world

Prof. Mayur Malviya


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Memorandum of association Significance

Basis of incorporation Charter of company objects

Future structure

Limits its activities Investments and risks

Liabilities

Authorisation Promoters

Prof. Mayur Malviya


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Name clause

Objects clause

Registered office

Capital

Liability

association

Prof. Mayur Malviya


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Doctrine of Ultra vires Beyond powers

An act is said to be ultra vires which though legalin itself,is not authorised by the objects clause inthe Memorandum of Association.

All activities and transactions beyond the objectsof the company shall be entirely void.

All actions against MOA

Directors will held personally resposible if anyacts ultra vires

Prof. Mayur Malviya


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Alteration of Memorandum Change of name

Change of Registered office

Alteration of objects

Change in liability clause Capital clause

Prof. Mayur Malviya


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Articles of association Regulations which govern the management of its

internal affairs Duties, rights,powers and authority of the

management and the board of directors in their

respective capacity A public company will be deemed to have

adopted Table A in Schedule I if the Companies

act, if it does not file its own Articles ofAssociation (Properly stamped, duly signed andattested.)

Prof. Mayur Malviya


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Contents Share capital

Lien on shares

Calls on shares

Procedure of allotment ofshares

Meetings and proceedings

Voting rights

Directors and capacities

Manager

Transfer of shares Share certificates issued

Transmission, forfeiture andreissue

Share warrants

Alteration of capital

Dividends and reserve

Book keeping

Accounts, audit and

borrowing powers Capitalisation

Winding up

Prof. Mayur Malviya


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Prospectus Sec.2(36)

Document described or issued as prospectusand includes any notice, circular, advt., orother documents invitin offers from the

public for the subscription or purchase of anyshares or debentures of a body corporate

1) Invites subscription to shares, debentures or

deposits2) Aforesaid invitation is made to public.

Prof. Mayur Malviya


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1) If the private company is changed into Public

Company2) If there is automatic or immediate collection

3) If the company has not issued prospectus

due to any reason

4) If the company has decided that it will notissue shares or debentures to public.

Prof. Mayur Malviya


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Types Offer

Draft

Red-Herring

Abridged

Shelf

Prof. Mayur Malviya


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Statement in lieu of Prospectus:

Section 70

Issued atleast 3 days before the allotment of

shares or debentures, there has beendelivered to Registrar for registration duly

director in the following cases:

Prof. Mayur Malviya


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APPOINTMENT OF DIRECTORS

By promoters

By thecompany

By thecourt

APPOINTMENTOF DIRECTORS

By the board

of directorsBy thethird

parties

By the centralgovernment

Prof. Mayur Malviya


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General powers of company boards

General powers ofthe board

Powersexercisable by

POWERS EXERCISABLE BYTHE BOARD SUBJECT TOINTERFERENCE BY

Company Act

AoA

e oar a eboard meeting

to make calls onshares

to borrow money

to fill casual vacancy

Malafides acts ofdirectors

Deadlock inmanagement

Prof. Mayur Malviya


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SharesSec.2(46) of the Companies act, 1956 has defined:

Share means share in the shares capital of thecompany and includes stock, except where adistinction between stock and shares is expressed

or implied. Interest

Liability

Right Binding

Prof. Mayur Malviya


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SharesTypes

Preference shares

Equity Shares

Sweat equity sharesListing of Shares [sec.73]

Prof. Mayur Malviya


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MeetingsStatutory

Annual general

Extraordinary

Class

Quorum

Resolution

Prof. Mayur Malviya


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Winding UpCompulsory

Voluntary

Supervision under court

Winding up and Dissolution

Prof. Mayur Malviya


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Winding up the Company Act session!!

Any Queries?

Thank you

Prof. Mayur Malviya

4.Company Law Slides

Documents

Transcript of 4.Company Law Slides