Final M. LAW

8/13/2019 Final M. LAW

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FORMATION OF COMPANY AND

MANAGEMENT OF COMPANY

PRESENTED BY:AKSHAY AGRAWALANIKET WAMAN

BRYAN RAJAN

DHIRAJ PATEL

GAURAV MISHRA

MEKHLA KHUSHWAHSMITA THAKUR

SHRUTI JAIN

SAHILA SUMAN

RISHABH SONKARSATYADARSHI SAHA


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INTRODUCTION

Definition of a company : An individual orassociation of individuals who share common

purpose and unite in order to achieve a

common goal.Companies Act 1956 is an act of the parliament

of India enacted in 1956, which enabled

companies to be formed by registration andset out the responsibilities of a company.

It is administered by the Government of India

through Ministry of Corporate affairs


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FEATURES OF A COMPANY

Separate legal entity

Limited liability

Perpetual succession

Common seal

Transferability of shares


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Types of Companies:-

On the basis of Incorporation:

Statutory companies

Registered companies

On the basis of numbers:

Private Company

Public Company Special Privileges of a Private company


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Continued

On the basis of Liability:

Companies with Limited Liability

Unlimited Companies

On the basis of control:

Holding Company Subsidiary Company


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Requirements for a private company

Minimum 2 directors

Minimum 2 shareholders

Shareholder and director can be the same

person Minimum share capital should be 1,00,000

Director identification number(DIN) for all the

directors Digital signature certificate(DSC) for one of the

directors


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What do you mean by Formation

of a Company?

A Company comes into existence when a

group of people come together with a view of

forming an association to exploit the businessopportunities by bringing together; men,

material, money and management


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FORMATION OF COMPANY

> Definition.> Stages in formation.

DOCUMENTS OF COMPANIES

> Memorandum of Association

(MoA)

> Article of Association (AoA)

> Prospectus of Association


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STAGES OF FORMATION OF A

COMPANY

Promotion Stage

Selection of Name

Incorporation (Registration Stage).

Raising the Share Capital Stage.


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STAGES OF FORMATION OF COMPANY

Electronic Filling of Forms

Incorporation of Company

Certificate of Incorporation


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ELECTRONIC FILING OF FORMS

MCA-21 project -

Registration of new companies.

Filling of annual balance sheets.

Inspection of documents .

Memorandum of association

Name & signature of subscriber.

Electronic process


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INCORPORATION OF COMPANY

Preliminary decisions

Include private or public company

What should be the capital.?

Modes of forming company

Its a private or a public company

Documents filled by registrar

Agreement

List of directors


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CERTIFICATE OF INCORPORATION

Legal document relating to the formation of

a company or corporation.

License to form a corporation issued by state

government. Depends upon the legal system.


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Example for :

CERTIFICATE OF

COMMENCEMENT OF

BUSINESS of VISWASGOLD INFRASTRUCTURES


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Director Identification Number

It is an unique identification number issued byMinistry of Corporate Affairs(MCA) for anexisting director or an intended person to be adirector.

Documents required for DIN application:-

Address Proof

Identity proof


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Continued

Educational Qualification

Current Occupation

Affidavit to be signed by an applicant(notarized on Rs 10 stamp) vide Ministry of

company affairs.

Note:

All the documents should be self attested


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Digital Signature Certificate:

DSC is the digital equivalent (i.e electronic

format) of physical or paper certificates.

A digital certificate can be presented

electronically to prove your identity, to access

information or services on the internet or to

sign certain documents digitally


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Requirements of DSC:-

DSC application form (duly signed by an

applicant)

All the documents required in DIN application

form

Note: All the documents require self attestation


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DOCUMENTS OF COMPANIES

Memorandum of

Association(MoA)

Article of Association (AoA)

Prospectus of Association


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THE MEMORANDUM OF ASSOCIATION(MOA)

Memorandum of association is one of the documents which has to file

with the registrar of companies at the time of incorporation of a company

It is a document which sets out the constitution of the company and is really

the foundation on which the structure of the company is based

It contains the fundamental conditions upon which alone the company is

allowed to be incorporated

A company cannot depart from the provisions contained in its memorandum


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PURPOSE OF MEMORANDUM

The purpose of the memorandum is THREE fold.

1. The intending share holder who contemplates the investment of his capital shall

know within what field it is to be put at risk.

