Introduction to Company Act

04/11/2023Prepared By - Vinay Golchha

1

COMPANY (COMPANIES ACT 1956)

Submitted To :- Prof. Priya kini

04/11/2023Prepared By - Vinay Golchha 2

DEFINITION A company can be defined as an "artificial person", invisible,

intangible, created by or under law, with a discrete legal entity, perpetual succession and a common seal. It is not affected by the death, insanity or insolvency of an individual member.

According to Section 3(1)(i) of the Companies Act, a company means, “ A company formed and registered under this Act or an existing company.”

A voluntary association formed and organized to carry on a business.


MEANING A company is an artificial person created by law.

It is a voluntary association of individuals for profits.

A company means a group of persons associated together for the attainment of a common end, social or economic.

‘Existing Company’ means a company formed and registered under any of the earlier Company Laws.


CHARACTERISTICSeparate legal entityLimited liabilityPerpetual successionCommon sealTransferability of sharesSeparate property


Companies

Incorporated

Chartered Companie

s

Statutory Companie

s

Registered Companie

s

Companies limited by shares

Public Private

Companies Limited

By Guarantee

Public Private

Unlimited Companie

s

Public Private

Unincorporated

Types Of Company


Company

Limited Liability

Unlimited Liability

Public

Private

Liability

Number Of Member

Types Of Company


Company

Control

Holding Subsidiary Govt. Non Govt.

Types Of Company


Incorporated Companies: These are the association of persons who contribute money to a common stock known as capital of the company. They have existence independent of its members.

Unincorporated Companies: These are the mere collection of persons who have agreed to join in partnership to run a business and share the profits.

Chartered Companies: The ‘Crown’ in the exercise of the royal prerogative has power to create a corporation by the grant of a charter to persons assenting to be incorporated. Such companies or corporations are known as chartered companies.

Statutory Companies: A company may be incorporated by means of a special Act of the Parliament or any State Legislature. Such Companies are called statutory companies. Such companies are generally formed to carry out some special public undertakings, e.g., railways, waterways, gas, electric generation etc. They are governed by the Acts creating them.


Registered Companies: Companies registered under the Companies Act,1956, or the earlier Companies Acts are called registered companies. Such companies come into existence when they are registered under the Companies Act and a Certificate of Incorporation is granted to them by the Registrar.

A company registered under the Act may be:

I. Companies limited by shares: In a company limited by shares the liability of the members is limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them.

II. Companies limited by guarantee: It is a registered company public or private, in which the liability of members is limited to such amounts as they may respectively undertake by the memorandum to contribute to the assets of the company in the events of its being wound up.

III. Unlimited Companies: A company not having any limit on the liability of its members is termed as unlimited company.


PRIVATE COMPANY According to Section 3(1)(iii) of the Companies (Amendment)Act,2000, a

private company means a company which:

(a) has a minimum paid up capital of one lakh rupees or such higher amount as may be prescribed by the Government;

(b) has a minimum of 2 and maximum of members excluding employees;

(c) restricts the right of members to transfer its shares , if any;

(d) prohibits any invitation to the general public to subscribe for its shares or debentures;

(e) does not invite the public to subscribe to its deposits.

E.g.:- Ambika Industries Pvt. Ltd., Paras Pharmaceutical Pvt. Ltd. etc.


PUBLIC COMPANY According to Section 3(1)(iv) of the Companies (Amendment)Act,2000, a

public company means a company which:

(a) is not a private company; and

(b) has a minimum paid up capital of five lakh rupees or such higher amount as may be prescribed by the Government.

E.g.:-Reliance Industries Ltd., Tata Iron & Steel Co. Ltd., D.C.M. Ltd., etc.


BESIDES ALL THESE COMPANIES THERE ARE FEW MORE KINDS OF COMPANIES:

Government Companies: It is a company of which 51% or more equity share capital is held by the Government. Rest of the shares can be held by private individuals or businessmen.

Foreign Companies: It is incorporated outside India but has a place of business in India. Some of the popular MNCs operating in India are Coca Cola(USA), Pepsi Cola(USA), Sony(Japan),etc.


FORMATION OF COMPANYA Company comes into existence when a group of people come together with a view of forming an association to exploit the business opportunities by bringing together; men, material, money and management.


STAGES OF FORMATION OF A COMPANY Promotion Stage.

Selection of Name.

Incorporation (Registration Stage).

Raising the Share Capital Stage.


PROMOTION STAGE Discovery of Business opportunities.

Detailed Investigation.

Assembling necessary requirements.

Financing of proposition.


SELECTING COMPANY NAMETo be identified for legal and business purpose (i.e. “Ltd” or “Pvt Ltd” ). The name should not be similar to the existing.


INCORPORATION STAGEA company is said to be incorporated when it fulfill the formalities of registration and obtain “CERTIFICATE OF INCORPORATION” by submitting the MoA, AoA and written consent of all the directors.

A public to commence business, should raise the required capital and obtain the “CERTIFICATE OF COMMENCEMENT OF BUSINESS”.


RAISING OF SHARE CAPITALEntering onto an agreement with underwriters.

Applying to the stock exchange for listing of shares.

Issue of prospectus inviting public to subscribe.

Allotting shares


MEMORANDUM OF ASSOCIATION Contains fundamental conditions.

Charter of company.

Lays down area of operation of the company.

Regulates external affairs.

Defines the object and scope.


CONTENTS OF MOAName.Object.Registered office clause.Liability Clause.Capital clause.Association or subscription.


ARTICLE OF ASSOCIATION In corporate governance, a company's articles of association is a document which, along with the memorandum of association form the company's constitution, defines the responsibilities of the directors, the kind of business to be undertaken, and the means by which the shareholders exert control over the board of directors.


ITEMS COVERED BY THE AOA The important Powers, duties, rights and liabilities of Directors Powers, duties, rights and liabilities of members Rules for Meetings of the Company Dividends Borrowing powers of the company Calls on shares Transfer & transmission of shares Forfeiture of shares Voting powers of members


PROSPECTUSA prospectus, is a disclosure document that describes a financial security for potential buyers. It commonly provides investors with material information about mutual funds, stocks etc., any litigation that is taking place, a list of material properties and any other material information. In the context of an individual securities offering, such as an initial public offering ,a prospectus is distributed by underwriters or brokerage to potential investors.


CLASSIFICATION OF PROSPECTUSProspectus issued generally i.e. issued to persons who are not existing members or debentures holders.

Prospectus issued generally uniform with shares or debentures already quoted on stock exchange.

Prospectus not issued generally i.e. only to the existing share holders and debenture holder.


Thank

you...!!

Introduction to Company Act

Education

Transcript of Introduction to Company Act