Transcript
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Company law
By Prof. Mayur Malviya
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Object
Company law has been enacted to consolidate
and amend law relating to companies andcertain other associations.
1) To encourage investments
2) To ensure proper administration
3) To prevent malpractices
4) To allow for investigations
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Company [Sec.3]
Sec.3(1)(i) A company means a company
formed and registered under this act or anexisting company.
an artificial person, created by law with
limited liability having a common seal and
perpetual succession.
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CHARACTERISTICS OF A COMPANY
An Incorporated
Association
Artificial legal person
Common capital&limited liability
Transferable shares
Separate legal entity
Perpetual existence
Common seal
Separate property
Capacity to sue & tobe sued
Not a citizenProf. Mayur Malviya
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Doctrine of Lifting the Corporate VeilJudicial Interpretation
Protection of Revenue
Com an as an a ent of
Statutory Exceptions
No. of members below statutoryminimum
Shareholders
Company formed by certain personsto avoid their own valid contractual
obligation
Company formed for some fraudulentpurpose
Company formed is against publicinterest or Public policy
Fa ure to re un app cat on money
Misdescription of Companys name
Fraudulent trading
Holding and subsidiaryProf. Mayur Malviya
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Protection of Revenue. (Case Study Jugilal vsCommissioner of Income Tax)
Prevention of Fraud or Improper conduct.(Case Study Johns vs Lip man)
Company is a Sham. (Case Study GilfordMotor Co Ltd vs Horne)
Determination of the character of the
company. (Case Study Daimler Co Ltd vsContinental Tyre & rubber Co.)
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Types of CompanyOn the basis of Incorporation
Chartered Companies
Statutory companies
Registered Companies
On the basis of Liability
- Limited by shares
- Limited by guarantee- Unlimited Company
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On the basis of Number of members:
- Private Company- Public Company
On the basis of Control:
- Holding Company
- Subsidiary Company
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On the basis of Ownership:
- Government
- Foreign
One Man Company
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Private Company Private Company [Sec.3(1)(iii)] is a Company
which by its articles of association:Limits the no. of its members to 50, excluding
em lo ees who are members or ex-em lo ees
who were and continue to be members.Restricts the rights of transfer of shares, if any.
Prohibits any invitation to the public tosubscribe for any shares or debentures of theco.
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Public company According to Sec.3(1)(iv), A Public Company is
one which is not a Private Company.
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Difference between Private Company
& Public CompanyCriteria Private [Sec.3(1)(iii)] Public [Sec.3(1)(iv)
1. Minimum Capital 1 Lakh 5 Lakhs
2. Number of members Minimum is 2 maximum is50
Minimum is 7. Norestriction on maximum.
3. Minimum numbers of Two Three
4. Mode of appointment ofdirectors
Consent letter is notrequired
Consent letters by thedirectors is required
5. Subscription for shares No invitation to the public Public may be invited toand can subscribe
6. Transferability of shares Members restricted intransferring shares
Members can transfer theirshares freely
7. Minimum quorum Two Five
8. Managerial remuneration No restriction Should not exceed 12% ofthe profits
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Conversion of Private into Public
Conversion of PrivateCompany into aPublic Company
By Default By Operation of Law By Choice
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Conversion of Public into Private1) The co. in general meeting has to pass special resolution foraltering the articles so as to include therein the necessary
restrictions, limitations and prohibitions, and to delete any
provision inconsitent with the restrictions
2) Word Private should be added before limited.
.
articles for converting a public company into a private
company should be obtained.
4) Within one month of the date of the receipt of the approval,
a printed copy of the altered articles must be filed with theregistrar.