2. Anyone who shall deal with the company shall know without reasonable doubt

whether the contractual relation into which he contemplates entering with the

company is one relating to a matter within its corporate objects.

3. Every subscriber to the memorandum shall take at least one share and shall write

opposite to his name the number of shares taken by him.


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CONTENT OF MoA : Sec 13

THE NAME CLAUSE.

THE REGISTER OFFICE CLAUSE.

THE OBJECT CLAUSE.

THE CAPITAL CLAUSE.

THE LIABILITY CLAUSE. THE ASSOCIATION CLAUSE.

NOTE : The MoA must be signed by at least seven subscribers

in the case of public company and two in case of private

company.


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Articles of Association of a company

The Articles of Association is a document that contains thepurpose of the company as well as the duties and

responsibilities of its members defined and recorded clearly.

It is an important document which needs to be filed with the

Registrar of companies.

Alteration of AoA is done by passing a special resolution.

AoA should be printed, divided into paragraphs and seriallynumbered.


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CONTENT OF AoA

Article contain provision relating to the following matters:

1. Share capital rights of share holders variation of these rights payment of

commission share certificates.

2. Lien on shares

3. Calls on shares

4. Transfers of shares5. Transmission of shares

6. Forfeiture of shares

7. Conversion of shares into stock

8. Share warrants

9. Alteration of capital

10.General meetings and proceedings thereat11.Voting rights of members ,voting and poll, proxies.

12.Dividends and reserves


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PROSPECTUS :

Prospectus means any document described or issued as a prospectus inviting

deposits from public or inviting offer from public for the subscription or

purchase of any shares , or debentures of the company.

CERTIFICATE OF LIEU OF PROSPECTUS is issued by a public

company, where the company doesnt invite public subscription.


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CONTENT OF PROSPECTUS:

Date of issue of prospectus.

Name and register office of the company. Consent of Central Govt. for the present issue/compliance with the SEBI

guidelines.

Voting rights ,dividend ,expenses on issue etc.

Name of the stock exchange.

Punishment for fictitious application.

Refund of issue if 90% min. subscription not received.

Names and addresses of leading managers.

Issue of allotment letter or refund within 10 weeks with interest.

Date of opening and closing of issues.


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Date of opening and closing of issues.

Credit rating fromCRISIL (CREDIT RATING INFORMATION SERVICES

OF INDIA LIMITED)

Terms of Underwriting & Risk Factors.

Capital Structure of the company

Terms and particulars of the issue.

Restriction on transfer and transmission of

shares.


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MANAGEMENT OF

COMPANY


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Definition : sec 2(13)

Director may be defined as a person having control over direction ,conduct ,

management or superintendence of the affairs of the company .

Only individuals can be directors of the company: (sec 253)

According to the companies act 2006 has introduced provisions with respect

to the director identification number , and it is been important that DIN is given

to the directors .

Number of directors :

Every public company shall have at least three directors and every other company

shall have two directorsIncrease or reductions in number of directors sec(258)

Sanction by the central government sec (259)


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APPOINTMENT OF DIRECTORS1. FIRST DIRECTORS SEC(254 and clause 64 of table A)

2. APPOINTMENT OF DIRECTORS BY THE COMPANY (SEC 255 to 257,263 and 264)

3. APPOINTMENT OF DIRECTORS BY DIRCTORS (SEC 260,262 and 313)

As additional directors (sec260)

In a casual vacancy (sec262)

As alternative director( sec313)

Appointment of directors by the third parties Appointment by proportional representation (sec265)

Appointment of directors by the central government sec(408)


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POSITION OF DIRECTORSIt is very difficult to pinpoint the exact legal position of the

directors of the company . They have been described byvarious names, some time as agent some time as truste andsometime as managing partners of the company .

we can sonsider the positin of the directors from all these

points of view Director as agent

Director as employees

Directors as officers

Directors as trustee:

directors are the trustees of the companys money andproperty

Directors are trustees of the powers entrusted to them


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RESTRICTIONS ON APPOINTMENT OF

THE DIRECTORSA person shall not be capable of being director appointed directors of acompany by thr articles and shall also not be named as a director or

proposed director in the prospectus unless before the regestration of the

articles , or the publications of the prospectus as the case may be , he or his

agent authorised .

