IntroductionIntroduction

• Definition & Meaning• Salient Features• Types of Companies• MoA & AoA• Membership• Shares & Share capital• Meetings• Accounts & Audit• Liquidation of Company• Case Study

Meaning of companyMeaning of company

A company is a groups of persons A company is a groups of persons associated together for the attainment associated together for the attainment

of a common goalof a common goal

Characteristics of a companyCharacteristics of a company

• Incorporated Association• Artificial person• Separate Legal Entity • Perpetual Succession i.e. continued existence• Limited Liability• Common Seal• Transfer of Shares• Separation of ownership from its management• Capacity to Sue

On the Basis of incorporation Statutory (created by special act of the legislature.ex: RBI ,SBI,LIC) Registered(Formed under the companies act 1956)

On the Basis of liablity Limited Co.(The liablity is limited to the unpaid capital in the shares only)

Unlimited Co(Liablity is unlimited.even the personal belongings can be adjusted for the outstanding)

On the Basis of number of members (i) Public Minimum paid up capital-Rs 1lakh Restricts transfer of shares Minimum no of persons is 2 Limits the members to 50

• Limitation of Liability (i).

• Country of formation (i) Domestic Co. (ii) Foreign Company

contdcontd(ii) PrivateMinimum paid up capital is Rs 5 lakhMinimum no of members is 7&no maximum

numbersAllows the transfer of shares On the Basis of ownershipGovernment Company(not less than 51% of the

ownership with the govt)Foreign companyCompany incorporated outside india with place of

business in indiaMinimum of 50% of the share with the indian

citizen

MOA - Charter of the company and explains the reason of its existence

Contents• Name of the company

• State of its registered office

• Objects of the company

• Liability Clause

• Capital Clause

Name clauseName clause

• Undesirable name to be avoided

• Use of limited in case of public limited company and use of private limited in case of private company

• Authorized capital to change according to the key words in its name.

Registered officeRegistered office

• Every company should have a registered office within 30 days from the date of incorporation

Objects clauseObjects clause

• Should mention clearly the

• Main objects

• Other objects

Capital clauseCapital clause

• Should mention the authorised capital of the company beyond which the company cannot issue shares

Liability clauseLiability clause

• Mention about the liability of the members

Association clauseAssociation clause

• Gives the details about the names of the share holders ,their address and the total no of shares they have taken

Doctrine of ultra viresDoctrine of ultra vires

• All the acts which is outside the purview of companies act, Memorandum of association and reasonably fair is ultravires.

• ultra vires means beyond power

AoA – (i) Rules & Regulation for the internal Management of the affairs of the company.

(ii)controlled by the memorandum

ContentsContents

• Business of the company• Amt. of capital issued & the classes of shares• Rights of each class of share holder & procedure for

variation• Allotment ,Calls, Forfeiture of shares• Transfer of shares• Companies lien on shares

• Exercise of borrowing powers including issue of debentures.

• General Meeting, Notices, Quorum, Proxy, Voting, resolution, Minutes etc.

• Appointment, No., & Powers of Directors.

• Dividends- Interim & Final- General Reserve.

• Accounts & Audits.

• Keeping of books.

Criteria for membership

• The subscriber of the memorandum of a company who shall be entered as members in it’s register of members.

• Who agrees in writing to become a member of a company.• Every person holding equity share capital of a company

and whose name is entered as beneficial owner in the records of depository.

“Every shareholder is a member but every member need not be a shareholder”

Articles and Memorandum Articles and Memorandum differencedifference

• Memorandum• Charter of the company• Supreme document• Must have MOA• Alteration is difficult• Act against Memorandum

is ultra vires

• Articles• Regulations for internal

management• Subordinate to MOA• No need in case of co

limited by shares• Can be altered easily by

passing resolution• Act if it is intravires to the

memorandum can be ratified by share holders

Constructive notice of MOA&AOAConstructive notice of MOA&AOA

• It is the presumption that all the persons have a notice of contents of the MOA&AOA.

Doctrine of indoor managementDoctrine of indoor management

• Exception to the rule of constructive notice

• Share-”Share in the share capital of a company and includes stock except where a distinction between stock and share is expressed or implied” [Sec. 2 (46)]

• Types of shares-

(1) Equity

(2) Preferential

Under Companies Act, a meeting means a gathering of two or more persons, convened in accordance with the provisions of the act and the articles of the company, for transacting some lawful business.

Requisite of a valid general meeting(i) Meeting must be properly called – Proper authority & Proper

Notice (ii)Must be properly convened – Proper Quorum & Proper

Chairman(iii)Must be properly conducted – Business must be validly

transacted i.e. resolutions must be properly moved & passed, and voting by show of hands & Proper minutes must be prepared.

• Meetings of members (i) Statutory meeting (ii) AGM (iii) EGM• Meetings of Directors (i) Meetings of BoD (ii) Meetings of committees of Board• Other Meeting (i) Meeting of debenture holdersMeeting of debenture holders (ii) Meeting of creditors(ii) Meeting of creditors

• Maintenance of Accounts as per AS prescribed by ICAI.

• Form of Bal. Sheet & P/L as per Schedule VI of the Companies Act,1956.

• 3 copies of B/S and P/L A/c within 30 days from the date of AGM to Registrar.

• 1st auditor(s) by BOD within 1month of incorporation.

• Qualification of Auditors:- Must be a CA.

Can’t be an auditor:(i) Body Corporate

(ii)Officer or Employee of the org.

(iii)A person who owes the Company more than Rs.1000.

(iv)A person holding any security carrying voting rights of the company.

(v)A person who is disqualified for appointment as auditor in any subsidiary or holding company.

• Right of free and complete access to the books & accounts.

• Right to require from the officers of the company such information & explanation.

• Entitled to receive notice of and to attend general meetings of the company.

• Based on the recommendation of Kumarmangalam Birla Committee report on Corporate Governance, the Companies (Amendment) Act, 2000 has introduced this sec.

• Every public company paid up cap. Of more than 5 crores shall constitute an Audit Committee.

• Penalty for non Compliance:-Every officer in default shall be punishable up to

one year of imprisonment or Rs. 50,000 or both.

• Compromise – It means an amicable settlement of differences by mutual concessions by the parties to dispute or difference by agreeing not to try it out.

• Arrangement – It is of wider import than compromise and includes a reorganization of the share capital of the company by the consolidation of shares of different classes.

Arrangement & Compromise may take place for the purpose of Reconstruction & Amalgamation of companies.

• Reconstruction

(i) The transfer of undertaking of an existing company to another company.The old company ceases to exist.

(ii) The rights of shareholders in the old company is being satisfied by issuing shares in new co.

• Amalgamation – It is the blending of two or more undertakings into one undertaking, the shareholders of each blending co. becoming substantially the shareholders of the other company which holds blended undertakings.

Modes of winding up(i)Compulsory winding up by Court [Sec.433]

(ii)Voluntary winding up

Members voluntary winding up

Creditors voluntary winding up

(i)Voluntary winding up under supervision of the court.

• Special Resolution.

• Default in holding statutory meeting.

• Failure to commence business.

• Reduction in membership.

• Inability to pay debts.

• Just & equitable.

• Ordinary resolution passed where the period fixed by the Articles for the duration.

• If the company resolves by special resolution that it shall be wound-up voluntarily [sec.484]

Members• Solvent companies• No need of creditors

meeting• Liquidator appointed

by the member• No committee of

inspection can be formed.

Creditors• Insolvent Companies• Creditors meeting

necessary• Liquidator appointed

by the creditor• If wish can formed a

Committee of inspection.

• Based on AGM Notice

• Based on separate legal entity