Company Law - Simon Haque (BUBT)

8/4/2019 Company Law - Simon Haque (BUBT)

1/26

Click to edit Master subtitle style

4/14/12

Welcome to the

Presentation sessionon

CompanyLaw


2/26

Law

4/14/12

Definition of

CompanyThe word Company is derivedfrom the Latin word Com and

pany. Commeans

simultaneouslyand pany meanslivelihood. So, company is such kindof business organization where a

group of people provides capital forearning profit and by this profit theymaintain their livelihood.


3/26

4/14/12

Company means a companyformed and registered under this

Act or any existing company. -Sec 2(1), Company Act, 1994.

A company is an association ofmany persons who contributemoney or moneys worth to

common stock and employs it inSome trade or business and whoshare the profit or losses arising

there form.


4/26

4/14/12

Characteristics/Essential Elements of acompany

General characteristics:

#Formation

#Voluntary Association

#Distinct objectives

# Membership

#Amount of Capital

# Size

# Transferability of shares

#Democratic management.

# Distribution of profits.

#Auditing accounts.

Legal characteristics:

# Created by law

# Artificial legal personality

# Separate legal entity

# Registration

# Perpetual succession

# Common seal

# Registered office

# Number of members

# Winding up


5/26

4/14/12

Classification

Company

Formationbasis

Liabilitybasis

Nationalitybasis

Ownershipbasis

Membersnumber

basis

MiscellaneousCompany

Chartered

Statutory

Registered

Withlimitedliability

With

unlimitedliability

Domestic

Foreign

Multinational

Govt.

Non-

govt.

Privateltd. co.

Publicltd.Co.

Holding

Subsidiary


6/26

4/14/12

Public Ltd. Co.VS

Private Ltd. Co.No. Topic Public Ltd. Company Private Ltd. Company01. Formation Procedure The formation procedure is complex due to

the excessive legal activities.Comparatively its formation procedure iseasy.

02. Number of members Minimum 7 and maximum is limited byshares.

Minimum 2 and maximum 50.

03. Scope & nature of ownership The owners live in a vast area and different

kind of people may be its member.

Owners may be limited between family and

friends.

04. Size Normally it is a large sized business. It is a middle sized business.

05. Secrecy Here maintaining secrecy isnt possible. Maintaining secrecy of business informationis possible here.

06. Expansion facility Because of low risk, there is a goodopportunity of expansion.

Though risk is high so that there is lessscope of expansion.

07. Decision making For bureaucratic problem the decisionmaking process is time-costing.

Here it is possible to take decision andimplement it fast.

08. Legal restriction Here it is need to be followed more legalrestriction.

Here the legal restriction is less than thePublic Ltd. co.

09. Safety of members For lawful control the safety of members aremore here.

Here the safety of members is less than thePublic Ltd. Co.

10. Use of the word Limited The word Limited is only written after this

company.

The word Pvt. Ltd. is written after this

company.


7/26

4/14/12

No. Topics Public Ltd. Co. Private Ltd. Co.13. Minimum

subscription

Public ltd. co. needs to collect minimumsubscription before distributing shares.

Private ltd. co. can distribute shareswithout minimum subscription.

14. Capital collection It can collect shares by addressing peoplefor purchasing shares.

It can collect shares only from themembers.

15. Share transfer Its shares are transferable. Its shares are not transferable.

16. Share warrant It can issue share warrant with the fullvalue.

It cant issue share warrant.

17. Issuing debenture It can issue debentures to the public. It cant issue debentures to the people.

18. Members list It is compulsory to make list if the numberof members exceed over 50.

There is no need of keeping the memberslist.

19. Number ofDirectors

Minimum number of directors is 3. Minimum number of directors is 2.

20. DirectorsAppointment

Directors are elected by the shareholdersthrough an election.

There is no exact rule to choose thedirectors.

21. Remuneration ofdirectors

Here the directors get the remuneration ata fixed rate.

Here the directors get the remunerationas they wish.

22. Directorsretirement

Here the directors have to take compulsoryretirement for 1/3 portion of a year.

Here there is no regulation like this.

23. Statutory meeting &reporting

Here it is compulsory to call a meeting andreporting to the registrar within thedetermined time.

Here it is not mandatory to call meetingand reporting.

24. Audit & submissionof Account

It has to audit the annual accounts andsubmit one copy to the registrar andshareholders.

No need to do these.

25. Changeability Public Ltd. Co. cant be changed to theother forms.

But this type of company can be changedto Public Ltd. Co.


8/26

4/14/12

Company Vs Partnership

No. Topic Company Partnership01. Formation Procedure The formation procedure is complex due to the

excessive legal activities.Comparatively its formation procedure is easy.

02. Number of members Minimum 7 and maximum is limited by sharesfor Public ltd. Co. and Minimum 2 andmaximum 50 for Private ltd. Co.

More than 2 may conduct partnership business.

03. Scope & nature of

ownership

The owners live in a vast area and different

kind of people may be its member.

Owners may be limited between family and

friends.

04. Size Normally it is a large sized business. It is a small or middle-sized business.

05. Secrecy Here maintaining secrecy isnt possible. Maintaining secrecy of business information ispossible here.

06. Expansion facility Because of low risk, there is a goodopportunity of expansion.

Though risk is high so that there is less scope ofexpansion.

07. Decision making For bureaucratic problem the decision makingprocess is time-costing.

Here it is possible to take decision and implementit fast.

08. Legal restriction Here it is need to be followed more legalrestriction.

Here the legal restriction is less.

09. Safety of members For lawful control the safety of members aremore here.

Here the safety of members is less.