1. signed and failed with the registor of consent in writing to act as suchdirector

2. Signed the memorandum for his qualifications shares if any ;or

3. Taken his qualifications shares if any from the company and paid or agreed to

pay for them or

4. Signed and filed with the registar an undertaking in writing to take from thecompany his qualifications share sif any and pay for them ; or

5. Made and filed with the registrar an affidavit to the effect that his

qualifications shares are registered in his name

6. This section does not apply to the private company

NUMBER OF DIRECTORSHIPS SEC


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NUMBER OF DIRECTORSHIPS SEC

275,277 TO 279No persons to be a director of more than 15 companies( sec 275)

Exclusion of certain directorships (sec 278) A private company which is neither a subsidiary nor a holding company of a

public company

An unlimited company

An associations not carrying a buiness for profit or which prohibits the

payment of a dividend

A company in which such person is only an alternate director


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DISQUALIFICATIONS OF DIRECTORS1. A person of unsound mind

2. An undischarged insolvent

3. A person whose calls in respect of share of the company held for more

than 6 months have been arrear

4. A person who is already a director of a public company

Has not filed annual accounts and annual returns for any three

continuous financial years commencing on and after the first day of april199 ; or

Has failed to repay its deposits or interest thereon on due date redeem

its debentures on the date or pay dividend and such failure continues for

one year or more

VACATIONS OF OFFICE AND REMOVAL


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VACATIONS OF OFFICE AND REMOVAL

OF DIRECTORS (SEC 283The office of the director shall become vacant if he

He fails to obtain within 2months of his appointment or at any timethereafterceases to hold the share qualification, if any , reuired of him by the

articles of the company

He is adjudged to be of unsound mind

He applies to be adjudicated an insolvent

He is adjudged an insolvent

He is convicted by a court of any offence involving moral turpitude and

sentenced in respect there of imprisonment for not less than 6 months

He fails to pay any call in respect of shares of the company held by him with

in 6 months from the last date fixed for the payment of the call . The centalgovt may by notification in the official gazette removes this disqualifications

He fails to make disclosure to the board of directors with regard to any

contract with the company in which he is directly or indirectly interested.


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REMOVAL OF DIRECTORSdirectors may be removed by the

shareholders( sec284)

Apply to the case of a director appointed by the central government under

sec408

authorise in the case of aprivate company removal of a director holding

office for life on april 1, 1952

Apply to the case of a company which has adopted the system of electing2/3 of its directors by the principle of proportional representation

1. central government (sec 388-B to 388-E)

2. Removal by company law board (sec402)


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MANAGERIAL REMUNERATIONManagerial remuneration is compensation for services provided to a

company in a managerial capacity. This can include cash payments,

along with benefits like stock options, health insurance, and

bonuses.

Over maximum managerial remuneration (sec198)

remuneration not to exceed 11 percent , under the sec 349,350,

351

If the company does not make any profit then the director will not

bee given any remuneration and will given any remuneration by

the previous approval of central government if required


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MEETINGS OF DIRECTORS

(SECTION-285)

NUMBER OF MEETINGS-ONCE IN EVERY

THREE MONTHS

NOTICE OF MEETINGS

QUOROM FOR MEETINGS


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POWERS OF DIRECTORS

GENERAL POWERS OF THE BOARD(SECS-291)

CAN NOT DO ACTS WHICH ARE TO BE DONE

BY THE COMPANY IN GENERAL MEETINGS

BOARD SHALL USE ITS POWER SUBJECT TO

THE PROVISIONS CONTAINED IN THE

COMPANIES ACT.


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POWERS USED FOR BOARD MEETINGS

(SECTION-292)

CAN CALL SHAREHOLDERS IF UNPAID SHARES

ISSUE DEBENTURES

BORROW MONEYS OTHER THAN DEBENTURES

INVEST THE FUNDS OF COMPANY

MAKE LOANS


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POWERS USED IN GENERAL MEETING

(SECTION-293)

TO SELL, LEASE,DISPOSE OR SUBSTANTIALLY OF THE

WHOLE UNDERTAKING OF THE COMPANY.

TO REMIT OR GIVE TIME FOR REPAYMENT OF ANY

DEBT DUE TO THE COMPANY TO INVEST IN COMPULSORY ACQUISITION USING

THE MOUNT OF COMPENSATION.

