INTRODUCTION TO COMPANIES ACT 1956

What is a companyA company is an artificial person created by law.A company means a group of persons associated together for the attainment of a common end, social or economic.

Definition of a companyAccording to Sec (1), A company formed and registered under the act.According to Sec (3) of the act, on incorporation a company becomes a body corporate or a corporation with a perpetual succession and a common seal.According to N.D.Kapoor, IT is a voluntary association of persons formed for some common purpose, with capital divisible into parts, known as shares, and with a limited liability. It is a creation of the law and is sometimes known as an artificial person with a perpetual succession and a common seal. IT exists only in the eyes of the law, I.e., it is regarded by the law as person, just as a human being. But it has no physical existence.

CHARACTERSTICS OF A COMPNAYSeparate legal entityLimited liabilityPerpetual successionCommon sealTransferability of sharesSeparate propertyCapacity to sue

Classification of CompaniesCompaniesOn the basis of incorporationOn the basis of liabilityOn the basisOf no. ofmembersOn theBasisOf controlOn the BasisOf ownershipStatutory companiesRegistered companiesCos. With limitedliabilityLtd. By sharesLtd.By guaranteeUnlimited liabilityPrivate companyPublic companyHoldingcompanySubsidiary companygovernmentNon-government

Classification on the basis of incorporationStatutory companies: These are created by special act of the legislatureE.g.: The Reserve bank of IndiaThe Life Insurance corporationThe Unit Trust Of IndiaRegistered Companies: These are the companies which are formed and registered under the companies Act, 1956 or were registered under any of the earlier companies act.

Classification on the basis of liability1. Companies with limited liability:A. Companies limited by sharesE.g.:Infrastructure Corporation of Andhra Pradesh Limited, MSEB Holding Company Limited, Maharashtra State Power Distribution Company Limited, Maharashtra State Power Generation Company Limited and Maharashtra State Power Transmission Company Limited. B. Companies limited by guaranteeE.g.:Schools & Educational EstablishmentsClubs & AssociationsCharities and Organisation intending to apply for charitable statusChurches & other Places of WorshipTrade or Research Associations

2. Unlimited companiesE.g.: Jonathan Rose co.,Wicks Group of companiesSuyog system and Software pvt. Ltd.

Classification on the basis of number of membersPrivate companyA private company means a company which has a minimum paid up capital of Rs.1,00,000 or such higher paid up capital as may be prescribed , and by articles-(a) restricts the right to transfer its shares, if any. This restriction Is meant to preserve the private character of the company(b) limits the number of its members to 50 not including its employee-members( C) prohibits any invitation to the public to subscribe for any shares in or debentures of the company(d) prohibits any invitation or acceptance of deposits from persons other than its members, directors and their relativesPublic companyA public company means a company whichHas a minimum paid up capital of Rs.5 lakh or such high paid-up capital, as may be prescribed

Classification on the basis of controlHolding companyA company is known as the holding company of another company if it has control over that other company.Subsidiary companyA company is known as a subsidiary of another company when control is exercised by the latter over the former called a subsidiary company.Company controlling composition of Board of DirectorsHolding of majority of sharesSubsidiary of another subsidiary

Classification on the basis of ownershipGovernment companyA Government Company means any company in which not less than 51% of the paid-up share capital is held byThe central government orAny state government or governments orPartly by the central government and partly by one or more state governments.E.g.: State Trading Corporation of India LimitedMinerals and Metals Trading Corporation of India limitedNon-government companyForeign companies

MNCS/ TRANSNATIONAL COMPANYA multinational corporation is a business enterprise that retains direct investments overseas and that maintains value-added holdings in more than one country. A firm is not really multinational if it just engages in overseas trade or as a contractor to foreign firms They are also called transnational companies

BLUE CHIP COMPANIESA blue chip stock is the stock of a well-established company having stable earnings and no extensive liabilities. The term derives from casino, where blue chips stand for counters of the highest value. Most blue chip stocks pay regular dividends, even when business is faring worse than usual. They are valued by investors seeking relative safety and stability, though prices per share are usually high. Typically, such stocks are perceived to offer reliable returns, low yield, and low risk.

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