9/26

4/14/12

Topic Company Partnership

Members list It is compulsory to make list if the number ofmembers exceed over 50.

There is no need of keeping the members list.

Number of DirectorsMinimum number of directors is 3 for public companyand minimum number of directors is 2 for privatecompany.

It is fixed by the partners.

DirectorsAppointment

Directors are elected by the shareholders through anelection for public company.

There is no exact rule to choose the directors.

Remuneration ofdirectors

Here the directors get the remuneration at a fixed rate. Here the directors get the remuneration as they wish.

Directors retirementHere the directors have to take compulsory retirementfor 1/3 portion of a year.

Here there is no regulation like this.

Statutory meeting &

reporting

Here it is compulsory to call a meeting and reportingto the registrar within the determined time.

Here it is not mandatory to call meeting and reporting.

Audit & submissionof Account

It has to audit the annual accounts and submit onecopy to the registrar and shareholders.

No need to do these.

Changeability Public Ltd. Co. cant be changed to the other formsbut private company can be changed to Public Ltd.

Co.

It may not be transferred to another form of organization.


10/26

4/14/12

Association Meaning

The Memorandum of Association is a

document which contains thefundamentalrules regarding the constitution andactivities of a company.

Memorandum of Association is a documentwhich contains the fundamental rules regardingthe constitution and activities of a company.

- J.K. Mitra.

Its objective is to inform the shareholders,

creditors and customers about the scope


11/26

4/14/12

Memorandum of Association Contents

The contents of the Memorandum of Association are discussedin the Company Act, 1994 (SECTION-6, 7, 8) which aredivided in 7 clauses:

1. Name clause

2. Situation clause

3. Objects clause

4. Area of operation clause

5. Liability clause

6. Capital clause

7. Consent clause

A ti l f i ti


12/26

4/14/12

Articles of association -Meaning

The Articles of Association contain rules,regulations and bye-laws regarding the internal

management of companies.

Articles are the internal laws of a company. Articles deviseways for the internal management of the company.

- LordBrobene.

A public company may or may not file articles. If it


13/26

4/14/12

Articles of association -Contents

q Name and address of thecompany.

q Rules of daily activities of the

company.q Rules about shares:

Number of shares.

Process of issuing shares.

Collection process of share value.

Issuing process of share certificate andshare warrant.


14/26

4/14/12

q Rules about shareholders:

Shareholders rights and liabilities.

Voting power of shareholders etc.

q Rules about capital:

Changing process of capital increase anddecrease.

Changing process of share value.

Distributing process of new shares.

Amount of minimum subscription.


15/26

4/14/12

q Rules about Directors:

Number of directors.

Power, duties and rights of directors. Conditions about the remuneration of

directors.

Number of qualification shares of directors. Disqualification of directors.

Retirement and replacement process of

directors.

q Rules about profit and reserve:

Process of rofit declaration.


16/26

4/14/12

q Rules about Accounts:

Maintaining accounts book.

Inspecting accounts. Auditing accounts.

Appointing auditor.

Process of companys profit-loss etc.

q

Other rules: Appointing managing directors, secretary,

underwriter and auditors and determiningtheir remuneration.

Use of the seal of the com an .


17/26

4/14/12

The Doctrine of IndoorManagement

When the Articles of association of a companyprescribed a particular procedure for doing a thing, theduty of carrying out the provisions lies on the person incharge of the management of the company. This isknown as the doctrine of Indoor Management.

It doesnt apply in the following cases:

- Void Acts

- Knowledge of irregularity

- Lack of authority


18/26

4/14/12

Directors - number

The Act provides that theremust be at least 3 directors in

a Public Company (Other thana public company which hasbecome such by virtue of sec.

43A) and at least 2 directorsin other Companies. Sec.252.


19/26

4/14/12

Directors Qualification

From the Contract Act and the Companies Act, it can be saidthat the director must have the following qualifications:

v A director must be capable of entering into a contract, i.e.

He must have attained the age of majority.

He must have sound mind.

He must not be disqualified from contracting by any law to which he is subject

Sec. 11.

v A director must be a natural person, i.e. not an artificialperson.

v A director must have the requisite qualification shares. The


20/26

4/14/12

Directors disqualification

A person shall not be

capable of beingappointed director of a

company, if

v


21/26

4/14/12

Meeting - Classification

Meetings

Meetings ofthe

shareholders

Othermeetings

Statutory

General

Extra-ordinarygeneral

Class meeting

Meeting ofdirectors

Meetings ofthe creditors

Meetings ofthe debenture

holders


22/26

4/14/12

Resolutions - Classification

Resolution

Specialresolution

Ordinaryresolution

Resolutionrequiring

special notice


23/26

4/14/12

Shares

A sharemay be defined as aninterest in the company entitling theowner thereof to receive

proportionate part of the profits, ifany, and of a proportionate part ofthe company upon liquidation.

A Companys owned capital issplit up into a large number of

equal parts, each such part being


24/26

4/14/12

Shares - classification

Shares

Equityshares

Preferenceshares

Deferredshares

Othershares

Cumulative

Non-cumulative

Convertible

Non-convertible

Redeemable

Non-redeemable

Right share

Bonus

share

Non parvalue

shares


25/26

4/14/12

Winding up

Winding up of acompany

Voluntarywinding up

Compulsorywinding up

Voluntarywinding upunder the

supervision ofcourt

Bymembers

By

creditors


26/26

4/14/12

THANK YOUALL

FOR

ATTENDING

Company Law - Simon Haque (BUBT)

Documents

Transcript of Company Law - Simon Haque (BUBT)