TO CONTRIBUTE TO CHARITABLE AND OTHER FUNDS

NOT DIRECTLY RELATING TO BUSINESS OF THE

COMPANY WELFARE.


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POLITICAL CONTRIBUTION

(SECTION-293-A)

Amount contributed in on financial year

should not exceed 5% of its average net profit

Resolution authorizing the making of the

contribution should be passed in board

meeting.

Amount of contribution should be shown in

the P/L A/C during the financial year.


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DUTIES OF DIRECTORS

FIDUCIARY DUTIES

1)EXERCISE THEIR POWERS HONESTLY AND

BONA FIDE FOR THE BENEFIT OF THE

COMPANY AS A WHOLE

2)SHOULD NOT HAVE A CONFLICT BETWEEN

THEIR DUTIES TO THE COMPANY AND

PERSONAL INTEREST


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DUTIES OF CARE, SKILL AND DILIGENCE

DIRECTORS SHOULD CARRY OUT THEIR DUTIES WITHREASONABLE CARE AND EXERCISE DEGREEE OF SKILL

AND DILIGENCE.

STANDARD OF CARE

a)The type of nature of work

b)Division of powers between directors and other

directors

c) General usages and customs in that type of business

d)Whether directors work remuneratively


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OTHER DUTIES OF DIRECTORS

TO ATTEND BOARD MEETINGS

NOT TO DELEGATE FUNCTIONS EXCEPT FEW

TO DISCLOSE HIS INTEREST


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CONTRACTS IN WHICH DIRECTORS ARE

INTERESTED

BOARDS SANCTION REQUIRED(SECTION 297) DISCLOSURE OF INTEREST BY DIRECTORS (SECTION-299)

INTERESTED DIRECTOR NOT TO PARTICIPATE OR VOTE INBOARDS PROCEEDINGS.

REGISTER OF CONTRACTSThe date of contract or arrangement

The names of the parties thereto

The principal terms r condition thereof

The name of directors voting for and against the contract andthe names of those remaining neutral

INSPECTION OF REGISTER


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LIABILITIES OF DIRECTORS

LIABILITIES OF THIRD PARTIESUNDER THE ACT

INDEPENDENTLY OF THE ACT

LIABILITY TO THE COMPANYULTRA VIRES ACT

NEGLIGENCE

BREACH OF TRUST

MISFEASANCE

LIABILITY FOR BREACH OF STATUTORY DUTIES

LIABILITY FOR ACTS OF HIS CO-DIRECTORS

VALIDITY OF ACTS OF DIRECTORS


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VALIDITY OF ACTS OF DIRECTORS

(SECTION-290)

De facto and de jure directors

A director who is not duly appointed but acts as

a director is called De facto (director) and is as

much as liable as a de jure (properly

appointed).


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DISABILITIES OF DIRECTORS

Avoidance of provisions relieving directors of

liability (sec-201)

Undischarged insolvent disqualified from

being appointed directors (sec-274)

No person to be a director of more than

20companies (sec-275)

Restrictions on powers of Board (sec-293)

Loans to directors (sec-295)


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Boards sanction for certain contracts in which

particular directors are interested (sec-297) Prohibition of assignment of office by director

(sec-312)

Directors not to hold office or place of profit(sec-314)


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MANAGING DIRECTOR

A director who is entrusted with substantial

powers of management which would not

otherwise be exercisable by him.

APPOINTMENT


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APPOINTMENT(SECTION-269)

COMPULSORY APPOINTMENT OF MANAGING ORWHOLE-TIME DIRECTOR OR MANAGER

PRIOR APPROVAL OF THE CENTRALGOVERNMENT UNLESS APPOINTMENT IS IN

ACCORDANCE WITH THE CONDITIONS SPECIFIEDIN SCHEDULE 13

PROVISIONS RELATING TO APPOINTMENT WHEREIT REQUIRES APPROVAL OF THE CENTRALGOVERNMENT

APPOINTMENT IN CONTRVENTION OF THEREQUIREMENTS OF SCHEDULE 13.

DISQUALIFICATION OF MANAGING


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DISQUALIFICATION OF MANAGING

DIRECTOR (SEC. 267)

Suspends

Undischarged insolvents

Has at anytime been

convicted by a Tribunal


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THANK YOU!