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8/4/2019 Company Law - Simon Haque (BUBT)
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4/14/12
Welcome to the
Presentation sessionon
CompanyLaw
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Law
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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.
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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.
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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
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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
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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.
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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.
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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.
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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.
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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
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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
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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
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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.
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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.
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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.
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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 .
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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
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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.
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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
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Directors disqualification
A person shall not be
capable of beingappointed director of a
company, if
v
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Meeting - Classification
Meetings
Meetings ofthe
shareholders
Othermeetings
Statutory
General
Extra-ordinarygeneral
Class meeting
Meeting ofdirectors
Meetings ofthe creditors
Meetings ofthe debenture
holders
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Resolutions - Classification
Resolution
Specialresolution
Ordinaryresolution
Resolutionrequiring
special notice
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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
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Shares - classification
Shares
Equityshares
Preferenceshares
Deferredshares
Othershares
Cumulative
Non-cumulative
Convertible
Non-convertible
Redeemable
Non-redeemable
Right share
Bonus
share
Non parvalue
shares
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Winding up
Winding up of acompany
Voluntarywinding up
Compulsorywinding up
Voluntarywinding upunder the
supervision ofcourt
Bymembers
By
creditors
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THANK YOUALL
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