5) Within 30 days of the passing of the special resolution, a
printed or typed written copy thereof should be filed with
the registrar. Prof. Mayur Malviya
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Formation of Companies
Stages in
PromotionRegistration/Incorporation
Capitalsubscription/
Floatation
Commencementof Business
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Promotion Stage Discovery of business opportunity
Conduct of preliminary investigation
Assembling
Financing
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Role of Promoter Ideation
Arranging resources Preparing preliminary documents
Preliminary investigation
Preliminary Contracts Naming the company
Finance
Appoint bankers, brokers, solicitors andunderwriters
Obtaining license
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Incorporation Availability and approval of the name Filing of documents
MOA
AOA
Notice
A reements
Return containing first directors particulars List of directors
Written consent
Statutory declaration
Undertaking of shares for qualification shares
Payment of fee
Registration
Certificate of incorporationProf. Mayur Malviya
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Commencement of business Prospectus or Statement in lieu of prospectus
Minimum subscription
Qualification shares
Return of allotment Declaration
Statutory declaration Certificate of commencement of business
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Memorandum of association Sec.2(28).
Memorandum means the memorandum ofassociation of a company as originally framed
of any previous companies law or of this act.
Establish the relationship between the
company and the outside world
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Memorandum of association Significance
Basis of incorporation Charter of company objects
Future structure
Limits its activities Investments and risks
Liabilities
Authorisation Promoters
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Name clause
Objects clause
Registered office
Capital
Liability
association
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Doctrine of Ultra vires Beyond powers
An act is said to be ultra vires which though legalin itself,is not authorised by the objects clause inthe Memorandum of Association.
All activities and transactions beyond the objectsof the company shall be entirely void.
All actions against MOA
Directors will held personally resposible if anyacts ultra vires
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Alteration of Memorandum Change of name
Change of Registered office
Alteration of objects
Change in liability clause Capital clause
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Articles of association Regulations which govern the management of its
internal affairs Duties, rights,powers and authority of the
management and the board of directors in their
respective capacity A public company will be deemed to have
adopted Table A in Schedule I if the Companies
act, if it does not file its own Articles ofAssociation (Properly stamped, duly signed andattested.)
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Contents Share capital
Lien on shares
Calls on shares
Procedure of allotment ofshares
Meetings and proceedings
Voting rights
Directors and capacities
Manager
Transfer of shares Share certificates issued
Transmission, forfeiture andreissue
Share warrants
Alteration of capital
Dividends and reserve
Book keeping
Accounts, audit and
borrowing powers Capitalisation
Winding up
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Prospectus Sec.2(36)
Document described or issued as prospectusand includes any notice, circular, advt., orother documents invitin offers from the
public for the subscription or purchase of anyshares or debentures of a body corporate
1) Invites subscription to shares, debentures or
deposits2) Aforesaid invitation is made to public.
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1) If the private company is changed into Public
Company2) If there is automatic or immediate collection
3) If the company has not issued prospectus
due to any reason
4) If the company has decided that it will notissue shares or debentures to public.
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Types Offer
Draft
Red-Herring
Abridged
Shelf
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Statement in lieu of Prospectus:
Section 70
Issued atleast 3 days before the allotment of
shares or debentures, there has beendelivered to Registrar for registration duly
director in the following cases:
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APPOINTMENT OF DIRECTORS
By promoters
By thecompany
By thecourt
APPOINTMENTOF DIRECTORS
By the board
of directorsBy thethird
parties
By the centralgovernment
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General powers of company boards
General powers ofthe board
Powersexercisable by
POWERS EXERCISABLE BYTHE BOARD SUBJECT TOINTERFERENCE BY
Company Act
AoA
e oar a eboard meeting
to make calls onshares
to borrow money
to fill casual vacancy
Malafides acts ofdirectors
Deadlock inmanagement
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SharesSec.2(46) of the Companies act, 1956 has defined:
Share means share in the shares capital of thecompany and includes stock, except where adistinction between stock and shares is expressed
or implied. Interest
Liability
Right Binding
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SharesTypes
Preference shares
Equity Shares
Sweat equity sharesListing of Shares [sec.73]
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MeetingsStatutory
Annual general
Extraordinary
Class
Quorum
Resolution
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Winding UpCompulsory
Voluntary
Supervision under court
Winding up and Dissolution
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Winding up the Company Act session!!
Any Queries?
Thank you
Prof. Mayur Malviya
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